rising deposits at banksIn its latest economic brief on monetary developments, National Bank of Kuwait (NBK) reports that the local bank funding grew rapidly in October, helped by a sizeable increase in government deposits. However, credit growth remained slow and did not match the rise in deposits. Meanwhile, money supply (M2) expanded KD 149 million month-on-month (m/m). Rising foreign assets at local banks and the Central Bank of Kuwait (CBK) boosted M2 in October and lifted year-on-year (y/y) growth to 15.7% from 14.8% in September.
NBK noted that local banks witnessed an increase of KD 656 million in total deposits during October. Government deposits rose KD 462 million m/m, their largest increase since January 2009. Meanwhile, private resident deposits grew 0.6% m/m (up KD 150 million), mostly local currency time deposits, while non-resident deposits were up KD 44 million. Bank assets rose KD 857 million (+2.2%) m/m, their largest monthly increase in 2009. However, of the total increase in assets, only 16% (KD 136 million) resulted from credit expansion, while the bulk of the rise (KD 452 million) was in placements with foreign banks. NBK also noted that credit to residents rose 0.5% m/m in October. Credit growth continues to decelerate, sliding to 7.3% y/y. Credit has been hampered during the entire year by slow growth in deposits and weak demand for credit. Deposit expansion in October, if sustained, would ease some of the constraints, and allow for stronger credit growth whenever demand picks up. During October, credit growth was primarily in personal facilities, which rose KD 111 million. Half of this growth came from loans for the purchase of securities. Loans to the construction and trade sectors rose KD 32 million and KD 26 million, respectively. Otherwise, loans to the real estate sector were flat in October despite a good performance so far this year.
Strong growth in deposits further lifted banks’ liquidity. Liquid assets (incl. net interbank deposits) rose KD 101 million in October, resulting from a KD 193 million increase in time deposits with the CBK. As a consequence, banks’ liquid assets to total assets ratio continued to increase, all the while KIBOR holds close to its all time lows.Liquidity Indicators Liquid assets to total assets Interbank rates Since the beginning of September through mid-November, the dinar made slight headway against the dollar. Nonetheless, the dinar continues to fall vis-à-vis the Euro, due to the large losses the dollar has suffered in the foreign exchange markets.