Consumer Lending by Saudi Banks Accelerates

Saudi Arabian banks picked up the pace of consumer lending in the second quarter, though corporate credit remains constrained, a report by Banque Saudi Fransi has said. The pace of consumer lending growth hit almost 10% in Q2, compared with 7.2% in the first quarter, according to data from the Saudi Arabian Monetary Agency (SAMA). By contracts, corporate lending remains stagnant as Saudi banks continue to shy away from extending credit. In July, bank claims on the private sector grew 0.6% from June, slightly below the month-on-month rate of 0.9% recorded in June.

“There has, therefore, been very little credit growth momentum despite government efforts to push ahead with strategic infrastructure projects,” analysts said. In the three months to 30 June 2010, real estate finance surged 30% from the year earlier period, pointing to muted housing market activity, while auto loans saw a 6.2% rise. Consumer lending is “the exception to passive loan growth,” the report said. “Saudi banks have been looking to boost their retail banking portfolios to tap into the GCC region’s strongest domestic demand story.” By contrast, credit card lending fell 5.2% over the same period, as cautious banks reevaluate their risk profiles.

The twin pressures of rising global commodity prices and domestic demand saw the kingdom’s inflation rate hit a 17-month peak in July of 6%, fuelled by hikes in food prices, rents and services. Food and beverage inflation rose to seven percent, from less than one percent in December, while rental inflation remained a steep 8.9% , the report noted. - Arabian Business