Single-digit loan growth looms over Singapore banks in 2013

November 2012 saw growth stalling to 15.9%.

According to UOB, loan growth moderated as economic growth slowed in 2H12. Loan growth averaged 24.9% in 1H12 but decelerated to 15.9% in Nov 12.

The slowdown was mainly driven by loans to businesses, which moderated from the average expansion of 31.6% in 1H12 to 15.3% in Nov 12. From an industry
perspective, the slowdown was driven by general commerce, transport & storage, and non-bank financial institutions & holding companies.

Here's more from UOB:

We forecast the banking industry to register high single-digit loan growth of 8-10% for 2013. We expect growth to be evenly balanced between loans to businesses and consumers.

The slowdown in loans to businesses could be near a bottom. We estimate growth in loans to consumers to be sustained due to continued drawdown for private residential properties already sold and newly-completed HDB flats.

Singapore banks have taken a conservative approach to strengthening their balance sheets given the turmoil in Europe. They have boosted their core equity tier-1 capital adequacy ratio (CET-1 CAR) through retained earnings.

In addition, OCBC also got a boost from divesting its holdings of F&N and APB shares in 3Q12. NPL ratios have remained relatively unchanged despite external turbulence while loan loss coverage ratios are significantly above 100%. We expect subdued credit cost to be maintained in 2013.

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