Singapore banks' loan growth slows down after blistering 1Q13

April statistics reveal momentum is moderating.

According to Barclays Research, the MAS April monetary statistics showed slowing loan growth momentum after a strong 1Q13, while the system loan to deposit ratio rose to 99%, another record high since 1999.

"As system liquidity tightens, we believe foreign banks will continue to drive pricing competition and margins for the sector will trend lower in the near-term," said Barclays.

Barclays cited how in April loans only rose by 0.7% m/m, down from a strong 6.2% q/q growth in 1Q13. Meanwhile, system deposits (ACU+DBU) declined slightly by 0.3% m/m driven by a mild contraction of ACU deposits.

"The slowdown was most evident in the manufacturing industry (+1.7% in April vs +17% q/q in 1Q), general commerce (up 2.7% m/m vs +11% in 1Q) and the other corporate loans category which contracted in April. Housing loan growth was steady at 0.9% m/m, though a marked slowdown from 2012 levels," Barclays said.

Liquidity is also tightening with the system loan to deposit ratio again rising to 99.1%, another record high since 1999. ACU LDR reached 109% while DBU LDR reached 97%.

"We see a lack of near-term positive catalysts for the sector with margins under pressure and loan growth to slow. Singapore banks are maintaining guidance for mid-single digit to 10% loan growth for the full year, vs 7% loan growth for the system YTD April 2013. UOB (OW) remains our top pick with the most diverse footprint in the ASEAN region," Barclays said as part of its investment view.

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