Saudi Arabia Shows Growth in Mortgages

Total credit up by almost 12 per cent y-o-y and 1.4 per cent m-o-m

As per reports, Saudi Arabia’s mortgages grew sharply by 65 per cent in May to SR6.8 billion ($1.8 billion), a smart recovery from April’s SR4.1 billion. As per a statement by Al Rajhi Capital Research that did the study, “In our view, non-REDF (Real Estate Development Fund) category has remained resilient and is driving the mortgage demand.”

Corporate loan
Further, corporate loan growth was also strong as total credit was up almost 12 per cent y-o-y and 1.4 per cent m-o-m. On the other hand, demand deposits continue to decline, while time deposits inflow remains strong. Despite the rising funding pressure, profitability for May was solid implying the banks are passing on the high interest costs to the end consumer, said Al Rajhi citing the Saudi Arabian Monetary Authority (SAMA) banking data. “We continue to believe interest rates will remain higher for longer period time than implied by the consensus, thus maintain our positive view on the corporate banks,” Al Rajhi said.

Credit
Credit growth for May came in strong growing at +1.4  per cent m-o-m and +11.8  per cent y-o-y (April: 0.3  per cent m-o-m and +11.1  per cent y-o-y). Bank lending to the private sector grew 1.3  per cent m-o-m in May and grew 10.3  per cent y-o-y (April: 0.3  per cent m-o-m and +9.7  per cent y-o-y).

Deposits
Deposits contracted for May (-0.7 per cent m-o-m, +9.8 per cent y-o-y), led by a decline in demand deposits (-0.2 per cent m-o-m, -2.1 per cent y-o-y). For the third consecutive month, government time deposit inflows were solid growing at +4.0 per cent m-o-m and +45.8 per cent y-o-y (April: +2.8 per cent m-o-m and 44.9 per cent y-o-y).

Liquidity
The simple LDR in the system grew 2.1 per cent m-o-m coming around 102.5 per cent in May, and the adjusted LDR (SAMA reported) grew 1.3 per cent coming around 82.0 per cent. The interbank liabilities increased 2.6 per cent m-o-m to SR109 billion in May from SR106 billion in April.
Consumer spending increased 15.2 per cent y-o-y in April to SR107.4 billion (+3.9 per cent y-o-y in April). Cash withdrawals in value terms increased 7.7 per cent y-o-y in May (-0.6 per cent y-o-y in April) to SR44.9 billion.

Mortgage
Residential mortgage came in at SR6.8 billion in May, accelerating from SR4.1 billion in April, in line with our yearly estimates. YTD average is around SR6.7 billion (Al Rajhi’s 2023 estimate is SR6.8billion).
Banking sector net profit before Zakat and tax for April came in at SR6.3 billion, +9.5 per cent m-o-m and +14.2 per cent y-o-y (April: -22.2 per cent m-o-m and +3.4 per cent y-o-y). 5M23 profitability came in 13.7 per cent higher than 5M22 profits.