DBS could be most susceptible to rate cuts amid slowing sector outlook
Given how DBS is currently trading at 1.3 times FY2023 price-to-book value (P/BV) versus its peers’ ratio of about one time, and signs of a potential slowdown in the Federal Reserve’s pace of its rate hikes have led CGS-CIMB to downgrade its sector call to “neutral” from “overweight”.
CGS-CIMB said DBS could be the most susceptible to rate cuts among its peers, as incremental margin expansion has been priced in for the stock at this stage.
The bank’s target price has been cut to S$36.50 from S$38.75 to account for a lower terminal growth assumption.
“Although DBS is a key beneficiary of rising rates given its robust funding profile, progressively higher funding costs should nonetheless affect the quantum of NIM,” commented CGS-CIMB in a report on Tuesday (Dec 6).
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