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Dec bank loans growth slows to near 5-yr low

Hit comes from a sharp 6.4 per cent fall in manufacturing loans compared to a month ago

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SOFT MARKET: Sustainable improvement in consumer and housing loans looks doubtful.

Singapore

BANK lending in December grew at 5.9 per cent from a year ago - the slowest pace since March 2010 - preliminary data from the Monetary Authority of Singapore showed on Friday.

Compared to November, it actually stagnated amid weak business loans, which have been contracting for most of the second half of 2014.

Loans through the domestic banking unit - which mainly reflect Singapore-dollar lending - stood at S$608 billion in December.

Business loans, which have shown clear weakness in the later part of last year, contracted 0.4 per cent to S$372 billion in December compared to a month ago. This reversed from the 0.8 per cent growth posted in November.

The hit in December came from a sharp 6.4 per cent fall in manufacturing loans compared to a month ago, reversing from slight gains made in November. Trade loans also declined for the fourth straight month. On a yearly comparison, trade-loan growth eased to a four-year low.

While construction loans - which make up the single-largest part, or about a quarter, of all business loans - were up 0.9 per cent in December, this was weaker than the 1.6 per cent growth posted in November.

On a yearly comparison, business loans grew just 6.4 per cent - a level not seen since August 2010.

"Key drivers of business loans are facing more subdued growth prospects going ahead," said Selena Ling, head of treasury research & strategy at OCBC Bank.

Consumer loans edged up slightly by 0.5 per cent from a month ago to S$236 billion in December. This mostly reflects higher housing loans, which make up three-quarter of loans to individuals. The gain compared with a 0.4 per cent lift in November.

With analysts' expectations for further softness in the domestic property market amid cooling measures and the rising interest rate environment, Ms Ling said it may be premature to conclude a sustainable improvement in consumer and housing loans is on the cards.

For 13 months now, year-on-year growth in consumer loans has been in single-digit territory, reflecting the raft of cooling measures introduced by the government. The total debt servicing ratio, which limits borrowings to 60 per cent of a person's gross monthly income, was put in place in 2013.