Banks turn to corporates for loan boost as mortgages weaken

Housing loan limits granted in Q1 fell to its lowest since Q4 2015 around $7.3b.

With consumer loans taking a hit from the property cooling measures, corporate borrowing is expected to drive a significant portion of Singapore banks’ lending gains for the year, according to a report from DBS Research.

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Systemwide loans grew 3.8% YoY and 1% MoM in March in what marks the strongest MoM uptick since June 2018, Rui Wen Lim, an analyst at DBS said in a report. The headline figure received a boost from business loans which expanded 4.8% YoY thanks to robust lending in the manufacturing and general commerce segment.

The heightened corporate M&A buzz will also lend support to business loans following big deals that have been announced in recent weeks including CapitaLand’s acquisition of Ascendas-SingBridge; the M1 buyout by Keppel and SPH and the mega-merger of OUE Commercial REIT and OUE Hospitality Trust, analyst Andrea Choong at CGS-CIMB said in an earlier report.

On the other hand, new housing limits granted continue to be slow at around $7.3b in Q1, which marks the lowest level since Q4 2015, The banks’ mortgage book also continued to be largely flat amidst ongoing mortgage repayments and slower new bookings. “We expect business loans to continue driving loan growth for the year as mortgage drawdown remains slow,” said Lim.

Lim expects Singapore banks’ full-year loan growth to settle between 4-6%.