The pace of Kuwaiti bank lending is slowing this year as project delays and loan defaults by local investment companies. Loans to the private sector and banks' investments in bonds in Kuwait grew 0.3 percent in the first six months of 2011, after a 1.9 percent increase in 2010, according to data on the website of the nation's central bank. However, lending grew faster in neighboring Saudi Arabia, the biggest Arab economy, and in the United Arab Emirates and Qatar. Kuwait lawmakers have sought to question Prime Minister Sheikh Nasser Al-Mohammed Al-Sabeh over delays in the implementation of a 30.8 billion dinar ($113 billion), four-year plan approved in February last year aimed at modernizing and restructuring Kuwait's oil-based economy. Some of the country's nearly 100 investment companies defaulted amid the credit crisis after the value of their assets collapsed and frozen debt markets prevented them from raising new loans. “Without urgent and rapid capital spending on various state projects, there will not be good growth,” Salem AbdulAziz Al-Sabah, Governor of Kuwait's central bank, told CNBC Arabia Television in a July 19 interview. “Without providing good investment opportunities to the private sector to enable it to expand its local financial activities, the future outlook will be limited.” National Bank of Kuwait SA., the country's biggest lender, reported a 4.5 percent decline in second-quarter profit amid a “weak operating environment,” the bank said. Its non-performing loans to gross loans ratio declined to 1.61 percent at the end of June from 1.81 percent a year earlier, the bank said. Kuwait Finance House, the country's largest Islamic bank, reported a 43 percent drop in second-quarter profit. Lending will not accelerate “unless the development plan starts to kick-in and in my view, this won't happen for several more months,” Michel Accad, the chief executive officer at Gulf Bank KSC, said. “Companies and investors have also been reluctant to borrow and invest in their normal course of business, due to the economic uncertainties.” “The oil sector doesn't need much external funding and without any aggressive non-oil expansion the demand just isn't there,” Khalid Howladar, a senior credit officer at Moody's Investors Service in Dubai, said in an e-mail yesterday. The problem with bad loans at Kuwait's investment companies “are still being worked through and this overhang is still a source of uncertainty for the banks there.
