Foreign banks seize time deposit share from local banks

Local banks have already retaliated and DBS raised deposit rates.

Here's more from CIMB:

Total system loans shrank 0.1% mom, mostly dragged down by ACU business loans. DBU loans grew 1.3% mom vs. 1.7% in June. Monthly new DBU business loans declined for athird consecutive month while DBU Property-related loans growth held stable at 1.2% mom in July. ACU business loans shrank 2.1% mom.

DBU deposits grew 1.2% mom, largely driven by an increase in deposits (+S$4.2bn) from Singapore residents. System LDR ratios remained largely unchanged in July (DBU: 91.9%; ACU: 103.6%; S$-only:73.6%). Credit charge-off rates rose 23bp to 4.58% in July.

This moderation in loans growth is in line with expectations and should be on track to meet the banks’ revised guidance of high-single-digit growth. The more profitable S$-loan market is still seeing some growth, which is good. Deposits growth has been muted this year on the back of liquidity flows into high yielding Perp, Pref, Bond and Reit (PPBR) instruments.

As deposit growth mutes, foreign banks also won time deposit share from local banks in 1H12. Local banks have retaliated recently, with DBS raising deposit rates. This could sustain margin pressure into 2H12. Asset quality remains sound for now.