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EFG: Kuwait's system loan growth recovering slowly

EFG: Kuwait's system loan growth recovering slowly
Kuwait's banking sector Slight pickup in loan growth in October; the increase year-to-date is still relatively modest at 6% , said a revent research compiled by EFG-Hermes.



Total loan growth picked up to 1.4% M-o-M in September, following weak seasonal growth in July and August. On a Y-o-Y basis, total loans increased by 7.7% Y-o-Y in October, up from 7.2% Y-o-Y in September.



EFG noted it has seen a slight recovery in corporate loan growth throughout 2014, however the recovery is modest at this point, with corporate loans having increased by 4% year-to-date and by 6.7% Y-o-Y, compared to an average growth rate of 5% during 2013. Retail loans continue to grow faster than corporate loans, and increased by 8% year-to-date and by 11.4% Y-o-Y.



Hermes suggested that further recovery in loan growth geared to progress on investment programme noting that the increase in project awards over the past year and a half should drive subcontractors lending demand from 2015, however the optimism with regards to the outlook on loan growth is mixed within the Kuwait banks we cover, partly driven we believe by the poor track record of the Kuwait government with regards to implementation of large infrastructure projects.



NBK is the best positioned to capitalise on project-led loan growth, in EFG'S view, due to its large market share with large contractors and multinationals.



EFG expects NBK’s loan growth to pick up to 12-13% in 2015, from 10% in 2014.



Kuwaiti banks deposits slowed to 4.5% Y-o-Y in September, down from 6.2% Y-o-Y in August, due to slower growth in private sector deposits, which account for 86% of total deposits at the system level.



However, the loan-to-deposit ratio has increased to 82% in September from c80% earlier in the year. Liquidity dynamics in the system are still at very comfortable levels.