20 June 2013
JEDDAH - The credit portfolio of Saudi banks continues to be largely comprised of the commerce sector which holds 20.4 percent of banks' total financing at SR212.5 billion, the National Commercial Bank (NCB) said in its May "Saudi Economic Review". The commerce sector recorded a relatively modest growth at 12.2 percent Y/Y as other sectors gain momentum due to the efforts of the government to diversify the Saudi economy.
Additionally, the vast projects in mining and quarrying have been captured by local banks as the sector recorded the highest annual growth at 59.0 percent with projects such as Maaden and Alcoa's aluminum refinery worth SR5.6 billion and Hanwha's gold processing plant worth SR1 billion.
The only sector to post a decline was the transport and communication which dropped by 14.4 percent as the Haramain railway project shifts beyond the financing phase.
The healthy growth in lending this year and the stable pace of deposits has taken the loans to deposits ratio to 80.5 percent in March from 79.3 percent last December.
NCB believes that credit is likely to maintain the current trajectory as banks are still below SAMA's limitations and the economy remains robust and absorbent of excess financing.
The current rate of growth is far below the exceptional levels seen in 2004- 2005 periods where annual growth reached near 40 percent or the 2007-2008 periods where rates reached as high as 34.9 percent Y/Y during August 2008.
Local banks' efforts to expand their maturity curve remains evident by the rise in medium and long term credit. Credit maturing within one year, short term credit, posted its slowest growth in eleven months at 5.6 percent Y/Y.
Meanwhile, medium term credit added SR40.9 billion over the past twelve months, a 26.7 percent increase on an annual basis.
Furthermore, long term credit, which mainly focuses on larger projects and corporations expanded by a substantial 32.6 percent annually to reach SR291.7 billion by the end of the first quarter of 2013.
Saudi banks continue to support the macroeconomic conditions by providing the necessary financing for local businesses. The depositary base reached an all-time high at SR1.29 trillion, increasing 12.5 percent on an annual basis. The pace of growth has been stable and supportive of local banks' financing expansions. The majority of deposits are demand based with a share of 62.4 percent as they climbed 18.9 percent Y/Y during March.
Businesses and individuals hold 92.5 percent of demand deposits while government entities make up the remaining 7.5 percent portion. However, government entities have recorded a staggering hike of 76.2 percent Y/Y to reach SR60.3 billion, more than doubling the level reached by the end of 2011.
NCB forecasts a shift in some of these funds towards interest yielding products to accommodate the government's long term outlooks. Bank wide time and savings deposits recorded the slowest growth rate over the past six months at 1.7 percent annually. Government entities added 12.5 percent to reach SR140.0 billion, a figure which is likely to grow further over the coming months, while businesses and individuals withdrew 5.8 percent of their time and savings deposits. Additionally, other quasimonetary deposits grew by 6.6 percent annually as foreign currency deposits increased by 5.1 percent Y/Y and outstanding remittances posted a record high by climbing 50.8 percent annually during the month of March.
The combined loans portfolio for local banks reached an all-time high during March at SR1.04 trillion, a 15.8 percent gain over March 2012. The pace of credit growth in the Saudi economy continues to soften by recording the third consecutive deceleration.
On a monthly basis, deposits with SAMA expanded during March by 3.6 percent M/M to reach SR160.8 billion.
Additionally, local banks increased their cash in vault which recorded a growth of 9.6 percent M/M amounting to SR20.9 billion. Currency outside banks has reversed the positive trend to decline by SR299 million during March to amount to SR135.3 billion. The liquid state of the economy will continue to contribute to the growth of the financial system.
The money supply (M3) undoubtedly has a positive correlation with M0. Consequently, M3 recorded a rise of 12.3 percent Y/Y by the end of March to reach an all- time high at SR1.43 trillion. On an annual basis, demand deposits (weighing 56.4 percent of M3) unsurprisingly outpaced time and savings deposits by posting a gain of 18.9 percent and 1.7 percent respectively.
However, on a monthly basis, demand deposits grew by 4.7 percent M/M to reach SR805.6 billion, while time and savings deposits dropped by SR 12.5 billion (- 3.9 percent M/M) to amount to SR312 billion. Other quasi-monetary deposits managed to expand by 3.4 percent on a monthly basis, while registering a 6.6 percent Y/Y gain reaching SR174.1 billion, which is in line with the growth of Saudi's trade activities.
JEDDAH - The credit portfolio of Saudi banks continues to be largely comprised of the commerce sector which holds 20.4 percent of banks' total financing at SR212.5 billion, the National Commercial Bank (NCB) said in its May "Saudi Economic Review". The commerce sector recorded a relatively modest growth at 12.2 percent Y/Y as other sectors gain momentum due to the efforts of the government to diversify the Saudi economy.
Additionally, the vast projects in mining and quarrying have been captured by local banks as the sector recorded the highest annual growth at 59.0 percent with projects such as Maaden and Alcoa's aluminum refinery worth SR5.6 billion and Hanwha's gold processing plant worth SR1 billion.
The only sector to post a decline was the transport and communication which dropped by 14.4 percent as the Haramain railway project shifts beyond the financing phase.
The healthy growth in lending this year and the stable pace of deposits has taken the loans to deposits ratio to 80.5 percent in March from 79.3 percent last December.
NCB believes that credit is likely to maintain the current trajectory as banks are still below SAMA's limitations and the economy remains robust and absorbent of excess financing.
The current rate of growth is far below the exceptional levels seen in 2004- 2005 periods where annual growth reached near 40 percent or the 2007-2008 periods where rates reached as high as 34.9 percent Y/Y during August 2008.
Local banks' efforts to expand their maturity curve remains evident by the rise in medium and long term credit. Credit maturing within one year, short term credit, posted its slowest growth in eleven months at 5.6 percent Y/Y.
Meanwhile, medium term credit added SR40.9 billion over the past twelve months, a 26.7 percent increase on an annual basis.
Furthermore, long term credit, which mainly focuses on larger projects and corporations expanded by a substantial 32.6 percent annually to reach SR291.7 billion by the end of the first quarter of 2013.
Saudi banks continue to support the macroeconomic conditions by providing the necessary financing for local businesses. The depositary base reached an all-time high at SR1.29 trillion, increasing 12.5 percent on an annual basis. The pace of growth has been stable and supportive of local banks' financing expansions. The majority of deposits are demand based with a share of 62.4 percent as they climbed 18.9 percent Y/Y during March.
Businesses and individuals hold 92.5 percent of demand deposits while government entities make up the remaining 7.5 percent portion. However, government entities have recorded a staggering hike of 76.2 percent Y/Y to reach SR60.3 billion, more than doubling the level reached by the end of 2011.
NCB forecasts a shift in some of these funds towards interest yielding products to accommodate the government's long term outlooks. Bank wide time and savings deposits recorded the slowest growth rate over the past six months at 1.7 percent annually. Government entities added 12.5 percent to reach SR140.0 billion, a figure which is likely to grow further over the coming months, while businesses and individuals withdrew 5.8 percent of their time and savings deposits. Additionally, other quasimonetary deposits grew by 6.6 percent annually as foreign currency deposits increased by 5.1 percent Y/Y and outstanding remittances posted a record high by climbing 50.8 percent annually during the month of March.
The combined loans portfolio for local banks reached an all-time high during March at SR1.04 trillion, a 15.8 percent gain over March 2012. The pace of credit growth in the Saudi economy continues to soften by recording the third consecutive deceleration.
On a monthly basis, deposits with SAMA expanded during March by 3.6 percent M/M to reach SR160.8 billion.
Additionally, local banks increased their cash in vault which recorded a growth of 9.6 percent M/M amounting to SR20.9 billion. Currency outside banks has reversed the positive trend to decline by SR299 million during March to amount to SR135.3 billion. The liquid state of the economy will continue to contribute to the growth of the financial system.
The money supply (M3) undoubtedly has a positive correlation with M0. Consequently, M3 recorded a rise of 12.3 percent Y/Y by the end of March to reach an all- time high at SR1.43 trillion. On an annual basis, demand deposits (weighing 56.4 percent of M3) unsurprisingly outpaced time and savings deposits by posting a gain of 18.9 percent and 1.7 percent respectively.
However, on a monthly basis, demand deposits grew by 4.7 percent M/M to reach SR805.6 billion, while time and savings deposits dropped by SR 12.5 billion (- 3.9 percent M/M) to amount to SR312 billion. Other quasi-monetary deposits managed to expand by 3.4 percent on a monthly basis, while registering a 6.6 percent Y/Y gain reaching SR174.1 billion, which is in line with the growth of Saudi's trade activities.
© The Saudi Gazette 2013
