The report titled ‘Embracing digital’ analyses the published financial statements of 56 listed commercial banks across Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates. It provides industry leaders with succinct analysis, insights and forward-looking views, while comparing banking sector results and key performance indicators from across the GCC. Key financial trends in the banking sector across the region included asset and profitability growth, lower NPL ratios, improved cost efficiencies, higher loan impairment charges and increased share prices.
27 June 2019 – Kuwait: KPMG recently released its fourth edition of the KPMG listed banks results report, which analyses the financial results of leading commercial banks across the region, providing industry leaders with succinct analysis, insights and forward-looking views. The 2018 report, titled ‘Embracing digital’ highlights that Kuwait’s banking sector stood in a healthy financial position at the end of 2018, with an overall 19.3 percent increase in profits compared to 2017. This growth was mainly due to higher net interest income which increased by 11.0 percent in local currency terms.
With a banking landscape of 11 locally incorporated banks and 12 branches of foreign banks, Kuwait’s banking sector total listed assets stood at US$264.5billion in 2018, which was 5% higher than at the end of 2017. Kuwaiti banks continue to observe declining non-performing loan (NPL) ratio, with an average NPL ratio of less than 2%, which is the lowest amongst GCC banks.
Speaking about the report, Bhavesh Gandhi, Partner in Audit and Head of Financial Services at KPMG in Kuwait commented, “Kuwait banks have observed one of the best years with all banks showing double digit growth in net profit compared to 2017. Total assets grew at a healthy 5.0 percent, with the cost-to-income ratio (CIR) showing a declining trend as banks focus on efficiency and use of technology and deployment of digital strategies to bring costs down”.
As global developments increase, the regulatory agenda continues to evolve on local, regional and international levels, to adapt to change as previously predicted. Bhavesh commented on the new regulatory guidelines in 2018, “CBK raised the discount rate from 2.75% to 3.0% on the back of the US Federal Reserve hike. Furthermore, the CBK has issued instructions for regulating electronic payments, a regulatory sandbox framework, and revised rules and regulations for granting consumer and installment loans/ finance.”
Bhavesh proceeds to elaborate on the effects of the digital era on regulatory standards, stating, “With the changing fintech landscape globally as well as regionally, we expect the regulatory authorities to issue regulatory guidelines/ framework. Any fintech regulations will need to be benchmarked against the framework/ guidelines that are issued by other regulators within the GCC to ensure a level playing field for Kuwaiti banks.”
The digital agenda for banks in Kuwait is expected to increase as Kuwaiti banks continue to invest in digital banking channels, infrastructure and solutions in 2019. This will involve investments in new age technologies such as intelligent automation, block chain and artificial intelligence (AI). It is anticipated that Kuwaiti banks will see increased acquisition of customers through digital channels across most of the product offerings.
Furthermore, the report saw that countries across the region have either talked of or experienced mergers in 2018. Kuwait experienced relatively one of the biggest mergers in the Middle East Bhavesh said, “One of the largest Islamic banking groups, Kuwait Finance House (KFH) announced its intention to acquire Bahrain-based Ahli United Bank (AUB). This acquisition will be the first cross-border banking transaction in the GCC and will create the largest banking group in Kuwait and the sixth largest banking group in the GCC.”
Looking forward, the report highlights a positive outlook for the year ahead (2019), with the expectation that Kuwaiti banks will continue to grow and report higher earnings. This growth will be driven by more lending as the government continues with project spending and consumer confidence improves. Furthermore, it is expected bank earnings may get a boost based on the increase in limit for consumer loans by the CBK in late 2018.
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