Consumer loans dive in April as circuit breaker kicks in

Singapore

CONSUMER loans in Singapore continued to dive in April, with credit card loans clocking their steepest fall on record as the Republic's circuit breaker took effect on April 7, keeping people at home and most retail outlets shut, according to the latest data from the Monetary Authority of Singapore (MAS).

Economists noted that the slide in consumer loans will likely persist in May, with recovery to be seen only when retail shops, property and car showrooms open.

In April, consumer loans fell 0.9 per cent from the month before to S$255.89 billion - slightly better than the 1.4 per cent contraction in March. However, its plunge of 3 per cent on a year-on-year basis marks its worst decline on record.

Consumer loans were dragged down by weakness across all segments, with credit card loans falling 9 per cent to S$9.65 billion from March - the biggest decline seen so far.

Unsecured personal loans - excluding credit cards - also contributed to the fall, down 2.8 per cent to S$35.79 billion. This would reflect borrowings for education and renovation purposes, among others.

Car loans fell further in April, dipping 1.3 per cent to S$8.69 billion from March, while share financing dropped 1.6 per cent to S$1.7 billion.

Housing and bridging loans, which make up the bulk of consumer loans, ticked down by 0.1 per cent to S$200.06 billion from March.

As a result, consumer loans weighed down on total bank lending, which saw its second straight month of contraction in April. Total loans fell 0.4 per cent to S$689.65 billion from the month before. But on a year-on-year basis, total loans still rose 2 per cent.

Business loans also went down a notch in April after two months of growth, dipping 0.1 per cent to S$433.76 billion.

This was primarily weighed down by a fall in loans to financial institutions, which dropped 1.9 per cent to S$105.9 billion, as well as loans to general commerce, which fell 3.4 per cent to S$67.43 billion. On the other hand, loans to building and construction; transport, storage and communication; and business services rose.

Maybank Kim Eng economist Chua Hak Bin noted that the circuit breaker measures had a larger negative impact on consumer loans than business loans.

"Credit card transactions and loans fell as consumers stayed home and could not travel or shop at their favourite malls," he said. "Auto loans fell as car show rooms were shut and COE (certificate of entitlement) auctions suspended."

Meanwhile, mortgage loans declined as property launches were delayed and showrooms were shut, he added.

Analysts are cautious about the outlook for loans in the near future, given the many uncertainties. According to OCBC economist Selena Ling, even with the Budget initiatives to help businesses with credit financing and access, the macroeconomic backdrop is bearish due to the Covid-19 double-whammy, which led to both supply chain disruptions and also a demand shock amid the numerous lockdowns across the world.

Bank loan growth, especially consumer loans, is likely to moderate further in May due to the extension of the circuit breaker, she noted. "Given the lifting of the circuit breaker from June 2 is gradual and sequential, the second-half recovery trajectory is likely to be still cautious and muted," said Ms Ling. "While consumer loans may rebound, it will probably not normalise anytime soon."