JEDDAH: ARAB NEWS
Published — Friday 4 July 2014
Last update 3 July 2014 10:47 pm
Bank lending to the Saudi private sector rose by 1.3 percent in May, lifting the year-on- year rate to 12.1 percent, says a report.
Bank claims on the government rose by 26 percent since the start of the year, mostly due to higher T-bills issuance as the Saudi Arabian Monetary Agency (SAMA) absorbed excess liquidity from the market, according to the latest Saudi Chartbook released by Jadwa Investment.
Stronger lending is boosting bank profits, according to the report.
It said profits for the first five months of the year were 16 percent above where they were in the same period of last year.
According to the chartbook, bank claims on the private sector continued to increase at a healthy pace in May.
It said banks claims on government and quasi-government institutions also maintained a positive trend in May, albeit at a slower pace than in the previous two months.
Stronger lending is boosting bank profits which continued to score long-term records in May.
The report added that bank deposits maintained positive annual growth rates in May, albeit at a slower pace than the previous few months, as demand deposits showed little change. Government time and saving deposits which recorded their fastest monthly growth in over 18-month period accounted for most of the gain in total bank deposits.
The growth of commercial bank deposits slowed for the second consecutive month in May, as demand deposits were unchanged.
The increase in total deposits was entirely due to a surge in government time and saving deposits which grew by over 12 percent in the month of May. The loan-to-deposit ratio remained below 80 despite the increase in lending, said the report.
According to the chartbook, year-on-year inflation was unchanged in May as rising core inflation was offset by a fall in both food and housing and related items inflation.
Seasonal factors were behind the increase in the core index. Wholesale price data points to a potential increase in food inflation in the supply chain over the coming few months.
Year-on-year inflation remained unchanged from 4 the previous month’s level at 2.7 percent in May. The contribution of both food
and housing and rental inflation also fell.
The rise in core inflation to a one year high of 2.1 percent was mostly due to seasonal factors pushing up some of its components, according to the Jadwa report.
It said inflationary pressures from domestic wholesale prices show that consumer food prices are set to increase again in the coming few months.
The report said that nonoil exports fell in April, but imports remained high. Much of the decline in exports was due to lower exports of petrochemicals and plastic, which together have accounted for 65 percent of total nonoil exports since the start of the year. New letters of credit opened suggest a slowdown in imports in the coming months.
Lower exports of petrochemicals and plastics pushed nonoil exports down by 6 percent compared to the previous month, said the report. Imports remained healthy in April at $14.5 billion.
According to the chartbook, new letters of credit opened by the private sector at commercial banks point to a slowdown in imports
over the coming months. The value of letters of credit opened over the first four months of the year is 3 percent higher than in the corresponding period of 2013.
The report said that Saudi crude production was up marginally by 0.5 percent, month-on- month, in May whilst Saudi exports rose in April by 4.6 percent. Iraqi crude production rose 4 percent, month-on-month, in May but there was little change in Iranian and Libyan supplies.
The higher need for Saudi crude in domestic power plants for electricity generation saw production rise above 9.7 million barrels per day (mbpd) in May.
Saudi crude exports rose by 4.6 percent, month-month, in April as many refineries reopened after a period of maintenance, according to the report. It said Iraq’s crude output increased 4 percent month- on-month in May, as rising levels of exports helped push total production to 3.2 mbpd.
The chartbook also referred to a decline in the Saudi stock market index in June. The combination of security issues in Iraq, a large correction in the Dubai bourse together with investors repositioning themselves before the start of Ramadan resulted in the Tadawul All Share Index (TASI) recording a 3.2 percent fall in June, month-on-month. This was the first decline following nine months of positive performance.
Negative geopolitical developments in Iraq and sizable falls in the Dubai stock market contributed to the TASI’s fall in June. Investors also started selling shares before the quieter trading period in early Ramadan, resulting in the worst monthly performance since the start of the year.
The TASI still outperformed most GCC stock markets, all of which, apart from Oman, also saw downward trends, according to the Chartbook.
It said average daily turnover dropped for the first time in eight months, reaching SR8.2 billion in June. Turnover by sector was dominated by the larger sectors, but smaller sectors saw larger turnover relative to market capitalization.
Average daily turnover value dropped to an average of SR8.2 billion, in June, with the last drop occurring in October 2013, said the Jadwa report. Larger sectors, with the exception of insurance, saw the biggest average daily turnover. Turnover to market cap was more prominent in smaller sectors due to investor speculation.
All but two sectors saw negative performances during June, as investor selling was felt across the board. Transport and Cement sectors performed better than others. The media sector continues to suffer from the previous month’s reported irregular trading activity, said the report. Selling of stocks by investors was felt across all sectors.