3Q bank lending to other countries aside China rose 32%.
Singapore banks are now driving topline growth to offset more provisions that need to be set aside in the face of worsening asset quality. Amongst which is finding new sources of loan growth elsewhere as banks contained risk exposures from China.
"Shrinking China's trade loans from mor attractive onshore borrowing rates would result i a retreat of capital back into Singapore or banks would have to find new sources of growth to fill the vacuum. This will affect DBS and OCBC more so than UOB as UOB has the smallest China exposure," said Maybank KimEng.
For loans growth in constant currency terms for this quarter, the research house noted that UOB did the best at 7% vs DBS's 5% and OCBC's 0%.
"OCBC's flat growth also underlies its more cautious stance in this landscape to enter new relationships with new clients," it said.
Based on the loan composition by geography between 2014 vs 3Q16, loans in Singapore have now risen by 1-2% for DBS and OCBC. However, subdued economic prospects in Singapore are pushing banks to seek growth in other countries.
According to Maybank KimEng, for DBS and UOB, lending to “Others” by region rose from 8-9% in 2014 to 10-12% of total loans currently.
This quarter, the lending by DBS to “Others” in the region increased 32% YoY was broad-based across geographies/industries. Similarly, OCBC's lending to the “Rest of the World” increased 7% YoY across broad-based industries. For UOB, loans in “Others” region increased 16% YoY mainly due to financial institutions (FI) lending in Australia, which also explained the 25% QoQ/4% YoY increase in FI loans.
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