• No plans to exit Egypt, being one of our key strategic markets.
• We are well positioned to mitigate the impact of the interest rate cycle throughout 2024.
• We expect the robust momentum in the project market to persist throughout 2024.
• The Saudi market is a priority for us, and the NBK brand is fundamental to our AUMs growth in KSA
• Our robust balance sheet will help us navigate through various economic cycles
KUWAIT: In an interview with Bloomberg, Shaikha Al-Bahar, NBK Deputy Group CEO, expressed optimism that a stabilized political environment will improve Kuwait’s business landscape. During the interview, Al-Bahar confirmed that in 2023, NBK consistently maintained strong asset quality and solid capitalization.
Optimism & positivity
Al-Bahar expressed confidence in the impact of Kuwait’s political landscape on business prospects. She underscored the favorable perspective on the newly appointed government and the transformative policies introduced by the new Prime Minister. Recognized as technocrats committed to a reform agenda, the new cabinet representatives aim to implement strategic changes that will boost the business environment in Kuwait.
“The new cabinet has started to actively engage with the parliament to align on the direction and promote cooperation,” Al-Bahar stated, noting that while the political scene is currently calm, the resumption of sessions and further interaction and execution progress by the newly appointed government are key to gain more confidence in a more optimistic outlook.
“What is important here is to highlight that a stable period of political dialogue can see a lot of these hanging issues get resolved and translate into a more productive legislative calendar,” Al-Bahar added. Discussing the projections for 2024, Al-Bahar pointed out that NBK maintains an optimistic and positive outlook regarding the revival of project execution, fostered by a more stable political environment. Such stability is expected to catalyze improvements in the non-oil GDP growth and boost credit demand.
“The strong momentum of projects is expected to continue and feed into the market in 2024, with another KD 6.2 billion worth of awards in the pipeline,” Al-Bahar indicated. She also pointed out that the projects market rebounded sharply in 2023 with KD +2.5 billion worth of awards: surpassing last year’s awards by almost 300 percent.
“We are hopeful to see some political stability and an improved dialogue between parliament members and the newly-appointed Cabinet as this will trigger project activity that can revive non-oil GDP activity and demand for credit,” Al-Bahar noted.
Al-Bahar also mentioned that Saudi Arabia is considered a key market that NBK is approaching from all fronts. She also noted that as the operating environment in the kingdom continues to improve, presenting lot of emerging opportunities that align with the bank’s strategic goals.
“We are also expanding under our newly launched Global Wealth Management platform. We have been active in the Saudi market and the NBK franchise is playing an important role in our AUM growth in KSA,” Al-Bahar stated.
2024 outlook: Navigating the future
Al-Bahar emphasized that the performance in 2024 may be influenced by an anticipated shift in the Fed’s monetary policy towards a direction that generally does not favor banks, given their business models are designed to thrive in environments of high or rising interest rates. She pointed out that the operational challenge for banks in 2024 will be to defend their margins. “With our diversification and our growing focus on fee business, we partially hedge revenue from interest rate movements. Our focus will remain on strategy execution and keeping the strength of our balance sheet intact as this is what helps us navigate through different economic cycles,” Al-Bahar explained.
Al-Bahar further elaborated that alongside the core banking’s growth momentum, there is an expectation for the ongoing expansion of NBK’s international and wealth management operations, supported by the Group’s presence in key markets, stating that” Our commitment to digital investments will persist in defining our future, with an increased emphasis on incorporating digital services across all business sectors and markets”.
In answering a question regarding provisions in 2023, Al-Bahar explained that the provisions are primarily a precautionary measure, reflecting a historically prudent stance towards managing credit risk.
The challenges facing the Egyptian pound
When asked about the Egyptian market’s condition and the future of the bank’s investments there, Al-Bahar stated, “The Group considers Egypt to be a key strategic market for our operations, often referring to it as our ‘second domestic market.’ She emphasized that NBK has a steadfast presence in Egypt and has no intentions of exiting from this investment, viewing it as a long-term commitment.” “With regards to our operations in Egypt and in domestic currency terms, it remains one of the most profitable in the Group with the highest ROEs and ROAs,” Al-Bahar responded.
“We are looking forward to some easing of geopolitical tensions to allow for some recovery in foreign currency inflows and a reactivation of the government’s asset sales program. Once the confidence is restored in the economy and the currency, we believe there are huge opportunities in Egypt and remain optimistic on its prospects,” Al-Bahar concluded.