Last week I began a rundown of the iShares MSCI Singapore ETF (AMEX:EWS) highlighting three of the principle holdings of the fund to acquaint investors with one of the most important centers for growth in the coming years as well as becoming one of the most important financial centers in the world.  

Since this week the West has been rocked by the fraud perpetrated by Barclay’s (NYSE:BCS) over the fixing of the LIBOR it seemed like an opportune time to run down some of the major banks in the Singapore.  In the previous article DBS Group (DBS:SP) was profiled so there’s no reason to recycle that.  

CIMB Group (CIMB:MK):  CIMB Group is the 2nd largest bank in Malaysia and like DBS Group has a presence all  around the world (15 countries to be exact) but is but the bulk of its business is done in ASEAN countries, primarily its home, Malaysia.  CIMB is looking to become one of the world’s largest banks and t0 achieve that goal they recently bought a portion of RBS’s investment banking business to put it on firm footing versus the large U.S. banks like Goldman-Sachs (NYSE:GS).  Their aggressive growth plan is to grow their market cap from $19 billion today to $31 billion by 2015.  They were the lead on Felda Global Ventures $3.3 billion IPO recently and will oversee the IPO process for at least two more of Malaysia’s multi-billion IPOs later this year. 

Q1 2012 was excellent from an annual perspective with net profit rising 10.3% and total assets up 13.9%. Return on Equity has averaged 16.3% for the last 9 quarters.  CIMB’s Malaysia business has been and continues to be the prime source of EBIT, but their business in both Singapore and Indonesia is growing.  Indonesia’s contribution to CIMB’s bottom line in YoY increased from 28% of net profit to 32% or 10% increase in actual profit.  They are aggressively moving into retail banking in Singapore and while their piece of that market is miniscule, it now accounts for 4% of the business, up 400% since Q1 2011.

CIMB’s various subsidiaries all carry investment quality ratings and AAA ratings in their local currency.  CIMB is current trading at 13.5 times forward earnings carrying a 2.8% yield.  CIMB is a major component of the iShares MCSI Malaysia Index ETF (AMEX:EWM)  as well as being a part of the KLCI Bursa Malaysia Index which just closed on July 6th at an all-time high.

United Overseas Bank (UOB:SP):   UOB is Singapore’s smallest bank in assets but it is one of the best capitalized.  Its capital position is so strong that it was recently noted by Bloomberg as the 7th strongest bank in the world beating out the much larger DBS Group.   They are currently carrying a 17.1% Capital Adequacy Ratio with 14% of that being Tier 1 assets and 12.3% being core Tier 1 assets.  This is a theme for Singaporean banks: high loan to deposit ratios but with high quality assets underlying their balance sheets and growing profits and low non-performing loan ratios (1.4% in 2011).

While 2011 saw increased revenue growth, especially in Malaysia, Indonesia and Greater China, final profits were off slightly after a blow-out 2010.  Shareholder equity has risen at a CAGR of 7.3% since 2007 while return on equity has averaged 12.1% over that same time period.  So far in 2012, year over year growth in Q1 was very strong with EBIT rising 13.8% while operating income rose 14.4%.

As a small bank, UOB has big ambitions as well, wanting to double AUM to S$60-70 billion such that it can begin to attract a high class of clientele.  UOB is currently trading at 12.5 times futures earnings paying a 3.1% yield.

Overseas Chinese Banking Corp (OCBC:SP):  Singapore’s banks have a well-earned reputation for being in good shape.  OCBC has been named the strongest bank in the world by Bloomberg for the past two years.  Moreover, OCBC is the 2nd largest bank in Southeast Asia behind DBS Group.  Their latest earnings report saw their non-interest income jump 28% with insurance leading the way and accounting for 28% of the total profit.

As for potential worries, non-performing assets rose year over year from S$1,208 MM to S$1,437 MM but the share of their total portfolio dropped from 1.1% to 1.0%.  Knowing that Singaporean banks have net exposure to European debt that totals 64% of Singapore’s $322 billion GDP this NPL ratio is particularly impressive. 

OCBC is invested mostly in Singapore, holding 52% of its assets there.  But, like DBS and UOB they are invested all over the region and with housing and construction lending showing the least amount of growth, well below the year over year total growth of 27%.   Their commercial lending portfolio grew 73% in 2011 while agriculture and mining grew 39% though is the smallest portion of their business.  U.S. Dollar denominated loans grew 89% in 2011 comprising more than 25% of their total assets.  With the strength in the U.S. Dollar in 2012 this will have a huge positive effect on their bottom line come earnings time in the ensuing quarters as it looks like the Federal Reserve will hold off on any further direct Quantitative Easing until it is absolutely necessary.

All three of these banks along with DBS Group make up nearly 20% of the AUM of the Global X FTSE ASEAN 40 ETF (AMEX:ASEA) which is invested across Singapore (37.2%), Malaysia (29.4%), Indonesia (20.%), Thailand (11.9%) and Philippines (0.75%) with Financials making up 39.2% of the fund.  It has seen $6 million in inflows in 2012 bringing total AUM up to $28.5 million.