Bank lending down as home loans fall for 7th straight month

Housing loans continued to drop for the seventh month, by 0.2 per cent. Banks lent $201.77 billion in July, compared with $202.21 billion in June.
Housing loans continued to drop for the seventh month, by 0.2 per cent. Banks lent $201.77 billion in July, compared with $202.21 billion in June.ST PHOTO: KUA CHEE SIONG

July figure also hit by weaker manufacturing, general commerce and business services lending

Mortgage lending declined for the seventh month in a row to help send overall bank borrowing down last month - the first contraction in six months.

Banks lent a total of $680.7 billion, down 0.9 per cent from the $687.08 billion in June, preliminary data showed yesterday.

But lending was up 2 per cent compared with July last year.

Maybank Kim Eng bank analyst Thilan Wickramasinghe said loans have been weak due to contracting mortgages as well as weaker manufacturing, general commerce and business services lending.

"Except for mortgages, these sectors are sensitive to the current volatile macro environment. The trade war and slowing growth everywhere are impacting domestic loan growth, given Singapore's highly open gearing towards global macro cycles," he added.

Associate Professor Lawrence Loh of the National University of Singapore Business School said: "From the business side, the drop may suggest that there are fewer expansion opportunities in the economic cycles now, thus the need for loan capital is less.

"For consumers, the drop may signify more prudent purchase behaviours due to imminent uncertainties in their earning powers."

Bank loans to businesses came in at $418.01 billion last month, down 1.3 per cent on June's level of $423.5 billion, the Monetary Authority of Singapore noted yesterday.

TWO PERSPECTIVES

From the business side, the drop may suggest that there are fewer expansion opportunities in the economic cycles now, thus the need for loan capital is less. For consumers, the drop may signify more prudent purchase behaviours due to imminent uncertainties in their earning powers.

ASSOCIATE PROFESSOR LAWRENCE LOH of the National University of Singapore Business School, on the fall in bank lending.

Loans for manufacturing, general commerce and financial institutions were down, while construction recorded month-on-month growth.

Lending to the manufacturing sector fell 2.7 per cent compared with June, but construction borrowings grew 0.7 per cent.

Bank lending to consumers hit $262.7 billion, down 0.3 per cent from June.

Housing loans totalled $201.77 billion, 0.2 per cent lower than June and the seventh month of contraction. They were down 0.8 per cent on July last year.

"Continued government property cooling measures and limited visibility on when these measures will be lifted have generally caused caution within this segment," Mr Wickramasinghe said.

Prof Loh noted that the overall outlook for bank lending will continue to be influenced by external factors.

He said: "The outlook for loans mirrors that for the economy that is fraught with volatilities induced by US-China trade tensions, the Hong Kong protests and the Korean peninsula's geopolitical challenges, as well as Brexit consequences."

A version of this article appeared in the print edition of The Straits Times on August 31, 2019, with the headline 'Bank lending down as home loans fall for 7th straight month'. Print Edition | Subscribe