Banks' lending up 4.7% in May

ACU-driven overseas loans rose 7.5%.

System-wide loan growth for Singapore banks increased 4.7% YoY in May, marking its fastest pace of growth for 2019, data from the Monetary Authority of Singapore (MAS) revealed. This was bolstered by the 7.5% YoY growth in ACU-driven overseas loan paired with the 2.1% rise in domestic loans.

“Surprisingly, trade-related sectors such as manufacturing and transportation saw strong expansion both domestically and overseas. We believe this rising credit demand may be a sign of manufacturing & logistics capacity re-locating from China and ramping up in ASEAN,” Maybank analyst Thilan Wickramasinghe said.

According to the data from MAS, ACU manufacturing loans increased 20.7% YoY, whilst domestically this increased 6% YoY, double the pace from April. Manufacturing loan utilization jumped to 59.2% which is the highest level since June 2017.

Meanwhile, other trade related sectors such as transport & storage also increased 9% YoY on a full system basis. Building & construction lending picked up 15.2% YoY led by ACU.

“We believe these indicators point to increasing manufacturing utilization and capacity in ASEAN. With more than a quarter of Singapore banks’ loans booked in ASEAN, this is a sign of the sector benefiting from this trend, in our view,” the analyst explained.

On the other hand, consumer loan growth remained muted with a marginal increase of 1.2% YoY. Domestic consumer loans contracted 0.4% YoY, marking its first negative reading since 1992 dragged by weak mortgages, which contracted 0.3% YoY. Share financing fell 11% YoY.

“[The] government property cooling measures continue to bite and this is creating a risk of heightened mortgage competition for market share amongst domestic lenders. Ultimately, this may have a negative impact on margins,” Wickramasinghe noted.