Bank lending up 20% in April

Bank lending up 20% in April

SINGAPORE - Banks stepped up lending to companies and households in April, a sign that economic activity is continuing apace.

Total bank loans accelerated for the fifth straight month in April, rising 20 per cent over a year ago, according to figures released by the Monetary Authority of Singapore (MAS) on Friday.

The increase was led by loans to businesses, which climbed 23.7 per cent in the period, driven by lending to companies in general commerce, construction and financial institutions.

"General momentum remains robust, even though businesses, especially small and medium-sized enterprises, may be facing headwinds in the form of tepid global demand and manpower constraints," said OCBC economist Selena Ling.

CIMB economist Song Seng Wun added that it is particularly encouraging to see lending to commerce growing strongly.

He noted that this segment - which includes restaurants and pubs - grew nearly 32 per cent in April over a year ago on top of a similar rate of increase last year.

Meanwhile, consumer loans held steady, up 15 per cent in April from a year earlier.

Housing loans rose 16 per cent but lending for cars fell 3.1 per cent, following new caps on vehicle loans earlier this year.

The property sector contributed significantly to the year-on-year jump in lending, owing to developers drawing down on credit facilities and consumers taking new mortgages, said Mr Song.

"Looking ahead, broad property lending is likely to sustain the relatively strong loan growth of 18 to 20 per cent year-on-year for the rest of the year," he added.

On a month-on-month basis, however, the overall pace of bank lending appeared to be easing, the MAS data showed.

Bank loans rose 0.9 per cent in April from March, down from the 1.5 per cent climb in March and the smallest increase in five months.

The growth in business loans eased to 1 per cent month-on-month, and the rise in consumer loans likewise decelerated slightly to 0.7 per cent.

This was partly due to "fewer working days, fewer car loans, and after four straight months of nearly 2 per cent growth", said Mr Song.

Economic watchers have recently highlighted the rapid growth in debt levels in Asia, including in Singapore, although they say it has yet to reach dangerous levels.

The International Monetary Fund recently warned that persistently low interest rates have fuelled strong credit growth and rising asset prices in many of the region's economies, and this could lead to asset bubbles if left unchecked.

"I think the concern is still contained for now on the debt servicing front," said OCBC's Ms Ling, pointing to policies implemented recently to curb excessive borrowing for home and car purchases.

But she added that if monetary indicators such as loans growth continue to accelerate, especially if fuelled by the easy liquidity conditions globally, that might indicate that the market is "setting itself up for a correction".

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