Riyadh – Mubasher: Saudi banks’ domestic liquid assets surged 11% to SAR 457 billion by the end of 2017, in spite of subdued deposit growth and challenging business conditions, a credit positive, Moody’s said in a report on Wednesday.

Over the course of the last year, deposits in Saudi banks inched up 0.1% due to 43% rise in banks’ holdings of domestic government instruments, as well as a 1.0% decline in banks’ loans, the report added.

"Since the oil price shock, Saudi banks’ deposit growth has been sluggish, averaging 1% since 2015 versus a 12% average during 2011-14," the report said.

Moody's ascribed the sluggish growth in banks' deposits to "a decline in government balances amid a fiscal deficit stemming from lower oil prices and a contraction in deposits from the private sector because of government spending cuts, payment delays and weakening economic growth."

The rating agency forecast that the Kingdom’s economy will improve in the coming period on the back of high spending in the nation’s 2018 budget.

The government’s plan to spur the Saudi private sector is also expected to boost the lenders, Moody’s said.

Banks’ reserves to total value of deposits increased 14.8% by the end of 2017, registering the highest level since 2012.