Investors have appeared more optimistic about the banks' prospects, with all three stocks gaining more than 15% this year as of Friday's close — outpacing the benchmarkKrishna Guha, an equity analyst at investment bank Jefferies, said in a report this month that a better earnings outlook could send the city-state's bank stocks higher.
The analyst has a "buy" rating on all three banks and raised his price targets for them in early-April.OCBC: 13.50 Singapore dollars, which is a 13% upside.Guha said growth in the banks' loans business is picking up, while lending margins may recover. Buoyant deal-making activities in the financial markets could also boost service fees for the banks, he added.
Lum said in a report this month that net interest margins — a measure of lending profitability — would stay weak even as bank earnings recover. He explained that competition in the Singapore housing loan market is one factor that could keep a lid on lending margins.Daiwa's top pick among the three Singapore banks is OCBC, which it rated "outperform." Both DBS and UOB have a "hold" rating.