S$ strength could weaken banks’ loan growth:DMG

Overseas assets of Singapore banks will be translated to SGD at less favourable rates.

According to DMG, in 1Q 2011, S$ appreciated most against THB, HK$ and US$, and less so against RM.

In the upcoming MAS monetary policy statement, DMG expects a slight tightening, which will keep the S$ strong and correspondingly SIBOR soft.

This is not a positive for DBS' NIM. DBS has a large percentage exposure to US$ and HK$. The loan exposure of DBS to both US$ and HK$ accounts for 44% of its total loans, which is sharply higher than OCBC's 18% and UOB's 12%.

OCBC's large exposure to Malaysia is a relative positive. Although S$ strengthened against RM in 1Q 2011, there was less impact compared to the strengthening against HK$. 

UOB is more exposed to RM and THB and the sharp 2.5% appreciation of S$ against THB in 1Q 2011 will weaken UOB's loan growth, but the impact is seen to be minimal as only 5.9% of its loan is denominated in THB.