Surprise surge in financial sector lending in July

Singapore

A SURPRISE Jump in loans to financial institutions and for trade lifted bank lending in July by 1.1 per cent from the month before, making it the strongest month-on-month jump since June 2015.

Loans through the domestic banking unit, which captures lending in all currencies but mainly reflects Singapore-dollar lending, stood at S$597 billion, up from S$590 billion in June.

The figure for June was in turn a 0.4 per cent dip from that in May.

In July, lending to financial institutions, the second-largest segment of business lending after construction loans, surged 11.9 per cent from the month earlier to S$75.8 billion, stemming four consecutive months of declines.

The jump was also significant year-on-year; lending to financial firms rose 7 per cent in July from July 2015. This makes it the strongest year-on-year lift since November 2014, and cracks 17 straight sessions of contraction in lending to the financial sector.

Selena Ling, head of treasury research and strategy at OCBC, said: "There could have been some initial post-Brexit concerns weighing on corporate loan demand in early July, and placements to financial institutions rose in response to the hunt for yield."

General commerce lending in July rose 5.7 per cent from the month before to S$59.7 billion - a quantum of gain not seen since March 2014.

The gains from lending to financial and trading firms cushioned the dip in construction lending. The single-largest contributor to business lending fell by a sharp 1.7 per cent from June to S$119 billion.

All in, business lending gained 1.9 per cent between June and July, and settled at S$352 billion.

There are some signs that business loans may be gradually bottoming out, said Ms Ling. She expects a 1.5 per cent decline in bank loans from 2015's figure for the full year.

The growth in consumer loans was flat in July from the month before, holding at S$245 billion.

Housing loans, which make up the largest chunk of consumer lending, hummed along. These were up 0.3 per cent from June to S$188 billion.

But car loans, which had registered a small gain in June, returned to contractionary mode, falling by 0.2 per cent in July to S$7.8 billion. This shrinkage came despite the recent easing in loan restrictions for car financing.

Credit-card loans fell one per cent from June to July to come in at S$10.1 billion; share financing contracted further by 1.9 per cent to S$2.3 billion.

From a year ago, bank lending was down 2.2 per cent, though this is a smaller contraction than that in June, which was at 2.7 per cent.

Business lending pared back its year-ago contraction to 5 per cent, compared to 6.2 per cent in June - a contraction not seen since October 2009.

Consumer loans still grew, at 2.2 per cent from a year ago, though this was weaker than the 2.8 per cent growth posted in June.