Singapore Banks - Maybank Kim Eng 2019-11-29: Some Softening

Singapore Banks - Maybank Kim Eng Research | SGinvestors.io OVERSEA-CHINESE BANKING CORP (SGX:O39) DBS GROUP HOLDINGS LTD (SGX:D05) UNITED OVERSEAS BANK LTD (SGX:U11)

Singapore Banks - Some Softening


October’s loan growth slowed, but not much

  • October loans expanded 4.4% y-o-y, according to MAS data. momentum softened after peaking at 5.1% in August, though we think the pace remained respectable against a backdrop of slowing macro readings.
  • Interestingly, domestic loans increased 2.6% y-o-y – their fastest pace since Feb 2019. This suggests a pick-up in economic activity. Overseas loans also remained resilient, up 6.2%, driven by consumer lending. We attribute the latter partly to private-banking activities.
  • Overall positive momentum should provide some compensation for weaker margins from falling interest rates. UOB (SGX:U11) is our top pick.



Domestic business loans picking up

  • Domestic business loans grew by their strongest 5.2% y-o-y since Feb 2019. This was led by general commerce (+3.2% y-o-y), which before that had contracted markedly since a year ago. This may signal a pick-up in SME activity, in our view.
  • Contrastingly, domestic consumer loans remained moribund, falling 1.2% y-o-y. This has been the case for six months. Weak mortgages, down 1.4%, remained the culprit.


Slower foreign lending, but China-ASEAN capacity relocation intact

  • ACU lending lost some pace, increasing 6.2% y-o-y vs 7.3% in September. Nevertheless, loans for manufacturing (+11%), construction (+9%) and business services (+33%) grew. To us, this signifies continued capacity relocation from China to ASEAN. It should drive ACU-loan demand in the medium term, given the slow burn of large capital-intensive projects.
  • Notably, overseas mortgages expanded 6.2% y-o-y – their best clip since Feb 2018. This was likely spearheaded by private banking as clients diversified their property holdings from markets such as the US, Europe and Australia.


4Q19 momentum intact






Thilan Wickramasinghe Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-11-29
SGX Stock Analyst Report HOLD MAINTAIN HOLD 11.260 SAME 11.260
BUY MAINTAIN BUY 29.920 SAME 29.920
BUY MAINTAIN BUY 30.500 SAME 30.500



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