First quarter of 2007
Saudi Arabian Monetary Agency Research and Statistics Department
First: Monetary Developments
Broad money supply (M3) rose by 2.6 percent (Rls 17.3 billion) to Rls 677.8 billion during the first quarter of 2007 compared to an increase of 6.0 percent (Rls 37.1 billion) in the preceding quarter. It registered an annual growth rate of 15.7 percent (Rls 92.0 billion).
A breakdown of the components of money supply (M3) during the first quarter of 2007 indicates that (M1) increased by 3.2 percent (Rls 9.9 billion) to Rls 322.7 billion or 47.6 percent of total money supply (M3), compared to an increase of 6.5 percent (Rls 19.1 billion) in the previous quarter. At the end of the first quarter of 2007, narrow money supply (M1) recorded an annual rise of 11.1 percent (Rls 32.3 billion). Money supply (M2) went up by 4.2 percent (Rls 22.9 billion) to Rls 561.7 billion (or 82.9 percent of total money supply (M3) during the first quarter of 2007, compared to a rise of 6.5 percent (Rls 33.1 billion) in the preceding quarter. At the end of the first quarter of 2007, money supply (M2) registered an annual increase of 16.9 percent (Rls 81.2 billion).
Second: Monetary Policy
During the first quarter of 2007, SAMA continued to pursue a monetary policy aimed at achieving price stability, supporting domestic economic activity, and coping with global economic developments. SAMA has raised the Official Repo Rate and Reverse Repo Rate by 30 basis points from 5.20 percent and 4.70 percent to 5.50 percent and 5.0 percent respectively, after the appearance of inflationary signs in the prices of some goods. The daily average value of Repo and Reverse Repo transactions stood at Rls 834 million and Rls 25,962 million respectively in the first quarter of 2007.
Inter-bank interest rates on deposits witnessed a slight increase in the first quarter of 2007. The three-month inter-bank interest rate (SIBOR) rose from 4.95 percent at the end of the 4th quarter of 2006 to 5.00 percent at the end of the first quarter of 2007. The differential between the riyal and the dollar deposits for a three-month period decreased to 29 basis points in favor of the dollar at the end of the first quarter of 2007 against 41 basis points in favor of the dollar at the end of the 4th quarter of 2006. The Saudi riyal maintained its exchange rate stability in the spot market around the official parity rate of SR 3.75 per dollar.
Third: Banking Developments
3-1 Bank Deposits
Total bank deposits registered an increase of 3.6 percent (Rls 21.5 billion) to Rls 612.8 billion during the first quarter of 2007, compared to a rise of 5.3 percent (Rls 29.9 billion) during the preceding quarter, achieving an annual rise of 16.8 percent (Rls 87.9 billion). At the end of the first quarter of 2007, the ratio of total bank deposits to total broad money supply (M3) stood at 90.4 percent compared to 89.6 percent at the end of the same period of the previous year.
A review of the developments of the components of deposits by type during the first quarter of 2007 indicates that demand deposits rose by 5.8 percent (Rls 14.2 billion) to Rls 257.6 billion compared to an increase of 5.1 percent (Rls 11.8 billion) in the preceding quarter. Time and savings deposits went up by 5.7 percent (Rls 13.0 billion) to Rls 239.0 billion compared to a rise of 6.6 percent (Rls 14.0 billion) during the preceding quarter. Other quasi-monetary deposits declined by 4.6 percent (Rls 5.6 billion) to Rls 116.2 billion against an increase of 3.4 percent (Rls 4.0 billion) during the preceding quarter. Time and savings deposits, demand deposits and other quasi-monetary deposits
recorded an annual rise of 25.7 percent (Rls 48.8 billion), 12.3 percent (Rls 28.3 billion), and 10.2 percent (Rls 10.8 billion) respectively.
3-2 Banks' Credit and Investment Activity
Total claims of commercial banks on the private and government sectors (bank credit and investments) rose by 1.1 percent (Rls 7.2 billion) to Rls 642.3 billion during the first quarter of 2007 compared to a rise of 2.1 percent (Rls 12.8 billion) in the preceding quarter. At the end of the first quarter of 2007, they recorded an annual rise of 5.3 percent (Rls 32.3 billion) to constitute 104.8 percent of total bank deposits compared to 116.2 percent at the end of the same quarter of the preceding year.
Total claims of commercial banks on the government and quasi-government sector rose by 0.7 percent (Rls 1.0 billion) to Rls 159.3 billion during the first quarter of 2007 compared with an increase of 3.3 percent (Rls 5.0 billion) in the previous quarter. At the end of the first quarter of 2007, they registered an annual decline of 1.6 percent (Rls 2.6 billion). Their ratio to total bank deposits stood at 26.0 percent at the end of the first quarter of 2007, compared to 30.8 percent at the end of the same period of the preceding year.
Total claims of commercial banks on the private sector rose during the first quarter of 2007 by 1.3 percent (Rls 6.2 billion) to Rls 482.3 billion compared to an increase of 1.8 percent (Rls 8.2 billion) during the preceding quarter. They registered an annual rise of 7.8 percent (Rls 34.8 billion) at the end of the first quarter of 2007. The ratio of commercial banks' claims on the private sector to total bank deposits was 78.7 percent at the end of the first quarter of 2007 compared to 85.3 percent at the end of the same period of the previous year.
An analysis of bank credit by maturity (private and government sectors) shows that medium-term credit rose by 22.9 percent (Rls 14.8 billion) to Rls 79.4 billion during
the first quarter of 2007 compared to a rise of 3.5 percent (Rls 2.2 billion) during the preceding quarter. Long-term credit went down by 5.0 percent (Rls 7.8 billion) to Rls 148.4 billion compared to an increase of 1.8 percent (Rls 2.8 billion) during the preceding quarter. Short-term credit also decreased by 0.4 percent (Rls 1.0 billion) to Rls 275.2 billion compared to a rise of 0.7 percent (Rls 2.0 billion) during the preceding quarter.
Total bank credit by economic activity rose by 1.2 percent (Rls 5.9 billion) to Rls 503.0 billion during the first quarter of 2007 compared to an increase of 1.4 percent (Rls 7.0 billion) during the preceding quarter, recording an annual rise of 7.7 percent (Rls 35.9 billion) at the end of the first quarter of 2007, compared to the end of the same period of the preceding year. A breakdown of bank credit by different economic activities during the first quarter of 2007 indicates that bank credit extended to the transport and communications sector went up by 33.5 percent (Rls 2.3 billion), mineral and mining by 27.0 percent (Rls 0.5 billion), agriculture and fishing by 8.5 percent (Rls 0.6 billion), water, electricity and other services by 4.4 percent (Rls 0.2 billion), commerce by 3.2 percent (Rls 3.5 billion), miscellaneous services by 1.7 percent (Rls 3.0 billion), manufacturing and processing by 1.3 percent (Rls 0.5 billion), and services sector by 0.2 percent (Rls 0.04 billion). In contrast, bank credit extended to the financing sector went down by 5.7 percent (Rls 3.5 billion), building and construction by 2.8 percent (Rls 1.1 billion), and government and quasi-government sector by 0.3 percent (Rls 0.1 billion).
3-3 Commercial Banks' Foreign Assets and Liabilities
Total foreign assets of commercial banks during the first quarter of 2007 increased by 9.8 percent (Rls 12.7 billion) to Rls 142.5 billion compared with a decrease of 1.0 percent (Rls 1.3 billion) in the preceding quarter, recording an annual growth rate of 48.3 percent (Rls 46.4 billion), and constituting 15.9 percent of total commercial banks' assets compared with 12.1 percent at the end of the same period of the preceding year.
Banks' total foreign liabilities rose by 8.2 percent (Rls 4.9 billion) to Rls 64.0 billion during the first quarter of 2007 compared to a rise of 7.9 percent (Rls 4.3 billion) in the preceding quarter. They recorded an annual growth rate of 3.2 percent (Rls 2.0 billion), constituting 7.1 percent of total liabilities compared to 7.8 percent at the end of the same period of the preceding year. Net foreign assets amounted to Rls 78.5 billion, increasing by 11.2 percent (Rls 7.9 billion) at the end of the first quarter of 2007 compared with a decline of 7.4 percent (Rls 5.6 billion) during the preceding quarter.
Hence, net foreign assets registered a rise of 130.4 percent (Rls 44.4 billion) in their annual growth rate.
3-4 Commercial Banks' Capital and Reserves, Profits and Branches
The capital and reserves of commercial banks went up by 36.5 percent (Rls 29.2 billion) during the first quarter of 2007. The ratio of commercial banks' capital and reserves to total bank deposits at the end of the first quarter of 2007 stood at 17.8 percent compared to 15.8 percent in the preceding year. Their annual growth rate rose by 31.6 percent (Rls 26.2 billion). Commercial banks' profits rose to Rls 7.8 billion during the first quarter of 2007 compared to Rls 7.3 billion in the preceding quarter, recording a rise of 7.9 percent (Rls 0.6 billion) and an annual growth rate of 7.6 percent (Rls 2.3 billion).
The number of commercial banks' branches operating in the Kingdom stood at 1308 at the end of the first quarter of 2007.
Fourth: Banking Technology:
The Saudi Riyal Inter-bank Express System (SARIE) has revolutionized electronic banking business and commercial transactions in the Kingdom. It constitutes the infrastructure on which advanced financial payments and settlements depend. Since its inauguration on 18/1/1418H (14/5/1997G.), SARIE has been undergoing ongoing development both in the technical technology of the System and in banking business.
SARIE statistics for the first quarter of 2007 indicate that the value of transactions carried out through SARIE totaled Rls 5,733.3 billion via 5,262,697 transactions. The value of single payments transactions totaled Rls 5,597.4 billion, whereas the total value of gross payments stood at Rls 133.4 billion. Customers' payments amounted to Rls 373.6 billion, declining by 4.0 percent from 389.1 billion in the first quarter of 2006.
Total value of Inter-bank payments stood at Rls 5,357.2 billion, increasing by 98.9 percent compared to the first quarter of 2006.
The Saudi Payments Network (SPAN) is still recording good growth in terms of transactions made through it. Total operations executed via SPAN in the first quarter of 2007 amounted to 62.6 million with a total value of Rls 32.5 billion. Total transactions of POS terminals executed through SPAN stood at 22.9 million with a total value of Rls 8.5 billion. The number of ATMs amounted to 6,519 and the number of cards issued by domestic banks exceeded 10.4 million. POS terminals continued their growth, increasing to more than 54,806 thousand at the end of the first quarter of 2007.
The number of bank checks (outgoing and incoming) cleared at clearing houses during the first quarter of 2007 totaled 1,592.1 thousand with a total value of Rls 127.1 billion during the same period. The number of household and business checks totaled 1,376.6 thousand and their total value amounted to Rls 95.6 billion during the period. The number of banks' checks (certified) totaled 215.5 thousand with a total value of Rls 31.5 billion.
Fifth: Domestic Share Market Developments
The general share price index declined during the first quarter of 2007 by 3.4 percent to 7,666.11 compared to a fall of 30.5 percent in the preceding quarter, recording an annual decrease of 55.1 percent. The number of shares traded in the first quarter of 2007 increased by 40.4 percent to 18.8 billion compared to a decrease of 29.4 percent in the preceding quarter. The annual growth rate of shares traded increased by 408.2 percent
(taking into consideration the splitting of shares). Total value of shares traded went up also by 19.0 percent to Rls 854.5 billion compared to a decline of 48.9 percent in the preceding quarter, recording a decline in the annual growth rate by 21.0 percent.
At the end of the first quarter of 2007, the market capitalization of issued shares went down by 2.6 percent to Rls 1,194.0 billion compared to a decline of 28.6 percent at the end of the preceding quarter. The total number of executed transactions during the quarter registered an increase of 10.7 percent to 21,444.3 thousand compared to a decline of 30.3 percent during the preceding quarter, with its annual growth rate increasing by 55.0 percent.
Sixth: Investment Funds
Total assets of investment funds managed by commercial banks recorded a decline of 3.5 percent (Rls 3.0 billion) to Rls 81.2 billion in the first quarter of 2007 compared to a decrease of 16.4 percent (Rls 16.5 billion) in the preceding quarter, registering a negative annual growth rate of 41.1 percent (Rls 56.8 billion).
A breakdown of the funds' total assets indicates a decline in domestic assets by 4.0 percent (Rls 2.5 billion) to Rls 59.2 billion in the first quarter of 2007, compared to a decline of 21.8 percent (Rls 17.2 billion) in the preceding quarter. Domestic assets recorded a negative annual growth rate of 49.4 percent (Rls 57.7 billion). Foreign assets registered a decrease of 2.1 percent (Rls 0.5 billion) to Rls 22.0 billion during the first quarter of 2007 against a rise of 3.0 percent (Rls 0.7 billion) in the preceding quarter, recording an annual growth rate of 4.5 percent (Rls 0.9 billion).
The number of subscribers to investment funds dropped by 4.7 percent (23,502) to 475,291 in the first quarter of 2007 compared to a decline of 8.6 percent (46,825) in the preceding quarter. The number of subscribers recorded a negative annual growth rate of 28.3 percent (187,949).
The number of operating funds in the first quarter of 2007 increased by 1.4 percent to 215 compared to 212 in the preceding quarter. Thus, the number of operating funds registered an annual growth rate of 5.4 percent.
Seventh: Cost of Living
During the first quarter of 2007, the average cost of living index increased by 1.5 percent, recording an annual rise of 2.2 percent. The index for “foods and beverages”
rose by 3.3 percent, “house furnishing” by 1.6 percent, “renovation, rent, fuel and water”
by 0.8 percent, “education and entertainment” by 0.4 percent, “medical care” by 0.2 percent, “transport and communications” by 0.2 percent, and “goods and other services”
by 0.1 percent, while the index for “fabrics, apparel and shoes” remained unchanged.
Eighth: Banking Supervisory and Legislative Developments during the first quarter of 2007
- Circular No. B.C.S/45165 dated 18/12/1427H (8/1/2007G) was issued to banks concerning bank prudential returns on loans, deposits and specific commissions.
- Circular No. B.C.S/44523 dated 12/12/1427H (2/1/2007G) was issued to banks concerning the draft reports of supervisory standard of capital adequacy in accordance with the Basel 2 for the purpose of obtaining the comments of banks thereon.
- Circular No. 5555/M.A.T/95 dated 8/2/1428H (26/2/2007G) was issued to banks regarding the rules for opening bank accounts in commercial banks in Saudi Arabia and the general rules for the operation of bank accounts, the second update.
- Circular No. B.C.S/9684 dated 3/3/1428H (22/3/2007G) was issued to banks concerning the second draft reports of supervisory standard of capital adequacy in accordance with the Basel 2 for the purpose of obtaining the comments of banks thereon.
- Circular No. B.C.S/6096 dated 8/2/1428H (26/2/2007G) was issued to banks regarding the Bank for International Settlements’ questionnaire about currency transfer and secondary market activities for 2007.
- Circular No. B.C.S/4225 dated 29/1/1428H (17/2/2007G) was issued to banks concerning the questionnaire about the conducting of business by external entities within the bank (Outsourcing).
- Circular No. 4222/M.A.Sh/55 dated 29/1/1428H (17/2/2007G) was issued to banks stipulating that banks need to obtain the approval of the borrower to include his/her data in the database of the Saudi Credit Bureau (SIMAH).
- On 24/3/2007 a branch of the Muscat Bank in Riyadh was inaugurated, and it was officially open for the public on 1/4/2007
Ninth: Most Prominent Regulatory Developments in the Saudi Economy during the First Quarter of 2007
The Council of Ministers issued a Resolution on 1/2/1428H (19/2/2007G) approving the formation of a national authority to protect integrity and combat corruption.
The Council of Ministers issued a Resolution on 8/2/1428H (26/2/2007G) approving the establishment of a Saudi joint-stock company, to be named “Leading Investment Co.” (Rai’d) to be fully owned by the Public Pension Agency.
The Council of Ministers issued a Resolution on 15/2/1428H (5/3/2007G) approving the establishment of an autonomous government authority for the development of Saudi non-oil exports, to be called the “Saudi Export Development Authority”.
The Council of Ministers issued a Resolution on 29/2/1428H (19/3/2007G) approving the establishment of a Saudi joint-stock company, to be named "Saudi Capital Market Company- Tadawul) with a capital of SR 1.2 billion, divided into 120 million shares, part of which will be offered for public subscription..
. 754y5-07
