RIYADH – Saudi Arabian banks are lending the most in at least five years as the government's plan to invest $500 billion in new housing, infrastructure and industry boosts confidence in the Kingdom's economy, Bloomberg reported Tuesday. Bank credit climbed 13 percent in the 12 months ending in May to SR868 billion ($231 billion), according to central bank data. At the same time, deposits are trailing credit growth, pushing the three-month Saudi interbank rate to 0.94625 percent Monday, the highest level since April 2009. That compares with a 13 basis-point decline this year in the London-Interbank Offered Rate to 0.455 percent. Ten of 11 publicly-traded banks reported raising the value of their loan portfolios in the first six months. “Bank lending to the private sector will increase by 14 per cent this year,” said Paul Gamble, Riyadh-based chief economist at Jadwa Investment. “Strong economic-growth prospects have reassured banks about the lending environment and spurred demand for credit. Although the loan-to-deposit ratio has edged up in the past couple of months, banks remain liquid and fairly keen to lend.” The government's spending plan, which is based on a forecast that the Kingdom needs to build 1.25 million new homes by 2014, encouraged banks to arrange a record $7.9 billion of syndicated loans in 2012, data compiled by Bloomberg showed. Alinma Bank posted the largest increase in loans with a jump of 33 per cent, while Al Rajhi Bank, the biggest lender by market value, reported a 23 percent gain. The economy of the world's largest oil producer is forecast to expand 4.8 per cent this year, the second-fastest pace in the GCC after Qatar, according to an April survey of economists. The cost of insuring Saudi debt against default fell to 115 basis points, or 1.15 percentage points, on July 13, the lowest level since Nov. 14. – SG
