Singapore big banks to see a silver lining in domestic housing loans

Their market share grew 7-10% YoY.

Singapore banking giants are now defending their market share in Singapore housing loans, which grew 7-10% faster than the system's 4%.

According to Maybank KimEng, UOB had 31% market share for new housing loans in Q4, while DBS's market rose 29%.

"Banks found lending opportunities in domestic housing loans to defend market share and demand from corporates looking to invest and make acquisitions. Pricing pressure is likely to remain and customer spreads will fall unless interest rates rise," the brokerage firm said.

"As housing loans form 21-27% of the banks’ total loans, it is a competitive business," Maybank noted.

Notable, foreign banks in Singapore are reducing their loan sizes, suggesting that they are unwilling to take on higher risks amid reduced profits.

"For instance, HSBC (5 HK, Not Rated) reduced its housing loans by 20% YoY in 2016 to curb the size of this portfolio. Standard Chartered Bank (2888 HK, Not Rated) also reported lower new bookings for housing loans and business banking in Singapore. These made way for Singapore banks to gain market share and to outpace the growth in system loans," Maybank stated.

Aside from housing loans, loan growth could also come from the building and construction sector, especially for public infrastructure projects. The Building and Construction Authority expects construction demand this year to reach $28-35b, with demand from the public sector of $20-24b.