• September’s 3M-SORA was up 1bps MoM to 3.70% and was 7bps higher than the 3Q23 average of 3.69%. 3M-HIBOR was down 3bps MoM to 4.95%.
• Singapore domestic loans dipped 6.71% YoY in August, below our estimates. The loan decline was slightly larger than in the previous month. The CASA balance dipped slightly to 18.8% (Jul23: 18.9%).
• 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 growth flat; 3M-HIBOR continues decline in September

Singapore interest rates continued to flatten in September. The 3M-SORA was up 1bps MoM to 3.70%. September’s 3M-SORA surged by 186bps YoY and was 7bps higher than 3Q23 3M-SORA average of 3.69% (2Q23: 3.62%).

Hong Kong interest rates declined and slightly reversed the previous few months’ increase. The 3M-HIBOR was down 3bps MoM to 4.95%, lower than August’s MoM decline of 12ps. Nonetheless, this is the third highest level that the 3M-HIBOR has reached so far in 2023. September’s 3M-HIBOR improved by 197bps YoY and was 6bps lower than 3Q23 3M-HIBOR average of 5.01% (Figure 1).

Singapore loans growth continues to decline

Overall loans to Singapore residents – which captured lending in all currencies to residents in Singapore – fell by 6.71% YoY in August to S$786bn. This was below our estimate of low-single digit growth for 2023 as the rise in interest rates started to be fully felt by consumers.

Business loans fell by 9.69% YoY in August. Loans to the building and construction segment, the single largest business segment, fell 1.93% YoY to S$169bn, while loans to the manufacturing segment fell 21.38% YoY in August to S$21.7bn.

Consumer loans were down 1.73% YoY in August to S$310bn, 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 1.05% YoY in August to S$223bn for the month.

Total deposits and balances – which captured deposits in all currencies to non-bank customers – grew by 3.10% YoY in August to S$1,776bn. The Current Account and Savings Account, or CASA proportion dipped slightly to 18.8% (Jul23: 18.9%) of total deposits, or S$334bn.