Singapore's overall loan growth dragged by 2.3% drop in business loans

System loan growth came in at 1.4% in November 2015.

Singapore's loan growth is moderating to a new norm. CIMB reports that total system loan growth for the year to date (YTD) Nov 2015 came in at 1.4% (Nov 2014: 9.1%).

"Overall loan growth was dragged by the contraction in business loans, compensated by growth in property loans. YTD Nov 2015, business loans fell 2.3%, consumer loans rose 2.4%, while property loans increased 9.7%. We expect loan growth in the low-single-digit range in 2015-16 due to weak loan demand."

According to CIMB, business loans saw YTD contraction in other loans (-8.0%), commerce (-5.1%), manufacturing (-2.3%); growth came from agriculture (+6.5%) and business services (+5.0%). Consumer loans were dragged by car loans (-9.1%) and credit cards (-2.5%); growth came from loans to individuals (+4.0%). Property loans, comprising building & construction (+18.6%) and mortgages (+3.5%), propped up overall loan growth.

But despite the slowing loan growth, a higher interest rate environment on NIM is expected to compensate for lower loan demand. CIMB notes 1H15 saw the impact of a higher SIBOR and SOR benefiting the banks’ margins on floating rate loans. Based on the analyst's channel checks, new fixed rate mortgages were disbursed at a higher interest rate in Dec 2015, which will provide NIMs with another leg up in 4Q15 onwards.