Saudi Arabia's banks have shifted to financing government-sponsored projects and financially-sound ventures, Saudi American Bank Group (Samba) said in a study. The Kingdom's 12 banks are also pursuing a drive to build up foreign investments, the study added. The combined foreign assets of the 12 commercial banks swelled by nearly SR47.45 billion at the end of 2009 to boost their overseas investments to one of their highest levels. “The main driver of new lending is project finance, with banks focusing on projects with robust sponsors and/or public sector involvement,” it said. They dipped to around SR187 billion at the end of January before rebounding to nearly SR204.2 billion at the end of February. Samba's figures showed Saudi banks' deposit growth declined sharply in January to a year-on-year rate of 8.5 percent, down from 11.2 per cent in December. The SR23 billion month-on-month drop, which was led by a SR20 billion drawdown of foreign currency holdings, was “something of a jolt after four consecutive months of increases.” “The monthly fall is in line with seasonal patterns and is not especially significant,” it added. The Saudi Arabian Monetary Agency said bank lending to the private sector slightly edged up in January in both month-on-month and year-on-year terms. At 0.8 percent, the year-on-year increase was slight, but it was at least positive following the overall decline registered in 2009, the study said. But it said the rise was not enough to push overall bank lending into positive territory, though there was a slight slowing in the rate of decline. It showed the main current projects are the Jubail and Yanbu refineries, both sponsored by Saudi Aramco, in partnership with France's Total and Conoco Phillips of the United States respectively. “The pick-up in project finance is encouraging and should give a boost to large-scale private investment this year. Nevertheless, banks remain cautious about more general lending given the shock of last year's corporate debt problems.” Through 2009 alone, Saudi banks boosted their investments abroad by a record high of nearly 75 percent to offset slackening credit to the private sector and the absence of government bonds, according to SAMA's figures. The banks' statutory deposits with SAMA also swelled to around SR50.3 billion at the end of 2009 from SR44.2 billion at the end of 2008. They rose to SR51.3 billion at the end of January before edging down to about SR50.6 billion at the end of February. Low lending allied with record annual bad debt provisions of more than SR10 billion to depress Saudi banks' profits by around 0.3 per cent to SR26.3 billion last year, their balance sheets showed.
