OCBC Bank expects up to 30% fall in new home loans

OCBC Bank expects up to 30% fall in new home loans this year following recent property-cooling measures, but the impact will not be as great to its mortgage book, said Ching Wei Hong, the bank's chief operating officer.

Over the past few years, OCBC has grown its mortgages strongly and the drawdown in 2013 of home loans sold in 2010 and 2011 will cushion the fall in new sales, he said at OCBC's fourth-quarter 2012 results briefing yesterday.

Last year, OCBC's home loans grew 18 per cent, or $5.7 billion, to $37.8 billion, with Singapore accounting for about 80 per cent.

Mortgages are OCBC's biggest loan product, making up 26 per cent of the $144 billion total loan book, which grew 7 per cent over the year and 3 per cent over the quarter.

"We've built up a very good size and do not expect loans to taper off significantly, come down slightly, will still get low teens (growth)," said Mr Ching, who also heads the bank's consumer financial services.

"In terms of sales, we do expect a sharper fall in new loan bookings, we estimate in the range of 20-30 per cent reduction in bookings," he said.

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.

The fall in new loans refers to bookings for new projects while mortgage sales for older properties or resales, are very quiet, he said.

"In terms of pricing, we've actually pricing up our loan book over the last quarter," said Mr Ching.

The margin pressure on home loans is easing off but it is still very competitive, he added.

OCBC's more optimistic view on home loans is in contrast to that of its bigger rival, DBS Group Holdings.

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

Its Singapore loan book is about $100 billion and mortgages make up about $37 billion, up about $5 billion in 2012, he said last week during the group's Q4 results briefing.

Resale bookings are down 25-30 per cent while bookings for new projects are 25-30 per cent higher because developers are giving discounts, noted Mr Gupta.

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 said.

In Hong Kong, 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 last year.

DBS' total loan book grew 8 per cent to $210.5 billion in 2012. 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.

Source: Business Times –16 February 2013