Like its local peers, DBS’ Q2 net profit of $552 mln beat analysts’ expectations: Bloomberg survey showed median estimate of $425 mln for DBS. Sequential profit growth, which we believe is far more important than y-o-y comparison in today’s context (coming out of the crisis), is 21.1% for DBS, the strongest of the 3.

DBS’ 2% drop in loans & advances seems disappointing, but that’s because of currency translation effects, eg lending in Hong Kong rose 2% in HK$ terms. (Neither OCBC nor UOB gave this reason for their respective decline, so we assume there was bona fide drop in lending.)

Provisions (and Non-Performing Loans), which we believe are lagging indicators much as unemployment rate, “surged” to $466 mln, with the largest being specific provisions for loans booked in Singapore.

As we had commented previously, we would not rule out the troubled Jurong Tech being one of the main reasons for the sharp increase. (DBS has understandably withheld more details on this.) Provisions had also risen sharply at UOB. (Standard & Chartered Bank and HSBC recently said they expected provisions / NPLs to continue to rise in the near term.)

DBS’ results presentation slides once again demonstrate why western banks are eager to do business in our part of the world. Consider these nuggets: DBS’ housing delinquencies in Singapore and HK stand at 0.14% and 0.02% in Q2; while credit card delinquency rate stands at 0.9% and 0.3% respectively.

The key question today is how are DBS, OCBC and UOB positioning themselves to take advantage of the end of the financial crisis. The CEO of StanChart earlier said the 1 bln pounds share placement was an opportunistic move so it can “support its corporate customers in Asia as they come out of the downturn”. Only DBS raised S$4 bln last December via a rights issue.

And as we commented yesterday, high Tier 1 may be a liability today. OCBC’s is the highest among the 3 local banks. (StanChart’s is 8.4x after the placement.) We maintain our preference as follows: DBS, UOB and OCBC.