DBS

DBS: DBGS reported 4Q14 core PATMI of $838m (-17% y/y, +4% q/q), falling short of lofty expectations of $935m as a result of weaker-than-expected fee income, plunge in net trading income and higher-than-expected overheads.

Nonetheless, Maybank-KE still likes DBS for its operational strength, especially in its core businesses.

We note that:
1. NIM improved 3bps q/q and 10bps y/y to 1.71%, helped by better funding costs and wider average asset yields

2. Loan growth was strong, at 5% q/q or 11% y/y, the result of regional non-trade corporate loans and consumer loans

3. Liquidity profile is still favourable – and still the best among Singapore banks – at 79% SGD LDR, with room to further benefit from expanding margins

4. Asset quality is strong, with NPLs 0.2% lower q/q and 16.1% lower y/y, especially in housing loans.

As such, DBS remains the top pick for SG Banks exposure, despite near-term selling pressure. The house reiterates Buy with TP of $23.50 pegged to 13x FY15E EPS in line with its 10-year historical mean.