(MENAFN - Kuwait News Agency (KUNA)) Statistics on Kuwaiti banking sector last October and expectations for 2012 stated that total increase in loans dropped by 0.5 percent and that the rate achieved in September 5.5 percent, due to a decline in various economic sectors, report prepared by Kuwait Finance House Research (KFH-Research) said on Tuesday.
The report added that total sum of loans settled at KD 26.8 billion.
The report mentioned an increase in constructions loans by 1.8 percent for the first time in 14 months, while total increase in deposits decreased in October compared to the previous month.
The report noted that bad loans reached their peak this year, and expected the growth rate of loans to reach by end of year 5.4 percent with four percent increase than last year.
Liquidity surplus is expected to increase by KD one billion by end of this year compared to liquidity surplus of last year.
Overall loan growth moderated slightly to 5.0 percent Year-Over-Year (y-o-y) in October 2012, after touching a 29-month high of 5.5 percent y-o-y in September 2012.
In absolute amount, total loans outstanding continued to be among the highest levels, at KD 26.8 bln during the month, the report said.
The slight slowdown in the overall loan growth was due to moderation across economic sectors.
Loan growth to the trade and real estate sectors was lower at 11.2 percent y-o-y and 4.0 percent y-o-y respectively in October 2012 (September 2012: 11.7 percent and 4.9 percent y-o-y respectively), while industry loan growth was down to 0.9 percent y-o-y during the month (September 2012: 3.4 percent y-o-y).
Loans to non-bank financial sectors continued to be negative at 16.7 percent y-o-y in October 2012 vs. -16.4 percent y-o-y in September 2012.
Meanwhile, personal loans growth held firm at 11.8 percent y-o-y in October 2012.
Loan growth to the construction sector turned around and was positive at 1.
8 percent y-o-y in October 2012 (September 2012: -2.1 percent y-o-y), the first expansion in 14 months.
On the funding front, overall deposit growth expanded by 9.2 percent y-o-y to KD 32.7 billion in October 2012 compared to 9.6 percent y-o-y in September 2012.
Private sector deposits, which accounted for 84.4 percent of total banking sector deposits, increased by 4.8 percent y-o-y to KD 27.6 billion during the month (September 2012: 5.1 percent y-o-y).
Meanwhile, public sector deposits grew by 41.3 percent y-o-y to KD 5.1 billion in October 2012.
In the first ten months of 2012, overall loan growth expanded by 4.5 percent.
Should the current loan growth momentum sustains for the rest of the year, 2012 full year loan growth is estimated at 5.4 percent (2011: 1.63 percent).
The gradual improvement of the operating environment in Kuwait and timely implementation of the Kuwait Development Plan are crucial to the recovery of banking system loan growth in 2012. Domestic banks should benefit in the medium to longer term.
On funding, total deposits of the banking sector grew by 6.5 percent in October 2012, translating into an annual growth rate of 7.8 percent for 2012.
As such, excess liquidity of the banking sector might reach KD 6.1 billion as at end-2012, higher than the KD 5.1 billion registered as at end-2011 on back of faster deposit vs. loan growth.
On asset quality, Kuwait's non-performing loans (NPLs) are expected to have peaked in 2012 with gradual improvement in asset quality moving forward.
However, impairment charges are expected to remain high for some banks in 2012 due to the need to improve low loan loss reserve coverage, the report concluded.