Singapore Banks - Could We Be Heading for a V-shaped GDP Recovery?

Top picks DBS, UOB — Banks still trade 8-27% below mid-cycle P/B despite rising 75-82% from March lows (STI +57%). Banks outperform the STI in the first 9-12 months of a new cycle as the economy moves from recession to recovery. Our economist Wei Zheng Kit models a U-shape profile in his recently upgraded GDP of -5.2% in 09E and +6.4% in 10E, but concedes that strong April Industrial Production data (+24.7% mom sa) presents further GDP upside risk. Consensus bank forecasts rose 4-13% since 1Q results. More upgrades could come from improving loan growth, margin expansion and lower than expected provisioning.

Upward revision to 1Q GDP — Singapore MTI revised 1Q09 GDP to -10.1%yoy (from -11.5%), better than our (-10.7%) and consensus (-10.9%) numbers. Our economist noted that while there was no change to official GDP forecast of -6 to -9%, the tone of the press statement noted that the revised estimates present a less pessimistic picture than the advance estimates, and that “things have stopped getting worse”. He maintains his view that that the economy will be out of recession by 4Q09, returning to pre-recession levels by end 2010 or early 2011.

April-09 loan data — Domestic loans fell 0.3% mom to S$270bn, but 7.6% higher versus a year ago. Business lending dropped by 0.1%mom with greatest declines in manufacturing, non-bank FIs and others. Consumer lending rose by 0.8%mom, with mortgages growing by S$0.5bn (+0.6%mom, +6.3%yoy). IE Singapore data shows that 1,834 SME-related loans, with total value of $1.06bn, were approved in April, bringing the total value of loans approved since Dec-08 to S$2.5bn.

Click here for more Banks and Financial Institutes Technical Analysis

Sponsored Links

Related Posts by Categories