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Kuwait credit growth solid with 7.1 pct, May gains KD 267 mln Household credit continues to ease, but remains healthy

KUWAIT CITY, July 19: Kuwait’s May monetary statistics revealed a largely steady picture, with credit growth solid and moderating money supply growth. The month’s credit figure has been softer than expectations as a result of the recent pay downs of bank debt by some companies. Meanwhile, rates appeared to ease further following some upward pressure over the last year. We expect bank credit growth to top 8% for the year. Credit saw a relatively strong month in May, though not strong enough to counter the effects of April’s weak number.

Growth eased further to 7.1% year-onyear (y/y) as a result. At KD 267 million, the monthly gain was well above the 12-month average of KD 167 million. Household credit continued to ease, but remained very healthy. Meanwhile, growth in business credit was solid in May, though unimpressive on y/y basis. Household debt (personal facilities ex-securities) was up KD 58 million, with y/y growth easing to 13.9%. While this figure continued to be affected by Family Fund settlements, it also reflects an easing trend in the sector which comes as no surprise. Non-bank financials saw an unusual increase of KD 21 million in credit, despite the deleveraging trend that has characterized the sector over the last few years.

Credit to the sector remains down against a year ago by 14.9%. The sector, which includes many struggling investment companies, has been seeing a gradual deleveraging since 2009; the process has reduced the sector’s banking debt by nearly 50% since its 2008 peak, to the current KD 1.5 billion.. All remaining credit gained KD 189 million, with growth easing to 6.3% y/y. Most of the gains came from the real estate sector (+KD 54 mn) and loans for the purchase of securities (+KD 29 mn). Trade and industry also saw relatively healthy growth as did the “other” sector. Overall, business credit remains healthy, though the pace of growth has not been picking up since the fall. Money supply (M2) growth eased to 6.1% y/y as private deposits rose by KD 514 million following a decline last month.

The increase was largely in dinar deposits, with time deposits seeing a disproportionate KD 303 million increase. Growth in the narrower M1 measure of money supply also eased to 15.1%. Average customer deposit rates on dinar time deposits moved lower across the board following some upward pressure in March and April. Rates on the 1-month, 3- month, 6-month, and 12-month time deposits stood at 0.59%, 0.78%, 0.98%, and 1.18%, off by 1-3 basis points (bps). KD interbank rates also edged lower with the 1-month KIBOR down by one basis point. The 1-month KIBOR had moved up quite noticeably over the last 12 months, from a low of 0.60% in July 2013 before peaking at 0.98% in March this year. It has since retreated to 0.94%.

By National Bank of Kuwait

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