Bank lending up 0.2% in Feb amid coronavirus outbreak

Business loans rise 0.6% from January, but consumer loans shrink 0.3%: MAS data

Bank lending crept up in February amid the coronavirus outbreak, on the back of a rise in business loans, preliminary data from the Monetary Authority of Singapore (MAS) showed yesterday.

Loans through the domestic banking unit, which captures lending in all currencies but reflects mainly Singapore-dollar lending, rose 0.2 per cent in February from January.

Total lending stood at $692.85 billion in February, compared with $691.15 billion in January. It also rose 3.1 per cent over the same month last year. This was mainly on the back of business loans, which were up 0.6 per cent from January to $430.91 billion.

OCBC Bank's head of treasury research and strategy Selena Ling said: "While there could be a low base due to the Chinese New Year festive timing in February 2019, nevertheless, the gradual resumption of factory production in China, the growing trend of work-from-home arrangements in Singapore, and the tightening funding conditions globally and in the region may have contributed as well."

Loans to nearly all business segments rose, including financial institutions, manufacturing, general commerce, business services, and the transport, storage and communications sector.

But loans to the building and construction sector fell to $142.23 billion in February from $142.4 in January.

In contrast to business lending, consumer loans shrank by 0.3 per cent to $261.93 billion in February from $262.81 billion in January. They fell 1.1 per cent compared with the same month last year.

Associate Professor Lawrence Loh from the National University of Singapore Business School said: "Just after the trade war perils and at the onset of the coronavirus outbreak, consumers were more cautious and prudent in their borrowings."

Ms Ling added: "The weakness in consumer loans is clearly mirroring the consumption fallout due to social distancing measures, cutback in risk sentiments and belt-tightening, especially for big-ticket items like housing."

Housing loans, which make up three-quarters of consumer loans, declined in February month on month. They dipped by 0.1 per cent to $200.63 billion in February, from $200.83 billion in January.

Prof Loh said: "Housing purchase decisions by consumers mirror their expectations of the economy and more critically their income security. Both consumer and business loans will decline. Consumers' creditworthiness might even suffer, which will make borrowing difficult... More critically, investment opportunities (for businesses) may also decline, which will lower the need for loans."

Ms Ling noted: "Economic activity is likely to remain soft in the near term. We expect second-quarter economic performance to be significantly weaker than in the first quarter, and a technical recession looks probable for the Singapore economy."

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A version of this article appeared in the print edition of The Straits Times on April 01, 2020, with the headline Bank lending up 0.2% in Feb amid coronavirus outbreak. Subscribe