(MENAFN- Arab Times) Credit growth in June was strong, but annual growth eased slightly to 5.2 percent y/y on basis effects. Lending was up by KD 453 million during the month. While much of the gain came from lending for securities purchases and household borrowing, other sectors also saw notable growth. Meanwhile, real estate saw a third month of decline in outstanding credit.
Private deposits were flat on the month, while money supply growth continued to ease on basis effects. Meanwhile, interbank and deposit rates held steady. Household borrowing remained robust adding KD 115 million, with growth accelerating to 12.3 percent y/y. While growth in June was largely from installment loans, consumer loans also rose for the first time in five months. Of the KD 1 billion credit added in the first six months of 2015, half was accounted for by household borrowing. Credit to non-bank financial companies continued to decline, losing KD 6 million.
While still in deleveraging mode, the net monthly declines in this sector's credit have been diminishing over the last year. This sector's credit has declined by 7.4 percent y/y. All remaining credit rose by a solid KD 343 million, though growth eased to 2.9 percent y/y on basis effects. The bulk of the gains were in lending for the purchase of securities, which rose by KD 206 million, though the segment remained down by 2.5 percent y/y. Trade, oil & gas, "other sectors", and construction were other areas of growth, with the sectors contributing for most of this year's business sector credit gains.
Real estate saw the largest decline of KD 20 million, which was also its third consecutive monthly decrease. There has been a marked pickup in the growth momentum of business credit over the last few months. The annualized 3-month growth rate of credit excluding personal facilities and lending to nonbanks and the real estate sector has accelerated gradually over the last six months from a low reached in December. In June, 3- month growth accelerated to an annualized 17 percent. Private deposits were flat in June largely on a drop in foreign currency deposits; as a result, Money supply (M2) growth eased to 4.1 percent y/y.
Private deposits saw a small KD 14 million decline, with a KD 64 million increase in KD deposits more than offset by a KD 77 million decline in foreign currency deposits. There was also a move to KD sight deposits in June at the expense of KD time deposits. Narrower money supply (M1) actually declined by 0.9 percent y/y due to a basis effect; it was a year ago that the CBK introduced the new currency which temporarily increased the amount of currency in circulation.
Average customer deposit rates on dinar time deposits, and interbank rates were steady in June. Average rates onthe1-month,3-month, and 6- month time deposits were steady at 0.61 percent, 0.77 percent, and 0.97 percent, while 12-month rates added 5 bps after a drop last month. KD inter bank rates held steady at 1.00 percent, up 21 basis points year-to-date.
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