JEDDAH – Near the end of the financial year of 2013, Saudi banks are close to record yet another profitable year, the National Commercial Bank said in its report Monday. Moreover, the Saudi Arabian Monetary Agency (SAMA) was able to expand their net foreign assets by 13.1 percent annually to reach a record SR2.66 trillion. The financial system's position is reasonably strong to withstand any external shocks whether regional or global as SAMA's prudent guidelines directed banks to safer grounds, NCB report noted. The report said the domestic loans market maintained a healthy level with an expected correction toward the end of the year. Banks were able to expand their credit portfolios given their solvent nature which was backed by a stable flow of deposits. The deposit base posted an 11.1 percent gain during the month of October, slowing from the previous 14.1 percent annual gain in September. “We expect deposit inflows to be relatively reduced in the coming months as the US government considers a tapering decision which will directly affect interest rates.” As such, investors are likely to postpone some of their medium and long-term decisions to evaluate their options accordingly. Demand deposits recorded a 16.4 percent Y/Y increase while time and savings deposits remained somewhat stable at a 0.4 percent addition as businesses and individuals reduced their holdings of the interest-yielding asset by 3.6 percent on an annual basis. The latest crackdown on illegal workers resulted in deporting over one million immigrants back to their respective countries. This was reflected in outstanding remittances that spiked by 62.1 percent annually, posting SR14.6 billion by the end of October. In addition, foreign currency deposits gained 5.4 percent Y/Y which supported total other quasi-monetary deposits to post a rise of 9.2 percent on an annual basis. Similarly, credit started slowing since May 2013 and banks recorded their sixth consecutive monthly deceleration for total claims of the banking system, excluding T-bills and government bonds, by expanding at an annual rate of 13.0 percent during October. “We do not believe the slowdown indicate a start of market saturation for credit locally. It is a combination of a higher base comparison and a chance for banks to reassess credit portfolio risk.” Regarding maturities of credit lines, local banks continue to favor longer maturating assets. Short-term credit expanded by 7.9 percent annually while medium term credit gained 10.4 percent Y/Y in October. Besides, long-term credit reached an all-time high at SR318.7 billion by gaining 25.9 percent annually. Fresh lending to the private sector reached SR105.7 billion in the first ten months of 2013, an 11.0 percent addition thus far. The recent regulatory changes in the labor market are expected to hinder businesses as they adapt accordingly. The pace of credit outpaced that of deposits which resulted in a higher utilization represented by loans-to-deposits ratio reaching 82.9 percent during October, compared to 81.5 percent during October of 2012. Meanwhile, claims to the public sector reached SR266.6, expanding 26.9 percent over the past twelve months. The government is controlling the level of liquidity by increasing its issuances of securities. The sum of T-bills and government bonds rose to SR220.4 billion, a 30.9 percent annual growth, in an attempt limit the inflationary risks. The interbank rate SAIBOR is forecast to remain around the 100bps level in the short-term due to the healthy cash levels of most Saudi banks. However, the differential between SAIBOR and LIBOR has widened to over 71bps. The pace is far from worrying as SAMA is closely monitoring risk indicators for the Saudi financial system. In the month of October, Saudi Arabian non-oil exports totaled SR18 billion, a record level for this year. The 12.6 percent Y/Y surge is explained by the recent upward momentum in global manufacturing, heightening demand for input material. Non-oil imports reached SR44.2 billion, short of last year's amount by 0.02 percent. Accordingly, non-oil balance of trade narrowed by 7.4 percent Y/Y at the end of the month. The weight of exports have also enjoyed a bump up by 9.4 percent Y/Y, measuring 4.1 megatons. The weight of imports, on the other hand, receded by 2.1 percent compared to last year, recording 5.9 megatons. Main non-oil exports include chemical products, which make up the largest portion of categories (31.7 percent), followed by plastics (29.9 percent). Due to the essential nature of these major categories in manufacturing, they received a considerable boost during last month. Contrasting with last year's October, chemical products and plastics grew by 9.6 percent to SR5.7 billion and 1.9 percent to SR5.4 billion, respectively. Transport equipment have been gaining traction in 2013 as the fastest growing export category, rapidly surpassing base metals exports in value terms. They currently account for 15 percent of total non-oil exports with a record growth pace of 127.2 percent, standing at SR2.7 billion. The UAE regained its position in October as the largest export destination after lagging behind China for three consecutive months. At SR2.6 billion, exports to UAE surged by 85.1 percent Y/Y, accounting for 14.4 percent of total nonoil exports. China, which started to pick up steam, received exports from the Kingdom worth SR2.5 billion, or 13.8 percent of total exports, up ticking by 22.7 percent Y/Y. On the import side, the composition of the SR44.2 billion worth of imports show that 24.8 percent of imports were machinery and electrical equipment. Total value of this category in amounted to SR10.9 billion, which is 2.5 percent lesser than October 2012's figure. – SG
