UOB KayHian tips DBS (D05.SG) 3Q net profit of $647 million, +14.9% on-year but weaker sequentially after “phenomenal” 2Q net profit of $718 million excluding HK impairment; says DBS preferred Singapore bank pick due to attractive valuation, efforts to increase Singapore loan/deposit ratio.

Says loan growth moderated to low- to mid-single digit in 3Q after +11.8% in 1H10. “We expect DBS to continue gaining market share in Singapore. The strengthening of the Singapore dollar...has, however, restrained loan growth from overseas operations.” 

 

Adds, buoyant capital market activities has resulted in steady fee income growth, cost/income ratio may drift higher to 43.8% vs 2Q’s 39.5% on new IT systems, more staff, ATMS. Expects asset quality to continue improving, credit costs to remain muted. 

 

Maintains earnings forecasts ($3.4 billion FY10F) based on loan growth of 17.9% for 2010, 8.3% for 2011. Rates stock at Buy with $19.55 target price, based on 1.67X P/B. Results due November 4. 

 

Shares last down 1.1% at $14.56.