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Business lending for June takes deepest dive since Lehman crisis

It falls 6.2% year on year to S$345b; such loans have fallen for 10 months straight

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SLOWER TIMES: Building and construction loans make up the single largest proportion of business lending. They grew just 3.7 per cent from a year ago to S$121 billion, compared to the double-digit gains in all but two months since February 2011.

Singapore

A SHARPLY reduced gain in construction loans and broad weakness across segments dragged business lending in June to its deepest fall since the Lehman crisis, preliminary data from the Monetary Authority of Singapore (MAS) on Friday showed.

Business lending fell 6.2 per cent from June 2015 to S$345 billion, in a contraction not seen since October 2009.

Business loans have been falling for 10 straight months now. Building and construction loans - the single-largest proportion of business lending - grew just 3.7 per cent from a year ago to S$121 billion.

The gain is sharply down from the double-digit gains in all but two months since February 2011. Building loans have been flat in recent times on a month-on-month comparison.

Overall bank lending in Singapore fell by 2.7 per cent last month from June 2015.

There was also a month-on-month contraction from May, extending the longest stretch of declines on record.

Loans through the domestic banking unit - which captures lending in all currencies but mainly reflects Singapore-dollar lending - stood at S$590 billion, down from S$607 billion a year ago; this was the ninth straight month of decline in bank lending - a record stretch ever since The Business Times started tracking bank-lending data in 1992.

Referring to the building and construction loans, Selena Ling, head of treasury research and strategy at OCBC Bank, said building activity was "gradually succumbing" to sentiment in the cooling property market.

That said, consumer loans, mainly boosted by mortgages, gained 2.8 per cent in June from a year ago to S$245 billion, rising at the same pace in May.

The big drag in business loans was also a result of further contraction in trade financing and manufacturing loans. General commerce loans plunged 24.7 per cent from a year ago to S$56.4 billion, extending declines since January 2015. Ms Ling warned that it has not bottomed yet, and the numbers are a testament to the weakness in regional trade activity.

The slide in manufacturing lending year-on-year for 19 straight months also affirms the extended soft patch for the sector, she added. This was down 7.2 per cent to S$27.3 billion.

Bank lending in June slipped by 0.4 per cent from the month before. In May, it had been up 0.5 per cent.