Singapore banks scratch and claw to maintain lending volume as they tone down China lending

Greater China lending by DBS was down to 30%.

Singapore’s banks are now struggling to maintain their lending volumes as they aggressively tone down their lending to greater China amid rising uncertainty.

According to a report by Maybank Kim Eng, after the Global Financial Crisis, China attracted large capital flows from DBS and OCBC.

“This worked well for the two from 2008 to 2014, bumping up their ROEs. Current subdued Chinese growth and high scepticism over the sturdiness of China’s banking system give cause for concern,” the report noted.

Meanwhile, trade loans have become much quieter as onshore borrowing turns more attractive, the report said.

“Greater China lending by DBS was down from 36% of its book in 2014 to 30% in 2Q16. DBS’ trade loans dived 67% from 2Q14 levels to SGD12b in 2Q16,” the report added.

Additionally, OCBC’s and UOB’s lending exposure to China retreated more modestly, from 26%/13% of their loan books in 2014 to 24%/11% in 2Q16.

“We think China exposures may be further downsized. All this capital has to find a new home,” the report said.