By Gabriel Chen

BANK lending fell last month - the second consecutive monthly decline - as loans to businesses slumped with the financial crisis hammering the economy.

Total Singapore-dollar bank loans shrank to $272.2 billion at the end of last month from $273.2 billion in November.

Singdollar loans also fell 1 per cent in November from October - the first monthly slide since December 2006.

New figures from the Monetary Authority of Singapore yesterday showed that business lending dipped from $159.6 billion in November to $157.8 billion last month.

'I think (the decline) is inevitable,' said OCBC Bank economist Selena Ling. 'We've been in a recession for two quarters...it's a bit like a tsunami and you can see it coming.'

Consumer-related loans tell a different story.

Housing and bridging loans - the biggest category of consumer lending - actually grew slightly, from $78.9 billion in November to $79.6 billion last month.

While overall bank lending - comprising business and consumer loans - was up 17 per cent last year, lending growth this year is expected to slow sharply.

This is because banks have tightened credit standards while businesses and individuals have cut back on borrowing.

Standard Chartered Bank (Stanchart) economist Alvin Liew is bearish on the loans outlook and had tipped last month that domestic loans this year will contract by 2 per cent.

He stands by his forecast, even after the Government announced in last week's Budget that it will make another $5.8 billion available in a new programme designed to get banks lending to cash-strapped firms.

'The government measures will help but you cannot deny the weaker investment and consumer sentiment,' Mr Liew said.

Daiwa Institute of Research analyst David Lum is less pessimistic and is betting on 'high single-digit' loans growth this year.

'Loans will not fall this year, unless you get a very negative situation,' he said.

While experts may not agree on how loans will perform this year, most believe housing, building and construction loans will hold up well.

Mr Liew said that despite private property sales plunging as buyers stay away, many new housing loans could be supported by people downgrading to HDB flats. Also, the HDB resale market remains 'fairly active' compared with the private sector, he added.

Mr Lum said: 'I know there'll be two things that'll be relatively robust and that is building and construction, as well as housing.'

The Government has already announced a string of measures that will basically ensure 'good and viable firms' can get the funding they need to stay afloat and grow.

The Special Risk-sharing Initiative (SRI), for instance, will involve the Government taking on more risk in bank loans - and making far bigger individual loans than before. It will also help trade financing.

Ms Ling said that SRI will probably help to 'partially offset the deceleration trend in bank loans growth, and hopefully avoid an outright contraction in bank loans growth this year'.

Stanchart's regional head of consumer banking for South-east Asia, Mr Ajay Kanwal, believes the SRI will revitalise bank lending, channelling liquidity into the business sector.

This article was first published in The Straits Times on January 31, 2009.