Saudi Arabia sees jump in private sector lending

Bank lending in Saudi Arabia bounced back in June to record its largest monthly gain since August last year and the second-highest growth since late 2008, the latest data from a Riyadh-based Jadwa Investment showed.

Lending to the private sector rose by 0.9 percent last month.

“The continued pick up shows that banks are becoming more confident in the prospects for local corporate borrowers as the economy improves,” Jadwa head of research Paul Gamble told Arabian Business.

However, growth in deposits outpaced lending, meaning that bank excess reserves still rose, and that lending declined as a proportion of total deposits.

The investment firm also reported that May data showed that imports and non-oil exports had risen to approach the levels they had reached prior to the global financial crisis.

Petrochemicals remains the strongest non-oil export, but Jadwa said that exports of plastics over the first five months were nearly double those recorded over the same period last year.

Jadwa additionally reported that new data - including a 44 percent increase in point of sale transactions, and a fourteen percent rise in ATM cash withdrawals – pointed towards the strengthening of the Saudi economy.

Inflation hit a one-year high of 5.5 percent in May, driven by food prices, which rose by 6.2 percent.

The Saudi stock market (TASI) is up by three percent so far in July, despite the lukewarm first-half results recorded by many companies.

However, Jadwa said that the TASI’s performance had been below that of many of its global peers, meaning that most of the index’s outperformance this year had been wiped out.

A sukuk issued in July by Saudi BinLaden Group – the third issued in the Kingdom this year – met with a strong response from investors, although there have been no trades in the third Saudi Electricity Company sukuk, which was listed in May.