Singapore Banks: What is the ceiling for the rerating?

研报英文原文证据摘录

Singapore Banks: What is the ceiling for the rerating?

an valuations stretch?

The key debate is how much further implied ERPs can compress. On our estimates,

Singapore banks now trade around 1SD below historical average ERPs, at about 5.9%

for DBS and OCBC, and 6.7% for UOB. While this suggests valuations are rich relative to

history, the DM comparison looks less demanding. We think Singapore banks still have a

relatively attractive combination of risk premium and yield, with average distributable

yields of around 5.0%, below US banks, HSBC/StanC but higher compared to Australian

banks (Figure 9SGbanksvsDMbanks–distributableyields). This supports the case that valuations can remain elevated, although

further gains will have to depend increasingly on sustained inflows and sentiment.

Q226 preview: Easing NIM pressure; focus on wealth

We expect a resilient set of Q226 results. While lower rates should continue to weigh on

margins, the headwind is easing, with only a modest 1–3bp q/q decline in NIM expected

in Q2. Loan growth remains healthy, with banking system loans up 2.2% q/q and 4.9%

YTD as of May 2026, while asset quality trends remain benign and credit costs should

stay comfortably within guidance. Wealth management momentum should also remain

supportive, with DBS and OCBC expected to deliver strong WM fee growth (c40%+ y/y).

Overall, we expect earnings to remain supported by healthy volume growth, resilient

asset quality and continued strength in wealth management, supporting attractive

capital returns and dividends across the sector.

Rising tides, different boats

We raise FY26E/FY27E EPS forecasts by 1-4% across the banks, reflecting stronger WM

fees, resilient loans and deposit growth, and a better-than-expected NII outlook. Our