Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Asian Banks
Be careful what you pay for
„ Reported book value: Be careful what you pay for
Price to book multiples are a popular valuation tool for Asian banks. However to
be afforded a multiple we believe reported equity needs to qualify as “core
regulatory tier 1 capital” so that it can be leveraged by the bank to generate returns.
In this report we look at discrepancies between reported equity & core tier 1 capital
to identify where & why gaps appear & their potential impact on valuation.
„ Price to adjusted core tier 1: Not perfect but a step in the right direction
Gaps between reported equity & core tier 1 capital are caused by many different
deductions such as goodwill & unrealised property gains. In aggregate the gap
across Asia is c15-16%; however at extremes this is over 50% distorting P/BV
ratios. We look to strip out & value items that do not apply for core tier 1 capital
separately (typically at 1x book) revealing underlying “core bank multiple”.
„ Domestic HK screen poorly as does Malaysia, China & India look better
Markets that screen poorly on this measure include the HK domestic banks,
Singapore (although valuations much less stretched) and Malaysia. Banks in India,
China and Korea screen best. On an individual stock basis Hang Seng Bank ranks
particularly poorly with less than 50% of its reported equity qualifying as tier 1
capital. Basel 3 is likely to only increase the gap & focus debate in this area. .
„ Still prefer Singapore Vs domestic HK, Indo looks good value Vs Malaysia
This analysis continues to support a preference for Singapore banks Vs domestic
HK names. The HK international names also look good value Vs their domestic
peers. On this metric Indonesia also looks good value relative to Malaysian banks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Asian Banks
Be careful what you pay for
„ Reported book value: Be careful what you pay for
Price to book multiples are a popular valuation tool for Asian banks. However to
be afforded a multiple we believe reported equity needs to qualify as “core
regulatory tier 1 capital” so that it can be leveraged by the bank to generate returns.
In this report we look at discrepancies between reported equity & core tier 1 capital
to identify where & why gaps appear & their potential impact on valuation.
„ Price to adjusted core tier 1: Not perfect but a step in the right direction
Gaps between reported equity & core tier 1 capital are caused by many different
deductions such as goodwill & unrealised property gains. In aggregate the gap
across Asia is c15-16%; however at extremes this is over 50% distorting P/BV
ratios. We look to strip out & value items that do not apply for core tier 1 capital
separately (typically at 1x book) revealing underlying “core bank multiple”.
„ Domestic HK screen poorly as does Malaysia, China & India look better
Markets that screen poorly on this measure include the HK domestic banks,
Singapore (although valuations much less stretched) and Malaysia. Banks in India,
China and Korea screen best. On an individual stock basis Hang Seng Bank ranks
particularly poorly with less than 50% of its reported equity qualifying as tier 1
capital. Basel 3 is likely to only increase the gap & focus debate in this area. .
„ Still prefer Singapore Vs domestic HK, Indo looks good value Vs Malaysia
This analysis continues to support a preference for Singapore banks Vs domestic
HK names. The HK international names also look good value Vs their domestic
peers. On this metric Indonesia also looks good value relative to Malaysian banks.
No comments:
Post a Comment