June marks the fourth month of decline in Singapore’s bank lending as both business and consumer loans took a hit from the Covid-19 health-turned-economic crisis.

Total loans from the domestic banking unit – which captures lending in all currencies, but mainly reflects Singapore-dollar lending – slipped 0.7% from the previous month to $680.36 billion. This is down from the $685.3 billion disbursed in May.

On a year-on-year basis, total loans were down 1%, the Monetary Authority of Singapore (MAS) outlined on July 31. This marks the first year-on-year decline in lending since 2016.

June’s decline was heralded by a 1% fall in total business loans to $425.85 billion, from $430.6 billion in May. This follows weaker lending to transport, storage and communication and general commerce and financial institutions, MAS notes.

Specifically, the transport, storage and communication segment logged an 8.6% plunge in loans to $26.88 billion – making this segment with the biggest drop in lending. Meanwhile, loans to general commerce was down 1.5% to $64.62 billion, while that to financial institutions dipped 1.3% to $102.24 billion.

Interestingly, lending to building and construction (1%), manufacturing (1.1%) and business services (1.2%) saw growth, presumably as most businesses resumed operations during the Phase Two of Singapore’s re-opening on June 19.

As for consumer loans, disbursements came in at $254.51 billion, down 0.05% from May’s $254.7 billion. With this, the segment’s lending has been on the decline for 14 months.

Share financing led the decline, dropping 7.3% to $1.6 billion. Car loans followed suit with a 7.5% year-on-year dip to $8.32 billion, making June the sixth straight month of decline.

The closure of car dealerships and showrooms and the suspension of the Certificate of Entitlement bidding exercise in this time, took a hit, with car loans declining to a four-year low. On a month-on-month basis, the dip was 2%. 

Housing loans, which account for three-quarters of consumer loans, also weakened due to consumer’s tighter purse strings and restrictions to home viewing. Month-on-month, loans for the segment was down 0.1% to $199.52 billion.

Interestingly, an uptick was seen in credit card loans, presumably as consumers had more opportunity to consume goods and services during Phase Two. The segment bucked its five-month downward trend with a 2.9% uptick in disbursements to $9.45 billion.

Even so, it is down 17% from lending in June 2019. 

Unsecured personal loans, which excludes credit cards, similarly reversed its four-month decline with a 0.5% month-on-month increase to $35.62 billion. This follows heightened borrowings for education, household renovation and the purchase of other big ticket items.

Singapore’s three banks – DBS, OCBC and UOB are slated to release their earnings in the coming week. Given the bleak economic outlook, MAS has called on the banks to cap their dividend payout to 60% of what was paid for FY2019.

While the banks’ capital positions are strong, the restrictions serve to bolster their lending capabilities to both businesses and consumers, the MAS said in a July 29 statement.

See: MAS calls on banks to cap dividends for FY20 to 60% of FY19

Shares of all three banks were down on July 30, with DBS dropping 63 cents or 3.09% to close at $19.77 and UOB also dipping 63 cents or 3.15% to $19.39. OCBC meanwhile closed at $8.56, down 34 cents or 3.82%.