KUWAIT: Al-Ahli Bank of Kuwait (ABK) recently hosted its H1 2024 analyst conference attended by Abdulla Al-Sumait, Acting Group Chief Executive Officer; Shiamak Soonawalla, Group Chief Finance Officer; Abdulaziz Jawad, Chief Strategy Officer; and Yaqoub Almulla, Senior Manager of Investor Relations.
The conference entailed a review of the Group’s H1 financial indicators, as well as the expectations and upcoming projects, with the aim of maintaining its leading position in the banking sector and improving customer service according to the highest standards in the industry.
Growing opportunities
During the call, Al-Sumait expressed his optimism, stating that ABK is prepared to capitalize on emerging growth opportunities and finance upcoming large infrastructure, oil, and energy projects in Kuwait. These initiatives aim to leverage its financial strength while continuing to adopt the highest standards of governance and transparency.
Al-Sumait continued, "We are hopeful and confident in the ability to enhance the partnership between the public and private sectors in implementing Kuwait Vision 2035 plans to advance economic activity and contribute to transforming Kuwait into a regional and global commercial and financial hub.”
Moving to key financial highlights and performance for this period, Al-Sumait highlighted that the Group has achieved a 22 percent increase in Net Profit attributable to shareholders to KD 29.1 million during H1 2024, and a 20 percent increase in EPS to 12 fils, with a comfortable Capital Adequacy Ratio of 15.3 percent. He expressed, "All financial indicators reflect our success in implementing strategic plans and keeping pace with economic changes. During H1, we maintained positive momentum, reflected in our improved profitability and asset quality ratios, including a NPL Ratio of 1.31 percent.”
In an initiative to reinforce its trust among global companies, Al-Sumait added that ABK has participated in several financing deals and has received numerous global awards, adding to its record of achievements. These were in recognition of the ABK’s exceptional performance and its provision of the best services, products, and banking solutions in all the markets it operates in.
In addition, Al-Sumait disclosed that ABK continues to work on its digital transformation plan and adopts the highest security standards across all businesses. He elaborated, "We have signed agreements for artificial intelligence (AI) technologies and live data dashboards across most functions. This is in addition to our consistent efforts in improving performance and services, and innovating our banking solutions that add more customer value simply and safely.”
Moving forward
On his part, Soonawalla expressed that H1 2024 has been a period of significant enhancements in profitability, operational efficiency, asset quality, and a solid capital position. He disclosed that ABK remains positive about its performance for the remainder of the year.
He said, "Our operating income witnessed a 15 percent increase to KD 100.9 million with the composition as follows: 46 percent was from commercial banking, 40 percent from retail banking, and 14 percent from treasury operations. In terms of asset allocation, commercial banking accounted for 59 percent, retail banking for 13 percent, and treasury operations for 28 percent.”
Furthermore, operating profit grew by 21 percent to KD 53.6 million. Soonawalla was also pleased to report that the non-performing loan ratio stands at 1.31 percent, while the Loan Loss Coverage Ratio is at an impressive 447 percent, underscoring ABK’s prudent provisioning policies and strong credit metrics.
Soonawalla proceeded to highlight that, as at the half year end, ABK has KD 221 million worth of provisions, exceeding IFRS requirements and acting as substantial buffers against downside risks. He emphasized that operational efficiency remains a priority, which is evident in the Net Interest Margin standing at 2.3 percent, an 8 percent improvement over H1 2023, and the Operating Profit to average assets ratio of 1.67 percent.
He stated, "These figures reflect the Group’s strong performance and continued focus on profitability. Additionally, our Return on Average Equity has reached 9.5 percent, marking a significant 15 percent increase compared to the same period last year.”
The Group’s Total Interest Income in H1 2024 reached KD 72.4 million, a notable increase of KD 7.1 million or 11 percent over the same period in 2023. Soonawalla elaborated, "This growth is largely due to higher asset levels and a more favorable interest rate environment; however, our interest expense also rose by 21 percent to KD 157 million, as deposits were repriced in line with the interest rate hikes last year.” The Group’s Total Assets grew by 6 percent to reach KD 6.6 billion while its loan portfolio expanded by 5 percent to KD 4.5 billion. Additionally, Total deposits stand at KD 4 billion, representing 65.9 percent of our total liabilities. ABK maintains a strong liquidity position with a net stable funding ratio of 113 percent and a liquidity coverage ratio of 279 percent, both comfortably above regulatory requirements.
Soonawalla continued, "Turning to the factors driving changes in income, margins, and costs, our total operating profit saw a notable 21 percent increase compared to the same period last year, arising from better margins and improved non-interest income streams.”
Furthermore, fees and commissions made a significant contribution, growing by 31 percent compared to the same period last year and amounting to KD 21 million in H1 2024. Soonawalla explained that ABK’s fees and commissions are diversified across various regions and business sectors, with the bulk stemming from core banking operations. As a final point, cost-to-income ratio for the current half improved to 46.9 percent, down from 49.5 percent in the same period last year.
Strong performance
Moving on to discussing strategic updates, Jawad indicated ABK’s financial stability and strength as a trusted banking and financial partner in the Kuwaiti and regional markets, it maintained high credit ratings of ‘A’ and ‘A2’ from Fitch and Moody’s respectively. In addition, he expressed ABK’s pride in winning two prestigious MEED awards, ‘Best Retail Bank – Egypt’ and ‘Excellence in Customer Protection/ Fraud Control – Kuwait.’
He highlighted that digitization efforts remain on track with a wave 1 mobile app launch by Q3 2024. This is in line with upgrading the Bank’s online banking platform to a best-in-class transaction banking digital framework, which includes standard non-lending service offerings for different market segments through a digital medium. Jawad proceeded to discuss the Bank’s launch of new offerings, including the ‘Al Tajer Plus’ account that supports SMEs into growing their businesses and increasing their profitability. This comes alongside the introduction of the first-of-its-kind ‘Family Package’ in Kuwait’s banking sector, offering integrated banking services to all family members.
Across borders, Jawad disclosed that ABK-Egypt kicked off the core banking system upgrade project as a significant step forward for the Bank in providing customers with an elevated banking experience. ABK-Egypt also launched the ‘ABK NEXT’ segment for youth to enjoy a wide range of products and services with tailored benefits that match their lifestyle.
Shifting to ABK Capital, the Bank’s investment arm, Jawad highlighted the introduction of two investment products, namely Ijara Fund (Equipment Leasing Fund) and International Private Credit Fund. Commenting on ABK’s sustainability and ESG efforts, Jawad said, "We are currently gathering internal data to evaluate our progress for the year. This comprehensive data collection will allow us to measure the effectiveness of our initiatives and identify areas for improvement.”
Kuwait and beyond
Jawad continued, "The July 2024 World Economic Outlook forecasted global growth to be at 3.2 percent in line with its previous outlook in April. The global economy also faces upside risks of inflation and raising the possibility of higher interest rates for an extended period, in the context of escalating trade tensions and increased policy uncertainty according to the IMF.”
Shifting to the outlook in the GCC, economic growth is expected to rebound to 2.8 percent, according to the 2024 Gulf Economic Update. The positive outlook for the region’s economy is expected as a result of the increases in oil production as OPEC+ eases production quotas in the second half of 2024 and the results of strong performance in the non-oil sector and capital expenditures.
Specifically in Kuwait, economic growth is expected to recover to 2.8 percent in 2024, supported by a higher oil production of 3.6 percent with increased output this year and highlighting the inauguration of Kuwait’s first offshore drilling platform ‘Nokhetha,’ which now rests at its location in the northeast waters. Jawad added that the non-oil sector is projected to grow by 2.1 percent due to a stable political scene planning new reforms and the initiation of significant development projects. He claimed, "The aforementioned leads to Kuwait’s construction sector expanding by 6.6 percent this year according to MEED.”
Jawad concluded by reaffirming ABK’s successful first half of 2024. He highlighted that it is progressing at a faster pace compared to ABK2X strategic targets which continues to drive noticeable outcomes. He said, "As we navigate the remainder of 2024, our commitment to ABK’s strategy execution will remain prudent and persistent to shaping a prosperous path forward.”