SINGAPORE (Oct 22): DBS is maintaining its “overweight” recommendation on Singapore banks within Asean and Singapore and continues to prefer OCBC over UOB for its healthier asset quality, Greater China expansion and its wealth management platform.

In a report out on Thursday, analyst Lim Sue Lin says 3Q15 will not be an “exciting” quarter and expects non-interest income to be mixed across the three Singapore banks.

“UOB should see a better quarter after a weak 2Q while OCBC may see a slight dent to its insurance income due to marked-to-market losses as credit spreads narrow,” says Lim.

Meanwhile, non-performing loans might arise from Asean-centric operations, namely Malaysia and Indonesia.

And although OCBC’s provision levels and NPL ratios have stayed low, Lim says she would not be surprised if it inches in coming quarters.

“We note that OCBC’s Greater China books remain healthy and direct onshore exposure remains small.” she adds.

Finally, Loan growth has been sluggish and such trends may be prolonged, even till next year.

“For 2015, we expect loan growth to stay below 5%. There could be downside risk to growth in 2016,” says Lim.

DBS is down 0.2% at $17.86, OCBC Bank is up 0.5% at $9.41 and UOB is up 0.7% at $20.25.