Singapore banks' loan to deposit ratio hit highest peak since 1999

After jumping to 96.6% in January.

According to Barclays, the MAS monthly monetary statistics showed a rebound in foreign currency corporate loan growth after a slow 2H12, driving system loans to rise by 3% m/m in January.

Loan to deposit ratio continued to rise to 96.6%, the highest level since 1999, as deposit growth lagged loan growth. 

"Therefore, we see deposit competition remaining fierce and placing pressure on margin. While January was a strong month, we see headwinds to FY13 loan growth both on corporate and retail loans (especially housing)," Barclays said.

Here's more from Barclays:

We maintain our neutral view on the Singapore banks and our preference for UOB (UOB SP, OW, PT S$21.9) with its diverse ASEAN footprint.

Strong loan growth and rising loan to deposit ratio: System (DBU +ACU) loan growth (+3.0% m/m) outpaced deposit growth (+2% m/m) and led to system loan to deposit ratio rising to 96.6% in January 2013, the highest level since 1999. ACU LDR gained 2.3% m/m to 106.2% while DBU LDR stood flat at 94.6%.

ACU loan growth of 4.6% m/m in SG$ terms was boosted by a 1.4% depreciation of SGD against USD in January, but even in US$ terms, ACU loans rose by 3% m/m, faster than DBU loans which rose 1.8% m/m.

Because of the continued rise in loan to deposit ratio, we believe banks will continue to focus on attracting deposit funding resulting in upward pressure on funding costs. All three local Singapore banks recently guided for margins to trend lower over the next few quarters.

Deposit growth in January was driven by both CASA and fixed deposits.