Strong credit growth reflects GCC’S economic rebound
Credit growth in the GCC remained strong during the third quarter of 2022 despite higher interest rates, underscoring strong economic activity and business confidence in the region.
Manufacturing activity data from Bloomberg showed PMI figures well above 50 for the UAE and Saudi Arabia, whereas data for Qatar showed a smaller growth during September-2022 at 50.7 points.
According to Kamco Invest, the marginal growth in credit offtake in Qatar mainly reflected completion of the Fifa World Cup-related projects, and new project growth is expected to resume in 2023. An S&P report also showed that the event is also expected to boost the economy of the broader GCC region as a result of higher tourism and logistics related businesses.
In 2024, S&P expects lending to accelerate slightly from 2023 as investment resumes. For Kuwait, S&P expects to see accelerated lending growth from stronger economic growth and investment from the government. “For the UAE, lending growth has sped up thanks to improving sentiment. In 2023-24, we expect to see slower overall lending growth in the region from the expected slowdown in economic growth.”
The Kamco report added that Dubai is expected to see higher demand for real estate in the current quarter as a result of the World Cup in Qatar. Data from GCC central banks showed strong lending activity across the region, barring a marginal decline in Qatar.
In Kuwait, outstanding credit facilities increased by 2.2 per cent during Q3-2022 after seeing healthy lending growth in almost all sectors that more than offset a decline in credit to trade and industry during the quarter. Data from the Saudi central bank also showed a 3.3 per cent growth in lending during the quarter while credit facilities reported by Bahraini and Omani central banks increased by 1.8 per cent and 0.9 per cent, respectively.
The credit sentiment survey from the UAE central bank showed continuation of strong credit appetite, reflected in solid demand for both business and consumer loans, coupled with banks and finance companies' increased willingness to provide credit. The report highlighted increasing customers' sales and fixed asset investment while positive outlook for the economy and the housing market is expected to support demand for credit.
Lending activity remained robust during Q3-2022 resulting in record high loan books at the end of the quarter. Aggregate gross loans reached $1.93 trillion, up 1.2 per cent q-o-q and 6.5 per cent y-o-y, mainly led by strong growth across the GCC, barring a marginal decline for Qatari banks. Aggregate net loans at the end of the quarter reached $1.73 trillion registering a growth of 1.1 per cent or $ 19.4 billion.
The GCC banking sector witnessed the initial positive effects of higher interest rates implemented by GCC central banks following the rate hikes in the US. Net interest income for listed banks in the GCC reached a record quarterly level at $18.6 billion during Q3-2022 as compared to $17.2 billion during Q2-2022.