Singapore Banks - DBS Research 2019-05-02: Loans Return To Growth Trajectory

Singapore Banks - DBS Group Research | SGinvestors.io DBS GROUP HOLDINGS LTD (SGX:D05) UNITED OVERSEAS BANK LTD (SGX:U11)

Singapore Banks - Loans Return To Growth Trajectory

  • Industry loan growth for March 2019 shows strongest m-o-m uptick of +1.0% in nine months.
  • New housing loan limits granted continue to be slow post property cooling measures.
  • Fixed deposits (+20.0% y-o-y) show fastest growth in > 10 years which may weigh on cost of deposits.
  • Continue to expect profit-taking in May (ex-dividend date); UNITED OVERSEAS BANK LTD (SGX:U11) remains our preferred pick.



Strong loan uptick in March.

  • Industry loan growth (DBU+ACU1) for March 2019 grew by +1.0% m-o-m/ +3.8% y-o-y, showing the strongest m-o-m uptick since June 2018, prior to the announcement of property cooling measures. The strong m-o-m growth was largely driven by business loans (+1.2% m-o-m/ +4.8% y-o-y), especially manufacturing and general commerce loans.
  • Consumer loans reversed four months of negative growth and posted +0.4% m-o-m/ +1.0% y-o-y growth. Year-to-date, loan growth was +0.8%.


New housing loan limits granted continue to be slow post property cooling measures.

  • New housing loan limits granted continue to be slow at c$7.3bn for 1Q19, the lowest level since 4Q15, as the industry’s mortgage book continue to be largely flat amid ongoing mortgage repayments and slower new bookings.
  • We expect business loans to continue driving loan growth for the year as mortgage drawdown remains slow.


Supports our thesis that 1Q19 loan drawdowns for Singapore banks are likely to be well supported.

  • As mentioned in our previous report Singapore Banks - Expecting A Better Quarter, we expect the banks’ 1Q19 loan drawdowns to continue to be well supported by developers in relation to their en-bloc transactions, as well as other deal-related pipelines.
  • We expect full-year loan growth for Singapore banks to come between 4% and 6%.


Strong growth in fixed deposits (FD) may still weigh on cost of deposits.

  • FD growth of +20.0% y-o-y/+1.5% m-o-m may continue to weigh on the banks’ cost of deposits, as lower-cost CASA is progressively shifted into FDs. We continue to see moderate NIM expansion of c.2-5bps through FY19F.


Continue to expect profit-taking in May (ex-dividend date); UOB remains our preferred pick.

  • The banks will trade ex-dividend in May. Until then, the attractive dividend yields will continue to provide valuation support, though we expect some profit-taking closer to May.





Rui Wen LIM DBS Group Research | https://www.dbsvickers.com/ 2019-05-02
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000
BUY MAINTAIN BUY 29.50 SAME 29.500



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