Singapore bank trio may benefit from some HK-like property mania

SINGAPORE: Stable oil prices are fine and a recovery in the Baltic Dry Index can’t hurt. But seriously, how long can Singapore’s banks remain hostages of the island’s shipping and offshore marine services industry?

That question is bound to be asked as another earnings season comes burdened with a high-profile bankruptcy.

Ezra Holdings Ltd, that sought protection from creditors in the US last month, counts DBS Group Holdings Ltd and Oversea-Chinese Banking Corp (OCBC) among its biggest unsecured creditors. United Overseas Bank Ltd (UOB) is on the hook too. The trio’s claims total US$642 million (RM2.78 billion), most of which is unsecured.

Providing for losses on soured corporate debt is one thing; finding new borrowers to replace the duds is another. Mortgages should have been the natural fallback.

Yet, unlike Hong Kong which is in the grip of property mania, Singapore’s residential real estate market is comatose after 14 straight quarters of declines in apartment prices.

In 2013, developers offered almost 16,000 new homes in Singapore, compared with 11,000 in Hong Kong. Last year’s figure for Singapore was below 8,000, while it almost touched 17,000 for a third year in Hong Kong.

While bankers rue the absence of a red-hot property market, their salvation is the so-called “net stable funding” requirement.

As regulators dissuade lenders from backing a long-term assets like mortgages. Singapore banks, which get plenty of lazy deposits, have an advantage over foreign rivals.

Jeremy Teong, an analyst at Phillip Securities Pte, estimates that DBS, OCBC and UOB had 47 per cent of the island’s housing loan market at the end of last year, compared with 43 per cent at the end of 2014.

Their market share may increase further in 2017. However, competing for good-quality mortgage business could also mean sacrificing margins, says Teong.

Hong Kong banks, too, are slashing mortgage rates, but they have the volumes to compensate. Where can Singapore banks find new customers when wage incomes among condo