The Banking Executive Magazine - July 2023 Issue

Saudi Mortgages GROW SHARPLY BY 65% TO $1.8BLN IN MAY Saudi Arabia mortgages grew sharply by 65% in May to SR6.8 billion ($1.8 billion), a smart recovery from April’s SR4.1 billion, according to Al Rajhi Capital Research. “In our view, non-REDF (Real Estate Development Fund) category has re- mained resilient and is driving the mortgage demand.” CORPORATE LOAN Further, corporate loan growth was also strong as total credit was up al- most 12% y-o-y and 1.4% m-o-m. On the other hand, demand deposits continue to decline, while time de- posits inflow remain strong. Despite the rising funding pressure, prof- itability for May was solid implying the banks are passing on the high in- terest costs to the end consumer, said Al Rajhi citing the Saudi Arabian Monetary Authority (SAMA) banking data. “We continue to believe interest rates will remain higher for longer period time than implied by the consensus, thus maintain our positive view on the corporate banks,” Al Rajhi said. CREDIT Credit growth for May came in strong growing at +1.4% m-o-m and +11.8% y-o-y (April: 0.3% m-o-m and +11.1% y-o-y). Bank lending to the private sector grew 1.3% m-o-m in May and grew 10.3% y-o-y (April: 0.3% m-o-m and +9.7% y-o-y). DEPOSITS Deposits contracted for May (-0.7% m-o-m, +9.8% y-o-y), led by a de- cline in demand deposits (-0.2% m- o-m, -2.1% y-o-y). For the third consecutive month, government time deposit inflows were solid growing at +4.0% m-o-m and +45.8% y-o-y (April: +2.8% m-o-m and 44.9% y- o-y). LIQUIDITY The simple LDR in the system grew 2.1% m-o-m coming around 102.5% in May, and the adjusted LDR (SAMA reported) grew 1.3% coming around 82.0%. The interbank liabilities in- creased 2.6% m-o-m to SR109 bil- lion in May from SR106 billion in April. Consumer spending increased 15.2% y-o-y in April to SR107.4 bil- lion (+3.9% y-o-y in April). Cash withdrawals in value terms increased 7.7% y-o-y in May (-0.6% y-o-y in April) to SR44.9 billion. MORTGAGE Residential mortgage came in at SR6.8 billion in May, accelerating from SR4.1 billion in April, in line with our yearly estimates. YTD aver- age is around SR6.7 billion (Al Rajhi’s 2023 estimate is SR6.8bil- lion). Banking sector net profit before Zakat and tax for April came in at SR6.3 billion, +9.5% m-o-m and +14.2% y-o-y (April: -22.2% m-o-m and +3.4% y-o-y). 5M23 profitability came in 13.7% higher than 5M22 profits the BANKING EXECUTIVE 14 ISSUE 175 JULY 2023