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28th April 2015

Singapore Real Estate

Loans growth estimate cut to 6% this year

Source: Business Times / Companies & Markets

DBS Group Holdings expects 6 per cent loans growth for 2015, said chief executive Piyush Gupta on Monday. That is down from the previous estimate of 8 per cent, he said at a press conference following the bank's Q1 results.

"We should grow the loan book, in constant-currency terms, 6 per cent for full year," said Mr Gupta.

At 6 per cent, it would be the slowest loan expansion since 2009. Mr Gupta was appointed DBS chief executive in November 2009. In 2009, a challenging year following the 2008 global financial crisis, DBS still managed to increase its loan book by 3 per cent as Asia bounced back in a V-shaped recovery in the second half.

Customer loans growth in 2014 was 11 per cent. Gross customer loans grew 2 per cent during Q1 2015 to S$284 billion due to currency effects. Loans were little changed in constant-currency terms.

Growth in regional corporate loans and Singapore housing loans was offset by a decline in trade loans.

DBS said trade loans fell 8 per cent on quarter to S$46 billion due to the contraction in China trade as growth slowed in the world's second largest economy and commodity prices fell. Another factor was the onshore-offshore renminbi interest rate convergence.

But non-trade loans are increasing across the region, Mr Gupta said. A lot of the non-trade loans are syndicated deals, he said.

In Q1, DBS was one of three banks to close a US$1.5 billion term loan facility for Formosa Group, Taiwan's largest conglomerate. Another syndicated deal was the HK$4 billion facility for Hong Kong's Kingboard Laminates Holdings, an electronic materials manufacturer.

DBS also saw strong demand for Singapore mortgages.

"New (mortgage) bookings in Q1 was the strongest . . . in many quarters," he said, adding that in Q1, new bookings came to S$2.1 billion to S$2.2 billion.

The bank is gaining market share in home loans; it's now at 24.56 per cent, he said.

Mortgages grew to S$53.9 billion at end-March 2015, up from S$52.9 billion and S$49.8 billion at end-2014 and March 31, 2014, respectively.

DBS has the smallest housing loan book among the three local banks. The housing loan books of rivals United Overseas Bank (UOB) and OCBC Bank were S$54.7 billion and S$54.2 billion respectively as at end-2014. UOB and OCBC will report first quarter results on Thursday.

DBS' sales of new home loans were mainly refinancing deals to fixed rate loans from floating rate packages. About one third of new home loans were on fixed rate loans, Mr Gupta said.

DBS sells three-year fixed rate loans at 2.18 per cent per annum. Not many banks can fix the interest rates for three years but DBS can because of its large deposits, Mr Gupta said.

DBS, South-east Asia's largest bank, saw customer deposits rise 2 per cent from the previous quarter and 8 per cent from a year ago to S$324 billion.

- By Siow Li Sen