Loan growth to slow significantly to a mere 8% in 2012

This is a depressing figure compared to 2011’s 30.3% growth.

According to DMG, this is based on the Singapore government’s expectations of 2012 GDP growth of 1-3%.

Here’s more from DMG:

Slower MoM loan growth, with uninteresting outlook. Dec 11 systemic loans rose 1.1% MoM, slower than Nov 11’s 2.3%. Dec 11 loans to businesses rose a mild 0.3% MoM, slower than consumer loan expansion of 2.2%, pointing to slower business activities.

The Singapore government expectations of 2012 GDP growth of 1-3% is sharply slower than the 2011 pace, and we are expecting 2012 loan growth of 8%, which is sharply lower than 2011’s 30.3% growth.

UOB is the only BUY within the NEUTRAL-weight banking sector. We forecast systemic rising loan loss provisioning and much weaker loan numbers going forward. UOB is the only BUY recommendation amongst the three banks, given its conservative loan stance (with a slower-than-peers loan growth and greater focus on lower-risk housing loans) contributing to a higher-than-peers loan quality.

The Jan 2012 rise in the equity markets has led to all the three banks showing share price strength. Whilst UOB’s share price has outperformed that of OCBC, it underperformed that of DBS. Looking ahead, we expect UOB share price to outperform its peers, particularly if concerns on European debt problems start taking centre-stage again.