A solid gain in credit was recorded in September, though 3Q17’s overall performance was visibly weaker. Credit saw a net gain of KD 231 million on the month, with the number boosted by usual end-of-quarter gains. Growth, however, slipped to 3.1% year-on-year (y/y). Credit’s performance for 3Q17 as a whole was underwhelming, registering at a quarterly annualized pace of 3.2%, compared to 7.3% for the first half of 2017. The bulk of September’s gains came from lending for the purchase of securities. Private deposits saw a second month of strong gains, while interest rates held steady.
Household lending was subdued in September, though growth was steady at 7.4% y/y. Personal facilities excluding securities lending added a net KD 27 million during the month, well below its year-to-date average of KD 69 million. This followed a strong performance the previous month.
All remaining credit (excluding nonbanks) saw a relatively modest gain in September, though this was largely from the regular end-of-quarter jump in lending for the purchase of securities. Credit gained KD 206 million, with growth slipping to 1.3% y/y. Outside securities lending, there were some gains in trade and “other sectors”, but these were offset by declines in real estate and construction.
While “productive” business sectors saw only a small gain during the month, growth in this segment remained relatively robust. Productive business credit, which excludes real estate and financial sector lending (i.e. lending to nonbanks and lending for securities), ticked up to 5.1% y/y. This figure continues to be held back by the large settlements made in 4Q16. Nonetheless, growth in “productive” sector credit thus far in 2017 averaged an annualized 10% compared to 5.9% for total credit.
Private deposits saw a second month of solid gains in September. Deposits rose by KD 358 million largely on the back of gains in KD time and KD sight deposits. Yet despite the pick-up, money supply (M2) growth slipped slightly to 2.5% y/y. Meanwhile, government deposits declined by KD 51 million, with growth easing further to 3.4% y/y.
The banking system’s liquid reserves, or “excess liquidity”, edged lower in September to 6.6% of bank assets. Bank reserves (cash, deposits with the CBK, and CBK bonds) decreased by KD 273 million to KD 4.2 billion. This coincided with KD 400 million in net issuance of public debt in September. This increased outstanding domestic public debt instruments (PDIs) to KD 4.97 billion, or an estimated 13% of GDP.
Domestic interest rates in September were little changed from August. The 3-month interbank rate edged up 2 basis points to settle at 1.76%, though rates have moved slightly higher since. Customer deposit rates were unchanged on the month.
By National Bank of Kuwait