Asian banks' earnings estimates are soaring

Better-quality asset growth and NIM expansion are amongst the factors.

Consensus earnings estimates across Asian banks (India, Thailand, and Australia) are rising because of better-quality asset growth, NIM expansion (as rates increase), stronger fees (driven by loan growth and stronger markets), and asset quality improvement, a Morgan Stanley research reveals.

Here's more from Morgan Stanley:

The earnings backdrop for Asian banks has not been this strong for years – and given improving economies, this is likely to be sustained.

P/PPoP is still attractive vs. history and PPoP growth is accelerating. We expect NIMs to be a big driver of earnings growth. As earnings improve, we expect continued rerating. These banks have the largest weight in our Asian banks portfolio and we maintain that weight.

Hong Kong banks' 2018 earnings are likely to be extremely strong (rates, loan growth, and stronger market activity). We are making one change in the portfolio. Whilst we expect strong earnings from Hang Seng Bank and Bank of China (Hong Kong) for 2018, 2H18 is likely to be better at Hang Seng Bank.

In India, we expect asset quality concerns to abate over the next 12 months. In Korea, we continue to see earnings upgrades and ROE recovery – multiples still have room to expand. Meanwhile DBS is geared to Asian recovery.