QNB Financial Services monthly banking sector update February 2016

Review and Outlook

The loan book continued its growth trajectory in January 2016, increasing by 1.3% MoM after increasing by 1.2% MoM in December 2015 (gaining by 2.4% MoM in November 2015). On the other hand, deposits receded by 1.4% MoM (+2.6 MoM in December 2015). Public sector drove total credit growth with a gain of 3.6% MoM (+1.1% MoM in December 2015). Conversely, public sector deposits contracted by 6.7% MoM (down 5.2% MoM in December 2015). Thus, the LDR was elevated to 119% vs. 116% at the end of December 2015 (117% in November 2015).

The public sector deposits dropped by 6.7% MoM for the month of January 2016 after a decline of 5.2% MoM in December 2015. Delving into segment details, the government institutions’ segment (represents ~54% of public sector deposits) declined by 10.5% MoM (down 2.7% MoM in December 2015).  Moreover, the semi-government institutions’ segment contracted by 9.2% MoM vs. flattish performance MoM in December 2015 (decreasing by 3.7% in November 2015). On the other hand, the government segment posted positive performance, climbing up by 2.6% MoM after dropping by 13.0% MoM in December 2015. On the Private sector front, the companies & institutions’ segment exhibited flat performance MoM (+2.1% MoM in December 2015). On the other hand, the consumer segment increased by 2.0% MoM (+0.8% MoM in December). Non-resident deposits ticked up by 2.0% MoM (+34.9% MoM in December). 

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The overall loan book inched up 1.3% MoM in January 2016 led by the public sector. Total domestic public sector loans increased by 3.6% MoM (+1.1% in December 2015). The government segment’s loan book continued its positive trend, expanding by 9.4% MoM and growing by 6.3% MoM in December (+10.5% Mom in November 2015). Moreover, the semi-government institutions’ segment expanded by 8.4% MoM during January vs. a MoM drop of 20% in December 2015. On the other hand, the government institutions’ segment (represents ~57% of public sector loans) displayed flat performance in January 2016. Hence, the government sub-segment pulled the overall loan book up for the month of January 2016.

Private sector loans exhibited flat performance MoM in January 2016 vs. an uptick of 1.0% MoM in December. The Consumption & Others (contributes ~30% to private sector loans) prevented an overall drop in private sector loans. This segment grew by 3.8% MoM in January 2016. On the other hand, General Trade and Industry contributed negatively to private sector loans, declining by 5.2% and 13.9% MoM, respectively. The Real Estate segment (represents ~29% of private sector loans) displayed flat performance MoM in January.