Loan Growth Worries Weighing On DBS Group

Even though DBS Group (OTCPK:DBSDY) is one of the best-regarded banks in Asia, it’s not immune to macro-economic concerns. If anything, the company’s position as a significant lender in China and Hong Kong and a large player in trade financing makes it even more sensitive to the health of the global economy. While DBS Group enjoyed a nice two-year run on easing credit quality concerns, new worries about loan growth have thumped the shares over the past three months.

I don’t want to undersell the risks to DBS Group if the trade dispute between the U.S. and China ratchets up, nor the risks from a weaker Chinese economy (and particularly its property market) or a slowing U.S. recovery/expansion. DBS Group needs loan growth to really thrive and any/all of those factors could create loan growth pressures, as well as efforts to cool the Singaporean housing market. That said, this is a bank that has been tested by macro challenges in the past and came through. With the shares trading more than 20% below my estimate of fair value, I’d at least consider these shares as candidates for a watch list.

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Loan Growth Worries Weighing On DBS Group