- Beats from overheads, allowances, customer treasury flows & Bank of Ningbo masked weak trends.
- NIM disappointed, down 5bps QoQ & 8bps YoY to 1.62% trough. Weak loan traction.
- Maintain HOLD for lack of catalysts & SGD11.10 TP, at 11x FY15 P/E. Top sector pick DBS.
1Q15 PATMI of SGD993.1m beat the market’s SGD911m and our SGD881.8m. Variances were: 1) lower-than-expected overheads of SGD873m vs our SGD960m on lower business-promotion and volume-driven expenses; 2) stronger-than-expected net trading income. This was primarily treasury-related income from customer flows; 3) smaller-than-expected allowances of SGD64m vs our SGD100m; and 4) strong contributions from Bank of Ningbo.
…but weak trends
Loan growth of 0.2% QoQ and 4% YoY, ex-Wing Hang, was softer than expected. SGD/USD loans were down 1.2% and 5.2% QoQ, partially offsetting a sharp 10.2% QoQ jump in HKD loans. Contrary to expectations, NIM contracted 5bps QoQ and 8bps YoY to a trough of 1.62%. This was due to aggressive HKD depositgathering and weaker income from money-market gapping. A large increase in fixed deposits pushed up cost of funds by 4bps QoQ, diluted improved SGD loan spreads. Like its peers, asset quality stayed strong.
Reiterate HOLD We leave our EPS unchanged pending our sector review. Reiterate HOLD with a SGD11.10 TP, at 11x FY15 P/E. This is more than 1SD below its rolling average since 2005
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