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Kuwait: Bank credit growth regains strength in August.

In its latest Economic Update, NBK reports that bank credit in Kuwait resumed its healthy growth trend after a weak July. The real estate sector saw a particularly strong gain while household borrowing maintained its solid growth. We expect credit to register growth of 7 per cent in 2013, accelerating to its strongest pace since 2009. Money supply continued to see a seasonal contraction on large withdrawals in mostly sight deposits.

Total bank credit bounced back with a KWD 231 million gain in August following a mostly flat July. Total credit reached KWD 28.2 billion and growth from a year ago slipped slightly from last month to 5.7 per cent y/y. Credit has gained KWD 1.4 billion thus far in 2013. Annualized growth thus far in 2013 reached 7.8 per cent. Growth is likely to ease slightly in the remaining months of 2013 as banks continue to see a number of corporate loan settlements, though the overall pace will remain relatively healthy.

Household borrowing maintained its strong growth in August, gaining KWD 105 million on the month. Growth in household credit (personal facilities excluding credit for the purchase of securities) was steady at 18 per cent y/y, a pace it has largely maintained throughout the last five months.

Credit to the non-financial business sector recovered from its decline last month, adding KWD 140 million in August. The rise was driven by a strong KWD 98 million increase in the real estate sector. Smaller gains in other business sectors provided additional support to August's healthy performance. Meanwhile, the non-bank financial sector remained in deleveraging mode registering a KWD 15 million drop in credit, with year-on-year growth at a negative 17 per cent.

Private sector deposits saw seasonal withdrawals continue in August (KWD -273 million). Dinar sight deposits (KWD -198 million) and foreign currency deposits (KWD -74 million) were again behind the declines, most likely due to seasonal factors. The loan-to-deposit ratio rose once again in August as a result of the declines, gaining a percentage point from July.

The declines in customer deposits further dampened money supply growth. Broad money (M2) contracted by KWD 383 million, on par with last month's drop, causing year-on-year growth to slip to 8.1 per cent from 10.6 per cent in July. The narrower M1 measure contracted by KWD 309 million, with growth slowing to 10.3 per cent from 14.8 per cent last month.

Deposit rates on dinar time deposits remained steady at their currently low levels. Average rates remained unchanged for the 1-month, 3-month, 6-month, and 12-month at 0.56 per cent, 0.74 per cent, 0.93 and 1.12 per cent, respectively.

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Publication:CPI Financial
Date:Oct 9, 2013
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