Al-Watani: Local credit grew by 2.9 percent through the end of the second quarter of 2026
- 4.2% growth in business sector credit
- 1.2% increase in securities purchase financing
- 1.5% acceleration in household credit
- 2.4% rise in resident deposits
- 23% surge in government deposits
The National Bank of Kuwait report recorded a slowdown in local credit growth to a still-solid 1.2% on a quarterly basis in the second quarter of 2026, compared to around 1.8% in the previous quarter, reflecting the first full quarter of the impact of the conflict between the United States and Iran. The slowdown was primarily attributed to weak growth in business sector credit, despite it remaining at strong levels, alongside a contraction in lending to banks and financial institutions. In contrast, household credit gained additional momentum during the second quarter, providing further support to local credit growth, which rose by 2.9% from the beginning of the year through the end of the second quarter, lower than the 4.6% recorded during the same period in 2025.
Meanwhile, both credit extended to non-residents and non-resident deposits declined during the second quarter amid rising regional uncertainty and weak cross-border financial activity. The outlook for credit demand for the remainder of the year depends on developments in the US-Iran conflict.
The report noted a notable slowdown in business sector credit growth to 1.3% on a quarterly basis in the second quarter, compared to around 2.8% in the first quarter, bringing year-to-date growth to 4.2%, slightly higher than the 4% recorded during the same period in 2025. This slowdown reflects decelerating lending in several key sectors, including a -1.6% quarterly contraction in credit directed to the manufacturing sector, alongside slower growth in the real estate (0.6%), oil and gas (1.8%), public utilities (1.8%), and other sectors (1.8%). Credit extended to banks and financial institutions also contracted by -2.6% on a quarterly basis, reversing the 5% gains recorded in the previous quarter and marking the first quarterly decline since the third quarter of 2025.
The report noted that, conversely, credit for securities purchases grew by 1.2% on a quarterly basis, with little change from the first quarter, but remained significantly lower than the stronger gains recorded during the same period in 2025.
In contrast, household credit growth accelerated sharply, recording a 1.5% quarterly increase compared to a weak 0.1% rate in the first quarter, indicating an improvement in consumer borrowing appetite, which may support consumer spending in the coming period. At the same time, credit extended to non-residents fell by -6.7% on a quarterly basis, reversing the 3.4% increase recorded in the first quarter, primarily due to a decline in lending to foreign banks.
On the funding side, the report recorded a 2.4% quarterly rise in resident deposits in the second quarter, compared to around 3.8% in the first quarter, raising the year-to-date growth rate to 6.3% by the end of the second quarter. The slowdown in growth was primarily due to a -2.2% quarterly decline in public institution deposits, after they had surged by 13.2% in the first quarter.
On the other hand, government deposits continued to provide strong support, rising by 23 percent on a quarterly basis following a similar increase of 22 percent in the first quarter. Private sector deposits, which account for 73 percent of total resident deposits, also showed signs of improvement, increasing by 1.2 percent on a quarterly basis after registering no growth in the previous quarter; however, growth from the beginning of the year through the end of the second quarter, at 1.2 percent, remained below the 3.4 percent recorded during the same period in 2025. Meanwhile, non-resident deposits declined by 4.6 percent on a quarterly basis, reversing the 1.9 percent increase seen in the first quarter, pushing year-to-date growth into negative territory (-2.8 percent).
The report attributed the weakness primarily to a decline in non-resident private sector deposits in foreign currency, reflecting increased caution in cross-border financial flows amid the ongoing US-Iranian conflict during the second quarter.
