{"id":85795,"date":"2024-05-05T00:00:00","date_gmt":"2024-05-05T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/ksa\/2024\/05\/05\/local-lenders-may-need-to-look-for-alternative-funding-sources-sp-global-says\/"},"modified":"2024-05-05T00:00:00","modified_gmt":"2024-05-05T00:00:00","slug":"local-lenders-may-need-to-look-for-alternative-funding-sources-sp-global-says","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/ksa\/2024\/05\/05\/local-lenders-may-need-to-look-for-alternative-funding-sources-sp-global-says\/","title":{"rendered":"Local lenders may need to look for alternative funding sources, S&P Global says"},"content":{"rendered":"

Local<\/strong> lenders may need to <\/strong>tap external <\/strong>sources to finance future borrowing <\/strong>needs on the <\/strong>back of a shift in funding profiles<\/strong>, according to a report by S&P Global<\/a>. It said that growing needs of the Kingdom\u2019s diversification plan, along with loan-to-deposit ratio north of 100%, could push banks to turn to international debt markets or mortgage backed sukuk issuances \u2014or liquidate part of their portfolios \u2014 to narrow the gap.<\/p>\n

By the numbers: <\/strong>The Kingdom\u2019s loan-to-deposit ratio broke past 100% in 2022, up from 86% at the end of 2019, with corporate borrowing expected to drive this trend over the coming years, according to S&P Global. It also highlighted what it described as a \u201cmaturity mismatch\u201d between lending and deposits in banks\u2019 balance sheets, where mortgages accounted for 23.5% of total bank assets at the end of 2023, up from 12.8% in 2019 on the back of government efforts to boost home ownership. On the plus side: the \u201crelative stability of Saudi deposits.<\/p>\n

On the table:<\/strong> Liquidating a portion of their investment portfolio could leave banks booking previously unrealized losses. S&P seems to think it\u2019s more likely that lenders will issue mortgage-backed sukuk (MBS) to get assets off their balance sheets and shore up liquidity. Banks could do this independently, but the Saudi Real Estate Refinance Company (SRC) could also be a player: At the end of last year, it \u201cbought about SAR 26.7 billion, or about 5% of banks' total mortgage-lending\u201d and could sell them off as government-backed MBS. Banks could also do private MBS sales. <\/p>\n

S&P says most banks like their mortgage portfolios: <\/strong>Default rates are low, it\u2019s relatively simple to repossess properties from defaulters, and bankers like the profitability of mortgages, it says. <\/p>\n

That makes it likely that Saudi lenders will continue to tap international debt markets <\/strong>for the next three to five years, flipping to \u201ca net external-debt position within a few years,\u201d with net foreign liabilities expanding from about USD 19.2 bn at the end of 2023 to meet the funding requirements of strong lending growth and amid lower deposit expansion.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

The Kingdom\u2019s loan-to-deposit ratio exceeded 100% in 2022, up from 86% at the end of 2019<\/p>\n","protected":false},"author":1,"featured_media":85796,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"newspack_ads_suppress_ads":false,"newspack_popups_has_disabled_popups":false,"newspack_sponsor_sponsorship_scope":"","newspack_sponsor_native_byline_display":"inherit","newspack_sponsor_native_category_display":"inherit","newspack_sponsor_underwriter_style":"inherit","newspack_sponsor_underwriter_placement":"inherit","ep_exclude_from_search":false,"_primary_brand":0,"newspack_featured_image_position":"","newspack_post_subtitle":"","newspack_article_summary_title":"Overview:","newspack_article_summary":"","newspack_hide_updated_date":false,"newspack_show_updated_date":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2617],"tags":[19,10,1002],"brand":[],"newspack_spnsrs_tax":[],"class_list":["post-85795","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking","tag-banking","tag-enterpriseam-ksa","tag-sp-global","wpautop","entry"],"acf":{"mongo_id":"ac256b14-457a-49d2-a374-1899a9f7c93b","order":"5","is_powered_by":false,"story_type":"1","photo_url":"https:\/\/ent.news\/2024\/3\/1577.jpg","photo_position":"above","homepage_title":"","full_issue_title":"Local lenders may need to tap external funding sources amid diversification plan, S&P Global says","related_issue":[85786],"teaser":"The Kingdom\u2019s loan-to-deposit ratio exceeded 100% in 2022, up from 86% at the end of 2019","voice_url":"https:\/\/s3.us-east-1.amazonaws.com\/ent.news\/audio\/2024\/5\/.828a6058-267e-4568-a691-820c71407ba6.mp3"},"yoast_head":"\nLocal lenders may need to look for alternative funding sources, S&P Global says - 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