Singapore's 10.4% loan growth driven by business loans

Business loans increased 2.5%.

According to CIMB, while 2012 ended on a good note, loan growth is likely to moderate given a potential fall in property demand. On the other hand, the analyst expects positive surprises from fee income drivers. Remain Neutral on the sector, with DBS as our top pick. 

Here's more from CIMB:

System loan growth in Dec (+1.6% mom, +10.4% in CY12) was in line with the preliminary GDP growth figure of 1.8% qoq. Business loans were the key growth driver, possibly fuelled by the services industry on the back of a rebound in wholesale and retail trade. New monthly mortgages were 6.8% higher yoy at S$1.7bn. 

DBU loans rose 2.1% mom and 16.7% in CY12. DBU business loans advanced 2.5% mom on the back of commerce and non-bank FI credit demand. ACU loans expanded 0.9% mom (3.3% for CY12), buoyed by an increase in other business loans and non-bank FI. DBU deposits inched up 1.2% mom (7.4% YTD). DBU and S$ LDR remained flat in Dec. DBU LDR was 94.6% and S$ LDR was 75.1% while ACU LDR rose 1.7% pts to 104.0%.

What We Think
Due to the strong showing in Dec, 2012 loan growth of 10.4% exceeded our 8.5-8.8% estimate. However, in light of a potential fall in mortgage demand due to cooling measures, we maintain our 7-8% loan growth estimate for 2013.

While the near-term NIM outlook remains weak, the recent rise in US treasury yields could provide some uplift in coming quarters, helping interest income growth in 2013. That said, we believe that fee income will be the focus this year.