Posted on November 23, 2014

Review and Outlook

The loan book decreased by 2.0% MoM (up 7.9% YTD) while deposits declined by 0.3% MoM (+8.0% YTD) in the month of October 2014. Public sector (down 5.7% MoM in October) was the primary driver of the overall decline in the loan book (public sector loans were up 3.9% MoM in September). Moreover, deposits also fell slightly by 0.3% MoM (deposits increased by 1.9% MoM in September). Thus, the LDR declined to 105% vs. 107% in September. Going forward, we expect increased activity in the sector. We continue to expect improvement in the public sector, in addition to large corporate loan growth followed by the SMEs and consumer lending to be the primary drivers of the overall loan book in 2014 and 2015. Our view is based on the expected uptick in project mobilizations in the coming months.

QNBFS monthly banking sector 2 [].jpgThe public sector deposits decreased by 3.3% MoM (+6.3% YTD 2014) for the month of October 2014. Delving into segment details, the government institutions’ segment (represents ~57% of public sector deposits) improved by 0.5% MoM (+11.4% YTD 2014). Moreover, the semi-government institutions’ segment posted a growth of 10.1% MoM (up 0.1% YTD 2014). However, the government segment decreased by 15.4% MoM (+0.3% YTD). On the other hand, private sector deposits increased by 1.0% MoM (+9.1% YTD 2014). On the private sector front, the companies & institutions’ segment increased by 1.0% MoM (+8.1% YTD 2014) while the consumer segment posted a growth of 1.1% MoM (up 10.1% YTD).

QNBFS monthly banking sector 3 [].jpgThe overall loan book declined by 2.0% MoM vs. a 4.0% growth  MoM in September 2014. Total domestic public sector loans decreased by 5.7% MoM (also down 5.7% YTD). The government segment’s loan book went down by 16.8% MoM (up 1.6% YTD 2014). Moreover, the government institutions’ segment (represents ~59% of public sector loans) declined by 1.5% MoM and is down 11.8% YTD. Furthermore, the semi-government institutions’ segment declined by 0.5% MoM (+11.4% YTD). Hence, all the three public sector segments pulled the overall loan book down for the month of October 2014. Private sector loans gained by 0.3% MoM and are up 13.8% YTD. Consumption & Others (contributes ~30% to private sector loans) increased by 0.9% MoM (+16.9% YTD). Furthermore, the Real Estate segment (contributes ~27% to private sector loans) grew by 2.1% MoM (+5.7% YTD). However, the Services segment posted a decline of 7.2% MoM but is still up 11.8% in the first ten months of 2014. Overall, the segments representing General Trade (+27.1% YTD) and Contractors (+23.0% YTD) are the best performing segments in the private sector YTD. On the other hand, the Industry segment is flat YTD.