Banks: Maybank-KE highlights that 4Q14 earnings were uninspiring but operating metrics stayed sound, DBS’ in particular. Its NIM expanded 3bps q/q, being the only bank with NIM improvements, and expects stronger margins ahead. DBS’ management also sounded most optimistic.
DBS has the largest exposure of $50b oil and commodity sectors, followed by OCBC’s $25b and UOB’s $17b, but there are no signs of stress yet. Banks have set up more buffers to anticipate lumpy provisions as credit outlook dims.
Liquidity profiles remained good. DBS has the lowest SGD LDR of 79%, relative to OCBC’s 84%, and UOB’s 95%. The house opines that banks are well-equipped for a potential USD crunch, given their ability to raise USD deposits, which grew 33.6% p.a. over the past 4 years. Alternative funding sources, e.g. commercial papers and currency swaps with MAS should help too.
Meanwhile, loan growth may stay limp in 2015, and adjusts FY15-16 projections accordingly, but keeps TPs unchanged.
Maybank-KE remains most bullish on DBS (TP: $22.70), followed by UOB (Buy, TP: $26.40). OCBC remains less preferred (Hold, TP: $11.10)
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