Private-sector credit growth in Saudi Arabia has risen by 9 per cent in September, compared with the same period in 2010, down slightly from 9.4 per cent the previous month.

The slight decline in credit growth, revealed in the latest figures to be published by the Saudi Arabian Monetary Agency (Sama), is not expected to impact expectations that for the full year private-sector credit growth will be about 10 per cent.

It is a significant improvement on 2009, when private-sector credit growth shrank slightly. It is also a sign that government stimulus measures, and the prudent regulations by Sama, are working to get the banks in Saudi Arabia lending again. The rising trend in credit to the private sector will help stimulate economic growth in the kingdom, which is forecast by the Washington-based International Monetary Fund (IMF) to growth by 6.5 per cent this year, followed by 3.6 per cent in 2012.

Net monthly new credit issuance for September was significantly below the monthly average for the year to date, with only SR4.3bn ($1.1bn) new issuance, compared with the 2011 monthly average of SR7.1bn.

Deposit growth also continues to outpace loan growth. Deposits rose by 10.4 per cent in September, falling slightly from 13 per cent in August, but this was still above overall loan growth, which rose by 8.9 per cent in September, down from 9.3 per cent in August.

The loan to deposit ratio of the overall Saudi banking sector is now at 79.7 per cent. The rate has fallen since August, when it had been 82.8 per cent, largely because of the rapid growth in deposits during September.

The challenge for banks in Saudi Arabia continues to be where to place the liquidity available. One banker in Riyadh says, “All the banks in Saudi Arabia are still in asset building mode, and that doesn’t look like it will change any time soon.”

The buildup of foreign assets held by Sama has accelerated in September, with SR63bn of new foreign assets added to August’s record high of SR1.94 trillion. In a report published on 31 October, the UK’s Barclays Capital said the increasing allocation of deposits abroad “could translate into more investment in foreign securities in the coming months”.

The holdings of bank reserves with Sama also rose in September, with excess reserves at the central bank rising 15 per cent month on month.

Point-of-sale transactions fell in September in terms of both value and volume. It is the second consecutive month of decline in the value of point-of-sale transactions, but the first time the number of transactions has dropped since February.