Bank Note$: The Sky Has Not Fallen

The latest round of negative posturing by bank sceptics is nothing new and comes at a time when the sector continues to perform well on the back of strong domestic GDP, rising spreads, tight cost management (always a value lever) and stable asset quality (with BDDs not unexpectedly and only gradually normalising towards the through-the-cycle 20-30bp range). Analysis of movements in the banks’ off balance sheet liabilities as a leading indicator of stress (capable of 8-9 months’ advanced warning in our view) suggests stable asset quality trends for some time to come. Analyst TS Lim provides a summary of his latest Bank Note$ report including his top picks for the sector.