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Sector: Financial Services
State Bank of India
- Sector: Financial Services
- Sub Sector: Banks
- Country: India
- Bond: SBIIN 4.875 28
- Indicative Yield-to-Maturity (YTM): 5.23%
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Fundamental View
AS OF 27 Mar 2025State Bank of India (SBI) is the largest state-owned bank in India and is in some respects the country’s flagship bank. Given the bank’s ~57% government ownership and systemic importance, government support for SBI is very strong.
The bank’s capital buffers are relatively low, but we take comfort in the strong government support.
Business Description
AS OF 27 Mar 2025- State Bank of India is the largest commercial bank in India. Its predecessor banks date back to the 19th century. In the early 20th century, they merged to form the Imperial Bank of India, which became the State Bank of India after India gained independence in 1947.
- The Government of India remains the largest shareholder with a 56.92% stake. Per the SBI Act, the government's shareholding cannot fall below 55%.
- SBI's merged with its 5 associate banks and Bharatiya Mahila Bank in 2018. The merger catapulted SBI into one of the world's 50 largest banks.
- The bank has 85% of its loans in the domestic market, and has steadily increased its international business too over the past few years with offices across all international business centres. The domestic book is split 42% retail, 34% corporates, ~14% SMEs and ~10% to the agri segment as of end-December 2024.
- It has diversified its operations with well regarded subsidiaries in the areas of fund management, credit cards, insurance, and capital markets.
Risk & Catalysts
AS OF 27 Mar 2025SBI does not have a strong buffer vs. the regulatory minimum of 8%, but its size, systemic importance and majority government shareholding confer particularly strong government support. But consequentially, any deterioration in the sovereign ratings will also affect the bank’s credit.
Increasing consolidation in the country’s financial space may narrow the gap between SBI’s market leading position vs its peers, particularly HDFC Bank.
Continued tight system liquidity has led to pressure on margins and loan growth of the Indian banks, but SBI’s less tight liquidity position than its private sector peers has allowed it to buck the industry trend and record relatively brisk loan growth that is ahead of deposit growth.
Asset quality is also trending well despite a stretched urban middle and lower-middle class consumer class, and slower than anticipated economic activity in India, as SBI’s personal unsecured loans book is ~95% to salaried employees of top tier corporates and the government.
Key Metric
AS OF 27 Mar 2025| INR mn | FY21 | FY22 | FY23 | FY24 | 9M25 |
|---|---|---|---|---|---|
| NIM | 3.04% | 3.12% | 3.37% | 3.28% | 3.12% |
| ROAA | 0.48% | 0.67% | 0.96% | 1.04% | 1.09% |
| ROAE | 8.4% | 11.9% | 16.5% | 17.3% | 17.1% |
| Equity to Assets | 5.6% | 5.6% | 5.9% | 6.1% | 6.6% |
| CET1 Ratio | 10.3% | 10.3% | 10.6% | 10.6% | 9.8% |
| Gross NPA Ratio | 4.98% | 3.97% | 2.78% | 2.24% | 2.07% |
| Provisions/Loans | 1.77% | 0.91% | 0.54% | 0.14% | 0.30% |
| PPP ROA | 1.65% | 1.58% | 1.59% | 1.60% | 1.65% |
CreditSight View Comment
AS OF 06 May 2025SBI is India’s largest bank and a well-run franchise. Government support underpins SBI’s relative positioning, while fundamentally, it has good operating metrics and business plans, a sufficient (though could be higher) CET1 ratio, and the best management among the public sector banks. SBI’s less tight LDR position than its private sector peers has allowed it to have continued higher loan growth than deposit growth in in F9M25. India’s macro backdrop remains relatively robust and SBI’s lower risk personal unsecured loans clientele is supporting asset quality well. Rate cuts will feed through to the NIM in FY26. Improved system liquidity however will provide some support for the NIM and loan growth. We like the name, but move it back to M/P as it now trades a few bp inside HDFCB.
Recommendation Reviewed: May 06, 2025
Recommendation Changed: April 25, 2025
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
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Fundamental View
AS OF 19 Mar 2025Mizuho has emerged as a significantly stronger and more capable institution than it was a decade ago.
Following the RBS North America business acquisition in 2015, which significantly improved its heft and offerings, Mizuho largely shied away from making investments in its businesses due to low capital levels and a focus on reducing expenses; that has changed over the past couple of years (Greenhill/Rakuten); separately, capital levels are now stronger than SMFG’s.
As one of the three megabanks, Mizuho’s credit standing benefits from a strong expectation of government support, if needed.
Business Description
AS OF 19 Mar 2025- Mizuho is the third largest by asset size among Japan's three megabanks. It was formed in 2000 through the merger of the former "City" banks, Fuji and Dai-Ichi Kangyo, and the Industrial Bank of Japan, a provider of long-term industrial credit financed by bond issues.
- Its main units are Mizuho Bank and Mizuho Trust & Banking (focusing on asset management and related services). The group's other main business is Mizuho Securities, a leading player in debt capital markets in Japan and the US.
- It expanded in North America in 2015 by acquiring assets and staff from RBS and has successfully captured more markets and commercial banking business in conjunction with its securities arm. It also acquired Greenhill, a boutique M&A firm, in 2023, and owns ~50% of Rakuten Securities and 15% of Rakuten Cards.
- Mizuho is less diversified than its megabank peers by product segment, although its securities arm is large.
Risk & Catalysts
AS OF 19 Mar 2025Its plans to recycle assets out of Japanese mortgages and low profitability assets into the Americas is sensible.
A series of Japan IT system failures in 2021-22 was a distraction, but has fortunately not recurred recently.
Asset quality is a key strength (but its international loan margins are also lower as a consequence) and credit costs are much lower than its peer megabanks, in part due to not owning a large Japanese personal unsecured loans business.
The buffer between its CET1 ratio (fully Basel III compliant and ex-security gains) and the 8% regulatory minimum has improved from 170 bp a year ago to 240 bp as of Dec-24.
Key Metric
AS OF 19 Mar 2025| JPY bn | FY21 | FY22 | FY23 | 3Q23 | 3Q24 |
|---|---|---|---|---|---|
| Net Interest Revenue/Ave Assets | 0.44% | 0.41% | 0.35% | 0.35% | 0.36% |
| Operating Income/Average Assets | 1.01% | 0.96% | 1.05% | 1.05% | 1.11% |
| Operating Expense/Operating Income | 62% | 63% | 62% | 59% | 60% |
| Pre-Impairment Operating Profit / Average Assets | 0.38% | 0.34% | 0.40% | 0.43% | 0.45% |
| Loan impairment (charge) or reversal/ave. loans | (0.28%) | (0.10%) | (0.12%) | (0.02%) | 0.05% |
| ROAA | 0.24% | 0.23% | 0.26% | 0.34% | 0.42% |
| ROAE | 5.8% | 6.1% | 7.0% | 9.0% | 11.0% |
| CET1 Ratio excl. unrealised securities gains in AOCI | 11.5% | 11.3% | 11.8% | n/a | n/a |
CreditSight View Comment
AS OF 04 Feb 2025Mizuho historically trailed its peers on profitability and capital (which in turn limited franchise investments), as the merger that formed it included IBJ, a large wholesale bank with thin margins. Credit costs related to Russia in 4Q21 + Japan corps in 1Q22 affected results but were better subsequently. Previous issues with its Japan IT system have not resurfaced. CET1 capital has a decent 2.5% buffer. Mizuho was the improved megabank over FY20-21 and again more recently. FY22 net income declined, but FY23 and 9M24 have seen good net income jumps, helped by better trading revenues and low credit costs. It has finally restarted investments in new product/M&A. Govt. support is assured. We see 10-15 bp of upside from current levels, and an improving credit trajectory.
Recommendation Reviewed: February 04, 2025
Recommendation Changed: January 27, 2025
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
How may we help you?
Search topics about wealth insights and investments.Sumitomo Mitsui Financial Group
- Sector: Financial Services
- Sub Sector: Banks
- Region: Japan
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Fundamental View
AS OF 18 Mar 2025After reorganising and building up capital for the full impact of Basel III, SMFG has in the past few years been acquisitive to build its next phase of growth, and now has a lower capital buffer than Mizuho.
In FY23, SMFG showed the best improvement in net interest income and fee income, but also had a number of one-offs in its results – insurance payouts for SMBCAC planes stuck in Russia offset by losses on the sale of its railcar leasing fleet in the US, as well as an impairment of its goodwill in FE Credit – that on the whole reduced net income. 9M24 results has showed improvements.
Given its size and systemic importance, SMFG is considered too big to fail, and will be supported by the Japanese government if needed.
Business Description
AS OF 18 Mar 2025- The core unit of SMFG is Sumitomo-Mitsui Banking Corp (SMBC), whose main predecessors were Sumitomo Bank and Mitsui Bank.
- SMFG does not have a large trust business as Sumitomo Trust and Chuo Mitsui Trust chose not to join SMFG, but merged with each other to form the separate Sumitomo Mitsui Trust Holdings.
- SMFG's group companies include the securities firm SMBC Nikko, SMBC Trust Bank, SMBC Card Company, SMBC Consumer Finance, Sumitomo Mitsui Finance and Leasing, SMFG India Credit Company (SMICC), Sumitomo Mitsui DS Asset Management, and SMBC Aviation Capital.
- It has been acquisitive over the years, particularly in emerging Asia and leasing assets. In 2021, the group took a 49% stake in Vietnam's FE Credit, 74.9% of Indian NBFI Fullerton Capital (now called SMICC), 4.99% of Philippines' RCBC, and 4.5% of US investment bank Jefferies. In 2022, it increased its stake in RCBC to 20%. In 2023, it acquired a 15% stake in Vietnam's VP Bank, and announced its intention to increase its stake in Jefferies from 4.5% to 15%, and in 2024 took its stake in SMICC to 100%.
Risk & Catalysts
AS OF 18 Mar 2025Similar to the other megabanks, SMFG aims to focus more on the US, and reduce low return RWAs in Europe and Asia ex-Japan.
Credit costs have seen some volatility. In FY23 bank level credit costs were good but worse at the card and personal unsecured loans units. 9M24 credit costs were up 17% YoY, mostly related to overseas banking subsidiaries. It has the lowest NPL ratio amongst the megabanks.
SMFG has taken stakes in FE Credit (49%) and VP Bank (15%) in Vietnam, Fullerton in India (100%, now renamed SMICC or SMFG India Credit Co) and RCBC in the Philippines (20%), to increase its exposure to emerging growth areas. It supported SMBC Aviation in its acquisition of Goshawk, and is increasing its 4.5% stake in Jefferies to 15%. However, FE Credit faced losses in 2022 and 2023 as a result of the Vietnam slowdown in 2022, highlighting the risks associated with EM personal unsecured lending.
Key Metric
AS OF 18 Mar 2025| JPY bn | FY21 | FY22 | FY23 | 3Q23 | 3Q24 |
|---|---|---|---|---|---|
| Net Interest Revenue/Average Assets | 0.64% | 0.68% | 0.70% | 0.68% | 0.78% |
| Operating Income/Average Assets | 1.23% | 1.26% | 1.47% | 1.38% | 1.47% |
| Operating Expense/Operating Income | 62% | 61% | 57% | 60% | 56% |
| Pre-Impairment Operating Profit / Average Assets | 0.48% | 0.51% | 0.58% | 0.61% | 0.68% |
| Impairment charge/Average Loans | (0.31%) | (0.22%) | (0.27%) | (0.18%) | (0.19%) |
| ROAA | 0.30% | 0.32% | 0.36% | 0.40% | 0.53% |
| ROAE | 5.9% | 6.5% | 7.0% | 8.0% | 10.2% |
CreditSight View Comment
AS OF 04 Feb 2025SMFG’s banking business had performed well, while its non-bank subsidiaries had underperformed over FY21-22. The group had a better 2H vs a poor 1H23, with improved trading and fee revenues, partially offset by higher credit costs at the non-bank businesses. The group became acquisitive from 2021, taking a 49% stake in a leading Vietnamese NBFI and 15% of its parent (VP Bank), 20% of RCBC of the Philippines, 74.9% of NBFI Fullerton India (now 100%), and 4.5% in US investment bank Jefferies (increasing to 15%), for the next stage of growth. Its high CET1 ratio has been whittled down by acquisitions. 9M24 results were boosted by share sales and structured investment trusts. Govt. support is assured. We see 10-15 bp of upside from current levels, and an improving credit trajectory.
Recommendation Reviewed: February 04, 2025
Recommendation Changed: January 27, 2025
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
How may we help you?
Search topics about wealth insights and investments.Mitsubishi UFJ Financial Group
- Sector: Financial Services
- Sub Sector: Banks
- Region: Japan
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Fundamental View
AS OF 18 Mar 2025MUFG is the largest of Japan’s three megabanks, and has the most diversified operations by business line and geography. It has also been the most acquisitive until recently.
Core profitability had been weak due to Japan’s ultra-low interest rates and growth; that improved post an efficiency drive and a CEO change in April 2020; the bank has the best international margin and benefits from rising domestic interest rates.
Given its size and systemic importance, MUFG is considered too big to fail, and will be supported by the Japanese government if needed.
Business Description
AS OF 18 Mar 2025- The 2 main banks of MUFG are MUFG Bank (earlier the Bank of Tokyo-Mitsubishi UFJ or BTMU) & Mitsubishi UFJ Trust & Banking. In the early stages of Japan's long banking crisis, Bank of Tokyo merged with Mitsubishi Bank, and in the late stages they absorbed UFJ (former Sanwa Bank & Tokai Bank) while Mitsubishi Trust absorbed Toyo Trust & Nippon Trust.
- The group includes consumer lenders Mitsubishi-UFJ NICOS & ACOM, and securities/IB joint ventures with Morgan Stanley. MUFG invested in Morgan Stanley in 2008 and now has a ~20% stake. In Dec-22, it completed the sale of its US retail and commercial bank, MUFG Union Bank, to US Bancorp.
- It has a majority stake in Thailand's Bank of Ayudhya (now Krungsri), 20% stakes in Vietnam's Vietinbank and Philippines' Security Bank, and 100% of Indonesia's Bank Danamon.
- In August 2019, it acquired Colonial First State from Commonwealth Bank of Australia to strengthen its global asset management business, in 2020 it invested $700 mn in SE Asia's Grab, and more recently has bought Home Credit's Philippine and Indonesian subsidiaries, Link (an Australian pension fund administrator), auto loan companies in Indonesia, Albacore Capital, StanChart's Indonesian retail operations, and an Indian NBFI.
Risk & Catalysts
AS OF 18 Mar 2025Its recent divisional performance has been strong, with the domestic businesses benefiting from higher JGB yields.
Total credit costs are running at JPY 251 bn in 9M24, of which JPY 203 bn is from overseas operations. As MUFG has budgeted for JPY 400 bn of credit costs this year, there could be some serious kitchen sinking in the coming quarter.
The group’s cost-income ratio was previously in the high 60’s a few years ago, but improved efficiency, the sale of MUFG Union Bank in the US, and better revenues has led to this ratio falling to 61% in FY23 and 58% in 9M24; the group targets a 60% cost-income ratio.
MUFG is exposed to Japanese equities through large unrealised gains, but has steadily been decreasing its shareholdings every year. It reduced the MTM impact of rising yields on its $ bond portfolio, as well as the potential impact on its JGB portfolio given the modifications to yield curve controls.
Key Metric
AS OF 18 Mar 2025| JPY bn | FY21 | FY22 | FY23 | 3Q23 | 3Q24 |
|---|---|---|---|---|---|
| Net Interest Revenue/Average Assets | 0.57% | 0.79% | 0.64% | 0.63% | 0.73% |
| Operating Income/Average Assets | 1.11% | 1.22% | 1.12% | 1.27% | 1.39% |
| Operating Expense/Operating Income | 69% | 65% | 67% | 58% | 58% |
| Pre-Impairment Operating Profit / Average Assets | 0.34% | 0.43% | 0.48% | 0.50% | 0.60% |
| Impairment charge/Average Loans | (0.30%) | (0.61%) | (0.44%) | (0.31%) | (0.28%) |
| ROAA | 0.32% | 0.30% | 0.39% | 0.45% | 0.59% |
| ROAE | 6.7% | 6.5% | 8.1% | 9.6% | 11.7% |
| CET1 Ratio excluding unrealised securities gains in AOCI | 9.5% | 9.8% | 11.8% | n/a | n/a |
CreditSight View Comment
AS OF 15 Apr 2025MUFG is the largest of the megabanks with more diversified business lines. Digitalisation and operational efficiency improvements, in addition to higher rates in Japan and the US, has led to much better results in 9M24. Lending discipline has lifted international margins, which are now well higher than the other two. Its ~20% shareholding in Morgan Stanley has been a boon. Acquisitions have become more targeted. The CET1 ratio on a post Basel 3 basis ex security gains has the highest buffer (2.7%) compared to the other megabanks, its $ liquidity is also the best amongst its peers, and government support is assured. NPLs have jumped because of certain Americas exposure. Govt. support is assured.
Recommendation Reviewed: April 15, 2025
Recommendation Changed: January 27, 2025
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
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Fundamental View
AS OF 14 Mar 2025WFC is a leading domestic bank with strong positioning across consumer and commercial lending asset classes and a top 3 deposit market share in the U.S.
The core credit risk profile remains solid; the company has actively shed non-core assets and business lines (including WFAM), both as a means of managing under the Fed’s asset cap and part of new-ish CEO Scharf’s streamline strategy.
The balance sheet is strong, but WFC continues to suffer from internal deficiencies across a range of compliance and risk mgmt. functions unearthed after the fake account scandal. Positively, WFC has been closing out consent orders over the past 6-12 months and there is increased optimism the company could be released from the asset cap sometime in 2025.
Business Description
AS OF 14 Mar 2025- Wells Fargo ranks as the U.S.'s 4th largest bank by total assets ($1.93 tn at 4Q24) and 3rd largest by total deposits ($1.37 tn).
- Wells Fargo ranks 3rd in terms of U.S. deposits with approximately $1.41 tn in deposits at YE23 and 4,248 branches across the U.S. in 2024(S&P Capital IQ). The company has leading market shares across its geographically diverse footprint, including in California (#3), South Dakota (#2), Florida (#2), Texas (#3), Minnesota (#2), and Georgia (#3).
- Wells Fargo's major business lines include U.S. retail banking, mortgage banking, consumer finance, corporate and middle market banking, and wealth management.
Risk & Catalysts
AS OF 14 Mar 2025The asset cap and associated regulatory remediation remains a millstone with an unknown timeframe, though recent reporting has the cap being lifted in 2025. There was some risk that Wells could bleed share and franchise value in an economic recovery if the company cannot fully capture the business opportunity due to the asset cap, though so far that has not been the case given freed up balance sheet capacity earlier in 2020-22 and the sharp slowdown in loan growth since.
Wells Fargo faces reputational risk tied to those misconduct and business practices scandals, though likely fading with time and remediation progress; at 4Q24, WFC high-end estimable loss above legal accruals was $2 bn, unchanged sequentially.
Wells has less fee income diversification as peers, largely due to the much smaller scale of the capital markets businesses and smaller presence in credit cards, both points of emphasis under Scharf as Wells embarked on aggressive card product refreshes and trading buildout.
Key Metric
AS OF 14 Mar 2025| $ mn | FY20 | FY21 | FY22 | FY23 | 4Q24 |
|---|---|---|---|---|---|
| ROAE (annual) | 1.8% | 11.4% | 7.3% | 10.5% | 10.8% |
| ROAA (annual) | 0.17% | 1.11% | 0.70% | 1.00% | 1.02% |
| PPNR / Avg. Assets | 0.72% | 1.26% | 0.91% | n/m | 1.44% |
| Efficiency Ratio | 81% | 70% | 78% | n/m | 66% |
| Net Interest Margin (Annual) | 2.27% | 2.05% | 2.63% | 3.05% | 2.74% |
| Net charge-offs (LTM) / Loans | 0.34% | 0.18% | 0.17% | 0.37% | 0.52% |
| Common Dividend Payout | 152% | 11% | 32% | n/m | 26% |
| CET1 Ratio | 11.6% | 11.4% | 10.6% | 11.4% | 11.1% |
| Supplementary Leverage Ratio (SLR) | 8.1% | 6.9% | 6.9% | 7.1% | 6.7% |
| Liquidity Coverage Ratio (LCR) | 133% | 118% | 122% | 125% | 125% |
CreditSight View Comment
AS OF 15 Apr 2025Our move to an Outperform view in 4Q24 was predicated on spread value among Big 6 peers. Though unlikely to move spreads, when WFC is finally released from the asset cap (rumored for 2025) it will have credible claim to the best-in-class risk management and compliance framework, which has real value for bondholders and should reduce headline/noise risk going forward. Regulatory-driven supply risk has abated with BISIII delay and softening, but could still be a headwind as WFC will look to grow capital markets post-asset cap. The strong fundamental risk profile is highlighted by 11%+ CET1, improved/improving profitability, and the right strategic moves under CEO Scharf.
Recommendation Reviewed: April 15, 2025
Recommendation Changed: October 14, 2024
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
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Fundamental View
AS OF 14 Mar 2025JPMorgan is one of the strongest and best positioned banks to navigate the current environment, with a well-diversified business model and good competitive positioning across a variety of lending and capital markets areas.
The company continues to deploy its considerable earnings power into reinvestment, specifically around technology where we are bullish on its ability to drive competitive advantages through strategic enhancements and efficiency gains.
Business Description
AS OF 14 Mar 2025- JPMorgan ranks as the largest U.S. bank by total assets ($4.0 tn at 4Q24) and deposits ($2.41 tn at 4Q24).
- JPMorgan ranks 1st in terms of U.S. deposits with approximately $2.08 tn in deposits at YE24 across 4,970 branches (S&P Capital IQ). JPMorgan's footprint includes New York (#1), Texas (#1), California (#2), Illinois (#1), Michigan (#1), Arizona (#1), Ohio (#5), and Florida (#4), among others.
- JPMorgan's major business lines include investment banking, retail banking, card services, treasury & securities services, commercial banking, and asset & wealth management.
Risk & Catalysts
AS OF 14 Mar 2025Succession planning at JPMorgan has a higher profile than many peers, with CEO Dimon (68 year-old) having held the top spot for over 15 years. Another recent round of shuffling top management yielded a little clarity, with Jennifer Piepsak taking herself out of the running and moving into the COO seat, with remaining candidates including Marianne Lake (CEO of Consumer), Troy Rohrbaugh (CEO of Commercial/Investment Bank), and Mary Erdoes (CEO of Asset/Wealth Management).
The sector remains exposed to reputational, legislative/administrative risk, and cyber threats, although the significant tech spend over the past few years should (theoretically) result in a stronger position for JPM to manage the security threats.
Although not likely a credit risk, JPMorgan may continue to be acquisitive around non-bank financial and ancillary services; but we would expect any deal to be conservatively funded and looking to further technology and fee income strategies (e.g. payments or asset management).
Key Metric
AS OF 14 Mar 2025| $ mn | FY20 | FY21 | FY22 | FY23 | 4Q24 |
|---|---|---|---|---|---|
| ROAE (annual) | 10.9% | 17.0% | 13.2% | 16.0% | 17.4% |
| ROAA (annual) | 0.9% | 1.3% | 1.0% | 1.3% | 1.4% |
| PPNR / Avg. Assets | 1.52% | 1.32% | 1.39% | n/m | 2.07% |
| Efficiency Ratio | 57% | 59% | 58% | n/m | 54% |
| Net Interest Margin (Annual) | 1.98% | 1.63% | 2.00% | 2.70% | 2.63% |
| Net charge-offs (LTM) / Loans | 0.52% | 0.26% | 0.25% | 0.48% | 0.63% |
| Common Dividend Payout | 38% | 24% | 32% | n/m | 24% |
| CET1 Ratio | 13.1% | 13.1% | 13.2% | 15.0% | 15.7% |
| Supplementary Leverage Ratio (SLR) | 6.9% | 5.4% | 5.6% | 6.1% | 6.1% |
| Liquidity Coverage Ratio (LCR) | 110% | 110% | 110% | 113% | 113% |
CreditSight View Comment
AS OF 14 Apr 2025Our Outperform view on JPM is all about defensive value: rightfully perceived as the industry bellwether, spread differentials among Big 6 peers have collapsed with investors now able to rotate into highest quality with only a nominal spread sacrifice. Defensive value has become more important given extreme policy uncertainty and we continue to like the value in JPM even after recent widening across IG and the bank peer group. Technicals may be mildly supportive, with larger JPM facing ~$25 bn in maturities/calls in FY25, below BAC with peer banks in the $21-22 bn range. Core credit strengths including capitalization may slide with the BISIII softening and delay, but from an extremely strong starting point.
Recommendation Reviewed: April 14, 2025
Recommendation Changed: December 05, 2024
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
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Fundamental View
AS OF 11 Mar 2025UOB 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.
Business Description
AS OF 11 Mar 2025- UOB was established in 1935 as a Chinese family-owned bank catering to the Hokkien (Fujian) community, Singapore's largest Chinese ethnic sub-group. The Wee family owns about 18% of the shares. A further 5.18% is held by the Lien family which previously controlled Overseas Union Bank, which UOB merged within 2001. The Wee family has significant real estate and hospitality interests in Singapore and regionally.
- UOB's main markets are Singapore and Malaysia where its presence dates back to before Singapore's independence. It expanded through acquisitions in Thailand (Bank Radanasin and Bank of Asia) and Indonesia (Bank Buana), and more recently bought over Citi's consumer franchise in Malaysia, Thailand, Indonesia and Vietnam.
- Franchise strengths are in SME and consumer lending. Building & construction accounts for 27% of loans, followed by housing at 24%, financial institutions at 12% and general commerce at 11% at 4Q24.
- Loans by geography comprise Singapore at 49% of loans, Greater China at 15%, Malaysia at 10%, Thailand at 8%, and Indonesia at 3% at 4Q24.
Risk & Catalysts
AS OF 11 Mar 2025UOB 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.
Key Metric
AS OF 11 Mar 2025| SGD mn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| PPP ROA | 1.19% | 1.23% | 1.31% | 1.52% | 1.51% |
| ROA | 0.69% | 0.92% | 0.99% | 1.19% | 1.19% |
| ROE | 7.4% | 10.2% | 11.9% | 14.2% | 13.7% |
| Equity to Assets | 9.5% | 9.3% | 8.6% | 8.8% | 9.2% |
| CET1 Ratio (fully-loaded) | 14.7% | 13.5% | 13.3% | 13.4% | 15.4% |
| NPL Ratio | 1.61% | 1.62% | 1.58% | 1.52% | 1.53% |
| Provisions / Loans | 0.57% | 0.20% | 0.20% | 0.25% | 0.27% |
| Liquidity Coverage Ratio | 135% | 133% | 147% | 158% | 148% |
| Net Stable Funding Ratio | 125% | 116% | 116% | 120% | 116% |
CreditSight View Comment
AS OF 09 May 2025UOB is conservatively run with a large family ownership and a sound balance sheet. The bank is more focused on Singapore and Southeast Asia than on Greater China. Outside Singapore, its main operations in ASEAN are in Thailand, Malaysia and Indonesia which collectively make up ~20% of its loan book. It acquired Citi’s consumer operations in Thailand, Malaysia, Indonesia and Vietnam, which has been good for the franchise. The bank has benefitted more from the final Basel III rules implementation than its peers – its CET 1 ratio was previously the lowest among the three but now the three banks have similar CET 1 ratios. UOB’s reserve cover is about 50 ppt behind the other two peers.
Recommendation Reviewed: May 09, 2025
Recommendation Changed: July 04, 2017
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Search topics about wealth insights and investments.UnionBank of the Philippines
- Sector: Financial Services
- Sub Sector: Banks
- Region: Philippines
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Fundamental View
AS OF 11 Mar 2025The 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.
Business Description
AS OF 11 Mar 2025- UnionBank of the Philippines was incorporated in 1968, and listed on the Philippine Stock Exchange in June 1992. Principal shareholders are Aboitiz Equity Ventures (49.66%), Insular Life (16%), & Social Security System (18%).
- UBP undertook mergers with International Corporate Bank in 1994 and International Exchange Bank in 2006. City Savings Bank (a thrift bank) was purchased in Jan 2013. City Savings received merger approval with PR Savings (a bank engaged in motorcycle, agri-machinery, & teachers' salary loans) in Dec 2018 from the BSP. It acquired the Citi Philippines retail franchise in 2022.
- The loan book is broadly split 40% wholesale loans and 60% retail loans (comprising 33% credit cards, 22% mortgages, 33% salary loans and 12% others including teachers loans, salary loans and motorcycle loans by the thrift bank subsidiary, City Savings Bank, and 3% UnionDigital).
Risk & Catalysts
AS OF 11 Mar 2025Any 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.
Key Metric
AS OF 11 Mar 2025| PHP mn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Net Interest Margin | 4.50% | 4.60% | 4.80% | 5.50% | 6.00% |
| Reported ROA (Cumulative) | 1.5% | 1.6% | 1.3% | 0.8% | 1.1% |
| Reported ROE (Cumulative) | 11.5% | 11.5% | 9.7% | 5.6% | 6.4% |
| PPP ROA | 2.68% | 2.59% | 2.17% | 2.31% | 3.08% |
| CET1 Ratio | 15.0% | 16.3% | 11.3% | 13.9% | 15.6% |
| Total Equity/Total Assets | 13.6% | 13.5% | 13.6% | 15.3% | 17.1% |
| Gross NPL Ratio | 5.10% | 5.00% | 4.80% | 6.27% | 6.89% |
| Net LDR | 64.3% | 63.1% | 67.4% | 73.8% | 77.3% |
| Liquidity Coverage Ratio | 207% | 272% | 148% | 163% | 250% |
| Net Stable Funding Ratio | 133% | 149% | 124% | 124% | 128% |
CreditSight View Comment
AS OF 13 Mar 2025UBP’s NIM and core revenue generation is strong thanks to its pivot towards higher yielding retail via organic growth and acquiring Citi’s local retail portfolio. However, returns have suffered as the asset quality repercussions which we have forewarned from its aggressive growth pace and riskier retail focus have come through, with elevated credit costs since 2H23. It has slowed loan growth but credit costs have not shown signs of stabilisation. The reserve cover is maintained relatively thin. Continued shareholder support with yet another stock rights offering in 2Q24 has ensured sufficient capital for now. Still, we maintain U/P as it trades tight for its size and risk, given its asset quality issues and weak fundamentals.
Recommendation Reviewed: March 13, 2025
Recommendation Changed: April 17, 2020
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International Container Terminal Services Inc
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Fundamental View
AS OF 10 Mar 2025We 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.
Business Description
AS OF 10 Mar 2025- The company is now the sixth largest bank holding company by assets in the U.S. with $1.21 tn of assets as of 4Q24, and is the fourth largest by market capitalization ($192.5 bn as of March 7th, 2025).
- Morgan Stanley maintains "significant market positions in each of its business segments," which include Institutional Securities, Wealth Management, and Investment Management.
Risk & Catalysts
AS OF 10 Mar 2025Ted 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.
Key Metric
AS OF 10 Mar 2025| $ mn | FY20 | FY21 | FY22 | FY23 | 4Q24 |
|---|---|---|---|---|---|
| ROAE (annual) | 12.4% | 14.3% | 10.8% | 9.1% | 13.2% |
| ROAA (annual) | 1.0% | 1.3% | 0.9% | 0.8% | 1.1% |
| PPNR / Avg. Assets | 1.40% | 1.64% | 1.22% | 4.41% | 1.42% |
| Efficiency Ratio | 69% | 66% | 72% | 298% | 70% |
| Net charge-offs (LTM) / Loans | 0.05% | 0.05% | 0.01% | 0.06% | 0.08% |
| Common Dividend Payout | 20.9% | 25.4% | 46.3% | 215.5% | 42.9% |
| CET1 Ratio | 17.4% | 16.1% | 15.3% | 15.2% | 15.9% |
| Supplementary Leverage Ratio (SLR) | 7.4% | 5.6% | 5.5% | 5.5% | 5.6% |
| Liquidity Coverage Ratio (LCR) | 129% | 134% | 132% | 129% | 131% |
CreditSight View Comment
AS OF 14 Apr 2025We maintain our Market perform recommendation for Morgan Stanley, with our positive view of fundamentals supported by another solid quarter in 1Q25, where Morgan Stanley’s trading results benefited from high levels of activity across all its equities trading businesses amidst shifting macro and policy narratives. We see slightly better valuation among some of the money center banks (increasingly WFC, as well as JPM) but continue to prefer MS relative to GS. Performance has rebounded in the Wealth segment from a difficult 2023.
Recommendation Reviewed: April 14, 2025
Recommendation Changed: March 14, 2016
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Woori Financial Group
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Fundamental View
AS OF 10 Mar 2025Goldman 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.
Business Description
AS OF 10 Mar 2025- Goldman Sachs is now the fifth largest bank holding company in the U.S. with approximately $1.68 tn in assets as of 4Q24 and a market capitalization of $185.0 bn as of March 7th, 2025.
- Goldman Sachs presents its activities through three business segments: Global Banking & Markets, Asset & Wealth Management, and Platform Solutions.
- Goldman's historical strengths include equity and FICC sales & trading, investment banking, institutional investment management including alternatives, and high net worth wealth management. It has been expanding its wealth management client base, and adding other stable fee income streams amid a sluggish capital market environment.
Risk & Catalysts
AS OF 10 Mar 2025The 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.
Key Metric
AS OF 10 Mar 2025| $ mn | FY20 | FY21 | FY22 | FY23 | 4Q24 |
|---|---|---|---|---|---|
| ROAE (annual) | 10.3% | 21.3% | 9.7% | 7.3% | 12.0% |
| ROAA (annual) | 0.8% | 1.5% | 0.7% | 0.5% | 0.8% |
| PPNR / Avg. Assets | 1.34% | 1.86% | 1.08% | 3.29% | 1.16% |
| Efficiency Ratio | 66% | 54% | 65% | 282% | 63% |
| Net charge-offs (LTM) / Loans | 0.70% | 0.19% | 0.30% | 0.68% | 0.61% |
| Common Dividend Payout | 19.0% | 10.6% | 28.4% | 158.9% | 26.6% |
| CET1 Ratio | 14.1% | 13.6% | 15.0% | 14.4% | 15.0% |
| Supplementary Leverage Ratio (SLR) | 6.9% | 5.5% | 5.8% | 5.5% | 5.5% |
| Liquidity Coverage Ratio (LCR) | 128% | 122% | 129% | 128% | 126% |
CreditSight View Comment
AS OF 15 Apr 2025We maintain our Market perform recommendation for Goldman Sachs; we remain quite comfortable with the name fundamentally but see better value at JPMorgan and Wells Fargo among money center banks, particularly in the context of our shift to a more defensive stance across the sector. Goldman should be back to a normal pace of issuance so technicals should not be quite as much of a tailwind going forward as they had been in 2023 and early 2024, though the fundamental picture continues to improve with improved capital markets conditions as well as reduced drag from exited businesses. Market conditions thus far have aligned well with Goldman’s strengths in trading, though market conditions will likely have to stabilize for investment banking to regain momentum.
Recommendation Reviewed: April 15, 2025
Recommendation Changed: January 12, 2022
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