CIMB Overweight on Singapore Banks

Singapore Banks Rating:

DBS Group ADD, TP S$28.35, S$28.79 close DBS is trading at 1.4x FY21F P/BV. 4Q20 earnings were above expectations, mainly on lower tax expenses and credit costs. We expect FY21F impairments to be lower yoy for singapore banks, although NPA formation may still trend upwards as government relief expires.

OCBC ADD, TP S$12.52, S$11.75 close OCBC is trading at 1.1x FY21F P/BV. 4Q20 results beat expectations, mainly due to lower-than-expected impairments. Latest credit cost guidance is unchanged, but NPLs may still trend upwards towards 2.5-3.5%. Group loans under moratorium reduced to c.5% (from 10%).

UOB ADD, TP S$27.72, S$25.83 close UOB is trading at 1.0x FY21F P/BV. 4Q20 earnings were line as NIM expansion continued. Group loans under moratorium reduced to c.5% (from c.10%). Asset quality visibility underpins our expectations of lower credit costs in FY21F.

Highlights for singapore banks:

Budding shoots of growth
■ System loan growth of +3.7% in 2M21 is encouraging, especially vs. the 1.1% contraction in FY20. On a mom basis, Feb 21 growth slowed slightly.
■ Loans for general commerce and FIs led the overall expansion in Feb 21. Domestic mortgage growth held steady; credit card balances contracted mom.
■ DBU deposits contracted 0.4% mom in Feb 21 as FD balances continued rolling off. The DBU-CASA ratio rose to 67% — an all-time high. ■ Reiterate sector Overweight. We think that improving business sentiment and ample liquidity conditions set the stage for credit growth momentum.

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Cimb Analyst:

Andrea CHOONG T (65) 6210 8672 E andrea.choong@cgs-cimb.com
LIM Siew Khee T (65) 6210 8664 E siewkhee.lim@cgs-cimb.com