Singapore banks' July 2013 loan growth outpaced deposit growth

But will this be sustained?

According to DMG Research, July 2013 deposits rose 0.6% m-o-m/+7.9% y-o-y (June 2013: -1% m-o-m/+8.6% y-o-y) but with loan growth still outpaced deposit growth.

The system loan to deposit ratio (LDR) rose to a new high of 100.1% as at end-July 2013, compared with 99.5% at end-June 2013.

Here's more from DMG Research:

Despite the uptick in July loans growth, we are keeping our expectations that growth would moderate in the upcoming months, partly due to seasonality and property market cooling measures taking effect. In our forecasts, our loan growth assumptions for the banks already imply slower growth in the quarters ahead. We maintain our Neutral call on the sector.

We like DBS (DBS SP; BUY; FV: SDG18.70) given its relatively stronger earnings growth profile, while valuations are still at a discount to peers. DBS is also less vulnerable to policy changes affecting the property market sector given its relatively smaller exposure to the segment.

Elsewhere, we think UOB (UOB SP; BUY; FV:SGD24.40) is well positioned to benefit from Asean’s rise as a new growth haven over the longer term.

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