2012-Dec- Singapore banks - Overweight (MER) ...
Warrants Highlight
Singapore banks - Overweight (MER)
Macquarie is listing new warrants over the Singapore Banks this morning.
Code Name Type Expiry Exercise Price
R4XW DBS MB eCW130604 Call 4-Jun-13 14.80
R4YW DBS MB ePW130606 Put 6-Jun-13 14.50
R4ZW DBS MB ePW130704 Put 4-Jul-13 13.30
R5BW UOB MB ePW130704 Put 4-Jul-13 18.20
R5AW OCBC Bk MBePW130704 Put 4-Jul-13 9.20
On 30th November, Macquarie Equities Research (MER) released a research report on the banking sector. In its report, MER said that the MAS October data release indicates a rebound in loan growth for sector Domestic Banking Units (DBU), with SGD deposits failing to keep pace and DBU loan to deposit rates (LDR) reaching yet another peak. MER thinks that this should put continued pressure on SGD deposit costs.
DBU LDR hits 14-year high
DBU loans rose 17.9% year on year (YoY) and 1.9% month on month (MoM), indicating a rebound of growth momentum vs Oct. But DBU deposits, 99% of which are SGD, grew by just 5.5% YoY / 1.5% MoM. As a result, the DBU LDR rose to 94.9%, the highest level since Nov 1998. But Asian Currency Unit (ACU) deposit growth (all FX) was faster than ACU loan growth, so the entire system LDR was up just 20bps MoM at 102.9%.
The DBU loan growth was surprisingly broad based, with corporate loans up 19% YoY / 1.3% MoM and consumer loans up 16% YoY / 1.8% MoM. The rebound in mortgages accounted for 26% of total YoY growth. This may be counterintuitive given the new mortgage restrictions that came into place during the month. But MER thinks this is a function of drawdowns. MER’s property analyst Brandon Lee expects 59% of the 12K units of 2012 project completions to happen in the second half of the year, which may explain the continued expansion of mortgages in the face of newly added restrictions.
MER’s Outlook
MER shifted its rating of Singapore banks from Neutral to Overweight when it upgraded DBS to Outperform on 21 Nov. MER’s view then was that the stocks had been oversold after posting the second worst performance in Asia over the prior three months. Pre-provision operating profit (PPoP) momentum is likely to remain weak in 4Q12-1Q13, with earnings dependent on extremely low provisioning. This may not exactly be an exciting time, but MER believes they still offer relatively attractive valuations and thus limited downside risk.
MER’s top pick is UOB where MER perceives less risk of disappointment given their relatively conservative risk management and provisioning policy. The risk to this call is higher SGD deposit costs, an environment in which DBS should be better positioned to maintain net interest margins (NIMs). MER has Neutral on OCBC due to earnings uncertainty.
** For a full list of Macquarie warrants over the Singapore banks, you may wish to do a search at http://www.warrants.com.sg/en/warrants/search_e.cgi
DBS takes stakes in MBFC Tower 3
DBS is paying S$1.04 billion for a stake in its headquarters located at Marina Bay Financial Centre Tower 3. DBS stated that such a move "allows it to better manage its occupancy costs in the long term" as well as "demonstrating its firm commitment to its home base as it further entrenches its leadership position in Singapore and the region". DBS rose marginally 0.1% to $14.80 for the trading session.
Overnight Market Wrap
Italian Prime Minister to resign after losing support
The S&P gained less than 0.1% last night to close at 1418.55. The index gapped up at open after China's industrial output and retail sales data beat economists' estimates.
However, the S&P started to trend lower as Italian Prime Minister Mario Monti said that he will resign as he has "lost support". Fortunately the index pared losses towards the end and ended marginally positive.
In the US, President Barack Obama and House Speaker John Boehner had a private meeting and no details of the negotiations were released. Still, both of them issued statements saying that "the lines of communication remain open".
Overnight Markets
Indices Last Change
STI 3114.34 0.2%
HSI 22276.70 0.4%
DJIA 13169.90 0.1%
S&P 500 1418.55 0.0%
Nasdaq 2986.96 0.3%
China A50 7426.37 1.1%
Corporate News
Corporate Announcements
SembMarine's subsidiary, Sembawang Shipyard has been awarded the Favoured Customer Contract from Royal Caribbean Cruises Ltd, to provide ship-repair, revitalisation, upgrading and related marine services.
For the full list of ex-div dates, please visit: www.sgx.com/wps/portal/sgxweb/home/company_disclosure/corporate_action/
Warrants Highlight
Singapore banks - Overweight (MER)
Macquarie is listing new warrants over the Singapore Banks this morning.
Code Name Type Expiry Exercise Price
R4XW DBS MB eCW130604 Call 4-Jun-13 14.80
R4YW DBS MB ePW130606 Put 6-Jun-13 14.50
R4ZW DBS MB ePW130704 Put 4-Jul-13 13.30
R5BW UOB MB ePW130704 Put 4-Jul-13 18.20
R5AW OCBC Bk MBePW130704 Put 4-Jul-13 9.20
On 30th November, Macquarie Equities Research (MER) released a research report on the banking sector. In its report, MER said that the MAS October data release indicates a rebound in loan growth for sector Domestic Banking Units (DBU), with SGD deposits failing to keep pace and DBU loan to deposit rates (LDR) reaching yet another peak. MER thinks that this should put continued pressure on SGD deposit costs.
DBU LDR hits 14-year high
DBU loans rose 17.9% year on year (YoY) and 1.9% month on month (MoM), indicating a rebound of growth momentum vs Oct. But DBU deposits, 99% of which are SGD, grew by just 5.5% YoY / 1.5% MoM. As a result, the DBU LDR rose to 94.9%, the highest level since Nov 1998. But Asian Currency Unit (ACU) deposit growth (all FX) was faster than ACU loan growth, so the entire system LDR was up just 20bps MoM at 102.9%.
The DBU loan growth was surprisingly broad based, with corporate loans up 19% YoY / 1.3% MoM and consumer loans up 16% YoY / 1.8% MoM. The rebound in mortgages accounted for 26% of total YoY growth. This may be counterintuitive given the new mortgage restrictions that came into place during the month. But MER thinks this is a function of drawdowns. MER’s property analyst Brandon Lee expects 59% of the 12K units of 2012 project completions to happen in the second half of the year, which may explain the continued expansion of mortgages in the face of newly added restrictions.
MER’s Outlook
MER shifted its rating of Singapore banks from Neutral to Overweight when it upgraded DBS to Outperform on 21 Nov. MER’s view then was that the stocks had been oversold after posting the second worst performance in Asia over the prior three months. Pre-provision operating profit (PPoP) momentum is likely to remain weak in 4Q12-1Q13, with earnings dependent on extremely low provisioning. This may not exactly be an exciting time, but MER believes they still offer relatively attractive valuations and thus limited downside risk.
MER’s top pick is UOB where MER perceives less risk of disappointment given their relatively conservative risk management and provisioning policy. The risk to this call is higher SGD deposit costs, an environment in which DBS should be better positioned to maintain net interest margins (NIMs). MER has Neutral on OCBC due to earnings uncertainty.
** For a full list of Macquarie warrants over the Singapore banks, you may wish to do a search at http://www.warrants.com.sg/en/warrants/search_e.cgi
DBS takes stakes in MBFC Tower 3
DBS is paying S$1.04 billion for a stake in its headquarters located at Marina Bay Financial Centre Tower 3. DBS stated that such a move "allows it to better manage its occupancy costs in the long term" as well as "demonstrating its firm commitment to its home base as it further entrenches its leadership position in Singapore and the region". DBS rose marginally 0.1% to $14.80 for the trading session.
Overnight Market Wrap
Italian Prime Minister to resign after losing support
The S&P gained less than 0.1% last night to close at 1418.55. The index gapped up at open after China's industrial output and retail sales data beat economists' estimates.
However, the S&P started to trend lower as Italian Prime Minister Mario Monti said that he will resign as he has "lost support". Fortunately the index pared losses towards the end and ended marginally positive.
In the US, President Barack Obama and House Speaker John Boehner had a private meeting and no details of the negotiations were released. Still, both of them issued statements saying that "the lines of communication remain open".
Overnight Markets
Indices Last Change
STI 3114.34 0.2%
HSI 22276.70 0.4%
DJIA 13169.90 0.1%
S&P 500 1418.55 0.0%
Nasdaq 2986.96 0.3%
China A50 7426.37 1.1%
Corporate News
Corporate Announcements
SembMarine's subsidiary, Sembawang Shipyard has been awarded the Favoured Customer Contract from Royal Caribbean Cruises Ltd, to provide ship-repair, revitalisation, upgrading and related marine services.
For the full list of ex-div dates, please visit: www.sgx.com/wps/portal/sgxweb/home/company_disclosure/corporate_action/
