Friday, October 28, 2011

SG Banks

SG Banks: Goldman Sachs has sector report. House forecast SG banks’ core net profit to be lower by 5% yoy/4% qoq this quarter, mainly weighed by UOB. Of the Singapore banks, see OCBC reporting best on qoq and yoy basis with estimation at: OCBC $573mn, +1% yoy, DBS $712mn, -1% yoy, and UOB $588mn, -15% yoy. Corresponding Bloomberg consensus estimates are $544m, $695m and $600m respectively.

House rating is below consensus and recommend to Buy DBS only on undemanding valuations. Add that SG banks have largely underperformed since last results, with DBS the most, largely reflecting concerns of higher NPLs and slower growth expectations. Consensus has cut FY12-13E earnings by 8-12%; and house lowers FY12-13E earnings by 13-22% to now below consensus by 5-16%, given slower topline growth and higher credit costs.

Despite weak earnings outlook, retain Neutral sector stance, given SG banks’ not demanding valuations; trading near +1 standard deviation below median P/B. Also hink 3Q steady earnings are also likely to be supportive of share prices near-term.

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