Sing Investments & Finance

[weijian]

The big3 banks have reported their 2Q/1H25 results and continue to see their NIM dropping constantly as loan yields drop much faster than deposit yields. OTOH, SingFinance is seeing the opposite as its NIM expanded with deposit yields dropping much faster than loan yields.

Do Finance firms actually have much less proportion of loans that benchmark to SORA (which has dropped ~100bps this year), hence giving it some sort of "immunity"? And they probably also have higher deposit rates to start with, hence giving them more leeway to resist against dropping them as alternatives dimmer in attraction.

FIRST HALF ANNOUNCEMENT Condensed Interim Financial Statements for Six Months ended 30 June 2025

Customer loans declined by 1% to $2.63 billion in a competitive market. Loan portfolio remained resilient with nonperforming loans ratio held steady at 0.2%. The Group continued to maintain adequate credit allowances for its credit
exposures amid economic uncertainties.

NIM expanded by 9 basis points to 2.15%, as the saving from lower deposit costs more than offset the decline in asset yields while interest rates continued to ease. Non-interest income growth was supported by strong fees and commissions and rental income, which rose by 54% and 11% respectively.

1H25 results: https://links.sgx.com/FileOpen/Announcem...eID=854363

[ghchua]

Hi weijian,

The fact is that local banks have a large pool of deposit savings accounts, paying only 0.05%pa interest and current accounts yielding zero interest. There is not much they can reduce the interest rate of these accounts when the overall interest rate environment is down. Therefore, their NIM will be narrowed along with lower loan rates.

On the other hand, what we can see from Sing Investments & Finance is that their deposit rates are quite high. Therefore, there is more leeway to reduce these costs when interest rate is coming down. Therefore, it is actually positive for their NIM as long as they priced their loan rates carefully.

YTD, Sing Investments & Finance share price had outperformed DBS significantly. The market has started to take notice of it. As I have said before, based on its long term ROE profile, it does not deserve to trade way below its book value.

[weijian]

Hi weijian,

The fact is that local banks have a large pool of deposit savings accounts, paying only 0.05%pa interest and current accounts yielding zero interest. There is not much they can reduce the interest rate of these accounts when the overall interest rate environment is down. Therefore, their NIM will be narrowed along with lower loan rates.

On the other hand, what we can see from Sing Investments & Finance is that their deposit rates are quite high. Therefore, there is more leeway to reduce these costs when interest rate is coming down. Therefore, it is actually positive for their NIM as long as they priced their loan rates carefully.

YTD, Sing Investments & Finance share price had outperformed DBS significantly. The market has started to take notice of it. As I have said before, based on its long term ROE profile, it does not deserve to trade way below its book value.

hi ghchua,

Coincidentally SingFinance's rival HLF also posted their 1H25 results - HLF's NIM has dropped to 1.3% from ~1.6% in FY24 and ~1.4-1.48% in FY23. They explained that rate on loans dropped more than deposit rates. I would assume been a finance firm, HLF should also have similar higher (than banks) deposit rates. It would be interesting to understand why SingFinance stood out, at least in 1H25 results.

On another note, SingFinance and HLF's NIM are different baselines and so I suppose their target clientele are probably different.

As a long term investor, I believe it is actually cold comfort that "YTD, Sing Investments & Finance share price had outperformed DBS significantly", isn't it.
Or rather, investors with shorter term horizons are the ones to welcome such price changes since they find more opportunities doing these sort of arbitrages.

Of course, mean reversion happens. Just that I try to minimize having my investment thesis largely depend on it.