Credit crunch: Record-high loan levels persist for Singapore banks in June

Deposits finally inched up after a 2-month contraction.

The country’s biggest banks have been given a reprieve after grappling with shrinking deposit pools in April and May. Monetary statistics released by the Monetary Authority of Singapore today show a rebound in deposits growth in June, inching up 0.8% after a 0.3% contraction in May.

However, the system loan-to-deposit ratio (LDR) stayed flat at 110.6% in June, a record high since 1998.

According to Barclays, System loans continued to grow, up 0.8% m/m, led by both Asian Currency Unit (ACU) corporate loans (+1.7% m/m) and retail loans (+2.7% m/m).

Domestic Banking Unit (DBU) loans were flat m/m as the growth in retail loans (+0.7% m/m) was offset by total corporate loans (-0.4% m/m), in the general commerce and business (-2.6% m/m) and manufacturing sectors (-2.3% m/m).

“System LDR remained flat at 110.6% in June (May: 110.6%) but is still a record high since 1998. We expect funding costs will increase due to competition for deposits. Moreover, with the implementation of the Basel III liquidity rules (including the Liquidity Coverage Ratio and the Net Stable Funding Ratio), we believe banks will increasingly focus on deposit funding both in S$ and in foreign currency. The three local banks have said that currently they are comfortably placed to meet the rules,” stated the report.