Singapore Banks - Sluggish Growth But Funding Costs Stabilising

Singapore Banks - CGS-CIMB Research 2023-09-04: Sluggish Growth But Funding Costs Stabilising

SGinvestors.io

Published: 2023-09-10 09:03 PM

DBS (SGX:D05) OVERSEA-CHINESE BANKING CORP (SGX:O39) UNITED OVERSEAS BANK LTD (SGX:U11)

Loan growth across Singapore banks (DBS, OCBC, UOB) stayed weak in Jul 23, with system balances sliding 5.5% y-o-y. The decline was broad-based, cutting across both the resident (-6.1% y-o-y, mainly domestic loans) and non-resident (-4.4% y-o-y, primarily regional loans) segments as well as business (-6% y-o-y) and consumer (-4.2% y-o-y) loans.
- - Read this at SGinvestors.io -
- In the consumer segment, personal loans continued to wind down, slipping 14.5% y-o-y in Jul 23.
Mortgage growth was mixed in Jul 23 – the domestic market posted 1% y-o-y growth while regional mortgages dipped 5.5% y-o-y.
- Read this at SGinvestors.io -

System deposit growth further cooled to +3.3% y-o-y in Jul 23 (vs. ~+5% y-o-y on average in 1H23). The deposit inflows were still primarily driven by foreign currency deposits (+S$38bn or +4.2% y-o-y in Jul 23). Local currency deposit growth was smaller at +S$17bn or +2.2% y-o-y in Jul 23. Notably, ~65% of these deposits were contributed by residents outside Singapore; we estimate that the bulk of these inflows originated from Europe and East Asia.
With the slower pace of Fed rate hikes in 1H23, fixed deposit (FD) growth eased to +45% y-o-y in Jul 23 (vs. +66% y-o-y on average in 1H23). In tandem, CASA continued to shrink at a steady -20% y-o-y in Jul 23.
Nonetheless, the proportion of system CASA to FDs was stable at 51:49 in Jul 23 for the 4th consecutive month (Dec 22: 55:45, Jul 22: 65:35).
System liquidity remained ample, with all-currency loan-to-deposit ratio (LDR) of 72% in Jul 23. Of this, S$ LDR stood at 70% in Jul 23 (Dec 22: 74%) while foreign currencies LDR stood at 73% (Dec 22: 77%).