Bank credit to Saudi public, private sector enterprises reaches SR1.417 trillion

Updated 18 July 2016
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Bank credit to Saudi public, private sector enterprises reaches SR1.417 trillion

JEDDAH: As oil revenue shrank on falling oil prices, the Kingdom, among other oil exporting Gulf countries, are increasingly taping capital markets in order to maintain and induce growth. This credit-induced growth comes at a time where widening fiscal deficits is adversely impacting sovereign credit ratings, according to Saudi Economic Review by the National Commercial Bank.
Moreover, with much of Saudi Arabian Monetary Agency’s (SAMA’s) monetary policy constrained to preserve the long-standing dollar peg, the Kingdom had to balance be- tween repatriating foreign assets and issuing debt.
In the month of April, the NCB report said, Saudi Arabia’s net foreign assets sank for the 15th consecutive month by 15.7 percent Y/Y, standing at a four-year low of SR2.14 trillion. As for debt issuance, the Kingdom began issuing sovereign development bonds in the second half of 2015 for the first time since 2007. The next move confirmed by the Saudi officials is the debut of the first international bond at about $15 billion possibly in July. The issuance will include several tenors up to 30 years in maturity and will be followed by an additional bond issuance later this year of a yet unspecified amount. Lower sovereign credit ratings will likely pressure the Kingdom’s debt pricing and place higher borrowing costs compared to other GCC countries. Early speculation suggests that the Kingdom’s 10-year yield could be around 4 percent which is higher than that of Qatar and Abu Dhabi which were issued earlier this year.
On the other hand, the National Transformation Program which was announced in June is considered to be credit-positive, and could lead to a swift recovery in the Kingdom’s credit rating which in turn would reflect on lower borrowing rates in the future.
As for the local credit market, the consolidated balance sheet of Saudi banks shows that growth in private sector credit remained strong at 10.4 percent Y/Y by the end of April. Bank credit to the private sector fell to single-digit growth rates during the second half of 2015, bottoming out in October of the same year at 5.5 percent Y/Y. However, since February of 2016, SAMA raised the cap on how much more lending banks can extend relative to their deposits. Previously, the loan-to-deposit ratio guidance limit stood at 85% but as banks started to face the prospects of a liquidity squeeze, SAMA allowed them to leverage an additional 5 percent to reach 90 percent which is still below the ceiling other GCC countries impose on their banks. In contrast, deposits marked the third consecutive monthly de- cline, shrinking by 1.7 percent Y/Y.
By the end of April, the NCB report said total bank credit extended to public and private sector enterprises amounted to SR1.417 trillion which is up 10.0 percent from a year ago. Total bank claims on the public sector marked the 13th month of decline, falling by 24.2 percent to SR250.5 billion.
As bank credit to the public sector does not exceed SR46.5 billion, the bulk of lending to governmental entities happens in the form of investments in government securities, bonds, and treasury bills.
Saudi banks’ holdings of SAMA bills dwindled by 72.3 percent Y/Y to SR64.2 billion, the largest annualized decline since October of 2005. On the other hand, the unutilized lending capacity from holding less SAMA bills helped banks absorb the government bond issuances which surged by 163.1 percent to SR139.9 billion.


UAE property developers’ earnings give Gulf markets a boost

Updated 17 February 2019
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UAE property developers’ earnings give Gulf markets a boost

  • Real estate sector gets confidence boost
  • DAMAC gains despite 87 pct drop in Q4 net profits

DUBAI: Most stock markets in the Middle East closed higher on Sunday, reflecting a rally in global stock markets on Friday, and were also boosted by better-than-expected company results, particularly in real estate.

The Abu Dhabi index gained 0.7 percent and the Dubai index 0.6 percent, as two of the largest property developers in the United Arab Emirates posted positive fourth-quarter financial results last week that beat market expectations.

“The market is starting to rebuild confidence in earnings as a driver for sentiment,” said Arqaam Capital in a research note. “Sentiment on the UAE was very weak in 2018, specifically for real estate, on concerns over oversupply risk, pricing pressure that is leading to extended payment plans, and a rental yield compression that is continuing to fall,” Arqaam said.

“But Q4 numbers provided evidence that a few developers have emerged as winners (Emaar Co’s, Aldar) out of market consolidation.” Emaar Properties, Dubai’s largest listed developer, reported a 27 percent rise in fourth-quarter profit.

The stock rose 2 percent on Sunday. DAMAC Properties closed up 0.8 percent, despite having reported a nearly 60 percent fall in full-year profit and an 87 percent drop in fourth-quarter net profits.

In Abu Dhabi, Aldar Properties gained 3.6 percent. Last week, the developer reported a rise in fourth-quarter earnings and higher dividends for 2018. In other sectors, Abu Dhabi Islamic Bank rose 0.5 percent after saying it had no merger and acquisition plans. This was in response to a Bloomberg report last week which said the bank was considering such options.

The Saudi index closed 0.4 percent down, in contrast to the rest of the region’s markets. Arab National Bank reported an increase in full- year net profit to 3.13 billion riyals ($834.62 million) from 3.03 billion riyals one year earlier.

The stock remained unchanged and this failed to give support to the banking sector. Alinma Bank < 1150.SE> and Al Rajhi Banking & Investment Corp. lost 0.3 percent and 0.6 percent, respectively.

In Egypt, where the main index gained 1.4 percent, Orascom Investment Holding, up 3.2 percent, was among the stocks attracting the highest trading volume. Shares in the company jumped last week after its chairman, Egyptian billionaire businessman Naguib Sawiris, said he saw possible investment opportunities in North Korea if a summit between its leader Kim Jong Un and US President Donald Trump later this month was successful.

SAUDI The index lost 0.4 pct to 8,592 points ARABIA DUBAI The index rose 0.6 pct to 2,550 points ABU DHABI The index rose 0.7 pct to 5,070 points QATAR The index gained 0.7 pct to 10,011 points EGYPT The index rose 1.4 pct to 15,199 points KUWAIT The index gainedd 0.1 pct to 5,427 points OMAN The index was down 0.8 pct at 4,077 points BAHRAIN

The index went up 0.6 pct to 1,381 points ($1 = 3.7502 riyals)