SINGAPORE (Apr 15): RHB Group Research is maintaining its “overweight” call on Singapore banks, after the Monetary Authority of Singapore (MAS) on Friday kept its monetary policy settings unchanged amid a worsening global growth outlook and low inflation.

MAS uses the exchange rate as its main policy tool. After tightening policy twice last year, the central bank last week left the slope and width of the currency band unchanged, as well as the level at which it is centred.

MAS says the stance is “consistent with a modest and gradual appreciation path” of the currency band.

“With the modest and gradual appreciation path for the SGD maintained, we believe the tracking of FFR (Fed Fund rate) and SIBOR (Singapore Interbank Offered Rate) will remain,” says analyst Leng Seng Choon in a report on Friday.

“Whilst the 3-month SIBOR may see limited upside from the current 1.94%, banks should still record 1H19 NIM widening from the lag effect of the SIBOR’s rise over the past 4-6 months,” he adds.

In addition, he believes Singapore banks could see a boost from further efficiencies from digitisation over the next few years.

RHB has “buy” calls on DBS Group Holdings and United Overseas Bank (UOB).

The brokerage says its target price of $29.60 for DBS is at the high end of consensus, and pegged at 1.43 times FY20F book value.

Meanwhile, its target price of UOB is pegged to 1.35 times FY19F book value. RHB says it is reviewing its target price for UOB to be pegged to FY20F BV.

As at 12.09pm, shares in DBS are trading 9 cents higher at $27.07 and shares in UOB are trading 1 cent higher at $16.69.