Money money money! KSA banks lend Riyals galore on biggest spree since 2007
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.
Bank credit climbed 13 per cent in the 12 months ending in May to 868 billion riyals ($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 per cent yesterday, 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 per cent. 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,- Paul Gamble, Riyadh-based chief economist at Jadwa Investment, said July 14 in response to e-mailed questions. "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, banksremain liquid and fairly keen to lend.-
King Abdullah's spending plan, which is based on a forecast that the kingdom needs to build1.25 million new homes by 2014, encouraged banks in the world's biggest oil exporter toarrange a record $7.9 billion of syndicated loans in 2012, data compiled by Bloomberg show. 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 per cent 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 compiled by Bloomberg.
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 November 14, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The contracts for Qatar and Abu Dhabi were at 121 basis points and 122 basis points, respectively, according to the data.
One-year Saudi riyal forwards weakened for a second day, declining less than 0.1 per cent to 3.7489 a dollar. Saudi Arabia pegs the spot local-currency exchange rate at about 3.75 a dollar.
Of the 10 Saudi banks that reported gains in second-quarter net income, Al-Jazira's profit doubled to 129 million riyals.