03 September 2012 Asia Pacific/Singapore Equity Research Banks

Singapore Banks Sector Research Analysts Anand Swaminathan 65 6212 3012 [email protected]

SECTOR REVIEW

QFBs in Singapore—gaining further inroads Figure 1: Revenues booked in Singapore (with number of branches on top) 80

5.0

68

55

20

9

20

22

8

4.7

5

2

7

Revenues (S$ bn) (2011)

4.5

2006-11 5Y CAGR (%)

4.0

3.3

3.5

60 50

3.5 3.1

40

3.0

2.2

2.5

30

2.0

20

1.2

1.5 1.0

0.6

0.6

0.7

0.5

10

0.2

0.1

ICICI

SBI

0.0

0 DBS

UOB

OCBC

STAN

HSBC

Citi

MAY

ANZ

BNP

Source: Company data, Credit Suisse estimates

■ Further banking liberalisation being considered. Qualifying Full Banks (QFBs) (currently eight) enjoy greater privileges than other foreign banks in terms of branch locations and service offerings in Singapore. After initiating the banking liberalisation process in 1999, the Monetary Authority of Singapore (MAS) has incrementally expanded privileges for foreign banks over the years. The MAS announced in June 2012 that it was considering a plan requiring QFBs with a significant retail presence to incorporate locally and in return allow more branch expansion privileges. The MAS is also considering issuing two new QFB licences to Chinese banks. ■ QFBs continue to grow from strength to strength. We provide detailed analysis of QFB performance over the past few years based on their statutory filings. Three key takeaways are: (1) QFBs have been consistently gaining loan/deposit and revenue market shares over the years and many are now big enough to influence competitive dynamics; (2) Profitability levels have improved significantly and are now better than local peers’; and (3) liquidity levels, although worsening at the margin, remain comfortable. ■ Implications for local banks—more competition at the margin, further profitability erosion in their Singapore business. While the Singapore banking system is already fiercely competitive, further liberalisation could mean more competition for asset and revenue market share over the medium term. Given the strong profitability and liquidity position of foreign banks here, the squeeze on NIMs and overall profitability could continue unabated in the near term. We remain UNDERWEIGHT banks in the Singapore market context, with a relative preference for UOB. DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. U.S. 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.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS

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03 September 2012

Focus table and charts Figure 2: Snapshot of Singapore operations (%)

LoanLoans

Deposits

dep.

Revenues

Operating

Cost-

expenses

inc.

Branches S$ bn CAGR S$ bn CAGR ratio S$ bn CAGR S$ bn CAGR

Pre-tax

Per branch

profit

(S$ mn)

RoA

ratio S$ bn CAGR Loans Revenue 2006

2011

DBS

80 129.2

16.5 143.2

11.4

90

4.7

6.9

1.95

5.7

41.3

2.30

4.0 1,615

59

1.1

1.0

UOB

68

92.3

12.9 105.7

10.9

84

3.3

2.9

1.33

3.8

39.9

1.84

0.6 1,357

49

1.2

0.9

OCBC

55

68.3

11.6

91.2

12.7

80

3.5

10.4

1.41

11.6

40.5

1.73

6.9 1,241

63

1.1

1.0

STAN

20

57.5

25.1

74.7

24.2

77

3.1

27.8

1.32

22.3

42.9

1.63

35.4 2,873

154

0.6

1.3

HSBC

9

25.7

17.7

43.6

10.9

59

1.2

8.3

0.60

7.1

50.7

0.50

5.8 2,855

132

1.0

0.8

Citi

20

32.2

10.3

51.9

-1.8

62

2.2

3.1

0.96

1.2

44.2

1.19

4.7 1,611

109

0.6

0.8

MAY

22

20.4

14.9

22.9

15.0

89

0.6

12.6

0.24

8.9

39.5

0.38

22.8

928

28

0.9

1.2

ANZ

8

12.2

48.4

20.6

45.6

59

0.6

52.2

0.52

60.9

91.3

0.06

21.3 1,522

71

0.8

0.2

BNP

5

12.9

8.5

4.9

-3.7

262

0.7

14.2

0.34

9.6

49.4

0.38

31.2 2,583

139

0.2

1.1

ICICI

2

6.4

15.2

2.3

6.4

276

0.2

4.1

0.02

10.4

9.5

0.14

3.4 3,185

98

2.1

1.8

SBI

7

2.4

18.8

1.0

18.7

236

0.1

34.9

0.03

30.1

29.6

0.06

13

0.8

1.5

36.9

341

Note: CAGR refers to 2006-11 five year CAGR. Please refer to Page 5 for caveats on the segmental financial information. Source: Company data, Credit Suisse estimates

Figure 3: Singapore loans and deposits (S$ bn)

Figure 4: Singapore loans and deposits five-year CAGR— 2006-11 (%)

160

Loans

143 140

Deposits

92

80

Deposits 5Y CAGR 48 46

40

106

100

Loans 5Y CAGR

50

129

120

60

91

30

2524

75

68

20

57

60

26

13 11

11

44 40

18

17

52

1213

11

10

8

10

32 2023

21 12

20

13

2

-2

21

-4

-10 UOB OCBC STAN HSBC

Citi

MAY

ANZ

6

0 6

5

0 DBS

1919

15

1515

BNP

ICICI

DBS

SBI

Figure 5: BNP—Singapore loans (S$ bn, YoY %)

UOB OCBC STAN HSBC

Citi

MAY

ANZ

BNP

ICICI

SBI

Figure 6: Revenue / pre-tax profit per branch (S$ mn) (2011)

25

Loans (S$ bn)

YoY% (RHS)

131.1

20

140

180

120

160

100

140

80 15

60 42.2

20 5.7

0 -17.5

5

0

'06

'07

'08

154

PBT / branch

'09

'10

'11

139

132

120

109

100 82

40

32.9

10

'05

Revenue / branch

80

60

-20

40

-44.1-40

20

-60

0

59

55

49

29

27

77

71

63

59

31

28 17 7

DBS

UOB

OCBC

STAN

HSBC

Citi

MAY

ANZ

BNP

Source: Company data, Credit Suisse estimates

Singapore Banks Sector

2

03 September 2012

MAS encouraging QFBs to deepen roots in Singapore Qualifying Full Banks (QFBs) have greater branching privileges than other foreign banks in Singapore. QFBs may conduct the full range of banking businesses permitted under the Banking Act, including retail deposit-taking. There are eight QFBs: (1) Australia & New Zealand Banking Group Limited; (2) BNP Paribas; (3) Citibank Singapore Limited; (4) Hongkong and Shanghai Banking Corporation Limited; (5) ICICI Bank Limited; (6) Malayan Banking Berhad; (7) Standard Chartered Bank; and (8) State Bank of India.

QFBs have greater branching and service privileges than other foreign banks in Singapore

Background on banking liberalisation in Singapore Banking liberalisation process started in 1999 in Singapore The MAS announced in May 1999 a programme to liberalise commercial banking in Singapore aimed at promoting a more open and competitive environment and to spur the development and upgrading of local banks. The programme included a package of new banking privileges and licences for foreign banks, to be granted over three years (199901). The new privileges and licences comprise:

The number of QFBs in Singapore has increased to eight (from four in 1999)

(1) QFB privileges for up to six foreign banks; (2) Increasing the number of restricted bank (RB) licences from 13 to 18; and (3) Qualifying offshore bank (QOB) privileges for approved offshore banks. Under the package, banks with QFB privileges were allowed the following: ■

Up to ten locations (branches and off-premise ATMs) of which up to five could be branches. No more than two new branches and three off-premise ATMs to be set up each year following the issue of the QFB privileges,

■

Free re-location of existing branches;

■

Sharing of ATMs among QFBs.

■

Offshore banks with QOB privileges will have their SGD lending limit raised to S$1 bn, from the previous limit of S$300 mn. QOBs will also be allowed to accept SGD funds from non-bank customers through swap transactions.

QFB privileges have expanded over the years (1999-05) 1999 ■

QFBs were allowed to establish up to 10 locations, of which five can be branches, and share an ATM network among QFBs.

QFB privileges have gradually expanded over the years

2001 ■

QFBs were allowed to establish up to 15 locations, of which up to 10 can be branches.

■

QFBs were allowed to provide debit services through an EFTPOS network from July 2002.

■

QFBs were allowed to provide supplementary retirement scheme (SRS) accounts and CPF Investment Scheme (CPFIS) accounts, and accept CPF deposits from July 2002.

2004 ■

QFBs were allowed to establish up to 25 locations (without further sub-limits on branches and offsite ATMs) from January 2005.

■

QFBs were allowed to negotiate with local banks on a commercial basis to let their credit card holders obtain cash advances through the local banks’ ATM networks.

Singapore Banks Sector

3

03 September 2012

MAS announced further changes to QFB programme in June 2012 On 28 June 2012 the MAS announced changes to its QFB programme to encourage foreign banks to deepen their roots in Singapore in a way that strengthens Singapore’s financial stability. MAS to require bigger QFBs to incorporate locally in Singapore and offer more privileges The MAS will require existing QFBs that are important to the domestic market to locally incorporate their retail operations. In determining whether a QFB will be required to locally incorporate its retail operations, the MAS will review factors such as the QFB’s market share of domestic deposits. The MAS will consult QFBs on the criteria for requiring local incorporation.

‘Deep rooted’ QFBs to be able to get up to 50 places of operation (from 25 now)

For QFBs that operate as local subsidiaries, a very small number may become significantly rooted in Singapore over time. The MAS will consider granting such QFBs an additional 25 places of business, of which up to ten may be branches. This will be part of an overall package negotiated with these QFBs’ home countries which are free trade agreement (FTA) partners with Singapore. These QFBs will be able to operate up to 50 places of business in Singapore. Criteria for local incorporation requirement still under consideration To determine if a QFB is significantly rooted, the MAS will consider a range of quantitative and qualitative attributes, including whether: ■

the majority of the Board of its local subsidiary are Singaporeans and Permanent Residents and what types of businesses are conducted by the local subsidiary;

■

Singapore is one of the QFB’s major markets contributing a substantial part of profits and assets to the bank group;

■

major business lines and key decision-makers have headquarters in Singapore; and

■

the bank serves a comprehensive spectrum of the local community in Singapore.

■

the QFB has to demonstrate its long-term commitment to Singapore’s financial stability and development.

■

the MAS will continue to consider awarding new QFBs only under FTA negotiations.

■

new QFBs granted under future FTA offers will have to first locally incorporate before they may establish up to 25 places of business

Singapore Banks Sector

A key regulatory change: New QFBs that are granted under future FTA offers will have to first locally incorporate before they may establish up to 25 places of business

4

03 September 2012

QFBs: Gaining market share, bigger players improving profitability We analyse the performance of QFBs in Singapore over the past five years to understand their growth and profitability profiles. Some caveats on the ‘Singapore’ segmental financial information in this report Singapore banks’ ‘Singapore’ segmental information: All Singapore banks’ ‘Singapore’ financials in this report are taken from their geographical segmental disclosures, which might include some regional business booked in Singapore. Given the lack of clarity in disclosure, we assume these financials mostly reflect their local business and are mostly comparable with those of their peers and the statutory filings of foreign banks. Statutory filings of foreign banks: All financials of foreign banks are from the statutory filings of their Singapore branches. We appreciate that these financials might include some regional business booked in Singapore. Given the lack of further details, we assume that the financials largely reflect their Singapore business and are mostly comparable with Singapore segmental information given by Singapore banks (which, again, is not a pure representation of their ‘Singapore only’ financial performance). Financial year-end: We normalise for December as the financial year-end for banks with different year-ends: ANZ (September), Maybank (June), SBI and ICICI (March). Significant acquisitions: CAGR calculations are normalised for M&A. For example, ANZ acquired Royal Bank of Scotland Singapore’s retail, wealth and commercial businesses in May 2010. Standard Chartered acquired American Express Bank-Singapore’s assets in July 2008. Citibank: All Citibank numbers have been calculated as an aggregate of Citibank Singapore Limited (a locally incorporated entity which has the QFB licence and is focussed mostly on retail business) and Citibank NA’s Singapore branch.

Growth: Mostly better than local banks Loans—local banks continue to cede market share All foreign banks have been gaining loan market share in Singapore except Citi and BNP which were forced to deleverage across Asian driven by capital constraints at head office. Figure 7: Loans booked in Singapore (S$ bn) 140

Figure 8: Five-year CAGR—2006-11 (%)

129

2006

2011

120

48.4

50

100

92

80

60

60

40

68 60

30

57

50

20

39

40

26 18

20

32

20

11

25.1

12.9 20 12

10 2

9

18.8

17.7

16.5 11.6

15.2

14.9 10.3

8.5

10

13 3

6

12

0

0 DBS

UOB OCBC STAN HSBC

Citi

MAY

ANZ

Source: Company data, Credit Suisse estimates

Singapore Banks Sector

BNP ICICI

SBI

DBS

UOB OCBC STAN HSBC

Citi

MAY

ANZ

BNP ICICI

SBI

Source: Company data, Credit Suisse estimates

5

03 September 2012

The bigger players, STAN and HSBC, appear the most aggressive in targeting market share gains, with STAN’s Singapore loan book size fast closing in on the local banks. Although smaller in size, ANZ has been the most aggressive in growing loans. Of the smaller players, Maybank has been growing steadily, while the youngest QFBs—ICICI and SBI—have been growing strongly (albeit still too small to make a difference).

STAN and ANZ the most aggressive on loan growth

Some signs of deleveraging evident at Citi and BNP The loan growth profiles of BNP and Citi offer an insight into the nature of forced deleveraging of western banks in Asia. BNP: After only a slight deleveraging during 2009 (a 17.5% fall in loan book), BNP saw a quick rebound in 2010 (131% YoY). But, as trouble in Europe came to the fore again in 2011, BNP saw a significant fall (-44% YoY) in its Singapore loan book in 2011. Citi: Citibank saw relatively mild deleveraging in 2008 (-22% YoY) and 2009 (-5% YoY) as the bank was restructuring its global businesses, but loan growth has rebounded significantly in 2010 (22% YoY) and 2011 (47% YoY). Figure 9: BNP—Singapore loans (S$ bn, YoY %) 25

Loans (S$ bn)

YoY% (RHS)

Figure 10: Citi—Singapore loans (S$ bn, YoY %) 140

131.1

120 20

35

Loans (S$ bn)

60

YoY% (RHS)

30

47.0

100 80

15

60 42.2

32.9

20 5.7

0 -17.5

5

0

-60

'07

'08

30 23.1

20

21.8

20

'09

15

10

7.0

0

10

-5.1 -10

-20 -44.1-40

'06

40 25

40

10

'05

50

'10

5 0

-30 '05

'11

Source: Company data, Credit Suisse estimates

-20

-22.0 '06

'07

'08

'09

'10

'11

Source: Company data, Credit Suisse estimates

Revenue growth performance mixed; STAN fast closing in on local banks Figure 11: Revenues (S$ mn) 5.0

Figure 12: Five-year CAGR 2006-11 (%)

4.7

2006

2011

60 52.2

4.5

50

4.0 3.3

3.5

3.5

40

3.1

34.9

3.0 2.5

27.8

30

2.2

2.0

1.5

20

1.2

1.0

0.6

0.6

0.5

10.4

0.7

10 0.2

0.1

BNP ICICI

SBI

6.9

14.2

12.6 8.3

2.9

4.1

3.1

0

0.0 DBS

UOB OCBC STAN HSBC

Citi

MAY

ANZ

Source: Company data, Credit Suisse estimates

Singapore Banks Sector

DBS

UOB OCBC STAN HSBC

Citi

MAY

ANZ

BNP ICICI

SBI

Source: Company data, Credit Suisse estimates

6

03 September 2012

While revenue growth performance has been mixed (in many cases, driven by volatility in treasury contributions), it has been mostly in line or better than local banks’. Interestingly, STAN’s Singapore revenues are very close to those of local banks, although partly driven by its regional corporate and trade finance USD businesses. QFBs’ profit growth outshines local banks As foreign players have focused on expending scale in Singapore, improving profitability levels have helped keep their profit growth profiles better than their local peers. Figure 13: Pre-tax profits (S$ mn) 2.5

Figure 14: Five-year CAGR—2006-11 (%)

2.3

2006

2011

40

36.9

35.4 35

2.0

1.8

1.7

31.2

30

1.6

25

1.5 1.2

22.8

21.3

20

1.0

15 10

0.5

0.5

0.4

0.4

5

0.1

0.1

6.9

5.8

4.0

0.1

4.7

3.4

0.6 0

0.0 DBS

UOB OCBC STAN HSBC

Citi

MAY

ANZ

BNP ICICI

DBS

SBI

Source: Company data, Credit Suisse estimates

UOB OCBC STAN HSBC

Citi

MAY

ANZ

BNP ICICI

SBI

Source: Company data, Credit Suisse estimates

Profitability: From strength to strength The restriction on QFBs to limit their branch presence to a maximum of 25 (versus DBS’s 80, UOB’s 68 and OCBC’s 55) is probably a blessing in disguise, helping them focus on better cost discipline and improve branch profitability. On all metrics, foreign banks have been able to squeeze more out of their smaller branch networks (STAN has 20, HSBC nine, Citi 20, Maybank 22, ANZ eight, BNP five, SBI seven, and ICICI two). Figure 15: Loans / deposits per branch (S$ bn)—2011

Figure 16: Revenue / pre-tax profit per branch (S$ mn)— 2011

6.0

Loans / branch

180

Deposits / branch

160

4.8

5.0

Revenue / branch 154

PBT / branch

3.7

4.0

2.9

3.0

2.0

1.6

1.8

1.4

120 2.9

1.7

1.6

139

132

140

109

100 2.6

2.6

1.6

1.2

82 80

60

1.5 0.91.0

1.0

2.6

1.0

40

59

55

49

29

27

59

31

28 17

20 0.0

77

71

63

7

0 DBS

UOB

OCBC

STAN

HSBC

Citi

Source: Company data, Credit Suisse estimates

Singapore Banks Sector

MAY

ANZ

BNP

DBS

UOB

OCBC

STAN

HSBC

Citi

MAY

ANZ

BNP

Source: Company data, Credit Suisse estimates

7

03 September 2012

Profitability has improved for most QFBs, with some better than local banks’ Driven by an aggressive growth in scale and better cost discipline, foreign banks’ profitability profiles have been mostly better than those of local banks’ (which are largely driven by the falling profitability of their retail businesses in a low rate environment and continuing pricing competition). Interestingly, STAN’s Singapore operations are the most profitable among peers—significantly better than for local banks. Figure 17: Cost-income ratios (%) 70

2006

Figure 18: Return on assets (%)—2011 1.4

65

2011

60

50

1.2 49

44

41

40

1.0

45

38 40

39

1.3 1.1

1.1

1.1 1.0

1.0

1.0

35

31 30

30

0.9

0.8

0.8 32

30

27

2011

1.2

41 35 36

2006

1.2

0.6

0.9 0.8

0.8 0.6

0.6

23

20

0.4

10

0.2

0

0.2

0.2

0.0 DBS

UOB

OCBC

STAN

HSBC

Citi

MAY

ANZ

BNP

Source: Company data, Credit Suisse estimates

DBS

UOB

OCBC

STAN

HSBC

Citi

MAY

ANZ

BNP

Source: Company data, Credit Suisse estimates

Liquidity: Comfortable at bigger QFBs Understanding liquidity positions of foreign banks is the key in determining competitive dynamics affecting net interest margins going forward. While not all foreign banks have gained deposit market share over the past five years, all the bigger players have comfortable liquidity positions enabling them to fund their assets from their retail deposits. The size of the local deposit base is one of the key criteria to be used by the MAS in determining the local incorporation requirement for foreign banks. While Citi already has a locally incorporated entity and STAN has already announced plans, HSBC, Maybank and ANZ might be required to incorporate locally. Figure 19: Singapore deposits (S$ bn)

Based on the size of their deposit books, HSBC, Maybank and ANZ might be required to incorporate their entities locally

Figure 20: Five-year CAGR—2006-11 (%)

160

2006

143

2011

140

50

45.6

40

120

106

100

30

91

84

75

80

11.4

57 52

50

23

26

23

20

21

11

3 UOB OCBC STAN HSBC

Citi

MAY

ANZ

Source: Company data, Credit Suisse estimates

Singapore Banks Sector

12.7

10.9 6.4

0 65

22

01

0 DBS

10.9

15.0

10

44

40

18.7

20

63 60

24.2

BNP ICICI

SBI

-1.8

-3.7

-10

DBS

UOB OCBC STAN HSBC

Citi

MAY

ANZ

BNP ICICI

SBI

Source: Company data, Credit Suisse estimates

8

03 September 2012

Note: In the above calculation in determining the DBS/UOB/OCBC deposits booked in Singapore, we include all SGD deposits and 50% of USD deposits. LDRs still comfortable, but inching higher across the board Except for notably HSBC, Citi and BNP, foreign banks have kept up their deposit growth in line with loan growth. Ironically, the loan-deposit ratios of the bigger QFBs appear lower than for local banks. This is probably driven by the proportion of non-SGD deposits at foreign banks. We can assume SGD loan-deposit ratios are better at local banks. Figure 21: Singapore loan and deposit five-year CAGR—

Figure 22: Singapore loan-deposit ratios (%)

2006-11 (%) 60

Loans 5Y CAGR

300

Deposits 5Y CAGR 48 46

50

2011

262

276 236

250

40

200

30 20

2006

2524 18

17 11

13 11

1213

11

1919

15

1515

10

8

10

150

100

6

90

84

80

89

77 59

62

UOB OCBC STAN HSBC

Citi

59

50

0 -2

-4

-10 DBS

UOB OCBC STAN HSBC

Citi

MAY

ANZ

0

BNP ICICI

SBI

Source: Company data, Credit Suisse estimates

DBS

MAY

ANZ

BNP ICICI

SBI

Source: Company data, Credit Suisse estimates

Singapore’s overall system loan-deposit ratio has been worsening incrementally Overall system loan growth (DBU+ACU i.e., SGD+non-SGD) has been outpacing deposit growth for the past three years, stretching the system loan-deposit ratio to historic highs. At the margin, this is being driven by a higher pace of non-SGD loan growth in Singapore. As is already evident with foreign banks starting to offer competitive deposit rates, deposit competition could intensify. Figure 23: Singapore banking system (DBU+ACU)—loan

Figure 24: Singapore banking system—loan-deposit ratio

and deposit growth (YoY %)

(%) 110

35 Loans YoY

Deposits YoY

30

DBU

ACU

Dec-07

Dec-08

100

25 90

20 15

80

10

70

5

60

0

50

-5 -10 Dec-06

Dec-07

Dec-08

Dec-09

Dec-10

Source: Company data, Credit Suisse estimates

Singapore Banks Sector

Dec-11

40 Dec-06

Dec-09

Dec-10

Dec-11

Source: Company data, Credit Suisse estimates

9

03 September 2012

Asset quality: Improvements across the board Not surprisingly, asset quality remains very benign across the system. But interestingly, NPL coverage levels remain low across many foreign banks, probably with general provisions mostly recognised at the headquarters. Figure 25: Singapore NPL ratios (%) 4.5

Figure 26: NPL coverage (%)

4.3

2006

2011

250

2006

4.0

202

200

3.5

157 2.6

2.4

2.5 1.8

2.0

112

0.5

0.8

0.7

0.5

0.4

UOB OCBC STAN HSBC

Citi

50 0.3 0.2

MAY

ANZ

Source: Company data, Credit Suisse estimates

Singapore Banks Sector

65

53

0.9 0.8

0.0 DBS

90

100

1.5 1.2 0.6

150

1.9

1.8

1.5 1.0

180

3.1

3.0

2.0

2011

40

50 35 21

0.1 0.0 0.0 BNP ICICI

SBI

42

30

20

0 STAN

HSBC

Citi

MAY

ANZ

BNP

ICICI

SBI

Source: Company data, Credit Suisse estimates

10

03 September 2012

Companies Mentioned (Price as of 30 Aug 12) American Express Co. (AXP, $57.17, UNDERPERFORM, TP $50.00) Australia & New Zealand Banking Group (ANZ.AX, A$24.86, NEUTRAL, TP A$25.00) BNP Paribas (BNPP.PA, Eu33.84, OUTPERFORM [V], TP Eu45.30) Citigroup, Inc. (C, $29.65, OUTPERFORM, TP $48.00) DBS Group (DBSM.SI, S$14.47, RESTRICTED) HSBC Holdings (0005.HK, HK$67.65, OUTPERFORM, TP HK$77.59) ICICI Bank (ICBK.BO, Rs917.70, NEUTRAL, TP Rs905.00) Malayan Banking (MBBM.KL, RM9.15, UNDERPERFORM, TP RM8.70) Oversea-Chinese Banking Corp. (OCBC.SI, S$9.17, UNDERPERFORM, TP S$9.00) Royal Bank of Scotland (RBS.L, 223 p, UNDERPERFORM [V], TP 180.00 p) Standard Chartered Plc. (2888.HK, HK$172.40, NEUTRAL, TP HK$185.70) State Bank Of India (SBI.BO, Rs1,840.25, NEUTRAL, TP Rs1,776.00) United Overseas Bank (UOBH.SI, S$19.18, NEUTRAL, TP S$20.00)

Disclosure Appendix Important Global Disclosures I, Anand Swaminathan, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. See the Companies Mentioned section for full company names. 3-Year Price, Target Price and Rating Change History Chart for DBSM.SI DBSM.SI Date 09-Sep-09 09-Nov-09 26-Apr-10 08-Nov-10 14-Feb-11 20-Jul-11 15-Aug-11 10-Oct-11 07-Nov-11 24-Feb-12 02-Apr-12

Closing Price (S$) 12.9 13.72 15.54 14.12 14.98 14.05 11.75 12.66 14.16 14.18

Target Price Initiation/ (S$) Rating Assumption 15 17 O 17.7 16 N 16.8 X 16.5 12.5 14.2 14.9 R

19 18

17

18 17

17

16

17

16

15 15

15

14

14

N

O

13

R

13

12 11 20-Jul-11

S$ 10

Closing Price

Target Price

Initiation/Assumption

Rating

O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered

3-Year Price, Target Price and Rating Change History Chart for OCBC.SI OCBC.SI Date 09-Sep-09 09-Nov-09 10-Nov-09 24-Nov-09 26-Apr-10 03-Aug-10 02-Nov-10 20-Jul-11 15-Aug-11 10-Oct-11 04-Nov-11 24-Feb-12

Closing Price (S$) 7.85 7.9 7.97 8.5 8.81 9.05 9.3 9.21 8.06 8.53 8.99

Target Price Initiation/ (S$) Rating Assumption 9 9.5 R N 10.25 O 10.8 11.6 X 11 8.4 U 8.9 9

13 12 12 11

11

11 10

10 10 99 N 8

9

9

O 8

R

U

20-Jul-11

S$ 7

Closing Price

Target Price

Initiation/Assumption

Rating

O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered

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3-Year Price, Target Price and Rating Change History Chart for UOBH.SI UOBH.SI Date 09-Sep-09 09-Nov-09 01-Mar-10 09-Nov-10 24-May-11 20-Jul-11 15-Aug-11 10-Oct-11 04-Nov-11 24-Feb-12

Closing Price (S$) 17.1 18 18.38 18.56 19.12 18.87 16.89 16.43 18.11

Target Price Initiation/ (S$) Rating Assumption 21.5 23 N 22.5 25 O X 24 19.3 N 17.7 U 20 N

26 25 24

24 23

23

22 22 20

O

N

18

20

19

N

18

N 16

U

20-Jul-11

S$ 14

Closing Price

Target Price

Initiation/Assumption

Rating

O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered

The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. Analysts’ stock ratings are defined as follows: Outperform (O): The stock’s total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stock’s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock’s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stock’s total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward. Analysts’ coverage universe weightings are distinct from analysts’ stock ratings and are based on the expected performance of an analyst’s coverage universe* versus the relevant broad market benchmark**: Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. *An analyst’s coverage universe consists of all companies covered by the analyst within the relevant sector. **The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months. Credit Suisse’s distribution of stock ratings (and banking clients) is: Global Ratings Distribution Outperform/Buy* 45% (52% banking clients) Neutral/Hold* 42% (49% banking clients) Underperform/Sell* 11% (39% banking clients) Restricted 2%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

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Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties. See the Companies Mentioned section for full company names. Price Target: (12 months) for (OCBC.SI) Method: Our 12-month target price of S$9.00 is based on Gordon Growth Model. We use average 2012-13E ROE as a proxy for medium term sustainable ROE, cost of equity (COE) of 9.2% and terminal growth (g) of 4.5%. Risks: Apart from the general economic performance in OCBC's key markets of Singapore, Malaysia and Indonesia, the risks to our S$9.00 target price are: (1) a slowdown in loan growth or credit quality deterioration in Malaysia; (2) steepness of the yield curve, which affects profits in insurance subsidiary, Great Eastern Holdings; (3) the continuation of capital management (i.e. share buy-backs); (4) the movement of Singapore Interbank Offered Rate (SIBOR); and (5) normalisation of loan loss provisions. Price Target: (12 months) for (UOBH.SI) Method: Our 12-month target price of S$20.00 is based on Gordon Growth Model. We use average 2012-13E ROE as a proxy for medium term sustainable ROE, cost of equity (COE) of 9.5% and terminal growth (g) of 4.5%. Risks: UOB is the most geographically diversified Singapore bank, with reasonable presence in Thailand, Malaysia and Indonesia. Apart from the general economic performance and monetary policy in these markets, the risks to our target price of S$20.00 for UOB are: (1) the potential impact by market dynamics in Malaysia especially if loan growth softens or credit quality suffers; (2) Thailand operation can potentially double its profits and stop being a drag on ROEs; (3) Indonesia interest rates and economic growth are key variables; (4) potential for capital management by distributing special dividends and share buy-backs. Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the target price method and risk sections. See the Companies Mentioned section for full company names. The subject company (DBSM.SI, OCBC.SI, UOBH.SI) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (DBSM.SI, OCBC.SI, UOBH.SI) within the past 12 months. Credit Suisse provided non-investment banking services, which may include Sales and Trading services, to the subject company (DBSM.SI, OCBC.SI, UOBH.SI) within the past 12 months. Credit Suisse has managed or co-managed a public offering of securities for the subject company (DBSM.SI, OCBC.SI, UOBH.SI) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (DBSM.SI, OCBC.SI, UOBH.SI) within the past 12 months. Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (DBSM.SI, OCBC.SI, UOBH.SI) within the next 3 months. Credit Suisse has received compensation for products and services other than investment banking services from the subject company (DBSM.SI, OCBC.SI, UOBH.SI) within the past 12 months. 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