SG Banks

SG Banks: Citi note that Basel 3 less harsh than feared and do not expect immediate capital mgmt. Add that banks are likely to maintain capital levels while loan growth remains strong and MAS is unlikely to allow banks to aggressively pare capital, while there is a requirement to implement a countercyclical capital framework by Jan 2016 and banks may view current 40-50% dividend payout ratios are already adequate, although it remains to be seen if scrip dividend schemes will continue.

SG Banks: IIFL has sector report. Note that SG Banks in track for record profits. Upgrade earnings estimates for Spore banks by 1-5% for 2011 and 4-9% over 2010-13 mainly due to faster loan growth and expect 18% YoY net profit growth in 2011 and 20% CAGR over 2010-13. Declining NIMs (due to exceptionally low SIBOR rates) have been a key concern for SG banks…..

However, faster loan growth, robust fee income and improving loan-to-deposit ratios would offset pressure on NIMs. Maintain positive stance on SH banks, with DBS (BUY) and OCBC (BUY) as preferred picks.