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The Straits Times

www.straitstimes.com
COMPA NIES

Published on Aug 31, 2013

July bank lending surges 17.6% year on year

Analysts say it will take time for the home sales slowdown to be reflected
By Yasmine Yahya

SHRUGGING off market turmoil and a slew of property-cooling measures, bank lending continued to grow at a robust pace last month. Loans to businesses surged, as activity across all industries held steady while consumers took on more debt to finance their property purchases, among other things. Banks lent $539 billion in total to both businesses and consumers last month, up 17.6 per cent from the same month a year ago. The pace of growth closely mirrors that seen in June, when overall loans rose 17.7 per cent year on year. Loans to companies last month grew 20.8 per cent from last year to $321 billion, as all business sectors took on more debt. Again, this was similar to the growth in June, when loans to businesses had risen 20.4 per cent from a year earlier. And just like in June, all types of consumer loans increased except for car loans. Banks lent $217.9 billion to consumers last month, up 13.2 per cent from last year, and lower than the 13.8 per cent year- on-year rise in June. The slowdown can be traced to an accelerated decline in car loans, which fell 7.4 per cent in July from last year to $11.7 billion as loan restrictions introduced in February continued to bite. This was a sharper drop than in June, when car loans slid 5.4 per cent. A drop in home sales had not yet affected the volume of home and bridging loans. Such loans grew 14.1 per cent year on year in July to $161.2 billion. Sales of new private homes plunged to a 43-month low last month after the Government introduced loan curbs in late June, which capped borrowers' total debt repayments relative to gross monthly income at 60 per cent. Analysts have said that property sales will likely soften further after a new set of property cooling measures was announced earlier this week, this time focusing on the HDB market. But it will take a while for the slowdown in home sales to be reflected in the loan numbers, noted CIMB economist Song Seng Wun. "For the time being, we are still going to have the people who bought properties in the past few years and those who are making progressive payments as their properties are completed," he said. "I would say that we will only start seeing a slowdown in loan growth in the first quarter of next year. By that time, perhaps loans will grow at a high single-digit and it may taper off gradually from there." yasminey@sph.com.sg
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