Chloe Lim Mon, Jun 13, 2022
CGS-CIMB Group Research analyst Andrea Choong has kept an “add” rating on Credit Bureau Asia (CBA) with an unchanged target price of $1.20.
On June 3, Green Link Digital Bank (GLDB) under the Greenland Financial consortium, launched its banking business, becoming one of the first digital wholesale banks in Singapore.
ANEXT Bank by Ant Group followed shortly after by soft launching its digital wholesale banking (DWB) business in Singapore on June 6.
GLDB will focus on integrating technological solutions to supply chain financing for small medium enterprises (SMEs), while ANEXT aims to serve local and regional micro and SMEs engaging in cross-border operations for global expansion.
Including the digital full banks (DFBs), Grab and Singtel’s GXS Bank and Sea Limited’s digital bank and Trust Bank, the number of bureau numbers in Credit Bureau Singapore (CBS) will rise to 36 once these banks are approved to commence operations by the Monetary Authority of Singapore (MAS).
As CBS’ drives the lion’s share of CBA’s revenues, additional bureau members offer scope for incremental revenue contribution based on the volume of credit enquiries from these banks and portfolio risk reviews the banks undertake, Choong observes.
“That said, we highlight that most of the incremental income will stem from DFBs given their focus on retail banking as compared to DWBs,” says the analyst. “Further, the ramp-up of operations will depend on the types of products offered such as credit cards that garner larger volumes compared to unsecured retail loans or mortgages, and value proposition with rates or user experience.”
Choong’s scenario analysis for incremental revenue to CBA from DFBs for new credit enquiries assumes that the DFBs augment the number of credit and charge card holders in the industry by approximately 2%-10% by lending to the unbanked and underserved segments. “This could raise CBA’s revenue by approximately 3%-6% by end-FY2026 ending December 2026,” writes Choong.
Credit enquiries for other retail products and data packets to DWBs priced at higher rates could also lead to further revenue streams for CBA, says the analyst.
“We expect earnings visibility for CBA to emerge only in the medium term once the banks firm up their growth strategies,” writes Choong.
Overall, Choong sees growth prospects abound for CBA, in light of licencing processes to collect and use commercial credit information from FIs and regulation of buy-now-pay-later providers by MAS, though she notes that these initiatives will likely take time to materialise.
As at 10.55am, shares in CBA are trading flat at $1.01 at a FY2022 P/B ratio of 4.85x and dividend yield of 3.38%.