Oct bank lending sags on slowing growth

Total bank loans to consumers and firms, and total deposits at domestic banking units shrank in October.
Total bank loans to consumers and firms, and total deposits at domestic banking units shrank in October.ST FILE PHOTO

Firms borrowing less due to languishing global economy, weaker demand for exports

Bank loans fell in October as the slowing economy weighed on lending to businesses.

Total bank loans to consumers and firms came in at $601.7 billion, down 1 per cent from September.

Total deposits at domestic banking units fell as well, down 0.3 per cent to $550.6 billion from September's $552.8 billion.

This kept the ratio of loans to deposits at about 107 per cent in October, below a record high in October 1997 of 115.6 per cent.

If the ratio is too high, banks may not have enough liquidity to cover unforeseen fund needs while a low ratio could mean banks are not earning as much as they could.

Preliminary data from the Monetary Authority of Singapore out yesterday shows that lending to companies added up to $360.2 billion in October.

This was 1.9 per cent lower than that in September as financial institutions and firms in manufacturing and commerce borrowed less.

Loans to companies in building and construction as well as business services ticked upwards.

Lacklustre company borrowing comes as firms here grapple with the tepid global economy and languishing demand for exports.

The Ministry of Trade and Industry trimmed its full-year economic growth forecast last week and has also warned of a mixed outlook for next year.

CIMB Private Bank economist Song Seng Wun said the bank loan numbers reflect tough underlying business conditions and tepid growth momentum.

The manufacturing sector, in particular, has been in recession for a year, he noted.

"We shouldn't expect anything inspiring until the outlook starts picking up," he added.

Consumer loans in October came in at $241.5 billion, up 0.2 per cent from September's $240.9 billion.

Housing and bridging loans, the biggest component of consumer loans, added up to $183.6 billion in October, a 0.3 per cent increase from September.

Car loans continued their descent, with $7.88 billion lent in October, down 0.2 per cent from the preceding month, while credit card loans rose 0.3 per cent to $9.95 billion.

A version of this article appeared in the print edition of The Straits Times on December 01, 2015, with the headline 'Oct bank lending sags on slowing growth'. Print Edition | Subscribe