The Saudi Central Bank (SAMA) published its monthly bulletin for May 2022. Banks loan book grew by 0.8% mom (+14.1% yoy) to SAR2.19trn, taking ytd growth to 6.5%. The loan growth marginally slowdown in May vs April (0.96%). Moreover, liquidity levels remained tight in May (LDR 82.2%), which kept SAIBOR high. The benchmark 3M SAIBOR increased to 3.04% as of 28 June 2022 vs 1.0% on 31 January 2022. We believe this will have an impact on the sector’s Q2 22 margins, particularly for banks that have relatively higher LDR.
From a macro perspective, total reserves remained largely flat on mom basis (+3.3% yoy) at SAR1.69trn (US$451bn), while CPI stood at 2.2% yoy vs 2.3% in April 2022.
The Saudi banking sector’s assets grew by 0.7% mom (+11.2% yoy) to SAR3.41trn in May 2022, primarily driven by an increase in the loan book. Investments increased by 1.1% mom (+8.2% yoy) to SAR556bn.
The loan book increased by 0.8% mom (+14.1% yoy) to SAR2.19trn, taking ytd growth to 6.5%.
Comparatively, the growth of 0.75% for May was lower than April level of a growth of 0.96% mom. In absolute terms, the sector originated SAR16.3bn of new loans in May vs SAR21bn in April.
Albeit at a slower pace, new mortgages remained the major contributor of loan growth in May. New mortgages stood at SAR8.8bn in May vs SAR9.2bn a month earlier. Mortgages account for 54% of new loan origination in May vs 45% in April.
Overall, the sector has originated new mortgages of cSAR54.2bn in 5M FY22 (39% of total new loans) vs cSAR64.6bn in 5M FY21 (40.6% of new loans), down 26.3% yoy.
On the other hand, deposits declined by 0.16% mom (+8.9% yoy) to SAR2.18trn, primarily driven by a decline in Time and Saving (T&S) deposits.
T&S declined by 2.5% mom (+17.8% yoy) to SAR517bn, while demand deposits decreased by 0.1% mom (+2.9% yoy) to SAR1.36trn. On yoy basis, we believe the increase in SAIBOR coupled with the introduction of new saving accounts by different banks encouraged many depositors to shift towards saving accounts.
Regulatory loan to deposit ratio (LDR) marginally increased further to 82.2% in May 2022 vs 81.4% in April 2022. Excess deposits (total deposits minus loans) were negative at SAR15bn in May 2022 vs an excess of SAR5.0bn in April 2022. We believe this indicates further tightening in the liquidity levels, which we believe may increase the sector’s cost of funds going forward.
The benchmark 3M SAIBOR stood at 3.04% as of 28 June 2022 vs 1.0% on 31 January 2022. We believe that tight liquidity may potentially impact the sector’s margins in Q2 22, particularly for banks that have relatively higher LDRs.
Investments increased by 1.1% mom to SAR556bn (+8.2% yoy).
The sector reported a net profit of SAR5.5bn in May, down 0.9% mom (+16.6% yoy).
In 5M FY22, the sector’s net income stood at SAR27.4bn vs SAR21.4bn in 5M FY21, up 28% yoy. We highlight that the last year’s numbers reflect higher provisioning mainly from Samba (prior to the merger with NCB).
Banks and other financing companies signed 11,085 new residential mortgages contracts for individuals in May 2022 vs 11,496 a month earlier (-3.6% mom, -6.0% yoy).
The total disbursed amount stood at SAR8.8bn in May 2022 vs SAR9.2bn in April 2022, down 4.4% mom (-1.1% yoy).
Average contract value declined to SAR0.81mn in May 2022 vs SAR0.82mn in April 2022.
Other Macro data
In May 2022, total personal transfers declined by 1.1% yoy (-13.1% mom) to SAR17.5bn.
Saudis transfers increased by 20.7% yoy (-4.1% mom) to SAR6.2bn while non-Saudis transfers declined by 10.0% yoy (-17.4% mom) to SAR11.3bn.
Total reserves remained largely flat on mom basis (+3.3% yoy) at SAR1.69trn (US$451bn).
Broader money supply (M3) increased by 7.8% yoy (-0.5% mom) to SAR2.40trn.
The yoy growth was due to a combination of growth in T&S deposits and Other Quasi Money deposits.
M1 increased by 2.2% yoy (-0.5% mom) to SAR1.57trn, with demand deposits increasing by 2.9% yoy (-0.1% mom) while currency in circulation (CIC) declined by 2.6% yoy (-3.5% mom).
T&S deposits increased by 17.8% yoy (-2.5% mom).
M1 represents 65.8% of the total M3 (vs 69.4% in May 2021), with CIC representing 8.7% (vs 9.6%) and demand deposits representing 57.2% (vs 59.8%).
CPI increased by 2.2% yoy (+0.12% mom) in May 2022 and is lower than 2.3% recorded in April 2022.
The increase is primarily due to higher food and transportation prices, which increased by 4.2% yoy and 4.0% yoy, respectively.
In 5M FY22, average CPI stood at 1.9% yoy, primarily driven by higher food (+3.2% yoy) and transportation prices (4.5% yoy).
PoS transactions stood at SAR42.4bn in May 2022, up 5.2% yoy (-14.3% mom).
ATM cash withdrawals (Banks and Mada) declined 15.7% yoy (-12.3% mom) to SAR41.7bn.