Chart of the Day: This graph isn't proof that Singapore banks did well in August

Numbers are high, but MAS is still worried.

According to CIMB, system loan growth was moderate in Aug, with the rise in consumer and mortgage loans offsetting the fall in business loans.

The system looks relatively stretched as both DBU and ACU LDRs have now crossed 100%. Credit quality, however, remains sound.

Here's more from CIMB:

The Monetary Authority of Singapore (MAS) released the monthly data for Singapore’s banking sector today. System loan growth was moderate in Aug (+0.7% mom, +11.4% YTD) as the demand for business loans fell.

DBU loan growth was weak (+0.3% mom, +10.2% YTD), with the lowermanu facturing and commerce loans offsetting the rise in credit cards, share financing, other consumer loans and mortgages. DBU deposits remained flat mom, which drove the DBU loan-to-deposit ratio (LDR) up 0.4% pts to 100.5%.

S$ LDR rose 1% pt to a high of 79.0%, while the ACU LDR fell 0.5% pts to 104.5%. Meanwhile, the credit card charge-offrates c ooled 40bp to 4.72% in Aug.

DBU LDR crossed the 100% mark in Jul, which means that the system is relatively stretched. While there is still excess S$ liquidity (S$ LDR was 79.0% in Aug), the rising S$ LDR means that funding pressure may show up in future if this trend continues.

The main cause of this is the falling S$ deposits as investors seek higher returns elsewhere in a low interest rate environment.

We expect the loan growth to slow in 2H, which is in line with the three local banks’ guidance. System loan growth looks set to reach +12-14% by end-2013.

While MAS was concerned about the rising credit card debt and unsecured credit earlier this month, the credit card charge-off rates fell below the historical average of 4.95% in Aug – signaling that consumers’ credit quality remains sound.

We believe the domestic NPLs will not be a cause of concern for the local banks, but rather the small pots of NPLs arising out of India, Indonesia and Malaysia.

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