Singapore Banks - DBS Research 2020-05-29: Consumer Loans Continue Decline Amidst Circuit Breaker

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 - Consumer Loans Continue Decline Amidst Circuit Breaker

  • Singapore banks are providing ongoing COVID-19 support measures.
  • Loans pulled back m-o-m in Apr’20 with declines in both consumer and business loans.
  • Loan-to-deposit ratio continues to moderate on growing deposit base.
  • Remain neutral on sector, watchful of downside risks.



Providing ongoing COVID-19 support measures.

  • Based on our understanding, 1Q20 saw some loan growth (+4.7% year-to-date since Dec’19) mostly as companies drew down on working capital loans and other loan facilities. Singapore banks are providing ongoing COVID-19 support measures, ranging from loan moratoriums for businesses, loan facilities to SMEs under government relief programme, mortgage principal and interest payment deferments, and personal loan relief, among others.


Apr’20 saw pullback in loans.

  • In Apr’20, loans pulled back 1.3% m-o-m but grew 5.8% y-o-y, as consumer loans saw a steeper decline of 1.8% m-o-m/1.9% y-o-y compared to business loans’ decline of 1.2% m-o-m/growth of 5.2% y-o-y. Since Dec’19, loans have grown 3.3%, led by broad-based growth in loans to Financial Institutions, Business Services, Manufacturing, Transportation, Storage and Communication, Building and Construction, while loans to consumers declined since peaking in Jan’20 across the board with the steepest decline in credit card loans amidst Circuit Breaker.
  • We see overall loan growth for Singapore banks at c.3-4% for FY20F. Principal moratoriums may continue to buffer overall loan books in the months to come.


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

  • Deposits grew 4.0% m-o-m/13.0% y-o-y which continued to outpace DBU loan growth as demand for fixed deposits remained high (+9.6% y-o-y), alongside a surge in demand deposits (+26.6% y-o-y). LDR (DBU) continued to ease to below 100%, a level last seen in Jun’13.
  • As of Apr’20, LDR stood at 96.8%, while S$ non-bank LDR declined to 77.7% (Mar’20: 79.8%) on ample liquidity.


Remain neutral on sector, watchful of downside risks.

  • We remain neutral on the sector as we see limited upside ahead, given the lower-for-longer interest rate environment and recessionary near-term outlook. We remain cautious and watchful of downside risks given re-escalation of US-China trade tensions and ongoing Hong Kong protests.
  • Our TPs for OCBC (SGX:O39) and UOB (SGX:U11) of S$7.90 and S$17.50 respectively are both pegged to c.0.7x FY21F P/BV, at 2008-2009 trough levels.






Rui Wen LIM DBS Group Research | https://www.dbsvickers.com/ 2020-05-29
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000
HOLD MAINTAIN HOLD 7.900 SAME 7.900
HOLD MAINTAIN HOLD 17.500 SAME 17.500



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