Saudi Bank Lending Seen To Rise 15% This Year On Tamed Inflation

Bank lending in Saudi Arabia is forecast to grow at an annual 15 percent rate this year, Murad Ansari, an analyst at Egyptian investment bank EFG-Hermes Holding SAE, said Sunday.

Banks have “sufficient room to increase lending and I don’t think liquidity is much of a concern at this point in time,” he said, adding that “bank lending, although it has picked up, isn’t really at levels which would be a concern to the central bank yet.”

Slowing inflation in Saudi Arabia is giving banks room to boost lending as the government increases spending on infrastructure and housing in the Kingdom.

Inflation concerns are easing even as loan growth to private businesses accelerates. The Kingdom has started implementing its $514 billion plan to build homes, industrial cities and airports. The projects helped boost lending to private businesses by 14 percent in July.

Consumer prices rose 4 percent in July, the lowest rate of increase since October 2009, according to data from the Central Department of Statistics.

Food, medical care and transport services led the slowdown, it said.

Loan demand has lifted the three-month Saudi interbank offered rate, known as Saibor, and the benchmark used by banks to price some loans, to 0.9563 percent Saturday, the highest since April 2009, data compiled by Bloomberg show. The rate’s spread over the equivalent US rate widened to 55 basis points Saturday, from 20 basis points at the end of 2011, according to the data.

The yield on one-year Saudi treasury bills is up eight basis points this year to 0.59334 percent at Monday’s auction. Saudi Arabia holds weekly bill sales Mondays.

Saudigazette