Small gasps of life in August business lending

Singapore

A little life in business lending might have crept into August after the months of ho-hum lending activity earlier this year, but comes as business demand stays weak amid uncertainty over the US elections and the eurozone.

Business loans rose 1.6 per cent in August from July to S$357 billion, preliminary data from the Monetary Authority of Singapore (MAS) showed on Friday.

To be clear, the pace was a shade slower than the 1.9 per cent expansion from June to July, as blips in stronger lending in the trade and financial sectors wore off.

However, lending in the building sector rose strongly in August, growing 1.3 per cent to S$120 billion from a month ago and reversing from a contraction in July. This is the single-largest contributor to business lending, at one third.

Lending in the transport and storage sector, which includes the oil-and-gas companies, jumped 6.6 per cent to S$19.8 billion. Lending to trade and financial sectors also continued to expand.

Loans to financial institutions rose 4.7 per cent from July to S$79.4 billion; lending to general commerce was up 2 per cent to S$60.9 billion.

Selena Ling, OCBC's head of treasury research and strategy, said that while loan demand has stabilised, core business demand remains mixed at this point.

"Business sentiments are still soft, given the clouds on the risk horizon such as the US presidential elections and the more immediate concerns about German/ eurozone banking sector stability."

Overall bank lending in Singapore was higher by 1.1 per cent in August from the month before - the same pace of growth as in July.

Loans through the domestic banking unit - which captures lending in all currencies but mainly reflects Singapore-dollar lending - stood at S$604 billion in August, up from S$597 billion in July.

Consumer loans' growth rose 0.4 per cent in August from July to S$247 billion. It had been flat in July. Consumer lending in August was boosted mainly by credit card spending and lending for car purchases.

Mortgages held their ground, with housing loans up 0.3 per cent from July to S$188 billion. Roughly the same pace of expansion has held since April.

From a year ago, bank lending in August dipped 1.6 per cent, though this was a smaller contraction than that in July, at 2.2 per cent.

Ms Ling expects "modest improvements" in credit expansion for the rest of 2016. She kept her full-year forecast at a 1.5 per cent contraction for bank lending.