• August’s 3M-SORA was up 1bps MoM to 3.69% and 3M-HIBOR was down 12bps MoM to 4.98%.
• Singapore domestic loans dipped 6.15% YoY in July, below our estimates. The loan decline has slightly increased from the previous month. The CASA balance was flat at 18.9% (Jun23: 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 flattened; 3M-HIBOR declined in August

Singapore interest rates flattened in August. The 3M-SORA was up 1bps MoM to 3.69%. August’s 3M-SORA surged by 227bps YoY and was 7bps higher than 2Q23 3M-SORA average of 3.62% (1Q23: 3.20%).

Hong Kong interest rates declined and slightly reversed the previous few months increase. The 3M-HIBOR was down 12bps MoM to 4.98%, a reversal of July’s MoM increase of 26bps. Nonetheless this is the second highest the 3M-HIBOR has reached for 2023. August’s 3M-HIBOR improved by 256bps YoY and was 70bps higher than 2Q23 3M-HIBOR average of 4.28% (Figure 1).

Singapore loans growth decline steepened in July

Overall loans to Singapore residents – which captured lending in all currencies to residents in Singapore – fell by 6.15% YoY in July 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 8.75% YoY in July. Loans to the building and construction segment, the single largest business segment, fell 2.46% YoY to S$169bn, while loans to the manufacturing segment fell 22.75% YoY in July to S$21.3bn.

Consumer loans were down 1.84% YoY in July to S$309bn, 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 1.09% YoY in July to S$223bn for the month.

Total deposits and balances – which captured deposits in all currencies to non-bank customers – grew by 3.25% YoY in July to S$1,751bn. The Current Account and Savings Account, or CASA proportion was flat at 18.9% (Jun23: 18.9%) of total deposits, or S$330bn.

Hong Kong loans growth continued to decline

Hong Kong’s domestic loans growth declined 4.73% YoY and declined 0.98% MoM in July. The YoY decline in loans growth for July was higher than the decline of 4.20% in June 2023, while the MoM decline of 0.98% was higher than the decline of 0.03% in June 2023.