02/09/2014 01:49 AST
Total bank deposits in the Kingdom hit a new all-time high above SR1.5 trillion for the first time in July, says a report.
Bank deposits climbed by 1.7 percent in July to cross the SR1.5 trillion mark. This lifts the year-on-year growth rate to 14.5 percent, the fastest in the last 12 months, according to the latest Saudi chart book from Jadwa Investment.
The prospect of higher interest rates in the US has boosted the annual growth of time and savings deposits to its highest level since December 2008.
The increase in deposits in July reflects a steady rise in private sector deposits as well as a seasonal spike in public sector deposits, said the Jadwa chart book for September 2014.
It says that banks remain highly liquid, with deposits at the Saudi Arabian Monetary Agency (SAMA) beyond the statutory requirement rising to a four-month high of SR78.4 billion at end-July.
With claims on the public and private sectors slowing and deposit growth accelerating, bank excess reserves at SAMA hit a four-month high. This also pulled the loan-to-deposit ratio down to 79.8 percent, indicating that banks still have plenty of ability to further step up lending.
With deposits rising and loans slowing, the private sector loan-to-deposit ratio fell to 79.8 percent.
Banks have recorded all- time high monthly profits in five of the last seven months, including July, according to the report.
“This confirms our view that banks are on track to break last year’s record high profits of SR35.7 billion,” said the Jadwa researchers.
The report says that bank lending to the private sector rose by 0.5 percent in July, the slowest monthly increase since December last year, pulling the year-on-year rate down to 11.8 percent.
According to the chart book, there was a large fall in debt outstanding for less than a year and a jump in debt outstanding at longer maturities. In part, this could reflect the refinancing of short-term loans at longer-term maturities. In addition, long-term lending may have been boosted by demand for real estate loans.
There was a second consecutive fall in bank holding of SAMA bills in July, suggesting a moderation of concerns about domestic inflation.
The chart book stated that economic data for July was strong with the nonoil PMI expanding at the fastest rate since September 2012.
Consumer spending also remained robust, with cash withdrawals from ATMs hitting a new high. The overall nonoil Markit/HSBC PMI registered 60.1 in July, the fastest rate of expansion since September 2012, according to the report.
The value of cash withdrawals from ATMs was at an all-time high in July and 8.3 percent greater than July 2013.
Cement production and sales declined on the back of seasonal trends, but also due to changes in labor market, added the report.
Cement production and sales dipped further in July following regular seasonal trends. Year-to-July production and sales were 6.8 and 7.5 percent below the same period of last year, respectively.
The report said that year-on-year inflation inched down in July, continuing the flat trend in the previous three months, although this trend hides some sharp movements.
While the lack of external inflationary pressures pulled food prices down, inflation for most other components of the cost of living index rose.
The chart book said year-on-year inflation inched down to 2.6 percent in July from 2.7 percent in the previous three months. Whilst food price inflation slowed, in line with global trends, other domestically-driven sources of inflation are not abating.
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