Singapore Banking Monthly - Singapore interest rates stagnate

• May’s 3M-SORA was up 1bp MoM to 3.61%, 3M-HIBOR was up 82bps MoM to 4.41%. HIBOR is down 88bps this year.
• Singapore domestic loans dipped 5.86% YoY in April, below our estimates. Loans previously contracted at this magnitude was in 2016. The CASA balance dipped slightly to 18.8% (Mar23: 18.9%).
• Maintain OVERWEIGHT. We remain positive on banks. Bank dividend yields are attractive at 5.7% with upside surprise in dividends due to excess capital ratios and push towards higher ROEs. SGX is another major beneficiary of higher interest rates (SGX SP, BUY, TP S$11.71).

3M-SORA growth flattens; 3M-HIBOR recovers in May

Singapore interest rates flattened in May. The 3M-SORA was up 1bp MoM to 3.61%; the MoM increase was the lowest recorded since Nov 2021’s MoM increase of 1bps. April’s 3M-SORA improved by 317bps YoY and was 41bps higher than the 1Q23 3M-SORA average of 3.20%.

Hong Kong interest rates surged and reversed the decline from the previous few months. The 3M-HIBOR was up 82bps MoM to 4.41%; the MoM increase was a reversal of the MoM decline of 21bps in April 2023. April’s 3M-HIBOR improved by 357bps YoY and was 59bps higher than 1Q23 3M-HIBOR average of 3.82% (Figure 1).

Singapore loans growth decline steepened further in April

Overall loans to Singapore residents – which captured lending in all currencies to residents in Singapore – fell by 5.86% YoY in April to S$792bn. This was below our estimate of low to mid-single digit growth for 2023 as the rise in interest rates started to be more fully felt by consumers.

Business loans fell by 8.44% YoY in April, as business loans dipped by 0.81% for the month. Loans to the building and construction segment, the single largest business segment, fell 2.77% YoY to S$169bn, while loans to the manufacturing segment fell 13.56% YoY in April to S$23.7bn and fell 3.93% MoM, slightly reversing the MoM increase of 10.21% in March.

Consumer loans were down 1.53% YoY in April to S$309bn, as dips in other segments were offset slightly by strong loan demand in the housing segment. Housing loans, which make up ~70% of consumer lending, grew 1.78% YoY in April to S$222bn for the month.

Total deposits and balances – which captured deposits in all currencies to non-bank customers – grew by 3.62% YoY in April to S$1,761bn. The Current Account and Savings Account (CASA) proportion dipped slightly to 18.8% (Mar23: 18.9%) of total deposits, or S$332bn, as there was a continued move towards Fixed Deposits due to the high interest rate environment.

Hong Kong loans growth continues to decline

Hong Kong’s domestic loans growth declined 3.28% YoY and declined 0.69% MoM in April. The YoY decline in loans growth for April was lower than the decline of 3.30% in March 2023, while the MoM decline of 0.69% was a reversal of the increase of 0.23% in March 2023.