ASEAN KEY DESTINATIONS
Malaysian banks earning rise
But interest rate margins for Singapore banks, led by DBS, will remain weak as rates remain hostage to the US, where the Federal Reserve could announce a second round of easing after its policy setting committee meets on Nov 2-3.
"Margins to remain under pressure from low interest rates and intense competition from the large foreign banks and new entrants such as CIMB and ANZ," Standard Chartered's Natasha Midgley said in a note to clients about Singapore banks.
Banks in Singapore and Malaysia will also benefit from a rise in large stock offerings in the two countries that will generate higher fees.
Malaysian oil giant Petronas's chemicals unit is set to raise US$4.2 billion in Southeast Asia's biggest IPO this month and Global Logistic Properties, a unit of Singapore sovereign wealth fund GIC raised about US$3 billion recently.
Investors are also keen to hear from DBS, Southeast Asia's biggest lender, about its strategy to tackle low interest rates and its desire to expand outside its two core markets - Singapore and Hong Kong.
DBS has said it is open to buying assets in Indonesia, but analysts doubt it will embark on another M&A quest at a time when valuations are so high.
The top four Indonesia banks are trading at an average price-to-book ratio of 3.87 based on 2010 estimates, versus 1.3 for DBS, according to Thomson Reuters data.
The Singapore bank will be wary of overpaying for any acquisition after getting burned on an expensive Hong Kong deal almost a decade ago.
"We do not believe that an acquisition is imminent within the next few quarters," Matthew Smith, a banking analyst at Macquarie, said in a note. "Management quite rightly is focused on implementing internal improvements to the existing business before embarking on M&A."
Malaysian banks are also expected to benefit from strong loan growth in the country as well as Indonesia, where both Maybank and CIMB have significant presence.
"Numbers should be good," says ECM Libra analyst Bernard Ching. "Loan growth has been rather strong, not only from Malaysia but also Indonesia."
He said CIMB will benefit from a pickup in capital market activity.
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