Credit Growth 6 pct in Sept.2015

Credit recorded a big gain in September, with growth accelerating to 6 percent year-on-year (y/y), as total credit rose by a net KD 693 million during the month, the strongest gain since May 2007, the National Bank of Kuwait said.

Gains were across the board but strongest in personal facilities, The NBK added in its latest monetary report issued Tuesday. Household debt saw another strong month and seems to be gaining momentum on the back of the reintroduction of loan rebooking.

Volatile loans for the purchase of securities posted a huge gain.

Following a couple of months of declines, deposits were up notably in September, stated the report. Meanwhile, interbank and deposit rates edged up a bit. Household borrowing (personal facilities excluding loans for the purchase of securities) saw a strong gain in September of KD 167 million, with growth accelerating to 12.9 percent y/y.

Installment loans, used primarily to finance housing, continued to be the only source of growth; consumer loans, used to finance cars and other consumer durables, saw another small decline and was off 0.9 percent y/y. According to the report, credit to nonbank financial companies posted a surprising and large gain of KD 62 million.

However, nonbank financial companies, as a trend, continue to deleverage, with the sector's credit declining by 7.4 percent y/y. All remaining credit gained an impressive KD 463 million, with growth now at 3.7 percent y/y.

Credit for the purchase of securities was up a significant KD 291 million. This category of lending tends to be volatile. In the meantime, almost all other categories posted good gains. Lending to the real estate sector during the month was particularly strong, adding KD 81 million, though growth in credit to the sector remained relatively weak at 1.1 percent y/y. Construction, trade and industry, added a combined 67 million. Private deposits were up a notable KD 335 million following two months of declines.

This recent volatility is most likely seasonal as the summer holiday season came to an end. The increase in September was exclusively in dinar sight and time deposit. Foreign currency deposits continued to decline, down KD 202 million. Money supply (M2) growth rose to 5.3 percent y/y.

Narrower money supply (M1) remained down 0.9 percent y/y despite the hefty September increase. This is due to a basis effect from last year's introduction of the new currency, which temporarily increased the amount of currency in circulation, the NBK said. Customer interest rates on dinar time deposits and interbank rates edged up in September.

Average rates on the 1-month and 6-month time deposits were up 2 and 4 basis point to 0.62 percent and 1.01 percent respectively, while the 3-month rate added one basis point to settle at 0.79 percent. KD interbank rates rose to 1.03 percent, having added 3 basis points in September and 24 basis points year-to-date. Rates are starting to pick up in anticipation of a Fed rate hike that's now very likely to take place before year end, the report concluded.