Flat consumer lending a drag on Aug bank loans growth

Singapore

FLAT growth in consumer loans in August affected overall bank lending compared to July, preliminary data from the Monetary Authority of Singapore showed on Wednesday.

Loans through the domestic banking unit (DBU) - which essentially captures lending in all currencies but mainly reflects Singapore-dollar lending - stood at S$613 billion in August, up 0.5 per cent from July. In July, bank lending stood at S$610 billion, up 0.6 per cent from the month earlier.

From a year ago, bank lending in August was up 1.5 per cent, weaker than the 2.2 per cent year-on-year gain posted in July. In this case, both business and consumer lending were weaker than the year-on-year growth seen in July. This brought the average loans growth to 1.9 per cent for the first eight months of 2015, noted Selena Ling, head of treasury research and strategy, OCBC Bank.

"Given the sluggish growth momentum seen in Q3 2015, there is little impetus for credit growth to expand strongly for the remaining months of this year, albeit the base in Q4 2014 is slightly less challenging."

Compared to a month ago, growth in consumer lending was flat, at S$240 billion in August. This reflected weaker growth in mortgages, which make up the bulk of consumer lending. Housing loans grew 0.2 per cent to S$182 billion, compared to 0.7 per cent growth in July.

Business loans rose by 0.8 per cent in August from a month ago to S$373 billion. This was a shade stronger than the 0.6 per cent growth seen in July.

Lending to financial institutions in August rose 2.7 per cent from July to S$72.8 billion - a pace of growth not seen for several months. Construction lending - the single-largest contributor to business loans - held up with 0.6 per cent growth compared to a month ago to S$118 billion.

Some drag came from lending to manufacturing and general commerce sectors. Loans to manufacturers in August reversed into a contraction of 3.4 per cent to S$28.7 billion from a month ago. Loans to trading companies registered flat growth.

Over the year, business loans were again hit by contractions in manufacturing and general commerce lending. Consumer lending was hit by weaker housing loans, credit card lending, and share financing. Car loans, meanwhile, have been contracting every month since December 2012.

Despite the sluggish loan growth, though, the ratio of loans to deposits, as accounted for under the DBU, remains at 111 per cent. Analysts had flagged last year that funding costs would rise as banks compete on pricing to retain and attract deposits.