Singapore Banks - CGS-CIMB Research 2020-10-05: Extended Support For Individuals & SMEs

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

Singapore Banks - Extended Support For Individuals & SMEs

  • The MAS announced targeted credit support measures for individuals and SMEs, ahead of the expiry of loan moratoriums at end-2020.
  • Key measures include reduced (pegged at 60%) instalments for property loans and deferment of 80% of principal on SME loans until Mar/Jun 2021.
  • These measures may smoothen out NPL and credit cost cliff effects from the expiry of moratoriums but sluggish economic recovery may hinder re-rating.
  • Reiterate NEUTRAL. Deferments are unlikely to affect earnings estimates materially given that interest will accrue on deferred principal amounts.



Reduction of property instalments to 60% of monthly repayments

  • Residential, commercial and industrial property loan borrowers may apply for reduced instalment repayment plans pegged at 60% of their monthly instalments. The repayment will incorporate interest and partial principal payments.
  • Reduced instalments will be granted for a period of up to 9 months but not beyond 31 Dec 2021. Loan tenures may be extended by up to a cumulative 3 years (to be discussed with banks on case-by-case basis).
  • Only eligible for borrowers with repayments not more than 90 days past due, and is on an opt-in basis with borrowers showing at least 25% loss of income/employment.


Partial deferment of principal on secured SME loans to Mar/Jun 21

  • Secured SME loans (including loans under Enterprise Singapore) may apply for deferment of 80% of principal repayments. The tenure of deferral will depend on the SME’s Jobs Support Scheme Tier.
  • SMEs in Tier 1 and 2 sectors (include aviation, tourism, hospitality, land transport, etc.) may defer repayments from 1 Jan 2021 to 30 Jun 2021. SMEs in Tier 3A and 3B sectors (include financial services, media, biomedical sciences, electronics, etc.) may apply for deferral from 1 Jan 2021 to 31 Mar 2021.
  • Separately, the Singapore government is extending the Temporary Bridging Loan Programme until Sep 2021 (from Mar 2021). Eligible borrowers may borrow up to S$5m with interest rate capped at 5% p.a., where the government will take on 90% risk-share.


Neutral to slight positive impact on Singapore banks

  • We view these measures to be neutral to slightly positive for Singapore banks given that interest income will still accrue on the deferred principal amounts (as per MAS statement in Mar 20), although incremental earnings impact should be minor.
  • The extended support will likely smoothen out potential credit cost (c.S$3bn-5bn guided for FY20-21F across banks) and NPL (guided to rise to c.2.5-3.5%) cliff effects. Repayment trends from the expiry of moratoriums in Malaysia at end-Sep 20 will be a useful gauge of credit cost guidance reliability, in our view. We do not expect NPLs or stage 2 restructured loans to rise solely due to the subscription of these relief schemes.
  • See PDF report attached below for the summary of targeted credit support schemes by MAS.


Singapore Banks


DBS (SGX:D05)

OCBC (SGX:O39)


UOB (SGX:U11)






Andrea CHOONG CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2020-10-05
SGX Stock Analyst Report HOLD MAINTAIN HOLD 20.460 SAME 20.460
HOLD MAINTAIN HOLD 9.380 SAME 9.380
HOLD MAINTAIN HOLD 20.580 SAME 20.580



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