Bank lending eases for 2nd straight month

Singapore

BANK lending in Singapore in January grew at a slower clip for the second straight month, dragged down by softer growth in the business loan segment.

The weaker growth in loans to manufacturers comes on the back of concerns over the recovery in the manufacturing sector and as banks in Singapore brace for slower loan growth this year.

Preliminary figures released by the Monetary Authority of Singapore yesterday showed that domestic banking unit (DBU) loans stood at $582 billion in January, up 1.4 per cent from December. This was slightly weaker than the 1.5 per cent month-on-month growth registered in December.

The gains refer to net growth, that is, new loans which have been granted after deducting loans which have been paid off.

Banks, while forecasting tepid loan growth, expect to fire their cylinders this year through business loans, which should cushion an easing in mortgage loans. The DBU figures refer to loans denominated in Singapore dollars. As a gauge, Sing-dollar loans made up 40 to 56 per cent of the loan book of OCBC, DBS and UOB as at end-2013, a recent Credit Suisse report showed.

Trade finance growth is not fully reflected in DBU numbers, since many of such loans are denominated in the greenback. US dollar loans constituted 15-34 per cent of the three banks' loan book last year.

On a yearly basis, the value of DBU loans rose 16.5 per cent in January, a slight dip from the 17 per cent growth in December. This is the second consecutive dip in growth on a year-on-year basis, and was dragged by weaker numbers in both the business and consumer loan segments. Business loans grew 22.5 per cent in January, weaker than the 22.9 per cent gain in December.

On a month-on-month basis, business loans in January grew 2.1 per cent to $356 billion. This is a narrower expansion compared with the 2.3 per cent growth posted in December.

The main drags came from softer growth in loans to the manufacturing and general-commerce segments. The value of loans to manufacturers grew 0.5 per cent over the month in January, compared with a 0.9 per cent expansion in December.

Analysts appear split on the prowess of the manufacturing sector this year. In a research note this week discussing the weaker-than-expected industrial production (IP) numbers in January, UOB economist Alvin Liew pointed to the growth potential from the recovery in consumption demand in the advanced economies. This is in spite of near-term weakness possibly extending into February.

Citi economist Kit Wei Zheng is less sanguine. "The lacklustre January IP performance, though possibly exaggerated by the earlier Chinese New Year, shows that a convincing pick-up in external demand remains to be seen," he said in a report.

One bright spot in loan growth was in the building and construction sector, which makes up the largest loan portfolio of all DBU loans. This was up 1.4 per cent in January, a shade stronger than the 1.2 per cent rise in December.

The month-on-month growth in consumer loans of $226 billion was 0.4 per cent in January, a slight bump compared with the 0.3 per cent gain in December. Still, on a yearly comparison, growth for consumer loans stood at 8.2 per cent, which was weaker than the 8.9 per cent expansion in December.