Singapore Banks - CGS-CIMB Research 2020-05-29: Strongest DBU Deposit Inflows Since 2006

Singapore Banks - CGS-CIMB Research | SGinvestors.io 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.






Andrea CHOONG CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2020-05-29
SGX Stock Analyst Report HOLD MAINTAIN HOLD 18.800 SAME 18.800
HOLD MAINTAIN HOLD 19.040 SAME 19.040
HOLD MAINTAIN HOLD 8.370 SAME 8.370



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