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Credit growth rate reaches 5.7%
KUWAIT CITY, August 16: The recovery in credit extended to the corporate sector continued, while growth in personal loans remained very strong, and even accelerated compared to the first quarter of 2022. As for performance since the At the beginning of this year, the credit growth rate reached 5.7%, almost equal to the growth recorded for the whole of 2021 of 6.3%, Al-Anba daily reports. A report released by the National Bank of Kuwait indicates that the Kuwaiti credit market had a strong performance in the second quarter of 2022, as it increased by 2.3% on a quarterly basis, which pushed the growth rate on an annual basis at 9.6. % Last June.
Credit to the corporate sector increased by 2.4% quarter-on-quarter (quarter-on-quarter), but at a slower pace compared to the fastest growth recorded in 10 years in the first quarter of 2022 (+3.7%), which resulted in an increase in yoy (year-on-year) growth rate to 6.2% in June. Credit to the corporate sector continues to benefit from the return to normal economic activity, as pandemic-related restrictions have been fully lifted, and against the backdrop of pent-up demand for investment due to weak investment from companies since the outbreak of the pandemic, and the improvement of the operating environment in general.
The commercial sector was the main beneficiary of the return to normal business activities and recorded the fastest growth rate in the second quarter of the year, reaching 6.1%, and continued the recovery started in the first quarter of the year (+5.1%) after falling for six consecutive quarters. In contrast, the oil and gas sector saw its first quarterly decline after posting rapid growth in the previous six quarters. On an annual basis, the industrial sector (+12.9%) and the oil and gas sectors (+8.9%) remain in the lead. Personal credit performance also improved (+3.1% quarter on quarter) compared to the first quarter of the year (+2.2%), with the annual growth rate generally stabilizing at its lowest high levels recorded for several years, reaching approximately 14%. % in June. This strong growth is attributed to the increase in consumer loans and housing loans, which both grew by around 14% on an annual basis.
A number of important factors contributed to personal loan growth, including continued strong demand and high valuations in the residential real estate sector, continued strength in consumer spending, and various campaigns (which sometimes included interest-free credit facilities) launched by many banks to attract retail customers.
In addition, given the nature of fixed interest rates generally on personal loans in Kuwait and the upward trend in benchmark interest rates (locally and globally), it is possible for some borrowers to accept their loans in advance in order to obtain a lower interest rate. . In addition to the factors mentioned, credit growth may continue to improve on the back of a return to normal business activity and higher oil prices, which could help bolster confidence levels and improve the pace of allocations. projects, in addition to pent-up demand for business capital expenditures. On the other hand, rising interest rates, given the expected trajectory of record rates, globally and locally, may weaken the pace of growth to some extent, but it is expected that factors supporting growth have a deeper impact.
In addition, corporate credit growth may slow in the second half, as we have always done. At the same time, growth in domestic deposits remained strong in the second quarter of the year, leading to an increase in year-on-year growth to 6.7% in June, which was mainly attributed to growth private sector deposits. , which rose 2.9% on a quarterly basis and contributed to year-on-year growth at 7.1%.
Despite the rise in oil prices, government deposits with local banks remained unchanged in the second quarter of the year and fell by 2% since the start of this year (+4.6% year on year) . Looking at the distribution of private sector deposits in Kuwaiti dinars, demand and savings deposits grew at a slower pace (1.4%) in the second quarter of the year compared to term deposits. more expensive (+3.5% year-on-year), bringing the growth of the latter to 7.7% since the start of the current year.
The growth in term deposits comes after three consecutive years of steady decline, which led to a cumulative decline of 17% between the end of 2018 and 2021. Going forward, given the continued rise in interest rates, the rate Growth in term deposits is expected to outpace growth in demand and savings deposits, reflecting the trend that has prevailed over the past three years. The Central Bank of Kuwait has raised the Bank Rate by a cumulative rate of 1.25% (25 basis points more than five times) so far this year, lower than the cumulative increase of 2.25% authorized by the US Federal Reserve. As a result, the weighted average interest rate on loans and, to a lesser extent, on deposits, started to rise. Since the Federal Reserve will continue to raise interest rates for the remainder of this year, it is assumed that the discount rate will continue to be increased in Kuwait, resulting in higher loan yields and cost of loans. funds.