DBS and OCBC downgraded to neutral

Macquarie says a convincing bull market could make them switch back, amidst improvement in earnings and sentiment.

Here’s more from Macquarie Equities Research:

We downgrade DBS to reflect the risks of the Danamon acquisition, which we view as overpriced and dilutive by approximately S$1 per share. This is already reflected in DBS’s valuation, but we think the shares will remain capped until the myriad uncertainties surrounding the deal have lifted – which may take some time.

We also cut OCBC to Neutral given its relative valuation and expected earnings volatility from insurance and potentially rising credit costs. A convincing bull market could make us switch back, as earnings and sentiment would improve.