Singapore banks' full-year loan forecast still at 'modest' 0.3%: report

Whether the uptick can be sustained remains to be seen.

The full-year forecast for Singapore banks’ overall loan growth still stands at a modest 0.3% YoY, according to an OCBC Research report, with the rise being sustained even if the monthly near-term momentum may be affected by the recent Phase 2 measures.

The sector saw its loan growth rise for the first time since May 2020 with a 0.4% growth rate in April this year. This was triggered by consumer loans which jumped for the third straight month by 3.4% YoY, with the key driver being housing and bridging loans which grew 2.3% YoY for the fifth consecutive month.

On the other hand, the business loan segment reported weaknesses in the manufacturing industry, transport, storage & communication, business services, and financial institutions. 

Bank loans grew for the sixth straight month by 0.1% MoM in April but lower than the 0.7% registered in March. Business loans grew almost flatly at 0.04% MoM, with muted loan demand from manufacturing, transport, storage & communication, and business services industries. Consumer loans, on the other hand, has improved sequentially by 0.3% MoM, helped by the loan demand recovery in the housing & bridging segment which has grown by 0.3% MoM.

Nevertheless, it remains to be seen whether the uptick can be sustained into May and June or will see a temporary setback given the return to Phase 2. Consumer loans may remain optimistic due to strong mortgage loans growth, the report said.

More important will be Prime Minister Lee Hsien Loong’s announcement on 31 May which is likely to unveil the progressive re-opening of the economy from the Phase 2 which could drive near-term market sentiments and business confidence, the report concluded.