瑞信-亚太地区-银行业-亚太金融策略：放松政策利率以压低利润率-2019.8.2-22页.pdf

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US 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.2 August 2019Asia PacificEquity ResearchRegional Banks Asia Pacific Financials Strategy THEMEResearch AnalystsAshish Gupta91 22 6777 3895ashish.guptacredit-Rikin Shah65 6212 3098rikin.shahcredit-Asia Financials TeamAshish Gupta(Head of APAC Financials Research,India)Charles Zhou(Regional,China Insurance)Chung Hsu(China/Taiwan)Danny Goh(Malaysia)Nicholas Teh(Singapore)Jeehoon Park(Korea)Atul Sethi(Thailand)Laurensius Teiseran(Indonesia)Danielo Picache(Philippines)Farhan Rizvi(Pakistan)Rikin Shah(Vietnam)Jarrod Martin(Australia)Makoto Kuroda(Japan)Easing policy rates to weigh on marginsFigure 1:Banks with large fixed rate book to benefit from lower rates-24-14-8-7-3-32416212424-30-20-100102030BCADBSKTBShinhanBPISBIMBTIndusIndBTNBJBRTCAPTISCONIM impact based on a 50 bp cut in the policy rate(in bp)Source:Company data,Credit Suisse estimatesEasing monetary policy in Asia.Weak exports,uncertainty from trade war,subdued inflation,and the dovish FED and ECB have led Asian central banks to ease monetary policy YTD(rate-cuts of 25-75 bp so far in IN,KR,ID,MY,PH and AU).However,real policy rates are still running ahead of long-term average across most of the Asian markets,which could drive further easing of 25-50 bp in IN,ID,PH and AU this year.Impact on banks margins.Net interest margins in Asia(unlike the US banks)display a far stronger correlation with short-term rates rather than the yield curve spread,which means decrease in policy rates,should lead to margin contraction and vice versa.Banks with higher proportion of fixed rate loans(IndusInd,BJBR,BTN,TCAP,Tisco and MBT)and investment securities(given typically long duration)in their interest earning assets should gain from lower rates.Banks with lower CASA(CEB,Yes,BTPN,Tisco,Public and MBT)and higher share of wholesale borrowings would also be the beneficiaries.Stock calls.Based on our sensitivity analysis,coupled with the likely policy rate trajectory,Indo and Sing banks are likely to be the most adversely impacted.We are OVERWEIGHT Indo banks,but prefer BTN over BCA now.In China,we remain cautious on joint stock banks due to tighter interbank market and higher shadow banking exposure.We would play policy easing in India through IndusInd bank.We prefer Tisco over KTB in Thailand and MBT over BPI in the Philippines.In Australia,Westpac and Bendigo should be the most adversely impacted from rate-cuts.2 August 2019Asia Pacific Financials Strategy2Focus charts and tablesFigure 2:After hiking policy rates in 2018,Asian central banks have started easing in 2019E(total expected rate cuts of 25 bp in KR and MY;50 bp in ID;75 bp in AU and PH;and 100 bp in IN)4.356.501.751.386.001.753.254.751.892.341.504.355.501.501.385.501.753.004.001.942.310.750.01.02.03.04.05.06.07.0CNINKRTWIDTHMYPHSGHKAUPolicy rate as of Dec-18Policy rate end-2019EIn absence of policy rates for SG and HK,we have used SIBOR and HIBOR respectively.Based on Bloomberg consensus.Source:CEIC,Credit Suisse estimatesFigure 3:Net interest margin impact based on the projected rate trajectory in 2019E(%)-12-7-5-4-2-1000-14-12-10-8-6-4-20IDSGMYINKRPHCNTHTWNIM impact based on projected rate trajectory in 2019Note:SG and HK do not have a policy rate;we have taken SIBOR and HIBOR here.Source:CEIC,Credit Suisse estimates(based on aggregate of banks under coverage)Figure 4:Most and least rate sensitive banks in each Asian countryNIMNet profitNIMNet profitChinaICBC-13-9 CEB65CCB-13-9 BCOM22IndiaSBI-3-2 Indus41Union-2-3 Yes36KoreaShinhan-7-6 KB Financial-3-2TaiwanHua Nan Bank-14-23 Mega Bank-7-7First Bank-12-14IndonesiaBBCA-24-5 BJBR2113BBRI-6-1 BBTN1611ThailandKTB-8-6 TCAP2427TMB-7-6 TISCO248MalaysiaAlliance-27-19 Public-5-3RHB-14-10 Hong Loeng-8-4PhilippinesBPI-3-2 SECB31BDO-2-1 MBT21SingaporeDBS-14-10OCBC-14-9Most rate sensitive stocksSensitivity to 50 bp rate-cutBankLeast rate sensitive stocksBankSensitivity to 50 bp rate-cutSource:Company data,Credit Suisse estimatesBeneficiaries of lower interest rates:India:IndusInd Indo:BJBR and BTNThai:TCAP and TISCOPhil:SECB and MBT2 August 2019Asia Pacific Financials Strategy3Easing monetary policy in AsiaWeak exports,uncertainty from trade war,subdued inflation,and the dovish US Federal Reserve(FED)and European Central Bank(ECB)have led Asian central banks to ease monetary policy YTD.In the past few months,central banks of China,India,Malaysia,and the Philippines have taken accommodating measures,with South Korea and Indonesia also cutting policy rates recently.Figure 5:After hiking policy rates in 2018,Asian central banks have started easing in 2019E(total expected rate cuts of 25 bp in KR and MY;50 bp in ID;75 bp in AU and PH;and 100 bp in IN)Policy rates across Asia(Current vs.end-2019E as per Bloomberg consensus)4.356.501.751.386.001.753.254.751.892.341.504.355.501.501.385.501.753.004.001.942.310.750.01.02.03.04.05.06.07.0CNINKRTWIDTHMYPHSGHKAUPolicy rate as of Dec-18Policy rate end-2019EIn absence of policy rates for SG and HK,we have used SIBOR and HIBOR respectively.Source:CEIC,Credit Suisse estimatesThe chart below shows that current policy rates are generally below ten-year average,but closer to five-year average across most of the markets.However,the exceptions to this are Indonesia,Philippines,Singapore and Hong Kong,where rates are still trending above the historical averages despite of YTD rate-cuts.Figure 6:Policy rates are below their historical averages across Asia,save for ID,PH,SG and HK 5.36.92.11.65.32.03.03.80.80.72.70.14.66.71.61.55.51.63.23.71.11.01.80.14.45.81.51.45.81.83.04.52.02.51.30.10.01.02.03.04.05.06.07.08.0CNINKRTWIDTHMYPHSGHKAUJP10Y avg5Y avgCurrentSource:CEIC,Credit Suisse2 August 2019Asia Pacific Financials Strategy4Supported by moderating money and credit growth,inflation has slowed in Asia YTD.Current consumer inflation readings are below the long-term historical average across the markets as shown in the chart below.Even in the Philippines,where inflation had inched up to 6.7%in Oct-18 prompting the BSP to hike rates by 175 bp in 2018,it has now fallen to a more reasonable level of 2.7%.Figure 7:however,consumer inflation is soft across the markets and is running below historical averageInflation(CPI)trends across Asia:10 year average,5 year average and current(%)2.66.91.81.04.81.62.23.11.73.32.10.51.84.31.20.84.20.52.12.70.22.61.70.82.73.20.60.93.31.01.52.70.63.31.60.70.01.02.03.04.05.06.07.08.0CNINKRTWIDTHMYPHSGHKAUJP10Y avg5Y avgCurrentInflation(CPI)Source:CEIC,Credit SuisseSubdued inflation has in-turn led to high real policy rates relative to historical average across many markets in Asia.This coupled with easy monetary policy in the West,would likely allow select Asian central banks to further cut policy rates to support faltering growth.This should particularly be true for India,Indonesia,Malaysia and the Philippines.Figure 8:resulting in high real policy rates in IN,KR,ID,MY,PH,SG,PK and VN relative to historical avg.Real policy rate across Asia calculated using CPI(%)2.70.00.30.60.60.40.80.7-0.9-2.60.5-0.42.21.72.82.40.40.71.31.11.11.01.0-1.60.0-0.73.03.71.72.60.90.52.40.81.51.81.4-1.0-0.6-0.64.93.8-4.0-3.0-2.0-1.00.01.02.03.04.05.06.0CNINKRTWIDTHMYPHSGHKAUJPPKVN10Y avg5Y avgCurrentReal policy rates using CPISource:CEIC,Credit Suisse2 August 2019Asia Pacific Financials Strategy5Impact on banks marginsAs far as NIMs of banks in Asia are concerned,we do not find a strong correlation with the yield curve spread(this is different from US banks).This is probably the reason for the lack of correlation in yield curve spread with bank stock prices in Asia.The western markets benefit thanks to banks with wholesale funding or with larger trading books or in markets with lower interest rates(which makes trading income look bigger compared to net interest income).On the other hand,net interest margins in Asia display a far stronger correlation with short-term rates rather than the yield curve spread,which means increase in short-term interest rates should lead to margin expansion and vice versa.This is true in developed Asia and even more pronounced in emerging Asia.For the latter,this is likely due to smaller trading books,very little reliance on wholesale funding and higher interest rates(which makes trading income look smaller compared to net interest income).Figure 9:KR:3M interbank versus bank NIMsFigure 10:ID:3M interbank versus bank NIMs1.001.502.002.503.003.504.004.505.005.506.001.601.802.002.202.402.602.803.003.203.403.602Q062Q082Q102Q122Q142Q162Q18Korea Banks NIMs3M interbank rate(RHS)3.05.07.09.011.013.015.05.606.006.406.807.207.602Q062Q082Q102Q122Q142Q162Q18Indonesia Banks NIMs3M interbank rate(RHS)Source:Company data,Credit Suisse(Aggr for CS coverage universe)Source:Company data,Credit Suisse(Aggr for CS coverage universe)The margin impact of lower policy rates will vary depending on(1)the composition of interest-earning assets(IEA)and interest-bearing liabilities,and(2)their repricing profile.Composition of IEA and IBLNot only the transmission of a change in short-term interest rates to the interest yields of interbank assets is relatively quicker,but also the extent of pass-through is almost 100%,which is relatively higher than that on the loans.Interbank pricing is market-determined,whereas pricing of loans depends on the banks discretion to some extent(for instance,banks can play around with the credit spread,competition permitting).Banks may choose not to pass the benefits of rate-cuts immediately to the borrowers,and instead maximise the margins.The third main component of interest earning assets,investment portfolio,typically consists of government(and corporate)bonds,has three to four-year duration and banks dont trade much.A part of the bond portfolio is also held to maturity.Therefore,the repricing of investment book is usually the slowest and takes place over a long period of time.On the deposit side,the low-cost current deposits and saving deposits are supposed to be repriced immediately but we show them as a separate category because normally these rates are stickier.2 August 2019Asia Pacific Financials Strategy6Figure 11:Asia banks:IEA composition(%)Figure 12:Asia banks:IBL composition(%)60637762737170817016951221482142528192725152217160102030405060708090100CNINKRTWIDTHMYPHSGLoansInterbankInvestments808675888789889086140010165846142521257290102030405060708090100CNINKRTWIDTHMYPHSGDepositsInterbankOther borrowingsSource:Credit Suisse(Aggr for CS coverage universe)based on average of 2019E-2020ESource:Credit Suisse(Aggr for CS coverage universe)based on average of 2019E-2020ERepricing profileThis refers to the time-frame within which the assets and liabilities will be repriced following a change in the interest rates.We look at the proportion of assets and liabilities which fall under different interest rate buckets as disclosed by the banks in the interest rate risk section of risk management.However,we use maturity risk profile for Indian banks in the absence of interest-rate risk profile disclosure for our sensitivity analysis.Assets and liabilities fall in different buckets such as less than three months,up to 12 months,less than five years,fixed interest rate,non-interest bearing,etc.Simply put,assets which fall under less than three month bucket will be the ones which will be repriced in three months.Ceteris paribus,in a falling interest rate environment,margins would contract if the repricing gap is positive(percentage of assets that will be repriced is greater than percentage of liabilities that will be repriced)and vice versa.Figure 13:Asia banks:IEA repricing profile(%)Figure 14:Asia banks:IBL repricing profile(%)4119253428626126521351388431011131016884310176634535145716846800102030405060708090CNINKRTWIDTHMYPHSG 3M3M x 6M6M x 12M43133556565927624422818101915283388813127111710151832101117834484707991776695020406080100120CNINKRTWIDTHMYPHSGCASA 3M3M x 6M6M x 12MSource:Credit Suisse estimates(Aggr for CS coverage universe)Source:Credit Suisse estimates(Aggr for CS coverage universe)2 August 2019Asia Pacific Financials Strategy7Banks generally borrow short-term and lend/invest long-term.Consequently,net liquidity gap and repricing gap is mostly negative on paper.However,if we assume that CASA deposits are not repriced(and remain with the bank),then repricing gap becomes positive.Figure 15:Net repricing gap of Asian banks in 3,6 and 12 months,excluding CASA deposits*1910724948332314247632164525321827353722401841280102030405060CNINKRTWIDTHMYPHSG3M6M12M*CASA or transaction deposits are repriceable immediately but for the purposes of our sensitivity analysis,we have assumed that CASA rates are unlikely to follow the changes in policy rate(which would affect time deposit rates fully).Source:Company data,Credit Suisse estimatesWe screen individual banks in each of the Asian markets on some of the key variables that would influence their margins amid falling interest rate environment.Percentage of IEA getting repriced in 12-months lower the betterIn a falling interest rate environment,banks whose interest earning assets get repriced sooner would relatively see a faster decline in asset yields.Joint stock banks(JSBs)in China;IIB and HDBK in India;smaller banks in Indonesia;TCAP and TISCO in Thailand;SECB and MBT in the Philippines screen better than their local peers as shown below.Figure 16:Interest earning assets(IEA)repriced in 12-months for individual banks36475153627678798323272932 3233353537 373849584453 53541643526674822642676975828566 6768697072374151517582830102030405060708090ABCBCOMCMBCEBCITICMSBBOCICBCCCBIIBHDBKUnionBOIICICIPNBYesAxisBOBKotakSBIKBFGSFGFubonMegaHua NanFirstBJBRBBTNBBRIBTPNBMRIBBCABDMNTCAPTISCOKBANKSCBTMBBBLKTBRHBMayCIMBPublicHLBankAllianceMBTSECBBPIBDODBSOCBCUOBIEA repriced in 0.5%long position of the total issued share capital of the subject company(105560.KS,024110.KS,HDFC.BO,138930.KS,BMRI.JK,BBTN.JK,BBCA.JK,BBRI.JK,BBNI.JK).Credit Suisse beneficially holds 0.5%short position of the total issued share capital of the subject company(086790.KS,055550.KS).As at 31-Jul-2019,Credit Suisse has a position in the debt securities of(CHLA.BO,INBF.BO,INBK.BO)Credit Suisse is acting as a financial advisor to Bharat Financial Inclusion Limited for a potential strategic transaction involving IndusInd Bank Ltd.Credit Suisse has a material conflict of interest with the subject company(CIMB.KL).An associate of Stephen Hagger is a Non-Exec director of CIMB.KL.For date and time of production,dissemination and history of reco