Total bank loans were down for an eighth straight month in May as the uncertain economic environment continued to weigh on sentiment.
Overall, loans slipped to $592.8 billion in May, down 0.7 per cent compared with the same month last year, with the decline stemming from a fall in business lending.
Bank loans last suffered a similar extended decline in the 1980s, when total lending shrank for 12 months in a row, from May 1986 to April 1987, said DBS economist Irvin Seah.
Business loans have been the main culprit this time - they fell 3.1 per cent year on year in May to reach $348.7 billion, the ninth straight month of decline.
The sharpest drop was in the general commerce sector, with loans falling 23.1 per cent year on year to $55.9 billion.
Loans to financial institutions also experienced a significant drop, declining 7 per cent year on year, while lending to firms in the manufacturing and business services sectors suffered too.
CONSUMERS STILL BULLISH
The unemployment rate remains low at about 2 per cent while job redundancies... have not quite reached previous crisis levels. These factors have probably provided comfort for consumers to remain bullish.
MR IRVIN SEAH, DBS economist
However, loans to construction industry firms as well as to companies in the transport, storage and communications sector grew. Lending to agriculture, mining and quarrying firms also ticked up.
Meanwhile, consumer loans went up despite the gloomy economic outlook, supported by an increase in mortgages, credit card interest payments and share financing.
Overall, consumer loans rose to $244.1 billion in May, up 2.8 per cent from the same month last year.
Housing and bridging loans increased 4 per cent year on year to reach $186.5 billion, while credit card interest payments grew 4.5 per cent to $10 billion.
Share financing chalked up the biggest jump, more than doubling year on year to $2.4 billion.
However, car loans slid 4.1 per cent to $7.8 billion.
DBS' Mr Seah said the "dichotomy" between consumer and business loans might be due to the relatively stable labour market, which has yet to "crack" despite the lacklustre economic outlook.
"The unemployment rate remains low at about 2 per cent while job redundancies... have not quite reached previous crisis levels," he noted. "These (factors) have probably provided comfort for consumers to remain bullish."
OCBC economist Selena Ling said bank loans could have fallen by up to 1.1 per cent in April to June compared with the corresponding period a year ago.
She expects total lending to fall 0.2 per cent for the whole of this year, "especially given lingering post-Brexit uncertainties".
Credit ratings agency Moody's has revised the outlook for Singapore's banking sector from stable to negative over the next 12 to 18 months, reflecting weaker operating conditions for banks as well as softer domestic and regional economic and trade growth, said Ms Ling.