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DBS chief flags steeper drop in mortgage loans growth this year

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DBS chief executive officer Piyush Gupta said on Monday there has been a moderate slowdown in economic growth, but conditions are still favourable for expansion.

DBS chief executive officer Piyush Gupta said on Monday the mortgage business is expected to slow down more than earlier expected. 

The bank now expects new mortgage bookings to end at S$2.5 billion for the year, slashing its property loan growth forcecast for 2018 more deeply by S$1.5 billion, Mr Gupta told reporters at the bank's third-quarter results briefing.

DBS, Singapore's biggest mortgage provider, had in the previous quarter cut its property loans growth forecast by S$1 billion, given that this year's cooling measures are expected to hit sentiment. The bank had originally anticipated putting on about S$4 billion consumer mortgages this year. DBS continues to hold a 31 per cent share of the Singapore housing loan market.

All in, DBS expects mid-single-digit loan growth this year. It also expects continued net interest margin progression through to 2019. The asset quality is stable, though the bank expects moderate deterioration in the SME (small and medium-sized enterprise) portfolio as interest rates rise.

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Mr Gupta expects the bank to be able to deliver a 13 per cent in return-on-equity (ROE) next year (see amendment note). He said: “Our own assessment is we’ll come in at 12.2 – 12.3 per cent ROE this year. We think we should be able to approach 13 per cent ROE next year.”

The trade war's impact, meanwhile, has been mostly on market sentiment, and has not been directly felt on the economy yet. "The outlook for next year continues to be quite favourable," he said. He noted as well that China deleveraging is a concern, but is not significant.

The "angst" from trade tensions will not be as material as markets expect, given that the technology supply chains cannot be shifted around so quickly.

"This doesn't happen overnight," he said, adding that even if there is a migration of trade and business out of China, it is likely to stay within the Asean region.

Shares of DBS were trading at S$24.06 as at 1.25pm, down 2.4 per cent or 60 Singapore cents. This comes amid broad weakness, with shares of its banking peers OCBC and UOB likewise trading lower on Monday. 

Amendment note: The article has been amended to clarify that the ROE target of 13 per cent is expected next year, and not this year as earlier reported.