Robust business loans save the day for bank lending in June

Singapore

ROBUST business loans more than offset the decline in residential mortgages, resulting in a 0.8 per cent month-on-month increase in total bank lending for the month of June.

Monetary Authority of Singapore (MAS) preliminary data on Wednesday showed that loans to businesses came in stronger at S$423.5 billion in June, up 1.3 per cent month on month and 3.8 per cent year on year.

But while business loans put up a good showing, performance within the segment was mixed.

On a month-on-month comparison, lending to transport, storage and communications shrank by 2.9 per cent; lending to business services fell back by 6.2 per cent, and to professional and private individuals for business purposes, by 1.7 per cent.

While loans to general commerce rose 0.4 per cent month on month, they have been dipping year-on-year since September 2018, hit by the protracted US-China trade war and regional growth slowdown.

Total bank lending, buoyed by stronger business loans, edged up to S$687.08 billion in June, with May's momentum maintained as the magnitude of increase remained unchanged in June - 0.8 per cent month on month, 2.1 per cent year on year.

Higher total bank lending came about because the uptick in business loans more than made up for the contraction in housing loans.

But head of treasury research and strategy at OCBC Bank Selena Ling expects bank loans growth in the second half of the year to decelerate, bringing the growth forecast for the full year at 1.6 per cent, given the dour business sentiment as the trade war rages on and the global economy becomes lethargic.

As for residential mortgages in June, the segment continued its downward trajectory for the sixth straight month. Housing loans stood at S$202.21 billion, down 0.2 per cent month on month. The magnitude of decline has thus widened from the 0.1 per cent month-on-month dip the month before.

Year on year for June, the dip was 0.4 per cent. Here again - with last year's cooling measures continuing to bite - the magnitude of the dip is wider than the 0.3 year-on-year contraction for May.

These trends were borne out by the contraction seen in the mortgage book of the Republic's biggest housing loan provider, DBS, in the April-to-June period. But bookings were 60 per cent higher than in the January-March quarter.

Loans for the S$2.5 billion in new bookings in Q2 will be drawn down only in subsequent quarter(s).

DBS equity research analyst Lim Rui Wen told The Business Times that while primary sales from several property launches in Q2 should help support the numbers, secondary property sales remain sluggish, and "we think this is the critical factor for a reversal in the near future".

Total consumer lending also declined on the back of weaker housing loans, which make up about three-quarters of total consumer loans, down 0.1 per cent month on month and 0.6 per cent year on year to S$263.58 billion.