Banks

Banks: our 3 banks are up 0.2-0.6% this morning. Sector lending growth picked up in Aug after slowing in Jul, on rebound in corporate loans ($160.7 bn, +1.6% mom), and higher consumer loans ($142.4bn, +1.3% mom). However we note that the banking environment is likely to remain challenging over the longer term, in view of the following
i) data does not capture the effects of the latest property measures introduced on Aug 30, and loan growth, particularly housing credit, may slowdown again from Sep,
ii) recent data on industrial pdtn and exports suggest weaknesses have emerged in other sectors, analysts have downgraded next yr’s GDP growth forecast to 4.2% from 5%,
iii) greater competition in the consumer market as more foreign banks like India’s ICICI Bank continue to muscle in,
iv) record low SIBOR rates.

Citi remains unexcited about the bank sector, sees no near term catalyst. Rates DBS as Hold (TP $14.40), OCBC as Sell (TP $8.40), UOB as Sell (TP $17.80).