- The SG Banks has been a “crowded” trade on the back of dividend spikes and capital return which we believe has reached the end of the cycle. With valuations above mean, we see a “normalisation” trade in the SG Banks.
Downgrade SG Banks on heightened risks to earnings, asset quality even as dividend yields remain high.
- - Read this at SGinvestors.io -
- In face of uncertainty, we believe that Singapore Banks’ managements are likely to be more prudent in capital management to brace for a more uncertain global economy even as current forward dividend yields are 6-7%. As the trade war progresses into 2025, we believe any further revision of absolute dividends per share will be placed on hold.
- That said, dividend yields may provide some support to share prices should the sell-off be too pronounced.
A more pronounced sell-off may be on the cards compared to 2018 US-China trade war.
- - Read this at SGinvestors.io -
- The peak-to-trough sell off in Singapore Banks during 2018 ranged ~22% to 35% where Singapore Banks were trading near then-peak valuations at 1.3x to 1.5x forward FY18 P/BV on expectations of NIM acceleration and clean asset quality with oil and gas woes largely accounted for. Share prices only found its bottom towards end 2018.
- With the existing announced scope of “bazooka” US tariffs, we believe a more pronounced sell-off may be on the cards through 2025 as valuations are, too, near all-time high at 1.2x to 1.8x forward FY25F P/BV.
What are we watching?
Loan growth, wealth management income may take hit.
- Read more at SGinvestors.io.
