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The balance between Saudi bank deposits and loans turns negative for the first time since at least 2013

CAIRO AND MOSCOW: Overall credit growth of Saudi banks to the private and public sectors fell to 14.1% in May year-on-year, from 14.7% in April, the most recent data from the Central Bank showed. saudi.

As for bank deposits, the annual growth rate also slowed to 8.9% in May from 9.4% in April. In absolute terms, the difference between deposits and credit turned negative for the first time at least since 2013, according to data compiled by Arab News.

Figures are not available before this date.

As of May 2022, the total bank credit balance exceeded the total bank deposit balance by SR14.5 billion ($3.9 billion). This compares to a shortfall of SR5.4 billion in April.

In absolute terms, total bank credit increased by SR16.3 trillion to SR2.19 trillion in May from SR2.18 trillion in April, while total deposits decreased by 3.6 trillion. billion SR over the same period.

On an annual basis, the growth of deposits, which are an important source of funding for bank loans, slowed to a much lower rate of 8.9% in May from 9.4% in April, according to data compiled by Arab News.

Annual growth in credit as well as deposits has slowed significantly from the record figures seen in June last year – 16.8% and 10.2%, respectively. However, considering the net changes over the same period, the total credit balance increased by SR 240.1 billion while that of total deposits increased by a much smaller amount of SR 148. SR3 billion.

As a result, the loan-to-deposit ratio exceeded 100.7% in May, down from 99.8% in April 2022 and 96.2% in June 2021, according to data compiled by Arab News.

“The pressure on bank liquidity stems from the fact that deposit growth has remained below loan expansion in recent years,” S&P Global Ratings said in a research note published in late June.

“Over the past two years, on average, 60% of loan growth has been funded by increased customer deposits. In 2021, the remaining loan growth was financed by an increase in external debt and a decline in liquid assets,” the note adds.

Following the injection of SR50 billion of bank liquidity by the central bank reported earlier this year, Saudi banks are facing less liquidity in the short term and the chances that the system will have to slow loan growth have diminished, concluded the S&P rating.

Looking at the distribution of loans by sector, the picture is relatively the same. Year-on-year credit growth to the private sector in 2022 hit a low of 14% in May from a peak of 16% in May 2021, according to a statistical bulletin released by the Central Bank of Saudi Arabia.

Saudi banks’ credit to the private sector, which consists mainly of loans, advances and overdrafts but excludes investments in private securities, increased by SR 18 billion in May, as indicated by SAMA in its report .

The total balance of these credits at the end of May stood at SR2,098 billion, with a year-on-year increase of SR257.1 billion, resulting in a rate of annual growth of 14%.

Bank credit to the private sector increased by 16% year-on-year in May 2021, when the annual rate reached its second highest level since October 2014.

On a monthly basis, the amount of the balance increased by 0.87% in May, the slowest rate in the Kingdom in the past four months.

In 2022, monthly bank credit to the private sector has started to increase. The first three months recorded an increase of 0.91%, 1.67% and 2.22%.

Furthermore, the monthly rate of change started to decline in April and May at 0.98% and 0.87%, respectively.

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