Companies' decreasing capex plans dispel robust loans growth

What Happened
System loans (DBU + ACU) maintained its robust 22.1% yoy growth. However, it fell 1.8% sequentially, the highest mom drop since Dec 08 when loans fell 3.4% mom. DBU loans grew 9.8% yoy and 0.3% mom. S$1.1bn worth of new loans was disbursed, mostly propped up by Property-related loan growth (+S$1.7bn).

Ex-property business loans grew S$444m sequentially. Growth was not broad-based, largely on the back of credit demand in general commerce (+S$973m) and non-bank FIs (+S$1.4bn). Loans contracted the most in other business loans (-S$1.2bn). Consumer loans fell S$1.1bn, due to a S$1bn fall in loans to Professionals & Individuals.

There was a broad based sequential decline in the ACU loans book. ACU loans grew 14.4% yoy but fell 4% mom.

Liquidity, while tightening, remains ample with DBU LDR growing 1.8% pts mom to 87.4%. ACU LDR remained largely unchanged to 104.4% (from 105%).

What We Think
We believe businesses are pushing back capex plans and discretionary spending is slowing. We expect loans growth will continue to slow moving forward. Impacts of a tight US$ liquidity is reflected in the decline in ACU loans. Our recent checks with local banks suggest similar trends
going forward.

What You Should Do
We maintain NEUTRAL on Financials. Our top pick is DBS. Our top short is OCBC. We are
Neutral on UOB.