Asian banks' loan-to-deposit ratios fall as deposits outpace loans

The biggest banks in Asia-Pacific, most of which are from mainland China, logged declines in their loan-to-deposit ratios in the first quarter as deposit growth outpaced loans amid easy monetary conditions.

The loan-to-deposit ratios at 17 of the 20 biggest banks by assets in Asia-Pacific fell year over year in the January-to-March quarter, according to data compiled by S&P Global Market Intelligence. The ratio of a bank's total loans to deposits is often used by investors to assess a bank's liquidity, and a fall in the metric suggests that the lender's earnings may be below its potential.

Of the biggest banks in the region, 14 are from mainland China, three are from Australia, two are from South Korea and one is from Singapore. The number of banks that reported an increase in loans in the quarter was equal to those that suffered a decline. Eleven banks among the top 20 saw their deposits increase, while nine saw declines, the data shows.

China easing

China's central bank has maintained its easing bias as it seeks to support the economy, with surplus liquidity finding its way into banks as deposits from customers wary about spending. The government has set a GDP target of about 5% for 2023, after the economy missed its 5.5% growth target in 2022. The Chinese economy expanded 3.0% in 2022.

Aggregate loans grew 11.8% in the first quarter of 2023, compared with 11.4% in the same period of 2022, according to data from the People's Bank of China. Deposit growth for the period, meanwhile, accelerated to 12.7%, from 10% in the prior-year period, the data shows.

In contrast with the easing bias in China and continued ultraloose monetary policy by the Bank of Japan, most global central banks have tightened monetary policy since early 2022, seeking to tamp down inflation, which reached its highest level in several decades in the US and parts of Europe. Other Asia-Pacific central banks, including those of India, Australia, Singapore and Indonesia, have also tightened policy to tame inflation.

Biggest movers

Shanghai Pudong Development Bank Co. Ltd. reported the sharpest decline in loan-to-deposit ratio among large Asia-Pacific banks in the first quarter. The bank's ratio fell 5.50 percentage points year over year to 98.15%, mainly due to a 5.53% decline in loans.

China Merchants Bank Co. Ltd. and Hua Xia Bank Co. Ltd. were among the five mainland Chinese banks that logged the steepest declines in their loan-to-deposit ratios in the first quarter. Other large banks that posted declines in their loan-to-deposit include South Korea's KB Financial Group Inc. and Singapore-headquartered DBS Group Holdings Ltd.

Postal Savings Bank of China Co. Ltd. recorded a 0.57 percentage point increase in its loan-to-deposit ratio to 55.78%, the biggest gain among the top 20 largest banks in Asia-Pacific. The Chinese lender's loan growth outpaced the increase in its deposits. Industrial Bank Co. Ltd. and China Everbright Bank Co. Ltd. were the other two mainland Chinese banks to log an increase in their ratios, the data shows.