Why analysts aren't surprised Singapore banks' system loan growth is spiraling down

Will it ever normalise?

According to DBS, system loan growth is trending down, as expected. Analysts expect loan growth to normalise at a more modest c.2% q-o-q, after the chucky loan growth seen in 1H13.

General provisions should moderate in line with slower loan growth and they do not expect negative surprises for specific provisions. Capital should improve q-o-q with recovery of some AFS positions.

Here's more from DBS:

In line with the softer capital market environment, market-related income is expected to moderate q-o-q. OCBC is likely to see insurance contribution remaining low for the quarter, albeit slightly better q-o-q, but other banking-related income should remain robust.

Wealth management fees may stay soft due to slower activities given the uncertainty in the investment environment. UOB would be booking a one-off gain from the sale of its stake in Pan Pacific Hotels in 3Q13, lifting its non-interest income, and alleviating its overall weaker market-related non-interest income trend.