Singapore Banks - Maybank Kim Eng 2017-01-03: Still Uninspiring

Singapore Banks - Maybank Kim Eng 2017-01-03: Still Uninspiring Singapore Banks DBS GROUP HOLDINGS LTD D05.SI  OVERSEA-CHINESE BANKING CORP O39.SI  UNITED OVERSEAS BANK LTD U11.SI 

Singapore Banks - Still Uninspiring


Uninspiring Nov’s system data 

  • Nov’s banking system data validate our negative view on the sector.
  • Fundamentally, our outlook on Singapore banks has not changed (link).
  • System loan growth continued into its 11th consecutive month of negative YoY growth and asset quality continues to worsen. Banks will focus on driving revenue and cost containment to offset more provisions that need to be set aside in the face of worsening asset quality.


Weak loan growth, system LDR eased 

  • System loan growth now at -1.2% YoY vs -2.2% YoY in Oct. While an improvement across lending in most sectors, overall outlook remains challenging. 
  • Corporate loan growth at -1.9% (Oct: -3.6%) and consumer loan growth slid to +0.7% (Oct: +1.7%). We estimate ~1-2% loan growth in FY17E for Singapore banks as we think: 
    1. lacklustre lending environment and 
    2. banks are likely to be careful in their lending and will work with customers whom they are familiar with.
  • Deposits grew 4.9% YoY, with DBU and ACU deposit growth at +6.2% and +3.5% respectively (ACU growth in SGD terms). The increase in ACU deposit growth is largely attributed to USD appreciation. System LDR eased to 97.8% from 98.3% in Oct.


Worsening asset quality 

  • As of Sep 2016, banks’ special mention and classified exposures continued to worsen. System NPL ratio was 2.1%, a level not seen since Jun 2010. 
  • Our credit costs estimate is 39-44bps on average for Singapore banks from FY16-18E. We estimate that for every 10bps decline in credit costs, banks’ FY17-18E net profits will increase by c.6-7%.


Maintain sector Negative; Prefer UOB 

  • We maintain NEGATIVE on Singapore banks and prefer UOB (HOLD, TP SGD18.36) for its lower exposure to O&G and China, and bigger general provision buffer.






Ng Li Hiang Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2017-01-03
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 18.360 Same 18.360
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 15.68 Same 15.68
SELL Maintain SELL 7.40 Same 7.40




Advertisement




MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......


ANALYSTS SAY


loading.......