SINGAPORE (Oct 14): Maybank Kim Eng has made a sharp reversal on its call on Singapore banks. In an Oct 14 report, the brokerage downgraded its call on the sector from “overweight” to “underweight”, as potentially fatter interest margins will be offset by higher chances of delinquent customers.

Maybank Kim Eng’s latest call is based on its own tests on sensitivity of banks customers’ net interest margins (NIM) to repricing risks, credit risks and yield-curve risks form firmer interest rates. The brokerage also tested interbank NIMs against the spread of the SIBOR and the LIBOR.

Specifically, DBS, widely seen as the biggest beneficiary of rising rates among the three because of its largest deposit base, is now rated a “sell” with a target price of $15.90; OCBC, similarly, is a “sell” with a target price of $8.50.

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