Singapore Banks - CGS-CIMB Research 2021-08-31: MAS Revamps Its Data Disclosure

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 - MAS Revamps Its Data Disclosure

  • MAS has removed the segregation of system statistical data by DBU and ACU, paving the path towards more robust and complete disclosures.
  • Renewed data measurement suggests some contraction in system loans in Jul 21. Liquidity remained ample, with 85% LDR and 71% CASA ratio.
  • Reiterate NEUTRAL for Singapore banking sector. Impact of the dividend cap removal is played out.
  • An earlier-than-expected Fed rate hike is a key re-rating catalyst for the sector.



The removal of DBU-ACU has been in the works since FY15

  • The Monetary Authority of Singapore (MAS) has now removed the segregation of monthly statistical data by Domestic Banking Unit (DBU) and Asian Currency Unit (ACU) in its publication of Jul 21 data. This proposal was first mooted in FY15.
  • While having been traditionally used to distinguish the domestic and offshore operations of banks, while offering developmental incentives to encourage the growth of the latter out of Singapore, the DBU-ACU divide has been losing its relevance given the change in the basis of developmental incentives and alignment of global regulatory standards between the two segments over the years.
  • We understand from the MAS that previous data points are not directly comparable with Jul 21 figures given adjustments in data remeasurement.


Jul 21 data suggest some contraction in system loans

  • Banking system loans (S$1.3tr in Jul 21; S$1.42tr in Jun 21 using previous data measurement method) are now segregated by resident and non-resident data, both segments inclusive of S$ and foreign currency loans (previously, DBU was mainly S$ and ACU only FCY).
  • While inconclusive given the remeasurement, Jul 21 data suggest some contraction in system loan growth.
    • As at end-Jul 21, business loans accounted for ~71% of system loans, with loans for financial and insurance activities (24% of system loans), building and construction – real property and development of land (15%), and general commerce – wholesale trade (8%) forming the bulk of this segment.
    • Consumer loans (29% of system loans) primarily comprised housing and bridging loans (17). For perspective, system loans expanded 4.6% in 6M21 (vs. -1.1% in FY20).
  • Separately, credit card charge-off rates reduced to 4.1% in 2Q21 (1Q21: 5%, 3Q20: peak of 9.1%) — we take this as a signal of improving consumer credit quality on the ground.

Ample liquidity in the system; LDR at 85% in Jul 21

  • System deposit data is now more comprehensive, with the disclosure of aggregated DBU and ACU deposits (from only DBU previously). As at end-Jul 21, total deposits stood at S$1.53tr (Jun 21 DBU deposits: S$778bn), with a split between S$ and foreign currency deposits of 49:51. Using past DBU data as a proxy for the system, the proportion of CASA to fixed deposits rose further to 71:29 (Jun 21: 70:30, Jul 20: 63:37).
  • Further, the MAS also reported a revised system LDR of 85% in Jul 21 (under the previous data measurement method, LDR stood at 94% in Jun 21). That said, deposit growth was lacklustre at +1.9% in 6M21 (FY20: +11.3%).
  • Downside risks to the sector are prolonged lockdowns across the region, affecting business sentiment and credit expansion.
  • Reiterate NEUTRAL for Singapore banking sector. Read also the PDF report attached at Singapore Market Outlook - CGS-CIMB Research 2021-08-19: Done Well, Cautiously Optimistic, FSSTI Target 3496 in for in depth analysis on outlook of Singapore banking sector.





Andrea CHOONG CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-31
SGX Stock Analyst Report ADD MAINTAIN ADD 32.700 SAME 32.700
ADD MAINTAIN ADD 13.750 SAME 13.750
ADD MAINTAIN ADD 29.000 SAME 29.000



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