Kuwait’s resident credit growth improved to KD96 million ($317 million) in February, remaining relatively modest, with growth rising slightly to 6.4 per cent year-on-year (y/y), a report said.

Growth in household borrowing was somewhat weaker than usual, while business credit continued to appear weak despite steady growth, added the latest Economic Update from the National Bank of Kuwait (NBK).

Meanwhile, the money supply expanded as private deposits saw a large boost. Deposit rates stayed stable, though interbank rates moved back up during the month.

Household debt was weaker than recent months, with growth easing slightly to 12.3 per cent y/y. The monthly gain of KD29 million was well below the KD90 million average seen over the previous 12 months. Installment loans, which have been the main source of growth in household debt, saw a smaller gain than usual; installment loan growth slowed slightly as a result to 14.9 per cent y/y.

Credit to non-bank financials was flat in February, confirming a clear slowdown in the pace of the sector’s deleveraging. The decline in the sector’s debt over the last year slowed to 8.1 per cent y/y. Non-bank financials, which have been in deleveraging mode since the financial crisis, have seen their share of total bank loans shrink from 12.6 per cent in 2008 to 4.5 per cent today.

All remaining credit rose by KD68 million, with growth accelerating to 4.9 per cent y/y. Most of the gain came from lending for the purchase of securities (+KD 18 million), which had seen a large decline in January, trade (+KD 15 million) and “other sectors” (KD 21 million).

Meanwhile, there was a notable decline in loans to the real estate sector (-KD 15 million). Business credit excluding lending for securities saw growth steady at 5.8 per cent y/y, but momentum remained weaker than in the first three quarters of 2014, according to the report.

February saw a large increase in private deposits, which pushed money supply (M2) growth up to 3.4 per cent y/y. Private deposits were up by KD 506 million, with KD sight deposits alone up KD206 million. The rest of the gain was in KD time deposits, which rose by KD 102 million, and foreign currency deposits, up by KD164 million. M1 growth accelerated to 4.1 per cent y/y.

Average customer deposit rates on dinar time deposits were stable in February, while interbank rates bounced back. The average rates on the 3-month, 6-month and 12-month time deposits increased by 1 basis point (bp) to 0.77 per cent, 0.96 per cent and 1.19 per cent, respectively.

The 1-month time deposit rate remained unchanged at 0.58 per cent. KD interbank rates picked up in February after falling for five consecutive months, reaching 0.84 per cent, up 5 bps from the previous month. – TradeArabia News Service