SINGAPORE (Dec 11): Better non-interest income franchise and healthier asset quality indicators with a larger Greater China presence are the reasons why DBS is picking OCBC over UOB.

While there will be little difference in the relative earnings performance of the Singapore banks in 2016 as overall drivers are expected to be lacklustre, differences in non-interest income potential and regional presence will matter, says DBS Group Research in a Thursday report.

Although expectations are rife of the first Fed rate hike in years, DBS believes the uptick in NIM may be muted as funding costs catch up and there is little room for banks to leverage on now that S$ loan-to-deposit ratio is at a high of 87% from two years ago. And with loan growth likely stay in the low single digits, topline growth will be slower.

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