Kim Eng says DBS may profit the most with $719m in 2Q11.
While UOB comes next with $660m and OCBC takes last place with $618m.
Here’s more from Kim Eng:
We expect the YoY loan growth trend for Singapore banks to have held strong in 2Q11, which would lift management guidance and consensus expectations for the sector this year. DBS will be the first to report its results this Thursday, followed by OCBC on 4 August and UOB on 12 August. Positive variance could also come from lower‐ than‐expected loan provisions. We remain positive on the sector.
Provisioning‐wise, all three banks are well‐covered with allowances for more than 100% of NPLs. Singapore’s healthy economic outlook gives us reason to expect a smaller percentage of loan charge‐off or in the case of UOB, a write‐back perhaps. On the other hand, trading income and/or investment banking fees could disappoint, given the high base in 1Q11 and weak market conditions in 2Q11. DBS is the most at risk as it has a high proportion of income tied to this arena.
We anticipate a keen focus on regional growth initiatives, given that all three banks are doing well at home. We expect 2Q11 profit growth to be healthy YoY, but not on a QoQ basis. We forecast 2Q net profit of $719m for DBS, $618m for OCBC and $660m for UOB.
Action & Recommendation
Maintain BUY on OCBC and DBS, and HOLD on UOB. Our top pick remains OCBC for its better growth profile.
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