BMI cuts loan growth forecast to 5% for S'pore banks

RESEARCH firm BMI has cut its forecast for loan growth of Singapore banks to 5 per cent from 10 per cent, citing economic headwinds ahead.

Singapore's banks are expected to be more cautious about extending credit as the Chinese and South-east Asian economies slow down, BMI said in a report.

Demand from borrowers could decline as well as the tepid economy cools the growth of housing and bridging loans.

"Overall, we believe that loan growth will remain subdued throughout 2016, and have lowered our forecast to 5.0 per cent, versus 10.0 per cent previously," BMI wrote.

Nevertheless, net interest margins at Singapore's three banks are expected to improve as lending rates increase and banks become more judicious about lending.

If the Singapore government eases up on property cooling measures that were implemented at the height of the property market in 2012 and 2013, that could give borrowing a boost. However, BMI does not expect the government to loosen policy.

"It remains our assertion that the Singaporean government is comfortable with the pace of the property market's correction so far, and prefers to see affordability improve further before it begins to ease up on its wide-ranging macro-prudential measures aimed at keeping a lid on prices," BMI wrote.