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Asia Pacific Financials Sector:Trim Indonesia, add to Korea banks

金融2010-07-23Sanjay JainCSFB清***
Asia Pacific Financials Sector:Trim Indonesia, add to Korea banks

DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/ researchdisclosures or call +1 (877) 291-2683. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. 21 July 2010 Asia Pacific Equity Research Financials / OVERWEIGHT Asia Pacific Financials Sector SECTOR REVIEW Trim Indonesia, add to Korea banks Figure 1: Asian banks – P/B relative less ROE relative premium/discount to NJA banks (%) 43261512117-2-5-1 1-1 7-23-30-20-1001020304050IDTWINSGHKMYPHAUTHKRCN Source: Credit Suisse estimates. ■ Trim Indonesia to mild OVERWEIGHT: Indonesian banks appear really stretched on valuations (+1.4 sd on P/B and +0.7 sd on forward P/E versus historic average). Our GEM strategist Sakthi Siva’s P/B relative minus ROE relative model shows that the Indonesian banks are trading at a 43% premium to NJA banks, the largest ever. Please note we still consider Indonesia as the best banking market in Asia given its consistent 20% plus potential growth and about 25% ROEs, this is a short-term tactical call. We would play this through selling Danamon and perhaps Bank Central Asia. ■ Put that money to work in Korea, tactically: We upgrade Korea to mild OVERWEIGHT from Neutral on the basis of valuations and other catalysts: 1) our belief that the asset quality risks are peaking in 2Q10, 2) some improvement in loan spreads and 3) rate hike of last week. On valuations, Korean banks are trading at the farthest distance from their five-year average P/B and second-farthest on P/E, and also turn out to be at second-widest discount to NJA banks on Sakthi’s P/B relative minus ROE relative model. Our preferred plays are Shinhan and Hana, both having less exposure to the troubled project finance segment. ■ Financials should outperform broader Asia; China, India OVERWEIGHT: Assuming a soft landing combined with rising rates, Asian financials should outperform the broader markets for the third consecutive year. Chinese banks remain the most attractive given their valuations and catalysts falling into place for 2H10. Indian economy is facing some headwinds from twin deficits and high inflation, but the growth and quality of private banks trumps all. Research Analysts Sanjay Jain 65 6212 3017 sanjay.jain@credit-suisse.com Anand Swaminathan 65 6212 3012 anand.swaminathan@credit-suisse.com Asia Financials Team Seok Yun (Korea) Chung Hsu (Taiwan) Teddy Oetomo (Indonesia) Danny Goh (Malaysia) Dan Fineman (Thailand) Thaniya Kevalee (Thailand) Ashish Gupta (India) 21 July 2010 Asia Pacific Financials Sector 2 Focus charts Figure 2: Asian banks – P/B 2010E (x) vs ROE 2011E (%) Figure 3: Banks YTD price performance (%) (MSCI US$) AUPKHKSGPHMYTHIDTWKRINCN0.81.31.82.32.83.33.88.0%13.0%18.0%23.0%28.0%P/B '10 EROE '11E -11-9-6-3-1-11111121831-15-10-505101520253035AUKRCNHKSGTWINPHTHMYID Figure 4: Asian banks: MSCI trailing P/B – distance from five-year average Figure 5: Korea banks – MSCI 12-month P/E (x) +1.4 s d+0.5 sd-0 .1 sd-0 .2 sd-0 .5 sd-0 .7 sd-0 .8 sd-0.9 sd -0 .9 sd-1 .0 sd+ 0 .4 sd-1.5-1.0-0.50.00.51.01.52.0IDPHMYTHINSGTWAUHKCNKR 3579111315Dec-03Dec-04D ec-0 5Dec -0 6De c-07De c-08Dec-09+1 s d-1 sd5Y average 8.7xCurrent 7.8x Figure 6: Korean banks: NPL ratio on household, SME and corporate loans 1Q05-2Q10E (%) (CS aggregate) Figure 7: Korea banks – loan spreads (%) 0.00.51.01.52.02.51Q054Q053Q062Q 071Q084Q083 Q0 92Q10EH ousehold loansSME loansC or porte loa ns 0.00.51.01.52.02.53.03.54.02Q012Q022Q032Q042Q052Q062Q072Q082Q09 2Q10ERate on new loans - cost of new depositsA vg lo a n yi el d - a vg de p osit cos t Source: Factset, Credit Suisse estimates 21 July 2010 Asia Pacific Financials Sector 3 Trim Indonesia, add to Korean banks We have liked China, Indonesia and India as the three structural growth stories in Asia for past several years and continue to do so. Korea for us has been a cyclical market and we are raising weights again after having downgraded it to Neutral on 26 November 2009. Trim Indonesia to mild OVERWEIGHT We are lightening up on Indonesian banks simply due to really stretched valuations. Compared to their own history, the banks are trading at 3.8x trailing P/B (MSCI), 1.4 standard deviation ahead of the five-year average and just shy of the 4.1x during the 2007 bull market. And the 13.1x forward P/E (MSCI) is 0.7 standard deviation ahead of the five-year average. Yes, we recog