S'pore Bank Lending Slides Further

Source : The Business Times, April 1, 2009

Property lending growth slows to near zero in Feb

Bank lending fell for a fourth straight month in February as loans to businesses shrank further and lending to the property sector slowed to a crawl, though the overall pace of decline eased slightly.

Total Singapore-dollar bank loans at end-February stood at $270.5 billion, down 0.2 per cent from a month earlier, the latest estimates from the Monetary Authority of Singapore show. In each of the preceding two months, overall bank lending slid 0.4 per cent, according to revised figures from MAS.

Loans to businesses dipped 0.6 per cent in February to $155.8 billion, compared with a 0.7 per cent drop in January and a 1.1 per cent decline in December.

Economists point out that credit supply and demand have slowed as the property sector cools, banks implement stricter lending standards and more businesses put expansion plans on hold amid the uncertainty over when the economy will recover.

In the first two months of this year, 22 companies have been forcibly wound up and petitions have been filed to liquidate another 26, separate data from the Insolvency and Public Trustee's Office shows. For the same period last year, 23 firms were dissolved and 19 petitions were filed.

Property-related lending, which makes up almost half of bank lending here, rose just 0.1 per cent to $130.5 billion in February - the weakest monthly growth since lending to the sector last contracted in December 2006.

The figure includes business loans to the building and construction sector and consumer home loans, but excludes loans to property trusts, which are counted separately under the category of loans to non-bank financial institutions.

'All we need is for lending to the broad property sector to slow down to pull down overall lending,' said Song Seng Wun, senior economist and head of research at CIMB.

Building and construction loans dipped 0.2 per cent to $50.1 billion in February, while consumer housing and bridging loans rose 0.4 per cent to $80.4 billion - the smallest percentage monthly increase since March last year.

Over the year to end-February, total bank lending rose 11.9 per cent - little more than half the 21.9 per cent yearly rate to end-February last year and the slowest pace of growth since August 2007.

Loans to most other important business sectors apart from building and construction - manufacturing, general commerce, and transport, storage and communication - also declined in February.

An exception was lending to non-bank financial institutions, which includes property trusts and business trusts. That rose 1.2 per cent during the month to $33 billion, reversing a 2.7 per cent decline in January.

Excluding home loans, consumer lending fell 0.2 per cent in February to $34.3 billion, as car loans, credit-card borrowing and share financing declined. Total credit-card billings fell to $1.78 billion, down 10.3 per cent from January and 5.6 per cent lower than a year earlier.

Overall, total consumer loans rose 0.2 per cent to $114.7 billion. Compared with a year earlier, total lending to consumers was up 7.6 per cent.

In the coming months, 'much really depends on how high unemployment will go', said Mr Song.

So far, there have been clear signs of a 'softening, but not a collapse' in consumer spending, mainly because unemployment among Singapore residents hasn't risen very much, he added. 'People are still spending.'

But he warned that a further round of retrenchments by firms here would likely hit local residents hard, in turn reducing their appetite to spend.