Business lending risks losing steam

Singapore

IF BANK loan numbers in January are to go by, there are some signs of stronger consumer confidence in Singapore from a year ago.

But there is caution over whether business lending is set to slow faster than the slight step-down in headline GDP growth expected in 2018.

Loans through the domestic banking unit - which tracks lending in all currencies, but mainly reflects Singapore-dollar lending - stood at S$651 billion in January 2018, 5.4 per cent higher than that a year ago. The gain was a shade weaker than the 5.6 per cent year-on-year growth in December 2017, as the stronger consumer loans were more than offset by the easing in business lending.

From a month ago, bank lending was flat.

Business loans continued to moderate lower on a year-on-year basis for the third consecutive session since November. The 5.6 per cent gain in January from a year ago to S$387 billion marks the slowest pace of expansion since January 2017 where business lending is concerned.

The smaller gains in business loans reflected some drag from two of the largest lending segments - building loans and lending to financial institutions. Lending to financial institutions dialled down to a 20.1 per cent expansion to S$97.2 billion, compared to a 23.1 per cent gain in December.

Lending to the building and construction segment in January contracted for the second straight month, this time by a deeper 1.4 per cent to S$120 billion, compared to the 0.8 per cent decline in December.

"What is key to watch would be if the pace of business loans slows further or stabilises in the coming months, as the macroeconomic outlook remains fairly benign for now," said Selena Ling, head of treasury research and strategy, OCBC Bank.

Ms Ling expects 2018 total bank loans growth to slow from the 6 per cent year-on-year increase in 2017, to around 4 per cent, in line with the slight moderation of headline GDP growth.

To be sure, consumer loans gained ground, expanding 5.2 per cent in January from a year ago to S$263 billion.

This reflected a greater uptick in housing loans - up by 4.4 per cent to S$201 billion in January - and the surge in share financing by 18.1 per cent to S$2.74 billion. Credit card lending was also up 3.1 per cent to S$10.9 billion.

OCBC's Ms Ling said that interest in the domestic residential property market may remain resilient, though it remains unclear if the stamp duty for property purchases above S$1 million would prompt any kneejerk effects.