DBS GROUP HOLDINGS LTD (SGX:D05)
OVERSEA-CHINESE BANKING CORP (SGX:O39)
UNITED OVERSEAS BANK LTD (SGX:U11)
Singapore Banks - More Lending In Feb’20
- Feb’20 saw increased lending, likely in anticipation of COVID-19 uncertainty.
- Loan-to-deposit ratio continues to ease.
- Mortgage book still holding firm m-o-m.
- Keep watch on downside risks even as Singapore banks’ share prices have corrected 22-29% YTD. See OCBC Share Price; UOB Share Price; DBS Share Price.
Feb’20 saw increased lending, likely in anticipation of COVID-19 uncertainty.
- In Feb’20, loans grew 2.0% m-o-m/ 8.2% y-o-y, led by growth in ACU loans to businesses.
- Since Dec’19, loans have grown 3.5%, led by loans to Financial Institutions, Business Services, General Commerce, Transportation, Storage and Communication. We believe that the increased lending may be in part attributed to businesses drawing down on working capital loans, amongst others, to shore up liquidity in anticipation of COVID-19 uncertainty.
- We see overall loan growth for Singapore banks at c.3-4% for FY20F, remaining cognisant of downside risks of slowing global growth.
- Principal moratoriums may continue to buffer overall loan books in the months to come as Singapore banks have been rolling out various relief measures since mid-Feb.
Loan-to-deposit (LDR) ratio continues to moderate on growing deposit base.
- Deposits grew 0.9% m-o-m/ 8.9% y-o-y, continuing to outpace DBU loan growth, as fixed deposit demand remain high. LDR (DBU) continued to ease to below 100%, a level last seen in Jun’13. As of Feb’20, LDR stood at 98.9%, while S$ non-bank LDR was at 81.8%.
- Mortgage book continues to hold firm m-o-m in Feb’20. Mortgage book saw a slight decline of 0.1% m-o-m/ 1.6%y-o-y, after seeing its first positive m-o-m growth in Jan’20.
- We believe the current COVID-19 situation may weigh on an impending property market recovery in the meantime. Big-ticket purchases are likely be deferred amidst the uncertain economic outlook, which will affect both the primary and secondary markets. Continued drawdowns of previous new bookings should provide some buffer for the mortgage book.
Keep watch on downside risks even as Singapore banks’ share prices have corrected c.22-29% since Jan’20.
- We maintain our HOLD call at current prices, given the uncertain macroeconomic outlook and recessionary pressures globally, on top of near-zero interest rate environment which will pressure net interest margins (NIM).
- We continue to keep watch on downside risks arising from higher-than-expected credit costs.
- We derive OCBC (SGX:O39) and UOB (SGX:U11)’s revised TPs of S$8.60 and S$19 respectively, at c.0.8x FY20F P/BV, 2SD below their average 10-year forward P/BV multiples. See previous report: Singapore Banks - DBS Research 2020-03-17: Pressured By Fed’s Rate Cut; HOLD OCBC UOB With Reduced Target Price.
- See
Rui Wen LIM
DBS Group Research
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https://www.dbsvickers.com/
2020-03-31
SGX Stock
Analyst Report
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SAME
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8.600
SAME
8.600
19.000
SAME
19.000
