Singapore banks' loan growth seen to moderate to 10-11% in 2014

January's 18.2% spike may be a fluke.

Business loans may have expanded in January, helping lift system loans growth to an 18.2% yoy increase, but expect more subdued activity for the rest of 2014, according to OSK-DMG.

"Notwithstanding the healthy increase seen in January, we expect banks’ loans growth to moderate to 10%-11% in 2014, with demand for credit dampened mainly by softness in the property market," said OSK-DMG in its commentary following the release of business loans growth data in January.

But the research firm noted that banks are not overly concerned about the high loan-to-deposit ratio as they have been tapping USD deposits and commercial papers as alternative sources of funding.

Investors looking at Singapore banks are advised to pick DBS.

"We expect the group to deliver stronger earnings growth (2014F: +8.6% vs the sector’s average +7.2%), helped by sustained corporate lending, intra-Asia trade flows and healthy momentum in its fee income businesses," said OSK-DMG.