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DBS shares: How much higher can they go?

Southeast Asia’s biggest bank DBS faces a promising asset-quality outlook and may see a healthy profit rebound this year, an analyst says.

  • DBS Group Holdings (SGX: D05) share price rises to S$30.36 on Tuesday (14 September)
  • The lender could make accretive mergers and acquisitions, Maybank analysts say
  • DBS recently strengthened payments security for all its cardholders
  • Feeling bullish or bearish about DBS shares? Open an account with us to go long or short on the stock.

DBS stock price stays buoyant

Shares of Singapore-headquartered DBS Group Holdings gained 0.2% to trade at S$30.36 as at 13:33 SGT on Tuesday. Year-to-date, the stock has surged 19.8%.

On Friday, UK financial publication Euromoney named DBS the world’s best bank as well as the world’s best digital bank.

As of Tuesday morning, 14 analysts recommended ‘buy’ on DBS shares, seven suggested ‘hold’, while none gave ‘sell’ calls.

Their average 12-month target price was S$33.55, according to Bloomberg data. That implies a potential upside of 10.8% from Monday’s close of S$30.29.

Research teams bullish on South-east Asia’s biggest bank included Morgan Stanley with an ‘overweight/in-line’ rating and S$32.40 target, RHB with a ‘buy’ call and S$35.50 target, as well as JPMorgan, which suggested ‘overweight’ while eyeing S$35 per share.

Bernstein recently gave a ‘market perform’ rating with a S$29.40 target, while Macquarie recommended ‘neutral’ alongside a S$31.25 target.

Why are some analysts optimistic about DBS’ prospects?

Bloomberg Intelligence (BI) analyst Rena Kwok last Friday opined that the bank’s return on equity ‘is well-placed to recover to pre-pandemic levels of 10-12% this year’.

On asset quality, Kwok added that the outlook appears promising for the second half of 2021, ‘with no significant signs of deterioration’ despite the regional resurgence in Covid-19 cases and lockdown restrictions.

‘We feel there could be more provision write-backs as the operating environment in key markets improve, alongside better inoculation rates,’ BI noted.

DBS’ capital buffer - driven by strong internal cash generation - also remains sustainable, in Kwok’s view.

In addition, the lender has well-diversified revenue streams, including wealth and transactions, and a high single-digit loan growth, coupled with falling provisions. These could position it for a healthy profit rebound on a ‘firm trajectory’ in 2021, according to BI.

DBS was one of the top picks by Maybank’s research team, which gave a ‘buy’ idea and S$35.11 target on the counter last week.

Maybank described DBS as a proxy to corporate lending demand, particularly in North Asia. Its analysts also favour the lender’s potential for accretive mergers and acquisitions.

DBS boosts security for cardholders

The lender on Friday announced new features for all its 3.6 million debit and credit cardholders, offering them real-time control over their card accounts through the DBS/POSB digital banking app.

This will provide an additional layer of protection for customers to safeguard their accounts and protect against fraudulent transactions, DBS said.

Principal cardholders are now able to manage access and stipulate spend limits on their own cards and their supplementary cards.

Moreover, customers can receive instant alerts whenever a transaction is blocked due to pre-set controls.

Keen to buy, sell and short DBS shares?

Go long or short with CFDs on DBS and 16,000+ shares with our award-winning platform.* Perfect your technique with S$200,000 worth of virtual funds in your free demo account. Create a free demo account here.

* Based on the Investment Trends 2018 Singapore CFD & FX Report based on a survey of over 4,500 traders and investors. Awarded the Best Online Trading Platform by Influential Brands in 2020. Awarded the best retail FX provider for Asia by FX Markets in 2020

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