ShareKUWAIT: Gulf Bank K.S.C.P. announced its financial results for the first three months ending March 31, 2024. The bank reported a net profit of KD 12.9 million, a decline of KD 4.4 million or 25.6 percent compared to 2023 first three months net profit of KD 17.3 million.
In addition, Gulf Bank recorded an operating income of KD 48.3 million for the first three months of 2024, representing an increase of 4.1 percent compared to the same period of last year. Moreover, operating profit before provisions and impairments has increased to KD 26.6 million, representing a healthy growth of 6.5 percent compared to the first quarter of 2023.
The decline in net profit for the first three months of 2024 is attributed to the concurrent rise in total provisions and impairments of KD 6.3 million compared to the same period of last year. The increase in total provisions was partially driven by a KD 2 million increase in general provisions as a result of the good year-to-date growth in net loans and advances of 3.6 percent and a KD 4.2 million increase in credit cost, which includes specific provisions and loan recoveries net of write-offs. While this increase in credit cost has impacted short-term results, we are actively implementing prudent risk management protocols to position ourselves for long-term sustainable growth.
As for asset quality, the non-performing loans (NPL) ratio was 1.2 percent as of March 31, 2024, compared to the prior year level of 0.8 percent. Additionally, the Bank continues to have significant non-performing loans coverage ratio of 458 percent including total provisions and collaterals.
Total credit provisions as of March 31, 2024 reached KD 300 million whereas IFRS 9 accounting requirements (ie, ECL or expected credit losses) were KD 170 million. As a result, the bank has a very healthy excess provision level of KD 130 million, above and beyond what is required by the IFRS 9 accounting requirements.
Compared to December 31, 2023, total assets increased by 1.3 percent to KD 7.3 billion, net loans and advances increased by 3.6 percent to KD 5.4 billion, while customer deposits increased by 4.6 percent to KD 4.4 billion and total shareholders’ equity reached KD 788 million.
The bank’s regulatory Tier 1 ratio of 14.7 percent was 2.7 percent above the regulatory minimum of 12 percent and the Capital Adequacy Ratio (CAR) of 16.8 percent was 2.8 percent above the regulatory minimum of 14 percent. On March 23, 2024, Gulf Bank held its Annual General Assembly Meeting, where shareholders approved the distribution of a cash dividend of 12 fils per share for the year 2023, representing a 57 percent cash payout ratio, in addition to a 5 percent bonus shares.
Financial performance and growth
Commenting on Gulf Bank’s first quarter 2024 financial results, Bader Nasser Al-Kharafi, Gulf Bank’s Chairman said: “I am pleased to announce that Gulf Bank has showcased a robust operational performance during the first quarter supported by a solid top line growth, and healthy balance sheet indicators. While the first quarter results may reflect a fall in net profit growth compared to the same period of last year, we remain optimistic about the bank’s future prospects.”
He added: “Having said that, the expansion of our loan book during the first three months of 2024 reflects the effectiveness of our strategic initiatives to meet our clients’ evolving needs. This upward trajectory in loan growth demonstrates our ability to adapt and thrive in dynamic market conditions solidifying our position in the Kuwaiti market.” On the improvement of the Bank’s operational profitability, Al-Kharafi stated: “The excellent enhancement in our operating profitability lines, particularly in net interest income, operating income, and operating profit, reflect our dedication to strategic growth and financial prudence, while highlighting our success in maintaining our market share.”
Operational efficiency
While Gulf Bank continues its digital transformation journey, it remains consistent in accelerating business development and driving operational efficiencies. Following the completion of implementing phase 1 of the new core banking system during 2023, the bank is now in the process of launching and implementing phase II of its core banking system. Commenting on this essential digital core banking transformation initiative, Waleed Khaled Mandani, Gulf Bank Acting CEO said: “Gulf Bank is ready to leverage these foundational changes to drive operational efficiencies and enhance customer experience. The bank remains committed to harnessing technology to streamline processes, improve accessibility, and deliver tailored financial solutions to its diverse customer base.”
Customer-centric
As part of Gulf Bank’s innovation strategy and focus on customer-centricity, the bank launched its latest initiative, the Kids Savings Account “Neo”, aimed at nurturing customer financial literacy and inclusion from a young age. Commenting on this latest offering, Waleed Mandani said: “This initiative demonstrates our dedication to providing innovative solutions that prioritize the needs of our customers at every stage of life.”
Moreover, and on the recent increase of the Al-Danah Millionaire account prize to two million dinars, Mandani stated: “The Al-Danah product is a pivotal strategy in strengthening the bank’s Current and Savings Accounts (CASA) portfolio, thereby, optimizing the cost of funds and expanding our funding channels.” It is worth mentioning that Gulf Bank’s CASA was 30.5 percent as of March 31, 2024.
Mandani concluded his remarks by saying: “By promoting savings through incentives and rewards to customers, the bank is fostering long-lasting relationships and cultivating a culture of fiscal responsibility and wealth accumulation”.
ESG initiatives
As part of Gulf Bank’s comprehensive ESG initiatives, the bank inaugurated its first eco-friendly branch during the first quarter of 2024. The Sabah Al-Ahmad residential area branch is designed with energy-efficient features and sustainable materials, aligning with the bank’s environmental stewardship. Furthermore, Gulf Bank is engaged in promoting environmental consciousness within the community. The bank is actively advocating the use of reusable bags and minimizing plastic consumption at five co-operative societies. Through, these relentless efforts, the bank aims at mitigating its environmental impact and fostering a culture of sustainability within the bank and the broader community.
Positive credit outlook
Gulf Bank continues to be well recognized in terms of its creditworthiness and financial strength internationally. During the year 2023, Moody’s Investor Services has affirmed the ‘A3’ long-term deposit ratings of Gulf Bank and changed the outlook to “Positive” from “Stable”. This upgrade is an acknowledgement of Gulf Bank’s sound capitalization, improving profitability and strong asset quality.
In addition, Fitch Ratings affirmed the bank’s Long-Term Issuer Default Rating at ‘A’ with a ‘Stable’ Outlook and a Viability Rating of ‘bbb-‘. The bank has also an affirmed Long-term Foreign Currency Rating of ‘A+’ with a ‘Stable’ Outlook from Capital Intelligence Ratings.
Appreciation
Al-Kharafi concluded his remarks by stating: “Looking forward, we are well positioned for sustainable growth in the years ahead with our firm commitment to innovation, strong financial foundation, and customer-centric approach.” He added: “On behalf of the Board of Directors, I would like to thank our shareholders for their ongoing trust, and our employees for their commitment and dedication. I would also like to thank the regulatory authorities for their continuous support. Finally, I want to thank our customers for their loyalty, and reiterate our commitment to offering them the best banking experience.”
Key financial indicators for Q1 2024
• First quarter 2024 net profit of KD 12.9 million.
• First quarter 2024 operating income of KD 48.3 million, an increase of 4.1 percent compared to same period of last year.
• Net loans and advances grew by 3.6 percent year-to-date to reach KD 5.4 billion.
• Non-performing loan ratio for the first quarter 2024 was 1.2 percent, with a strong non-performance loan coverage ratio of 458 percent.
• Capital ratios as of the first quarter 2024, Tier 1 ratio was 14.7 percent and capital adequacy ratio (CAR) was 16.8 percent.
