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

New Straits Times - - Business -

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

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