SECTOR RESEARCH | Singapore

May 6, 2015

Singapore Banks

OVERWEIGHT (Unchanged)

Better NIMs ahead   

Loan softness aside, 1Q15 operations strong. NIMs likely to rise, providing EPS upside. Funding remains ample. Cut EPS by up to 4% for latest guidance. Raised TPs by up to 9% after rollover. Maintain OVERWEIGHT. Catalysts from higher interest rates. DBS our top pick, followed by UOB. Still cautious on OCBC.

Analysts Ng Wee Siang (65) 6231 5838 [email protected]

Ng Li Hiang (65) 6231 5840 [email protected]

Changes to TP

DBS

New TP (SGD) 24.80

Old TP (SGD) 22.70

Change (%) 9.3

UOB

27.50

26.40

4.2

OCBC

11.50

11.10

3.6

Loan softness common to all As expected, loan growth for DBS and OCBC was slower in 1Q15. UOB’s held up better given its lower reliance on China trade loans. With trade-loan demand likely to stay limp, banks cut their guidance. Accordingly, we trim our expectations for FY15-17 by up to 3ppts. Along with higher overheads for DBS/UOB, we cut FY1517 EPS by up to 4% for the three.

NIM support in 2Q15; 1Q a blip While DBS’s NIM was marginally softer than expected, management sounded the most optimistic. Higher interest rates are working their way through the system and their benefits should become more visible soon. Surprisingly, OCBC stayed cautious even after a 7bp decline in its 1Q15 NIM. Liquidity profiles remained good. DBS had the lowest SGD LDR of 78% to OCBC’s 83% and UOB’s 96%. Given comfortable USD funding profiles and less demand for USD trade loans, banks may trim their USD deposits and commercial papers. This should provide some NIM support in 2Q15.

Rec Maintain BUY Maintain BUY Maintain HOLD

Source: Maybank KE

Earnings revisions (SGD m) DBS UOB OCBC

Original 2015E 4,358.6 3,518.4 3,884.5

Revised 2015E 4,331.2 3,370.6 3,826.4

Revisions (%) (0.6) (4.2) (1.5)

(SGD m) DBS UOB OCBC

2016E 5,373.2 4,121.7 4,486.2

2016E 5,225.6 3,983.5 4,447.8

Revisions (%) (2.7) (3.4) (0.9)

2017E 6,260.6 4,612.1 4,969.8 KE

2017E 6,108.5 4,440.2 4,940.9

Revisions (%) (2.4) (3.7) (0.6)

(SGD m) DBS UOB OCBC Source: Maybank

Maintain OVERWEIGHT While banks have been re-rated, we see further upside. We expect better earnings growth as NIM improves in FY16. To capture this potential, we now use average EPS for FY15-16, instead of FY15. This raises our TPs by up to 9%. No change to stock calls. DBS remains our top pick as it should be best positioned to take advantage of rising interest rates. Our second choice is UOB.

Peer comparisons Stock

Rec

Price*

TP

Upside

(SGD)

(SGD)

(%)

FY15E

PER (x) FY16E 9.9 9.8

P/BV (x) FY15E

ROAE (%)

Div. yield (%)

FY16E

FY15E

FY16E

FY15E

1.3 1.2

1.2 1.2

11.3 11.9

12.5 13.0

2.9 3.1

FY16E 2.9 3.1

BUY

20.70

24.80

19.8

UOB

BUY

24.37

27.50

12.8

12.0 11.6

OCBC

HOLD

10.57

11.50

8.8

11.0

9.5

1.3

1.2

12.7

13.5

3.4

3.4

11.5

9.7

1.3

1.2

12.0

13.0

3.1

3.1

DBS

Sector average * Share prices as of 5 May 2015 Source: Maybank KE

SEE PAGE 24 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Co. Reg No: 198700034E

MICA (P) : 099/03/2012

Singapore Banks

Loan weakness aside, all was well Strong start to the year. It was a strong quarter for banks with positive earnings surprises from DBS and OCBC. While UOB’s earnings were in line, its operating metrics were better than peers’:  Unlike peers’ NIM contractions, UOB’s NIM surprisingly improved 7bps QoQ to 1.76%.  Its loan traction beat peers’. Loan growth slowed for all. With weaker loan growth in 1Q15 and likely to stay weak, guidance has either been lowered or skewed to the lower ends of earlier ranges. Trade loans to China should remain a swing factor, particularly for DBS and OCBC. Short term, a narrowing of on- and offshore spreads (Figure 1) may affect the economics of China trade loans. Weak commodity prices and a slowing Chinese economy do not augur well. Figure 1: On- & offshore interest-rate convergence Narrowed significantly, reducing arbitrage loan demand (%) 5.5

CNY 6m SHIBOR 4.9

5.0

4.9

4.8

CNH 6m swap

4.8

4.7

4.8

4.8

4.1

4.1

4.8

4.5 4.4

4.0 3.5

4.1

3.4

3.0 2.9

2.5 2.5

2.0

Jul-14

3.0

2.9

2.4 Sep-14

Nov-14

Jan-15

Mar-15

Source: Bloomberg

NIMs down but should turn better. There were two extreme surprises:  Negative. OCBC’s NIM contracted 5bps QoQ and 8bps YoY to a trough of 1.62%.  Positive. UOB’s NIM reached its highest since 4Q12. It was the only bank with sequential expansion. While NIM was marginally weaker than expected for DBS, management sounded the most optimistic. It guided for fatter NIMs ahead. UOB expects to hold up its NIM in 2H15, after a small blip in 2Q15. OCBC was the most cautious, believing upside may be constrained by a rollover of currently higher-yielding trade loans from China.

May 6, 2015

2

Singapore Banks Figure 2: Industry NIM

Figure 3: Individual banks’ NIMs

Expected to trend up as the benefits of higher interest rates filter through (%) 2.4

Divergence, with UOB’s ticking up but OCBC’s collapsing (%) 2.5

2.32

DBS

UOB

OCBC

2.4

2.3

2.3

2.14

2.2 2.1

2.2

Avg = 1.93%

2.0

2.1

2.05

2.0

1.9

1.87

1.88

1.8

1.9 1.8

1.82

1.7 1.65

1.6

1.69

1.5

1.7 1.6 1.5

1Q05

1Q07

1Q09

1Q11

1Q13

1Q15

Source: DBS, UOB, OCBC

1Q05

1Q07

1Q09

1Q11

1Q13

1Q15

Source: DBS, UOB, OCBC

No asset-quality hiccups but sufficient buffers, anyway. Other than weakness in specific accounts especially in the shipping industry, asset quality was steady. Singapore housing NPL ratios stayed low. While the credit outlook is dimming, we believe risks will be contained by banks’ proactive NPL classification. Also, more buffers for bad times have been set aside (Figure 6). UOB’s outsized general-provision ratio was raised preemptively in the past two years to counter potential slippages. Figure 5: Individual banks’ NPA ratios

Figure 4: Individual banks’ specific charge-off rates* (%)

DBS

UOB

(%) 4.0

OCBC

1.4 1.2

3.5

1.0

3.0

0.8

DBS

UOB

OCBC

2.5

0.6 2.0

0.4 0.2

1.5

0.0

1.0

(0.2) 1Q08

1Q09

2Q10

2Q11

2Q12

1Q13

*Specific allowances as a percentage of average net loans Source: DBS, UOB, OCBC

May 6, 2015

1Q14

1Q15

0.5 1Q08

1Q09

2Q10

2Q11

2Q12

1Q13

1Q14

1Q15

Source: DBS, UOB, OCBC

3

Singapore Banks Figure 7: Individual banks’ provision coverage

Figure 6: Individual banks’ GP ratios*

(%) 180

(%) DBS

1.7

UOB

OCBC

DBS

UOB

OCBC

160

1.5 1.3

140

1.1

120

0.9

100

0.7 1Q08

1Q09

2Q10

2Q11

2Q12

1Q13

1Q14

80

1Q15

1Q08

*General allowances as a percentage of average net loans Source: DBS, UOB, OCBC

1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

Source: DBS, UOB, OCBC

EPS cuts We cut EPS by up to 4% after incorporating weaker loan growth for three for the next three years and higher overheads for DBS/UOB. Our lower loan-growth expectation captures a less vibrant economy and more cautious guidance. Figure 8: Changes to our key assumptions 2015E

Revised 2016E

2017E

2015E

Original 2016E

2017E

1.75 1.75 1.66

1.87 1.82 1.75

1.91 1.82 1.77

1.73 1.73 1.72

1.87 1.82 1.80

1.90 1.82 1.83

Loan growth (%) DBS UOB OCBC

6.0 6.0 5.0

7.0 7.0 6.0

9.0 8.0 8.0

7.0 7.0 8.0

8.0 8.0 8.5

9.0 9.0 9.5

Gross NPA (%) DBS UOB OCBC

0.9 1.3 0.7

0.9 1.3 0.7

0.8 1.2 0.7

0.9 1.3 0.7

0.9 1.3 0.7

0.8 1.2 0.7

Net interest income (SGD m) DBS UOB OCBC

7,294.8 5,103.9 5,503.3

8,325.3 5,672.7 6,162.6

9,210.0 6,132.2 6,720.2

7,221.4 5,195.3 5,555.6

8,426.1 5,827.1 6,273.4

9,322.7 6,328.3 6,888.5

Non-interest income (SGD m) DBS UOB OCBC

3,561.5 2,884.7 3,257.2

4,088.5 3,097.0 3,584.2

4,751.7 3,383.4 3,971.2

3,607.6 2,825.4 3,536.3

4,060.5 3,033.1 3,891.3

4,685.5 3,314.0 4,309.1

Overhead expenses (SGD m) DBS UOB OCBC

4,866.8 3,449.2 3,690.0

5,276.8 3,667.5 3,978.4

5,722.9 3,900.5 4,290.0

4,739.6 3,360.7 3,783.0

5,157.3 3,572.2 4,126.6

5,596.0 3,797.9 4,503.1

Provisions (SGD m) DBS UOB OCBC

769.9 689.0 395.7

865.6 545.9 389.6

929.0 543.0 458.3

856.7 648.2 456.4

905.9 581.9 455.7

946.5 585.7 518.2

Net profit (SGD m) DBS UOB OCBC

4,331.2 3,370.6 3,826.4

5,225.6 3,983.5 4,447.8

6,108.5 4,440.2 4,940.9

4,358.6 3,518.4 3,884.5

5,373.2 4,121.7 4,486.2

6,260.6 4,612.1 4,969.8

(0.6) (4.2) (1.5)

(2.7) (3.4) (0.9)

(2.4) (3.7) (0.6)

NIM (%) DBS UOB OCBC

Earnings revisions (%) DBS UOB OCBC Source: Maybank KE

May 6, 2015

4

Singapore Banks Raising TPs. We raise TPs after rolling over to mid-2016. We use average EPS for FY15-16. This is to account for part of the earnings lift from higher interest rates in FY16. There is no change in our valuation methodologies. Figure 9: New target prices

DBS

UOB

New TP (SGD) 24.80

27.50

Old TP (SGD) 22.70

26.40

Change (%) 9.3

4.2

Rec Maintain BUY

Maintain BUY

Valuation methodology

Rationale

 Based on 13x average EPS for FY15 and FY16.

 Consistent with its rolling average since 2005.

 Implies 1.5x FY15 P/BV, 1SD above its 1.3x rolling average since 2005.

 Strongest EPS CAGR forecast of 17.6% for FY14-17.

 Based on 12x average EPS for FY15 and FY16.

 Slightly below its rolling average since 2005 as it may not benefit as much from higher interest rates as DBS.

 Implies 1.5x FY15 P/BV, slightly above its rolling average since 2005. OCBC

11.50

11.10

3.6

Maintain HOLD

 Based on 11x average EPS for FY15 and FY16.  Implies 1.4x FY15 P/BV, slightly below its rolling average since 2005.

 EPS CAGR of 11.0% for FY14-17.

 More than 1SD below its rolling average since 2005. This is to account for Wing Hang integration risks.  Expected to deliver second-strongest EPS CAGR of 14.0% for FY14-17.

Source: Maybank KE

Maintain OVERWEIGHT Catalysts from higher interest rates. DBS remains our top pick as it should be best-positioned to take advantage of rising interest rates. UOB is our second choice. We remain cautious on OCBC on account of Wing Hang integration risks.

May 6, 2015

5

Singapore Banks Figure 10: Investment theses

DBS

UOB

OCBC

Target price (SGD) 24.80

Share price* (SGD) 20.70

27.50

Upside (%) 19.8

24.37

11.50

12.8

10.57

8.8

Rec BUY

Investment thesis  Management’s medium-term strategy of acquiring outfits to plug product gaps should reduce inherent M&A risks.

BUY

HOLD



Decent presence in Greater China. In good stead to ride renewed Chinese economic growth.



Key beneficiary of higher interest rates, expected in mid-2015, and internationalisation of CNY.



Risk to TP: Unexpected departure of key personnel.



Catalysts: Consistent earnings deliveries and sharp rise in interest rates.



Disciplined and cost-conscious management.



With its less-favourable SGD funding profile, it may not be as wellpositioned for rising interest rates as peers.



But strong focus on liquidity management. Requires all regional operations to be fully funded in local currencies.



Risk to TP: Weakening ability to expand SGD deposits or further jumps in its housing NPLs.



Catalysts: Stronger growth in SGD deposits and better housing-loan quality.



Integration risks after acquisition of Wing Hang Bank.



More volatile earnings from outsized contributions from 87%-owned Great Eastern Holdings.



Current management yet to prove itself.



Risks to TP: 1) failure to extract operational synergies from Wing Hang Bank; and 2) capital markets stay depressed for longer.



Catalysts: Strong pick-up in capital markets and sharp rise in interest rates.

*Share prices as of 5 May 2015 Source: Maybank KE

Figure 11: Sector rolling PER band

Figure 12: Sector rolling P/BV band

(x) 18.0

(x) 2.1 +1SD = 14.8x

+1SD = 1.6x

15.0 Mean = 13.0x

1.6 Mean = 1.4x

12.0 -1SD = 11.3x

1.1

-1SD = 1.2x

9.0

6.0 Apr-05

Apr-08

Source: Bloomberg, Maybank KE

May 6, 2015

Apr-11

Apr-14

0.6 Apr-05

Apr-08

Apr-11

Apr-14

Source: Bloomberg, Maybank KE

6

Singapore Banks

Appendix 1: Liquidity profile SGD liquidity DBS best-positioned for higher SIBOR. Of the three banks, DBS has the most liquid SGD balance sheet, with a 78% LDR. This implies a SGD31.7b net deposit surplus, which should allow DBS to reap the fullest benefits of a higher SGD SIBOR. UOB least liquid. UOB should gain less when SGD SIBOR rises because of its tight SGD liquidity. As of 1Q15, it had a net deposit surplus of SGD4.0b. However, we believe this could be compensated by its large SGD loan base of SGD108.2b (DBS: SGD112.4b, OCBC: SGD75.7b). Of this, 80% is based on floating rates. Figure 13: Individual banks’ SGD LDRs (%)

2010

2011

2012

Figure 14: SGD deposits and LDRs for our universe

2013

2014

(SGD b) 350

1Q15

100

95 9596

90

85

80

75

82

79 78

80

340

84

330

82

320

80

310

78

300

76

86

84 83

82 77

76

69

70

64 60

60

290

50 DBS

OCBC

74 1Q12

UOB

3Q12

1Q13

Source: DBS, UOB, OCBC

Source: DBS, UOB, OCBC

Figure 15: DBS’s SGD LDR

Figure 16: UOB’s SGD LDR

(SGD b)

SGD loans (LHS) SGD deposits (LHS) LDR (RHS) 75

160

79

(%) 78

140

80 75

69

120

70

64

100 57

(SGD b)

40 2008 Source: DBS

May 6, 2015

2009

2010

2011

2012

2013

2014

1Q14

3Q14

1Q15

(%) 110 105

110 100

95

95

96

100 95

90

60

80

55

70

50

60

1Q15

90

86 82

55 60

3Q13

SGD loans (LHS) SGD deposits (LHS) LDR (RHS)

120

65

60 80

(%) 86

Industry SGD deposits (LHS) LDR (RHS)

85

77

80 75

2010

2011

2012

2013

2014

1Q15

Source: UOB

7

Singapore Banks

USD liquidity Banks can cope with any USD crunch. This is because:  Singapore banks have proven capable of raising USD deposits: 38.5% CAGR for OCBC, 32.8% for DBS and 29.8% for UOB in the past four years.  USD loans are largely short-term trade loans, which can be run down quickly in a liquidity crunch. When this occurred in 2012, Singapore banks braked their USD lending growth to 0.4% (2011: +64.4%, 2010: +32.9%).  Banks have alternative funding sources in short-term commercial papers (CPs) and currency swaps with MAS. As of 1Q15, the three had issued SGD34b of CPs or 2.9% of their combined balance sheets. Banks to trim excess USD CPs and fixed deposits. Given improving funding profiles and potentially less demand for USD loans, banks are looking to trim their excess USD CPs and fixed deposits. This could somewhat help boost NIMs. Figure 17: USD LDRs for our universe (%)

DBS

170

Figure 18: Individual banks’ USD deposits

OCBC 162.6

2007 2012

(SGD b)

UOB

100

2008 2013

2009 2014

2010 1Q15

2011

92

90

150

75

80 151.2

130

58

60

110

99.9

97.6 90

65

70

116.0 102.3

88.2

81.6

50 40 30

46

40 29 29

22

20

70 58.4 50

41

14 17

11 11

20

10 0

2007 2008 2009 2010 2011 2012 2013 2014 1Q15

DBS

OCBC

UOB

Source: DBS, UOB, OCBC

Source: DBS, UOB, OCBC

Figure 19: USD deposit growth for our universe

Figure 20: Commercial papers issued by our universe

(SGD b)

Industry USD deposits (LHS)

(%)

QoQ growth (RHS)

240

(SGD b) 16

220

14

200

12

180

10

160

8

140

6

120

40

30

80

5

0

0

Source: DBS, UOB, OCBC

May 6, 2015

1Q15

41

41 34

30 26

15 10

1Q14

42

20

2 1Q13

39

25

100

1Q12

37

35

4

60

43

45

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 Source: DBS, UOB, OCBC

8

Singapore Banks

Appendix 2: Loan drivers SGD loan growth Tepid. SGD loans grew 6% YoY in 1Q15. As the primary housing market is likely to stay listless, we reckon loan drawdowns for newly completed homes will be banks’ only source of consumer loan growth. Elsewhere, business loans should be propped up by building & construction loans. Trade-dependent general-commerce loans remain a key swing factor. Figure 21: Singapore banks’ SGD loans (SGD b)

Figure 22: DBS’s (YoY %)

SGD loans (SGD b) Change (YoY %)

300

25 20

SGD loans (SGD b) Change (YoY %)

(SGD b)

(YoY %)

120

25

110

20

100

250

15 10

200

90

15

80

10

70 5

150

0 1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

5

60 50

0 1Q09

1Q15

1Q10

Source: DBS, UOB, OCBC

Source: DBS

Figure 23: OCBC’s

Figure 24: UOB’s SGD loans (SGD b) Change (YoY %)

(SGD b) 80

(YoY %)

1Q11

(SGD b)

25

110

20

100

15

90

10

80

5

70

0

60

(5)

50

1Q12

1Q13

1Q14

1Q15

(YoY %)

SGD loans (SGD b) Change (YoY %)

25 20

70

60

15 10

50

40 1Q09 Source: OCBC

May 6, 2015

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

5 0 1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

Source: UOB

9

Singapore Banks

USD loan growth USD loans a source of driver. Singapore banks have emerged as credible USD lenders after the retreat of European banks from 2011, on the heels of the euro-zone crisis. They have proven capable of gathering sizeable USD deposits and CPs. USD loans formed 26.3% of their loans as of 1Q15, up from 19.2% in 2010. Slowing traction in 2015. Having said that, USD loan growth decelerated to 7.9% in 1Q15 from 17.8% in 2014 and 34.8% in 2013. This was due to weaker trade loan demand from China. Figure 25: Singapore banks’ USD loans (SGD b)

Figure 26: DBS’s (YoY %)

USD loans (SGD b) Change (YoY %)

200

(SGD b)

80

120

60

100

40

80

20

60

0

40

(20)

20

(YoY %)

USD loans (SGD b) Change (YoY %)

70

180 160 140

50

120

30

100 80

10

60 40 1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

(10) 1Q09

1Q10

Source: DBS, UOB, OCBC

Source: DBS

Figure 27: OCBC’s

Figure 28: UOB’s

(SGD b)

USD loans (SGD b)

60

Change (YoY %)

(YoY %) 100

50

80

40

60

30

40

20

20

10 0 1Q09 Source: OCBC

May 6, 2015

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

1Q11

1Q12

1Q13

(SGD b)

USD loans (SGD b)

35

Change (YoY %)

1Q14

1Q15

(YoY %) 70

30

50

25

30

20

10

0

15

(10)

(20)

10

(30) 1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

Source: UOB

10

Singapore Banks

General commerce loan growth Figure 29: Singapore banks’ general commerce loans

Figure 30: DBS’s

Slowdown reflected a weaker economy

Weakness may persist for a while

General commerce (LHS) Growth (RHS)

(SGD b) 120

(YoY %) 100 80

100

60

80

(SGD b)

General commerce (LHS)

60

Growth (RHS)

(YoY %) 130 110

50

90 40

70

30

50

40 60

20

40

0

20

(20) 1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

30 20

10

10

(10) 1Q09

1Q15

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

Source: DBS, UOB, OCBC

Source: DBS

Figure 31: OCBC’s

Figure 32: UOB’s

Continued to fizzle out

Held up better than peers’ given its lesser reliance on China General commerce (LHS) Growth (RHS)

(SGD b) 35

(YoY %)

30

(SGD b)

80

30

60

25

(YoY %)

General commerce (LHS)

50

Growth (RHS)

40 30

25

40

20

20

20

15

10

0

10

20 15 10 5

(20) 1Q09

Source: OCBC

May 6, 2015

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

0 (10)

5

(20) 1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

Source: UOB

11

Singapore Banks

B&C loan growth Figure 33: Singapore banks’ B&C loans

Figure 34: DBS’s

Stripping out Wing Hang, growth was modest

Strengthening

(SGD b)

Building and construction (LHS) Growth (RHS)

120

(YoY %) 50

110

(SGD b)

Building and construction (LHS) Growth (RHS)

50

(YoY %) 50 40

40 40

100

30

30

90 80

20

70

30

20 10

10 20

60

0

0

50 40

(10) 1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

10

(10) 1Q09

1Q15

1Q10

Source: DBS, UOB, OCBC

Source: DBS

Figure 35: OCBC’s

Figure 36: UOB’s

Bumped up by Wing Hang Bank

Slight uptick

(SGD b)

Building and construction (LHS) Growth (RHS)

35

(SGD b)

(YoY %) 50

1Q11

1Q12

1Q13

1Q14

Building and construction (LHS)

30

1Q15

(YoY %) 60

Growth (RHS)

50

40

30

25

40

30

25

20

30 20 20

20

10

15

0

10

(10) 1Q09

Source: OCBC

May 6, 2015

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

10

15

0 10

(10) 1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

Source: UOB

12

Singapore Banks

Housing loan growth Figure 37: Singapore banks’ housing loans

Figure 38: DBS’s

Modest growth expected, from drawdowns for newly-completed homes

Gaining traction

(SGD b)

(YoY %)

Housing loans (LHS) Growth (RHS)

180

(SGD b) 60

30

160

25

140

(YoY %)

Housing loans (LHS) Growth (RHS)

30 25

50

20

20 40

120

15

15

100

30

10

80 60

20

5 1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

10 5 1Q09

1Q15

1Q10

Source: DBS, UOB, OCBC

Source: DBS

Figure 39: OCBC’s

Figure 40: UOB’s

Standalone momentum still weak

Flat

Housing loans (LHS) Growth (RHS)

(SGD b)

(YoY %)

60

55

30

55

50

25

50

20

45

15

40

10

35

25

5

30

20

0

25

(5)

20

45 40 35 30

15 1Q09 Source: OCBC

May 6, 2015

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

1Q12

1Q13

1Q14

Housing loans (LHS) Growth (RHS)

(SGD b)

35

60

1Q11

1Q15

(YoY %) 30 25 20 15 10 5

1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

Source: UOB

13

Singapore Banks

Manufacturing loan growth Figure 41: Singapore banks’ manufacturing loans Manufacturing (LHS) Growth (RHS)

(SGD b) 70

Figure 42: DBS’s (YoY %)

65 60 55 50 45 40 35 30 25 1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

(SGD b)

40

40

30

35

20

30

10

25

0

20

(10)

15

(20)

10

20 10 0 (10) 1Q10

Source: DBS, UOB, OCBC

Source: DBS

Figure 43: OCBC’s

Figure 44: UOB’s

Bumped up by Wing Hang Bank

Continued to decline Manufacturing (LHS) Growth (RHS)

(SGD b) 14

40

13

1Q11

(SGD b)

(YoY %)

40 30

1Q09

1Q15

(YoY %)

Manufacturing (LHS) Growth (RHS)

1Q12

1Q13

1Q14

(YoY %)

Manufacturing (LHS) Growth (RHS)

20

1Q15

50 40

30

12

20

11 10

10

9

0

8

(10)

7

30

15

20 10 10

0 (10)

(20)

6 5

(30) 1Q09

Source: OCBC

May 6, 2015

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

5

(20) 1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

Source: UOB

14

Singapore Banks

Appendix 3: Asset quality General commerce NPLs No signs of threat. This was despite a strong 27.5% loan CAGR over the past five years. Most of these loans are trade loans, typically of short durations and are thus inherently safer. Figure 45: Industry general commerce NPLs (SGD m) 1400

Figure 46: DBS’s (%)

Industry general commerce NPLs (LHS) Industry general commerce NPL ratio (RHS)

6.0

(SGD m) 600

General commerce NPLs (LHS) General commerce NPL ratio (RHS)

(%) 5.0

5.0

4.0

500

1200 4.0 1000

3.0

3.0 400 2.0

2.0 300

800

1.0

1.0 600

0.0 1Q07

1Q09

1Q11

1Q13

200

0.0 1Q07

1Q15

*Specific allowances as a percentage of average net loans Source: DBS, UOB, OCBC

Source: DBS

Figure 47: OCBC’s

Figure 48: UOB’s

(SGD m) 300

(%)

General commerce NPLs (LHS) General commerce NPL ratio (RHS)

250

6.0 5.0

600

4.0

200

(SGD m) 700

1Q09

1Q11

1Q13

1Q15

General commerce NPLs (LHS)

(%)

General commerce NPL ratio (RHS)

6.0 5.0 4.0

500

3.0

3.0 400

150

2.0

2.0

100

1.0

50

0.0 1Q07

Source: OCBC

May 6, 2015

1Q09

1Q11

1Q13

1Q15

300

1.0

200

0.0 1Q07

1Q09

1Q11

1Q13

1Q15

Source: UOB

15

Singapore Banks

Housing NPLs Consumer loan quality expected to stay strong. Our optimism is premised on strong household balance sheets, a solid employment market and government prudential measures for all types of consumer loans. Figure 49: Industry housing NPLs

Figure 50: DBS’s

Specific cases, no systemic risks observed

Solid quality

Industry housing NPLs (LHS) Industry housing NPL ratio (RHS)

(SGD m) 1100

(%) 1.8

1000

800

(%) 1.0

250

0.8

200

0.6

150

0.4

0.6

100

0.2

0.2

50

1.4

900

Housing NPLs (LHS) Housing NPL ratio (RHS)

(SGD m) 300

1.0

700 600 500 400 1Q07

1Q09

1Q11

1Q13

1Q15

Source: DBS, UOB, OCBC

1Q11

1Q13

1Q15

Figure 52: UOB’s Affected by defaults for 37 condo units at Marina Collection in 2014

Rising from a low base, with some lift from Wing Hang Bank (%)

Housing NPLs (LHS) Housing NPL ratio (RHS)

450

1Q09

Source: DBS

Figure 51: OCBC’s (SGD m)

0.0 1Q07

2.5

Housing NPLs (LHS) Housing NPL ratio (RHS)

(SGD m) 550

(%) 2.4

500

400

2.0

350

1.5

300

2.0

450 400

1.6

350 1.0

250

0.5

200

1.2

300 250

0.8

200

150

0.0 1Q07

Source: OCBC

May 6, 2015

1Q09

1Q11

1Q13

1Q15

150

0.4 1Q07

1Q09

1Q11

1Q13

1Q15

Source: UOB

16

Singapore Banks

Manufacturing NPLs Marginal weakness expected on soft economy. We expect manufacturing NPLs to stay steady, barring sharp increases in interest rates. Figure 53: Industry manufacturing NPLs

Figure 54: DBS’s

Industry mfg NPLs (LHS) Industry mfg NPL ratio (RHS)

(SGD m) 2400

(%)

900

2200

7.0

800

2000

6.0

1800

5.0

1600

4.0

1400

3.0

1200

2.0

400

1000

1.0

300

0.0

200

800 1Q07

1Q09

1Q11

1Q13

1Q15

Mfg NPLs (LHS) Mfg NPL ratio (RHS)

(SGD m)

8.0

5.0

700

4.0

600

3.0

500

2.0 1.0 0.0 1Q07

1Q09

*Specific allowances as a percentage of average net loans Source: DBS, UOB, OCBC

Source: DBS

Figure 55: OCBC’s

Figure 56: UOB’s

(SGD m) 600

(%) 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0

Mfg NPLs (LHS) Mfg NPL ratio (RHS)

500

400

300

200 1Q07 Source: OCBC

May 6, 2015

1Q09

1Q11

1Q13

1Q15

(%) 6.0

1Q11

1Q13

1Q15

Mfg NPLs (LHS) Mfg NPL ratio (RHS)

(SGD m) 800

(%) 9.0 8.0

700

7.0

600

6.0 5.0

500

4.0

400

3.0 2.0

300

1.0

200

0.0 1Q07

1Q09

1Q11

1Q13

1Q15

Source: UOB

17

Singapore Banks

Appendix 4: PER and P/BV bands Figure 57: DBS’s rolling PER band

Figure 58: DBS’s rolling P/BV band

(x) 18.0

(x) 2.0 1.7

+1SD = 14.6x

15.0

Mean = 12.7x

+1SD = 1.5x Mean = 1.3x

1.4

12.0 1.1 -1SD = 10.8x

9.0

6.0 Apr-05

-1SD = 1.1x

0.8

Apr-08

Apr-11

Apr-14

0.5 Apr-05

Apr-08

Apr-11

Source: Bloomberg, Maybank KE

Source: Bloomberg, Maybank KE

Figure 59: UOB’s rolling PER band

Figure 60: UOB’s rolling P/BV band

20.0

(x) 2.2

18.0

2.0

(x)

+1SD = 1.7x

1.8

16.0

+1SD = 14.6x

14.0

Mean = 12.7x

12.0

1.6

Mean = 1.4x

1.4 1.2

10.0

-1SD = 10.8x

0.8

6.0 Apr-05

0.6 Apr-05

Apr-08

-1SD = 1.2x

1.0

8.0

Apr-11

Apr-14

Apr-08

Apr-11

Source: Bloomberg, Maybank KE

Source: Bloomberg, Maybank KE

Figure 61: OCBC’s rolling PER band

Figure 62: OCBC’s rolling P/BV band

(x) 21.0

(x) 2.4

19.0

2.2

17.0

1.8

Mean = 13.8x

+1SD = 1.7x Mean = 1.5x

1.6 1.4

13.0

1.2

-1SD = 11.9x

11.0

-1SD = 1.2x

1.0 9.0

0.8 Apr-08

Source: Bloomberg, Maybank KE

May 6, 2015

Apr-14

2.0

+1SD = 15.8x

15.0

7.0 Apr-05

Apr-14

Apr-11

Apr-14

0.6 Apr-05

Apr-08

Apr-11

Apr-14

Source: Bloomberg, Maybank KE

18

Singapore Banks

Appendix 5: Earnings & balance-sheet data Figure 63: Key P&L and balance-sheet data (SGD m) Net interest income DBS UOB OCBC

2011

2012

2013

2014

2015E

2016E

2017E

4,825.0 3,678.0 3,410.4

5,285.0 3,917.0 3,747.7

5,569.0 4,119.8 3,882.8

6,321.0 4,557.7 4,736.1

7,294.8 5,103.9 5,503.3

8,325.3 5,672.7 6,162.6

9,210.0 6,132.2 6,720.2

Fee income DBS UOB OCBC

1,542.0 1,318.1 1,137.1

1,579.0 1,507.8 1,198.3

1,885.0 1,730.6 1,355.5

2,027.0 1,748.9 1,494.7

2,272.5 1,826.0 1,694.5

2,698.2 1,939.2 1,863.0

3,235.3 2,113.0 2,073.7

Core non-interest income DBS UOB OCBC

2,759.0 2,021.0 2,211.3

2,779.0 2,577.9 2,897.6

3,314.0 2,561.7 2,738.6

3,254.0 2,899.6 3,181.7

3,561.5 2,884.7 3,257.2

4,088.5 3,097.0 3,584.2

4,751.7 3,383.4 3,971.2

Core operating income DBS UOB OCBC

7,584.0 5,698.9 5,621.7

8,064.0 6,495.0 6,645.4

8,883.0 6,681.5 6,621.4

9,575.0 7,457.3 7,917.8

10,856.3 7,988.6 8,760.5

12,413.8 8,769.7 9,746.8

13,961.8 9,515.6 10,691.5

Overhead expenses DBS UOB OCBC

3,303.0 2,450.5 2,429.9

3,614.0 2,747.4 2,694.7

3,918.0 2,898.2 2,783.9

4,330.0 3,146.3 3,257.6

4,866.8 3,449.2 3,690.0

5,276.8 3,667.5 3,978.4

5,722.9 3,900.5 4,290.0

Core pre-provision profit DBS UOB OCBC

4,281.0 3,248.5 3,130.4

4,450.0 3,740.2 3,890.7

4,965.0 3,783.3 3,779.4

5,245.0 4,311.0 4,586.0

5,989.5 4,539.4 4,974.5

7,136.9 5,102.2 5,671.4

8,238.9 5,615.1 6,303.6

722.0 523.2 277.8

417.0 476.4 271.4

770.0 428.9 266.1

667.0 635.3 357.1

769.9 689.0 395.7

865.6 545.9 389.6

929.0 543.0 458.3

Core operating profit DBS UOB OCBC

3,559.0 2,725.3 2,852.6

4,033.0 3,263.8 3,619.3

4,195.0 3,354.4 3,513.4

4,578.0 3,675.7 4,229.0

5,219.6 3,850.4 4,578.8

6,271.4 4,556.3 5,281.8

7,309.9 5,072.1 5,845.3

Core PBT DBS UOB OCBC

3,686.0 2,818.4 2,859.8

4,157.0 3,351.2 3,645.9

4,274.0 3,465.4 3,567.3

4,618.0 3,824.9 4,340.9

5,254.6 3,984.7 4,937.2

6,309.2 4,706.7 5,711.9

7,350.7 5,245.0 6,339.9

Core net profit (net of preference share dividends) DBS 2,972.0 UOB 2,337.5 OCBC 2,133.7

3,343.0 2,803.1 2,734.7

3,441.0 2,889.1 2,677.4

3,750.0 3,249.1 3,329.6

4,331.2 3,370.6 3,826.4

5,225.6 3,983.5 4,447.8

6,108.5 4,440.2 4,940.9

Provisions DBS UOB OCBC

Total net loans DBS UOB OCBC

194,275.0 141,191.3 133,556.9

210,519.0 152,929.8 142,376.5

248,654.0 178,856.9 167,854.1

275,588.0 195,902.6 207,534.6

292,123.3 207,656.7 217,911.4

312,571.9 222,192.7 230,986.0

340,703.4 239,968.1 249,464.9

Total assets DBS UOB OCBC

340,847.0 236,957.7 277,757.6

353,033.0 252,899.5 295,943.5

402,008.0 284,228.7 338,448.4

440,666.0 306,736.5 401,226.0

461,840.9 325,718.6 423,241.3

494,833.3 349,623.5 453,088.5

536,383.2 378,022.9 488,316.8

Source: DBS, UOB, OCBC, Maybank KE

May 6, 2015

19

Singapore Banks Figure 64: Key ratios – profitability (%) Non-interest income/core operating income DBS UOB OCBC

2011

2012

2013

2014

36.4 35.5 39.3

34.5 39.7 43.6

37.3 38.3 41.4

34.0 38.9 40.2

Fee income/core operating income DBS UOB OCBC

20.3 23.1 20.2

19.6 23.2 18.0

21.2 25.9 20.5

Cost/income DBS UOB OCBC

43.6 43.0 43.2

44.8 42.3 40.6

Cost/average assets DBS UOB OCBC

1.1 1.1 1.0

SP/average net loans DBS UOB OCBC GP/RWA DBS UOB OCBC

2015E

2016E

2017E

32.8 36.1 37.2

32.9 35.3 36.8

34.0 35.6 37.1

21.2 23.5 18.9

20.9 22.9 19.3

21.7 22.1 19.1

23.2 22.2 19.4

44.1 43.4 42.0

45.2 42.2 41.1

44.8 43.2 42.1

42.5 41.8 40.8

41.0 41.0 40.1

1.0 1.1 0.9

1.0 1.1 0.9

1.0 1.1 0.9

1.1 1.1 0.9

1.1 1.1 0.9

1.1 1.1 0.9

0.1 0.1 0.1

0.1 0.3 0.1

0.2 0.1 0.1

0.2 0.1 0.1

0.2 0.2 0.1

0.2 0.2 0.1

0.2 0.2 0.1

0.9 1.5 0.9

1.0 1.5 1.0

1.0 1.4 1.0

1.0 1.6 1.0

1.0 1.5 1.0

1.0 1.5 1.0

1.0 1.5 1.0

Loan-deposit ratio DBS UOB OCBC

86.2 83.3 86.4

83.1 84.0 86.2

85.0 83.4 85.7

86.9 83.8 84.5

86.1 82.4 82.6

85.7 81.6 81.0

85.7 81.0 80.3

Net loan growth DBS UOB OCBC

28.1 25.6 27.2

8.4 8.3 6.6

18.1 17.0 17.9

10.8 9.5 23.6

6.0 6.0 5.0

7.0 7.0 6.0

9.0 8.0 8.0

Customer deposit growth DBS UOB OCBC

16.3 19.1 25.3

12.5 7.4 6.8

15.3 17.9 18.7

8.5 9.0 25.3

7.0 7.8 7.5

7.5 8.0 8.0

9.0 8.8 9.0

Source: DBS, UOB, OCBC, Maybank KE

May 6, 2015

20

Singapore Banks Figure 65: Key ratios – asset quality (%) Gross NPL DBS UOB OCBC

2011

2012

2013

2014

2015E

2016E

2017E

1.5 1.8 1.1

1.3 1.8 0.8

1.2 1.3 0.8

0.9 1.3 0.6

0.9 1.3 0.7

0.9 1.3 0.7

0.8 1.2 0.7

SP/NPLs DBS UOB OCBC

45.0 38.1 21.0

46.3 40.7 25.9

39.2 38.5 17.6

40.6 27.9 25.2

54.6 35.9 25.1

65.0 36.7 27.7

71.9 39.7 32.4

GP/NPLs DBS UOB OCBC

72.7 98.1 84.9

79.6 83.2 115.2

83.2 112.0 115.9

106.8 118.0 144.0

109.8 114.6 130.0

114.9 112.9 122.9

117.7 120.6 126.3

GP/net loans DBS UOB OCBC

0.98 1.38 0.90

0.98 1.27 0.94

0.96 1.28 0.89

0.93 1.40 0.91

0.97 1.38 0.91

0.97 1.36 0.91

0.97 1.33 0.91

126.0 124.3 106.6

141.8 122.2 141.8

135.1 147.3 134.2

162.5 144.1 170.6

159.2 137.9 151.4

174.4 138.0 147.4

184.1 147.6 155.5

Tier 1 DBS UOB OCBC

12.9 13.5 14.4

14.0 14.7 16.6

13.7 13.2 14.5

13.1 13.9 13.8

12.9 13.9 14.4

13.2 14.0 15.0

13.5 13.9 15.4

CAR DBS UOB OCBC

15.8 16.7 15.7

17.1 19.1 18.5

16.3 16.6 16.3

15.3 16.9 15.9

15.4 16.6 16.3

15.6 16.6 16.8

15.7 16.4 17.0

Average lending yields DBS UOB OCBC

2.40 2.94 2.91

2.45 2.97 2.82

2.32 2.71 2.60

2.38 2.69 2.70

2.50 2.83 2.81

2.94 3.22 3.15

3.22 3.51 3.40

Average cost of funds DBS UOB OCBC

0.69 1.05 1.12

0.81 1.13 1.13

0.75 1.03 1.03

0.75 1.02 1.07

0.82 1.14 1.25

1.19 1.49 1.53

1.46 1.80 1.79

Interest spread DBS UOB OCBC

1.71 1.89 1.79

1.64 1.84 1.69

1.57 1.68 1.57

1.63 1.67 1.63

1.68 1.68 1.56

1.76 1.73 1.62

1.77 1.71 1.62

NIM DBS UOB OCBC

1.77 1.92 1.86

1.70 1.87 1.77

1.62 1.72 1.64

1.68 1.71 1.68

1.75 1.75 1.66

1.87 1.82 1.75

1.91 1.82 1.77

Provision coverage DBS UOB OCBC

Source: DBS, UOB, OCBC, Maybank KE

May 6, 2015

21

Singapore Banks Figure 66: Key valuation summary 2011

2012

2013

2014

2015E

2016E

2017E

121.3 148.5 62.0

135.2 178.0 79.5

138.7 183.3 77.8

149.5 202.7 83.4

172.6 210.3 95.8

208.3 248.6 111.4

243.5 277.0 123.7

Cash core EPS growth (%) DBS UOB OCBC

80.8 (7.0) (4.3)

11.5 19.9 28.2

2.6 3.0 (2.1)

7.7 10.6 7.2

15.5 3.7 14.9

20.6 18.2 16.2

16.9 11.5 11.1

PER (x) DBS UOB OCBC

17.1 16.4 17.0

15.3 13.7 13.3

14.9 13.3 13.6

13.9 12.0 12.7

12.0 11.6 11.0

9.9 9.8 9.5

8.5 8.8 8.5

P/BV (x) DBS UOB OCBC

1.7 1.8 1.8

1.6 1.7 1.6

1.5 1.6 1.5

1.4 1.4 1.4

1.3 1.3 1.3

1.2 1.2 1.2

1.1 1.1 1.1

P/NTA (x) DBS UOB OCBC

2.0 2.3 2.2

1.9 2.1 1.9

1.8 1.9 1.8

1.6 1.7 1.7

1.5 1.5 1.6

1.3 1.4 1.4

1.2 1.3 1.3

Cash core ROE (%) DBS UOB OCBC

10.7 11.6 11.1

11.0 12.8 12.8

10.6 12.3 11.7

10.7 12.6 12.7

11.3 11.9 12.7

12.5 13.0 13.5

13.3 13.2 13.7

Cash core ROA (%) DBS UOB OCBC

1.0 1.0 1.1

1.0 1.1 1.2

0.9 1.1 1.0

0.9 1.1 1.1

1.0 1.1 1.1

1.1 1.2 1.2

1.2 1.2 1.2

Net dividend yield (%) DBS UOB OCBC

2.7 2.5 2.8

2.7 2.9 3.1

2.8 3.1 3.2

2.8 3.1 3.4

2.9 3.1 3.4

2.9 3.1 3.4

2.9 3.1 3.6

BVPS (SGD) DBS UOB OCBC

12.21 13.23 6.01

12.98 14.56 6.66

13.63 15.36 6.89

14.87 17.09 7.44

16.03 18.33 8.04

17.54 19.99 8.79

19.42 21.93 9.65

NTA/share (SGD) DBS UOB OCBC

10.17 10.45 4.86

10.99 11.80 5.55

11.64 12.62 5.81

12.81 14.40 6.15

14.09 15.74 6.75

15.60 17.40 7.50

17.47 19.34 8.36

Net DPS (SGD cts) DBS UOB OCBC

56.0 60.0 30.0

56.0 70.0 33.0

58.0 75.0 34.0

58.0 75.0 36.0

60.0 75.0 36.0

60.0 75.0 36.0

60.0 75.0 38.0

Dividend payout ratio (% of cash core earnings - net of preference share dividends) DBS 43.9 40.9 41.3 UOB 40.4 33.6 40.9 OCBC 48.0 41.4 51.9

38.3 37.0 38.3

34.3 35.7 37.6

28.5 30.2 32.3

24.4 27.1 30.7

Cash core EPS (SGD cts) DBS UOB OCBC

Share prices as of 5 May 2015 Source: DBS, UOB, OCBC, Maybank KE

May 6, 2015

22

Singapore Banks Research Offices REGIONAL

HONG KONG / CHINA

INDONESIA

WONG Chew Hann, CA Regional Head of Institutional Research

Howard WONG Head of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional

Wilianto IE Head of Research (62) 21 2557 1125 [email protected] • Strategy

Alexander LATZER (852) 2268 0647 [email protected] • Metals & Mining – Regional

Rahmi MARINA (62) 21 2557 1128 [email protected] • Banking & Finance

Benjamin HO (852) 2268 0632 [email protected] • Consumer & Auto

Aurellia SETIABUDI (62) 21 2953 0785 [email protected] • Property

(603) 2297 8686 [email protected] ONG Seng Yeow Regional Head of Retail Research (65) 6432 1453 [email protected]

ECONOMICS Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected] Luz LORENZO Philippines (63) 2 849 8836 [email protected] Tim LEELAHAPHAN Thailand (66) 2658 6300 ext 1420 [email protected] JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext 29682 [email protected]

Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer Staples & Durables Ka Leong LO, CFA (852) 2268 0630 [email protected] • Consumer Discretionary & Auto Karen KWAN (852) 2268 0640 [email protected] • Property & REITs

Isnaputra ISKANDAR (62) 21 2557 1129 [email protected] • Metals & Mining • Cement Pandu ANUGRAH (62) 21 2557 1137 [email protected] • Infra • Construction • Transport• Telcos

Mitchell KIM (852) 2268 0634 [email protected] • Internet & Telcos

Janni ASMAN (62) 21 2953 0784 [email protected] • Cigarette • Healthcare • Retail

Osbert TANG, CFA (86) 21 5096 8370 [email protected] • Transport & Industrials

Adhi TASMIN (62) 21 2557 1209 [email protected] • Plantations

Ricky WK NG, CFA (852) 2268 0689 [email protected] • Utilities & Renewable Energy

PHILIPPINES

Steven ST CHAN (852) 2268 0645 [email protected] • Banking & Financials - Regional

Luz LORENZO Head of Research (63) 2 849 8836 [email protected] • Strategy • Utilities • Conglomerates • Telcos

Willie CHAN Hong Kong / Regional

Warren LAU (852) 2268 0644 [email protected] • Technology – Regional

Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement

(852) 2268 0631 [email protected]

INDIA

MALAYSIA

Jigar SHAH Head of Research (91) 22 6632 2632 [email protected]

Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics

STRATEGY Sadiq CURRIMBHOY Global Strategist (65) 6231 5836 [email protected]

WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy • Construction & Infrastructure

• Oil & Gas • Automobile • Cement

• Banking & Finance

Anubhav GUPTA (91) 22 6623 2605 [email protected] • Metal & Mining • Capital Goods • Property

LIAW Thong Jung (603) 2297 8688 [email protected]

Vishal MODI (91) 22 6623 2607 [email protected]

Desmond CH’NG, ACA (603) 2297 8680 [email protected]

• Oil & Gas - Regional • Shipping

• Banking & Financials

ONG Chee Ting, CA (603) 2297 8678 [email protected]

Abhijeet Kundu (91) 22 6623 2628 [email protected]

• Plantations - Regional

• Consumer

Mohshin AZIZ (603) 2297 8692 [email protected]

SINGAPORE

• Aviation - Regional • Petrochem YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property & REITs LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove Producers CHAI Li Shin, CFA (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure Ivan YAP (603) 2297 8612 [email protected] • Automotive Kevin WONG (603) 2082 6824 [email protected] • REITs LEE Cheng Hooi Regional Chartist (603) 2297 8694 [email protected] Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]

May 6, 2015

NG Wee Siang Head of Research (65) 6231 5838 [email protected] • Banking & Finance Gregory YAP (65) 6231 5848 [email protected] • SMID Caps – Regional • Technology & Manufacturing • Telcos

Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction Ramon ADVIENTO (63) 2 849 8845 [email protected] • Mining Michael BENGSON (63) 2 849 8840 [email protected] • Conglomerates Jaclyn JIMENEZ (63) 2 849 8842 [email protected] • Consumer Arabelle MAGHIRANG (63) 2 849 8838 [email protected] • Banks

THAILAND

YEAK Chee Keong, CFA (65) 6231 5842 [email protected] • Offshore & Marine

Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer • Materials • Ind.Estates

Derrick HENG, CFA (65) 6231 5843 [email protected] • Transport • Property • REITs (Office)

Jesada TECHAHUSDIN, CFA (66) 2658 6300 ext 1394 [email protected] • Financial Services

Joshua TAN (65) 6231 5850 [email protected] • REITs (Retail, Industrial) WEI Bin (65) 6231 5844 [email protected] • Commodity • Logistics • S-chips John CHEONG (65) 6231 5845 [email protected] • Small & Mid Caps • Healthcare TRUONG Thanh Hang (65) 6231 5847 [email protected] • Small & Mid Caps

Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap Chatchai JINDARAT (66) 2658 6300 ext 1401 [email protected] • Electronics

VIETNAM LE Hong Lien, ACCA Head of Institutional Research (84) 8 44 555 888 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 8 44 555 888 x 8180 [email protected] • Real Estate • Construction • Materials Le Nguyen Nhat Chuyen (84) 8 44 555 888 x 8082 [email protected] • Oil & Gas NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage

Kittisorn PRUITIPAT, CFA, FRM (66) 2658 6300 ext 1395 [email protected] • Real Estate • Telcos Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector • Transport Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 [email protected] Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy

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Singapore Banks APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report. This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report. Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Singapore This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. Thailand The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result. Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect. US This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations. UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

May 6, 2015

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Singapore Banks DISCLOSURES Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.

Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Singapore: As of 06 May 2015, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report. Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report. Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. As of 06 May 2015, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report. MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Ong Seng Yeow | Executive Director, Maybank Kim Eng Research

Definition of Ratings Maybank Kim Eng Research uses the following rating system BUY Return is expected to be above 10% in the next 12 months (excluding dividends) HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends) SELL Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

May 6, 2015

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Singapore Banks  Malaysia Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194

Stockbroking Business:

Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888 Fax: (603) 2282 5136

 Philippines Maybank ATR Kim Eng Securities Inc. 17/F, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1200 Tel: (63) 2 849 8888 Fax: (63) 2 848 5738

 Singapore Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Research Pte Ltd 50 North Canal Road Singapore 059304

Maybank Kim Eng Securities (London) Ltd 5th Floor, Aldermary House 10-15 Queen Street London EC4N 1TX, UK

Tel: (65) 6336 9090 Tel: (44) 20 7332 0221 Fax: (44) 20 7332 0302

 Hong Kong

 Indonesia

 New York Maybank Kim Eng Securities USA Inc 777 Third Avenue, 21st Floor New York, NY 10017, U.S.A. Tel: (212) 688 8886 Fax: (212) 688 3500

 India

Kim Eng Securities (HK) Ltd Level 30, Three Pacific Place, 1 Queen’s Road East, Hong Kong

PT Maybank Kim Eng Securities Plaza Bapindo Citibank Tower 17th Floor Jl Jend. Sudirman Kav. 54-55 Jakarta 12190, Indonesia

Kim Eng Securities India Pvt Ltd 2nd Floor, The International 16, Maharishi Karve Road, Churchgate Station, Mumbai City - 400 020, India

Tel: (852) 2268 0800 Fax: (852) 2877 0104

Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189

Tel: (91) 22 6623 2600 Fax: (91) 22 6623 2604

 Thailand Maybank Kim Eng Securities (Thailand) Public Company Limited 999/9 The Offices at Central World, 20th - 21st Floor, Rama 1 Road Pathumwan, Bangkok 10330, Thailand Tel: (66) 2 658 6817 (sales) Tel: (66) 2 658 6801 (research)

 South Asia Sales Trading

 London

 Vietnam Maybank Kim Eng Securities Limited 4A-15+16 Floor Vincom Center Dong Khoi, 72 Le Thanh Ton St. District 1 Ho Chi Minh City, Vietnam Tel : (84) 844 555 888 Fax : (84) 8 38 271 030

 Saudi Arabia In association with

Anfaal Capital Villa 47, Tujjar Jeddah Prince Mohammed bin Abdulaziz Street P.O. Box 126575 Jeddah 21352 Tel: (966) 2 6068686 Fax: (966) 26068787

 North Asia Sales Trading

Kevin Foy Regional Head Sales Trading [email protected] Tel: (65) 6336-5157 US Toll Free: 1-866-406-7447

Alex Tsun [email protected] Tel: (852) 2268 0228 US Toll Free: 1 877 837 7635

Malaysia

Thailand

Rommel Jacob [email protected] Tel: (603) 2717 5152

Tanasak Krishnasreni [email protected] Tel: (66)2 658 6820

Indonesia Harianto Liong [email protected] Tel: (62) 21 2557 1177

New York

India

Andrew Dacey [email protected] Tel: (212) 688 2956

Manish Modi [email protected] Tel: (91)-22-6623-2601

Vietnam

Philippines

Tien Nguyen

Keith Roy [email protected] Tel: (63) 2 848-5288

[email protected]

Tel: (84) 44 555 888 x8079

May 6, 2015

www.maybank-ke.com | www.maybank-keresearch.com

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