UOB has strong stand-alone credit profile and benefits from the high likelihood of support from the government of Singapore, where it is one of the three major local banks.

The bank is more focused on Singapore and Southeast Asia than on Greater China; its traditional strengths are the SME and retail sectors, although its large corporate book is now over 60% of loans.

UOB has been conservatively managed with a sound risk profile, a strong focus on liquidity and a long track record of relatively good performance.

UOB has a greater focus on Southeast Asia than its Singapore bank peers, which leaves it open to more AQ risk in a downturn / high interest rate environment. However, both collateral and UOB’s SGD 2.7 bn in general provisions will be more than sufficient.

UOB’s NIM saw the largest impact from the US Fed’s rate cuts among the three Singapore banks, down 5 bp QoQ in 4Q24 to 2.00%, which was 15 bp lower than the other two. It was also the only Singapore bank to report a decline in net interest income in FY24.

The bank has benefited more from the final Basel III rules implementation than its peers – its CET 1 ratio was previously the lowest among the three but surpassed the two peers by 4Q24.

The bank has historically generated higher returns than peers, but it geared its focus significantly towards the retail segment through acquiring Citi’s Philippine retail portfolio in 2022 and organic growth, which brought retail loans to more than half the total book.

Returns have suffered despite the good boost to core revenues, as asset quality deterioration from the riskier growth direction resulted in high credit costs which we have forewarned. Continued rounds of capital infusions from shareholders have thus been required. The reserve cover is maintained relatively thin.

Any rating downgrade of the Philippine sovereign or reduction of shareholding by Aboitiz Equity Ventures would negatively impact UBP.

The bank’s aggressive retail expansion has improved the NIM, but negatively impacted overall profitability because of high credit costs (particularly since 2H23) which we have forewarned. We continue to dislike its focus on riskier retail given the already large loan book exposure. It is now focusing on lower risk, shorter term loans at UnionDigital, as well as payroll and credit card loans, but the improvement in credit costs have been slow to come through.

The bank however benefits from good shareholder support; it successfully completed a third stock rights offering of PHP 10 bn in 2Q24 (2023: PHP 12 bn; 2022: PHP 40 bn) to shore up capital. Lower opex from 2Q24 onwards is also aiding the bottomline.

DBS Group has sound standalone fundamentals and benefits from its strong home country. Support may be stronger than peers thanks to its longstanding relationship with the government and Temasek’s ~29% stake.

DBS is a major player in Asian corporate banking, and also has strengths in mass market and private banking. It is also one of Asia’s leading digital banks. Acquisitions have been skillfully handled in the past decade or so.

DBS has performed well in recent years, with a high RoE, and its asset quality has been more resilient than that at UOB and OCBC.

Loan growth has been a recent challenge, with continued high repayments in Greater China.

Asset quality has outperformed the other two Singapore majors with very low credit costs. Management expects a slight increase in specific provisions by a few bp in FY25.

The bank encountered some operational issues recently. On 30 April 2024, the MAS removed its restriction on DBS’s non-essential activities, which had been imposed in Nov-23 following IT failures. Its retail payments system had another outage on 2 May 2024.

Non-interest income performance was very strong in FY24, establishing a high baseline for FY25.

We view Morgan Stanley’s credit profile positively, supported by high capital levels, diversification in revenues and continued progress on building out wealth/asset management both organically and through acquisition.

Morgan Stanley’s capital markets businesses have rebounded as capital markets conditions improved in 2024, and should continue to benefit from market conditions in 2025. Wealth Management also saw some slowdown in growth in 2023 but appears back on track as market conditions improved.

Ted Pick took over as CEO in 2024, and MS was able to retain other key managers under consideration for the role; we see no clear changes in strategy as a result of the handover.

Much of Morgan Stanley’s core business is tied to global macroeconomic trends and investor risk appetite. Additionally, it has significant trading risk and counterparty exposures, though such risk appears well-managed overall and is reflected in capital requirements which are governed by the annual DFAST and SCB regime. MS has typically run with capital levels at or near the highest among GSIBs given the trading losses included in the Fed’s model.

Rapid growth in the Wealth business in recent years at MS has had some publicized missteps in vetting clients; there remains a possibility of regulatory action, though we wouldn’t expect anything that alters the long-term strategy for the Wealth business.

Goldman Sachs’ performance and market share in its core legacy businesses of investment banking and sales and trading have remained very solid, working through soft periods associated with rising rates; with market conditions improving into 2025 these businesses should continue to excel.

Goldman’s results have been weighed in recent years by costs associated with exiting the unsuccessful foray into various consumer banking businesses; such costs are largely in the rearview mirror. Wealth and Asset Management are now the most likely areas of growth in the coming years, where Goldman can leverage its strengths in HNW and alternative asset management.

The early 2020’s have been a mixed bag– the foray into consumer lending was costly and ultimately was reversed, diverting capital and management attention and providing a meaningful drag on profitability. Goldman has re-focused on its core businesses, though its profile will remain less diversified than large GSIB peers.

Goldman could participate in further M&A to achieve its long-term strategic goals, most likely through add-on deals related to asset/wealth management.

Goldman could be impacted by the lack of liquidity in the secondary markets during periods of market turmoil, but for the most part, has been positively impacted by bouts of volatility which tend to spur more client trading activity. Goldman is subject to significant market and counterparty risks though these are captured in the DFAST and SCB regime.

Bank of the Philippine Islands (BPI) is the 3rd largest bank in the Philippines by assets.

We view the bank as too big to fail given its systemic importance in the country. There is also a strong probability of support from the government in addition to its main shareholder, the Ayala Corporation if needed.

BPI has a long history, and we view it as a fundamentally sound bank with strong and improved profitability, and comfortable liquidity. Capital management however has become less conservative, and while asset quality is relatively well managed, we are keeping an eye on strong growth in the non-wholesale book.

Any rating downgrade of the Philippine sovereign would have a negative impact on BPI.

BPI is focusing on unsecured retail and MSME growth, which has put pressure on asset quality and reduced capital buffers, and provision reserves have also been pared down. We see risks to asset quality from the strategy, but BPI’s large corporates-focused book (72% of total loans) provide comfort and provisioning capacity is strong.

The declining rate environment as rate cuts come through will adversely impact NIMs, but management expects to maintain a flattish FY25 NIM, supported by RRR reductions and a continued pivot towards better yielding retail/MSME.

The acquisition of Robinsons Bank was completed on 1 January 2024, and it opens BPI up to new customer segments such as teachers and motorcycle loans. The current footprint is small but we are wary of the brisk intended growth.

Security Bank has historically been a wholesale focused bank. Rapid retail book expansion pre-pandemic led to a large asset quality hit when COVID-19 struck. The bank completed working through its risk issues at end-2021 and resumed brisk growth again in the retail book since.

The bank had a less well-established deposit franchise than most peers, resulting in a heavy hit to NIMs when rates rose this cycle. This has led it to focus aggressively on growing the higher yielding retail and MSME segments, the latter via forming a new business banking segment in 2022.

Capital ratios have fallen as the bank refocused on growth; the CET1 ratio is in a low 12-13% range.

MUFG is a 20% shareholder of Security Bank.

Any rating downgrade of the Philippine sovereign would have a negative impact on Security Bank.

Margin pressure from the bank’s earlier weaker deposit franchise is easing with the declining rate environment and heavy growth focus on the higher yielding retail and MSME (business banking) segments, which continues to be the strategy going forward.

While asset quality held up in FY24, we are cautious about risks from the brisk growth in riskier segments, given the thinning reserve cover and capital buffer.

Capital ratios have fallen due to brisk RWA growth and are now behind peers. They are set to fall by a further ~1 ppt from the buying of a 25% stake in Home Credit Finance Philippines (HCPH) from MUFG, which would take the CET1 ratio to ~12%. We regard this level as low, but do not rule out capital support from MUFG if needed.

BDO Unibank (BDO) is the largest bank in the Philippines in terms of assets & market share.

Given its size and systemic importance, BDO is considered too big to fail and is strongly likely to be supported by its controlling shareholder SM Investments, as well as the Philippine government in times of stress.

BDO is widely viewed as the soundest bank in the country given its strong fundamentals, well-diversified businesses, and good management.

Growth in retail loans has been robust, but we see few asset quality risks for BDO given a comfortable NPL cover (145% at 4Q24) and build up of the CET1 ratio (FY24: 14.1%), as well as BDO’s large corporates-focused book (52% of total loans) and underwriting track record. Loan growth momentum should carry through into 2025, with a strong pipeline in capex loans as a result of the larger banks’ stronger banking relationships with the larger corporates.

Some NIM reduction is likely in FY25 despite reductions to the reserve requirement ratio (RRR), as more BSP rate cuts come through.

Any rating downgrade of the Philippine sovereign would negatively impact BDO.

Standard Chartered has been making good progress in the past few years, improving its asset quality and profitability and dealing with legacy litigation issues. Capital, funding and liquidity look solid.

However, tension between China and the West, and global economic headwinds continue to cloud the near term outlook.

Its unusual business mix – headquartered and regulated in the UK but operating primarily in Asia, Africa and the Middle East – means it is well diversified but sensitive to geopolitical developments and emerging market volatility.

Anti-government protests in Hong Kong, a slowing economy in China and a weak commercial real estate sector, and US/China trade tensions have threatened the growth and stability of some of Standard Chartered’s key markets.

A number of Standard Chartered’s markets have underperformed in the past and have therefore been seen as turnaround stories, including India, Korea, Indonesia and the UAE.

The group has had to improve its AML and sanctions controls. In April 2019, it paid a $947 mn fine to US authorities over breaches of US sanctions and a £102 mn fine to the UK FCA for AML weaknesses.