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Singapore banks fairly valued but Maybank sees upside risks

PC Lee
PC Lee • 2 min read
Singapore banks fairly valued but Maybank sees upside risks
SINGAPORE (July 3): Maybank Kim Eng is maintaining its “neutral” recommendation on Singapore banks as valuations appear to be fair in view of tail risks from the Oil & Gas sector and stable net interest margins.
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SINGAPORE (July 3): Maybank Kim Eng is maintaining its “neutral” recommendation on Singapore banks as valuations appear to be fair in view of tail risks from the Oil & Gas sector and stable net interest margins.

Maybank’s loan growth assumption for Singapore banks is +6% y-o-y for FY17, as banks stand to benefit from the recovery in the domestic economy.

“We see upside risk to our assumption if the momentum is sustained. We think it is feasible for Singapore banks to reach their guidance of mid-single digit loan growth for FY17,” says analyst Ng Li Hiang in a Monday report.

“DBS remains our preferred pick as we are positive on its ability to manage liability costs to drive pre-provision profits,” adds Ng.

In May, UOB’s system loan growth moderated to +5.1% y-o-y from +6.4% y-o-y in April which is in line with Maybank’s expectation.

Corporate loan growth moderated to +6.6% y-o-y in May led by lending to Financial Institutions (FI). Consumer lending also eased to +1% y-o-y from April’s +2.5% y-o-y.

Manufacturing loans contracted at -2.2% y-o-y while consumer lending eased to +1% y-o-y.

Despite some surprise revisions to property cooling measures by the government in March, housing loan growth has so far remained stable at +4.1% y-o-y.

System deposits grew 4.1% y-o-y in May. Domestic Banking Unit (DBU) deposit growth was driven by CASA (current and saving accounts) deposits.

As at 11.23am, shares in DBS are trading at $20.74.

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