Singapore's Oversea-Chinese Banking Corp plans to raise its headcount in China to more than 1,000 by 2010 from 200 at present. The bank intends to open two new branches in the country every year before 2010, and aims to establish branches in Guangzhou and Chengdu this year, seeking business from wealthy Chinese clients.

Oversea-Chinese Banking Corp's stake in Bank of Ningbo, now a shade above 10 per cent, remains an 'integral part of its strategy in China', with no hints of being pushed down the priority list even with the launch of OCBC's own subsidiary there. Since OCBC bought into the Chinese city commercial bank in May last year, it has launched several joint initiatives including trade financing, investment banking, wealth management, cross-border financing and treasury, which OCBC said 'have begun to show encouraging results'. OCBC calls this strategic partnership with Bank of Ningbo one that is 'beneficial for both parties'. It has been supporting the Chinese bank in growing its SME (small-and-medium-sized enterprises) and consumer banking businesses through a comprehensive training and technical assistance programme. At the other end, Bank of Ningbo has been sharing with OCBC its knowledge and experience in the Chinese market, particularly in yuan products. "While most foreign banks have taken the route of expanding in China mainly through organic growth, we place equal emphasis on organic growth and our local strategic alliance," said Soon Tit Koon, chief financial officer of OCBC Bank and chairman of OCBC China, the newly incorporated entity in China. "We believe our partnership with Bank of Ningbo will boost our efforts to grow in this country." OCBC is keen to stay invested in Bank of Ningbo for the long haul, saying it does not rule out the possibility of raising its stake in the Chinese bank as there's still some way to go before hitting the minimum quota of 20 per cent.

We believe there?s potential for Singapore banks to outperform the market, with stronger-than-expected loan growth in 2H07. While ROEs may remain flat, we expect overall earnings growth of 18% y-o-y. Our top sector pick is UOB (Buy, TP $27.50) for better growth and ROE prospects. We also have a Buy rating for OCBC with target price of $10.20. The sector has been a laggard and we would recommend it as a late cycle proxy and alternative exposure to the property boom. Maintain Overweight.

Credit Suisse - BUY

TP - S$11.00