Banks Lend Big For Property And Share Investments

Source : The Business Times, November 1, 2007

Share financing grows a thumping 74.8% over the year

Bank loans to the property sector in September grew at the fastest annual pace in nearly eight years, according to new data released yesterday.

Booming: Loans to the broad property sector hit $102.4b at end-September

Meanwhile, lending by banks to individuals to buy shares rebounded to its highest level since end-July, when the recent financial market turmoil started, the latest estimates from the Monetary Authority of Singapore (MAS) show.

'All these reflect the robust growth of the domestic economy,' said CIMB economist Song Seng Wun.

Loans to the broad property sector, which comprises consumer home loans and business loans to the building and construction industry, reached $102.4 billion at end-September - up 15.1 per cent from a year ago.

The year-on-year expansion was the largest since October 1999, when property-related lending grew by 19.5 per cent, said Mr Song.

Over the month of September, property-related loans grew 2.4 per cent from end-August, the fastest monthly pace since May last year. The property-related loans make up nearly half of all outstanding bank loans.

The MAS data also shows that share financing grew 74.8 per cent over the year to $1.26 billion at end-September - the highest since end-July, when it hit $1.42 billion.

The year-on-year growth in share financing is by far the fastest among all consumer loan segments, although it is still the smallest segment, accounting for just 1.2 per cent of total consumer loans.

Over the month, share financing grew 7.1 per cent, reversing a 17.2 per cent fall in August, when financial markets worldwide were rocked by the collapse of several hedge funds and widespread uncertainty stemming from problems in the US mortgage market.

'After the jitters of August, the market sort of bounced back,' said Mr Song. Since then, 'both property lending and share financing have been growing very rapidly'.

Total customer deposits grew 22 per cent over the year to $308.7 billion at end-September, while total loans grew just 12.8 per cent to $218.7 billion.

But while deposit growth continued to outpace loans growth on a year-on-year basis, monthly growth in loans has exceeded that of deposits since June.

Overall, loans to businesses grew at a faster pace than consumer loans, both on a monthly basis and when compared to a year ago.

Loans to businesses grew 15.1 per cent over the year and 2.7 per cent over the month to $117 billion - just over half of total bank loans at end-September.

Among the business sectors, loans to the transport, storage and communications industry showed the fastest year-on-year growth at 36.6 per cent, followed by loans to the building and construction industry, which grew 21.2 per cent.

Meanwhile, consumer loans expanded 10.1 per cent over the year and 1.8 per cent over the month to $101.7 billion. Next to share financing, credit card debt grew the fastest among consumer loans over the year, rising 13 per cent to $4.3 billion.