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Healthy growth in loan markets boosts margins for Big Three local banks

Channel NewsAsia Online
13 December 2006

Healthy growth in loan markets boosts margins for Big Three local banks

Synopsis

It has generally been a good year for Singapore’s three local banks – DBS, UOB and OCBC: 

Healthy loan growths where lending rate is rising faster than depositing rate;
Growing wealth has resulted in better fees for private banking and corporate financing deals

And there could be further growth ahead.

According to experts, the Big Three will have to be more innovative in their product offerings to fight the increasing competition from foreign Qualifying Full Banks operating in Singapore and lenders like GE Money.

Leon Perera, Group Managing Director, Spire Research & Consulting, says: “The success of GE Money for example, is a wake up call to the banks not to neglect the needs of low-income consumers who can be said to be under-banked. And 
in this sector providing credit to the low to middle-income consumers, the banks will face non-traditional types of competition from, for example, thrift-and-loan societies, finance companies and so on.”

All three Singapore lenders have grown by expanding in the region. Analysts say Southeast Asia presents great growth opportunities for Singapore. This is because Singapore players had been working the ground over the past few years to establish a foothold whereas international rivals have neglected the region. Downside risks include the projected slowdown in the US, Japan and China markets.

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