UOB faces the most deposit pressure, warns analyst

Blame it on UOB's high dependence on time deposit funding.

Here's more from CIMB:

We believe that the reason for muted system deposit growth is the low interest rate environment. Because of th sustained low interest rates, depositors have turned yield-hungry, channelling savings into property (shoebox units), REITs, bonds, preference shares and perpetual bonds.

There is still excess S$ liquidity at the moment but that gap is closing. S$-LDR has gone up to 73.6% from 66.1% at the start of 2010. If system deposit growth stays muted due to sustained leakage into alternative yield instruments, the local banks might be forced to meet the deposit rate competition head-on as liquidity tightens.

Local banks’ S$ loans-to-deposit ratio (LDR) has been on the uptrend in recent quarters. In 2Q12, UOB had the highest LDR among local peers, even higher than that of the system. In our view, compared to peers, UOB faces the most pressure to raise S$-deposit rates if system liquidity tightens.

In fact, UOB was offering relatively attractive promotional rates in August and September. We think it could see above-peers margin compression going forward as its funding costs edge up. Also, in our estimation, UOB has the highest dependence on time deposit funding among the three.

Reaching the people who run Asia's businesses is harder than it used to be.

Inboxes are crowded. Attention is short. The executives you most want to reach — the founders, CFOs, and operators who actually move budgets — are the hardest to find through the usual channels. If you're building a company, a category, or a reputation, you already know this.

We've spent twenty years building the room they read. Singapore Business Review is where senior decision makers in Singapore and across Southeast Asia come for business coverage they can't get elsewhere — in print, online, and in person at the summits and roundtables we host across seven markets.

If you have something these readers should know about — a point of view worth publishing, a product worth their attention, an event worth their time — we'd like to hear what you're trying to do.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia