Singapore Banks - RHB Invest 2019-10-23: NIM Likely Peaked in 2Q19

Singapore Banks - RHB Invest | SGinvestors.io DBS GROUP HOLDINGS LTD (SGX:D05) OVERSEA-CHINESE BANKING CORP (SGX:O39) UNITED OVERSEAS BANK LTD (SGX:U11)

Singapore Banks - NIM Likely Peaked in 2Q19

  • We are NEUTRAL on Singapore banks, with UOB (SGX:U11) as our only BUY recommendation. We spoke to the three banks prior to their blackout period before 3Q19 results release – they guided for NIMs to have peaked in 2Q19 and sluggish 3Q19 loan growth.
  • In addition, DBS (SGX:D05) and OCBC (SGX:O39) have relatively larger percentage loan exposure to Greater China (including Hong Kong), and we believe this puts them at risk of more loan loss provisioning going forward.



Expect 3Q19 NIM to have narrowed sequentially.

  • The 3-month SIBOR has weakened in recent months. Our recent checks with all three banks suggest 3Q19 NIM should be narrower than 2Q19, due to weakening 3-month SIBOR in recent months; and corporate loan yields being pressured as banks compete for higher-quality loans.


Weak 3Q19 home mortgage numbers.

  • Indications point to soft home mortgage disbursements in 3Q19 – July and August Monetary Authority of Singapore (MAS) data on home mortgages have been weak. However, business lending remains relatively stable. The three banks could possibly still record mild 3Q19 sequential overall loan growth.


3Q19 non-interest income should hold up.

  • Wealth management should remain respectable in 3Q19, whilst loan-related fees (which are correlated with loan growth) are likely to be more subdued.


3Q19 asset quality remains good.






Leng Seng Choon CFA RHB Securities Research | https://www.rhbinvest.com.sg/ 2019-10-23
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 25.300 SAME 25.300
NEUTRAL MAINTAIN NEUTRAL 11.500 SAME 11.500
BUY MAINTAIN BUY 29.500 SAME 29.500



Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......



ANALYSTS SAY


loading.......