DBS Group Holdings

UOBKayhian on 24 June 2015

FY15F PB (x): 1.3
FY16F PB (x): 1.2

DBS is able to weather any turbulence brought about by the normalisation of US interest rates as developed markets, such as Singapore and Hong Kong, account for 82% of its total income and 65% of total loans. Loan growth has decelerated but margins should expand in 2Q15. Maintain BUY. Target price: S$25.08. DBS would be the most resilient and better able to weather any turbulence brought about by the normalisation of US interest rates. Developed markets, such as Singapore and Hong Kong, account for 82% of its total income and 65% of total loans. Prime beneficiary of higher interest rates in Singapore. UOB Global Economics & Markets Research forecasts 3-month SIBOR to reach 1.30% at end-15 (previous: 1.0%). We estimate a 1% increase in interest rates would improve DBS’s NIM by 10bp to 1.78% and improve ROE by 0.6ppt to 11.3%. Maintain BUY. Our target price of S$25.08 is based on P/B of 1.56x, derived from the Gordon Growth Model (ROE: 11.3%, required return: 7.8% and constant growth: 1.5%).