Credit was strong in June, with year-on-year (y/y) growth accelerating to its fastest pace since 2009 and putting two months of weakness behind it, a specialized economic report stated Wednesday.
The report, by National Bank of Kuwait, pointed out that the month’s strong credit figure, which reflected a pick-up in the non-financial business sector, will help ensure credit growth tops 8 percent in 2014.
“Meanwhile, currency in circulation saw a notable increase with the new notes introduced in June, boosting the money supply in what is likely to be a temporary development. Interest rates remained mostly stable,” reads the report.
It also reported total credit rise by KD 480 million during the month with y/y growth accelerating to 8.3 percent.
“Household credit remained healthy but continued to ease as expected, in part thanks to the settlement of Family Fund loans. Meanwhile, growth in non-financial business credit strengthened noticeably in June, though much of the strength was in real estate and for purchase of securities,” said the report.
Household debt (personal facilities ex-securities) was up KD 90 million, with y/y growth easing to 13.2 percent, its slowest pace in two years. Some of this easing is due to the settlement of Family Fund loans, which may be taking around two percentage points off y/y growth.
It, however, noted that the moderating trend in household debt growth preceded the settlement of Family Fund loans and is expected to continue as the strong growth in household income that helped fuel strong borrowing moderates.
“Indeed, the CBK’s point-of-sale (POS) transaction data for 2Q14 further confirm the moderating trend in consumer activity, though the pace remains healthy. The value of POS transactions was up 13.6 percent y/y in the quarter, down from 17.4 percent growth a year ago,” said the report.
The data also showed that the non-bank financials saw another albeit smaller increase (+KD 3 mln) in credit, following months of deleveraging.
“Credit to the sector remains down by 13.9 percent against a year ago and stands at 5 percent of total credit compared to 13 percent at its height in 2008. Deleveraging by financial companies is likely to continue in the months ahead, though the pace will ease further,” report said.
The NBK also stated that the all remaining credit gained KD 387 million, with growth accelerating to 8.2 percent y/y.
“A large part of the gain came from the real estate sector (up KD 138 million) and loans for the purchase of securities (up KD 147 million), with growth (y/y) in both accelerating to their highest levels in over four years (9.3 percent and 7.2 percent respectively). The trade and “others” sectors accounted for most of the rest of the June gain,” it added.
Furthermore, the NBK reported money supply (M2) growth by 7.4 percent y/y as the CBK’s new currency notes resulted in a jump in currency in circulation (+KD 362 mn).
“Private deposits actually declined by KD 69 million on a drop in time deposits of KD 168 million, though some of this was offset by increases in sight and savings accounts. M1 growth accelerated to 18.1 percent,” said the report.
“Average customer deposit rates on dinar time deposits remained unchanged in June. Rates on the 1-month, 3-month, 6-month, and 12-month time deposits stood at 0.59 percent, 0.78 percent, 0.98 percent, and 1.18 percent. KD interbank rates edged higher, the 1-month KIBOR was up 3basis points to reach 0.97 percent.”
Source : KUNA Kuwait News agency
