(MENAFN - Arab Times) A report issued by KFH-Research noted that the growth rate of loans in Kuwait increased by 5.2 percent y-o-y in November 2012, compared to 4.9 percent in October. Total loans within the month reached KD 27 billion.
The report mentioned that personal loans was the sector that witnessed the most growth, followed by real estate loans sector. The industrial sector loans were the least in November where liquidity surplus reached KD 5.98 billion.
The report expected growth rates for 2012 to reach annual loans growth rate 5.6 percent, and annual growth rate for deposits 7.7 percent, while liquidity surplus in banking sector will reach KD 6.1 billion, which is higher than KD 5.1 billion reached in 2011, because of the significant increase in growth of deposits compared to loans.
Overall loan growth was higher at 5.2 percent y-o-y in November 2012 vs 4.9 percent y-o-y in October 2012. November 2012's loan growth was the third highest in 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 the highest at KD 6.9 billion during the month.
Stronger loan growth in November 2012 was supported by higher loan growth in the personal and real estate segments at 12.2 percent y-o-y and 4.8 percent y-o-y respectively (October 2012: 11.6 percent y-o-y and 4.0 percent y-o-y respectively). Construction sector loan growth continued to be positive for a second month at 2.8 percent y-o-y in November 2012 vs 1.6 percent y-o-y in October 2012. Meanwhile, loans to the trade sector moderated to 9.1 percent y-o-y in November 2012 (October 2012: 11.2 percent y-o-y). Loans to non-bank financial sectors continued to be negative at 18.4 percent y-o-y in November 2012 vs -17.1 percent y-o-y in October 2012. Industry sector loan growth contracted by a marginal 0.1 percent y-o-y in November 2012 vs 0.9 percent y-o-y in October 2012.
On the funding front, overall deposit growth was unchanged at 9.2 percent y-o-y to KD 32.9 billion in November 2012. Private sector deposits, which accounted for 84.4 percent of total banking sector deposits, was almost flat at 4.7 percent y-o-y to KWD27.8 billion during the month (October 2012: 4.8 percent y-o-y). Meanwhile, public sector deposits grew by 42.6 percent y-o-y to KD 5.1 billion in October 2012.
As the rise in total loans exceeded total deposits, excess liquidity of the banking system eased slightly to KD 5.98 billion in November 2012 from KD 6.01 billion in October 2012.
2012 Growth Estimates and 2013 Outlook
In the first eleven months of 2012, overall loan growth expanded by 5.1 percent, translating into annual loan growth rate of 5.6 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 2013. Domestic banks should benefit in the medium to longer term.
On funding, total deposits of the banking sector grew by 7.0 percent in 11M12, translating into an annual growth rate of 7.7 percent for 2012. As such, excess liquidity of the banking sector is estimated at 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/ 2013 due to the need to improve low loan loss reserve coverage.