Local banks are feeling the pressure from the slowing property market as bad debts filter through and new home loans fall.
OCBC chief executive Samuel Tsien told a briefing yesterday that the number of new mortgages issued has dropped by 40 per cent for the year so far, compared with the same period two years ago.
Mr Tsien chose 2012 as the base of comparison as that was the peak of the recent property market boom.
Unless there is a significant uptick in the property sector, the impact of slower growth in the mortgage book could put a dent in earnings next year, he said.
"New housing loan origination has come down significantly," Mr Tsien said at the briefing on OCBC's third-quarter results.
"We expect by the second half of next year, you will start to see the impact of the lower loans origination, which started two years ago."
But he stressed that OCBC's overall housing loans may not come down as its newly acquired Wing Hang Bank is fairly strong in housing loan originations in Hong Kong.
The local banks are being sheltered because of the strong pipeline of home loans that is still progressively coming through, depending on the completion status of properties.
United Overseas Bank (UOB) reported yesterday that its non-performing loans (NPL) for mortgages came in at $502 million as at the end of September. That was 12.3 per cent higher than the $447 million NPL seen in the second quarter and 70.2 per cent higher than the $295 million for the same period last year.
UOB said the housing NPL rose in the past two quarters primarily due to borrowers investing in a high-end residential project in Singapore.
The total NPL associated with the unnamed project was $166 million, including $80 million logged for the second quarter and $59 million for the third quarter.
UOB managing director for investor relations Jimmy Koh noted that the NPL amount set aside for the project had dropped in the latest quarter.
"We are confident we're on the other side of this issue and we remain positive on the rest of our housing loan portfolio," he said.
Total NPL at UOB for the third quarter was $2.29 billion, down from $2.31 billion in the second quarter.
This article was first published on Oct 31, 2014.
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