SR1.5 trillion: KSA bank deposits hit all-time high
JEDDAH: ARAB NEWS
Published — Tuesday 2 September 2014
Last update 1 September 2014 10:58 pm
Total bank deposits in the Kingdom hit a new all-time high above SR1.5 trillion for the first time in July, says a report.
Bank deposits climbed by 1.7 percent in July to cross the SR1.5 trillion mark.
This lifts the year-on-year growth rate to 14.5 percent, the fastest in the last 12 months, according to the latest Saudi chart book from Jadwa Investment.
The prospect of higher interest rates in the US has boosted the annual growth of time and savings deposits to its highest level since December 2008.
The increase in deposits in July reflects a steady rise in private sector deposits as well as a seasonal spike in public sector deposits, said the Jadwa chart book for September 2014.
It says that banks remain highly liquid, with deposits at the Saudi Arabian Monetary Agency (SAMA) beyond the statutory requirement rising to a four-month high of SR78.4 billion at end-July.
With claims on the public and private sectors slowing and deposit growth accelerating, bank excess reserves at SAMA hit a four-month high. This also pulled the loan-to-deposit ratio down to 79.8 percent, indicating that banks still have plenty of ability to further step up lending.
With deposits rising and loans slowing, the private sector loan-to-deposit ratio fell to 79.8 percent.
Banks have recorded all- time high monthly profits in five of the last seven months, including July, according to the report.
“This confirms our view that banks are on track to break last year’s record high profits of SR35.7 billion,” said the Jadwa researchers.
The report says that bank lending to the private sector rose by 0.5 percent in July, the slowest monthly increase since December last year, pulling the year-on-year rate down to 11.8 percent.
According to the chart book, there was a large fall in debt outstanding for less than a year and a jump in debt outstanding at longer maturities. In part, this could reflect the refinancing of short-term loans at longer-term maturities. In addition, long-term lending may have been boosted by demand for real estate loans.
There was a second consecutive fall in bank holding of SAMA bills in July, suggesting a moderation of concerns about domestic inflation.
The chart book stated that economic data for July was strong with the nonoil PMI expanding at the fastest rate since September 2012.
Consumer spending also remained robust, with cash withdrawals from ATMs hitting a new high. The overall nonoil Markit/HSBC PMI registered 60.1 in July, the fastest rate of expansion since September 2012, according to the report.
The value of cash withdrawals from ATMs was at an all-time high in July and 8.3 percent greater than July 2013.
Cement production and sales declined on the back of seasonal trends, but also due to changes in labor market, added the report.
Cement production and sales dipped further in July following regular seasonal trends. Year-to-July production and sales were 6.8 and 7.5 percent below the same period of last year, respectively.
The report said that year-on-year inflation inched down in July, continuing the flat trend in the previous three months, although this trend hides some sharp movements.
While the lack of external inflationary pressures pulled food prices down, inflation for most other components of the cost of living index rose.
The chart book said year-on-year inflation inched down to 2.6 percent in July from 2.7 percent in the previous three months. Whilst food price inflation slowed, in line with global trends, other domestically-driven sources of inflation are not abating.
According to the report, nonoil exports rebounded in July owing to greater production of petrochemicals and plastics. In contrast, imports fell for the second consecutive month in June, in both absolute and year-on-year terms. Data on letters of credit issued for imports suggests further declines are likely in the months ahead.
New letters of credit opened by the private sector at commercial banks point to further declines in imports over the coming months, said the report.
In July, Saudi production edged over 10m bpd for the first time, since September last year, on the back of rising seasonal domestic consumption. Latest available data shows Saudi crude exports in June dropped to their lowest level in three years as oil use in the power sector and in refinery processing increased.
The report added that the Tadawul All-Share Index (TASI) increased by 8.8 percent, month-on-month in August as the prospect of opening the stock continued to buoy investors’ confidence.
The favorable domestic macro-economic climate and recent positive economic data from the US added to the overall positive sentiment, helping push the TASI over 11,000 mark.
The TASI leaped above the 11,000 for first time since December 2007 with the largest month-on- month increase since February 2012 outperforming most major indices.
Average daily turnover jumped by 45.6 percent in August, the largest rise in more than two years, said the report. Banks and petchem sectors dominated daily turnover but turnover was more prominent among the smaller sectors, when considering market capitalization. Average daily turnover in August increased by 45.6 percent to SR9.9 billion.
In August, the TASI’s price-to-earnings (PE) valuations increased to 21.3, moving further away from the two year average of 16.5, although it still below previous peaks of 27.4 back in mid 2006. PE was higher than comparable indices, such as Dubai, but dividend yield was at the lower end, at 2.59.
In August, banks performed much better than other sectors as expected near term US interest rate rises fueled positive sentiment in the sector. Building and construction was boosted by developments in a major national projects, but seasonality negatively affected hotels.
Announcements of a date to begin work on eleven stadiums helped the building and construction sector gains.
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