Saudi bank lending to rise in 2018: SABB MD

Bank lending to the private sector in Saudi Arabia will steadily return to growth this year, boosted by higher oil prices and higher government spending, Reuters reported, citing David Dew, managing director of Saudi British Bank (SABB).

Lending to the Saudi private sector has slumped over the past two years as the decline in oil prices impacted economic growth and cut demand for credit facilities.

Loan growth dipped 1 percent in 2017 – for the first time in at least 11 years – following modest growth of 2 percent in 2016, as companies shelved investment plans amid concerns over government austerity policies.

“I believe we are going to be on a gentle upward trajectory in 2018 that might reverse what happened in 2017,” Dew said, adding that he expects loan growth to be in the low single digits.

Saudi Arabia plans to increase spending to SAR 978 billion ($261 billion) in 2018, compared to SAR 890 billion in the 2017 budget plan and SAR 926 billion of actual spending last year.

SABB, the Kingdom's sixth largest bank by assets and 40 percent-owned by HSBC Holdings, sees opportunities in the housing and financial sectors, in the country's privatization drive, and in projects led by the Public Investment Fund (PIF), Dew said.

Commenting on the planned merger with Alawwal Bank, Dew said discussions are still ongoing, but gave no further details over the expected outcome.

Alawwal and SABB said in April last year that they had agreed to start merger talks, but progress has been slow.

The merged entity will be Saudi Arabia’s third-largest bank with assets of $77.6 billion, behind National Commercial Bank and Al Rajhi Bank.