Lum of Daiwa has downgraded the banking sector to negative from positive, with DBS Group as an "underperform" from a "hold". The ratings for UOB and OCBC are maintained as "holds" Loan growth will look anaemic next year. Moreover, the building and construction sector may have peaked. "We cannot expect strong loan growth to be dragged by the deceleration of building and construction loans and the expected softness of housing-loan growth forecast for 2010 to 4.9% from 5.4% previously.
Harsh Modi, bank analyst of JP Morgan, acknowledges that although margins for banks are tightening, and that overall laon growth could slow, trade flows are improving and beginning to flow to flow down to the banking sector. "Trade financing and remittance-related income have also increased in the last couple of quarters as global trade has rebounded." We expect these to continue, especially as high season for merchandise transportation starts in 3Q2009. Within the sector, his preference at the moment is for DBS, followed by UOB.
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