Aggregated Performance of the Banking Sector – First Half 2019

The banking sector comprising 10 Kuwaiti banks achieved during the first six months of this year noticeable growth in their net profit compared with the same period in 2018. Profits of the first half of 2019, after deducting taxes and minority equities, scored KD 493.6 million, rising by KD 38.2 million or 8.4% compared with KD 455.4 million for the same period in 2018. The banks’ operating profit (before deduction of allocations) decreased by KD 3.9 million or about 0.4%, reaching KD 894.3 million versus KD 898.1 million due to increase in operating expenditures of the banks by 19.3% or by KD 219.2 million, a value which is slightly higher than the increase in total operating income which increased by KD 215.3 million or by 10.6%. It is worth mentioning that the rise in the level of profits is not comprehensive. Figures indicate that three banks achieved decline in their profits during that period; however, the rise in the profits’ level of seven other banks compensated for the decline and more so that the outcome was an increase in profits level for the entire sector.

Despite the growth in revenues, Kuwaiti banks continued to applying the policy of withholding allocations against non-performing loans although at a decreasing pace, total withheld allocations in the first half amounted to KD 323.6 million versus KD 358.8 million in the same period of 2018, a decrease by KD 35.2 million or by 9.8%. This means that part of the increase in net profits is due to the decrease in total allocations.

Profits of the five conventional banks amounted to KD 310.2 million representing 62.8% of the total net profit of the 10 banks, increasing by 7.6% compared to the same period of last year. While the share of Islamic banks scored KD 183.4 million representing 37.2% of the net profits of the ten banks, increasing by 9.8% from the level in the same period last year. This means the performance of the Islamic banks during the first half continued to grow at higher rates.

The Price to Earnings multiplier (P/E) for the 10 banks sector, calculated on an annual basis, was nearly 18 times versus 14.3 times for the same period last year. The annual return on total assets (ROA) rose slightly to 1.19% compared to 1.17%, while the annual return on equity (ROE) decreased to about 9.3% versus 9.5%.  Comparing the performance of the 10 banks, National Bank of Kuwait (NBK) continued to achieve the highest value among the 10 banks’ profits with KD 209.1 million (EPS 31 Fils), or 42.4% of the net profits of the banking sector which is 12.5% higher when compared with the same period in 2018, due to higher net interest income. Kuwait Finance House (KFH) achieved the second highest profits by KD 107.7 million (EPS 15.46 Fils) or about 21.8% of the net profits of the 10 banks, rising by 13.1% compared to the same period last year due to higher investment income and net foreign exchange profit alongside the decrease in total operating expenses. Commercial Bank of Kuwait (CBK) achieved the highest relative profit growth of 62.4%, reaching KD 9.8 million profit versus KD 6 million, as a result of the increase in all operating income items except for the distributions of dividends income, while Kuwait International Bank (KIB) achieved a net profit of KD 9.6 million compared with KD 12 million, a decline by 19.7% due to lower operating profit and increase in allocations by 25.2% making it the highest bank in declining profit. Burgan Bank and Gulf Bank profit levels also fell by 11.3% and 10.6% respectively.