Strategy Note /
Saudi Arabia

Saudi Central Bank Monthly Bulletin - October 2022

  • The Saudi Central Bank (SAMA) published its monthly bulletin for October 2022

  • Banks and other financing companies signed 12,656 new residential mortgage contracts for individuals in October

  • Broader money supply (M3) increased by 8.7% yoy (+.32% mom) to SAR2.47trn

SNB Capital
5 December 2022
Published bySNB Capital

The Saudi Central Bank (SAMA) published its monthly bulletin for October 2022. Banks loan book increased by 1.1% mom (+15.8% yoy) to SAR2.33trn, taking ytd growth to 13.2%. New mortgages accounted for 56.8% of new loans in October, which indicates a more broad base growth in the loan book. The liquidity in the banking system remains tight as indicated by the increase in the regulatory LDR to 82.1% in October 2022 vs 81.9% in September 2022.

From a macro perspective, total reserves decreased by 0.9% mom (+2.96% yoy) to SAR1.74trn (US$464bn), while CPI stood at 3.0% yoy in October vs 3.1% in September2022.

Banks

  • The Saudi banking sector’s assets increased by 1.3% mom (+13.0% yoy) to SAR3.61trn (US$963bn) in October 22. This takes 2022 ytd increase to 10.1%.

  • The loan book increased by 0.7% mom (+15.8% yoy) to SAR2.33trn. This takes the ytd growth to 13.2% vs 12.9% in the same period last year.

    o    In absolute terms, the new loan origination stood at SAR16.5bn in October, lower than SAR24.6bn in September..

    o    New mortgage originations (by banks) decreased by 5.8% mom (-23.0% yoy) to SAR9.35bn in October 2022. However, the segment still accounted for c56.8% of new loans in October 2022 vs 40% in September 2022.

    o    Overall, the sector has originated new mortgages of cSAR119.1bn in 10M 22 (39% of total new loans) vs cSAR128bn in 10M 21 (56% of new loans), down 16.9% yoy. In addition to higher interest rates, we believe higher real-estate valuations and cost of construction are also impacting the demand for new mortgages, in our view.

    o    The Fed raised the interest rates 6 times in 2022 to a range of 3.75–4.0%, after it was almost zero at the beginning of the year. Furthermore, there is an anticipation that the Fed will raise the rate further by another 25bps by December 2022. Given the currency peg, SAMA is expected to follow.

  • Deposits increased by 0.25% mom (+9.8% yoy) to SAR2.27trn. Demand deposits decreased by 4.7% mom (+0.6% yoy) to SAR1.33trn, while T&S deposits increased by 3.4% mom (+18.1% yoy) to SAR543bn. T&S deposits now accounts for 27% of total deposits base vs 24% in October 2022. The re-classification of the deposit mix is a result of higher Mudaraba rates due to tight liquidity in the sector, and increase in policy rates in line with Fed rates.

  • Subsequently, regulatory loan to deposit ratio (LDR) increased to 82.1% in October 2022 vs 81.9% in September 2022. Excess deposits (total deposits minus loans) remained negative at SAR60bn in October 2022, similar to September 2022

    o    We believe tight liquidity situation will continue to impact the sector cost of funds going forward, particularly for those banks that have higher LDRs.

Mortgages

  • Banks and other financing companies signed 12,656 new residential mortgage contracts for individuals in October 2022 vs 13,183 month earlier (-4.0% mom, -23.7% yoy).

  • The total disbursed amount stood at SAR9.5bn in October 2022 vs SAR10.2bn in September 2022, down 6.3% mom (-22.8% yoy).

  • Average contract value remained flat mom at SAR0.80mn.

Other Macro data

Reserves

  • Total reserves decreased by 0.9% mom (+2.96% yoy) to SAR1.74trn (US$464bn).

Money Supply

  • Broader money supply (M3) increased by 8.7% yoy (+.32% mom) to SAR2.47trn.

  • The yoy growth was due to a combination of growth in T&S deposits and Other Quasi Money deposits.

  • M1 increased by 0.16% yoy (-4.21% mom) to SAR1.53trn, with demand deposits increasing by 0.55% yoy (-4.75% mom) while currency in circulation (CIC) was down by 2.37% yoy (-0.43% mom).

  • T&S deposits increased by 27.1% yoy (+11.2% mom).

Inflation

  • CPI increased by 3.0% yoy (+0.2% mom) in October 2022 and lower than 3.1% recorded in September 2022.

  • The increase is primarily due to higher food and transportation prices, which increased by 4.4% yoy each.

  • In 10M 22, average CPI stood at 2.3% yoy vs 3.5% in the same period last year, primarily driven by higher food (+3.7% yoy), transportation (4.1% yoy) and education prices (+5.8% yoy)

Consumer Spending

  • PoS transactions stood at SAR47.6bn in October 2022, up 17.8% yoy (0.4% mom).

  • ATM cash withdrawals (Banks and Mada) increased by 3.1% yoy (-0.7% mom) to SAR46.8bn.