Deposits decline at Saudi Arabia's top 12 banks

Deposits at Saudi Arabian banks have fallen, as weak loan demand makes a liquidity crunch unlikely, Reuters reported on Sunday.

Eight of the top 12 banks in the Kingdom reported lower deposits in their second-quarter earnings, which were released over the past couple of weeks.

Deposits at Alawaal Bank dropped 19 percent from a year ago to SAR 66.2 billion ($18 billion), while deposits at Bank Aljazira fell 3 percent to SAR 47.8 billion. However, National Commercial Bank reported a 1 percent rise in deposits to SAR 317.7 billion, while Islamic bank Alinma saw a 4 percent increase.

In 2016, the government had placed deposits in the banking system to counter a shortage of funds due to low oil prices, which was pushing funding costs up sharply. 

Meanwhile, deposits by government entities in all commercial banks fell 11.7 percent from a year earlier to SAR 313.6 billion in June, according to Saudi Arabian Monetary Authority (SAMA) data released on Sunday.

Deposits by the private sector rose sharply, countering the decline in total deposits in commercial banks to mere1.2 percent decline to SAR 1.61 trillion.

Deposits by the private sector rose sharply, limiting the decline in total deposits in commercial banks to 1.2 percent to SAR 1.61 trillion.

The loan-to-deposit ratio in commercial banks fell to 78.1 percent in June, way below the regulatory maximum of 90 percent, suggesting "banks have plenty of room to expand lending if demand for loans revives."