Bank loans fall for 11th month in a row in August

Decline largely due to lower business lending but slight uptick seen compared with July

Bank loans fell year on year for an 11th straight month in August as the sluggish economy continued to weigh on business activity and sentiment.

Loans slipped to $603.9 billion, down 1.6 per cent compared with August last year, due largely to a decline in business lending.

Compared with the preceding month, however, the August data was less downbeat.

Total bank loans rose 1.1 per cent in August over July, reaching a nine-month high.

The August data also marked the smallest year-on-year decline in loans since May this year, noted OCBC economist Selena Ling.

Demand for loans has stabilised but core business demand remains mixed, she added.

"Business sentiments are still soft, given the clouds on the risk horizon such as the United States presidential election and more immediate concerns about German and euro-zone banking sector stability."

Business loans fell 4.2 per cent year on year in August to reach $357.3 billion, the 12th straight month of decline, according to preliminary data released yesterday by the Monetary Authority of Singapore.

The sharpest drop was once again in the general commerce sector, with loans plunging 20.5 per cent year on year to $60.9 billion.

Loans to manufacturers also experienced significant declines. This points to "sustained doldrums for the manufacturing and export activities within Singapore and the region", said Ms Ling.

However, this was partially offset by a rise in lending to financial institutions, business services firms and companies in the building and construction sector.

Meanwhile, consumer loans rose year on year, supported by an increase in mortgages, credit card interest payments and share financing.

Overall, consumer loans rose to $246.5 billion in August, up 2.6 per cent from the same month last year.

Housing and bridging loans rose 3.4 per cent year on year to reach $188.3 billion, while credit card loans grew 3.1 per cent to $10.1 billion. Share financing chalked up the biggest jump, more than doubling year on year to $2.3 billion.

Buying interest and transactions appear to be picking up modestly in the housing and car markets, said Ms Ling. "For property, the benign interest-rate environment and speculation over potential cooling measures tweaks may have been contributing factors."

Bank loans growth probably bottomed in the second quarter and should improve modestly for the remainder of this year, she added.

A version of this article appeared in the print edition of The Straits Times on October 01, 2016, with the headline 'Bank loans fall for 11th month in a row in August'. Print Edition | Subscribe