Friday, March 18, 2011

SG Banks

Citi has Asean banks Strategy report. Singles out OCBC as SG’s 'top gun' for next 5 yrs. Note that OCBC delivered best 5 yrs total returns, with 5 yr CAGR of 8.1%, a 3 yr CAGR of 6%, and 8.6% one-yr return, with share price rising 48% over 2005-2010 period, making it the top-performing bank in Spore…..

Add that bank was also the most defensive going into the 2008/2009 crisis and best performer coming out. Quote DBS as 'dark horse' in SG, with strong and liquid balance sheets for growth but sub-par ROA and ROE. Conclude that SG remains challenged due to low profit economics, capital ratio constraints enforced by conservative regulator, and greater need to execute on regional growth to deliver superior returns.

CLSA has Banks report. Maintain UnderWeight with UOB as top pick. Note that Siboring recovering in SG interest rates and NIM remains unlikely in 2011. SIBOR remains tied to US interest rates and there is little sign in SG or US yield curves of a rate recovery in 2011.
While bank NIMs should bottom out in 1H11, caution that recovery in NIMs remains a 2013 story. Maintain UnderWeight on SG banks, with UOB (BUY) as top pick, on relative value.

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