Singapore Banking Stocks
DBS vs OCBC vs UOB
DBS GROUP HOLDINGS LTD
SGX: D05
OVERSEA-CHINESE BANKING CORP
SGX: O39
UNITED OVERSEAS BANK LTD
SGX: U11
Singapore Banking Monthly - SIBOR Will Keep NIMs Elevated
- Singapore’s domestic loans rose 5.7% y-o-y in April. This is a mild acceleration from the 1Q18 growth of 4.8%.
- Loans growth in Hong Kong continues to be robust. Loans expanded 17.1% y-o-y in April.
- 3-month SIBOR near 10-year highs at 1.51% in May.
- Oil & gas sector is improving but short-term recovery remains subdued.
- Maintain ACCUMULATE for the Singapore Banking Sector.
Singapore’s domestic loans in April grew 5.7% y-o-y.
- Loans growth in April was driven by business loans that expanded 6.1%.
- Consumer loans growth in April was 5.1% y-o-y, sustaining the strong momentum we saw since in November.
- Mortgage loans maintained its steady pace of growth at 4.7% y-o-y.
- Car loans growth spiked to 5-year highs with a rise of 7.8% y-o-y in April.
Hong Kong’s loans in April grew 17.1% y-o-y – fastest in 6 months.
- Loans growth was supported by HKD loans growth of 25% y-o-y, boosted by IPO financing. Excluding IPO, HKD loans rose 19%. Hong Kong's residential volume and value showed renewed vigour after some weakness in January.
- According to JLL Hong Kong, May residential sales volume was up 55.9% m-o-m and value was up 59.3% m-o-m, driven by demand from first-time homebuyers and the ability of developers to drive up prices in the secondary market where supply is limited.
SIBOR and SOR to continue their upward trend.
- 3-month SIBOR crept up in May to near 10-year highs. We expect the Singapore banks’ NIMs to be on a gradual upward trend given expectations of 3 or more Fed rate hikes in 2018.
- NIM expansion will be the main share price catalyst for the next few quarters.
- Despite the 40bps increase in SIBOR this year, mortgage loans growth has remained resilient at 4.4% y-o-y. Therefore, we do not expect new mortgage loans to be adversely affected by the gradual increase in SIBOR.
Offshore oil and gas operating conditions are improving, but recovery is weak.
- Global jack up utilisation rate has bottomed out in February and now hovering around c.60%. However, global day rates have been on a downward trend and short-term recovery is unlikely because utilization rates have not reached high enough levels for offshore contractors to enjoy much pricing power.
- Oil prices rose but charter fees stayed flat even though the volume of business increased. The industry is burdened by structural overcapacity and is unlikely to see a recovery in profitability in the short term.
INVESTMENT ACTIONS
Maintain Singapore Banking Sector at Accumulate.
- Loans growth remains healthy. Banks are guiding for high single-digit loans growth in 2018. The vibrant loans growth in Hong Kong should help banks meet this target. The continuing rise in SIBOR and SOR will keep NIMs elevated.
- Volatility in the capital market may place some downward pressure on wealth management business. Banks are benefiting from both expanding loan volume and margins this year.
| Rating | Forecast Dividend (SGD) | Target Price (SGD) | Total Return | |
|---|---|---|---|---|
| DBS Group Holdings | Accumulate (Maintain) | 1.20 | 32.70 | 19.79% |
| Oversea-Chinese Banking Corp | Accumulate (Maintain) | 0.40 | 14.90 | 22.11% |
| United Overseas Bank Limited | Accumulate (Maintain) | 1.00 | 31.70 | 16.37% |
Tin Min Ying
Phillip Securities
|
https://www.stocksbnb.com/
2018-06-04
SGX Stock
Analyst Report
32.70
Same
32.70
14.900
Same
14.900
31.700
Same
31.700
