SG Banks

SG Banks: Morgan Stanley note that strong broad based lending brings YTD loan growth to +8.8%, Apr11 loan growth +21.9% yoy vs +19.9% yoy in Mar 11. Deposit growth was +12.7% yoy up from +10.8% in Mar 11 and CASA mix improved a further +14bps to 57.95% of total deposits. Interest rates remain low and expect rates to stay at current levels through 2H2011 with first pick up in rates likely happening in 1Q12…..

House prefers exposure in DBS for 2 reasons: 1) see DBS as the most geared to rising rates from 1Q12 onwards. 2) believe that DBS will deliver benefits from its organic transformation program, which has not been priced into the stock.

SG Banks: RBS see significant potential upside to 15% FY11F loan growth for SG, which reinforces positive view on the sector. House prefers UOB and DBS over OCBC on valuation grounds.

SG Banks: BNP Paribas expect an orderly process to internationalise Rmb. Bankers opine RMB internationalisation is one event to watch and is a step in right direction and a gradual approach significantly reduces risks. Tip DBS to gain the most, given its largest presence in Greater China and DBS's forte in treasury and wealth management should carry it ahead of sector peers…..

Pick OCBC as top sector pick, for its differentiated franchise with niches in insurance, retail banking and private banking, and its well-articulated and well-executed set of corporate strategies.