Kuwait credit growth moderates to 7.2 pct; household loans flat – Private deposits rise in Sept; govt deposits add KD 46 mln
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KUWAIT CITY, Nov 14: Outstanding bank credit recorded a healthy gain in September, but saw growth slow notably to 7.2% year-on-year (y/y) due to base effects. Loans rose by a good KD 272 million, driven largely by lending for the purchase of securities. Meanwhile, household loans were flat during the month and business credit was mixed. Private deposits saw a solid gain during the month combined with a smaller increase in government deposits. Domestic interest rates held steady throughout the month.
Household lending was flat in September, with growth slowing to 7.2% following months of softening. The absence of growth during the month was the worst result since early 2011, though it did come on the heels of a strong showing in August. As a result, growth was the weakest it’s been in five years.
Lending to nonbank financial companies saw a healthy net gain and maintained positive growth from a year ago. Sector debt added KD 42 million during the month, with growth coming in at 2.7% y/y. The sector appears to have largely completed deleveraging that began in the wake of the 2008 financial crisis.
All remaining credit rose by KD 231 million, though growth eased to 7.5% y/y on basis effects. A large part of the gain came from a KD 219 million increase in lending for the purchase of securities. Other business sectors were mixed. Some solid gains were visible in the construction, real estate and trade sectors. This was offset, however, by a notable weakness in crude oil & gas and “other”.
Private deposits rose in September, following three months of decline during the summer. Deposits rose by KD 405 million. The gains were concentrated in KD sight and time deposits. Meanwhile, foreign currency deposits declined, partially offsetting the gains. The notable rise in KD sight deposits pushed growth in the narrower M1 money supply higher to 2.3% y/y; meanwhile, broad M2 money supply growth slowed slightly to 2.6% y/y on base effects.
Government deposits added KD 46 million on the month with growth steady at 27%. Government deposits have grown notably over the last twelve months at a time when private sector deposits have been under pressure; they added KD 1.4 billion over the last twelve months compared to a gain of only KD 825 million in private deposits during the same period.
Banking system liquidity improved in September, further bolstering its healthy level. Bank reserves (i.e. cash, deposits with the CBK and CBK bonds) added KD 210 million to reach KD 5.8 billion or 9.5% of total bank assets.
The increase was predominantly in time deposits with the CBK and coincided with a KD 413 million increase in CBK foreign reserves, which jumped to KD 8.1 billion. Meanwhile, net domestic debt issuance, which taps back liquidity, rose from the previous month; outstanding public debt instruments (PDIs) rose by KD 200 million during September to KD 2.77 billion.
Interest rates have been relatively steady. The 3-month Kuwait interbank offered rate (Kibor) was unchanged in September at 1.56% and has been relatively steady since. Meanwhile, customer deposit rates appeared to ease during September, declining by up to 2 basis points (bps) for various maturities.
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