Wednesday, December 18, 2013


Banks: With the odds of the US Federal Reserve tapering its quantitative easing programme on the rise, interest rates are set to rise. The implications will manifest in banks’ net interest margin (NIM), asset quality and loan growth. Based on Maybank-KE's estimates, every 5bps increase in NIM will raise FY14F-15F EPS by 4% on average. The earnings uplift is significant after the past few years of depressed NIMs. Meanwhile, every 5bps increase in credit charge will impact earnings by 2.5-3.1%. Maybank-KE believe DBS is best positioned to take advantage of a rising interest rate environment, given its liquid balance sheet and strong deposit franchise with cheap funds accounting for 58.4% of total deposits. House have a BUY call on DBS with $19.70 TP, based on 14x FY14F core EPS, a slight premium to its rolling PER average since 2005.

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