Chart of the Day: Check out how much Singapore’s bank lending has plummeted

On back of weaker trade conditions.

Don’t expect loan growth to rise for Singapore’s banks soon as analysts from Moody’s say softer economic conditions in the city-state and in Asia will compound weak credit demand from businesses.

According to a report by Moody’s, Singapore’s domestic bank loans contracted by 2% year-on-year in March 2016, led by a 4% contraction in business loans.

“Cross border loans (so-called Asia currency unit, or ACU) contracted by a more material 9% for the same period, because of the banks' much weaker trade finance business,” the report noted.

Meanwhile, Moody’s also expects mild deterioration in the banks’ asset quality for the next one and a half year, driven by softer economic and trade growth in Asia.

“Most of the deterioration will likely come from domestic and foreign corporates – which borrowed extensively during the current low interest rate environment which started in 2009 – and from energy-related companies,” Moody’s noted.

“In contrast, we expect that the quality of household loans will remain stable because of the relatively benign employment conditions in Singapore and the low risk of a material property market correction. Under our central scenario, the consolidated problem loans ratio for the three large Singapore banks will increase to 1.8% by end-2017 from 1.1% at end-March 2016,” it added.