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Bank lending in GCC continues consistent recovery.

Summary: JEDDAH: Bank credit in the GCC region has generally continued its cautious, albeit fairly consistent recovery. The strong performance of the regional economies, along with the generally robust health of the banking sector, has tended to support confidence and lending activity. By contrast, the highly uncertain global economic backdrop, along with regional pressures points, has checked the positive momentum, according to a report by the National Commercial Bank (NCB).

Although the positive trend is now in evidence virtually across the region, the pace of progress still varies a great deal with a robust recovery under way in Qatar, Oman, Saudi Arabia, and of late also in Bahrain. The situation is far more subdued in Kuwait and the UAE. Saudi Arabia Bank lending in Saudi Arabia attained a total of SR891.6 billion in November, up 15.1 percent on November 2010. Average lending during the three months to November was 10.9 percent higher than a year earlier. Continuing a pattern established during much of the past year, the positive momentum has been led by credit to the private sector. Private sector loans reached the level of SR859.7 billion in November, up 15.8 percent. Lending to the public sector stood at SR31.9 billion, down 0.3 percent on November 2010. The increase in lending is reflective of the strong performance of the economy in 2011 with economic growth reaching 6.8 percent. A strong performance in the hydrocarbons sector was underpinned by resilient prices and increased production levels, partly in response to the production disruptions in Libya. Well- capitalized Saudi banks are generally well positioned to boost lending. The UAE The progress of bank lending in the UAE has remained fairly subdued in spite of a clear rebound in economic activity. Overall bank credit in September 2011 reached AED998.4 billion, just under 2.0 percent up on AED979.2 billion a year earlier. The average figure for Q3 was up 1.4 percent YoY. Bank credit to the private sector has remained fairly flat with a much more positive momentum observed in lending to the government. Lending to the private sector was AED732.2 billion in September, which represented a modest 0.8 percent increase. Lending to the public sector advanced by 13.2 percent to AED196.5 billion. The NCB report said UAE bank credit has been depressed by a combination of localized economic weakness and regulatory challenges. The stricter new rules on bank credit have curbed the momentum in some areas. Lending has been further hit by the depressed property markets which continue to be marked by excess supply in many parts of the country. Also the broader financial sector in the UAE has been more sensitive to external shocks due to recurrent concern about leverage and potential refinancing challenges. Kuwait The progress of bank lending in Kuwait has remained very modest by regional standards. Total bank credit in November 2011 reached KWD27.4 billion, up 1.9 billion on KWD27.0 billion a year earlier. The three-month average to November was up 1.5 percent. Private sector credit attained a total of KWD25.6 billion in November. This marked a 2.1 percent increase. Lending to the public sector stood at KWD1.9 billion in November, a 0.9 percent drop on a year earlier. This reflects the persistent delayed in the implementation of development projects in the past year. Qatar Gas-rich Qatar remains very clearly the regional leader in terms of bank lending growth. Overall bank credit rose by an annual 23.5% to a total of QAR368.9 billion in November 2011. The average rate of increase in the three months to November was 22.26 percent. Private sector credit growth in November reached an annual 22.3 percent, taking the total figure to QAR227,85 billion. Public sector credit, by contrast, rose by a remarkable 28.6 percent to QAR141.0 billion. This highlights the important role of the national banking sector in funding public sector projects and other activities which account for 38.2 percent of overall bank credit. Also private sector credit has responded well to Central Bank efforts to boost lending. Oman Bank credit in Oman has continued its robust expansion led above all by the private sector. Overall bank credit in October stood at OMR11.8 billion, some 13.4 percent above the level recorded in October 2010. The figure for the three months to October was up 12.9 percent. Credit to the private sector attained a total of OMR10.6 percent in October, up 10.8 percent. Credit to the government and public enterprises rose by a remarkable 41.8 percent to OMR1.3 billion. Bahrain Following a period of political instability in the spring, Bahrain has witnessed a pronounced recovery in bank credit. Total bank loans reached BHD6.5 billion in November, 12.7 percent up on BHD5.7 billion a year earlier. This rebound makes the Kingdom one of the strongest markets in the region in terms of loan growth. The annual growth for the three-month period up to November was 10.4 percent. Credit to the private sector reached a total of BHD6.2 billion in November, up 13.9 percent. By contrast, public sector credit declined by an annual 14.3 percent to just over BHD0.2 billion, the NCB report said.

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Publication:Arab News (Jeddah, Saudi Arabia)
Geographic Code:7QATA
Date:Jan 24, 2012
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