http://www.businesstimes.com.sg/arch...-half-20130207

Published February 07, 2013

DBS sees growth in mortgages falling by half

By Siow Li Sen


[SINGAPORE] DBS Bank's local mortgages growth could halve this year as the residential property market slows, said chief executive Piyush Gupta.

The bank's Singapore loan book is about $100 billion and mortgages make up about $37 billion, up about $5 billion last year, he said yesterday during the group's Q4 results briefing.

"A couple of weeks ago, my estimate was that mortgage volume is going to come off," he noted.

Mr Gupta said at an event last month that mortgage volumes could fall as much as 20 per cent following the latest round of cooling measures.

The government introduced harsher cooling measures on Jan 11 to rein in the red-hot property market. Private home sales rose to a record 22,290 units in 2012, easily eclipsing the previous 16,292 peak in 2010.

Last month DBS' mortgage applications held up, though a lot were for purchases made before the measures, Mr Gupta said. "If you exclude that ... interestingly bookings are still holding up."

But there is a shift in the mix. Resale bookings are down 25-30 per cent while bookings for new projects are coming in at 25-30 per cent higher because developers are giving discounts, Mr Gupta pointed out.

The problem is that resale bookings get onto the loan book immediately but for a building under construction, the loan disbursements happen over two to three years, he explained.

"Our growth instead of being $5 billion might wind up being $2.5 to $3 billion for this year," said Mr Gupta. "So we were already projecting about 10 per cent (total) loan growth (for 2013); I think, the total impact of this is we might give up one percentage point, so we might grow 9 per cent, instead of 10 per cent."

Pricing for new mortgages has also improved as subsidies were removed and interest rates were raised but the impact has been offset by the rollover of older loans.

So far, DBS has been able to hold up the prices, but this would also depend on the competition, said Mr Gupta.

In Hong Kong, though, DBS is running down its mortgage business which is not making money because of its high funding cost, he said. DBS Hong Kong's mortgages dropped $1 billion this year, he added.

The group's total loan book grew 8 per cent to $210.5 billion last year. Growth was broad-based, led by corporate loans in Singapore and the region and consumer loans. Housing loans rose 10.4 per cent to $45.6 billion.

On this year's projected 9-10 per cent loan growth amid slow economic activity, Mr Gupta said 40 per cent of DBS' business is outside Singapore.

Singapore is projected to grow 1-3 per cent this year following 1.2 per cent in 2012. And Singapore being a financial centre means banks sell loans not just to the domestic economy, he added.

Last year, total lending rose 17 per cent, according to estimates from the Monetary Authority of Singapore.