JEDDAH – An increase in lending by Saudi banks propelled the loans-to-deposits ratio to its highest level in nearly three years, which augurs well for the banks' performance this year, the National Commercial Bank (NCB) said in a report. Deposits with the Kingdom's 12 banks swelled by more than 10 percent year-on-year in August, yet the growth was outpaced by domestic credit, the report noted. It showed total claims of the country's banking sector, excluding T-bills and government bonds, surged by around 15.6 percent to SR960.9 billion at the end of August. The report also said Saudi banks have recently shifted their focus to fund small to medium enterprises, adding that the maturity of credit reflects the initiative. Short-term credit increased by an annual rate of 15.7 percent while long-term credit gained a relatively small 8.4 percent Y/Y. Meanwhile, medium term credit added the highest percentage at 27.4 percent to reach SR168.3 billion by the end of August. “The pickup in lending has outpaced the flow of deposits which led to the improvement in the loans-to-deposits ratio to reach 83.2 percent, the highest since April 2009. This will support banks in growing their profit levels which have already made a strong recovery from the financial crisis.” In the private sector, total claims increased by an annual 14.4 percent during August, the report said, noting that the momentum of private sector growth continues to climb as business activity in the Kingdom grows. Data showed fresh lending to the private sector has reached SR93.1 billion for the first eight month of 2012 compared to SR81.7 billion for the whole 2011. In contrast, claims on the public sector contracted by 12.4 percent Y/Y as the level of treasury bills dropped drastically due to the elevated issuances last year in an attempt from SAMA to mop up excess liquidity in the market which is unlikely to occur this year. The NCB, Saudi interbank overnight rate (SAIBOR) has been rising since late September 2011 from 60bps to 97bps by mid-October 2012. However, it added, the interbank market remains subdued owing to the low policy rate taken by SAMA. “Interestingly, interbank liabilities have gained a substantial 20.7 percent Y/Y, far below the peak of 78.2 percent during May…we expect SAIBOR to remain around the 100bps level in the short-term due to the healthy cash levels of most Saudi banks,” the report further said. Moreover, NCB said Saudi banks, which control the second largest Arab asset base after UAE banks, have benefited from the large deposit base which has been accumulated due to the global financial crisis. It showed total deposits grew by around 10.4 percent during August against the same month last year, reaching SR1.16 trillion. – SG/Agencies
