SG Banks

Banks: There has been mounting concerns over potential loan defaults by foreigners who had snapped up Singapore properties in 2005 to 2011, after more luxury homes in Sentosa and Orchard, sold at losses, hit headlines recently. Maybank-KE sees minimal risks of a massive withdrawal of foreign equity from the housing market without a global economic collapse, taking comfort in the tighter credit criteria which have been applied by the banks to foreign investors since 2009, limiting LTVs to this group of less than 60%. In the event of any housing meltdown, OCBC would be most at risk, given its backend-loaded loan growth, while DBS should be the least, thanks to its modest housing loan (CAGR of 8.2%) in the past nine years. Maybank-KE maintains OVERWEIGHT on the sector and expects re-rating to continue in 2015 from continued earnings deliveries. DBS (Buy, TP $23.50) is its first choice, followed by UOB (Buy, TP $26.70), while house remains cautious on OCBC (Hold, TP $10.70) over its Wing Hang Bank integration risks.