Singapore Banks - Impact of Property Measures Tweak on - BUY UOB
- This relates to the Singapore government’s today-announced tweaks to the residential property cooling measures, which includes
- the reduction in Sellers Stamp Duties (SSD) holding period,
- relaxation of Total Debt Service Ratio (TDSR) for retirees, and
- alignment of stamp duties on transfer of equity interest in entities whose primary tangible assets are Singapore residential properties.
- Whilst the tweaks are minor, in our view, the benefits to the three banks will vary as their exposure to property loans differ a fair bit.
- OCBC & UOB’s exposure to housing loans stands at 27% each, whilst DBS’ is a lower 21%.
- UOB has the highest percentage exposure to building & construction loans at 23%.
- All three banks recorded 4Q16 low single-digit housing loans and building & construction loans sequentially.
Our view is that UOB will be the key beneficiary
- Our view is that UOB will be the key beneficiary as it has the largest exposure to property-related loans.
- In addition, we also like UOB for its higher general provisioning to loan ratio, which provides scope for write-back of general provisions in the quarters ahead.
- UOB is our only buy recommendation within the Singapore banking space – our TP of SGD23.90 is pegged to 1.2x 2017F P/B. This is the link to our recent UOB report UOB : Lower Overall Provisions Due To GP Write-back .
- We have NEUTRAL recommendations on DBS and OCBC.