Riyadh-Mubasher: Saudi Arabia is expected to issue bonds worth SAR 120 billion to banks and other independent government institutions this year, compared with SAR 98 billion a year earlier, Jadwa said in a recent report.
The government is likely to continue issuing sovereign bonds at a monthly rate of SAR 20 billion ($5.3 billion), the research firm said.
It added that 2016 bonds are expected to reach 14% of the public spending.
"We forecast credit growth to further slow during 2016, putting the full year expansion in credit at 6%. In month-on-month terms, average growth in credit was 0.7% in 2015, compared with 0.9% in 2014," Jadwa said.
It expects the performance of banks to continue at a weakening pace, as the rate of growth in credit is expected to trend downwards throughout 2016.
"Nevertheless, we expect banks to primarily benefit from higher interest rates on loans, while simultaneously being able to reduce overall risks through more diversified loan portfolios. Bank’s portfolio diversification would include the continued accumulation of foreign assets as well as increased holdings of sovereign development bonds," Jadwa said.
It added that these factors combined should result in bank credit remaining positive throughout 2016, as the sufficiently liquid banking system will provide room to counter any contraction in money supply.
