RHB Research has maintained its “buy” rating for DBS Group Holdings and a “neutral” rating for United Overseas Bank (UOB) following the release of their 3QFY2025 results. This stance contrasts with the calls made by OCBC Investment Research, which had downgraded DBS to “hold” and upgraded UOB to “buy” after the same set of results.
RHB Research cited DBS’s strong 3QFY2025 performance, which saw a 9% year-on-year increase in net profit to SGD 2.24 billion, driven by higher net interest income and non-performing loan (NPL) recoveries. The research house also noted that DBS’s return on equity (ROE) improved to 14.1%, surpassing its long-term target of 12-13%. Additionally, RHB highlighted DBS’s robust capital position, with a common equity tier-1 (CET-1) ratio of 14.1%, providing a buffer against potential risks.
In contrast, RHB maintained its “neutral” rating for UOB, citing the bank’s lower net interest margin (NIM) and higher credit costs compared to DBS. While UOB’s 3QFY2025 net profit rose 6% year-on-year to SGD 1.13 billion, its NIM declined 10 basis points to 1.82%, and its credit costs increased to 23 basis points. RHB also noted that UOB’s ROE of 11.4% was lower than DBS’s, and its CET-1 ratio of 13.4% was slightly below DBS’s.
The differing views between RHB and OCBC Investment Research reflect varying assessments of the banks’ performance and prospects. OCBC had downgraded DBS due to concerns over its exposure to the slowing Singapore property market and potential risks from its overseas expansion. In contrast, RHB believes that DBS’s diversified business model and strong capital position will help it navigate these challenges.
Overall, RHB’s “buy” rating for DBS and “neutral” rating for UOB suggest that the research house is more optimistic about DBS’s prospects, citing its strong earnings momentum, robust capital position, and improving ROE. In contrast, UOB’s lower NIM, higher credit costs, and lower ROE have led RHB to maintain a more cautious stance on the bank. The differing views between RHB and OCBC highlight the complexities and uncertainties of the banking sector, and investors should carefully consider these factors when making investment decisions.