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.


SoftBank to launch Vision Fund 2 mega-venture

Updated 12 min 51 sec ago
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SoftBank to launch Vision Fund 2 mega-venture

  • Vision Fund 2 will aim to pull in existing investors such as the Public Investment Fund in Saudi Arabia and Mubadala in the UAE
  • Vision Fund 2 is expected to at least equal the original fund’s $97 billion fund, and could reach $150 billion

LONDON: The global mega-investor SoftBank Vision Fund is preparing to launch another giant investment venture.
Vision Fund 2 will aim to pull in existing investors such as the Public Investment Fund in Saudi Arabia and Mubadala in the UAE, the biggest investors in the original fund along with SoftBank, the Japanese group run by Masayoshi Son.
Sources told Arab News that Vision Fund 2 is expected to at least equal the original fund’s $97 billion fund, and could reach $150 billion — which would make it the largest private investment fund in history.
A team from SoftBank Investment Advisers led by its chief executive Rajeev Misra and Masayoshi Son have been in preliminary discussions with potential investors for several months.
They have been talking to sovereign wealth funds in the Middle East and elsewhere, as well as big global corporates, some of which were also investors in the first fund.

*** Read our full interview with CEO Rajeev Misra here: SoftBank Vision Fund stands shoulder to shoulder with Saudi Arabia — CEO Rajeev Misra ***
Investment is also expected from global banks, insurance companies and pension funds, and SoftBank is expected to put up about $40 billion.
The first phase of the launch is due to end “in the next few months,” with a final close around 12 months later.
The original fund plans to return profits to existing investors over the next few months, including big partners such as PIF, Mubadala and SoftBank. If they see healthy returns they may be more likely to invest heavily in the new fund.
The interests of Saudi Arabia and the Vision Fund align as the Kingdom diversifies away from reliance on oil, Misra told Arab News. “Our commitment is to support the creation of tens of thousands of jobs in Saudi Arabia, high-tech jobs not blue collar, over the next few years,” he said.