The Aggregated Performance of the Banking sector – September 30 2019

The banking sector, which includes 10 Kuwaiti banks, achieved noticeable growth in net profits during the first nine months of the current year compared to the same period in 2018, as the profits of the first nine months of 2019 (after deduction of taxes and minority rights) amounted to KD 744.7 million, an increase by KD 40.3 million or by 5.7%, compared to KD 704.4 million for the same period in 2018. This was achieved despite the drop in the operating profit (before deduction of provisions) by KD 4.8 million or by 0.4%, to reach KD 1.354 billion versus KD 1.359 billion, as a result of the rise in operating expenses for banks by 17.9% or by KD 311.5 million, i.e. a value slightly higher than the rise in total operating income, which increased by KD 306.7 million or by 9.9%. It is worth noting that the rise in the profits’ level is not comprehensive as figures indicate that 4 banks achieved a decline in their profits during that period. However, the rise in the level of net profits of 6 other banks compensated for the decrease and increased the total outcome for the entire sector.

Profits for the third quarter of this year in the amount of KD 251.1 million have increased by 0.8% above the profits for the third quarter of 2018 in the amount of about KD 249 million. They increased by 1.4% from the profits for the second quarter of the current year in the amount of KD 247.7 million, and also increased by 2.1% from the first quarter profits in the amount of about KD 245.9 million. Banks continued, though at a slower pace, the policy of reserving provisions against irregular loans. Total provisions reserved in the first nine months of this year scored about KD 491.7 million versus KD 548.3 million, i.e. decreased by KD 56.6 million or by 10.3%. This means that part of the increase in net profits is due to the decrease in total provisions. Profits of the five conventional banks were at KD 438.8 million and represented 58.9% of the total net profits of the ten banks, rising by 2.4% compared with the same period of last year. While the profits of Islamic banks were at KD 305.9 million, representing 41.1% of the net profits of the ten banks, higher by 10.8% than their level in the same period last year. This means that the performance of the Islamic part of the banks during the first nine months continued to grow at higher rates.

The (P/E) multiplier for the ten banks’ sector calculated on an annual basis was 17.1 times versus 15.1 times for the same period last year. The return on total assets (ROA) calculated on an annual basis decreased slightly to 1.17% versus 1.20%. Also, the annualized return on equity (ROE) decreased to 9.1% compared to 9.5%.When comparing the performance of the ten banks, the National Bank of Kuwait (NBK) continued to achieve the highest value in profits among the ten banks by scoring KD 302.2 million (46 Fils EPS), or 40.6% of the net profits of the banking sector, increasing by 10.9% compared to the same period in 2018, due to the increase in net interest income in addition to the decrease in total provisions. Kuwait Finance House (KFH) achieved the second highest profit level by KD 190.5 million (27.67 Fils EPS), or 25.6% of the net profits of the ten banks, an increase by 12.7% compared to the same period of last year as a result of higher investment income. Warba Bank achieved the highest relative growth in profits by 49.4%, as its profits amounted to KD 12.1 million compared to KD 8.1 million, as a result of the rise in all items of operating income. While Al-Ahli Bank of Kuwait (ABK) achieved KD 15.4 million profits compared to KD 27.1 million, i.e. a decrease by 43% due to an increase in the total provisions by a value higher than the increase in the operating profit. Therefore, it was the bank with the highest drop in profits. Profit levels of Kuwait International Bank (KIB), Gulf Bank and Burgan Bank decreased by 17.3%, 13% and 4.9% respectively.decreased slightly to 1.17% versus 1.20%. Also, the annualized return on equity (ROE) decreased to 9.1% compared to 9.5%.When comparing the performance of the ten banks, the National Bank of Kuwait (NBK) continued to achieve the highest value in profits among the ten banks by scoring KD 302.2 million (46 Fils EPS), or 40.6% of the net profits of the banking sector, increasing by 10.9% compared to the same period in 2018, due to the increase in net interest income in addition to the decrease in total provisions. Kuwait Finance House (KFH) achieved the second highest profit level by KD 190.5 million (27.67 Fils EPS), or 25.6% of the net profits of the ten banks, an