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Saudi banks rely on a portfolio of long-term loans; demand deposits increase

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MOSCOW / RIYAD: The long-term portion of credit provided by Saudi banks to the private and public sector continues to account for a larger portion than short-term credit, according to data from the Saudi Central Bank.

Long-term credit consisting of loans, advances and discount bills has grown at a much faster rate than short-term credit since the pre-pandemic period.

Short-term credit increased 13% to SR 791.3 billion from SR 699 billion during the same period.

Making long-term credit increasingly accessible to businesses and individuals bodes well for the economic conditions of businesses and households as it helps them manage funds for longer-term projects.

However, SAMA as a regulator obliges commercial banks to respect certain ratios showing the maturity of their assets compared to that of their liabilities.

In this regard, Saudi banks’ liabilities are still dominated by sight deposits, with their share of total deposits at end-September 2021 unchanged from September 2019 at 64%.

Demand deposits increased at a rate of 21 percent against a 7 percent increase in term deposits and savings during the same period.

Growth in term deposits and savings was driven by government entities, as their contribution to total term deposits and savings increased from 38% at the end of September 2019 to 50%.

The share of the private sector – businesses and individuals – rose from 62% to 50%, respectively.

In April 2018, the Saudi Arabian Central Bank changed the methodology for calculating loan-to-deposit because it “gave a higher weight to longer-term deposits in order to encourage banks to introduce savings products.”

The ratio increased to 0.8 at the end of September 2021 from 0.75 at the end of the same month a year ago, but only marked a marginal increase from 0.79 at the end of September 2019.

As for personal loans, their maturity profile suggests a more positive picture. As defined by SAMA, these loans include consumer loans granted to individuals to finance personal and non-commercial consumption needs other than real estate as well as card loans. (Personal credit = Consumer credit + Card credit)

For this category of credit (personal loans), the share of long-term loans increased by 40% at the end of September 2021 compared to the same month of 2019, while short-term loans only grew by 14%. %.

As a result, the share of long-term credit in total bank personal loans rose to 50%, from 45% at the end of September 2019.

At the end of September 2021, personal loans accounted for 21% of total loans granted by Saudi banks to the private and public sectors, according to data compiled by Arab News from the latest monthly statistical bulletin released by the Saudi Central Bank.


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