OVERSEA-CHINESE BANKING CORP (SGX:O39)
DBS GROUP HOLDINGS LTD (SGX:D05)
UNITED OVERSEAS BANK LTD (SGX:U11)
Singapore Banks - Strongest DBU Deposit Inflows Since 2006
- System loans contracted 1.3% m-o-m in Apr 20, mainly due to general commerce and FIs. Largest decline in credit card balances on record.
- Fuelled by a flight to safety, DBU deposits jumped +4% m-o-m/+13% y-o-y (+S$28.5bn) in Apr 2020 – the strongest since May 06. Most were CASA.
- Absolute S$ (+S$22.5bn)/FCY (+S$6.0bn) DBU deposit inflows were the second-largest/largest on record since data was made available in 1991.
- Reiterate NEUTRAL. We expect similar loan and deposit growth trends to recur, but the reopening of regional economies could provide some upside.
Muted loan growth on weaker reinvestment sentiment
- Banking system loans contracted 1.3% m-o-m (+5.8% y-o-y) in Apr 2020 from muted reinvestment sentiment on both the domestic (-0.4% m-o-m/+2% y-o-y) and regional (-0.4% m-o-m/+2% y-o-y) front. The shrinkage was primarily due to lower general commerce (-4.6% m-o-m) and financial institution (FI) (-2.2% m-o-m) balances – not unexpected as working capital expansion plans take a back seat for now.
- Building and construction loan held up at +2.3% m-o-m/+9.2% y-o-y for the second month running.
Largest monthly decline in domestic credit card balances
- What was apparent in Mar-Apr 2020 statistics was the sluggishness in retail financing (- 1.8% m-o-m in Mar, -2.2% in Apr), which has typically been relatively minor compared to that of business loans. Notably, outstanding domestic credit card balances staged its largest contraction (-S$949m, -9% m-o-m) this month since data was made available in FY04. Subdued discretionary spending amid continued stay-home advisories will limit sequential growth. Housing loan balances shrank 0.1% m-o-m in Apr 20.
Record high levels of absolute S$ and FCY deposit growth
- The excess liquidity from paused reinvestments drove the significant +4% m-o-m/+13% y-o-y DBU deposit growth in Apr 2020 – strongest since May 06. Collectively, Apr 2020 recorded largest total DBU deposits (S$ and FCY: +S$28.5bn) since Nov 1998. S$- denominated deposits rose S$22.5bn while FCY deposits increased S$6bn –these levels were the second-largest and largest monthly inflows recorded since data was made available in 1991, respectively.
- Interestingly, FCY deposits came up to a sizeable S$8.3bn in 4MFY20, close to the full-year FY19 balance of +S$10bn. We believe this to be due to a flight to safety given Singapore’s regional safe haven status.
- Separately, most of Apr 20’s influx were placed as CASA deposits (+5.5% m-o-m, +15.3% y-o-y) as investors await timelier investment opportunities. FD growth was modest at +1.8% m-o-m and +9.6% y-o-y on the back of declining benchmark rates.
Liquidity from paused investments drive strong CASA growth
- 3MSIBOR/SOR dipped to an average 0.64%/0.25% in May 20 as 3MLIBOR slipped to an average 0.41% (Mar 20: 1.22%/0.84% and 1.07%). FD growth is likely to taper further as these rates transmit through the system. We recalibrate our GDP growth expectations to - 4.9% in FY20F on a stronger-than-expected rebound in biomed output (previously - 6.8%).
- Nonetheless, continued economic uncertainty should keep system loan growth dependent on credit line drawdowns to tide over liquidity constraints.
- Upside/downside risks are a swift recovery in business sentiment/ prolonged business closures.
Singapore Banks
Andrea CHOONG
CGS-CIMB Research
|
LIM Siew Khee
CGS-CIMB Research
|
https://www.cgs-cimb.com
2020-05-29
SGX Stock
Analyst Report
18.800
SAME
18.800
19.040
SAME
19.040
8.370
SAME
8.370
