The three local banks are currently dominating the month-to-date index gainers chart. DBS leads the pack with a 5.6% increase, followed by OCBC's 3.1% and UOB's 0.9% versus the STI's 0.9%. The strong performance in all three banks comes on the back of their third quarter results released in the last two days of October. 

Macquarie Equity Research (MER) released a research note on 12 November with updated earnings per share estimates, target prices and recommendations for all 3 banks. Here are the excerpts…

Singapore banks – still strong
Trends in the third quarter of 2014 were again good for the Singapore banks. All three banks posted higher than expected profits driven by solid revenue growth. All of that led to further market earnings per share (EPS) upgrades for the sector

MER thinks UOB showed the best quarterly trends and given the relative share price underperformance over the past two quarters, UOB is MER’s new top pick among the Singapore banks (before DBS).

DBS – New Target Price S$ 22.00 – Outperform - (i) earnings beat from better than expected revenues (ii) still some asset quality issues in India and cut in loan growth guidance (iii) market share gains in Transaction Banking.
 
UOB – New Target Price S$ 26.50 – Outperform – (i) earnings beat from better fee income (ii) asset quality trends looked much better versus 2Q14 (iii) the funding position improved (iv) strong capital ratios of 12.6% Tier 1 Common Equity ratio.
 
OCBC – New Target Price S$ 9.50 – Upgrade to Neutral – (i) earnings beat from GEH and WHB while core banking activities missed MER’s expectations (ii) slight uptick in Singapore and Malaysia NPLs (iii) the accounting impact from the Wing Hang Bank consolidation was more favourable than MER expected.

Outlook
MER remains Overweight the Singapore banks on a regional sector basis.
 
Given the strong share price performance of DBS, MER is making UOB its new Top Pick among the Singapore Banks (previously DBS).

OCBC remains MER's least preferred pick among the Singapore banks.

Source: Macquarie Research - 14 Nov 2014