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UBS Investment Research
Asia Financials
Alpha Preferences
„ Most: Add TISCO, OCBC, CIMB; Remove Shriram, BOC-H, BAY, PNB
We remove BOC-H and BAY due to change of preferred stocks in each market.
We remove Shriram due to its recent relative outperformance. We remove PNB
due to our recent downgrade of Indian PSU banks. We expect corporate loan
growth could accelerate further at TISCO. The stock is currently trading at 2.1x
2010E P/B, with 2011E ROE of 18.9%. CIMB is our most preferred bank in
Malaysia as we think it is the main beneficiary of our positive capital markets
activities outlook. The stock is currently trading at 2.6x 2010E P/B, with 2011E
ROE of 17.8%. OCBC is a UBS Key Call. We view OCBC’s acquisition of ING
Asia Private Bank (IAPB) earlier this year as a significant milestone in its strategy
to build up its wealth management business. The stock is currently trading at 1.7x
2010E P/B, with 2011E ROE of 12.6%.
„ Least Preferred: First, UOB and Minsheng; Remove CITIC-H
We remove CITIC-H due to its recent underperformance and due to the realisation
of capital-raising overhang. We think First FHC will encounter the largest
provision shortfall among our coverage thus is exposed to the highest earnings risk.
It is at 1.5x ‘10E P/B with ‘10E ROE of 4.4%. While UOB is a laggard relative to
the market, we think it will be difficult for the stock to perform in the absence of
showing strong loan growth (loan book up 9% for first 3Q, vs. DBS +15%, OCBC
+23%). The stock is trading at 1.7x tangible equity with 10E ROTE of 16%.
Minsheng has the highest LDR in the sector (avg LDR of 84% 1H10) and capital
constraints (8.3% Tier 1 YE10E). It’s at 1.6x ‘10E P/B with ‘10/11E ROE of
16.4%/15.6%.
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