Deposits at Saudi banks exceed SR 1.3 trillion

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 The National Commercial Bank (NCB) said in its new report that total deposits in the Saudi banking industry surpassed the SR 1.3 trillion level during April, providing a solid backbone for credit expansions. Demand deposits recorded the fastest pace since February 2012 at 19.6 percent 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 percent Y/Y by the end of April. Government entities increased their share of the interest bearing deposit base by an annual growth of 19.3 percent while businesses and individuals withdrew 1.9 percent over the same period. 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. Additionally, other quasi-monetary deposits reached SR 180.9 billion, a gain of 7.4 percent Y/Y. Interestingly,remittances have averaged SR 15.3 billion during four months of 2013 in comparison to SR 10.9 billion for the first four months of 2012 due to the Ministry of Labor’s strict saudization quest. Following three months of deceleration, total claims of the banking system, excluding T-bills and government bonds, posted an annual increase of 16.2 percent during April.

Driving lending growth, longer term credit maturities remain the focus of banks this year. Long-term credit expanded by a staggering 42.4 percent annually to reach a record SR 299.7 billion. Furthermore, medium term credit registered an increase of 39.4 percent Y/Y by the end of April.

The NCB report said short-term credit only grew by 17.0 percent on an annual basis. However, short-term credit lines still represent more than half of total credit with a share of 54.4 percent whereas long and medium term credit hold 28.4 percent and 18.2 percent, respectively.
According to NCB’s Construction Contracts Index, the state of the construction sector is on a positive trajectory. Contracts worth a total of SR 49.1 billion have been awarded during the first quarter of 2013 and banks will be keen to finance more projects in the remainder of this year.

The private sector had a pivotal role in driving the non-oil economy as Saudi experiences unprecedented growth years. Fresh lending to the private sector has reached SR 49.1 billion for the first four months of 2013 in comparison to SR 46.0 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 percent Y/Y during April. Interestingly, SAMA (Saudi Arabian Monetary Agency) seems to have developed a concern for the liquidity levels in the economy. Treasury bill issuances have reached the highest level in almost two years at SR 171.2 billion. Given the peg of the Saudi riyal, SAMA has used open market operations to absorb any excess liquidity with interest rate policy in lockstep with the US. Additionally, Repo transactions reached SR 580 million in April. Despite being low in absolute value, when compared to the average of the last three years at SR 118 million, SR 113 million, and SR 9 million, respectively, it reflects SAMA is more than aware of the status of monetary aggregates and is trying to limit the risks that could hinder the economy.

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