singapore commercial banking report q2 2012

Q2 2012www.businessmonitor.com

commercial Banking report

iSSn 1747-8723published by Business monitor international ltd.

SingaporeINCLUDES BMI'S FORECASTS

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SINGAPORE COMMERCIAL BANKING REPORT Q2 2012 INCLUDES 5-YEAR INDUSTRY FORECASTS TO 2016

Part of BMI’s Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: March 2012

Singapore Commercial Banking Report Q2 2012

© Business Monitor International Ltd Page 2



CONTENTS

Executive Summary ......................................................................................................................................... 5

Table: Levels (SGDbn) .......................................................................................................................................................................................... 5 Table: Levels (US$bn) ........................................................................................................................................................................................... 5 Table: Levels At January 2012 .............................................................................................................................................................................. 5 Table: Annual Growth Rate Projections 2012-2016 (%) ....................................................................................................................................... 5 Table: Ranking Out Of 59 Countries Reviewed In 2011 ........................................................................................................................................ 6 Table: Projected Levels (SGDbn) .......................................................................................................................................................................... 6 Table: Projected Levels (US$bn) ........................................................................................................................................................................... 6

SWOT Analysis ................................................................................................................................................. 7

Singapore Commercial Banking SWOT ................................................................................................................................................................. 7 Singapore Political SWOT ..................................................................................................................................................................................... 7 Singapore Economic SWOT ................................................................................................................................................................................... 8 Singapore Business Environment SWOT ............................................................................................................................................................... 9

Business Environment Outlook .................................................................................................................... 10

Commercial Banking Business Environment Rating ............................................................................................................................................ 10 Table: Commercial Banking Business Environment Ratings ............................................................................................................................... 10 Commercial Banking Business Environment Rating Methodology ...................................................................................................................... 11 Table: Asia Commercial Banking Business Environment Ratings ....................................................................................................................... 12

Global Commercial Banking Outlook ........................................................................................................... 13

Asia Banking Sector Outlook ........................................................................................................................ 17

Three Threats To Asia's Banks In 2012 ................................................................................................................................................................ 17 Asia Banking Sector Forecast Overview .............................................................................................................................................................. 22 Table: Banks' Bond Portfolios ............................................................................................................................................................................. 22 Table: Asia Commercial Banking Business Environment Ratings ....................................................................................................................... 23 Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios ............................................................................................................. 24 Table: Anticipated Developments in 2012 ........................................................................................................................................................... 25 Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn) ................................................................................................. 26 Table: Comparison of US$ Per Capita Deposits (2011) ...................................................................................................................................... 27 Table: Interbank Rates and Bond Yields .............................................................................................................................................................. 28

Singapore Banking Sector Outlook .............................................................................................................. 29

Loan Growth Seen Hampering Profits In 2012 .................................................................................................................................................... 29

Economic Outlook .......................................................................................................................................... 34

Table: Singapore – Economic Activity ................................................................................................................................................................. 36

Competitive Landscape ................................................................................................................................. 37

Market Structure ....................................................................................................................................................................................................... 37 Protagonists ......................................................................................................................................................................................................... 37 Table: Protagonists In Singapore's Commercial Banking Sector ........................................................................................................................ 37 Definition Of The Commercial Banking Universe................................................................................................................................................ 37 List Of Banks ....................................................................................................................................................................................................... 38 Table: Licensed Commercial Banks In Singapore ............................................................................................................................................... 38

Company Profiles ........................................................................................................................................... 42



Bangkok Bank ...................................................................................................................................................................................................... 42 Table: Key Statistics For Bangkok Bank, 2006-2008 (THBmn) ........................................................................................................................... 43 Hong Leong Bank ................................................................................................................................................................................................ 44 Table: Key Statistics For Hong Leong Bank, 2007-2009 (MYRmn) ..................................................................................................................... 45 Maybank .............................................................................................................................................................................................................. 46 Table: Key Statistics For Maybank, 2007-2009 (MYRmn) ................................................................................................................................... 47 Islamic Bank of Asia ............................................................................................................................................................................................ 48 Bank of China ...................................................................................................................................................................................................... 49 DBS Bank............................................................................................................................................................................................................. 51 Singapore Stock Market Indicators ...................................................................................................................................................................... 52 Singapore Balance Sheet (LCYmn) ...................................................................................................................................................................... 53 Singapore Balance Sheet (US$mn) ...................................................................................................................................................................... 53 Singapore Key Ratios (%) .................................................................................................................................................................................... 53 Oversea-Chinese Banking Corporation ............................................................................................................................................................... 54 Table: Stock Market Indicators, 2004-2009 ......................................................................................................................................................... 55 Table: Balance Sheet (SGDmn, unless stated), 2004-2009 .................................................................................................................................. 55 Table: Balance Sheet (US$mn, unless stated), 2004-2009 ................................................................................................................................... 56 Table: Key Ratios (%), 2004-2009 ....................................................................................................................................................................... 56 United Overseas Bank ......................................................................................................................................................................................... 57 Table: Singapore Stock Market Indicators........................................................................................................................................................... 58 Table: Singapore Balance Sheet (LCYmn) ........................................................................................................................................................... 58 Table: Singapore Balance Sheet (US$mn) ........................................................................................................................................................... 59 Table: Singapore Key Ratios (%) ........................................................................................................................................................................ 59 Citibank Singapore .............................................................................................................................................................................................. 60

BMI Banking Sector Methodology ................................................................................................................ 62

Commercial Bank Business Environment Rating ................................................................................................................................................. 63 Table: Commercial Banking Business Environment Indicators And Rationale.................................................................................................... 64 Table: Weighting Of Indicators ........................................................................................................................................................................... 65



Executive Summary

Table: Levels (SGDbn)

Date Total

assets Client loans

Bond portfolio Other

Liabilities and

capital Capital Client

deposits Other

January 2011 798.8 328.8 98.1 372.0 798.8 66.3 437.5 295.0

January 2012 867.7 422.1 0.0 445.6 867.7 68.4 487.3 312.0

Change, % 9% 28% -100% 20% 9% 3% 11% 6%

Source: BMI; Central banks; Regulators

Table: Levels (US$bn)

Date Total

assets Client loans

Bond portfolio Other

Liabilities and

capital Capital Client

deposits Other

January 2011 624.4 257.0 76.6 290.8 624.4 51.8 342.0 230.6

January 2012 689.6 335.5 0.0000 354.1 689.6 54.3 387.3 248.0

Change, % 10% 31% -100% 22% 10% 5% 13% 8%


Table: Levels At January 2012

Loan/deposit ratio Loan/asset ratio Loan/GDP ratio GDP Per Capita,

US$ Deposits per

capita, US$

86.62% 48.65% 123.72% 37,075 74,759

Falling Falling Rising


Table: Annual Growth Rate Projections 2012-2016 (%)

Assets Loans Deposits

Annual Growth Rate 2 0 9

CAGR 3 2 8

Ranking 56 57 31




Table: Ranking Out Of 59 Countries Reviewed In 2011

Loan/deposit ratio Loan/asset ratio Loan/GDP ratio

38 46 10

Local currency asset growth Local currency loan growth Local currency deposit growth

38 30 34


Table: Projected Levels (SGDbn)

2008 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f

Total assets 668.30 705.76 781.61 867.58 915.30 951.91 980.47 995.18 1,010.11

Client loans 272.18 281.27 322.74 419.57 444.74 453.64 455.90 456.82 457.73

Client deposits 347.51 391.40 433.76 459.78 494.27 536.28 581.86 631.32 684.98

e/f = estimate/forecast. Source: BMI; Central banks; Regulators

Table: Projected Levels (US$bn)

2008 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f

Total assets 466.49 502.39 609.01 669.23 709.54 806.71 860.06 921.46 952.93

Client loans 189.99 200.22 251.48 323.64 344.76 384.44 399.92 422.98 431.82

Client deposits 242.57 278.61 337.98 354.66 383.15 454.47 510.41 584.56 646.21

e/f = estimate/forecast. Source: BMI; Central banks; Regulators



SWOT Analysis

Singapore Commercial Banking SWOT

Strengths The general macroeconomic environment and prospects remain favourable.

Singapore's monetary policymakers have built a track record of low inflation and stable growth, by guiding the exchange rate to offset inflationary pressures.

Strikes and labour protests will remain rare, or absent, in the foreseeable future due to the government's insistence on a business-friendly environment. Policymakers will continue to use heavy-handed tactics so unions remain pliant.

Weaknesses The effect of slowing global demand on exports will weaken the sector.

Singapore faces a number of long-term economic problems. Productivity is low, competition from low-cost neighbouring countries is on the increase and structural unemployment is placing a growing burden on the economy.

Opportunities Due to the lack of progress at the WTO, the Singaporean government has committed the country to sign 19 bilateral free trade agreements (FTAs). Talks are ongoing for an FTA with Gulf Cooperation Council countries.

In the face of regional competition for both exports and investment, the government is encouraging diversification. Areas promoted are biomedical sciences, tourism, medical and financial services, and there are plans to develop two casino resorts.

Threats While liberalisation has been necessary in order to strengthen the big three domestic banks, it has brought increased competition from foreign lenders.

Exporters will need to adapt to competition from regional low-wage economies.,

Singapore Political SWOT

Strengths Singapore enjoys a very stable political system, following the country's second change of leadership in 40 years, which saw Lee Hsien Loong – son of the nation's founder Lee Kuan Yew – take over as prime minister in 2004.

Official promises have been made to eradicate Singapore's reputation as an overprotective nanny-state, with efforts to enhance freedom of expression.

Weaknesses Singapore is not a properly functioning democracy. The ruling People's Action Party has won all but six seats in parliament and the opposition is restricted from campaigning through tight control over political debate and frequent use of libel laws.

The government has yet to improve the situation for the less well off in Singapore and there is a rising wage gap between the top earners and the lowest paid.

Opportunities Lee is proving himself a capable leader, moving away from the shadow of his father by repeatedly calling for more openness.

Singapore is leading its regional neighbours in signing free trade agreements. Increased regional integration is likely to give the country more influence in Asia. .

Threats There are fears that Singapore's foreign policy alignment with the US will cause the city-state to become a target for terror attacks launched by Muslim extremists.

The last election showed that segments of the electorate are becoming disenchanted with the People's Action Party and its repression of opposition voices.



Singapore Economic SWOT

Strengths Singapore's monetary policymakers have gained credibility by guiding the exchange rate to offset inflationary pressures while ensuring stable growth.

Singapore's current account surplus remains about 20% of GDP and its external finances are in good shape. This is reflected by the world's credit rating agencies, which continue to award Singapore top marks for external strengt

Weaknesses The trade-dependent economy remains exposed to global trends in demand for electronic goods, which account for around half of Singapore's non-oil exports.

Singapore faces a number of long-term economic problems. Competition from low-cost neighbouring countries is on the increase and its population is ageing rapidly.

Opportunities In the face of regional competition for both exports and investment, the government is encouraging economic diversification to boost competitiveness. New areas being promoted include biomedical sciences, medical services, financial services and tourism.

There may be increased prospects for Singapore to expand its investments in the Iskandar Malaysia project (a government-directed economic corridor initiative) in Johor, following a cordial visit by Malaysian Prime Minister Najib Razak in May 2009.

Threats There is significant state involvement in the private sector, with the government refusing to disclose the assets of the Government of Singapore Investment Corp (GIC). The GIC is one of the world's largest institutional investors, managing foreign exchange reserves and government funds worth more than US$100bn. Without increased openness, investor confidence could be damaged and domestic growth hindered.

Singapore's exporters will need constantly to adapt to competition from low-wage economies such as China and India.



Singapore Business Environment SWOT

Strengths Singapore is the least corrupt country in the world, according to Transparency International's 2010 Corruption Perceptions Index.

Strikes and labour protests will remain rare, if not absent, for the foreseeable future owing to the government's autocratic insistence on a business-friendly environment. Policymakers will continue to use heavy-handed tactics to ensure unions stay pliant.

Weaknesses Political and economic stability has come at a price. The government censors the media and limits the distribution of foreign publications. The judiciary's record of siding with prominent politicians calls into question the true extent of its neutrality in any contract dispute involving a politically sensitive issue.

Opportunities Owing to the lack of progress at the WTO, the government has committed the country

to sign 18 bilateral free trade agreements with 24 trading partners. Singapore has already signed agreements with several countries, including the US, Japan, India and Australia.

Singapore has one of the best business operating environments in Asia. This is reflected by its second place in the Index of Economic Freedom league table compiled by Heritage Foundation and the Wall Street Journal.

Threats Singapore is potentially at risk of a terrorist attack. The city-state has previously been

identified as a target by Islamist militants from neighbouring Indonesia and elsewhere. Singapore's adjacency to the Malacca Straits means its trade is vulnerable to international piracy.



Business Environment Outlook

Commercial Banking Business Environment Rating

Table: Commercial Banking Business Environment Ratings

Limits of potential returns Data Score out of 10 Ratings score out of 100

Total assets end-2012, US$bn 609 7 Market Structure 67

Growth in total assets 2012-2016, US$bn 243.4 7

Growth in client loans 2012-2016, US$bn 87.1 6

Per-capita GDP 2012 52,132.7 10 Country Structure 95

Tax 8.8 9

GDP volatility 0.9 10

Financial infrastructure 8.8 9

Risks to realisation of returns

Regulatory framework and development 10.0 10 Market Risk 97

Regulatory framework and competitive landscape 9.0 9

Moody's rating for local currency deposits 10.0 10

Long-term financial risk 8.0 8 Country Risk 86

Long-term external risk 8.7 9

Long-term policy continuity 9.0 9

Legal framework 8.4 8

Bureaucracy 9.0 9

Commercial banking business environment rating 82

Source: BMI



Commercial Banking Business Environment Rating Methodology

Since Q108, we have described numerically the banking business environment for each of the countries

surveyed by BMI. We do this through our Commercial Banking Business Environment Rating (CBBER),

a measure that ensures we capture the latest quantitative information available. It also ensures consistency

across all countries and between the inputs to the CBBER and the Insurance Business Environment

Rating, which is likewise now a feature of our insurance reports. Like the Business Environment Ratings

calculated by BMI for all the other industries on which it reports, the CBBER takes into account the

limits of potential returns and the risks to the realisation of those returns. It is weighted 70% to the former

and 30% to the latter.

The evaluation of the 'Limits of potential returns' includes market elements that are specific to the

banking industry of the country in question and elements that relate to that country in general. Within the

70% of the CBBER that takes into account the 'Limits of potential returns', the market elements have a

60% weighting and the country elements have a 40% weighting. The evaluation of the 'Risks to

realisation of returns' also includes banking elements and country elements (specifically, BMI's

assessment of long-term country risk). However, within the 30% of the CBBER that take into account the

risks, these elements are weighted 40% and 60%, respectively.

Further details on how we calculate the CBBER are provided at the end of this report. In general, though,

three aspects need to be borne in mind in interpreting the CBBERs. The first is that the market elements

of the 'Limits of potential returns' are by far the most heavily weighted of the four elements. They account

for 60% of 70% (or 42%) of the overall CBBER. Second, if the market elements are significantly higher

than the country elements of the 'Limits of potential returns', it usually implies that the banking sector is

(very) large and/or developed relative to the general wealth, stability and financial infrastructure in the

country. Conversely, if the market elements are significantly lower than the country elements, it usually

means that the banking sector is small and/or underdeveloped relative to the general wealth, stability and

financial infrastructure in the country. Third, within the 'Risks to the realisation of returns' category, the

market elements (i.e. how regulations affect the development of the sector, how regulations affect

competition within it, and Moody's Investor Services' ratings for local currency deposits) can be markedly

different from BMI's long-term risk rating.



Table: Asia Commercial Banking Business Environment Ratings

Limits of Potential Returns Risks to Potential

Returns Overall

Market Structure Country

Structure Market

Risks Country

Risks Rating Ranking

Bangladesh 46.7 45.0 43.3 44.0 45.3 54

China 93.3 55.0 63.3 74.0 75.5 13

Hong Kong 76.7 92.5 73.3 84.0 82.0 6

India 83.3 57.5 60.0 56.0 68.4 28

Indonesia 76.7 65.0 80.0 52.0 69.4 24

Japan 33.3 77.5 66.7 80.0 58.1 37

Malaysia 73.3 80.0 83.3 80.0 77.6 11

Pakistan 40.0 50.0 53.3 42.0 44.8 55

Philippines 50.0 62.5 60.0 52.0 55.1 46

Singapore 66.7 95.0 96.7 86.0 81.7 7

Sri Lanka 23.3 55.0 33.3 46.0 37.5 57

South Korea 80.0 82.5 83.3 78.0 80.7 9

Taiwan 76.7 72.5 86.7 76.0 76.6 12

Thailand 63.3 65.0 86.7 74.0 68.5 27

Vietnam 70.0 55.0 36.7 48.0 57.8 38

United States 90.0 85.0 100.0 80.0 88.0 2

Scores out of 100, with 100 the highest. Source: BMI



Global Commercial Banking Outlook

Europe Is Still The Main Event

With BMI's core macroeconomic forecasts pointing toward a sustained if weak economic recovery, the

eurozone crisis remains the biggest risk to the global banking sector. Looking at the outlook region-by-

region, there are none that would be unaffected by a major deterioration in the European crisis. We

covered this closely in the Q1 2012 report ('Europe On The Brink'), but some questions have been

addressed since that time, namely whether the European Central Bank (ECB) would intervene to stave off

a short-term credit crunch and expand support to peripheral bond markets (it has, in increasingly bold

fashion). We retain our core view that the eurozone is set to 'muddle through' the current crisis, with the

monetary bloc surviving, albeit only after significant zone-wide macroeconomic and fiscal reforms.

However, a renewed escalation to the crisis would pose significant risks to our regional banking outlooks.

Developed State And Emerging Market Commercial Banking Overview

US: While the US banking sector recovery remains tentative, there are several reasons why we believe

the US banking sector has turned the corner, and we continue to project fairly robust lending and asset

growth in 2012. Among other positive factors: lending growth is picking up, loan standards continue to

ease, and banks are looking increasingly to profit-making opportunities, rather than merely ensuring their

survival. However, the European crisis poses a major threat to the US banking sector; the long end of the

yield curve is set to remain low-yielding for years, which will hurt profitability, and the regulatory regime

is increasingly restrictive.

Signs Of Life, But Real Estate Lending Still Trailing US – Loans By Category, % chg y-o-y

Source: BMI, Federal Reserve



Eurozone: From an aggregate level the eurozone banking sector would seem to be recovering well from

the turmoil of 2008 and 2009. However, this masks increasing disparity between the relatively prosperous

core and crumbling periphery, as well as stresses in traditional bank funding markets across the region.

We cannot discount the possibility of a major credit crunch should the debt crisis reach its meltdown

moment. While we expect continued industry growth in aggregate, this masks deep divisions at the

national level. Going forward, growing stresses in the banking system will require the ECB to intervene

still further. This will likely take the form of additional cuts to the refinancing rate, an expansion of the

Securities Market Programme (which has already purchased EUR213bn in government debt) and a

reduction in collateral requirements for securities repoed at the ECB. We still expect the central bank to

have to significantly ramp up its intervention in the sovereign debt markets from 2012 given the

enormous refinancing demands of the region's issuers.

Emerging Asia: In 2012 we expect weaker earnings, hampered by foreign funding constraints, slower

credit growth, and higher non-performing loans. One corollary of the surge in credit growth seen in 2010

and 2011, and the inevitable slowdown in 2012, will be a resurgence in non-performing loans (NPLs).

Our core view is for a sharp slowdown in real GDP growth across the board this year, lead by a hard

landing in China and a slowdown in trade growth driven by a recession in the eurozone. These factors

alone are likely to lead to an uptick in NPLs. However, when we combine this with the impact of

weakening housing markets across the region and tighter availability of credit, the impact on NPL is

likely to be exacerbated. We look for the likes of China, Hong Kong, and Australia to see a surge in bad

debts in 2012.

Leveraged On FX Loans Asia – Foreign Exchange Loans Of Asian Banks

Source: BMI



Emerging Europe: We maintain our wary view towards Central and Eastern European (CEE) banking

sectors on the back of continued macroeconomic and financial headwinds emanating from the eurozone

sovereign debt crisis. We also hold to our preference for the Czech Republic and Poland's banking sectors

on the grounds of stability and growth potential, respectively, while reaffirming our negative outlook for

the Hungarian and Ukrainian banking. We also caution that Southeastern European banking sectors are

showing some worrying risk indicators.

CE Generally Better Placed Despite High Foreign Claims On Assets CEE – European Banks' Claims, % of Total Assets

Source: BIS, BMI

Latin America: We believe asset and loan growth will remain strong in 2012, driven by stable

fundamentals and the use of monetary stimulus in those markets where credit cycles are slowing. In

addition, we do not view the prevalence of European banks operating in the Latin American region as a

risk to regional banking sector stability. Indeed, those sectors which have greater foreign participation

tend to be the most attractive from a growth perspective, with any serious threats to sector stability

coming mainly from domestic factors.

Sub-Saharan Africa: The outlook for the South African, Nigerian, Kenyan and Ghanaian banking

sectors is mixed. We see Nigeria and Ghana as having the strongest growth potential over the coming

year, while South Africa should see slow but stable expansion, and Kenya will likely struggle amid

various macroeconomic challenges.



Diverse Regional Picture Africa – Total Banking Sector Loans, % chg y-o-y

Source: Central Banks; BMI

Middle East And North Africa: The outlook for banks across the Middle East and North Africa

(MENA) continues to diverge, with oil-fuelled spending in the Gulf facilitating a slight improvement in

lending conditions, whilst risks of currency devaluations and a spike in non-performing loans tempers our

outlook on financial institutions in Egypt and the Levant. Although the region is by no means

homogenous, the recent spike in interbank lending rates from Saudi Arabia to Jordan would suggest that

risks of a broad-based tightening in credit conditions cannot be ruled out, particularly given rising

regional tensions and ongoing concerns surrounding the fate of the eurozone.

Credit Conditions Improving...For Some MENA – Banking Sector Credit, % chg y-o-y

Source: BMI/Respective Central Banks



Asia Banking Sector Outlook

Three Threats To Asia's Banks In 2012

BMI View: In 2011 Asian banking stocks weakened substantially as earnings multiples collapsed amid

record earnings. In 2012, we expect the reverse, as weaker earnings, hampered by foreign funding

constraints, slower credit growth, and higher non-performing loans (NPLs), to be offset by multiple

expansion. On balance, we retain our bearish bias, although we highlight key technical areas to watch.

Asian banking equities suffered a difficult year in 2011. The Bloomberg Asia Banking Index recorded a

13% fall, taking prices back to mid-2009 levels. While the index is heavily weighted towards Chinese

banks, equity losses were recorded across the board. As the accompanying chart shows, only Indonesian

financial equities gained in 2011, with the rest posting varying degrees of losses, led by India.

Only Indonesia In The Black Asia – 2011 Returns For MSCI Financial Indices, %

Source: BMI

This weakness in equity prices came despite an impressive earnings display on the whole. The Bloomberg

Asian Banking Index saw its earnings increase by an impressive 27%, with the price fall coming entirely

via a collapse in multiples. In fact, the vast majority of countries saw banking sector earnings hit a new

high, accompanied by new highs in book values, taking P/E and P/B multiples to very low levels. This is

most starkly shown in the case of the MSCI India Financials index. While the market lost 29% thorough

2011, earnings were actually up 25%, with the loss coming from a staggering 10.7 percentage point

decline in the P/E ratio.



Earnings Up, Prices Down India – MSCI India Financials Index, P/E Ratio & Earnings Per Share

Source: BMI

In 2012, we expect to see a reversal of trends seen in 2011. On the whole we should see earnings weaken,

quite substantially is some cases, and book values follow suit. Multiples should expand, however (greatly

in countries such as Hong Kong, Singapore, and Australia, which run serious risks of losses). The big

question is whether prices will manage to mount a sustainable increase in the face of weakening earnings

or continue their slide from the April 2011 peak, when we voiced our concerns surrounding Asian banks.

On the whole, we believe that another price low in on the cards this year in the Bloomberg Asia Banking

Index, although this is contingent upon a continued deterioration in the regional economy, led by China,

and further global economic dislocation, which would both hit earnings and raise equity risk premiums.



Foreign Funding Difficulties To Continue

We recently articulated the risks faced by Asian financial systems from the reduced availability of

overseas funding amid growing global risk aversion and deleveraging in the European banking system.

Asian banks have rapidly expanded their foreign currency-denominated loan books in recent years, with

the FX loans-to-deposit ratio now in excess of 100% as corporates and speculators have looked to take

advantage of low US dollar interest rates versus local currency rates. With US dollar funding conditions

tightening over recent months (despite easing somewhat following the ECB's measures to improve

funding conditions), this is likely to have negative implications for Asian banks. Firstly, it will reduce net

interest margins (NIM) on FX-denominated loans as funding costs increase. Secondly, the recent increase

in the value of the US dollar in Q411 will have raised the local currency value of borrowings, making it

more difficult to meet loan repayments. We could perhaps see the lagged impact of this show up in

greater non-performing foreign currency loans in the coming months. Our expectation of another bout of

US$ strength suggests this problem is also likely to reoccur later in the year.

Leveraged On FX Loans Asia – Foreign Exchange Loans Of Asian Banks

Source: BMI

Shrinking Credit Growth

One major supportive factor for banking sector earnings in 2011 was the rise in the amount of credit

banks extended, with growth hitting new highs in the likes of Hong Kong and Singapore. In 2012 we see

credit growth falling across the board, with not a single country in the region expected to see an

acceleration in credit. This will act as a clear and direct drag on earnings growth. Net interest margins are

also unlikely to offer much help as, despite our expectations that short-term interest rates will fall, long-



term interest rates should also fall. With credit growth weakening and NIMs potentially falling, we

believe these dynamics are sure to hurt banks' bottom lines in 2012.

Malaysia Leading The Way Asia – Foreign Exchange Loan Growth By Country, % chg y-o-y

Source: BMI

Rising NPLs

One corollary of the surge in credit growth seen in 2010 and 2011, and the inevitable slowdown in 2012,

will be a resurgence in NPLs. Our core view is for a sharp slowdown in real GDP growth across the board

this year, led by a hard landing in China and a slowdown in trade growth driven by a recession in the

eurozone. These factors alone are likely to lead to an uptick in NPLs. However, when we combine this

with the impact of weakening housing markets across the region and tighter availability of credit, the

impact on NPL is likely to be exacerbated. We look for the likes of China, Hong Kong, and Australia to

see a surge in bad debts in 2012.

Technical Levels To Watch

The technical chart of the Bloomberg Asia Banking Index shows tough resistance lies ahead in the near

term at the 150 level, and a break of this level could trigger a run at the 2011 high. However, should

prices approach this level, we would turn outright bearish given the prospect of weaker earnings in 2012.

In the event of weakness, we identify the 115 level. The gap left by the break-out in 2009 is a potential

downside target, and a region-wide recession could see prices return to this level. Given our bullish long-

term outlook on regional growth, however, we would see any move to this area as a long-term

opportunity.



Right On Resistance Asia – Bloomberg Asia Banking Index

Source: BMI



Asia Banking Sector Forecast Overview

Table: Banks' Bond Portfolios

Bond Portfolio, US$bn Bond as % total assets Year-on-year growth %

Bangladesh 16.6 23.0 8.2

China 1,573.8 10.8 11.8

Hong Kong 338.4 21.4 11.6

India 308.3 24.2 19.3

Indonesia 14.9 4.6 -1.1

Japan 3,008.4 29.9 14.8

Malaysia 68.2 14.0 15.7

Pakistan 21.8 28.4 26.7

Philippines 37.2 26.4 9.2

Singapore 73.3 12.0 -1.1

Sri Lanka 2.2 12.8 22.2

South Korea 266.1 17.4 14.0

Taiwan 192.7 16.8 40.2

Thailand 60.6 15.5 7.6

Vietnam 10.5 6.9 28.4

United States 526.8 4.4 19.6

Source: Central banks, regulators, BMI



Table: Asia Commercial Banking Business Environment Ratings

Limits of Potential

Returns Risks to Potential

Returns Overall

Market

Structure Country

Structure Market

Risks Country

Risks Rating Ranking

Bangladesh 46.7 45.0 43.3 44.0 45.3 54

China 93.3 55.0 63.3 74.0 75.5 13

Hong Kong 76.7 92.5 73.3 84.0 82.0 6

India 83.3 57.5 60.0 56.0 68.4 28

Indonesia 76.7 65.0 80.0 52.0 69.4 24

Japan 33.3 77.5 66.7 80.0 58.1 37

Malaysia 73.3 80.0 83.3 80.0 77.6 11

Pakistan 40.0 50.0 53.3 42.0 44.8 55

Philippines 50.0 62.5 60.0 52.0 55.1 46

Singapore 66.7 95.0 96.7 86.0 81.7 7

Sri Lanka 23.3 55.0 33.3 46.0 37.5 57

South Korea 80.0 82.5 83.3 78.0 80.7 9

Taiwan 76.7 72.5 86.7 76.0 76.6 12

Thailand 63.3 65.0 86.7 74.0 68.5 27

Vietnam 70.0 55.0 36.7 48.0 57.8 38

United States 90.0 85.0 100.0 80.0 88.0 2

Scores out of 100, with 100 the highest. Source: BMI



Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios

Loan deposit

ratio % Rank Trend

Loan/Asset

ratio % Rank Trend

Loan/GDP

ratio % Rank Trend

Bangladesh 96.3 29 Falling 67.7 11 Falling 52.6 39 Rising

China 68.3 54 Falling 52.1 41 Falling 118.0 13 Falling

Hong Kong 65.1 57 Rising 36.7 57 Rising 260.1 2 Rising

India 80.1 50 Rising 61.2 27 Falling 45.1 48 Rising

Indonesia 80.0 45 Rising 60.1 32 Falling 30.7 51 Rising

Japan 72.3 53 Rising 51.4 44 Rising 89.5 23 Rising

Malaysia 80.3 48 Rising 60.8 26 Rising 118.1 11 Rising

Pakistan 73.6 56 Falling 54.9 42 Falling 24.0 58 Falling

Philippines 66.1 55 Rising 47.3 47 Rising 32.7 52 Rising

Singapore 91.3 38 Rising 48.4 46 Rising 123.4 10 Rising

Sri Lanka 81.3 49 Rising 60.6 31 Rising 29.8 54 Rising

South Korea 113.6 17 Falling 70.6 7 Falling 102.0 16 Falling

Taiwan 74.2 51 Falling 60.2 29 Falling 147.3 6 Falling

Thailand 98.6 28 Falling 63.3 24 Falling 73.6 32 Falling

Vietnam 117.6 6 Rising 83.8 1 Falling 125.3 8 Rising

United States 111.1 20 Falling 75.1 3 Falling 62.7 34 Falling




Table: Anticipated Developments in 2012

Loan/Deposit

Ratio, % Trend Loan Growth,

US$bn

Deposit Growth,

US$bn Residual,

US$bn

Bangladesh 96.3 Falling 5.4 5.6 -0.2

China 68.3 Falling 461.4 675.0 -213.7

Hong Kong 65.1 Falling 19.1 29.3 -10.2

India 76.1 Falling 223.3 344.2 -120.9

Indonesia 82.0 Rising 54.4 58.7 -4.3

Japan 69.3 Falling -129.1 162.3 -291.4

Malaysia 79.9 Falling 27.1 35.6 -8.5

Pakistan 65.4 Falling -1.6 6.8 -8.4

Philippines 66.1 Falling 1.7 2.6 -0.9

Singapore 90.0 Falling 21.1 28.5 -7.4

Sri Lanka 79.0 Falling 2.9 4.3 -1.4

South Korea 111.5 Falling -73.0 -47.3 -25.8

Taiwan 75.2 Rising 33.4 31.2 2.2

Thailand 97.2 Falling -0.2 3.3 -3.5

Vietnam 125.7 Rising 44.1 27.0 17.2

United States 110.6 Falling 521.1 511.4 9.6

NB Incorporates estimated economic data and projected banking data. Source: Central banks, regulators, BMI



Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn)

2011 2010

Total Assets Client Loans Client

Deposits Total Assets Client Loans Client

Deposits

Bangladesh 81.8 55.4 57.5 72.2 48.9 50.8

China 16,477.9 8,588.8 12,567.0 14,592.6 7,606.2 11,129.1

Hong Kong 1,772.3 650.3 998.4 1,581.2 560.2 882.8

India 1,267.2 775.1 967.2 1,275.6 780.3 990.5

Indonesia 404.7 243.2 304.1 322.1 196.7 260.5

Japan 11,406.8 5,867.8 8,115.5 10,050.2 5,154.7 7,150.4

Malaysia 503.2 305.8 381.0 485.7 286.1 361.0

Pakistan 86.7 47.6 62.1 76.8 46.0 56.7

Philippines 154.7 73.2 110.8 140.7 64.8 103.5

Singapore 669.2 323.6 354.7 609.0 251.5 338.0

Sri Lanka 27.0 16.4 20.2 23.1 13.1 17.6

South Korea 1,532.5 1,081.9 952.1 1,527.1 1,083.3 915.9

Taiwan 1,147.6 690.6 931.1 1,147.1 690.3 913.1

Thailand 385.3 244.1 247.5 391.1 247.8 245.3

Vietnam 176.9 148.3 126.1 151.5 127.0 113.3

United States 12,609.5 9,474.0 8,523.9 11,884.0 9,256.1 7,971.5

Source: Central banks, regulators, BMI,



Table: Comparison of US$ Per Capita Deposits (2011)

GDP Per Capita Client Deposits,

per capita

Rich 20% Client Deposits, per

capita

Poor 80% Client Deposits, per

capita

Bangladesh 734 368 1,529 96

China 5,268 6,374 37,303 2,331

Hong Kong 34,842 91,309 560,711 35,044

India 1,614 624 3,116 195

Indonesia 3,383 1,004 5,020 314

Japan 51,850 46,387 256,623 16,039

Malaysia 9,136 10,597 52,808 3,301

Pakistan 1,130 269 1,405 88

Philippines 2,232 772 4,672 292

Singapore 52,133 62,383 273,451 17,091

Sri Lanka 2,724 779 3,832 239

South Korea 22,947 22,357 78,696 4,919

Taiwan 21,539 29,642 159,850 9,991

Thailand 4,903 3,563 14,448 903

Vietnam 1,357 1,670 5,679 355

United States 48,281 30,260 108,902 6,806




Table: Interbank Rates and Bond Yields

3 Month Interbank Rate

%

Current Account % of

GDP, 2011f Budget balance % of

GDP, 2011f End H1 2010

Bangladesh 0.9 -4.1 n/a

China 3.3 -0.6 1.71

Hong Kong 5.8 3.3 0.50

India -3.5 -9.4 7.00

Indonesia 0.2 -1.7 7.00

Japan 2.3 -10.8 0.24

Malaysia 10.2 -5.9 2.70

Pakistan 0.1 -6.6 12.10

Philippines 2.6 -2.7 4.70

Singapore 18.6 1.5 0.56

Sri Lanka -8.1 -7.5 9.58

South Korea 2.2 1.0 4.44

Taiwan 8.2 -2.9 0.48

Thailand 2.0 -3.1 1.41

Vietnam -4.7 -2.6 10.25

United States -3.1 -8.6 0.35

NB Incorporates actual financial markets data; estimated economic data and projected banking data. na=not available. Source: Central banks; regulators; BMI



Singapore Banking Sector Outlook

Loan Growth Seen Hampering Profits In 2012

BMI View: Singaporean banks ended 2011 on a strong note, but we believe they will find it progressively

harder going forward to grow profits. On the back of a cooling housing market and a tepid overall

economic outlook for 2012, credit growth has likely peaked in the city-state, and we forecast that it will

decline from its current 28.3% y-o-y clip to 6.0% by the end of the year. This, combined with continued

low net interest margins, is likely to affect negative profits growth for the sector in 2012.

Following an extended period of expanding credit growth that began in Q309, loan growth appears to

finally be ready to take a breather. Having peaked in September at 31.1%, the metric remained elevated in

the range of 30% for the remainder of 2011 before dropping to 28.3% in January. We expect that the

trend going forward will be one of softening credit growth amid more moderate economic growth.

Indeed, we forecast that Singapore's economy will grow by just 2.6% in 2012, following 4.9% growth in

2011 and a 14.5% expansion in 2010. The forecast reflects our view that weak external demand will hit

Singapore's export sector, hitting business conditions at home despite a generally strong domestic

outlook. Against growth of 6.7% in 2011, we therefore see private consumption expanding by a slower

5.3% in 2012.

A View From The Top Singapore – Total Outstanding Loans, % chg y-o-y

Source: BMI, MAS



Real Estate Correction Playing Out

These conditions will inevitably weigh on credit growth, with consumers less likely to look to credit to

fund their expenditures amid a less stable economic environment. This will be particularly true for the

real estate sector, which has seen both considerable loan and price growth since Singapore's recovery

following the global financial crisis. As we have pointed out numerous times since mid-2011, Singapore's

real estate market is in bubble territory and due for a correction. This correction now appears to be

playing out.

Supply And Demand Singapore – Private Property Price Index (RHS) & Total Supply In The Pipeline

Source: BMI, URA

Private property prices edged up by a mere 0.2% q-o-q in Q411, marking their worst quarter since Q309.

Moreover, the flash Singapore Residential Price Index published by the National University of

Singapore indicates that home prices actually fell by 1.0% in December and 0.4% in January. That prices

began to fall in December is not surprising, considering the Additional Buyer's Stamp Duty of 10%

imposed upon foreign buyers by the government at the beginning of that month. Given historical trends in

Singapore's real estate market, we may now see a correction as large as 25.0%, or a little less than half of

the 54.7% run-up that we've seen since Q309.



Correction Time Singapore – Private Property Price Index

Source: BMI, URA

Housing loans have constituted 28.2% of new non-bank loans since January 2011, making them the

greatest single contributor to the category. With prices now beginning to turn over following a 54.7% run-

up, we expect demand for housing loans to do the same. As such, the correcting real estate sector will

likely lead credit growth downwards over the course of 2012.

Momentum Waning Singapore – Total Housing Loans, SGDmn, & % growth y-o-y (RHS)

Source: BMI, MAS



Auto Loans To Remain Depressed

Despite a recent upwards tick, we also see auto loan growth remaining weak. After more than two years

of monthly y-o-y contractions, total automobile loans finally posted positive growth in December of

8.7%, and again of 8.0% in January. However, this was likely due to a rare decrease in certificate of

entitlement (COE) prices. COE Cat A prices briefly collapsed to around SGD47,000 in mid-January

before quickly recovering to SGD57,000 by mid-February. Our core view remains for weak auto loan

growth over the medium term in Singapore, as the market is artificially depressed by both COEs and

extremely high vehicle taxation.

Challenges Ahead, But Domestic Risks Contained

Net Interest Margins (NIMs) fell across the board for Singapore's three largest banks in 2012. DBS

reported a 2011 NIM of 1.77 versus 1.84 in 2010, while OCBC 's and UOB 's fell from 1.98 to 1.86 and

2.09 to 1.92, respectively. While DBS reported net profit growth of 86% for FY2011, OCBC saw its net

profit stagnate and UOB saw its net profit decline by 13.7% despite strong loan portfolio growth. This is a

trend that we see being exacerbated in 2012 as support from the latter fades. We expect to see total credit

growth decline somewhat precipitously from its current rate of 28.3% to 6.0% by end 2012.

Despite the pressure that declining credit growth will exert on bank earnings, the sector remains sound.

Non-performing loans among DBS, UOB, and OCBC are 1.3%, 1.4%, and 0.9%, respectively. Given

tight lending restrictions in Singapore, as well as the tendency for homeowners to make large down

payments, we do not foresee a material impact on NPLs from a fall in prices. Indeed, as we wrote in

November, Singapore remains one of the safest banking sectors in the world, as indicated by its best in

the region Commercial Banking Risk rating of 90.3.



King Of The Hill Asia – BMI Commercial Banking Risk Rating

Source: BMI

Risks To Outlook

We continue to be wary regarding loans to China, which the three banks have grown strongly over the

past year in order to build market share in the credit scarce mainland. Although NPLs among mainland

loans have not yet shown a marked rise, the developing hard-landing in China combined with a major

housing correction already under way could present considerable challenges.



Economic Outlook

External Rebalancing A Necessary Evil

BMI View: Singapore is set to enter technical recession In H112 and register growth of just 2.6% in

2012, below consensus expectations of 3.6%. The country's overarching reliance on overseas demand

and the domestic investment in property have depressed private consumption's share of GDP to extreme

levels. Going forward, private consumption growth is set to outperform, but the transition to a more

balanced economy will come at the expense of weaker headline expansion.

We continue to see Singapore entering technical recession as the economy contracts in Q112, and see

continued weakness in H212. This will result in full-year real GDP growth of just 2.6%, versus consensus

expectations of 3.6%. With exports accounting for well over 200% of GDP, a slump in global trade and

financial services will obviously take its toll on growth. Even on the domestic front, though, the situation

looks very precarious, with a property bubble about to burst. The Singapore economy, much like that of

China, is desperately in need of rebalancing more towards domestic consumption. The rebalancing

process will likely mean much slower growth going forward than we have seen over the past few years,

with risks heavily weighted to the downside.

We have already seen signs that the economy is likely to contract in Q112, with the purchasing mangers'

index (PMI) falling to 48.7 in January, and new orders underperforming at just 47.7. New export orders

also remain below the crucial 50 level. Although credit metrics suggest that domestic businesses

continues to be enthusiastic about prospects for 2012, with business lending up 40.7% y-o-y in December,

we expect external factors to dominate growth as weakness in exports feeds through into domestic

demand.

Private Consumption Artificially Depressed

While China deservedly grabs the limelight when it comes to its low share of private consumption in

GDP, Singapore comes in a very close second at 38.6% of GDP in 2011 (versus China's 34.6%).

Although there is nothing necessarily wrong with a low (or high) share of consumption in GDP, extreme

figures in either direction can point to underlying structural economic problems. In the case of China, this

is manifest in the excessive share of investment, which has been driven by artificially low interest rates

and a funnelling of capital towards housing and state-led infrastructure, which has resulted in large scale

malinvestment.

In the case of Singapore, it is a combination of artificially low interest rates, an artificially inflated

savings rate, and an extremely undervalued exchange rate. These factors have signalled to businesses to

direct resources towards export goods and, to a lesser extent, investment goods. This has created an

unhealthy reliance on fragile external demand. In 2012, we expect to see continued signs of Singapore



embarking on its path towards greater consumption in GDP terms, primarily at the expense of net exports,

but also investment, as the domestic property bubble bursts.

Private Consumption

Although we expect private consumption to hold up strongly relative to overall GDP growth in 2012,

expanding by 5.3%, this represents an expected decline from the 6.7% we have pencilled in for 2011.

Indeed, as we saw in 2009, even as private consumption's share of GDP rose, falling export demand had

seriously negative knock-on effects on consumption. While we do not envisage a similar shock this time

around, the trend is expected to be the same and, again, the risks seems weighted to the downside.

Aside from a slowdown in the external sector, the largest threat to household consumption in 2012 comes

from a bursting of the local property bubble. With price momentum declining according to the Urban

Redevelopment Authority, and private data already reporting price falls in response to government

measures such as limiting second mortgages, we believe prices are set to drop in excess of 10% this year

on average. Although Singaporean consumers are only minimally leveraged to the housing market in

terms of mortgage debt-to-income and loan-to-value ratios, meaning a vicious spiral will likely be

avoided, consumer sentiment will be damaged.

Government Consumption

With a wealth of financial assets at their disposal in the event of a growth slump, the Singaporean

government is likely to boost spending in 2012, with public consumption set to rise by 5.0% from an

estimated 1.7% in 2011. Education subsidies are one area that the government has shown a willingness to

increase spending in recent downturns, and there remains scope for further action here. As a share of

GDP, however, public consumption is unlikely to deviate from its long-term average of 10% of GDP.

Gross Fixed Capital Formation

We are forecasting gross fixed capital formation to rise by 6.3% in 2012, from an estimated 11.9% in

2011, with the drop off explained by both a weaker external outlook and property price declines, which

will keep businesses on the back foot for much of the year. Naturally, Singapore's investment and

inventory cycle is highly dominated by global conditions, and this will remain the case for the foreseeable

future. However, the business community faces an addition threat from the potential for a collapse in

housing investment in 2012. As the accompanying chart shows, residential units under construction

surged to a new record high in Q411. Given that property prices look to be peaking and residential

vacancy rates are ticking up, this is a negative sign for future construction.

Net Exports

With total exports equivalent to twice GDP, a one percentage point fall in external demand can have

serious negative consequences for economic growth. With exports forecast to grow by just 1.8%, versus

3.1% growth of imports, this narrowing trade surplus is set to take 2.0 percentage points off of headline



expansion. An outright sequential contraction in exports looks highly likely in Q112, as the new export

orders component of the PMI and total cargo arrivals suggest. Given the European Union represents

Singapore's main export destination, we do not expect to see a V-shaped recovery even if the eurozone

can avoid a series of sovereign defaults. Indeed, we expect export growth to average just 3.3% annually

over the next three years, which would mark a sharp turn of events from the 8.4% averaged over the past

decade. As well as weaker global growth, real effective exchange rate strength will play a part in this

external adjustment.

Table: Singapore – Economic Activity

2011e 2012f 2013f 2014f 2015f 2016f

Nominal GDP, SGDbn 3 334.9 355.7 373.9 391.8 410.1 429.0

Nominal GDP, US$bn 3 266.3 273.6 301.5 337.8 372.8 400.9

Real GDP growth, % change y-o-y 3 4.8 2.6 3.6 3.3 3.3 3.4

GDP per capita, US$ 3 51,339 52,051 56,879 63,291 69,359 73,998

Population, mn 4 5.2 5.3 5.3 5.3 5.4 5.4

Industrial production index, % y-o-y, ave 1,3 4.8 5.3 6.1 6.0 5.8 5.7

Unemployment, % of labour force, eop 2,5 2.2 2.5 2.5 2.5 2.5 2.5

Notes: e BMI estimates. f BMI forecasts. 1 Manufacturing data used; 2 Seasonally-adjusted figures used; Sources: 3 Statistics Singapore/IMF/BMI. 4 World Bank/UN/BMI; 5 Ministry of Manpower/BMI.



Competitive Landscape

Market Structure

Protagonists

Table: Protagonists In Singapore's Commercial Banking Sector

Central bank: Monetary Authority of Singapore (MAS)

www.mas.gov.sg

The central bank is the Monetary Authority of Singapore, established in 1971. Initially, the MAS was given powers to act as a banker to, and financial agent of, the government, and to promote monetary stability and credit and exchange policies conducive to economic growth. Aside from being the banking regulator, the MAS has also been the insurance regulator since 1977 and the securities regulator since 1984. Since its merger with the Board of Commissioners of Currency in October 2002, the MAS has also been responsible for issuing currency.

Principal banking regulator: Monetary Authority of Singapore (MAS)

www.mas.gov.sg

The MAS has been responsible for regulation of the banking sector since its inception in 1971.

Banking trade association: The Association of Banks in Singapore (ABS)

www.abs.org.sg

The ABS was founded in 1973. For its first nine years, the association was headed by the Oversea-Chinese Banking Corporation. Since 1981, leadership of the ABS has rotated between the 'big three' domestic banks (prior to 2001, the 'big four') every two years. The ABS represents the interests of its members and sets standards of good practice. It has regular dialogue with the MAS to discuss industry issues and promote a sound financial system in Singapore.

Banking trade association: Singapore Investment Banking Association (SIBA)

www.siba.org.sg

SIBA acts as a forum for Singapore's investment banks. It also provides 'a channel for consultation, advice and feedback with the relevant authorities'. It works closely with the MAS and government bodies to promote the development of Singapore as a financial centre.

Definition Of The Commercial Banking Universe

Commercial banks in Singapore can operate as full banks, wholesale banks or offshore banks. Full banks

can provide the full range of banking businesses approved under the Banking Act. Seven of the 31 full

banks in Singapore are local entities under the three main domestic banking groups: one is a locally

incorporated subsidiary of a foreign bank and 26 are branches of foreign banks. Unlike other full banks,

foreign banks are only allowed to operate in up to 25 locations in Singapore.

Wholesale banks cannot carry out Singapore dollar retail banking activities, but are otherwise able to do

everything else performed by full banks. Offshore banks that operate through their Asian currency units

(ACUs) can carry out the same operations as full banks and wholesale banks. Their Singapore dollar



businesses, which are subject to more restrictions than local operations, and are carried out by full banks

and wholesale banks, are conducted through their domestic banking units (DBUs). All offshore and

wholesale banks are structured as branches of foreign banks. Merchant banks carry out investment

banking activities through their ACUs. Within their DBUs, they may only deal with other financial

institutions. Many of the merchant banks are commercial affiliates of the wholesale or offshore banks.

List Of Banks

Table: Licensed Commercial Banks In Singapore

Bank Type of licence

ABN AMRO Bank Full Bank

Agricultural Bank of China Offshore Bank

Arab Bank Offshore Bank

Australia & New Zealand Banking Group Wholesale Bank

BBVA Wholesale Bank

Bangkok Bank Full Bank

Bank Hapoalim (Switzerland) Offshore Bank

Bank Julius Baer Wholesale Bank

Bank of America Full Bank

Bank of Baroda Offshore Bank

Bank of China Full Bank

Bank of Communications Offshore Bank

Bank of East Asia Full Bank

Bank of India Full Bank

Bank of New York Mellon Offshore Bank

Bank of New Zealand Offshore Bank

Bank of Nova Scotia Wholesale Banks

Bank of Singapore Full Bank

Bank of Taiwan Offshore Bank

Bank of Tokyo-Mitsubishi UFJ Full Bank

Barclays Bank Wholesale Bank

Bayerische Hypo- und Vereinsbank Wholesale Bank

BNP Paribas Full Bank

BNP Paribas Securities Services Wholesale Bank

BNP Paribas Wealth Management Wholesale Bank

Calyon Full Bank




Canadian Imperial Bank of Commerce Offshore Bank

Cathay United Bank Offshore Bank

Chang Hwa Commercial Bank Offshore Bank

China Construction Bank Corporation Offshore Bank

Chinatrust Commercial Bank Wholesale Bank

CIMB Bank Full Bank

Citibank Full Bank

Citibank Singapore Full Bank

Clariden Leu Offshore Bank

Clearstream Banking Offshore Bank

Commerzbank Wholesale Bank

Commonwealth Bank of Australia Wholesale Bank

Credit Agricole (Suisse) Offshore Bank

Credit Industriel et Commercial Wholesale Bank

Credit Suisse Wholesale Bank

DBS Bank Full Bank

Deutsche Bank Wholesale Bank

Dexia Banque Internationale a Luxembourg Offshore Bank

DnB NOR Bank Offshore Bank

DZ Bank Wholesale Bank

Fare Eastern Bank Full Bank

First Commercial Bank Wholesale Bank

First Gulf Bank Wholesale Bank

Fortis Bank Global Clearing Wholesale Bank

Fortis Bank Wholesale Bank

Fortis Bank (Nederland) Wholesale Bank

Habib Bank Wholesale Bank

Hana Bank Offshore Bank

Hang Seng Bank Offshore Bank

HL Bank Full Bank

HSBC Full Bank

HSBC Private Bank (Suisse) Wholesale Bank

HSH Nordbank Offshore Bank

Hua Nan Commercial Bank Offshore Bank




ICICI Bank Offshore Bank

Indian Bank Full Bank

Indian Overseas Bank Full Bank

Industrial and Commercial Bank of China Wholesale Bank

ING Asia Private Bank Wholesale Bank

ING Bank Wholesale Bank

Intesa Sanpaolo Wholesale Bank

Islamic Bank of Asia Full Bank

JPMorgan Chase Bank Full Bank

KBC Bank Wholesale Bank

Korea Development Bank Offshore Bank

Korea Exchange Bank Wholesale Bank

Krung Thai Bank plc Offshore Bank

Land Bank of Taiwan Offshore Bank

Landesbank Baden-Wurttemberg Wholesale Bank

Lloyds TSB Bank Offshore Bank

Malayan Banking Full Bank

Mega International Commercial Bank Wholesale Bank

Mitisubishi UFJ Trust & Banking Corporation Offshore Bank

Mizuho Corporate Bank Full Bank

National Australia Bank Wholesale Bank

National Bank of Kuwait Wholesale Bank

Natixis Wholesale Bank

Norddeutsche Landesbank Girozentrale Wholesale Bank

Nordea Bank Finland Offshore Bank

Norinchukin Bank Offshore Bank

Northern Trust Company Wholesale Bank

Oversea-Chinese Banking Corporation Full Bank

Philippine National Bank Offshore Bank

PT Bank Mandiri Offshore Bank

PT Bank Negara Indonesia Full Bank

Qatar National Bank Wholesale Bank

Rabobank Wholesale Bank

Raiffeisen Zentralbank Oesterreich Offshore Bank




RHB Bank Full Bank

Royal Bank of Canada Offshore Bank

Royal Bank of Scotland Wholesale Bank

Shinhan Bank Offshore Bank

Siam Commercial Bank Offshore Bank

Skandinaviska Enskilda Banken Offshore Bank

Societe Generale Wholesale Bank

Societe Generale Bank & Trust Wholesale Bank

Standard Bank Offshore Bank

Standard Chartered Bank Full Bank

State Bank of India Full Bank

State Street Bank and Trust Wholesale Bank

Sumitomo Mitsui Banking Corporation Full Bank

Sumitomo Trust & Bank Offshore Bank

Svenska Handelsbanken Offshore Bank

Toronto-Dominion Bank Offshore Bank

UBS Wholesale Bank

UCO Bank Full Bank

Union de Banques Arabes et Francaises Offshore Bank

United Overseas Bank Full Bank

VTB Capital Wholesale Bank

Wachovia Bank Wholesale Bank

WestLB Wholesale Bank

Westpac Banking Corporation Wholesale Bank

Woori Bank Offshore Bank

Source: MAS



Company Profiles

Bangkok Bank

Strengths Regional strength and a strong brand name.

High level of deposits.

Strong balance sheet and capital adequacy ratio.

Weaknesses Exposure to a weaker Singaporean market could weigh on the bank's overall

performance.

In Thailand, the rapidly slowing economy will put pressure on margins.

Opportunities Relative strength enables acquisition opportunities during the downturn.

Threats Slowdown of regional economies.

Exposure to the Thai real estate market, which is contracting due to oversupply and

falling demand.

Company Overview Bangkok Bank was established in 1944 and is the largest commercial bank in Thailand. It is the

fifth largest regional bank in South East Asia, with total assets of approximately US$43bn. It is the

market leader in corporate and small- and medium-enterprise (SME) banking, and has the

country's largest retail customer base with over 16mn accounts (including business and retail

customers), 250 business centres and desks and a nationwide network of approximately 900

branches. The bank's self-service network includes more than 6,500 ATMs and cash deposit

machines, a phone banking facility and an internet banking service.

Its Singapore branch provides full commercial banking services. The bank has an overseas

network of 19 branches, including a wholly owned subsidiary in London and a representative

office in New York.

Singapore is an important centre for Bangkok Bank, where it offers loans to foreigners and

demand is increasing. The bank is able to tender loans in several currencies, including American

and Singaporean dollars.

The executive chair of Bangkok Bank, Kosit Panpiemras, said the bank had a target for lending

growth of 3-4% in 2010, in line with Thailand's expected economic growth.

By September 2009 the bank had capital reserves of THB188.51bn and Tier 1 capital of

THB153.76bn. The bank's capital adequacy ratio was 15.5% and the Tier 1 capital ratio was

12.7%. These capital indicators demonstrate the well capitalised nature of the bank, with the

ratios exceeding regulatory requirements.

In December 2009, Bangkok Bank agreed to sell its stake of 19.26% in ACL Bank, a Thai

financial institution, for US$105mn to the Industrial and Commercial Bank of China, which is the

world's largest bank in terms of market value.



Company Data Website: www.bangkokbank.com

Status: Full bank

Table: Key Statistics For Bangkok Bank, 2006-2008 (THBmn)

2006 2007 2008

Total Assets 1,484,351 1,575,799 1,659,844

Loans & Mortgages 886,913 968,392 1,111,948

Total Deposits 1,221,733 1,267,068 1,311,477

Total Shareholders' Equity 146,736 164,392 173,177

Source: Bangkok Bank 2008 annual report



Hong Leong Bank

Strengths High level of deposits.


Falling NPL ratio.

Weaknesses Exposure to a weaker Singaporean market could weigh on overall performance.

Opportunities Growth in online trading, which is a priority for the bank.

Vietnam commercial banking licence approved.

Potential for acquisitions in downturn.

Entering the Chinese banking sector though its stake in Bank of Chengdu.


Narrow margins and high competitiveness of the local market.

Overview Hong Leong Bank, a public listed company on the Bursa Malaysia stock exchange, is part of the

Hong Leong Group. In Singapore, the bank's HL Markets division offers a range of treasury

services, risk management and investment products, as well as private banking. The group

includes 14 listed companies worldwide with combined market capitalisation in excess of

US$11bn. The gross assets of the group amount to over SGD30bn.

Hong Leong Bank is a well recognised business franchise that can trace its history back to 1905

in Kuching, Malaysia, and the Kwong Lee Mortgage & Remittance Company, which was

incorporated as Kwong Lee Bank in 1934.

The bank has more than 200 branches in Malaysia, Singapore, Hong Kong and Vietnam. Through

its financial services arm, Hong Leong Financial Group, which includes Hong Leong Bank, Hong

Leong Islamic Bank, Hong Leong Assurance, HLG Capital and Hong Leong Tokio Marine Takaful,

the group is well positioned as an integrated financial services provider.

The bank's asset quality remains strong, with one of the two lowest non-performing loan (NPL)

ratios in the Malaysian banking sector. The bank said it had 'the financial flexibility to grow and

take advantage of market opportunities during these times'.

For FY09, the group's pre-tax profit stood at MYR1.13bn while post-tax profits grew by 22% y-o-y

to MYR163mn. The total assets of the group increased by 2.5% to MYR79.4bn. Customer

deposits also grew, by over 8% to MYR67.6bn, but despite this, overall lending has not increased.

The FY09 result is particularly flat, with total lending at MYR35.6bn. The strategy of increasing

capitalisation has paid dividends, with the risk-weighted capital ratio standing at 16%, up from

15.9% in FY08. Additionally, the stability of the bank seems assured as in 2009 the gross NPL

ratio decreased to 2.4%, an improvement from FY08.

Group chief executive Yvonne Chia said: 'Hong Leong Bank has continued to post satisfactory

results for the third quarter of its 2009 financial year despite the significant pressures on the

economy and banking sector, in line with developments regionally and globally.'



The bank obtained a commercial bank licence in Vietnam to set up a bank with charter capital of

about MYR205mn in Q210.

Company Data Website: www.hlb.com.my

Status: Full bank

Table: Key Statistics For Hong Leong Bank, 2007-2009 (MYRmn)

2007 2008 2009

Total Assets 66,161 69,993 70,733

Loans & Mortgages 27,966 30,306 30,938

Total Deposits 51,873 56,467 59,719


Source: Hong Leong Bank 2009 annual report, BMI



Maybank

Strengths Largest commercial bank in Malaysia and strong regional presence.

Extensive international network.

Weaknesses Falling asset quality and lower demand for loans and services.

Exposure to falling returns from international operations.

Opportunities Growth in online trading, a priority for the bank.

Vietnam banking licence approved.

Potential for acquisitions during the downturn.

Growth in the retail sector.

The establishment of China-ASEAN free trade area provides an opportunity for a group

with such a regional presence.

Potential for improvement in interest margins.

Threats Slowdown of South East Asian economies.

Increased impairment of assets.

Further pressure on margins.

Company Overview State-owned Malaysian lender Maybank, one of the top five banks within the ASEAN, started its

Singaporean operations in 1960. It is the largest financial services group in Malaysia and a major

regional banking presence. Its large products and services range includes commercial banking,

investment banking, Islamic banking, offshore banking, leasing and hire purchase, insurance,

factoring, trustee services, asset management, stock broking, nominee services, venture capital

and online banking. Maybank has more than 450 offices in Malaysia, Singapore, Philippines,

Brunei, Indonesia, Vietnam, Cambodia, Papua New Guinea, Hong Kong, China, Bahrain,

Uzbekistan, Pakistan, the UK and the US. Maybank Islamic aimed to provide MYR750mn in

financing through its two Islamic financing facilities, specifically aimed at businesses in 2010.

In Singapore, the bank has 22 branches and is part of the ATM network, reaching to more than

140 ATMs of the five qualifying full banks. In 2008 the bank's total assets in Singapore amounted

to SGD22.7bn, while the assets of the bank worldwide totalled SGD112bn, indicating a

comparatively large disconnect between the trade-tied fortunes of Singapore and the bank itself.

At the end of 2009 Maybank signed a strategic alliance agreement with Mizuho Securities for the

further development of markets in Japan, Malaysia and other countries.

In 2009, Maybank said it would raise its stake in Vietnam's An Binh Bank (ABBank) up to 20%.

Maybank already has 15% of ABBank and plans to invest a further US$19.25mn. A maximum of

20% is allowed by a foreign shareholder in a Vietnamese company.

Also in 2009 UOB Kay Hian upgraded Maybank's FY10 and FY11 earnings forecasts by 6%, to

MYR3bn, and 4%, to MYR3.6bn, respectively, representing an important and positive re-

evaluation of the bank's future. The upgrade took into consideration improvements in net interest



margins and higher contributions from subsidiaries as well as the better-than-expected global

economic recovery. Consumer loans were expected to grow by about 10% in FY10 as the bank

expanded its retail arm. Maybank had US$140mn exposure to Dubai debt, with one-third of it

made up of direct exposure to Dubai World through a syndicated loan that was still performing in

2009.

Company Data Website: www.maybank.com.sg

Status: Full bank

Table: Key Statistics For Maybank, 2007-2009 (MYRmn)

2007 2008 2009

Total Assets 227,447 219,172 238,277

Loans & Mortgages 118,557 138,855 144,432

Total Deposits 133,856 156,323 163,453


Source: Maybank 2008 and 2009 annual reports



Islamic Bank of Asia

Strengths Solid backing from DBS.

Impressive contacts and investor base within the Gulf Cooperation Council countries.

Weaknesses The Islamic banking market is important but small.

Strong competition from Islamic banking operations in market-leading Malaysia.

Opportunities Growth among the GCC countries.

Growing interest in Islamic banking products for non-Muslim customers.

Threats Continued weakness in the real estate market in some GCC countries.

Increased competition for the relatively small pool of Islamic banking business.

Company Overview Islamic Bank of Asia (IB Asia) was established in May 2007 by DBS, with strong links and

investment from key Gulf Cooperation Council-based individuals, families and business groups. In

2008 the bank opened a representative office in Bahrain, providing access to new capital from the

wealthy island.

IB Asia has its headquarters in Singapore and focuses on commercial banking, corporate finance,

capital market and wealth management services. Its emphasis is on the provision of shari'a-

compliant wholesale banking services and the origination and distribution of wealth management

and capital market instruments.

IB Asia's founding shareholders include DBS and 34 Middle Eastern investors. DBS holds a

majority stake of 50%-plus-one-share. The banks' chair is Abdulla Hasan Saif, an adviser for

economic affairs to Bahraini Prime Minister Khalifa ibn Salman al-Khalifa.

In 2009 IB Asia launched its first US dollar liquidity product, the US dollar Islamic placement, a

short-term deposit instrument. It is based on the shari'a principle of murabaha, a cost-plus-profit

sale contract, and is aimed at Muslim and non-Muslim customers. In 2009 after the MAS

launched the SGD200mn Sukuk al-Ijara Trust Certificate Issuance Programme, IB Asia became

one of the two lead arrangers of the country's first sovereign-rated sukuk.

At the end of 2009 the repayment of a US$400mn bilateral loan from Dubai World Finance was

suspended on a 'standstill notice' after the Dubai firm asked for a six-month freeze of its debt

repayments. DBS' total exposure to Dubai-owned businesses was US$1.28bn. However, a

substantial proportion of this related to Dubai-owned firms with operations in Asia such as Labroy

and South Beach.

Company Data Website: www.islamicbankasia.com

Status: Full bank



Bank of China

Strengths The established presence in Singapore of a major player in China's market.

Trade financing expertise.

Strong remittance business.

Weaknesses Constraints on expansion in the highly competitive Singaporean market.

Opportunities Increased remittance business potential.

Ideally placed to capitalise on trade financing deals to service China's economic

stimulus.

The establishment of the China-ASEAN free trade area has the potential to accelerate

economic growth and bring opportunities for ASEAN businesses, including companies in

Singapore.

Threats Any stalling of growth in China.

Company Overview Bank of China was established in 1912. It is the most internationalised of China's four largest

commercial banks, with more than 600 overseas branches and subsidiaries in 28 countries and

regions, as well as over 10,000 domestic branches. Its business scope covers commercial

banking, investment banking and insurance. It has been included in the Fortune Global 500 for 18

consecutive years and was ninth in the world's top 1,000 banks list compiled by The Banker

magazine in 2007.

In August 2004, Bank of China was formally incorporated in Beijing as a state-controlled joint-

stock commercial bank. It was dual listed on the Hong Kong Stock Exchange and Shanghai Stock

Exchange in 2006. The listings have enhanced its strength and influence in the international and

domestic markets, bringing additional kudos to the brand. Bank of China was the sole banking

partner of the 2008 Olympics in Beijing.

Established in 1936, the Bank of China Singapore branch is the only Chinese bank with a full

banking licence in Singapore. It has a network of five sub-branches and one subsidiary. The

Singapore branch provides a full range of financial services to customers in Singapore, China and

the surrounding region.

The main business of the Singapore branch includes corporate banking, retail banking, trade

financing and international trade settlement (with specialised knowledge and expertise in China-

related trade financing and settlements) and remittance services.

In 2009, Bank of China announced plans to launch commercial banking operations in Myanmar.

The commercial hub of Yangon (Rangoon) was selected as the site for the bank's representative

office. Continuing along this expansion of international business, it became the first lender to

undertake more than CNY1bn in cross-border yuan trade settlements. The People's Bank of

China has allowed foreign lenders to offer trade financing to Chinese companies settling

international transactions in yuan, a programme that applies to Singapore and other countries.



Company Data Website: www.bocsg.com

Status: Full bank



DBS Bank

Strengths Powerful presence across South East Asia.

Strong capitalisation, with its capital adequacy ratio well above statutory requirements.

AA- and Aa1 credit ratings, among the highest in the Asia Pacific region.

Weaknesses Depressed market for corporate financing, particularly in SME segment.

Opportunities Large corporate financing operations set to provide strong growth after economic

recovery.

Access to lucrative deals in the GCC region through its IB Asia investment.

Potential to expand its customer base through government-backed loans.

Well positioned to take advantage of the nascent economic recovery.

Expansion in Chinese operation.


DBS was the most exposed among Singaporean lenders to Dubai's debt problems, with

total exposure of US$1.28bn.

Consumer fallout from unauthorised cash machine withdrawal scam.

Company Overview DBS Bank is one of the largest financial services groups in Asia, active in 16 markets and

providing a full range of services in corporate, SME, consumer and wholesale banking activities

across Asia and the Middle East.

DBS was established in 1968 and is a leading consumer bank in Singapore and Hong Kong with

over 5mn retail customers. In May 2007, DBS launched Islamic Bank of Asia (IB Asia), a

partnership between DBS and 34 investors from prominent families and industrial groups based

within Gulf Cooperation Council. IB Asia's headquarters are in Singapore and it has a

representative office in Bahrain. DBS has AA- and Aa1 credit ratings that are among the highest

in the Asia Pacific region. Its regional network includes over 200 branches and more than 1,000

ATMs in 50 cities.

DBS partnered with Singapore Post (SingPost) in November 2011 to offer banking services at the

latter's branches, boosting the lender's total retail network. The deal would see DBS offer a

number of banking services through SingPost branches, including cash deposits, withdrawals and

savings account openings. DBS' branch network will effectively be expanded to 140 from 80

under the agreement.

The bank surprised analysts by posting a 6% increase in net income to SGN762mn

(US$597.93mn) in Q311, compared to the same quarter in the previous year, Bloomberg reports.

Southeast Asia's largest bank managed to lift earnings for the quarter by boosting lending as

interest margins tightened during the period. The strategy saw its loan book jump by as much as

26% y-o-y as corporate credit dominated borrowing. The bank's earnings for Q3 were in sharp

contrast with rival United Overseas Bank's 24% y-o-y drop in profits.



DBS customers were hit by unauthorised withdrawals that amounted to at least SGD200,000

(US$154,373) in early January 2011. The thefts, which involved average withdrawals of about

SGD1,000 (US$772) most likely using cloned cards, have affected around 200 customers. The

bank said that it intends to reimburse affected customers.

Chief executive Piyush Gupta said in November 2011 that the bank was interested in acquiring

assets in Asia that may be divested by European lenders as the latter attempt to weather the

region's sovereign debt crisis. DBS will 'always be a buyer' at the right time and right place, Gupta

said as he used the bank's purchase of parts of Royal Bank of Scotland (RBS)' Chinese retail and

commercial operations as an example of a desired deal.

The bank said in September 2011 that it intended to hire more private bankers to take advantage

of favourable conditions in the Singaporean banking sector. Many of DBS' rivals in Europe and

the US are decreasing hiring or cutting jobs as cost saving increasingly becomes a concern,

paving the way for a recruitment drive in the more settled Singaporean market.

Company Data

Website: www.dbs.com.sg

Status: Full bank

Singapore Stock Market Indicators

2006 2007 2008 2009 2010 27-Feb-12

Market Capitalisation LCY 34,140.25 31,417.87 19,209.73 35,149.77 33,061.63 26,976.08

Market Capitalisation US$ 22,249.90 21,842.24 13,373.52 25,021.19 25,758.96 20,810.06

Share Price LCY 19.45 17.84 8.42 15.40 14.32 11.52

Share Price US$ 12.67 12.40 5.86 10.96 11.16 8.89

Share Price, % change (eop) 48.42 -2.11 -52.74 87.01 1.77 na

Change YTD (2011 only) 3.98

Shares Outstanding (mn) 1,746.61 1,755.09 1,512.85 2,274.67 2,303.17 2,339.00

Source: BMI



Singapore Balance Sheet (LCYmn)

2006 2007 2008 2009 2010

Total Assets 197,372 232,963 256,718 258,644 283,710

Loans & Mortgages 85,149 109,912 125,841 129,973 158,838

Total Deposits 122,092 152,944 169,858 178,448 187,695

Total Shareholders' Equity 21,046 23,158 24,003 29,499 33,102

Earnings per share (EPS) 1.29 1.29 1.26 0.90 0.70

Source: BMI

Singapore Balance Sheet (US$mn)

2006 2007 2008 2009 2010

Total Assets 128,631.4 161,959.8 178,723.2 184,114.5 221,044.0

Loans & Mortgages 55,493.35 76,412.68 87,608.60 92,520.64 123,753.80

Total Deposits 79,569.9 106,329.3 118,252.6 127,027.3 146,236.9

Total Shareholders' Equity 13,716.11 16,099.83 16,710.53 20,998.72 25,790.42


Source: BMI

Singapore Key Ratios (%)

2006 2007 2008 2009 2010

Return on Assets 1.201877 1.05871 0.78786 0.792065 0.567848

Return on Equties 12.86755 11.67487 9.60466 9.095568 5.982646

Loan Deposit Ratio 70.9293 72.741 75.19516 74.42504 86.02573

Loan Asset Ratio 43.87603 47.75565 49.75304 51.34857 56.91234

Equity Asset Ratio 9.428389 8.763194 7.694435 9.714511 9.288358

Total Risk Based Capital Ratio 14.5 13.4 14 16.7 18.4

Tier 1 Capital Ratio 10.2 8.9 10.1 13.1 15.1

Source: BMI



Oversea-Chinese Banking Corporation

Strengths Well established financial group with wide regional and international network.

Dominant bancassurance and housing loan operations in Singapore.

Ranked by Bloomberg markets as on of the world's strongest banks.

Weaknesses Higher provisions for NPLs and doubtful loans.

Opportunities Underlying strength may lead to acquisition opportunities in downturn.

Lower costs and higher margins put OCBC in a good position to capitalise on the

economic recovery.

Insurance demand is rising.

Threats Weaker regional and international economic climate.

Company Overview Oversea-Chinese Banking Corporation (OCBC) is the oldest Singaporean bank, in operation

since 1912. It is one of the largest financial services groups and financial institutions in the

Singapore-Malaysia market, with group assets of approximately SGD267bn, over 500 branches

and representative offices in Singapore, Malaysia, Indonesia, Thailand, Vietnam, China, Hong

Kong, Taiwan, Brunei, Myanmar, Japan, South Korea, Australia, the UK and the US. This network

includes more than 400 branches and offices in Indonesia operated by its subsidiary Bank OCBC

NISP.

OCBC is one of the dominant players in the consumer and business banking segments in

Singapore and Malaysia and the biggest home loans operator in Singapore. Its insurance

subsidiary, Great Eastern Holdings, is the largest insurance group in Singapore and Malaysia in

terms of assets and market share. The Lion Global Investors subsidiary is one of the largest asset

management companies in South East Asia. OCBC is also the 100% owner of Bank of

Singapore.

In November 2011, OCBC announced the launch of a new mortgage loan, available to customers

wanting to buy homes in prime sections of Sydney and Melbourne, Australia. The induction of

OCBC Overseas Property Financing-Australia was confirmed after the success of a similar

programme for the London property market six months previously. The facility is ringgit-based,

meaning customers will not be exposed to undulating foreign exchange risks.

OCBC reported net profits of SGD513mn for Q311, a 10% drop on Q310's figure of SGD570mn.

This loss has been attributed to the instability of global financial markets and its direct influence

on the bank's trading income. Net interest income increased 16% to SGD874mn, bolstered by

loan growth of 27%, partly offset by a decrease of 13 basis points in net interest margins. Fees

and commissions increased by 20% to SGD307mn after strong growth in wealth management,



loans and trade fees. Operating expenses were up 7% y-o-y, reaching SGD611mn, while

allowances for loans and assets fell to SGD38mn from SGD43mn in Q310. The non-performing

loan ratio strengthened to 0.7%, from 1.1% in the same period of 2010.

Company Data Website: www.ocbc.com.sg

Status: Full bank

Table: Stock Market Indicators, 2004-2009

2004 2005 2006 2007 2008 2009 2010

Market Capitalisation, SGD 17,778.49 20,862.99 24,073.74 25,918.79 15,601.56 29,530.60 33,343.63

Market Capitalisation, US$ 10,887.68 12,547.66 15,689.35 18,020.43 10,861.57 21,021.21 25,492.07

Share Price, SGD 5.23 6.70 7.70 8.29 4.99 9.10 9.98

Share Price, US$ 3.20 4.03 5.02 5.76 3.47 6.48 7.63

Share Price, % change (eop) 16.03 25.84 24.54 14.86 -39.73 86.47

Change, year-to-date -3.63

Shares Outstanding (mn) 3,159.72 3,114.34 3,074.79 3,086.22 3,100.82 3,230.34

Source: OCBC, Bloomberg

Table: Balance Sheet (SGDmn, unless stated), 2004-2009

2004 2005 2006 2007 2008 2009

Total Assets 119,881.07 134,710.40 151,219.70 174,607.30 181,385.20 194,299.50

Loans & Mortgages 52,962.53 55,134.11 59,309.00 71,316.00 79,807.87 80,876.47

Total Deposits 57,304.04 64,108.53 75,234.62 88,788.39 94,078.42 100,632.60

Total Shareholders' Equity 11,731.19 13,486.86 14,490.90 16,838.81 18559.74 21,779.04

Earnings per share (SGD) 0.36 0.40 0.63 0.66 0.55 0.59




Table: Balance Sheet (US$mn, unless stated), 2004-2009

2004 2005 2006 2007 2008 2009

Total Assets 73,416.42 81,019.07 98,552.97 121,398.40 126,277.60 138,311.20

Loans & Mortgages 32,434.64 33,159.39 38,652.89 49,583.54 55,561.03 57,571.52

Total Deposits 35,093.41 38,556.88 49,031.95 61,731.48 65,495.98 71,634.80

Total Shareholders' Equity 7,184.27 8,111.41 9,444.02 11,707.44 12,921.01 15,503.30

Earnings per share (US$) 0.21 0.24 0.40 0.44 0.39 0.41


Table: Key Ratios (%), 2004-2009

2004 2005 2006 2007 2008 2009

Return on Assets 1.10 0.99 1.37 1.25 0.95 1.00

Return on Equities 11.51 11.56 16.39 14.89 11.75 12.06

Loan/Deposit Ratio 96.37 89.21 81.26 81.96 86.46 81.82

Loan/Asset Ratio 46.07 42.46 40.43 41.68 44.84 42.38

Equity/Asset Ratio 8.63 8.49 8.27 8.47 7.71 8.79

Total Risk Based Capital Ratio 17.7 17.3 15.8 12.4 15.1 16.4

Tier 1 Capital Ratio 12.6 13.2 13.1 11.5 14.9 15.9




United Overseas Bank

Strengths Large established bank with wide regional and international network.

Dominant player in Singaporean credit card market.


Weaknesses Presence in home lending market in Singapore during the housing downturn.

Opportunities Lower cost base since the crisis prepares way for strong growth in the eventual

recovery.

Underlying strength may lead to acquisition opportunities in downturn.

The establishment of China-ASEAN free trade area has a potential to accelerate

economic development and provide opportunities for regional businesses.

Threats Weakness in overseas economies could lead to further NPL growth.

Company Overview United Overseas Bank (UOB), founded in 1935, has a well established regional presence,

particularly with its subsidiaries in Singapore, Malaysia, Indonesia, Thailand and China. UOB has

a network of over 500 offices in 19 countries and territories in Asia Pacific, Western Europe and

North America.

It provides a wide range of financial services, including personal financial services, private

banking, commercial and corporate banking, investment banking, corporate finance, capital

market activities, treasury services, futures broking, asset management, venture capital

management, general insurance, life assurance and stock broking services. UOB also has

diversified interests in travel and leasing. In Singapore, UOB is the market leader in the credit

card and private residential home loan sectors. It is also a key player in loans to SMEs.

UOB's fund management arm, UOB Asset Management, is one of Singapore's most highly

regarded and award-winning fund managers. UOB is rated among the world's top banks by

Moody's, who gave it a B for financial strength, Aa1 for long-term bank deposits and Prime-1 for

short-term bank deposits, reflecting the core performance of the bank.

In January 2012, UOB predicted that growth levels in Asia will slow moderately in 2012.

Singapore's economy is estimated to gain 2.5% growth in 2012, down from 4.8% in 2011.

However, UOB officials are positive about the bank's resilience. Head of Research and Investor

Relations Jimmy Koh stated: 'Investors across the globe are still looking to Asia as a harbour of

decent investment returns' and added that Asian economies have remained 'buoyant in choppy

waters.'

UOB reported post-tax net profits of SGD522mn for Q311, while loans increased 7% in Q3 alone.

Net interest income reached SGD915mn, a 1.2% rise from Q310, but net interest margin in Q311

dropped 3 basis points to 1.89% from Q211. Fees and commission income was SGD323mn, a

4% drop y-o-y, largely attributed to lowered loan administration fees. Trading and investment

income was SGD56mn, down significantly at 31% less than the previous year. Expenses rose

3%, reaching SGD631mn. UOB's Chief Executive called the results: 'a resilient set of financials



amidst volatile markets.'

Company Data Website: www.uob.com.sg

Status: Full bank

Email: [email protected]

Table: Singapore Stock Market Indicators

2006 2007 2008 2009 2010 27-Feb-12

Market Capitalisation LCY 29,551.53 30,322.82 19,689.18 30,026.62 28,394.54 24,035.19

Market Capitalisation US$ 19,259.34 21,080.93 13,707.31 21,374.30 22,122.74 18,541.38

Share Price LCY 19.11 19.80 12.85 19.60 18.10 15.27

Share Price US$ 12.45 13.76 8.95 13.95 14.11 11.78

Share Price, % change (eop) 45.49 10.51 -34.98 55.91 1.12 na

Change YTD (2011 only) 8.21

Shares Outstanding (mn) 1,523.28 1,512.16 1,505.61 1,506.02 1,542.62 na

Source: BMI

Table: Singapore Balance Sheet (LCYmn)

2006 2007 2008 2009 2010

Total Assets 161,311.7 174,950.3 182,940.8 185,578.4 213,778.5

Loans & Mortgages 76,874.59 92,668.61 99,840.41 99,201.08 112,439.90

Total Deposits 95,551.7 106,967.5 118,171.5 121,502.1 142,299.5



Source: BMI



Table: Singapore Balance Sheet (US$mn)

2006 2007 2008 2009 2010

Total Assets 105,130.1 121,628.4 127,360.6 132,103.1 166,559.0

Loans & Mortgages 50,100.75 64,424.78 69,507.39 70,615.80 87,604.11

Total Deposits 62,273.0 74,365.6 82,269.2 86,490.7 110,868.3



Source: BMI

Table: Singapore Key Ratios (%)

2006 2007 2008 2009 2010

Return on Assets 1.64751 1.22988 1.048566 0.973055 1.296988

Return on Equities 16.79426 12.74214 12.54208 11.84985 14.32351

Loan Deposit Ratio 83.07539 88.42214 86.34307 83.73829 80.90139

Loan Asset Ratio 49.20906 54.06275 55.7737 54.82523 53.85118

Equity Asset Ratio 9.893322 9.429629 7.337849 9.072809 9.039459

Total Risk Based Capital Ratio 16.3 14.5 15.3 19 19.8

Tier 1 Capital Ratio 11 10 10.9 14 15.3

Source: BMI



Citibank Singapore

Strengths Strong global network.

Strong position in local institutional banking, as well as in the consumer and high-net

worth individual sectors.

Weaknesses Local operations perceived to be tainted by global exposure to toxic assets.

Opportunities Potential to leverage growth from the bank's strong client base of large corporations,

pension plans, insurance companies and sovereign wealth funds.

Growing trade flow between the Middle East and the rest of Asia.

Threats Exposure to the weakness of regional markets.

Export collapse in the key markets such as Japan and the US.

Company Overview Citigroup has about 200mn customer accounts and operates in more than 140 countries. Citibank

first established its operations in Singapore in 1902. It was then called International Banking

Corporation and was the first American bank to set up a branch in the city-state. Citibank's global

consumer banking division started operations in Singapore in 1982. Although a relative latecomer

to the retail banking sector, it has grown into a formidable market player with major market share

in key businesses such as unsecured lending, deposits and investments and secured assets.

Citibank was among the first foreign banks to be awarded a qualifying full bank licence by the

MAS in 1999.

In June 2004, Citibank incorporated the wholly owned subsidiary of Citigroup in Singapore,

Citibank Singapore Ltd, with paid-up capital of SGD1.5bn. This was part of Citibank's strategy to

grow its international businesses and reaffirms the bank's long-term commitment to the city-state.

The bank has a shared ATM network with HSBC, ABN AMRO, Standard Chartered and Maybank

called atm5. In 2009, Citibank was the first bank to launch a mobile payment pilot service in

Singapore in partnership with Visa.

In January 2012 Citibank was ordered to pay US$2.5mn to the Ceylon Petroleum Cooperation

(CPC) to cover its legal fees over a dispute in oil hedging. The arbitration panel in charge of the

case threw out Citibank's claim against CPC for US$192mn plus interest following a voided oil

hedging deal. Citibank were arguing for compensation after CPC purchased complex options

positions then refused to pay in full after the 2008 collapse in oil prices.

Citigroup's full year net income declined 11% from Q410 to SGD1.2bn in Q411, a SGD1.2bn

decrease in y-o-y revenues. Operating expenses increased by SGD465mn and tax provision was

up by SGD470mn. Both these figures played a hand in largely offsetting a SGD2bn increase in

credit cost from Q410. Compared to Q410, credit cost in Q411 decreased by 41% to SGD2.9bn.

Operating expenses increased 4% from the fourth quarter of 2010, reaching SGD12.9bn after

SGD557mn was spent on legal costs and SGD428mn on a repositioning charge. On December

31 2011, book value per share was SGD60.78 and tangible book value per share was SGD49.81,

increases of 8% and 12% respectively. Tier 1 Capital Ratio was 13.6% and Tier 1 Common Ratio

was 11.8%.



Company Data Website: www.citibank.com.sg

Status: Full bank



BMI Banking Sector Methodology

BMI's Commercial Banking Forecast Report series is closely integrated with our analysis of country risk,

macroeconomic trends and financial markets. As such, the reports draw heavily on our extensive

economic data set, which includes up to 550 indicators per country, as well as our in depth view of each

local market. We collate our commercial banking databank from official sources (including central banks

and regulators) wherever possible, and only fall back on secondary sources where all attempts to secure

primary data have failed. Company data is sourced, in the first instance, from company reports, with

central bank, regulator or trade association data only used as a backup. All of the risk ratings and

forecasts within this report are a result of BMI's own proprietary research and do not in any

circumstances include consensus or third party numbers.

How Our Data Set Is Structured

The reports focus on total assets, client loans and client deposits.

Total assets are analogous to the combined balance sheet assets of all commercial banks in a particular

country. They do not incorporate the balance sheet of the central bank of the country in question.

Client loans are loans to non-bank clients. They include loans to public sector and state-owned

enterprises. However, they generally do not include loans to governments, government (or non-

government) bonds held or loans to central banks. Client deposits are deposits from the non-bank public.

They generally include deposits from public sector and state-owned enterprises. However, they only

include government deposits if these are significant.

We take into account capital items and bond portfolios. The former include shareholders funds, and

subordinated debt that may be counted as capital. The latter includes government and non-government

bonds.

In quantifying the collective balance sheets of a particular country, we assume that three equations hold

true:

Total assets = total liabilities and capital.

Total assets = client loans + bond portfolio + other assets.

Total liabilities and capital = capital items + client deposits + other liabilities.



In terms of the equations, other assets and other liabilities are balancing items that ensure equations two

and three can be reconciled with equation one. In practice, other assets and other liabilities are analogous

to inter-bank transactions. In some cases, such transactions are generally with foreign banks.

In most countries for which we have compiled figures, building societies/thrifts are an insignificant part

of the banking landscape, and we do not include them in our figures. The US is the main exception to this.

In some cases, total assets and client loans include significant amounts that are owned or that have been

lent to customers in another country. In some cases, client deposits include significant amounts that have

been deposited by residents of another country. Such cross-border business is particularly important in

major financial centres such as Singapore and Hong Kong, the richer OECD countries and certain

countries in Central and Eastern Europe.

Commercial Bank Business Environment Rating

In producing our Commercial Banking Business Environment Rating, our approach has been threefold.

First, we have explicitly aimed to assess the market attractiveness and risks to the predictable realisation

of profits in each state, thereby capturing the operational dangers facing companies operating in this

industry globally. Second, we have, where possible, identified objective indicators that serve as proxies

for issues/trends within the industry to ensure consistent evaluate across states. Finally, we have used

BMI's proprietary Country Risk Ratings in a nuanced manner to ensure that the ratings accurately capture

broader issues that are relevant to the industry and which may either limit market attractiveness or imperil

future returns. Overall, the ratings system, which integrates with all the other industry Business

Environment Ratings covered by BMI, offers an industry-leading insight into the prospects/risks for

companies across the globe.

Conceptually, the ratings system divides into two distinct areas:

Limits of Potential Returns: Evaluation of industry's size and growth potential in each

state, and also broader industry/state characteristics that may inhibit its development.

Risks to Realisation of Returns: Evaluation of industry-specific dangers and those

emanating from the state's political/economic profile that call into question the likelihood of

anticipated returns being realised over the assessed time period.

In constructing these ratings, the following indicators have been used. Almost all indicators are

objectively based.



Table: Commercial Banking Business Environment Indicators And Rationale

Limits of Potential Returns Rationale

Banking market structure

Estimated total assets, 2012

Indication of overall sector attractiveness. Large markets are considered more attractive than small ones

Estimated growth in total assets, 2012-2016

Indication of growth potential. The greater the likely absolute growth in total assets, the higher the score

Estimated growth in client loans, 2012-2016 Indication of the scope for expansion in profits through intermediation

Country structure

GDP per capita A proxy for wealth. High-income states receive better scores than low-income states

Active population Those aged 16-64 in each state, as a % of total population. A high proportion suggests

that the market is comparatively more attractive

Corporate tax A measure of the general fiscal drag on profits

GDP volatility Standard deviation of growth over seven-year economic cycle. A proxy for economic

stability

Risks to Realisation of Returns

Banking market risks

Regulatory framework and industry development

Subjective evaluation of de facto/de jure regulations on overall development of the banking sector

Regulatory framework and competitive environment

Subjective evaluation of the impact of the regulatory environment on the competitive landscape

BMI's Country Risk Ratings (CRR)

Short-term financial risk Rating from CRR, evaluating currency volatility

Policy continuity Rating from CRR, evaluating the risk of a sharp change in the broad direction of

government policy

Legal framework Rating from CRR, to denote strength of legal institutions in each state. Security of

investment can be a key risk in some emerging markets

Bureaucracy Rating from CRR to denote ease of conducting business in the state

Source: BMI

Weighting: Given the number of indicators/datasets used, it would be inappropriate to give all sub-

components equal weight. Consequently, the following weights have been adopted.



Table: Weighting Of Indicators

Component Weighting, %

Limits of Potential Returns, of which: 70, of which

- Banking market structure 60

- Country Structure 40

Risks to Realisation of Returns, of which: 30, of which

- Banking market risks 40

- Country Risk 60

Source: BMI

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

singapore commercial banking report q2 2012

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