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Tue 31 Aug 2010 11:38 AM

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Saudi banks pick up pace of consumer lending in Q2

However, corporate credit remains stagnant, Banque Saudi Fransi report says.

Saudi banks pick up pace of consumer lending in Q2
SAUDI STATS: Credit card lending fell 5.2 percent during the second quarter 2010. (Getty Images)

Saudi Arabian banks picked up the pace of consumer lending in the second quarter, though corporate credit remains constrained, a report by Banque Saudi Fransi has said.

The pace of consumer lending growth hit almost 10 percent in Q2, compared with 7.2 percent in the first quarter, according to data from the Saudi Arabian Monetary Agency (SAMA).

By contracts, corporate lending remains stagnant as Saudi banks continue to shy away from extending credit. In July, bank claims on the private sector grew 0.6 percent from June, slightly below the month-on-month rate of 0.9 percent recorded in June.

“There has, therefore, been very little credit growth momentum despite government efforts to push ahead with strategic infrastructure projects,” analysts said.

In the three months to June 30, real estate finance surged 30 percent from the year earlier period, pointing to muted housing market activity, while auto loans saw a 6.2 percent rise.

Consumer lending is “the exception to passive loan growth,” the report said. “Saudi banks have been looking to boost their retail banking portfolios to tap into the Gulf region’s strongest domestic demand story.”

By contrast, credit card lending fell 5.2 percent over the same period, as cautious banks reevaluate their risk profiles.

The twin pressures of rising global commodity prices and domestic demand saw the kingdom’s inflation rate hit a 17-month peak in July of six percent, fuelled by hikes in food prices, rents and services.

Food and beverage inflation rose to seven percent, from less than one percent in December, while rental inflation remained a steep 8.9 percent, the report noted.

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