Y-o-Y loan growth picks up to 8.0% Y-o-Y: System loan growth accelerated to 1.9% M-o-M in December, up from 0.6% M-o-M in November, owing to a pick-up in both corporate and retail loan growth. Loans to the retail sector increased by 2.2% M-o-M, compared to 1.1% M-o-M in November. Corporate loan growth of 1.7% M-o-M (up from 0.4% in November) was mostly driven by strong expansion in loans to the industry sector (up 17.2% M-o-M compared to a contraction of -0.6% M-o-M in November). On a Y-o-Y basis, loan growth surged to 8.0% Y-o-Y in December, the strongest in the past 18 months, and up from 6.5% Y-o-Y in November, driven by stronger retail loan growth, up 11.0% Y-o-Y, and corporate loan growth, up 6.8% Y-o-Y. Our 2016 loan growth forecast for Kuwait banks factors in a pick-up in loan growth driven by government spending.   Private sector deposit growth recovered, driving a pick-up in system deposit growth to 2.4% M-o-M and 2.7% Y-o-Y: Deposit growth picked up to 2.4% M-o-M in December, following a decline of -0.7% M-o-M in November and -1.4% M-o-M in October, as private sector deposits increased 2.5% M-o-M. On a Y-o-Y basis, total deposits increased 2.7% Y-o-Y in December, compared to 0.6% Y-o-Y in November, also driven by higher private sector deposits, up 1.3% Y-o-Y. Despite lower oil prices, public sector deposit growth was solid, up 11.2% Y-o-Y. Government deposits account for 15% of total deposits, and its contribution has increased slightly over the past 12 months.   Loan-to-deposit ratio up to 85.6% compared to 81.4% a year earlier: The loan-to-deposit ratio was broadly flat M-o-M at 85.6% in December 2015, but looking at the past year trend, the loan-to-deposit ratio has increased from 81.4% in December 2014, as loan growth has been stronger than deposit growth during last year. Loan-to-deposit ratios continue to be lower than in other GCC banking systems, and for now, Kuwait banks have not experienced any material pressure on funding costs. Going forward, with liquidity being tighter in the wider GCC, we expect funding costs to increase slightly for Kuwait banks. (Central Bank of Kuwait, Elena Sanchez-Cabezudo, Rajae Aadel)