The banking industry in Saudi Arabia recorded 1.1% increase in deposits during May 2010 owing to high capitalization and strong liquidity.
According to the Saudi Arabian Monetary Agency (SAMA), bank deposits in the country soared 1.1% to SR 921.71 Billion in May 2010, but contracted in the previous two months, as reported by arab news
Low foreign currency holdings of the government organizations and businesses played a major role in the overall decline of deposits during the first part of 2010. However, the trend got reverse in May 2010 as the deposits in foreign currency rose 2.2% against April 2010.
Time and saving deposits rose marginally 0.1% to SR 307.982 Billion in May against April, whereas demand deposits grew 1.5% to SR 464.99 Billion. Demand deposits have also increased 7.3% year to date, but time and saving deposits have tumbled 4.8% to SR 307.98 Billion.
Moreover, the loan to deposits ratio fell to a low of 77% in December 2009, but improved marginally to 78.6% in May 2010. In the month of April, the ratio climbed to 79%.
Saudi Arabia represents one the strongest banking sectors in the Middle East owing to several advantages like high profitability, high capitalization, strong liquidity and strict supervision by monetary agency.
The uptrend in bank deposits could be attributed to different factors such as the market expansion (in terms of bank credit to the private sector), large net domestic government expenditure and sustainable inflow of direct foreign investments.
As per the research report “Saudi Arabia Banking Sector Analysis
” by RNCOS
, bank deposits are expected to grow at a staggering rate in coming years on account of rising popularity of demand deposit products and growth in time & saving deposits. Hence, the deposits are anticipated to grow at a CAGR of around 20% between 2010 and 2013.
According to a Banking Analyst at RNCOS
, “Banks in Saudi Arabia posted solid financial results in the past decade and counted among the most profitable banks in the region. The banking sector outstanding performance in terms of deposits exhibits its strong position. Demand deposits are expected to account for a major share in future, while time & saving deposits might witness decline in share because of slow and gradual recovery in demand for time & saving deposits.”
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