Circuit breaker spells downturn in loan growth

Consumer loans were mostly affected, shrinking 0.9% MoM, OCBC said.

The beginning of the Circuit Breaker in April marked the decline of bank loan growth for the second straight month, contracting 0.4% MoM (2% YoY), its slowest since July 2019, according to an OCBC report.

The circuit breaker hindered private consumer spending, as reflected in the 0.9% MoM shrinking of consumer loans (3.3% YoY). Credit card loans also slumped -9% that month (13.1% YoY), as well as share financial loans (-14.6% YoY), car loans (-3% YoY), and housing and bridging loans (1.3% YoY).

On the other hand, loans in Q1 saw quite a growth (4.7% YTD since December 2019) mostly as companies drew down on working capital loans and other facilities, a separate DBS report revealed. Business loans inched up 5.4% YoY but dipped 0.1% in March, dragged down by loans to professional and private individuals (-3.9% MoM) general commerce (-3.4% MoM) and financial institutions (-1.9% MoM), OCBC added.

The macroeconomic outlook remains bearish despite initiatives to grant businesses credit financing, brought about by the double-edged sword in both supply and demand amidst numerous lockdowns across the region and globally, OCBC said.

Bank loans growth, especially consumer loans, will continue to moderate in May given the extension of the Circuit Breaker. Recovery for H2 this year is likely to be muted as consumer loans may not normalise anytime soon. OCBC tips bank loans to grow at a modest 2% YoY, whilst DBS sees overall bank loans grow at around 3-4% for FY2020.

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