• March’s 3M-SORA was up 14bps MoM to 3.35%, 3M-SIBOR was down 2bps MoM to 4.19%.
• Singapore domestic loans dipped 3.10% YoY in February, below our estimates, while Hong Kong’s domestic loans declined 3.28% YoY in February. The CASA balance dipped slightly to 19.2% (Jan23: 20.0%).
• Maintain OVERWEIGHT. We remain positive on banks. Bank dividend yields are attractive at 5.7% with upside surprise in dividends due to excess capital ratios and push towards higher ROEs. SGX is another major beneficiary of higher interest rates [SGX SP, BUY, TP S$11.71].

3M-SORA continues to climb; 3M-SIBOR growth dips in March

Interest rates rose in March. The 3M-SORA was up 14bps MoM to 3.35%, while the 3M-SIBOR was down 2bps MoM to 4.19%. The SORA MoM increase similar to the 16bps increase in February but still the smallest growth recorded since May 2022, while the SIBOR MoM decline was the second decline since September 2020. March’s 3M-SORA improved by 310bps YoY and was 15bps higher than the 1Q23 3M-SORA average of 3.20%. March’s 3M-SIBOR improved by 352bps YoY and was 2bps lower than 1Q23 3M-SIBOR average of 4.21% (Figure 1).

Singapore loans growth declined in February

Overall loans to Singapore residents – which captured lending in all currencies to residents in Singapore – fell by 3.10% YoY in February to S$804bn. This was below our estimate of mid-single digit growth for 2023 as the rise in interest rates started to be more fully felt by consumers.

Business loans fell by 4.47% YoY in February, as business loans dipped by 0.57% for the month. Loans to the building and construction segment, the single largest business segment, grew 0.28% YoY to S$171bn, while loans to the manufacturing segment fell 15.06% YoY in February to S$22.4bn.

Consumer loans were down 0.86% YoY in February to S$311bn, as dips in other segments were offset slightly by strong loan demand in the housing segment. Housing loans, which make up ~70% of consumer lending, grew 2.57% YoY in January to S$222.3bn for the month.

Total deposits and balances – which captured deposits in all currencies to non-bank customers – grew by 6.06% YoY in February to S$1,741bn. The Current Account and Savings Account (CASA) proportion dipped slightly to 19.2% (Jan23: 20.0%) of total deposits, or S$335bn, as there was a continued move towards Fixed Deposits due to the high interest rate environment.