Once again it is time for us to take a snapshot of the report put out by the 3 major lenders in Singapore. Being a mortgage blog, we are of course more concerned with their mortgage books more than anything else. However this time round the head honchos spent more time and focus during results briefing to highlight their asset quality in particular their exposure to the oil & gas sector, understandably after the Swiber saga which has shaken up financial markets here.
As we zoomed in on their mortgage loan books, on a portfolio basis (aggregate of all countries) all 3 lenders have grown their loan books by 4-5% in the most recent 6-month period compared to the last, with UOB home loans registering the highest growth rates. It is regrettable that as the banks do not provide sufficient insights for us to further slice and dice the data set, we are unable to comment much or infer how the 3 lenders will seek to grow their mortgage business going forward.
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We can only detect a few notable trends on an overall basis from the presentation slides at the results briefing which are all downloadable from SGX website, coupled with some anecdotal evidence we gather at the ground levels. Do read our opinions here with a pinch of salt:
- DBS has finally overtaken as market leader this year amongst the 3 local banks and much credited to their DMR (Deposit Mortgage Rate) strategy as it was the first bank to launch FHR18 back in 2014. In 2 short years it has leapfrogged the other 2 bigger mortgage players.
- The success of this strategy may help explain how DBS home loans managed to consistently deliver a higher net interest margin or NIM of 1.86 (versus 1.72-1.73) over its other 2 rivals as it has more control over the final interest rate it charges its borrowers, compared to SIBOR loans where the interest is determined by the market.
- The higher NIM of DBS can also be explained by its lower cost base compared to its rivals with its large Sing dollar CASA (current account and savings account) deposits base of 127.1B (89% of total). This means that fixed deposits only form around 10% of its total Sing dollar deposits base, unlike say 30% in the case of OCBC. This has implication for which bank has a higher propensity to increase its DMR peg over time, when interest rate eventually rises.
- DBS also has a significantly higher loan-to-deposit ratio at over 91% compared to its other two local rivals. It has been aggressively lending out over the years on a much a bigger deposits base to start with. This can be double-edged sword as more aggressive lending generates return on assets for its shareholders but it can also cause the bank to be over exposed to certain sectors if its risk management does not keep up. However with rising NPLs goig forward we do expect the banks to exercise more restraint in lending.
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