Consumer loans see record fall in March on virus fallout

Singapore

CONSUMER loans registered its sharpest fall on record over a big shrinkage in unsecured personal loans in March, fresh data from the Monetary Authority of Singapore (MAS) showed on Thursday.

This comes even as loans to businesses continue to grow steadily amid the novel coronavirus fallout, with analysts suggesting that weaker consumption sentiment is starting to show as fears of a deeper recession and job losses loom ahead.

Total consumer loans in Singapore fell 1.4 per cent to S$258.2 billion in March from a month ago. This marks the second straight month of contraction and the sharpest decline on record since March 2004, according to checks by The Business Times.

Year on year, consumer loans were down 2.4 per cent - also the steepest contraction since March 2004.

While there was broad weakness across all segments, unsecured personal loans - excluding credit cards - fell 7.1 per cent (or S$2.8 billion) to S$36.8 billion in March, compared with a month ago. This would reflect borrowings for education and renovation purposes, among others.

Housing loans, which account for three-quarters of consumer lending, dipped 0.2 per cent to S$200.3 billion on a month-on-month basis.

Credit card loans were down 3.6 per cent to S$10.6 billion, while car loans slipped 0.1 per cent to S$8.8 billion. Meanwhile, loans for share financing fell 7.8 per cent to S$1.7 billion.

Consequently, total bank lending in March ticked down 0.1 per cent month-on-month even as loans to businesses continued to grow.

Loans through the domestic banking unit - which captures lending in all currencies, but reflects mainly Singapore-dollar lending - stood at S$692.4 billion in March, down from S$692.8 billion in February. Compared to a year ago, total lending rose 2.4 per cent.

In March, total business loans rose 0.8 per cent month-on-month to S$434.2 billion, mostly from the manufacturing and transport sectors.

CGS-CIMB analyst Andrea Choong told BT that, in DBS's Q1 results briefing on Thursday, the bank saw increased drawdowns for capex acquisitions in the real estate space.

"We think some of the rise in business loans are also for general liquidity management, to manage cash flows due to the border and business closures," said Ms Choong.

On a month-on-month basis, loans to the manufacturing sector grew 9.2 per cent to S$29.1 billion in March, while loans to the transport, storage and communication sector rose 3.6 per cent to S$26.5 billion over the same period.

Loans to the building and construction segment were up 1.1 per cent to S$143.9 billion, while loans to others grew 1.3 per cent to S$35 billion.

However, loans to financial institutions inched down one per cent to S$108 billion; loans to general commerce also fell 1.3 per cent to S$69.8 billion.

Year on year, total loans to businesses climbed 5.5 per cent.

Maybank analyst Thilan Wickramasinghe expects overall loan growth to remain resilient, though this should "start to lose momentum" in the second quarter of the year.

This comes as system loans saw strong growth of 8.2 per cent in February on a year-on-year basis, likely because companies had "bulked up liquidity" ahead of the worsening pandemic, said Mr Wickramasinghe in a research note on April 24.

CGS-CIMB's Ms Choong said the full-fledged impact on system loans will "likely show up over the next few quarters", depending on how long the pandemic lasts.

"Do note that there will be some degree of support in loan momentum from SME (small and medium-sized enterprise) loans being extended by the banks in view of the attractive funding support by the MAS," she added.