The Banking Executive, Issue 155, November 2021

Saudi Banks Building ON LONG-TERM LOAN PORTFOLIO; DEMAND DEPOSITS GROW The long-term portion of the credit provided by Saudi banks to the pri- vate and public sector continues to account for a greater share than short-term credit, Saudi Central Bank data showed. The long-term credit made up of loans, advances, and discounted bills has risen at a much faster rate than short-term credit since the pre-pan- demic period. Bank total long-term credit amounted to SR971.3 billion at the end of September 2021 and experi- enced a growth rate of 70 percent from September 2019. Short-term credit grew by 13 percent to SR791.3 billion from SR699 bil- lion over the same period. Making long-term credit increasingly available for businesses and individ- uals bodes well for the economic conditions of companies and house- holds as it helps them manage funds for longer projects. However, SAMA as a regulator re- quires commercial banks to comply with certain ratios showing the ma- turity of their assets relative to that of their liabilities. In this regard, Saudi bank liabilities are still dominated by demand de- posits, with their share in total de- posits at the end of September 2021 unchanged from September 2019 at 64 percent. Demand deposits grew at a rate of 21 percent compared to a 7-percent in- crease in time and saving deposits over the same period. Growth in time and saving deposits was driven by government entities as their contribution to total time and saving deposits rose to 50 percent from 38 percent at the end of Sep- tember 2019. The share of the private sector — businesses and individuals — dropped from 62 percent to 50 per- cent, respectively. In April 2018, Saudi Central Bank modified the loan-to-deposit calcu- lation methodology as it “placed higher weights for longer-term de- posits to encourage banks to intro- duce savings products.” The ratio saw an increase to 0.8 at the end of September 2021 from 0.75 at the end of the same month a year ago but marked just a marginal increase from 0.79 at the end of Sep- tember 2019. As for personal loans, their maturity profile suggests a more positive pic- ture. According to SAMA definition, these loans comprise consumer loans provided to individuals to fi- nance non-commercial personal and consumer needs other than real es- tate as well as card loans. (Personal loans = Consumer loans + Card loans) For this credit category (personal loans), the share of long-term loans grew by 40 percent at the end of Sep- tember 2021 from the same month of 2019 whereas loans with short ma- turities witnessed only 14-percent growth. As a result, the share of long-term credit in banks' total personal loans increased to 50 percent from 45 per- cent at the end of September 2019. At the end of September 2021, per- sonal loans accounted for 21 percent of total credit provided by Saudi banks to private and public sectors, data compiled by Arab News from the most recent monthly statistical bulletin published by Saudi Central Bank showed. ISSUE 155 NOVEMBER 2021 the BANKING EXECUTIVE 33