Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Third Indian Bank Failure In 15 Months: For the third time in 15 months, the Reserve Bank of India (RBI) took over a failing regional bank - announcing that it would limit deposit withdrawals and replace the board of directors at Lakshm Vilas Bank (LVB.IN) due to a "serious deterioration" in its finances. After the failure of Punjab and Maharashtra Co-operative Bank and Yes Bank (YES.IN); and 12 consecutive quarters of posting losses it should come as no surprise that the RBI placed LVB under moratorium through December 16, 2020; and*Not Letting Cash Burn A Hole In Its Pocket: On Novenber 17, 2020, the RBI also announced a draft scheme to merge LVB with DBS Bank India Limited, the 100%-owned subsidiary of DBS Bank Holdings (DBS.SP), which will infuse INR 25 bn into its subsidiary to absorb and recapitalize LVB. This transaction is riddled with problems and will certainly cost DBS far greater than its initial investment.

*Third Indian Bank Failure In 15 Months: For the third time in 15 months, the Reserve Bank of India (RBI) took over a failing regional bank - announcing that it would limit deposit withdrawals and replace the board of directors at Lakshm Vilas Bank (LVB.IN) due to a "serious deterioration" in its finances. After the failure of Punjab and Maharashtra Co-operative Bank and Yes Bank (YES.IN); and 12 consecutive quarters of posting losses it should come as no surprise that the RBI placed LVB under moratorium through December 16, 2020; and*Not Letting Cash Burn A Hole In Its Pocket: On Novenber 17, 2020, the RBI also announced a draft scheme to merge LVB with DBS Bank India Limited, the 100%-owned subsidiary of DBS Bank Holdings (DBS.SP), which will infuse INR 25 bn into its subsidiary to absorb and recapitalize LVB. This transaction is riddled with problems and will certainly cost DBS far greater than its initial investment.  

Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

Risk markets rallied on expectations that a meaningful economic restart will be brought forward following news of <a href="https://www.smartkarma.com/entities/pfizer-inc" target="_blank" data-smartkarma-citation="entities:1131:1" rel="noopener">Pfizer's (PFE US)</a> preliminary success rate of 90% in its Coronavirus vaccine trials. Combined with a Goldilocks election outcome whereby President Trump loses the election, but Joe Biden does not win a mandate, Caa rated corporates continued to tighten by more than the Asia High Yield (HY) index and other components of the US HY complex.Following two days of initial euphoria, markets consolidated on news of increased Coronavirus contagion. The growing footprint of Coronavirus related, pre-Christmas, restrictions across Europe and the US may be a headwind for economic growth over the near term.In the rate markets, a sharp jump in US yields early in the week retraced as the week progressed and attracted end-user buying, particularly in Asia. Japanese investors were reported to have been strong buyers of 7- to 10-year Treasuries. One of the developing risks at this point is that the reflation trade does not resurface while federal stimulus is constrained, and near-term economic prospects reduce. A tepid increase in yields could limit the effectiveness of any fresh Fed action. Against this background, almost all Asia-headquartered bonds tightened relative to their benchmark spreads as vaccine progress and US Treasury curve steepening increased prospects for higher net interest margins. Amongst Additional Tier 1 bonds, Thai-headquartered banks led advances as the Bank of Thailand lifted a dividend ban and stated that the financial institutions have sufficient capital and loan-loss provisions to withstand the impact of COVID-19. This sounds like cheer-leading and we are tempted to fade this rally. Concurrently, Turkish HY Senior Unsecured bank bonds materially outperformed their global peers in anticipation of more orthodox monetary and economic policies. Given the starting point for a potential Turkish bank bond rally, we may see higher returns from Turkish- as opposed to Thai-bank bonds.In the debt capital markets, over US$30 billion was raised by financial institutions in USD, Euros and Sterling across the credit continuum. When we noted last week that issuers were likely to bring 2021 issuance needs forward, we did not anticipate a flood like this. In what may have been the busiest bank bond issuance week of the year, the amount issued was almost one-half the amount brought in the prior eight weeks.Market Outlook: Over the near term, positive vaccine news combined with a goldilocks US election outcome lowers the likelihood of excessive US federal stimulus. This should cap additional upward pressure on US Treasury yields until vision increases on likely H2 ’21 US economic growth, post-vaccine distribution. Reflation remains on hold. This could limit US dollar weakness and limit positive impacts on reflationary beneficiaries such as bank valuations and Emerging Markets (EM) assets. Over the medium term, a less expansionary US fiscal policy should reduce upward pressure on U.S. rates and is likely to support yield-seeking, including EM fixed income securities over time.

Risk markets rallied on expectations that a meaningful economic restart will be brought forward following news of Pfizer's (PFE US) preliminary success rate of 90% in its Coronavirus vaccine trials. Combined with a Goldilocks election outcome whereby President Trump loses the election, but Joe Biden does not win a mandate, Caa rated corporates continued to tighten by more than the Asia High Yield (HY) index and other components of the US HY complex.Following two days of initial euphoria, markets consolidated on news of increased Coronavirus contagion. The growing footprint of Coronavirus related, pre-Christmas, restrictions across Europe and the US may be a headwind for economic growth over the near term.In the rate markets, a sharp jump in US yields early in the week retraced as the week progressed and attracted end-user buying, particularly in Asia. Japanese investors were reported to have been strong buyers of 7- to 10-year Treasuries. One of the developing risks at this point is that the reflation trade does not resurface while federal stimulus is constrained, and near-term economic prospects reduce. A tepid increase in yields could limit the effectiveness of any fresh Fed action. Against this background, almost all Asia-headquartered bonds tightened relative to their benchmark spreads as vaccine progress and US Treasury curve steepening increased prospects for higher net interest margins. Amongst Additional Tier 1 bonds, Thai-headquartered banks led advances as the Bank of Thailand lifted a dividend ban and stated that the financial institutions have sufficient capital and loan-loss provisions to withstand the impact of COVID-19. This sounds like cheer-leading and we are tempted to fade this rally. Concurrently, Turkish HY Senior Unsecured bank bonds materially outperformed their global peers in anticipation of more orthodox monetary and economic policies. Given the starting point for a potential Turkish bank bond rally, we may see higher returns from Turkish- as opposed to Thai-bank bonds.In the debt capital markets, over US$30 billion was raised by financial institutions in USD, Euros and Sterling across the credit continuum. When we noted last week that issuers were likely to bring 2021 issuance needs forward, we did not anticipate a flood like this. In what may have been the busiest bank bond issuance week of the year, the amount issued was almost one-half the amount brought in the prior eight weeks.Market Outlook: Over the near term, positive vaccine news combined with a goldilocks US election outcome lowers the likelihood of excessive US federal stimulus. This should cap additional upward pressure on US Treasury yields until vision increases on likely H2 ’21 US economic growth, post-vaccine distribution. Reflation remains on hold. This could limit US dollar weakness and limit positive impacts on reflationary beneficiaries such as bank valuations and Emerging Markets (EM) assets. Over the medium term, a less expansionary US fiscal policy should reduce upward pressure on U.S. rates and is likely to support yield-seeking, including EM fixed income securities over time.

Bank Credit Weekly: Vaccine Rally, Then Consolidation, Drives Outperformance & Turkey Vs Thai Banks

Potential returns from investing along <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc-a723bd63-0890-486f-aaa0-3bb9ad2b95ce" target="_blank" data-smartkarma-citation="entities:21976:1" rel="noopener">HSBC Holdings (HSBA LN)</a> Additional Tier 1 (AT1) curve vary considerably between its Euro, Sterling, Singapore- and US- dollar bonds; however, this difference is not entirely driven by the choice of currency. The Singapore-dollar denominated securities offer the highest yield-to-call at current price levels; however, the question is whether you will get what you pay for in yield terms.At the other end of the yield spectrum, HSBC’s Euro-denominated AT1 securities offer significantly less yield-to-call. The question here is whether HSBC’s credit risk is appropriately priced in these securities.Yields available on the Sterling and US dollar denominated securities are somewhere between that available on the Singapore-dollar and Euro-denominated bonds, and they generally trend upwards over time. However, that does not necessarily equate with value for money.We examine these securities from a credit and extension risk perspective towards determining which bonds may ultimately provide a higher return over time.

Potential returns from investing along HSBC Holdings (HSBA LN) Additional Tier 1 (AT1) curve vary considerably between its Euro, Sterling, Singapore- and US- dollar bonds; however, this difference is not entirely driven by the choice of currency. The Singapore-dollar denominated securities offer the highest yield-to-call at current price levels; however, the question is whether you will get what you pay for in yield terms.At the other end of the yield spectrum, HSBC’s Euro-denominated AT1 securities offer significantly less yield-to-call. The question here is whether HSBC’s credit risk is appropriately priced in these securities.Yields available on the Sterling and US dollar denominated securities are somewhere between that available on the Singapore-dollar and Euro-denominated bonds, and they generally trend upwards over time. However, that does not necessarily equate with value for money.We examine these securities from a credit and extension risk perspective towards determining which bonds may ultimately provide a higher return over time.

HSBC’s AT1 Curve: Where Is the Cross-Currency Value?

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

<!DOCTYPE html PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN" "http://www.w3.org/TR/REC-html40/loose.dtd">
<html><body>
<ul>
<li>
Recent rotation from Momentum to Value stocks has seen DBS, OCBC and UOB recipient of S$670 million in combined net institutional inflow in the November month-to-date. This has coincided with the trio averaging 16% gains for the eight sessions.  
	 </li>
	<li>
For their 3QFY20, DBS, OCBC and UOB reported a combined S$5.1 billion in Net Interest Income (NII). The three banks have consecutively and resiliently reported combined NII above S$5.0 billion since 1QFY18. 
	 </li>
	<li>The trio also maintain an average ROE of 11% compared to the median ROE of the top quartile of globally listed banks by market value at 7%.  The trio average a NPL ratio of 1.6% as of 3QFY20, up from 1.5% in the year-ago period. Their NIM averaged 1.53%, down from in 3QFY19.</li>
</ul>
 

In the first week of November, DBS Group Holdings (DBS), Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank (UOB) unveiled their business updates for the three months ended 30 September 2020. Recent rotation from Momentum to Value stocks has seen DBS, OCBC and UOB recipient of S$670 million in combined net institutional inflow in the November month-to-date. This has coincided with the trio averaging 16% gains for the eight sessions. Earnings Highlights 
For the three months ended 30 September 2020, the three banks averaged a net profit of S$998 million, down an average 24.3% YoY. DBS reported the highest net profit of S$1.3 billion, while OCBC registered the smallest YoY decline in earnings – down 12.3% to S$1.0 billion. 
Net interest income averaged S$1.7 billion, down an average 11.9% YoY. DBS registered the highest net interest income for the period – at S$2.2 billion.

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			3Q2020 Net Profit (S$M)
			</td>
			<td>
			YoY Growth (%)
			</td>
			<td>
			3Q2020 Net Interest Income (S$M)
			</td>
			<td>
			YoY Growth (%)
			</td>
		</tr>
<tr>
<td>
			DBS
			</td>
			<td>
			1,297
			</td>
			<td>
			-20.4
			</td>
			<td>
			2,171
			</td>
			<td>
			-11.8
			</td>
		</tr>
<tr>
<td>
			OCBC
			</td>
			<td>
			1,028
			</td>
			<td>
			-12.3
			</td>
			<td>
			1,421
			</td>
			<td>
			-11.2
			</td>
		</tr>
<tr>
<td>
			UOB
			</td>
			<td>
			668
			</td>
			<td>
			-40.3
			</td>
			<td>
			1,474
			</td>
			<td>
			-12.6
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			998
			</td>
			<td>
			-24.3
			</td>
			<td>
			1,689
			</td>
			<td>
			-11.9
			</td>
		</tr>
</tbody></table>
 

<ul>
<li>DBS’s 3Q 2020 net profit was up 4% QoQ, with improved business momentum as fee income rebounded 17% to pre-Covid levels, softening the impact of lower interest rates as well as a decline in trading income from a high base</li>
	<li>OCBC’s performance reflected the robustness of its customer franchise and diversified business model – while net interest income was impacted by lower market rates, its banking and wealth management businesses saw strong QoQ fee-based growth</li>
	<li>UOB’s performance was hit by declining margins, slower customer activities and pre-emptive credit provisioning in view of the uncertainties from the COVID-19 pandemic</li>
</ul>
 

The trio averaged a Non-Performing Loan (NPL) ratio of 1.6% as of 3Q 2020, up from 1.5% in the year-ago period. Net interest margin (NIM) averaged 1.53%, down from 1.81% in the year-earlier period.

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			3Q20 NIM (%)
			</td>
			<td>
			3Q19 NIM (%)
			</td>
			<td>
			3Q20 NPL Ratio (%)
			</td>
			<td>
			3Q19 NPL Ratio (%)
			</td>
		</tr>
<tr>
<td>
			DBS
			</td>
			<td>
			1.53
			</td>
			<td>
			1.90
			</td>
			<td>
			1.6
			</td>
			<td>
			1.5
			</td>
		</tr>
<tr>
<td>
			OCBC
			</td>
			<td>
			1.54
			</td>
			<td>
			1.77
			</td>
			<td>
			1.6
			</td>
			<td>
			1.6
			</td>
		</tr>
<tr>
<td>
			UOB
			</td>
			<td>
			1.53
			</td>
			<td>
			1.77
			</td>
			<td>
			1.5
			</td>
			<td>
			1.5
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			1.53
			</td>
			<td>
			1.81
			</td>
			<td>
			1.6
			</td>
			<td>
			1.5
			</td>
		</tr>
</tbody></table>
 Source: Company data

 

Outlook

DBS

<ul>
<li>Expect strong economic rebound in Asia from low base to support mid-singledigit loan growth and double-digit fee income growth in 2021; partly offsets fullyear impact of lower NIM</li>
	<li>Cost-income ratio for 2020 at 43%. Expect to hold 2021 expenses flattish to 2019</li>
	<li>Some episodic corporate NPL formation, while consumer delinquencies declined with improved collections</li>
	<li>Overall NPA formation expected to trend upwards as government relief programmes expire in 2021</li>
	<li>Guidance for total allowances of S$3 billion-$5 billion over two years remains
	<ul>
<li>S$2.5 billion already taken, reflecting conservative approach</li>
		<li>Amount in 2021 expected to be lower than 2020</li>
	</ul>
</li>
	<li>Loan moratoriums increased marginally for corporates, unchanged for consumers
	<ul>
<li>Corporates increased to S$13.5 billion from S$12.6 billion in 2Q, mostly secured</li>
		<li>Consumers unchanged at S$5.7 billion, mostly owner-occupied Singapore housing loans with loan-to-value (LTV) ratios well below regulatory thresholds</li>
	</ul>
</li>
</ul>
 

Click <a href="https://links.sgx.com/1.0.0/corporate-announcements/VQL042GR3BGPGNS1/638003_3Q20_trading_update.pdf">here</a> for full results release.

 

OCBC 

<ul>
<li>While 3Q20 saw a recovery from the trough of the previous quarter, we may not have seen the full extent of the lagging economic impact of the crisis yet, which will have more visibility next year</li>
	<li>We are proactively following and responding to the government relief programme exits in all markets</li>
	<li>With the outlook still uncertain, we continue to strengthen our capital and balance sheet to position us well for the crisis, and enable us to emerge well-prepared for new opportunities when the market recovers</li>
	<li>We have set aside prudent levels of allowances including management overlays on top of the ECL model requirements on a forward-looking basis</li>
	<li>We will stay vigilant in managing the credit portfolio and are working closely with our customers to ensure a smooth and disciplined transition out of the moratorium programmes</li>
	<li>While cost has been tightly managed, the Group will continue to invest in digital transformation to boost customer engagement, increase productivity and achieve greater cost efficiencies</li>
</ul>
 

Click <a href="https://links.sgx.com/1.0.0/corporate-announcements/RNNS7M77E75VRBX0/638008_OCBC_3Q20_Results_Update.pdf">here</a> for full results release.

 

UOB 

<ul>
<li>While there are early signs of recovery across the global economy, the trajectory remains uneven and unclear</li>
	<li>Given the evolving geopolitical and pandemic situation, we remain vigilant, especially in our key regional markets</li>
	<li>However, our asset quality is manageable and we are adequately provisioned even with the expiry of moratorium programmes across the region</li>
	<li>Our healthy balance sheet, fortified with additional allowance and backed by robust capital and liquidity positions, ensures we are well-placed to help our customers to weather this crisis</li>
	<li>COVID-19 has presented an opportunity for us to accelerate our omni-channel approach and to open up new customer service models</li>
	<li>Our digital services such as UOB Mighty and TMRW have seen a rise in engagement and transactions; we also recently launched UOB Infinity, our enhanced digital service for corporate customers</li>
	<li>As of 30 September 2020, outstanding O&amp;G loans represented 3% of total loans as compared with 4.7% at 30 June 2018</li>
	<li>Approximately 70% of O&amp;G exposure is to downstream players and traders, of which around two thirds are to national oil companies (NOCs) and global firms, while short-term structured loans account for a significant share of the remainder</li>
	<li>A significant portion of upstream exposure is to NOCs and international oil companies, while vulnerable accounts were already classified and their collateral value marked down (by as much as 90%) by end-2017 
	 </li>
</ul>
 Click <a href="https://links.sgx.com/1.0.0/corporate-announcements/T9VMMAFTCBIDZ1H5/637796_3Q20%20Performance%20Highlights.pdf">here</a> for full results release.
</body></html>





Recent rotation from Momentum to Value stocks has seen DBS, OCBC and UOB recipient of S$670 million in combined net institutional inflow in the November month-to-date. This has coincided with the trio averaging 16% gains for the eight sessions.  
	 
	
For their 3QFY20, DBS, OCBC and UOB reported a combined S$5.1 billion in Net Interest Income (NII). The three banks have consecutively and resiliently reported combined NII above S$5.0 billion since 1QFY18. 
	 
	The trio also maintain an average ROE of 11% compared to the median ROE of the top quartile of globally listed banks by market value at 7%.  The trio average a NPL ratio of 1.6% as of 3QFY20, up from 1.5% in the year-ago period. Their NIM averaged 1.53%, down from in 3QFY19.

 

In the first week of November, DBS Group Holdings (DBS), Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank (UOB) unveiled their business updates for the three months ended 30 September 2020. Recent rotation from Momentum to Value stocks has seen DBS, OCBC and UOB recipient of S$670 million in combined net institutional inflow in the November month-to-date. This has coincided with the trio averaging 16% gains for the eight sessions.  Earnings Highlights  
For the three months ended 30 September 2020, the three banks averaged a net profit of S$998 million, down an average 24.3% YoY. DBS reported the highest net profit of S$1.3 billion, while OCBC registered the smallest YoY decline in earnings – down 12.3% to S$1.0 billion.  
Net interest income averaged S$1.7 billion, down an average 11.9% YoY. DBS registered the highest net interest income for the period – at S$2.2 billion.




			Name
			
			
			3Q2020 Net Profit (S$M)
			
			
			YoY Growth (%)
			
			
			3Q2020 Net Interest Income (S$M)
			
			
			YoY Growth (%)
			
		


			DBS
			
			
			1,297
			
			
			-20.4
			
			
			2,171
			
			
			-11.8
			
		


			OCBC
			
			
			1,028
			
			
			-12.3
			
			
			1,421
			
			
			-11.2
			
		


			UOB
			
			
			668
			
			
			-40.3
			
			
			1,474
			
			
			-12.6
			
		


			Average
			
			
			998
			
			
			-24.3
			
			
			1,689
			
			
			-11.9
			
		

 


DBS’s 3Q 2020 net profit was up 4% QoQ, with improved business momentum as fee income rebounded 17% to pre-Covid levels, softening the impact of lower interest rates as well as a decline in trading income from a high base
	OCBC’s performance reflected the robustness of its customer franchise and diversified business model – while net interest income was impacted by lower market rates, its banking and wealth management businesses saw strong QoQ fee-based growth
	UOB’s performance was hit by declining margins, slower customer activities and pre-emptive credit provisioning in view of the uncertainties from the COVID-19 pandemic

 

The trio averaged a Non-Performing Loan (NPL) ratio of 1.6% as of 3Q 2020, up from 1.5% in the year-ago period. Net interest margin (NIM) averaged 1.53%, down from 1.81% in the year-earlier period.




			Name
			
			
			3Q20 NIM (%)
			
			
			3Q19 NIM (%)
			
			
			3Q20 NPL Ratio (%)
			
			
			3Q19 NPL Ratio (%)
			
		


			DBS
			
			
			1.53
			
			
			1.90
			
			
			1.6
			
			
			1.5
			
		


			OCBC
			
			
			1.54
			
			
			1.77
			
			
			1.6
			
			
			1.6
			
		


			UOB
			
			
			1.53
			
			
			1.77
			
			
			1.5
			
			
			1.5
			
		


			Average
			
			
			1.53
			
			
			1.81
			
			
			1.6
			
			
			1.5
			
		

 Source: Company data

 

Outlook

DBS


Expect strong economic rebound in Asia from low base to support mid-singledigit loan growth and double-digit fee income growth in 2021; partly offsets fullyear impact of lower NIM
	Cost-income ratio for 2020 at 43%. Expect to hold 2021 expenses flattish to 2019
	Some episodic corporate NPL formation, while consumer delinquencies declined with improved collections
	Overall NPA formation expected to trend upwards as government relief programmes expire in 2021
	Guidance for total allowances of S$3 billion-$5 billion over two years remains
	
S$2.5 billion already taken, reflecting conservative approach
		Amount in 2021 expected to be lower than 2020
	

	Loan moratoriums increased marginally for corporates, unchanged for consumers
	
Corporates increased to S$13.5 billion from S$12.6 billion in 2Q, mostly secured
		Consumers unchanged at S$5.7 billion, mostly owner-occupied Singapore housing loans with loan-to-value (LTV) ratios well below regulatory thresholds
	


 

Click here for full results release.

 

OCBC 


While 3Q20 saw a recovery from the trough of the previous quarter, we may not have seen the full extent of the lagging economic impact of the crisis yet, which will have more visibility next year
	We are proactively following and responding to the government relief programme exits in all markets
	With the outlook still uncertain, we continue to strengthen our capital and balance sheet to position us well for the crisis, and enable us to emerge well-prepared for new opportunities when the market recovers
	We have set aside prudent levels of allowances including management overlays on top of the ECL model requirements on a forward-looking basis
	We will stay vigilant in managing the credit portfolio and are working closely with our customers to ensure a smooth and disciplined transition out of the moratorium programmes
	While cost has been tightly managed, the Group will continue to invest in digital transformation to boost customer engagement, increase productivity and achieve greater cost efficiencies

 

Click here for full results release.

 

UOB 


While there are early signs of recovery across the global economy, the trajectory remains uneven and unclear
	Given the evolving geopolitical and pandemic situation, we remain vigilant, especially in our key regional markets
	However, our asset quality is manageable and we are adequately provisioned even with the expiry of moratorium programmes across the region
	Our healthy balance sheet, fortified with additional allowance and backed by robust capital and liquidity positions, ensures we are well-placed to help our customers to weather this crisis
	COVID-19 has presented an opportunity for us to accelerate our omni-channel approach and to open up new customer service models
	Our digital services such as UOB Mighty and TMRW have seen a rise in engagement and transactions; we also recently launched UOB Infinity, our enhanced digital service for corporate customers
	As of 30 September 2020, outstanding O&amp;G loans represented 3% of total loans as compared with 4.7% at 30 June 2018
	Approximately 70% of O&amp;G exposure is to downstream players and traders, of which around two thirds are to national oil companies (NOCs) and global firms, while short-term structured loans account for a significant share of the remainder
	A significant portion of upstream exposure is to NOCs and international oil companies, while vulnerable accounts were already classified and their collateral value marked down (by as much as 90%) by end-2017 
	 

 Click here for full results release.



DBS, OCBC & UOB Average 16% Gains in Early Nov

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

<div class="content-highlight">
Corrigenda: There is an error in this Insight. Please note the correction.
Correction: The Insight <a href="https://www.smartkarma.com/insights/bjbr-positive-fundamental-momentum-at-a-decent-valuation" target="_blank" data-smartkarma-citation="insights:44897" rel="noopener">BJBR: Positive Fundamental Momentum at a Decent Valuation</a> was improperly attributed to Thomas Monaco. It was published by <a href="https://www.smartkarma.com/profiles/paul-hollingworth" target="_blank" data-smartkarma-citation="accounts:2554" rel="noopener">Paul Hollingworth</a>.
</div>
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The week that was in <a href="mailto:ASEAN@Smartkarma" target="_blank" rel="noopener">ASEAN@Smartkarma</a> is filled with another eclectic mix of differentiated, substantive, and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights over the past week.
We add below a NEW section, which includes emerging themes in ASEAN and selects important news flow or developments for commentary, which may impact SE Asian companies and markets.  
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<a href="https://www.smartkarma.com/insights/smartkarma-corporate-webinar-indo-banks-the-worst-is-over" target="_blank" data-smartkarma-citation="insights:44882" rel="noopener">Smartkarma Corporate Webinar | Indo Banks: The Worst Is Over</a>- 10th November at 4 pm.
For our next Corporate Webinar, we welcome <a href="https://www.smartkarma.com/entities/bank-mandiri-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:441:1" rel="noopener">Bank Mandiri Persero (BMRI IJ)</a>'s Group Head of Investor Relations, <a href="https://www.smartkarma.com/profiles/yohan-setio" target="_blank" rel="noopener">Yohan Setio</a>, who will share some company updates and sit down for a fireside chat with Smartkarma Insight Provider <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" rel="noopener">Angus Mackintosh</a>.
<h2>Indonesia's Recovery and the Next Digital Darling</h2>
This week below the fold we look at Indonesia's recent economic numbers which saw the country slide into recession, its first since the Asian Crisis but find it encouraging that the economy is moving onto a recovery track. We see selective banks and <a href="https://www.smartkarma.com/entities/astra-international-tbk-pt" target="_blank" data-smartkarma-citation="entities:46:1" rel="noopener">Astra International (ASII IJ)</a> as core ways to play this recovery. 
<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> is SoutEast Asia's largest Market Cap stock, and there are very few if any alternatives to get exposure to the region's e-commerce boom, certainly in the listed universe. One potential future candidate is <a href="https://www.smartkarma.com/entities/elang-mahkota-teknologi-tbk" target="_blank" data-smartkarma-citation="entities:7752:1" rel="noopener">Emtek (EMTK IJ),</a> which is the major shareholder of <a href="https://www.smartkarma.com/entities/surya-citra-media-pt-tbk" target="_blank" data-smartkarma-citation="entities:14739:1" rel="noopener">PT Surya Citra Media Tbk (SCMA IJ)</a> but it also has stakes in Bukalapak and Dana, the number three digital payments player in Indonesia and a JV with Ant Financial.
<a href="https://www.smartkarma.com/entities/elang-mahkota-teknologi-tbk" target="_blank" data-smartkarma-citation="entities:7752:1" rel="noopener">Emtek (EMTK IJ)</a> has announced that it will seek approval for a stock split in December but this may not be the end of the story. Any restructuring which brings all of its digital assets under one roof and improves liquidity would certainly help the company attract more institutional investors and secure a higher valuation. 
<h3>Macro Insights</h3>
In <a href="https://www.smartkarma.com/insights/thai-strategy-2021-part-2-top-10-stock-picks" target="_blank" data-smartkarma-citation="insights:40851" rel="noopener">Thai Strategy 2021 (Part 2): Top 10 Stock Picks,</a> our Thai guru <a href="https://www.smartkarma.com/profiles/athaporn-arayasantiparb-cfa" target="_blank" data-smartkarma-citation="accounts:766" rel="noopener">Athaporn Arayasantiparb, CFA</a> lays out his top stock picks in Thailand for next year.
In <a href="https://www.smartkarma.com/insights/thai-strategy-2021-part-3-sector-outlooks" target="_blank" data-smartkarma-citation="insights:40864" rel="noopener">Thai Strategy 2021 (Part 3): Sector Outlooks,</a> our Thai guru <a href="https://www.smartkarma.com/profiles/athaporn-arayasantiparb-cfa" target="_blank" data-smartkarma-citation="accounts:766" rel="noopener">Athaporn Arayasantiparb, CFA</a> provides us with his sector strategy in Thailand for the coming year. 
<h3>Equity Bottom Up</h3>
In an Indonesian Insight,<a href="https://www.smartkarma.com/insights/astra-international-asii-ij-an-auto-recovery-story-with-a-golden-digital-twist" target="_blank" rel="noopener"> Astra International (ASII IJ) - An Auto-Recovery Story with a Golden Digital Twist</a>, CrossASEAN Insight provider<a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" rel="noopener"> Angus Mackintosh</a> returns to look at<a href="https://www.smartkarma.com/entities/astra-international-tbk-pt" target="_blank" rel="noopener"> Astra International (ASII IJ)</a> after a conversation with management. 
In <a href="https://www.smartkarma.com/insights/pt-surya-citra-media-tbk-scma-ij-let-the-games-begin" target="_blank" data-smartkarma-citation="insights:44914" rel="noopener">PT Surya Citra Media Tbk (SCMA IJ) - Let the Games Begin,</a> CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> revisits one of Indonesia's leading media companies, which has an increasingly digital twist.
In <a href="https://www.smartkarma.com/insights/aem-holdings-optimistic-on-fy21-fair-value-remains-at-5-sgd-41-upside" target="_blank" data-smartkarma-citation="insights:44915" rel="noopener">AEM Holdings: Optimistic on FY21; Fair Value Remains at 5 SGD (41% Upside),</a> CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/nicolas-van-broekhoven-24a66c2d-bca4-4f5b-adda-c4e2bcc509f4" target="_blank" data-smartkarma-citation="accounts:1208" rel="noopener">Nicolas Van Broekhoven</a> revisits <a href="https://www.smartkarma.com/entities/aem-holdings-ltd" target="_blank" data-smartkarma-citation="entities:11019:1" rel="noopener">AEM Holdings (AEM SP)</a> after an impressive set of results and remains positive.
In <a href="https://www.smartkarma.com/insights/bjbr-positive-fundamental-momentum-at-a-decent-valuation" target="_blank" data-smartkarma-citation="insights:44897" rel="noopener">BJBR: Positive Fundamental Momentum at a Decent Valuation,</a><a href="https://www.smartkarma.com/profiles/thomas-j-monaco" target="_blank" data-smartkarma-citation="accounts:1716" rel="noopener">Thomas J. Monaco</a> writes on this smaller Indonesian lender with a positive slant.
In <a href="https://www.smartkarma.com/insights/oversea-chinese-banking-corp-still-not-a-great-eastern" target="_blank" data-smartkarma-citation="insights:44901" rel="noopener">Oversea Chinese Banking Corp – Still Not A Great Eastern,</a><a href="https://www.smartkarma.com/profiles/thomas-j-monaco" target="_blank" data-smartkarma-citation="accounts:1716" rel="noopener">Thomas J. Monaco</a> looked in detail at <a href="https://www.smartkarma.com/entities/great-eastern-holdings-ltd" target="_blank" data-smartkarma-citation="entities:13993:1" rel="noopener">Great Eastern Holdings (GE SP)</a> numbers ahead of <a href="https://www.smartkarma.com/entities/oversea-chinese-banking-corp" target="_blank" data-smartkarma-citation="entities:114:1" rel="noopener">Oversea Chinese Banking Corp. (OCBC SP)</a> results. 
In <a href="https://www.smartkarma.com/insights/oversea-chinese-banking-corp-solid" target="_blank" data-smartkarma-citation="insights:45061" rel="noopener">Oversea Chinese Banking Corp. – Solid,</a><a href="https://www.smartkarma.com/profiles/thomas-j-monaco" target="_blank" data-smartkarma-citation="accounts:1716" rel="noopener">Thomas J. Monaco</a> revisits this Singapore lender with a positive view post its recent 3Q2020 numbers. 
<a href="https://www.smartkarma.com/entities/surya-citra-media-pt-tbk" target="_blank" data-smartkarma-citation="entities:14739:1" rel="noopener"></a>In<a href="https://www.smartkarma.com/insights/dbs-group-holdings-not-trending-the-right-way-yet" target="_blank" rel="noopener"> DBS Group Holdings – Not Trending The Right Way Yet</a>,<a href="https://www.smartkarma.com/profiles/thomas-j-monaco" target="_blank" rel="noopener"> Thomas J. Monaco</a> reports back<a href="https://www.smartkarma.com/entities/dbs-group-holdings-ltd" target="_blank" rel="noopener"> DBS Group Holdings (DBS SP)</a>'s post its recent 3Q2020 results with a chequered view.
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In this Thai Insight,<a href="https://www.smartkarma.com/insights/hmpro-expect-government-stimulus-scheme-drive-4q20-recover-qoq" target="_blank" rel="noopener"> HMPRO: Expect Government Stimulus Scheme Drive 4Q20 Recover QoQ,</a> our friends at <a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> circle back to Thailand's leading home improvements player <a href="https://www.smartkarma.com/entities/home-product-center-pcl" target="_blank" data-smartkarma-citation="entities:9906:1" rel="noopener">Home Product Center (HMPRO TB)</a>. 
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In<a href="https://www.smartkarma.com/insights/synex-solid-earnings-growth-outlook-but-largely-priced-in" target="_blank" rel="noopener"> SYNEX: Solid Earnings Growth Outlook but Largely Priced In</a>,<a href="https://www.smartkarma.com/companies/country-group" target="_blank" rel="noopener"> Country Group</a> provides a view on<a href="https://www.smartkarma.com/entities/synnex-thailand-pcl" target="_blank" rel="noopener"> Synnex Thailand (SYNEX TB),</a> following the recent run-up in the share price. 
In this Thai Insight, <a href="https://www.smartkarma.com/insights/scc-strong-3q20-thanks-to-petrochemical-spread" target="_blank" rel="noopener">SCC: Strong 3Q20 Thanks to Petrochemical Spread</a>, our friends at <a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> return to look at<a href="https://www.smartkarma.com/entities/siam-cement-pcl-the" target="_blank" rel="noopener"> Siam Cement (SCC TB)</a> post 3Q2020 results. 
In <a href="https://www.smartkarma.com/insights/mc-prominent-denim-brand-with-new-growth-momentum" target="_blank" data-smartkarma-citation="insights:45077" rel="noopener">MC: Prominent Denim Brand with New Growth Momentum,</a> our friends at <a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a>initiate on this leading Thai denim apparel player. They initiate coverage of <a href="https://www.smartkarma.com/entities/mc-group-pcl" target="_blank" data-smartkarma-citation="entities:17093:1" rel="noopener">MC Group Pcl (MC TB)</a> with a BUY rating and a target price of Bt12.0, derived from 18.5x FY21E PER, which is +1SD above its 5-year trading average but slightly lower than its global apparel peers.
<h3>Credit Insights</h3>
In <a href="https://www.smartkarma.com/insights/lippo-karawaci-earnings-flash-q3-fy-2020-results-lucror-analytics" target="_blank" rel="noopener">Lippo Karawaci - Earnings Flash - Q3 FY 2020 Results</a>, credit specialist<a href="https://www.smartkarma.com/profiles/trung-nguyen" target="_blank" rel="noopener"> Trung Nguyen</a> looks at<a href="https://www.smartkarma.com/entities/lippo-karawaci-tbk-pt" target="_blank" rel="noopener"> Lippo Karawaci (LPKR IJ)'s</a> after its recent results, which continued to be robust in Q32020. 
In <a href="https://www.smartkarma.com/insights/chandra-asri-earnings-flash-9m-fy-2020-results-lucror-analytics" target="_blank" data-smartkarma-citation="insights:44814" rel="noopener">Chandra Asri - Earnings Flash - 9M FY 2020 Results</a> credit specialist <a href="https://www.smartkarma.com/profiles/leonard-law-cfa" target="_blank" data-smartkarma-citation="accounts:7106" rel="noopener">Leonard Law, CFA</a> circles back to this leading chemicals player post 3Q2020 results.


Corrigenda: There is an error in this Insight. Please note the correction.
Correction: The Insight BJBR: Positive Fundamental Momentum at a Decent Valuation was improperly attributed to Thomas Monaco. It was published by Paul Hollingworth.



The week that was in ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive, and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights over the past week.
We add below a NEW section, which includes emerging themes in ASEAN and selects important news flow or developments for commentary, which may impact SE Asian companies and markets.  

Smartkarma Corporate Webinar | Indo Banks: The Worst Is Over- 10th November at 4 pm.
For our next Corporate Webinar, we welcome Bank Mandiri Persero (BMRI IJ)'s Group Head of Investor Relations, Yohan Setio, who will share some company updates and sit down for a fireside chat with Smartkarma Insight Provider Angus Mackintosh.
Indonesia's Recovery and the Next Digital Darling
This week below the fold we look at Indonesia's recent economic numbers which saw the country slide into recession, its first since the Asian Crisis but find it encouraging that the economy is moving onto a recovery track. We see selective banks and Astra International (ASII IJ) as core ways to play this recovery. 
Sea Ltd (SE US) is SoutEast Asia's largest Market Cap stock, and there are very few if any alternatives to get exposure to the region's e-commerce boom, certainly in the listed universe. One potential future candidate is Emtek (EMTK IJ), which is the major shareholder of PT Surya Citra Media Tbk (SCMA IJ) but it also has stakes in Bukalapak and Dana, the number three digital payments player in Indonesia and a JV with Ant Financial.
Emtek (EMTK IJ) has announced that it will seek approval for a stock split in December but this may not be the end of the story. Any restructuring which brings all of its digital assets under one roof and improves liquidity would certainly help the company attract more institutional investors and secure a higher valuation. 
Macro Insights
In Thai Strategy 2021 (Part 2): Top 10 Stock Picks, our Thai guru Athaporn Arayasantiparb, CFA lays out his top stock picks in Thailand for next year.
In Thai Strategy 2021 (Part 3): Sector Outlooks, our Thai guru Athaporn Arayasantiparb, CFA provides us with his sector strategy in Thailand for the coming year. 
Equity Bottom Up
In an Indonesian Insight, Astra International (ASII IJ) - An Auto-Recovery Story with a Golden Digital Twist, CrossASEAN Insight provider Angus Mackintosh returns to look at Astra International (ASII IJ) after a conversation with management. 
In PT Surya Citra Media Tbk (SCMA IJ) - Let the Games Begin, CrossASEAN Insight Provider Angus Mackintosh revisits one of Indonesia's leading media companies, which has an increasingly digital twist.
In AEM Holdings: Optimistic on FY21; Fair Value Remains at 5 SGD (41% Upside), CrossASEAN Insight Provider Nicolas Van Broekhoven revisits AEM Holdings (AEM SP) after an impressive set of results and remains positive.
In BJBR: Positive Fundamental Momentum at a Decent Valuation,Thomas J. Monaco writes on this smaller Indonesian lender with a positive slant.
In Oversea Chinese Banking Corp – Still Not A Great Eastern,Thomas J. Monaco looked in detail at Great Eastern Holdings (GE SP) numbers ahead of Oversea Chinese Banking Corp. (OCBC SP) results. 
In Oversea Chinese Banking Corp. – Solid,Thomas J. Monaco revisits this Singapore lender with a positive view post its recent 3Q2020 numbers. 
In DBS Group Holdings – Not Trending The Right Way Yet, Thomas J. Monaco reports back DBS Group Holdings (DBS SP)'s post its recent 3Q2020 results with a chequered view.



In this Thai Insight, HMPRO: Expect Government Stimulus Scheme Drive 4Q20 Recover QoQ, our friends at Country Group circle back to Thailand's leading home improvements player Home Product Center (HMPRO TB). 



In SYNEX: Solid Earnings Growth Outlook but Largely Priced In, Country Group provides a view on Synnex Thailand (SYNEX TB), following the recent run-up in the share price. 
In this Thai Insight, SCC: Strong 3Q20 Thanks to Petrochemical Spread, our friends at Country Group return to look at Siam Cement (SCC TB) post 3Q2020 results. 
In MC: Prominent Denim Brand with New Growth Momentum, our friends at Country Groupinitiate on this leading Thai denim apparel player. They initiate coverage of MC Group Pcl (MC TB) with a BUY rating and a target price of Bt12.0, derived from 18.5x FY21E PER, which is +1SD above its 5-year trading average but slightly lower than its global apparel peers.
Credit Insights
In Lippo Karawaci - Earnings Flash - Q3 FY 2020 Results, credit specialist Trung Nguyen looks at Lippo Karawaci (LPKR IJ)'s after its recent results, which continued to be robust in Q32020. 
In Chandra Asri - Earnings Flash - 9M FY 2020 Results credit specialist Leonard Law, CFA circles back to this leading chemicals player post 3Q2020 results.

The Week that Was in ASEAN@Smartkarma - Indonesia's Recovery and the Next Digital Darling

Singapore

Oversea-Chinese Banking Corporation Limited offers a comprehensive range of financial services.  The Company's services include deposit-taking, corporate, enterprise and personal lending, international trade financing, investment banking, private banking, treasury, stockbroking, insurance, credit cards, cash management, asset management and other financial and related services.

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OCBC (OCBC SP)

DBS Group Holdings – Dumb India Deal

DBS GROUP HOLDINGS: Transaction For Lakshmi Vilas Bank In India At INR 25 BN Is Way Too Pricey For Risk DBS Is Taking On. Price Will Ultimately Be...

Thomas J. Monaco

Bank Credit Weekly: Vaccine Rally, Then Consolidation, Drives Outperformance & Turkey Vs Thai Banks

Positive vaccine news and the US election result lowers the likelihood of excessive US stimulus. This should cap pressure on Treasury yields and...

Hank Calenti, CFA

HSBC’s AT1 Curve: Where Is the Cross-Currency Value?

Potential returns from investing along HSBC’s Additional Tier 1 curve vary considerably between its Euro, Sterling, Singapore- and US- dollar...

Hank Calenti, CFA

DBS, OCBC & UOB Average 16% Gains in Early Nov

Recent rotation from Momentum to Value stocks has seen DBS, OCBC and UOB recipient of S$670 million in combined net institutional inflow in the...

Singapore Exchange Ltd (SGX)

The Week that Was in ASEAN@Smartkarma - Indonesia's Recovery and the Next Digital Darling

The week that was in ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive, and actionable insights from across SE...

Angus Mackintosh

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