Singapore banks still attractive investments despite housing loan weakness

DBS named top pick in sector.

Maybank Kim Eng remained bullish on the returns of Singapore banks, maintaining its Overweight rating for the sector even after the release of October loan data which showed industry housing loans dropping to its weakest level in four years.

Maybank said that despite the housing loan weakness, overall October loan data is holding up.

It cited how industry domestic banking unit loan growth was sustained at 16% YoY in October. Stronger business loan growth of 19.4% YoY, compensates for a slower 10.4% YoY consumer loan growth.

It also said prospective growth for the battered industry housing loans will primarily come from loan drawdowns of new home completions.

The industry Singapore dollar deposit base has flattened out over the past eight months with 6.5% YoY growth, near its weakest in eight years, said Maybank.

But stripping out non-Singapore dollar loans, the Singapore dollar loan-to-deposit ratio remained comfortable at 82.5%.

Still, Maybank expects "the current lethargic industry deposit growth to persist in 2014."