Saturday, March 30, 2013

Demand for home and car loans has plunged this year: DBS  |  Posted: 28 March 2013 2216 hrs

SINGAPORE : Southeast Asia's biggest bank has said demand for home and car loans in Singapore has plunged this year following government measures to cool inflation.

DBS Group's chief executive, Piyush Gupta, told Channel NewsAsia new home loan demand fell by 50 to 60 per cent last month.

He said lending this year is unlikely to match 2012.

Mr Gupta said: "March volumes are down but I think they will be down more like 15 to 20 per cent relative to what they were, and that is consistent with my view that the latest set of measures will probably bring volumes down in terms of incremental growth... what that means is last year we grew five billion, this year we will grow 3-4 billion."

Mr Gupta said car loans halved last month after the Monetary Authority of Singapore (MAS) restricted borrowing to 60 per cent of the vehicles' value, and he expects no improvement this month.

Analysts have said auto loans account for less than 4 per cent of DBS' total loan book.

Jonathan Koh, associate director at UOB Kay Hian Research, said that even if consumer loans slow, DBS should be able to make up the shortfall with higher business lending.

DBS has been waiting a year for Indonesia's approval for its US$6.8 billion bid for Bank Danamon.

And while Mr Gupta dismissed media reports that the agreement is only weeks away, he said he is positive DBS will soon acquire Danamon's near 600 Indonesian branches.

He said: "Frankly, we do not know a lot more than you have seen in the media. It is safe to say a lot of it is speculative. However, our application is in.

"We have been working very closely with the central bank on responding to the queries that they have, and so we remain hopeful we should get approval of our application sometime in the near future."

Indonesia's central bank said it will approve the deal if its lenders get equal access to the Singapore market.

Mr Koh said DBS may abandon a takeover if it can't control branding and technology.

He said: "The final outcome may depend on whether DBS is allowed to get majority control. So if they get majority control, I think DBS will go ahead with the transaction.

"If they do not get majority control, they are not allowed to have more than 50 per cent stake in Bank Danamon, then DBS may have to work out an alternative arrangement and in the worst case scenario, DBS may abort the deal."

Mr Gupta said that if MAS allows Indonesian banks to expand in Singapore, more competition would not be a problem for DBS.

He said the bank's market share is not suffering from the presence of Citibank, HSBC and Maybank, and DBS is planning its own regional expansion in Indonesia, India and Greater China.

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