87% of profits from core earnings, 8.1% increase in ToI

Mazin Al-Nahedh

KUWAIT: Group Chief Executive Officer at Kuwait Finance House (KFH), Mazin Al-Nahedh said that 87% of the total profits of the year 2017 came from core earnings, which reflects the success in implementing the bank’s strategy of achieving sustainable profitability and improving assets quality. This percentage might exceed 90% for the year 2018, he added.

Al-Nahedh’s statement was made during TV interviews to comment on the bank’s 2017 financial results. He indicated that the most significant growth indicators of the financial results despite the challenging circumstances are the surge of financing income of 3.2% compared to last year accompanied by the increase of financing portfolio to reach KD 9.216 billion, ie an increase of 12.7% compared to last year. Net operating income increased to reach KD 408.3 million, ie a growth of 11.9% over the last year. Total operating income increased to reach KD 713.3 million for the year 2017, i.e. a growth of 8.1% over the last year.

This increase is mainly due to the growth in net financing income, commission and fees income as a result of the focus on core banking business, not to mention the increase of investment income due mostly to exiting non-core investments during the year, in addition to the increase in other revenues, indicating the growth in financing portfolio came from various sectors, especially corporate finance of which is the oil sector.

Optimizing cost
KFH continued its efforts in optimizing cost. The decrease of expenses was 3.1% over the last year despite an increase of staff costs of 13.9 million, i.e. 8% over the last year. He pointed out that the increase of staff costs is due mainly to the impact of amendments made during the year to the Kuwaiti Labor Law which resulted in an additional liability for employees’ end of service benefits of KD 17.6 million within staff costs.

Al-Nahedh said that the provisions slightly increased to reach for the Group KD 163.4 million for the year 2017. This comes in line with KFH conservative policy and as per the regulations of regulatory authorities. The provisions include financing, investment and other provisions. The total provisions for Group reached KD 668.2 million as of end 2017. He reiterated that KFH assets showed remarkable improvement, indicating the non-performing facilities at KFH solo dropped to 1.58% in 2017 compared to 1.67% over 2016, while remained constant for the Group at 2.65%. The total debt coverage is 330% and 161% at KFH and the Group respectively.

Al-Nahedh explained that KFH exited non-core assets of KD 120 million. He expected the year 2018 will witness exiting non-core assets of KD 140-150 million. This allows the bank to focus more on core banking business while achieving further growth in the financing operations. He remarked that KFH is assuming significant role in the participation in financing the public debt issued by Ministry of Finance and the CBK through Tawarruq product. KFH is keen on financing public debt as it is characterized by suitable returns and very low risk, not to mention it increases the level of liquidity and doesn’t consume form the capital.

KFH has realized a net profit of KD 184.2 million for the year 2017 for KFH shareholders compared to KD 165.2 million last year i.e. an increase of 11.5%. Total assets increased to reach KD 17.358 billion, ie an increase of KD 858.6 million or 5.2% compared to last year. Depositors’ accounts increased to reach KD 11.597 billion, i.e. an increase of KD 880 million or 8.2% compared to last year. Shareholders’ equity increased to reach KD 1.872 billion i.e. an increase of KD 61.8 million or 3.4% compared to last year. KFH’s capital adequacy ratio (CAR) reached 17.76%, (after the recommended distributions) i.e. higher than the required limit of 15%, thus reiterating the strength of KFH financial position.