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

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.


No intent to drive US shale out of business says OPEC chief

Updated 09 July 2020

No intent to drive US shale out of business says OPEC chief

  • Mohammad Barkindo: There is no objective whatsoever from us as a group or as individual countries to drive US shale production out of business
  • Mohammad Barkindo: Without the US shale probably, we could have entered into a worse crisis than we are seeing in this pandemic
LONDON: OPEC Secretary Mohammad Barkindo said there was no aim to drive US shale oil producers out of business, after the price of US barrels briefly turned negative in April.
He was speaking in a CERAWeek interview ahead of next week’s OPEC+ market monitoring panel meeting. The Organization of the Petroleum Exporting Countries (OPEC) and other exporters including Russia are collectively known as OPEC+. In April the group agreed the single largest output cut in history in response to plunging oil prices that followed in the wake of the coronavirus pandemic.
“There is no objective whatsoever from us as a group or as individual countries to drive US shale production out of business,” said Barkindo. “No. It is not in our interest to do that. It is not in the interest of the global industry to do that. Without the US shale probably, we could have entered into a worse crisis than we are seeing in this pandemic.”

It costs more for US shale drillers to produce oil than their conventional counterparts in OPEC, so the slide in prices this year has had a devastating impact on that industry. The situation reaching crisis point on April 21 when storage space at Cushing in Oklahoma, the main delivery point for US light sweet crude oil, became full, forcing prices to turn negative for the first time ever.
Barkindo said OPEC had established a line of communication with US independent producers and thanked both the US and the G20 for helping to “restore communication" between OPEC+ producers.
Oil prices dipped on Thursday amid concerns about the renewed spread of the coronavirus in the US and other countries.
Brent crude was down about 0.2 percent to $43.20 in early afternoon trade in London while US WTI also dipped by about 0.7 percent to $40.59.