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Banking Sector -Overweight
May-07 stats: Loan growth dips to 8.7% y-o-y
Loan growth dipped to 8.7% y-o-y and 2.7% q-o-q in May-07, still at the highest point prior to achieving 10% y-o-y growth the last two months.
Despite that, acceleration in growth continued for consumer loans at 4.7% y-o-y and 1.7% q-o-q (Apr-07: +4.2% y-o-y; +1.4% q-o-q), with housing loans growing their highest at 5.9% y-o-y and 2.7% q-o-q (Apr-07: +4.8% y-o-y and +1.9% q-o-q). Construction loans continued double-digit growth at 19.0% y-o-y and 8.8% q-o-q (Apr-07: 26.7% y-o-y and 8.7% q-o-q).
Deposits continued their pace at 24.7% y-o-y and 6.9% q-o-q, slightly slower than Apr-07 which grew 26.3% y-o-y and 7.7% q-o-q. Meanwhile, LD ratio was marginally lower at 67.1% from 67.9% the previous month.
1st half year report should be very positive... has potential to hit $10 after report released...
This is the most affordable of the 3 major banks...
Buy on current weakness and wait for windfall...
Vickers upgrade the banking sector to Overweight from Neutral as they believe there's potential for Singapore banks to outperform the market, with stronger-than-expected loan growth in 2H07. Project 2007 loan growth at 10% y-o-y and earnings to grow 18% y-o-y.
Loan growth momentum has been accelerating over March and April 07 to the 10% mark y-o-y, and expect such trends to continue, particularly in housing and construction. Robust construction activities and private residential sectors are a boon to the banking sector.
BUY call from DBS Vickers.
Sustainable growth with regionalisation catalyst BUY; S$9.35; Price Target : 12-month S$ 10.20 (Prev S$ 9.75)
Story: Sustainable earnings growth and ROE. Focus on regional expansion in China and Indonesia.
Point: Expect NIM to remain strong, backed by non-interest income.
Capital management would mainly be focused on share buy back rather than special dividends.
Relevance: Maintain Buy with target price upgraded to $10.20 (from $9.75) based on Gordon Growth Model. As almost all of its profits are derived from the two key markets (Singapore and Malaysia), we see regional expansion a crucial element for growth and diversification as well as a catalyst for re-rating.
revisiting the local bank merger..
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Banks feel no urge to merge for now.
while it can never be ruled out - seems unlikely to take place in the near term, banking
chiefs say. Record profits, the way the banks have charted a regional growth path, and the
healthy state of developments in the banking sector mean that there is little pressure for the
three local banks to merge. And three local banks may not be too many for Singapore,
given the growing economy and the government's plans for a future population of more
than 6 million people, said Wee Ee Cheong, chief executive of United Overseas Bank
(UOB), who is also chairman of the Association of Banks in Singapore. (BT 15May)
Another round of domestic banking consolidation -DBS, UOB, OCBC chart own course for regional growth. All three Singapore banks
share regional ambitions, but getting there is where they differ. While DBS Bank's ambitions
span the whole of Asia and it remains on the lookout for sizeable acquisitions, both United
Overseas Bank (UOB) and OCBC Bank are more focused on South-east Asia and
consolidating what they already have. Several years of acquisitions and expansion have
resulted in overseas earnings now accounting for a significant share of the three banks'
profits - DBS's offshore units contributed 35% to group earnings in 2006, for UOB it's 32.5%
and 34% for OCBC. It is how to go from here that the banks differ. (BT)
Just guessing, looks like OCBC is testing the 50 MA, the 14 days ADX is downslopping indicating a loss of trend. Maybe those banks writing the covered warrant is unwinding some of the stock hedges.Experienced forummers any comments?
goldcarps
Dear TA gurus,
Could you kindly advise the TA trend for OCBC? Weird that OCBC is declined while the other banks are advancing...
Thanks!
adobepie, why do you think there could only be two local banks left?
My thought: when singapore had 3 million people, we had 4 banks. Now 4 million, 3 banks. With the aim to increase population to 6 million, I think the market is big enough for 3 banks. Not forgetting these banks are all into regional market (though not too successful yet).
just me view...eventually there could only two local banks left....if i can afford will certainly load more at $9 and then hold on for a few years...and wait for the merger to come
There has been a recent mixed views from analysts. One analyst issued a downgrade to underperform :( cannot remember the details. I doubt it can break $10. $8.5-9.6 are reasonable ranges.
Subprime woes seen as well contained and forms only a small portion of US economy (Mr Alan Greenspan) according to recent reports.
jipuo, can you kindly share what you trying to tell us