The Saudi Arabian Monetary Agency (SAMA) released monetary data for July 2016. Major points worth highlighting are:   Deposits base remains volatile; decline 0.8% M-o-M Loan book shrinks 0.5% M-o-M Sharp decline in ATM and POS data Sector aggregate profits fall 4.3% M-o-M; lowest monthly profit in 2016   Sector deposit base remained volatile; July is the fifth time in seven months of 2016 where deposits have declined M-o-M. Aggregate deposits of the sector declined 0.8% M-o-M, bringing the total decline to 1.6% YTD. The decline was led by private sector deposits, which fell 1.6% M-o-M, while deposits from government entities rose 1.5% M-o-M. Money supply base continued to contract, declining 0.4% M-o-M. Monetary base contracted further; M3 declined 1.1% M-o-M. Sector LDR edged up to 90.5% in July vs. 90.2% in June.   The pick-up in loan growth momentum in the first four months of the year is easing steadily. Loan growth slowed to 8.0% Y-o-Y after peaking at 10.0% Y-o-Y in April-16. On a M-o-M basis, sector loans declined 0.5%. July is likely to have been weak, also due to seasonality (Eid vacations, summer holidays). Banks, however, have been sounding a slightly more optimistic recently on loan growth for the year compared to their assessment at the start of the year. As opposed to earlier guidance of 5-6% sector loan growth at the start of the year, banks are expecting loan growth of 7-8%. This is driven by expectation of a growing reliance on banks by the corporate sector to meet funding gaps.   Fewer working days in the month due to Eid holidays, coupled with the start of the holiday season dented profitability of the sector. Aggregate sector profits declined 4.3% M-o-M to SAR3.6bn - its lowest reading in 2016 - and 6% below average of SAR3.8bn in the first six months of the year.   ATM withdrawals and POS transactions saw a strong decline on Y-o-Y and M-o-M bases. POS transaction volume declined 26% M-o-M and 16% Y-o-Y. Similarly, ATM withdrawals declined 25% M-o-M and 22% Y-o-Y. This could have been driven by seasonality – Eid and summer holidays in July. Data for import also weakened, with new LCs opened in July halving on a Y-o-Y basis to only SAR7.3bn – its lowest data reading since Jun 2006.   We continue to favour Samba in the current tight liquidity environment: Samba remains our preferred pick in the sector due to its higher balance liquidity. The bank’s regulatory LDR was at 76% vs. sector average of 84% in 2Q16. (SAMA, Murad Ansari)   Samba Financial Group: SAR18.20 as of 28 August 2016, Rating: Buy, FV: SAR25.00 per share, MCap: USD9,707mn, SAMBA AB / 1090.SE