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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