Singapore bank lending could turn cautious

Loans could only grow 0-2% by next year.

MayBank KimEng is projecting a 0-2% loan growth in FY17 for Singapore banks as it believes banks will be cautious in their lending and will only work with customers whom they are familiar with.

Nevertheless, the research house thinks loan pricing in Singapore will remain competitive for Singapore banks to retain or gain market share, as they were lending out faster at 4-5% YoY growth vs system’s -5% as of Sep.

Post-Trump’s victory, MayBank KImeEng notes that 3M SIBOR and 3M SOR rose by ~5bps and ~6bps respectively. T

The main bulk of banks’ Singapore loan book is pegged to floating rates. Going forward, we expect SIBOR to rise by ~25bps each for FY17-18E, and NIMs to remain stable or expand slightly across the banks.

"If banks’ NIM rises by 5bps from our FY17E NIM estimate, we estimate FY17E net profits will increase by 3-5%, ceteris paribus," it said.

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