A worrying trend is starting to show through at large-cap US banks. In recent weeks and months, commercial and industrial loan growth has slowed, prompting analysts to warn of an impending economic slowdown.

Until recently the deteriorating loan figures have been passed off as being an energy sector problem, but according to a new research report from analysts at Credit Suisse, energy only explains part of the problem.

Loan Growth
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According to Credit Suisse’s analysis, based on the detailed disclosure from Bank of America, JPMorgan and Wells Fargo, it’s clear that the energy and commodities sectors have “contributed to the slowing in loan growth, materially impacting the year-over-year comparisons, but only modestly impacting results quarter-to-quarter.”

Is Slowing Loan Growth A Sign Of Collapsing GDP Growth?

Based on the Fed’s weekly H8 data for the first quarter, C&I loan growth came in at 5% year-over-year for Q1 2017 but fell by 0.3% on a quarter-by-quarter basis. This drop indicates that loan growth has slammed to a halt in recent months as over the past five years C&I loan growth has been 9% CAGR.

Is Slowing Loan Growth A Sign Of Collapsing GDP Growth? Is Slowing Loan Growth A Sign Of Collapsing GDP Growth?

Figures have improved during the first few weeks of the second quarter with H8 data through April showing industry-wide loan growth up 3% year-over-year and 0.3% quarter-on-quarter according to Credit Suisse, but these numbers are still materially below historic trends.

So what could be behind the sudden slowdown? Analysts at the Swiss bank believe that it is just part of the normal economic cycle. After several years of explosive loan growth, now that the credit markets are beginning to normalize, credit growth is falling back in line with GDP growth. Looking back to 1973 the analysts point out a strong correlation between GDP growth and loan growth (R-squared of 99%). As loan growth has run well ahead of GDP growth since the financial crisis, it’s not unreasonable to expect some normalization.

What’s more, the analysts point out that companies now have more options to raise finance than traditional channels. Thanks to a healthy macro and market backdrop, corporate debt issuance has recovered well and capital markets are taking up the slack from the banks.

Simply put, for the time being, Credit Suisse doesn’t see any reason to worry about the borrowing slowdown just yet:

“Assuming that this is both normalization and displacement and given our embedded assumptions, we don’t see the current slowing as materially impacting estimates. What’s in our estimates… our 2017 and 2018 estimates rely on 3% and 4% average loan growth, with C&I loan balances expected to grow 4% and 5%, in 2017 and 2018 respectively. In terms of the estimate sensitivity to +/- 100bps of commercial loan growth… all else being equal, assuming a 300bps spread and a 65% pass through rate to pretax earnings, translates to a modest +/- 0.3% impact on our full year 2018 estimates (that sensitivity drops to 0.2% with a more conservative 200bps lending spread). Bottom line: loan growth is important, but slower loan growth is manageable relative to expectations.”