Bank loans fell for a 10th straight month in July as the sluggish economy continued to weigh on business activity and sentiment.
Overall, loans slipped to $597.2 billion, down 2.2 per cent compared with July last year, due largely to a decline 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.
Business loans fell 5 per cent year on year in July to reach $351.8 billion, the 11th straight month of decline, according to preliminary data released yesterday by the Monetary Authority of Singapore.
The sharpest drop was in the general commerce sector, with loans plunging 22 per cent year on year to $59.7 billion.
Loans to manufacturers also experienced significant declines.
2.2% Percentage bank loans slipped, compared with July last year.
5% Percentage business loans fell year on year in July.
However, this was partially offset by a 7 per cent rise in lending to financial institutions.
"There could have been some initial post-Brexit concerns weighing on corporate loan demand in early July, and placements to financial institutions rose in response to the hunt for yield," said OCBC economist Selena Ling.
Lending to companies in the transport, storage and communications sector also went up.
Construction industry firms took out more loans against the same month last year, but loan growth to the sector slowed to 1.2 per cent - from 3.7 per cent in June and double-digit growth earlier in the year.
HUNT FOR YIELD
There could have been some initial post-Brexit concerns weighing on corporate loan demand in early July, and placements to financial institutions rose in response to the hunt for yield.
OCBC ECONOMIST SELENA LING, on the rise in lending to financial institutions.
"Domestic construction companies face headwinds, including oversupply, cooling measures and the tight foreign manpower situation," noted Ms Ling.
Lending to agriculture, mining and quarrying firms ticked up, as did loans to business services firms.
Meanwhile, consumer loans rose despite the gloomy economic outlook, supported by an increase in mortgages, credit card interest payments and share financing.
Overall, consumer loans rose to $245.5 billion in July, up 2.2 per cent from the same month last year.
Housing and bridging loans rose 3.4 per cent year on year to reach $187.7 billion, while credit card loans grew 2.9 per cent to $10.1 billion. Share financing chalked up the biggest jump, more than doubling year on year to $2.3 billion.
However, car loans slid 2.9 per cent to $7.8 billion.
Consumer loan growth is expected to "plod, rather than race along", in view of the softening labour market, said Ms Ling.