Singapore Banks - CGS-CIMB Research 2023-10-02: Loan Growth Remains Negative

• Singapore banking system loan growth remained subdued, further contracting 6% y-o-y in Aug 23. This marked the 10th consecutive month of shrinkage since Nov 22 (on a y-o-y basis). The decline was broad-based across resident (-6.7% y-o-y, mainly domestic loans) and non-resident loans (-4.9% y-o-y, primarily regional loans).
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• In consumer loans, personal loan balances decreased 14% y-o-y in Aug 23, although this was offset slightly by some growth in credit cards (+15% y-o-y) and housing loans (+0.7% y-o-y).

Expect relatively muted loan growth in the upcoming 3Q23F earnings

• With cumulative m-o-m system growth in Jul-Aug 23 of -1.9% noticeably weaker than 1H23’s -0.9% (cumulative m-o-m growth in Jan-Jun 23), we expect Singapore banks to post relatively muted loan growth in the upcoming 3Q23F earnings (for Jul-Sep 23), in line with the banks’ low-to-mid single-digit loan growth guidance for FY23F.

S$ deposit growth outpaced foreign currencies'; fixed deposit growth continues to ease

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• For the first time since Jul 22 (as the Monetary Authority of Singapore revised data disclosures in Jul 21), S$-denominated deposit growth (+S$28.9bn or +3.7% y-o-y) outpaced that of foreign currencies (FCY, +S$24.5bn or +2.6% y-o-y). That said, overall deposit growth was still fueled by fixed deposits (FDs, +37% y-o-y), at the expense of CASA (-17% y-o-y).
• Although the pace of CASA outflow has improved slightly (albeit slowly) since the -20% y-o-y recorded in Jan 23, we highlight that the pace of FD growth has slowed significantly from the +71% y-o-y posted in Jan 23. We think that this should ease funding cost pressures going forward, aiding NIM growth in 2H23F.

Ample liquidity

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Andrea CHOONG CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2023-10-02 SGinvestors.io

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