Saudi bank lending climbs on real estate loans

Bank lending is on the rise again in Saudi Arabia helping to boost retail and real estate spending. (Getty Images)
Updated 29 May 2018
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Saudi bank lending climbs on real estate loans

  • Total real estate loans rise 5.7 percent in first quarter yoy
  • Oil price recovery helps to boost overall bank lending

Bank lending to the private sector in Saudi Arabia rose in April, providing a tentative sign that confidence in the Kingdom’s economy is returning, say analysts.

Total bank credit to the private sector increased by about 0.7 percent compared to the same month the previous year, according to Saudi Arabian Monetary Authority (SAMA) data.

“It’s a hard indicator to read, but it may be a sign that Saudi consumers and business people feel less uncertain about the future and a bit more secure. It is probably linked to the return to fiscal expansion,” said Marcus Chenevix, a Middle East and North Africa analyst at TS Lombard in London.

“However, Saudi Arabia has a comparatively underdeveloped banking sector for its level of per-capita wealth, meaning that this is an area in which we would expect to see pretty strong growth.”

The loan growth was put down in part to a revival in the property sector.

“Lending growth was driven primarily by the construction sector and the real estate retail loans in the first quarter,’ said Mohamed Damak, senior director, financial institutions ratings at S&P Global.

Total real estate loans by banks in the first quarter this year increased by 5.7 percent compared to the same quarter the previous year.

“Under our base case scenario, we expect slight lending growth in 2018 explained by a higher GDP growth in 2018,” he said.

Ashraf Madani, vice president, senior analyst at rating agency Moody’s Investors Service, agreed that lending is likely to rise this year. “We expect credit demand to increase in 2018 boosted by the planned increases in government capital expenditure,” he said.

The April data also revealed that SAMA’s foreign reserves rose to $498.9 billion in April, the highest level in more than a year and an increase of more than $13 billion on the previous month.

The increase is mainly due to the recovery in oil prices which reached approximately $75 a barrel in April.


“It is 90 percent due to rising oil prices,” said Chenevix.

“The remaining 10 percent of responsibility is down to the fact that the Saudi budgetary system is far better managed than it was just three years ago, even though the state is actually spending more money, it is doing so in a more effective and better planned way than before,” he said.

The Kingdom’s reserves also benefited from the government’s international bond issuance of $11 billion in the first half of April.


Pakistan in final round of talks with IMF over bailout deal

Updated 38 min 41 sec ago
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Pakistan in final round of talks with IMF over bailout deal

  • Finance Minister Asad Umar acknowledged the two sides have differences and that the talks may not end on Tuesday
  • Pakistan has been approaching the IMF since 1980s and received a $6.7 billion loan in 2013
ISLAMABAD: Pakistan and the International Monetary Fund are into their final round of talks over an $8 billion bailout package Islamabad seeks from the international lending agency to overcome the country’s economic woes.
Finance Minister Asad Umar acknowledged the two sides have differences and that the talks may not end on Tuesday.
Authorities say they are still at odds over electricity rate hikes, as well as interest rate hikes and tax collection targets, and that the IMF is looking for more than Pakistan’s new government feels it can manage.
Pakistan has been approaching the IMF since 1980s and received a $6.7 billion loan in 2013. It’s also seeking fresh loans from China, which has already heavily invested in transport and energy, as well as Saudi Arabia and some other Muslim countries.