Credit growth in Kuwait seen weakest in 6 years NBK

Kuwait -  Bank credit in Kuwait registered a 1.9% y/y growth in March, ending the first quarter with its weakest performance since January 2012, according to a recent report by the National Bank of Kuwait (NBK).

The overall credit growth was impacted by modest business lending, a slight decline in household borrowing, and continuous deleveraging by non-bank financial companies.

Business credit, excluding non-bank financial firms, was lackluster, with growth slowing to 1.5% y/y in March from 3.4% in December 2017.

“Subdued business confidence may still be weighing on borrowing appetite. However, there were some promising sectors: lending for construction had its best quarter in 18-months, albeit still down in March year-on-year, and the oil sector’s quarterly performance was solid. Borrowing by other uncategorized sectors was also decent and the pick-up in domestic real estate sales saw credit to that sector higher over the quarter,” the NBK’s report added.

Growth in household lending, excluding securities lending, eased slightly in the first quarter of 2018 to 7.1% y/y by March when compared to 7.3% in December.

Meanwhile, the NBK’s report clarified that lending rose a moderate KWD 189 million in the quarter, below its two-year average of KWD 230 million.

“Deleveraging in the non-bank financial sector, primarily investment and financing companies, picked up pace in 1Q18. The contraction in the sector’s outstanding loans peaked in January, -12.6% y/y, settling at -11.5% in March,” according to the report.

Private deposits growth over in Q1-18 eased to 0.9% y/y in March. NBK’s report added that this and a large jump in deposits a year earlier slowed growth in the M2 money supply to just 1.1% y/y in March.

“However, it is expected to pick up pace in April when the dividend payments filter through. Meanwhile, government deposits, which have been weakening over the last year, improved in Q1-18, contracting by a smaller 1.3% y/y in March compared to 3.5% in December,” the report said.

Liquid reserves of the banking system in Kuwait increased in Q1-18. Bank reserves, including cash, deposits with the CBK, and CBK bonds, increased by KWD 287 million to KWD 5.3 billion or 8.3% of bank assets.

“This coincided with the absence of public debt issuances following the expiration of the public debt law in September 2017. With KWD 1.2 billion in public debt maturing in 2018 and no new government borrowing, liquidity is expected to continue to rise this year,” the report added.