Singapore Banks’ Book Value May Take AFS Hit - CSFB

Credit Suisse reiterates Underweight call on Singapore banks, warns available-for-sale securities (AFS) related destruction in book value likely to continue. Says shareholders’ equity hit last year by mark-to-market losses on AFS, which is key as banks are valued on their book value. Notes AFS securities are 123% of DBS’s (D05.SG) shareholders’ equity, 194% of UOB’s (U11.SG), 158% of OCBC’s (O39.SG); estimates that if corporate bonds marked down by another 10%, equities by 20% with government bonds unchanged, DBS’s book value will drop 6%, 13% lower for UOB, 8% for OCBC. Rates all 3 banks Neutral but says DBS top pick with S$9.50 target price; has S$5.00 target for OCBC, S$12.00 target for UOB. DBS +0.3% at S$7.21, OCBC +0.5% at S$4.27, UOB +1.0% at S$9.23. (KIG)