Bank lending up: Record debts?

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Is the increase in bank lending good or bad?

I refer to the article “Bank lending up 6.2% to $640.68b in September” (Straits Times, Nov 1).

It states that “Total lending hit $640.68 billion, up 6.2 per cent compared with September last year, according to preliminary data from the Monetary Authority of Singapore yesterday.

Bank loans have been rising year on year since October last year with growth hitting 7.6 per cent in June, the fastest in more than two years. Momentum slowed in July and August, mainly because of slower growth in business loans.

On a month-on-month basis, September lending rose 1 per cent from the $634.41 billion recorded in August, when growth of 0.3 per cent was racked up.

Business lending in September expanded year on year for the 10th straight month to $383.29 billion, up 8 per cent from a year earlier.

Meanwhile, consumer borrowing in September rose 3.6 per cent year on year to $257.4 billion, lower than August’s 3.9 per cent growth. Mortgages and bridging loans increased 4.2 per cent to $197.03 billion.”

In this connection – Singapore’s “debt ratios – total liabilities as a percentage of total assets – are still relatively high at 73.7 per cent”.

According to the Allianz Global Wealth report – “Singapore with highest per capita debt (in Asia) – Debt per capita 2016 by country, in EUR”.

Singapore’s debt per capita at 36,075 euros is a whopping 49 per cent higher than second ranked South Korea’s 24,200 euros.

So, is there something wrong with the Straits Times news report “S’pore is No. 1 in Asia for gross financial assets” (Sep 28) – which said that “Singapore’s per capita liabilities was €36,075 at the end of last year, among the highest in Asia” – when in fact according to the report – Singapore’s debt is actually the highest in Asia?

Is Singapore’s high household debt to income ratio alarming?

According to the article “Household debt: The no-longer-managings” (The Economist, Aug 26).

UK 2008-09 household debt to income ratio 150% 

It states that “On the eve of the financial crash of 2008-09, households were up to their necks in debt. On average they owed 150% of their income, with three-quarters of liabilities in the form of mortgages.

UK household debt to income ratio is now at 135% 

Following the bust, households paid down much of what they owed. After falling to 130% of income, borrowing has more recently risen to 135%, with consumer lending leading the charge.”

S’pore economic growth hampered by high household debt to income ratio?

In this connection, according to the article “Steep household debt is the biggest speed bump ahead for Singapore: report” (Singapore Business Review, Mar 14, 2016) – “A report by ICAEW showed that the pace of consumer spending in Singapore has slowed compared to its long-term average, suggesting that steep household leverage are crimping the city-state’s growth prospects.

S’pore 2016 household debt to income ratio 150%? 

“In our view, consumer debt is probably the greatest danger area. Rising household debt has been prominent in driving up overall private debt ratios in many countries in recent years, and household debt ratios look high in several countries – especially debt/disposable income ratios. Debt/income ratios are close to or above 150% in Singapore and Malaysia and are well above 100% in Thailand,” said ICAEW … the high debt-to-income ratios of close to 150% in Singapore may already be hampering the country’s growth potential,” the report noted”.

UK personal loan % 4% vs S’pore 13%?

As to “In 2012-17 the average advertised interest rate on a £10,000 personal loan fell from 8% to around 4%” – in contrast, the EIR (Effective Interest Rate) of personal loans in Singapore are now at around 13% per annum.

Leong Sze Hian

 

About the Author

Leong
Leong Sze Hian has served as president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), invited to speak more than 200 times in over 30 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of Indonesia and Brunei. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.