Singapore Banking Monthly - Phillip Securities 2018-02-12: SIBOR Surrendered December Gains In January

Singapore Banking Monthly - Phillip Securities 2018-02-12: SIBOR Surrendered December Gains In January Singapore Banking Stocks Recommendation DBS GROUP HOLDINGS LTD D05.SI OVERSEA-CHINESE BANKING CORP O39.SI UNITED OVERSEAS BANK LTD U11.SI

Singapore Banking Monthly - SIBOR Surrendered December Gains In January

  • Singapore December domestic loans growth was up 5.6% y-o-y. Demand was driven by real estate related business loans.
  • Hong Kong November domestic loans growth was 15.5% y-o-y.
  • SIBOR surrendered December gains in January, but channel checks reveal that SIBOR pegged mortgage rates have risen.
  • Maintain Accumulate for the Singapore Banking Sector.

Singapore December domestic loans grew 5.6% y-o-y.

  • Singapore domestic business loans grew 6.2% in December driven by real estate related business loans but offset by weak building and construction loans growth of -0.8%.
  • Consumer loans growth in December was 4.8% y-o-y, continuing the strong momentum we saw in November. 
  • Mortgage loans kept pace with c.4% y-o-y growth and car loans growth again made a new high of 7.1% y-o-y in December.

Hong Kong December domestic loans grew 15.5% y-o-y.

  • Hong Kong, Real Estate related loans such as building & construction, property development & investments, continue to lead industry growth. The outstanding value of mortgage loans continue to climb higher sequentially, increasing 0.6% m-o-m (up 7.8% y-o-y) to HK$1,206bn at the end of December. However, Hong Kong residential volume and value showed some weakness in January. 
  • According to JLL Hong Kong, January residential sales volume was down 6.3% m-o-m and value was down 3.5% m-o-m as the secondary market is expected to be more subdued in the wake of the extension of the “stamp duty rebate window” from 6 to 12 months.

SIBOR surrendered almost all the December gains in January.

  • Both 3 month and 1-month SIBOR declined in January. However, our channel checks show that the Singapore banks’ SIBOR pegged mortgage loans had increased about 20bps to 30bps by the end of January compared to the beginning of January. Therefore we do not expect new mortgage loans to be adversely affected by the fall in SIBOR. 
  • Given that inflation expectations are higher following the strong February reading of US non-farm payrolls and hourly wages, we expect SIBOR to resume its upward move in tandem with the Fed Rate hike cycle.

Offshore oil and gas operating conditions are improving and should no longer pose a major threat.

  • Semisubmersibles utilisation has bottomed out and hovered at c.40%. Jackup utilisation continues to be healthy at c.70%. Finally, day rates may have bottomed out in November as oil price hovers at c.US$60 per barrel.


  • Maintain Singapore Banking Sector at Accumulate – Loans growth continues to be robust.
  • Though SIBOR may have declined in January, the SIBOR pegged loans pricing continue to edge higher. Quality of the oil and gas assets are expected to remain healthy as utilisation and day rates have not shown further deterioration. In summary, key parameters are healthy for Singapore banks.

Stock Calls & Target Price

  • DBS Group Holdings: Buy (Maintain); Target Price SGD 29.30.
  • Oversea-Chinese Banking Corp: Buy (Maintain); Target Price SGD 13.48.
  • United Overseas Bank Limited: Accumulate (Maintain); Target Price SGD 25.22.

Jeremy Teong Phillip Securities | https://www.stocksbnb.com/ 2018-02-12
Phillip Securities SGX Stock Analyst Report BUY Maintain BUY 30.400 Same 29.300
BUY Maintain BUY 14.880 Same 13.480
ACCUMULATE Maintain ACCUMULATE 25.220 Same 25.220