Less whoop, more whimper from July's bank lending

Singapore

BANK lending in July reflected a tepid showing in business loans, dashing some hopes of a sustained momentum into the second half, data from the Monetary Authority of Singapore (MAS) showed on Thursday.

Loans through the domestic banking unit - which capture lending in all currencies but mainly reflect Singapore-dollar lending - stood at S$633 billion in July, up 5.9 per cent. This was weaker than the year-on-year gain of 7.6 per cent posted in June.

Selena Ling, OCBC head of treasury research and strategy, said she had earlier anticipated bank loans growth to expand by 10 per cent year-on-year in the third quarter of this year to bring full-year bank loan growth to 7 per cent.

"July is off to a somewhat slower start, but the August-December 2016 base is not too challenging at an average. Nevertheless, if total bank loans stagnates around the July print, then full-year bank loans growth may fall short of our forecast." If so, OCBC expects to then revise down its expected full-year growth to 5 per cent.

This numbers came as business lending in July rose 7.4 per cent to S$378 billion, again weaker than the 10.4 per cent gain registered in June. Business lending also slid on a month-on-month basis by 0.9 per cent for the first time since January this year.

Lending to financial institutions - the single second-largest contributor to business lending - decelerated, gaining 16.9 per cent to S$88.6 billion as compared to the 32 per cent jump noted in June. Lending for trade also weakened, growing at 12.2 per cent to S$67 billion, as compared to the 21 per cent lift in general commerce loans in June.

There was some buffer offered via stronger activity in the building and construction sector, with loans gaining 2 per cent in July to S$121 billion. This was stronger than the 1.7 per cent increase in June.

"Given that late June to early July was characterised by market volatility, especially in the global bond markets, as major central banks including the FOMC and ECB sounded more hawkish, this could have had a knee-jerk impact on market sentiments," said Ms Ling. "It would be critical to see if the August bank loan prints stabilise."

Consumer loans accelerated, but just marginally, from 3.7 per cent year-on-year in June to 3.8 per cent, bringing it to S$255 billion for July. Housing loans remained healthy, growing 4.1 per cent in July - unchanged in pace from June - to S$195 billion. Car loans stood at S$8.08 billion, up 3.9 per cent - the biggest rise since November 2012 - and marking the eighth straight month of expansion. "Consumer confidence remains intact as the domestic labour market remains resilient so far," said Ms Ling.