The Saudi banking industry remains robust, the National Commercial Bank (NCB) said in its Quarterly Monetary Review for the third quarter 2011. On the financing front, private sector credit continued its upward trajectory, posting a 9.0 percent Y/Y growth rate, which marks the highest growth since 1Q2009. The trajectory was underpinned by the manufacturing sector that grew by 39.1 percent Y/Y. Additionally, the building & construction sector rebounded back to expansion as it reached SR54.2 billion during 3Q2011. Saudi banks' consumer loans grew by 0.8 percent Q/Q in 3Q2011, the slowest pace since 4Q2010, yet in absolute value it registered around SR227 bilion, a historical-high, the NCB report said. However, it said, on an annual basis, consumer loans remained around 10 percent Y/Y growth rate, largely driven by a 26.6 percent Y/Y growth in real estate finance. Nonetheless, credit cards maintained the negative trajectory since 4Q2008, contracting 6.9 percent Y/Y. Concerning private sector activity, newly opened letters of credits surged at 27.8 percent Y/Y compared to 4.7 percent and 15.7 percent in the previous two quarters, respectively. The major contributors to this growth were building materials and other goods that gained 43.4 percent and 52.6 percent, respectively. Notably, the newly opened LCs accumulated to SR129.9 billion in the first three quarters of 2011, representing a 15.5 percent increase over the corresponding period of 2009. Money creation marginally decelerated as broad money (M3) grew by 11.9 percent Y/Y, driven by 10.8 percent Y/Y increase in total deposits. The growth in total deposits was mainly attributed to demand deposits, which went up by 22.2 percent Y/Y, thus, maintaining three years of double-digit growth rates. Accordingly, the share of demand deposits continued its rise, reaching 57.4 percent of total deposits, the highest level on record. On the other hand, time/saving deposits declined by 2.9 percent, the eighth consecutive quarterly drop. Quasi-monetary deposits decreased by 1.0 percent Y/Y, driven by SR7.3 billion drop in marginal deposits for letters of credit. Monetary aggregates have moderated further in 3Q2011, with the monetary base and money supply growing by 11 percent and 11.9 percent compared to 15.7 percent and 13.1 percent, respectively in 2Q2011. Currency outside banks reached an all-time high at SR120.7 billion, surpassing deposits with SAMA, which lost SR17.8 billion on a quarterly basis as excess reserves fell to pre-crisis levels to 47.3 percent. Banks' net foreign assets picked up slightly after a sharp deceleration during the previous quarter. Assets due from banks abroad surged by 31.5 percent Q/Q, reaching SR48.4 billion. While due from branches abroad plunged by 22.9 percent over the previous quarter, limiting total assets' growth to 1.6 percent Q/Q. Total foreign liabilities grew by a mere 1.3 percent, which brought net foreign assets to SR115.0 billion, expanding 1.8 percent on a quarterly basis. Banks' foreign liabilities have declined back to normal levels after peaking at SR142.1 billion during the financial crisis, reflecting the cautious attitude of banks in limiting their foreign exposure amid global uncertainty and elevated credit risk. Bank claims on the public sector dropped, from its record high last quarter, to SR207.0 billion, yet growing by 23.9 percent on an annual basis. Maturing government bonds fell lower to SR48.2 billion while treasury bill levels dropped by SR12 billion to SR158.8 billion. Nevertheless, we still believe the government will continue their issuances to replace maturing government bonds and to absorb ample liquidity from the financial system. On the geographical front, private sector imports from GCC countries have reached SR34.1 billion in 9M2009, 27.2 percent Y/Y increase compared to 9M2009, which reflects the importance of intra-trade activity within the regional economies, accounting for 23.2 percent of aggregate private sector imports financed through commercial banks in 3Q2011. LCs for North American, western European and Chinese goods have increased by 48 percent, 23.5 percent and 28.3 percent, respectively. On the retail side, points of sale transactions soared by 37.1. percent Y/Y, thus, achieving the eighth consecutive quarter of double-digit growth, indicating an expansion in consumption in 3Q2011.
