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Saudi Central Bank says loans at 18-month high

W107M0 Female employee bookkeeper in hijab working in the office The central bank said there was a 7 percent year-on-year growth for personal loans, while business lending grew 16 percent Elnur Amikishiyev/Alamy via Reuters
The central bank said there was a 7 percent year-on-year growth for personal loans, while business lending grew 16 percent
  • Sama releases new data
  • $753bn of loans
  • Personal loans make up 46%

Saudi Arabia’s bank loans reached their highest level in 18 months, according to the latest data from the Saudi Central Bank (Sama). 

Figures released for August show loans reached SAR2.82 trillion ($753 billion), a 12 percent increase from the previous year.

The monthly bulletin said personal loans made up 46 percent of the market total, with 7 percent year-on-year growth.

Business lending grew 16 percent over the same period. 

Lending in the real estate sector accounted for 11 percent of overall loans (20 percent of the business sector), and reached SAR303.48 billion, a 26 percent increase year on year.

Loans in the electricity, gas and water supply sector grew 26 percent, while lending in wholesale and retail trade loans climbed 13 percent.

Last month, experts said Saudi Arabia’s banks are financially well equipped to meet the expected surge in corporate borrowing once US interest rates start to fall.

In June 2022, Sama placed about SAR50 billion in deposits with commercial lenders to try to ease the worst liquidity squeeze since late 2008.

Liquidity, as measured by a bank’s loan-to-deposit ratio, has again tightened, rising to 97.8 percent as of June 30, up from 97 percent three months earlier, according to a report by consultants Alvarez & Marsal.

This is, however, unlikely to lead to banks suffering fresh liquidity problems, according to Sara Boutros, head of real estate and financials research at Cairo’s CI Capital.

“Executives at several banks were asked about this on their recent earnings calls and they said the pressures had eased,” Boutros told AGBI. “Yes, the loan-to-deposit ratio has increased but we’re not concerned.”

S&P said in September that credit growth in Saudi Arabia is anticipated to range between 8 percent and 9 percent over 2024-26, down from 10 percent in 2023, driven primarily by corporate lending. The trend stems from fewer mortgage lending opportunities, given the high interest rates and implementation of Vision 2030 projects.

As lending growth outpaces deposits, banks are likely to turn to external funding, potentially shifting the financial system towards a modest net external debt position.

“This structural shift introduces some exposure to changes in investor sentiment and capital flows. Overall, the Saudi banking sector will remain well capitalised,” S&P said.

AGBI reported that month that growth in Saudi mortgage lending had led to local liquidity constraints, and several US investment companies were preparing to step in.

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