Saudi banks continue to expand their credit operations after post-crisis stagnation, buoyed by a surge in deposits, the Gulf Kingdom’s largest bank said on Sunday.
The deposit base in the Saudi financial system continues to be majorly composed of non-interest bearing liabilities, Saudi Commercial Bank (NCB) said.
In a study sent to Emirates24|7, it said businesses and individuals compensate the low deposit yield by keeping their funds in demand deposits for quick access to grasp “lucrative, also relatively riskier, opportunities.”
The report showed total deposits in the Saudi banking industry surpassed the SR1.3 trillion level at the end of April, “providing a solid backbone for credit expansions.”
It said demand deposits recorded the fastest pace since February 2012 at 19.6 per cent annually, reflective of the low interest rate environment globally and locally.
Meanwhile, time and savings deposits were outpaced yet again as they expanded by only 6.7 per cent Y/Y by the end of April, NCB said.
Government entities increased their share of the interest bearing deposit base by an annual growth of around19.3 per cent while businesses and individuals withdrew 1.9 per cent over the same period, it added.
“As the financial system continues to expand its credit portfolios, especially in longer term maturities, banks should attract more time and savings deposits to comfortably finance larger long-term projects,” it said.
The report showed other quasi-monetary deposits reached SR180.9 billion, a gain of 7.4 per cent Y/Y. “Interestingly, remittances have averaged nearly SR15.3 billion during 4M13 in comparison to SR10.9 billion for the first four months of 2012 due to the Ministry of Labor’s strict saudisation quest.”
“Following three months of deceleration, total claims of the banking system, excluding T-bills and government bonds, posted an annual rise of 16.2 per cent in April. Driving lending growth, longer term credit maturities remain the focus of banks this year.”
According to NCB, long term credit expanded by a staggering 42.4 per cent annually to reach a re-cord SR299.7 billion.
Furthermore, medium term credit registered an increase of 39.4 per cent Y/Y by the end of April while short term credit only grew by 17.0 per cent on an annual basis.
“The private sector had a pivotal role in driving the non-oil economy as Saudi experiences unprecedented growth years.”
Its figures showed fresh lending to the private sector reached SR49.1 billion for the first four months of 2013 in comparison to SR46 billion for
the same period last year.
“The momentum of private sector growth has been sustainable as business activity grows. However, credit to the public sector increased by 21.2 per cent Y/Y during April.”
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