Kuwait: Credit at 5.9% in November with 2014 expected at 7% y/y

Economic Update
28 January 2015
Monetary developments
Kuwait: Credit at 5.9% in November
with 2014 expected at 7% y/y
chakere
Credit growth was up in November, but failed to make up for recent
weakness. Growth ticked up to 5.9% y/y on a KD 222 million gain in
lending during the month, but remained weaker than expectations. We
expect growth to have finished the year closer to 7% on a stronger
December. Family Fund write-offs and a slew of corporate debt
rescheduling deals have put a damper on growth in recent months. Gains
in November were seen in household debt, as well as the oil & gas and
real estate sectors. Meanwhile, strong gains in deposits drove up money
supply growth to healthy levels, while deposit rates remained stable.
Interbank rates, on the other hand, edged lower for the second
consecutive month.
Household debt remains strong, gaining KD 88 million in November;
growth was stable at 13.1% y/y. Actual household debt growth is
expected to have maintained a more rapid pace once adjusted for the
Family Fund settlements. Installment loans still remain the sector’s main
driver, consistently maintaining a healthy double digit pace, which edged
higher to 15.6% in November. As a result, installment loans have
accounted for 60% of the net gain in total credit this year.
Credit to non-bank financials saw a small increase of KD 9 million.
The sector continues to deleverage with credit shrinking by 12.4% y/y.
The sector’s ongoing contraction has eroded most of its share of total
credit, bringing it down to 4.6% from a pre-crisis high of 13%.
Chart 1: Money supply
(% y/y)
30
M2
25
25
20
20
15
15
10
10
5
0
Nov-12
5
0
Mar-13
The oil & gas sector saw the largest gain (KD 100 million) followed
by the real estate sector (KD 48 million). Loans for the purchase of
securities were also up (KD 21 million) on the heels of a large decline in
October. Meanwhile, trade, industry and construction saw declines, with
all three sector seeing growth come off from earlier in 2014.
Money supply (M2) growth rose in November to 4.5% y/y on strong
gains in deposits, following several months of decline. Private
deposits were up by KD 907 million, split between gains in KD and FX
deposits. KD sight deposits received a large boost (KD 752 million) while
time deposits declined (KD 297 million). M1 growth rose to 14.7% y/y on
the movement from time to sight deposits.
Average customer deposit rates on dinar time deposits were
unchanged. The average rates on the 1-month, 3-month, 6-month and
12-month time deposits stood at 0.62%, 0.81%, 1.01% and 1.23%,
respectively. KD interbank rates eased for a second consecutive month,
with the 1-month KIBOR offer rate shaving off 2 bps to 1.09%.
NBK Economic Research, T: (965) 2259 5500, F: (965) 2224 6973, [email protected], © 2014 NBK
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Source: Central Bank of Kuwait
Chart 2: Credit growth
(% y/y)
20
20
15
15
10
10
5
5
0
0
Household Debt
-5
-5
Business Credit (all remaining)
-10
All remaining credit rose by KD 124 million, though the gain was
smaller than last month’s decline. Growth rose to 4.3% y/y, but
remained well below the 7-8% pace seen earlier in 2014. Growth in
credit to “productive sectors” (i.e. excluding real estate and securities)
rose to a healthier 6.8% y/y, continuing to reflect the improvement in
activity in Kuwait’s non-oil economy.
30
M1
-10
Non-Bank Financials
-15
-15
-20
-25
Nov-12
-20
-25
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Source: Central Bank of Kuwait
Chart 3: Interest rates
(%)
3.5
3.0
3.5
Discount Rate
1-month KIBOR
3.0
1-month Dep. Rate
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
Nov-12 Mar-13
0.0
Jul-13
Nov-13 Mar-14
Jul-14
Nov-14
Source: Central Bank of Kuwait
www.nbk.com
Table 1: Monetary highlights
Chart 4: Exchange rates
1-month
change
Nov-14
Total system liquidity (M2)
Currency in circulation
Private sector deposits
KD deposits
Sight deposits
Savings deposits
Time deposits & CDs
Foreign currency deposits
KD mn
KD mn
33,771
1,447
32,324
29,362
8,393
4,864
16,105
2,962
875
-32
907
425
752
-30
-297
482
3-month
change
%
2.7
-2.2
2.9
1.5
9.8
-0.6
-1.8
19.4
KD mn
574
-117
691
463
857
-94
-301
228
12-month
change
%
1.7
-7.5
2.2
1.6
11.4
-1.9
-1.8
8.3
KD mn
1,440
4
1,436
1,342
1,257
61
24
94
0.30
%
4.5
0.3
4.7
4.8
17.6
1.3
0.1
3.3
0.43
Dinar / Dollar (LHS)
Dinar / Euro (RHS)
0.29
0.41
0.28
0.38
0.27
0.36
Source: Central Bank of Kuwait
0.26
Jan-13 May-13
Table 2: Banking system highlights
Nov-14
KD mn
1-month
change
KD mn
3-month
change
%
KD mn
12-month
change
%
KD mn
Jan-14 May-14
Sep-14
Jan-15
Source: Thomson Reuters Datastream
%
Total bank assets
Liquid assets
Cash and CBK Balances
CBK bonds
Public debt instruments
Local interbank deposits
Time deposits with CBK
55,098
9,303
1,445
1,875
1,561
1,525
2,898
1,229
464
317
0
1
156
-10
2.3
5.2
28.1
0.0
0.1
11.4
-0.3
819
184
379
0
1
-45
-151
1.5
2.0
35.5
0.0
0.1
-2.8
-5.0
4,087
763
218
-25
59
479
33
8.0
8.9
17.8
-1.3
3.9
45.8
1.1
Credit facilities
Trade
Industry
Construction
Agriculture & fishing
Non-bank financial
Personal facilities
Purchase of securities
Other personal facilities
Real estate
Crude oil & gas
Other sectors
Foreign assets
Other assets
30,598
2,878
1,790
1,957
16
1,402
12,215
2,690
9,525
7,863
422
2,024
11,441
3,755
222
-32
-21
-4
1
9
109
21
88
48
100
7
547
-4
0.7
-1.1
-1.1
-0.2
6.7
0.7
0.9
0.8
0.9
0.6
30.9
0.3
5.0
-0.1
396
81
-21
-4
2
-45
293
-9
303
-16
105
-13
262
-22
1.3
2.9
-1.2
-0.2
10.3
-3.1
2.5
-0.3
3.3
-0.2
33.2
-0.6
2.3
-0.6
1,710
109
-41
39
2
-198
1,037
-65
1,102
290
207
236
1,791
-178
5.9
3.9
-2.3
2.0
10.3
-12.4
9.3
-2.4
13.1
3.8
96.5
13.2
18.6
-4.5
Total bank liabilities
Total deposits
Private sector deposits
Government deposits
Interbank deposits
Foreign liabilities
Other liabilities
47,812
39,152
32,324
5,313
1,525
4,203
4,457
1,252
1,085
907
24
156
70
97
6.8
2.8
2.9
0.5
11.4
1.7
2.2
815
771
691
154
-45
-195
240
3.3
2.0
2.2
3.0
-2.8
-4.4
5.7
3,774
2,047
1,436
169
479
1,296
431
60.8
5.5
4.7
3.3
45.8
44.6
10.7
7,286
-23
-0.3
4
0.1
313
4.5
Shareholder equity
0.33
Sep-13
Source: Central Bank of Kuwait
NBK Economic Research, T: (965) 2259 5500, F: (965) 2224 6973, [email protected], © 2014 NBK
www.nbk.com
NBK Economic Research, T: (965) 2259 5500, F: (965) 2224 6973, [email protected], © 2014 NBK
www.nbk.com

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