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.


Australia overtakes Qatar as top global LNG exporter

Updated 10 December 2018
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Australia overtakes Qatar as top global LNG exporter

  • Australia shipped 6.79 million tons of LNG in November while Qatar exported 6.2 million tons
  • Australia has invested heavily in a number of LNG export projects over the last few years

LONDON: Australia has become the largest exporter of liquefied natural gas (LNG) in the world, overtaking Qatar for the first time, according to data published on Monday.

Australia shipped 6.79 million tons of LNG in November while Qatar exported 6.2 million tons, according to Refinitiv Eikon, the financial data arm of Thomson Reuters.

While LNG exports from Australia increased by more than 15 percent from the previous month, Qatar’s exports dropped by 3 percent.

Australia has invested heavily in a number of LNG export projects over the last few years. Just last month, the first LNG shipment left the country’s new offshore Ichthys project on the northwestern coast of Australia.

Analysts expect Australia will look to maintain its lead ahead of the Qataris.

“Competition between Qatar and Australia for the share of global LNG market is set to intensify further,” said Abhishek Kumar, senior energy analyst at Interfax Energy’s global gas analytics in London.

“Australia has boosted its market share in recent years by bringing online a slew of LNG export projects. This is in stark contrast with the situation in Qatar where the export capacity has remained around 77 million tons per annum,” he said.

Ehsan Khoman, head of regional research and strategy at MUFG, in Dubai, said Australia has an advantage over Qatar due to it being geographically closer to major gas importers.

“The lower transportation freight costs will remain the backbone of Australia comparative advantage as an exporter vis-à-vis Qatar, given the country’s closer proximity to the largest LNG importers in Asia, namely, Japan, China and South Korea,” he said.

Rising LNG exports from US will add to the global market competition, he said.

“Going forward, the LG space is likely to undergo a major transformation driven by new supplies coming from the US, with our expectation of a three-way tug of war between the US, Australia and Qatar to intensify in the medium term for global leadership among LNG exporters, notably for a larger share of the key market in Asia.”

The data follows Qatar’s announcement last week that it would leave the Organization of Petroleum Exporting Countries (Opec) in early 2019 to focus on gas production.

Kumar said he expects Qatar to ramp up efforts to maintain its market position as competition grows from other exporters.

“Qatar has plans to vigorously defend its market share in the coming years as it is moving ahead with expanding the capacity of its Ras Laffan plant to around 110 million tons per annum by the end of 2025 or early 2026,” he said.