News Column

Sharp gains in KSA bank lending to private sector

May 7, 2014

Arab News, Jeddah, Saudi Arabia

May 07--JEDDAH -- Bank lending to Saudi Arabia's private sector posted its strongest gain in over 11 months in March, says the latest edition of Saudi chart book from Jadwa Investment.

Saudi manufacturing and construction firms have been main recipients of new lending so far this year, according to the report issued by Fahad Alturki, head of research, Jadwa Investment.

There was a notable increase in bank claims on the public sector in March, said the chart book.

It said that bank lending to the private sector jumped by 1.7 percent in March, lifting the year-on-year growth rate to 12.8 percent.

The manufacturing and construction sectors were the largest recipients of new funds in the first quarter.

Credit to the commerce sector was down for the first time since the fourth quarter of 2011, according to the report.

It said that a notable increase in bank holdings on treasury bills could indicate that the government may be concerned about the impact of the excess liquidity on local stock market.

Bank deposits rose for the fifth consecutive month in March, with demand deposits accounting for the entire rise, said the Jadwa report. It said loan-to-deposit ratio fell further in March as monthly deposits grew at a faster rate than that of lending. Bank excess deposits at Saudi Arabian Monetary Agency (SAMA) remained very high, giving scope for further lending growth.

It said that banks remained very liquid; deposits at SAMA in excess of the regulatory requirement remained above SR91 billion.

Bank provisions for bad debts fell in the first quarter, in line with standard practice, according to Jadwa's Saudi chart book.

It said higher lending and deposits and lower provisions have supported monthly bank profits, which were at record high in January and March.

At the end of the first quarter, bank profits were 10.6 percent higher than in the same period last year.

Bank provisions for bad debts fell in the first quarter, but were 5 percent higher than in the same period last year.

Monthly bank profits were at record high in both January and March. As a result, profits expanded by 10.6 percent year-on-year at the end of the first quarter, said the report.

It said annual inflation continued to fall for the fourth consecutive month in March. Falling food inflation was the main reason for this decline while rental inflation slightly picked up to become the largest single contributor to headline inflation.

According to the report, core inflation slightly increased on the back of higher prices of "other goods and services".

It said that year-on-year inflation dropped to 2.6 percent in March from 2.8 percent in February.

Food prices continued to fall, but inflation for rent and housing related items picked up to become the largest single contributor to headline inflation, said the report.

It said that inflation for transport hit a long term low in March while that for "other goods and services" turned positive for the first time in nine months.

Full balance of payments data for 2013 show that the current account surplus was $134.3 billion (18 percent of GDP), $4.5 billion higher than the preliminary estimate in the budget, but down from an all-time high of $164.8 billion in 2012. Both lower oil revenues and higher imports of goods were the cause of the decline, according to Jadwa's Saudi chart book.

Current account surplus remained strong at 18 percent of GDP last year, the report pointed out.

Despite a 7.3 percent increase in nonoil exports, lower oil exports pushed overall exports slightly down by 2.9 percent in 2013. Also, a 7.7 percent increase in imports led to a $22.2 billion contraction in trade balance.

The report said that workers remittances have been on an upward trend and totaled an all-time high of $34.1 billion in 2013, despite a slight decline in the final quarter of last year.

Economic data for March was strong. Monthly indicators remained at levels consistent with robust economic growth, with the value of point of sale transactions hitting a new high and PMI index still points to an expanding economy, said the report. Despite a monthly recovery in cement sales in March, they remain shy of their level a year earlier.

The value of point of sale transactions was at an all- time high in March and 14.2 percent greater than March 2013.

Although the Purchasing Managers Index (PMI) dipped in March, it remains at a level consistent with strong economic growth.

Brent prices were up 2.4 percent whilst WTI dropped 1.5 percent in April.

The report cement sales were 13.6 percent higher than the February level, but remained 5.2 percent lower than a year earlier.

According to the chart book, the Tadawul All-Share Index (TASI) rose by 1.2 percent in April, although the pace of increase was at a slower rate than in the previous month. The TASI recorded its eighth consecutive month of rises, reaching levels not seen since June 2009. The average daily turnover was SR10.6 billion, the highest for two years.

The TASI rose by 1.2 percent in April, slower than March's rise of 4 percent, but still managed to climb above the 9,500 mark, equal to levels previously seen in June 2009. The TASI recorded its eighth month of increases, although it was the lowest level of rises since Oct. 2013, said the report.

It said that market turnover averaged SR10.6 billion per day in April, up 20 percent from March. The turnover average was the highest in exactly two years.

Twelve of the 15 sectors in the stock market were up in April. Smaller sectors outperformed larger ones with media and publishing stocks the highest gainers. Weaker Q1 2014 results affected petrochemical and energy stocks.

The smaller sectors outperformed larger ones with media & publishing, multi-investment and

insurance recording the highest gains, and petrochemicals and banks among the larger sectors to perform the worst, according to the chart book.

It said investors jumped into many of the smaller sectors that have been the focus of activity in previous times of high volumes, reflecting investor confidence in the wider economy due to solid domestic fundamentals. Disappointment with Q1 2014 results negatively affected petrochemical and energy stocks in April, the report added.

Net income of listed companies totaled SR25.3 billion in the first quarter, according to the Jadwa report. It says the petrochemical sector still accounts for the largest share of earnings, with banks second, whilst smaller sectors, such as media, recorded the highest annual growth. Net income of listed firms continued to show strong growth, in the first quarter it was up by 11 percent, year-on-year, and 2.1 percent, quarter-on- quarter, for listed companies.

There is a high level of profit concentration among listed companies, with the top three sectors, petrochemicals, banks and telecoms, contributing 82 percent of net income in the first quarter.

The smaller sectors such as 300 media, multi-investment 200 and energy recorded the 100 largest net income growth in the first quarter, year-on- year.

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(c)2014 the Arab News (Jeddah, Saudi Arabia)

Visit the Arab News (Jeddah, Saudi Arabia) at www.arabnews.com

Distributed by MCT Information Services


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Source: Arab News (Saudi Arabia)


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