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Local banks’ loan growth to weaken: Survey

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Singapore banks will struggle to lift lending in the months ahead, according to Fitch Solutions yesterday.

The research and consultancy company has cut its loan growth forecasts from 5 per cent to 4 per cent for this year, and down from 4.5 per cent to 3 per cent for next year. Fitch noted that loan growth for the local banks softened to 4.5 per cent year on year in September, the lowest level since February.

"The subdued trend is likely to persist in the light of the global economic headwinds stemming from rising US-China trade tensions and an upswing in interest rates," it said in its report.

"Domestically, tighter curbs on the residential property market will act as a headwind to overall credit growth over the coming quarters.

"Given that economic conditions are likely to worsen over the coming months, we expect business loan growth to slow further."

Fitch expects consumer loan growth will be dragged down, mainly by weakness in housing and bridging lending due to tighter regulations. These loans account for about 76.7 per cent of all consumer borrowing.

Since property cooling measures were introduced in July, "the growth of housing and bridging loans trended lower to 3.5 per cent year on year in September from a high of 4.8 per cent year on year in May, and a further slowdown is likely, as seen from previous episodes when property curbs were tightened", the report said.

Overall mortgage growth seems set to weaken despite demand from first-home buyers and those with collective sale proceeds to spend.

Fitch said: "Despite signs of a cooling housing market, the Monetary Authority of Singapore stated on Oct 11 it will continue to keep a close watch over the property market and the implications of the tightening measures. This suggests should the housing market reignite, additional curbs would be forthcoming, meaning risks to mortgage demand remain weighted to the downside..." - THE STRAITS TIMES