Which bank will be the most vulnerable during a housing meltdown?

This bank is weighed down by speculative loans.

Delinquent mortgages have once pushed the global economy to its knees, and analysts are prudently keeping a close watch on the quality of housing loans for Singapore’s three biggest banks.

According to a report by Maybank Kim Eng, OCBC is the most at risk in the event of a housing meltdown. The report states that OCBC’s loan growth was backend-loaded to 2Q09-2Q12, during which home prices breached pre-GFC highs on the back of quantitative easing in the West.

“Unlike UOB, much of OCBC’s housing loan growth came in the latter part of the housing boom. Speculation was rife, with foreign purchases peaking at 21.2% of all transactions in 4Q11. In contrast, DBS may be better positioned, given its modest housing loan growth during this period. We understand that 90% of DBS’s home loan borrowers have only one loan account,” stated the report.

While UOB had spooked the market with a spike in housing NPLs, Maybank Kim Eng states that UOB’s loans are “manageable”.

“UOB is most exposed to Sentosa. Of the three, UOB’s housing loans grew the fastest during 2Q06-2Q07, when Sentosa developments were all the rage. While UOB’s housing loan growth was the strongest in the past nine years, thankfully, much of its growth occurred during the early years of Singapore’s housing booms in 2006-07 and 2010-11 (Figure 27). This suggests better housing-loan quality,” stated the report.