Banks see home loan growth slowing on cooling measures

The Singapore interbank offered rate and SOR (swap offer rate) have been rising steadily since 2016, wrote Phillip Securities analyst Tin Min Ying last week.
The Singapore interbank offered rate and SOR (swap offer rate) have been rising steadily since 2016, wrote Phillip Securities analyst Tin Min Ying last week. PHOTO: ST FILE

OCBC Bank, like the other two Singapore lenders, is feeling the chill of last year's property cooling measures with its mortgage book "reduced visibly" for the first quarter.

"Our housing loans outstanding have reduced visibly on quarter and on year," chief executive Samuel Tsien said during the bank's results announcement yesterday. "Housing demand is there but it's not as strong as before."

Its total housing loans stood at $64.8 billion as of March 31, up from $64.5 billion at end-2018. It was $64.2 billion as of March 31 last year. Mr Tsien said the Singapore home loan contraction was "less than a billion" (in Singapore dollars) year on year.

In addition, he said OCBC, whose home loan market share remains over 20 per cent, is not keen to fight for more of the pie by cutting rates.

"Sometimes, the pricing is not worth our participation in the market," he added.

Sibor (Singapore interbank offered rate) and SOR (swap offer rate) have been rising steadily since 2016, wrote Phillip Securities analyst Tin Min Ying last week.

However, they appear to be consolidating near the 2 per cent mark since the start of this year, she said, suggesting that interest rate pressures on housing loans may be capped at this level.

Nonetheless, the slowdown in housing loan growth is "a red flag" for the banking sector's loan business, where housing loans make up 30 per cent of total domestic loans in Singapore, Ms Tin said.

United Overseas Bank told The Business Times last week that "Singapore mortgage loan growth was flat quarter on quarter, and expected to be low single-digit for this year as the impact of cooling measures is still being felt".

The bank's housing loans rose to $68.7 billion at end-March, up from $68.4 billion at end-2018. It was $66.5 billion a year ago.

 

In contrast, DBS Group Holdings saw its mortgage book shrink for the first time in years for the first quarter of this year in results posted last month.

DBS' total housing loans fell to $74.4 billion as of March 31, down from $75 billion as at end-2018. It was $73.5 billion as of March 31 last year. The Singapore home loan contraction of "half a billion dollars" was due to last year's round of property curbs, DBS chief executive Piyush Gupta said.

Overall, OCBC beat market estimates with an 11 per cent rise in first-quarter net profit to $1.23 billion from $1.11 billion a year ago, driven by broad-based growth, while net interest income grew 8 per cent.

Net profit beat the $1.16 billion average estimate of five analysts, according to data from Refinitiv.

The bank saw growth across its banking, wealth management and insurance franchise.

Earnings per share was 28.3 cents, up from 26.3 cents the year prior. No interim dividend was declared for the quarter as the bank pays dividend on a semi-annual basis, it said.

OCBC said total income for the first quarter rose 15 per cent to $2.68 billion, from $2.33 billion a year ago.

A version of this article appeared in the print edition of The Straits Times on May 11, 2019, with the headline 'Banks see home loan growth slowing on cooling measures'. Print Edition | Subscribe