Report Summary
Faster Than Expected Growth In Q1 2007 Faster than expected growth in Q107 growth has led us to revise our year-end 2007 GDP forecast, to 5.8% from 5.2%. While we maintain our core scenario, which envisages a moderation in economic activity as a result of slowing external demand for Singapore's exports, the economy's resilience over the past two quarter's will support higher growth levels in the months ahead.
Singapore's government raised its 2007 growth forecast by half a percentage point in May, to 5.0-7.0%, after its economy registered faster than expected growth in Q107. This marks the second upward revision this year, as annualised GDP in the January-March period reached a seasonally adjusted 7.6% thanks largely to a booming construction and strong services sector. Year-on-year, the economy grew by 6.1% in the first quarter, beating the 6.0% advance estimate, which was based largely on data from January and February. Overall, Singapore's economy is holding up well, despite data for April pointing to weak manufacturing data and NODX (non-oil domestic exports) figures. Overall we expect the Singaporean economy to slow over the coming year, as an economic downturn in the US impacts on economic activity. Nevertheless it is holding up well, and to better reflect the economy's resilience, we too have upwardly revised our year-end forecast, to 5.8% from 5.2%, compared with 7.9% in 2006. Looking ahead however, the current decelerating trend is forecast to continue, as waning external demand and a restructuring of the economy towards greater service sector orientation begins to weigh on growth potential. Over our five-year forecast period (2007-11), GDP growth will contract to an average of 5.4%, down from 6.0% during 2001-06.
The Commercial Banking Sector Singapore's loan/asset ratio (38.3%) is falling, suggesting an 'air of caution' on the part of the banks.
However, Singapore's loan/GDP ratio is rising. Singapore's domestic market is very well developed by any standards, and has proven its ambition and capacity to establish itself as an offshore financial centre.
One can therefore expect that it will continue to grow, particularly with respect to deposits.
Latest figures show that total assets, loans and deposits amount to US$330.3bn, US$126.4bn and US$176.9bn, respectively. In local currency terms, asset growth was 19.6% over the preceding year and loan growth was a low 6.3% by the same measure. Deposit growth was stronger than loan growth, at 21.8%; deposits per capita currently amount to around US$40,399. Collectively, Singaporean banks hold bonds worth US$32.9bn. The banks' bond holdings amount to about 10.0% of total assets, indicating that they are neither highly nor lightly exposed to bonds.
Press Reports Press reports show that the Singaporean banking sector is currently strong, with record net profits posted in 2005 and growth expected to continue on into 2007. All three Singaporean banks posted profits, with
DBS Group Holdings showing the best improvement in core bank earnings. Growth is in large part due to a booming property market and a rapid increase in home loans. The booming property market does mean, however, that Singaporean banks are exposed through increased lending to investment companies involved in property development, and their total exposure to the industry could be 20-30%. Deferred payments schemes used by developers could pose additional risks to banks. High levels of liquidity in Singapore, though, mean that many buyers acquire with cash and much of the buying is at the high end of the market, thus helping to reduce bank risk. Competition is also currently tight, and there have been recent calls to reduce the sector from the current three, to two Singapore banks. They may, however, be able to grow by expanding internationally, and Singapore banks are expected to start expanding into India, with both DBS and UOB waiting for clearance from the Indian government to open branches there.
Banks are also opening up additional domestic branches to service small and medium-sized enterprises.
In other news, an extradition treaty has recently been signed between Indonesia and Singapore and the government has stressed that this will not scare off Indonesian investors or harm Singapore's banking and property sectors. In addition, Indonesia only constitutes 2-3% of the Singaporean financial sector. The treaty could, however, lead to the arrest of Indonesian officials accused of corruption who fled to Singapore during former President Suharto's regime.
Contents
Executive Summary
Key Issues
Changes To The Commercial Banking Forecast
Singapore Commercial Banking SWOT
Latest Developments - Q307
International Context
Lending Trends And External Accounts
Total Assets, Loans And Deposits
Year-On-Year Growth Rates
Per-Capita Deposits
Macroeconomic Trends And Developments
Economics: BMI Core Scenario
Politics: BMI Core Scenario
Business Environment:
Macroeconomic Activity
Industry Forecast Scenario
Comment On The Past
Comment On Forecasts
Comment On Trends
Banks' Bond Portfolios
Competitive Landscape
Market Protagonists
“Singapore Commercial Banking Report Q3 2007” is available from Report Buyer. For more information go to: http://www.reportbuyer.com/
Piribo Product ID: BMI00479
