DMG & Partners, Feb 4
SYSTEM loans grew 1.6 per cent m-o-m in December, lifting growth to a high of 19.5 per cent y-o-y in 2013 (Dec 2012: +10.4 per cent y-o-y).
Loan expansion was underpinned by the business segment (+22.1 per cent y-o-y) as consumer lending moderated (+12.8 per cent y-o-y).
Robust growth in business loans (DBU and ACU) reflects Singapore's increasing importance as a funding centre for corporates and intra-Asian trade.
That said, we expect system loan growth to decelerate to high single-digit in 2014 largely on softening demand for mortgages.
Until interest rates rise, which is expected only in 2015, banks earnings growth would be muted.
DBS ("buy", target price: S$19.40) is our preferred pick given its stronger earnings growth (2014F: +7 per cent vs sector average of +5.7 per cent).
Sector - NEUTRAL
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