Domestic credit to the private sector in Saudi Arabia surged by around 8.7 per cent year-on-year in July to record one of their highest growth rates since the end of the banks’ boom year in 2008 because of the global fiscal crisis.
Month-on-month, lending grew by about 1.4 per cent to extend a steady growth over the past months this year amidst expectations the Gulf Kingdom’s 12 commercial banks will continue to ease credit curbs and perform better in 2011.
From around SR764.6 billion at the end of July 2010, the banks’ credit to the private sector swelled to nearly SR831.5 billion at the end of July 2011.
This means lending grew by nearly 8.7 per cent year-on-year and around 7.2 pet in the first seven months of this year.
Credit to the government and other public institutions also soared by nearly 19 per cent year-on-year in July but edged down month-on-month as they stood at around SR247.4 billion at the end of July against SR250.4 billion at the end of June, according to the Saudi Arabian Monetary Agency (SAMA).
“With the loan-to-deposit ratio falling, there is ample scope for further lending,” the Riyadh-based Jadwa Investment said in a recent study.
The rise in lending followed modest increases over the past two years as Saudi banks appear to have remained risk averse since the eruption of the global crisis and a severe debt problem involving two local business conglomerates.
Before the crisis, lending was at its height in Saudi Arabia and other Gulf oil producers because of strong domestic demand during the oil boom.
Domestic credit in Saudi Arabia, the world’s top oil exporter, leaped by nearly 27.2 per cent through 2008 and 21.2 per cent in 2007.
Recovering credit allied with better economic performance and other factors to allow Saudi banks to net relatively high profits of around SR18.7 billion in the first seven months of 2011, an indication the banks are heading for a better year.
“Overall, the Saudi banking system remains profitable with plenty of room to grow. As the global risk averseness continues to diminish, Saudi banks cautiously follow suit and deem eventually to expand their loans portfolios….with over SRone trillion deposits on balance sheets, and a range of lending opportunities in an expanding economy, banks are set for a profitable year in 2011,” said National Commercial Bank, Saudi Arabia’s largest bank.
SAMA’s figures showed the combined deposits with Saudi banks totalled around SR1,053 billion at the end of July, slightly lower than their level at the end of June, when they stood at nearly SR1,054 billion.
Assets totalled SR1,502 billion, maintaining Saudi Arabia’s position as having the second largest Arab banking sector after the UAE, where bank assets stood at nearly Dh1,707 billion at the end of June.