Singapore Banks - DBS Research 2020-02-28: Expect Slower Loan Growth In 1H20

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

Singapore Banks - Expect Slower Loan Growth In 1H20

  • Jan’20 saw healthy loan growth after a slow 2H19; expect slower loan growth in 1H20 due to COVID-19.
  • Mortgage book held firm in Jan’20.
  • Loan-to-deposit ratio eases as deposit growth outpaces loan growth.
  • Remain Neutral on sector; dividend yields and strong capital base should provide some support.



Jan’20 saw healthy loan growth after a slow 2H19; expect slower loan growth in 1H20 due to COVID-19 situation.

  • Singapore system loans grew 4.2% y-o-y in 2019. In Jan’20, loans grew 1.5% m-o-m/6.3% y-o-y after a slow 2H19, led by growth in ACU loans. We believe that increased uncertainty regionally and ex-Asia due to the current COVID-19 situation will result in slower loan growth in 1H20 going forward as investment decisions are pushed back.
  • DBS (SGX:D05) has guided for a mid-single-digit loan growth, while OCBC (SGX:O39) and UOB (SGX:U11) have guided for low and low-to-mid single-digit loan growth for FY20F respectively.
  • We see overall loan growth for Singapore banks at c.3-4% for FY20F, remaining cognisant of downside risks should COVID-19 continue to affect more countries.


Mortgage book held firm.

  • After 12 consecutive months of decline, Singapore banks’ mortgage book held firm in Jan’20 (+0.04%m-o-m/ -1.7% y-o-y), as the rate of decline since Sep’19 seemed to have slowed from the peak of 0.3% m-o-m decline seen in Apr’19.
  • We expect to see some of the new bookings seen through 2H19 (relating to popular launches) being translated into mortgage drawdowns subsequently.
  • We also continue to keep watch for the secondary refinancing market as y-o-y declines for secondary sales in 2H19 has moderated from declines of c. 45- 50% y-o-y since the cooling measures were implemented. We believe the current COVID-19 situation may weigh on an impending property market recovery in the meantime.


Loan-to-deposit (LDR) ratio continues to moderate on growing deposit base.

  • Deposit growth of 1.5% m-o-m/9.0% y-o-y continued to outpace loan growth as demand for fixed deposits remained high even as interest rates have come off the peak. LDR (DBU) continued to ease to below 100%, a level last seen in Jun’13. As of Jan’20, LDR stood at 99.6%, while S$ non-bank LDR was at 83.0%.


Remain Neutral on Singapore banks.

  • We remain Neutral on Singapore banks and are cautious of the impact of COVID-19 on the domestic economy, as well as supply chains in the region.
  • Barring any sharp deterioration in asset quality, we are of the view that share prices are likely to trade sideways; dividend yields and strong capital base should provide some support.


Company Report






Rui Wen LIM DBS Group Research | https://www.dbsvickers.com/ 2020-02-28
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000
HOLD MAINTAIN HOLD 11.500 SAME 11.500
BUY MAINTAIN BUY 27.200 SAME 27.200



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