System loans grew 1.2% m-o-m in Feb and 1.6% for 2M18 while loan growth was led regionally by ACU (Asian Currency Unit) -- a proxy for offshore lending -- expanding 3.5% for 2M18.
In a Thursday report, analyst Yeo Zhi Bin forecasts top pick DBS to deliver superior returns over peers as it is the most rate-sensitive and the most digital-savvy bank. Sector downside risk includes disorderly rise in rates.
Yeo expects 1Q18 net profit of $1,443 million. On Net Interest Income (NII), he expects a 2-3bp q-o-q growth in loans as well as 2-3bp q-o-q rise to 1.8% in Net Interest Margins (NIM). Non-II is expected to remain healthy. Asset quality is set to be stable, with stable NPLs, NPL ratio and NPL coverage. DBS will report earnings on Apr 30.
"We expect DBS to deliver superior returns over peers as it is the most rate-sensitive and the most digital-savvy bank," says Yeo. CIMB has an "add" on DBS with target price of $33 implying 1.7 times FY18 book value.
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As for OCBC, CIMB expects 1Q18 net profit of $1.16 billion. On NII, Yeo expects 2-3bp growth in loans as well as 1-2bp q-o-q rise in NIM to 1.68%. On non-II, he similarly expects fee momentum to remain healthy.
But due to FRS 109, Yeo notes there could be a y-o-y decrease in Great Eastern's earnings as non-operating profit would be taken in as other comprehensive income. CIMB has a an "add" with $15.00 target price implying 1.5 times FY18 book vs sustainable ROE. OCBC will report on May 7.
Finally, Yeo expects UOB to post 1Q18 net profit of $948 million. On NII, we expect 1-2bp growth in loans and 2-3bp q-o-q rise in NIM to 1.84%. Non-II should be steady as wealth management and loan-related fees could more than offset seasonal weakness in trading income. CIMB has an "add" on UOB with target price of $33.00 implying 1.5 times FY18 book value vs 11.5% sustainable ROE. UOB reports on 3 May.
As at 11.05am, shares in DBS, OCBC and UOB are trading at $29.66, $13.69 and $29.67 respectively.
