Global Arab Network | Kuwait: Bank credit drops by KD 18 million in July

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Kuwait: Bank credit drops by KD 18 million in July

Thursday, 02 September 2010 22:59

Kuwait - The total bank credit in Kuwait declined by KD 18 million in July following the sizeable slide of KD 253 million in the previous month, said a report on Thursday.

In its weekly economic brief entitled "Monetary Developments - July 2010," the National Bank of Kuwait (NBK) attributed the June drop largely to the sale of Zain's African assets. As a result, year on year (y/y) credit growth slowed further to 2.2 percent. Again in July, lending to real estate was the weakest component, while strong growth in consumer credit was partially offset by declining credit to non-bank financial institutions.

Money supply (M2) dropped significantly with major deposit withdrawals that summed up to KD 338 million, which currently stands only 1.2 percent above the July 2009 figure. However, the decline in M2 in July could be largely attributed to seasonal outflows, according to the report.

Outstanding credit to residents was down 0.1 percent in July. The real estate sector saw the biggest decline dropping KD 72 million while y/y growth fell into negative territory (-1.2 percent). Lending to non-bank financial institutions also fell by KD 34 million.

Private resident deposits were down KD 338 million on the month. On y/y basis though deposits still show a 1.0 percent growth, indicating that the drop in July was largely due to seasonal outflows related to the summer holidays. The drop came mostly from local currency deposits which fell by KD 308 million m/m but foreign currency deposits also declined by KD 29 million m/m.

The drop in resident deposits was offset by an increase of KD 175 million in non-resident private deposits.

The outflow of money reduced banks' liquidity somewhat and their liquid assets fell KD 155 million in July, with time and sight deposits at CBK dropping KD 320 million and KD 92 million, respectively.

However, this was partially offset by the liquidity in the interbank market, while liquidity levels at banks, although slightly off, remain comfortable and well above recent lows. Meanwhile, total bank assets were up KD 236 million, boosted by growth in banks' foreign balance sheet.

The US dollar regained momentum against the Euro in the past weeks as high risk aversion dominated global financial markets and the greenback was back in favor. Consequently, the weeks-old Euro rally against the KD ended as well. Meanwhile the KD weakened somehow against the dollar but volatility remains relatively low.
(KUNA)

Global Arab Network

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