See what pushed Singapore bank system's LDR to another record high

Foreign banks are driving it up.

According to the latest statistics in February, Barclays believes that foreign banks are driving up the system loan to deposit ratio, which has reached 108%, its highest since 1999.

Here's more from Barclays:

February monetary statistics from the Monetary Authority of Singapore (MAS) showed that deposits contracted by 0.9% m/m while loans grew 1.2% m/m, resulting in the system loan to deposit ratio (LDR) climbing to 108%, another record high since 1999. We believe foreign banks are driving up the system LDR while local banks are increasingly preparing for the risk of potential outflows in future caused by tapering and tightening. DBS (OW), which is most positively leveraged to a rise in interest rates, is our top pick.

System deposits contracted by 0.9% m/m, across both DBU (-0.4%) and ACU (-0.7% in US$ terms and -1.4% in SG$ terms). System loans rose 1.2% m/m, again led by ACU + 2.1% m/m in USD terms, while DBU loans rose 0.4% m/m. Loan growth was driven by corporates, mainly in agricultural, mining and quarrying (3.3% m/m), and manufacturing (2.6% m/m), similar to the trends in January. After the strong 36% y/y growth in general commerce loans in FY13, growth slowed to 1.6% m/m in February. Other retail loans (ex housing) continued to grow at a reasonably strong pace, at 2.4% m/m (22% y/y) despite the MAS’s concern over the rise in consumer debt, while housing loans rose by 1% m/m.

The system loan-to-deposit ratio further climbed to 108% (from 106% in January 2014) as a result of the contraction in deposits and continued growth in ACU loans, which we believe was led by the foreign banks as the local banks are maintaining LDRs below 90%. DBS (OW) is our top pick among the Singapore banks given its strong deposit franchise and positive leverage to rising rates, followed by UOB (OW). We rate OCBC as UW as we believe the potential acquisition of Wing Hang Bank (exclusive talks deadline on 31 March) will remain an overhang.

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