Chart of the Day: Analysts fear Singapore banks' loan growth to slow from 19%

Could things get any worse?

According to Nomura, based on their discussions with bank managements, the new framework now formalises what have been internal lending practices as well as imposes a standard policy across all the banks.

For example, most banks have already adopted a DSR limit of 50-60%, based on a theoretical interest rate of 3.0-3.5%. However, some adjustments will be required given MAS’s explicit guidelines on the maximum DSR, interest rate assumptions and adjustments to variable/investment-led income.

Here's more from Nomura:

The adjustments to the LTV guidelines were largely driven by ‘loopholes’ in the LTV measures announced earlier. The new rules are mainly directed at guarantors for family members who do not meet the DSR threshold where a stricter LTV cap should be applied.

In summary, there will be adjustments to the banks’ current practices, which is likely to result in lower mortgage volumes going forward.

The banks’ managements have not specifically mentioned the proportion of mortgages affected by the new framework but are still guiding for a 20-30% decline in approvals this year.

Our current loan growth forecasts (average 10% for FY13F) already assume a significant slowdown in lending from the current run-rate of 19%.

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