Here's why 2014 was a challenging year for Singapore banks' loan growth

Growth across the board was sluggish.

For Singapore banks, 2014 proved to be a challenging year for industry loan growth, with growth weak across the board.

According to a research note from Maybank Kim Eng, business and consumer loans grew at their slowest in more than four and seven years respectively.

Meanwhile, industry domestic banking unit (DBU) loan growth slowed to 5.9% YoY in 2014 from 2013’s +17.0%.

Here's more from Maybank Kim Eng:

General commerce loan growth decelerated the most, to +2.9% from 2013’s +32.3%. This was the sub-sector’s weakest growth since Jan 2010, reflecting a challenging global environment.

Unlike the other larger business subsectors, B&C loan growth held up better, at 13.6% in 2014 vs 16.0% in 2013. General commerce loans accounted for 12.8% of DBU loans as at end-December, B&C 17.1%.

Consumer loan growth remained lethargic, weighed down by property-market weakness (+6.5% YoY) and fast-shrinking car loans (-19.2% YoY).

LDR may start to improve: More positively, DBU deposit growth continued to inch up, fractionally. We expect this to continue amid rising short-term interest rates. This suggests DBU LDR may dip slightly this year.

We expect our banks’ loan growth to average 9% in 2015 vs an estimated 9.3% for 2014. Given the slowdown locally, there is a risk that our 12% business loan growth projection for 2015 may not be met. General commerce loans could come to the rescue if the global economy strengthens in 2H15.