Banks

Banks: CLSA remains Underweight on the local banking sector
- Aggregate NPAT was down 4% y/y, but up 1% q/q with DBS the only bank to beat expectations, though it was low quality.
- Key P&L trends: Higher customer asset yields, constrained market-related income, and contained discretionary expenses. Bad debts relatively low.
- Key B/S trends: Weak/negative loan momentum, reduction of expensive fixed deposits, reduction in commercial paper use
- Outlook: Inorganic activity to feature, low single digit loan growth, stable to widening NIMs, fee income growth, neutral jaws, and slight deterioration to asset quality
- On YTD basis, banks have underperformed STI, CLSA expects this to continue with revenue and asset quality headwinds, EPS contraction, ROE contraction, and rising RWA density.
- Upgrade UOB to Outperform from Sell, TP: $17.95, maintains DBS and OCBC with Sell ratings and TPs of $13.30, $7.35.