Bank credit maintained its healthy growth in April, said National Bank of Kuwait (NBK) in an Economic Update.
“Household credit continued to show strength, while non-financial business sectors experienced a third consecutive month of solid growth,” said the update. “If this pace is maintained, we expect credit growth to approach seven per cent in 2013, its strongest since 2009. Despite this, private deposit growth continued to outpace credit growth, boosting bank liquidity.
“Total bank credit rose by a solid KWD 169 million in April to KWD 27.51 billion, up 5.8 per cent year-on-year (y/y). Net credit gains thus far in 2013 averaged KWD 173 million a month, up from an average of KWD 100 million a month during 2012. Household credit (personal facilities excluding lending for the purchase of securities) remained the key driver of credit growth, though there has also been a clear pick up in non-financial business activity.
“Growth in the household sector was healthy, with personal facilities (ex-securities) up by KWD 119 million in April. The monthly gain was notably larger than in previous months, suggesting household borrowing remains solid. The y/y rate of growth accelerated to 17.9 per cent. In the coming months, with the implementation of the Family Fund law, reported household debt may actually decline as some debt will be transferred to the government.
“The strong growth in household credit has boosted its share of total credit, raising it by nearly 3 percentage points in the last 12 months to reach 28 per cent. This came at the expense of non-bank financial (NBF) credit, which saw its share decline to 6.5 per cent on the sector’s ongoing deleveraging. The sector saw the decline of NBF credit resume following a modest rise in March, falling by KWD 51 million.
“Non-financial business activity saw its growth pickup sustained in April, with its third consecutive month of healthy growth. April saw credit up KWD 101 million. Gains during the month were led by real estate and other credit facilities. Meanwhile, oil & gas, trade, and industry saw declines in total credit.
“Private sector deposits saw a fifth strong consecutive monthly gain. Deposits were up a total of KWD 351 million, exclusively in local currency sight and saving accounts. Gains have averaged KWD 450 million per month since December 2012, helping reduce the loan-to-deposit ratio by 2.8 percentage points to 91.6 per cent over the last five months. Saving and sight deposits saw strong increases in April (+KWD 319 mn and +KWD 164 mn, respectively), while time and foreign currency deposits declined (-KWD 78 mn and KWD 54 mn, respectively).
“The broader measure of money (M2) expanded by KWD 337 million during the month, with double digit growth maintained at 10.3 per cent (y/y). The narrower measure (M1) increased by KWD 150 million.
“Deposit rates on dinar time deposits remained steady at current low levels. Average rates fell by a basis point across all maturities except for the three-month rate. The one-month, three-month, six-month and 12-month deposit rates averaged 0.56 per cent, 0.75 per cent, 0.96 per cent and 1.16 per cent respectively.”