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New Age Banking

7 June 2020 – Kuwait City

recently released its fifth edition of the ‘GCC listed banks’ results — New Age Banking’ report, which analyses the published results of the listed commercial banks across the region for the year ended 31 December 2019. The report, titled ‘New Age Banking’, shows that the Kuwait banking sector has experienced a healthy growth of 8.2 percent in total assets with a marginal decline of 0.9 percent in net profits, mainly on account of higher expected credit losses in 2019. Further, during the year, the non-oil sector grew at a moderate rate of 2.5 percent, which resulted in stable consumer spending and supported the growth of banking assets. The Kuwait banking sector remained well capitalised with an average CAR of 18 percent in 2019 and the non-performing loans ratio for the sector remained low at 1.3 percent as of December 2019.

The local banking sector continues to be strong and resilient, as Kuwait banks saw growth of 8.2 percent in their asset base despite the liquidity pressure. This also reflected in the market sentiment, with the share prices of all the listed banks, except one, showing an upward trend; however, this trend has reversed in 2020 with an overall decline of 24% in the listed bank share prices in Kuwait from 1 January 2020 to 30 April 2020.

Authors

Partner, Audit and Head of Financial Services

KPMG in Kuwait

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“The financial trends identified through our analysis were largely positive, which, given the unique political and economic circumstances the region has witnessed in recent years, is particularly impressive, reflecting the continued resilience of the banking sector.”

Bhavesh Gandhi, Partner and head of Financial Services

On another note, the COVID-19 pandemic — faced by the world since the beginning of 2020 — is having an unprecedented impact on the financial markets, both globally and locally. Furthermore, this is creating a unique situation for the industry because of its implications on operating models, employees, suppliers and customers, leading to a drop in oil prices. All these factors are affecting the financial results. Banking experts agree that the sector will be dealing with the effects of this pandemic for the foreseeable future, leading the banking sector to evolve, and only agile and flexible banks that are willing to transform will succeed and secure their financial strength for future growth.

Looking at the future of the financial services sector in light of this pandemic, Bhavesh Gandhi  added, “We are witnessing banks evolving at a faster pace than ever before and in some cases transforming their business models and venturing into ‘New Age Banking’, be it through the use of AI (artificial intelligence), RPA (robotic process automation), or by launching digital-only branches to serve their customer base more effectively. We expect banks to continue to aggressively pursue technological advancement and use revamped business platforms, by partnering and collaborating with various fintech firms.”

Lenders in the GCC have been rapidly consolidating, as they seek to remain competitive. In 2019, most GCC countries experienced mergers, or had talks to merge, both in the conventional and Islamic banking sectors, thus creating larger, stronger and more resilient financial institutions. One of the mergers announced during 2019 was a cross-border merger between banks from Kuwait and Bahrain. It is expected that this consolidation drive will continue in 2020 across the region, with numerous talks or potential further transactions.

Additional insights into the report suggest that although regional banks have remained resilient in terms of profitability and asset growth, they do continue to focus on managing the credit quality of their loan portfolios to ensure this resilience can be maintained.

The report titled ‘GCC listed banks’ results — New Age Banking‘ analyses the results of the selected listed banks in the Kingdom of Bahrain, the State of Kuwait, the Sultanate of Oman, the Kingdom of Saudi Arabia, the State of Qatar and the United Arab Emirates. It summarises the banks’ results against selected key performance indicators for the year ended 31 December 2019 and compares these with the same information for the year ended 31 December 2018.

GCC listed banks’ results - over the years