Domestic credit growth accompanied with a slowdown in monetary aggregates encouraged Saudi banks to reduce their foreign assets, the National Commercial Bank (NCB) said in a study. The Kingdom's monetary base and the money supply registered annual growth rates of 15.7 and 13.1 percent in the second quarter compared to 24.7 and 13.8 percent, respectively in the first quarter, NCB said. The study showed banks' net foreign assets had decelerated sharply by 11.2 percent, or around SR14.2 billion, falling from an all-time high of SR127.1 billion at the end of the first quarter to SR112.9 billion at the end of the second quarter. The decline was attributed to the plunge in assets due from banks abroad by SR9.1 billion, the downfall in investment abroad by SR6.3 billion, reaching SR119.1 billion and the surge in liabilities due to foreign banks by SR2.5 billion, the bank said. “In our opinion, banks had shifted this significant amount to the domestic market market, especially that claims on private and public sectors had edged higher by around SR53.4bn, a quarterly pace unseen since the third quarter of 2008,” NCB study said. Banks' claims on the public sector increased by SR31.9 billion in the second quarter of this year from the previous quarter as treasury bill issuances grew to SR38.4 billion, largely undertaken to proactively replace the maturing government bonds that currently stands at SR50.8 billion, it said. Private sector credit grew by 7.8 percent year-on-year, the highest growth rate since the first quarter of 2009 and the sixth consecutive quarter of positive growth
