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Balance between Saudi bank deposits and loans turns negative for the first time since at least 2013

CAIRO & MOSCOW: Growth in Saudi banks’ aggregate credit to the private and public sectors slipped  to 14.1 percent in May year-on-year, down from 14.7 percent in April, the most recent data from the Saudi Central Bank revealed.

As for banks’ deposits, the rate of annual growth also slowed to 8.9 percent in May versus 9.4 percent in April. In absolute terms, the difference between the deposits and credit turned negative for the first time at least since 2013, according to data compiled by Arab News.

Figures are not available for before this date.

In May 2022, the balance of total bank credit exceeded the balance of total bank deposits by SR14.5 billion ($3.9 billion). This compares to a shortfall of SR5.4 billion in April.   

In absolute terms, total bank credit increased by SR16.3 billion to SR2.19 trillion in May from SR2.18 trillion in April while total deposits decreased by SR3.6 billion over the same period.

On a year-on-year basis, growth in deposits, which are an important source of funding bank loans, slowed to a much lower rate of 8.9 percent in May from 9.4 percent in April, according to data compiled by Arab News.

The annual growth in credit as well as deposits has slowed noticeably from the peak numbers observed in June last year – 16.8 percent and 10.2 percent, respectively. However, looking at net changes over the same period, the balance of total credit grew by SR240.1 billion while that of total deposits increased by a much smaller SR148.3 billion.

As a result, the loan-to-deposit ratio exceeded 100.7 percent in May compared to 99.8 percent in April 2022 and 96.2 percent in June 2021, data compiled by Arab News showed.

“The pressure on banks’ liquidity stems from deposit growth remaining lower than lending expansion over the past few years,” S&P Global Ratings said in a research note issued at the end of June.

“Over the past couple of years, on average, 60 percent of lending growth has been financed by the increase in customer deposits. In 2021, the remaining lending growth was financed by an increase in external debt and a drop in liquid assets,” the note added.

Following the central bank’s SR50 billion injection in bank liquidity reported earlier this year, Saudi banks are facing less short-term liquidity and the chances that the system would have to decelerate lending growth have diminished, the S&P note concluded.

Looking at lending breakdown by sectors, the picture looks relatively the same. The year-on-year growth in credit to the private sector in 2022 reached a low of 14 percent in May since the 16 percent peak of May 2021, according to a statistical bulletin published by the Saudi Central Bank.

Saudi banks’ credit to the private sector, which mainly consists of loans, advances and overdrafts but excludes investment in private securities, increased by SR18 billion in May, as stated by SAMA in their report.

The total balance of such credit at the end of May stood at SR2.098 trillion, with a year-on-year increase of SR257.1 billion, which translates to an annual growth rate of 14 percent.

Bank credit to the private sector grew 16 percent year-on-year in May 2021, when the annual rate rose to its second-highest level since October 2014.

On a monthly basis, the balance amount increased by 0.87 percent in May, the slowest rate in the Kingdom in the last four months.

In 2022 the month-on-month bank credit to the private sector started to increase. The first three months recorded a 0.91 percent, 1.67 percent and 2.22 percent increase.

Furthermore, the monthly rate of change started to decline in April and May to 0.98 percent and 0.87 percent, respectively.