Saudi bank rates dip in sign cash squeeze easing
dubai — Saudi Arabian bank-lending costs declined in a sign the kingdom’s cash squeeze may be easing after the government pledged to inject $5.3 billion into its financial institutions.
The three-month Saudi Interbank Offered Rate, the price banks pay each other for loans, fell for a second day, the first back-to-back decline since June. It had been unchanged since last week, when the kingdom sold its first-ever international bond.
Saudi Arabia, the world’s biggest oil exporter, is facing its toughest economic challenge in years as a halving of oil prices pushed it to cut subsidies and spending as well as boost borrowing to bridge the widest budget deficit since 1992. The cash squeeze among the nation’s lenders, which has driven borrowing rates to near their highest since 2009, prompted the central bank to announce last month an injection of about SR20 billion ($5.3 billion) for banks via deposits from state-run companies.
“The market is stable on the back of last month’s liquidity injection,” Numair Attiyah, the head of treasury at Emirates NBD’s Saudi Arabia unit and chairman of a committee of bank treasurers, said by phone from Riyadh on Wednesday.
Saibor, as the rate is known, fell 0.2 basis points to 2.382 per cent. The bank loans-to-deposit ratio, a key measure of liquidity, climbed beyond the regulatory limit of 90 per cent in August.
“Most banks aim to meet the loans-to-deposit ratio target at the end of the month,” Attiyah said. There may be a small move in Saibor “next Sunday or Monday as they seek to maintain that ratio,” he said.
Saudi Arabia sold $17.5 billion of dollar bonds on October 19, an unprecedented amount for a developing nation, after raising SR94 billion from the sale of government bonds to local banks and institutions in the first eight months of the year. — Bloomberg