• December’s 3M-SORA was down 2bps MoM to 3.74% and was similar to the 4Q23 average. This is the first decline in 11 months. 3M-HIBOR was down 7bps MoM to 5.37%, but still the second highest level in 2023.
• Singapore domestic loans dipped 2.9% YoY in November, below our estimates. The loan decline was the smallest decline recorded in 10 months. The CASA balance dipped slightly to 18.5% (Oct23: 18.7%).
• Maintain OVERWEIGHT. We remain positive on banks. NIMs may see flat growth despite the higher-for-longer interest rate environment, but a recovery in loan growth and fee income will uplift profits. Bank dividend yields are also attractive with upside surprises due to excess capital ratios and a push towards higher ROEs. SGX is another major beneficiary of higher interest rates (SGX SP, BUY, TP S$11.71).

3M-SORA and 3M-HIBOR dip slightly in December

Singapore interest rates dipped slightly in December, the first decline in 11 months. The 3M-SORA was down 2bps MoM to 3.74%. Nonetheless, December’s 3M-SORA rose by 66bps YoY and was similar to the 4Q23 3M-SORA average of 3.74% (3Q23: 3.69%).

Hong Kong interest rates dipped slightly in December. The 3M-HIBOR was down 7bps MoM to 5.37% but was still the second-highest level reached in 2023. November’s 3M-HIBOR improved by 8bps YoY and was 3bps higher than 4Q23 3M-HIBOR average of 5.34% (Figure 1).

Singapore loans growth decline flattens

Overall loans to Singapore residents – which captured lending in all currencies to residents in Singapore – fell by 2.89% YoY in November to S$793bn. This was below our estimate of low-single-digit growth for 2023 as the rise in interest rates started to be fully felt by consumers. Nonetheless, this is the smallest decline recorded in 10 months.

Business loans fell by 4.43% YoY in November. Loans to the building and construction segment, the single largest business segment, fell 0.29% YoY to S$169bn, while loans to the manufacturing segment fell 15.7% YoY in November to S$21.9bn.

Consumer loans were down 0.4% YoY in November to S$312bn, as dips in other segments were offset slightly by strong loan demand in the housing segment. Housing loans, which make up ~70% of consumer lending, grew 1.42% YoY in November to S$225bn for the month.

Total deposits and balances – which captured deposits in all currencies to non-bank customers – grew by 4.35% YoY in November to S$1,794bn. The Current Account and Savings Account, or CASA proportion, dipped slightly to 18.5% (Oct23: 18.7%) of total deposits, or S$332bn.

Source: Phillip Capital Research - 8 Jan 2024