Macquarie Equities Research released a research paper covering the local banks two weeks ago on 31 October 2013. Some excerpts are included below.

Singapore’s Domestic Banking Unit’s (DBU) loan-to-deposit ratio (LDR) set yet another post-Asian financial crisis high in September, furthering the likelihood of higher SGD time deposit rates heading towards year-end. Meanwhile, unutilised mortgage commitments fell for a second month but should sustain double-digit mortgage growth through 2014.

Impact

• The SGD-dominated DBU deposit base declined by 0.3% MoM while loans expanded by 1.1% MoM, resulting in a 101.8% LDR. MER expects to see marginally higher FD promotional rates heading into the yearend balance sheet close. Combined with the FX-dominated Asian currency unit data, where deposits grew by 3% MoM (helped by 2% SGD appreciation), the overall systemwide LDR was flat MoM at 98%.
• Unutilized mortgage commitments fell 1% from August and 3% from the historical peak of July. This still leaves S$30.4bn in commitments yet to be drawn down, which represents 18.2% of in-force mortgages and should sustain double digit balance sheet mortgage expansion through 2014E.
• On a combined DBU / ACU (Asian Currency Unit) basis, overall loan growth came in at 16% YoY, driven by an 18% rise in corporate loans and 12% rise in consumer loans. General commerce was the single largest contributor, rising 33% YoY in SGD terms. Mortgages increased 12% YoY, the key driver of consumer growth.

MER’s outlook for Singapore Banks
Any pressure on SGD deposit costs should predominantly impact foreign banks. Among the domestic players, Hong Leong Finance would be by far the most impacted if this happens, but UOB and OCBC could feel some level of pressure on funding costs in 4Q13-1Q14. MER does not see it as an issue for 3Q13 results. MER retains Neutral on the Singapore banks from a country view, however DBS is MER’s top pick within the sector.

Source: Macquarie Research - 18 Nov 2013