Public-sector borrowing led Saudi bank credit growth in August

Saudi bank lending kept expanding in August, led by the public sector. Total bank credit rose 7% y-o-y to SAR 3.46 tn, with lending to public-sector enterprises up 18.4% y-o-y to SAR 277 bn — about three times the 6% pace of private-sector credit — even as the month's liquidity readings softened, the Saudi Central Bank’s monthly bulletin (pdf).

Net foreign assets in the Kingdom’s banking sector dipped to SAR 1.52 tn in August from SAR 1.54 tn in July.

Behind the decline: Both Sama and commercial banks contributed to the monthly drop. The central bank’s net foreign assets declined to SAR 1.74 tn in August from SAR 1.75 tn in July, while commercial banks’ net foreign asset deficit widened to SAR 217.3 bn from SAR 210.8 bn over the same period.

Overall, commercial banks’ total assets reached nearly SAR 5.18 tn by the end of August, up 5.2% y-o-y from SAR 4.92 tn, though marginally down from SAR 5.19 tn in July. Bank credit across all maturities climbed 7% y-o-y to SAR 3.46 tn from SAR 3.24 tn. Bank claims on the private sector, meanwhile, rose 6% y-o-y to SAR 3.30 tn from SAR 3.11 tn.

Where the money went: Personal loans remained the largest category at SAR 1.47 tn; followed by real estate activities at SAR 422.7 bn; electricity, gas, and water supplies at SAR 258.2 bn; wholesale and retail trade at SAR 220.9 bn; and manufacturing credit at SAR 211.1 bn. Construction credit reached SAR 149.2 bn.

Mortgages were steady: Bank-financed mortgages hit SAR 5.87 bn in August, virtually unchanged from July, though total contract count hit a 12-month high of 9.8k. Houses accounted for the lion’s share of August’s financing (SAR 3.66 bn), followed by apartments (SAR 1.91 bn) and land (SAR 290 mn).

Import financing cooled: Settled letters of credit (LCs) and bills received for the private sector fell 4.1% to SAR 14.3 bn from SAR 14.9 bn in July, though still up 5.9% y-o-y. Among itemized categories, building materials accounted for the largest share at SAR 2.8 bn, followed by motor vehicles at SAR 2.6 bn and foodstuffs at SAR 1.4 bn. Appliances accounted for SAR 888 mn, while machinery came in at SAR 658 mn.

New LCs — our look-ahead for imports — totaled SAR 14.9 bn, up 17.6% m-o-m from July’s SAR 12.7 bn. Food more than tripled to SAR 4.5 bn from SAR 1.2 bn in July. Strip food out, and new LCs fell 8.9% m-o-m. Building materials (SAR 2.2 bn), motor vehicles (SAR 1.8 bn), appliances (SAR 822 mn), machinery (SAR 697 mn), and textiles (SAR 73 mn) made up the rest of the itemized list.

ALSO- Broad money supply (M3) fell to SAR 3.33 tn in August from SAR 3.36 tn in July, but remained 5.6% higher y-o-y. Demand deposits made up 42.8% of M3, narrowly ahead of time and savings deposits at 42.1%, while other quasi-money deposits accounted for 7.7% and currency outside banks for 7.5%. Total liabilities in the monetary survey reached SAR 5.77 tn, up 6% y-o-y.

Government and quasi-government bonds held by banks reached SAR 676 bn, up 6.1% y-o-y from SAR 637.4 bn. Bank credit to public sector enterprises stood at SAR 277.0 bn, up 18.4% y-o-y from SAR 234.0 bn.

MEANWHILE- The monetary base stood at SAR 443.5 bn, down 0.5% m-o-m but up 3.7% y-o-y. Currency outside banks accounted for 56.1% of the monetary base, while deposits of local banks at Sama made up 39.3%.