Singapore banks' loan growth suffers 11th consecutive month of negative growth in November

Asset quality continues to worsen.

According to Maybank Kim Eng, Nov’s banking system data validate our negative view on the sector. Fundamentally, our outlook on Singapore banks has not changed. System loan growth continued into its 11th consecutive month of negative YoY growth and asset quality continues to worsen.

Banks will focus on driving revenue and cost containment to offset more provisions that need to be set aside in the face of worsening asset quality.

Here's more from Maybank Kim Eng:

System loan growth now at -1.2% YoY vs -2.2% YoY in Oct. While an improvement across lending in most sectors, overall outlook remains challenging. Corporate loan growth at -1.9% (Oct: -3.6%) and consumer loan growth slid to +0.7% (Oct: +1.7%).

We estimate ~1-2% loan growth in FY17E for Singapore banks as we think: 1) lacklustre lending environment and 2) banks are likely to be careful in their lending and will work with customers whom they are familiar with.

Deposits grew 4.9% YoY, with DBU and ACU deposit growth at +6.2% and +3.5% respectively (ACU growth in SGD terms). The increase in ACU deposit growth is largely attributed to USD appreciation. System LDR eased to 97.8% from 98.3% in Oct.