Mortgage growth for DBS could stay healthy despite property curbs

And its net interest margin could get a boost by a hike in the US federal funds rate.

Mortgage growth for DBS could remain steady until end-2019 with the drawdown of already approved loans taking effect amidst the property cooling measures, RHB said.

The research firm thinks that loan growth from 2020 onwards could remain intact if property sales continue to be supported by lower selling prices.

RHB noted that the market expressed concern with Singapore banks’ loan growth due to the property curbs imposed in July.

“Recent property show-flat visits (eg to JadeScape) however, point to continued interest from potential buyers, as indicative prices were lowered by ~10%,” they explained.

RHB also thinks that DBS could benefit with the widening of the net interest margin (NIM) as the market expects the US federal funds rate (FFR) to be raised by 25bps by September.

“Given the historical correlation between the FFR and 3-month Singapore Interbank Offered Rate (SIBOR), we expect further upside in the 3-month SIBOR (from 1.64% now).

The firm noted that the SIBOR averaged 1.51% in Q2 and a higher 1.63% for QTD Q3.

“This rising trend is positive for Singapore banks’ NIM,” they explained. They noted that DBS’ NIM could inch up to 1.87% in 2018 and 1.95% in 2019 from 1.85% in Q2.