29/01/2015 14:33 AST
Credit growth was up in November, but failed to make up for recent weakness. Growth ticked up to 5.9% y/y on a KD 222 million gain in lending during the month, but remained weaker than expectations. We expect growth to have finished the year closer to 7% on a stronger December. Family Fund write-offs and a slew of corporate debt rescheduling deals have put a damper on growth in recent months. Gains in November were seen in household debt, as well as the oil & gas and real estate sectors. Meanwhile, strong gains in deposits drove up money supply growth to healthy levels, while deposit rates remained stable. Interbank rates, on the other hand, edged lower for the second consecutive month.
Household debt remains strong, gaining KD 88 million in November; growth was stable at 13.1% y/y. Actual household debt growth is expected to have maintained a more rapid pace once adjusted for the Family Fund settlements. Installment loans still remain the sector’s main driver, consistently maintaining a healthy double digit pace, which edged higher to 15.6% in November. As a result, installment loans have accounted for 60% of the net gain in total credit this year.
Credit to non-bank financials saw a small increase of KD 9 million. The sector continues to deleverage with credit shrinking by 12.4% y/y. The sector’s ongoing contraction has eroded most of its share of total credit, bringing it down to 4.6% from a pre-crisis high of 13%.
All remaining credit rose by KD 124 million, though the gain was smaller than last month’s decline. Growth rose to 4.3% y/y, but remained well below the 7-8% pace seen earlier in 2014. Growth in credit to “productive sectors” (i.e. excluding real estate and securities) rose to a healthier 6.8% y/y, continuing to reflect the improvement in activity in Kuwait’s non-oil economy.
The oil & gas sector saw the largest gain (KD 100 million) followed by the real estate sector (KD 48 million). Loans for the purchase of securities were also up (KD 21 million) on the heels of a large decline in October. Meanwhile, trade, industry and construction saw declines, with all three sector seeing growth come off from earlier in 2014.
Money supply (M2) growth rose in November to 4.5% y/y on strong gains in deposits, following several months of decline. Private deposits were up by KD 907 million, split between gains in KD and FX deposits. KD sight deposits received a large boost (KD 752 million) while time deposits declined (KD 297 million). M1 growth rose to 14.7% y/y on the movement from time to sight deposits.
Average customer deposit rates on dinar time deposits were unchanged. The average rates on the 1-month, 3-month, 6-month and 12-month time deposits stood at 0.62%, 0.81%, 1.01% and 1.23%, respectively. KD interbank rates eased for a second consecutive month, with the 1-month KIBOR offer rate shaving off 2 bps to 1.09%.
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