KUWAIT: Kuwait Finance House (KFH) held the earnings webcast for highlighting the Bank’s financial performance during H1-2024. AbdulWahab Al-Roshood, Acting Group Chief Executive Officer said:” By the grace of Allah, KFH has reported a record net profit for its shareholders of KD 341.2 million up to the end of the first half of 2024, an increase of 2.3 percent compared to the same period last year.
Earnings per share reached 20.73 fils; an increase of 2.6 percent compared to the same period last year. The financial statements demonstrated a solid capital base, high liquidity ratios and robust operating performance which drove growth in all key financial indicators.
Al-Roshood added that KFH ranked first among the largest listed companies and banks on Boursa Kuwait in terms of a market capitalization which exceeded KD 12 billion. Additionally, KFH claimed third place among the top 20 Middle East and Africa Banks by market cap according to the latest S&P Global Intelligence analysis. He pointed out that KFH implemented strategic steps to strengthen its expansion and solvency, develop its operations, and keep pace with technology and digital banking updates. Additionally, KFH Group signed the final agreement with Al Salam Bank to acquire, in return for cash consolidation, the entire share of KFH Group in KFH – Bahrain.
Al-Roshood said that KFH is the first strategic partner for major development plans. The Bank offers comprehensive financing solutions across various project sectors, with a particular focus on petrochemicals, oil and gas, water and energy, renewable energy, and infrastructure as well as SMEs. KFH is committed to providing top-notch digital financial services and solutions. The Bank successfully transitioned numerous processes and functions from manual systems to automated systems using Robotic Process Automation (RPA).
This improved production efficiency, reduced service times for customers and increased their satisfaction levels. Al-Roshood indicated that KFH is dedicated towards investing in green finance products and integrating Sustainable Development Goals and ESG principles across all its operations. KFH has been recently included in the FTSE4Good Index Series created by the global index and data provider FTSE Russell. KFH also released the first-of-its-kind in the Kuwaiti banking sector carbon footprint report. Additionally, KFH signed the Global Takaful Alliance agreement with the United Nations Development Program (UNDP). This alliance aims to provide Takaful insurance to 100 million farmers worldwide.
Al-Roshood said that KFH succeeded in attaining the key goals of its strategy, overcoming the challenges of the operational environment. KFH maintained its long-term credit rating at (A) by Fitch with Stable Outlook and at (A2) by Moody’s with Stable outlook.
KFH has scooped many local and global awards. The awards confirm KFH’s reputation, diverse capabilities in the Islamic finance sector, brand excellence, and robust operating performance. These awards include Kuwait’s Best Bank for Sustainable Finance by Global Finance magazine. KFH also received His Highness Sheikh Salem Al-Ali Al-Sabah Informatics Award under the patronage and in the presence of His Highness the Amir Sheikh Mishal Al-Ahmad Al-Jaber Al-Sabah for the category of excellence in digital transformation in technical financial solutions, in addition to winning several awards in different categories.
Eng Fahad Al-Mukhaizeem
Meanwhile, Group Chief Strategy Officer Eng Fahad Al-Mukhaizeem covered highlights of the Kuwait operating environment with an overview on KFH. He also shared KFH’s strategy, as well as H1-2024 results. Al-Mukhaizeem said: "During 2024, Central Bank of Kuwait (CBK) has maintained the discount rate at the level of 4.25 percent, after an increase of 75 basis points during 2023. Furthermore, inflation is moderating where Kuwait’s annual inflation rate based on average consumer prices is forecasted to decline to 3.2 percent in 2024 compared to 3.6 percent in 2023 according to latest International Monetary Fund (IMF) outlook report.
Additionally, Kuwait’s GDP is estimated to reach KD 39.7 billion in 2024 and to increase further in the coming years according to the most recent (IMF) report. Kuwait’s crude oil price increased to $87.9 per barrel as of the end of June 2024 with an increase of 13 percent from the same period last year. Al-Mukhaizeem added that Moody’s Rating Agency has recently affirmed the Government of Kuwait’s long-term local and foreign currency issuer ratings at A1 with a stable outlook. Similarly, in June Standard & Poor’s also reaffirmed Kuwait’s sovereign rating at A+ with a stable outlook. We expect for Kuwait long-term economic prosperity with signals of stability in the local environment and a commitment to advancing the development path. He pointed out that Kuwait has implemented a range of economic reforms with the goal of diversifying its economy and reducing its reliance on oil revenue. These reforms encompass areas such as Economic Diversification, Foreign Investment Promotion, Fiscal Reforms, and Public-Private Partnerships.
Their aim is to establish a more resilient and diversified economy, attract foreign investment, and foster sustainable economic growth in Kuwait. However, there are certain challenges associated with these reforms, in addition to external factors, including volatility in oil prices and production, as well as spillovers from regional conflicts.
Al-Mukhaizeem explained that Kuwait has solid economic fundamentals, due to improved financial balances as well as increased foreign investments and anticipates more opportunities in 2024 notably in terms of diversification, strategic investments, and financial and structural changes. Kuwait’s improved financial and external balances mean that its financial prospects are still favorable overall.
Al-Mukhaizeem said that KFH was recognized for its leading position in the Islamic banking sector by winning five prestigious awards at Euromoney’s Middle East Awards for Excellence 2024. Additionally, KFH Capital, the investment arm of KFH Group, won the Islamic Finance Deal of the Year Award in Türkiye for its role in the Republic of Turkey’s $2.5 billion Sukuk. Winning these awards further recognizes KFH’s successes and achievements in its pursuit of becoming one of the 100 largest banks globally. KFH is also committed to leaving a clear mark by supporting development and economic growth in Kuwait.
Jamal Al-Humairi
Acting Group Chief Financial Officer and General Manager Financial Control and Regulatory Reporting, Jamal Al-Humairi said that KFH Group has achieved Net Profit After Tax attributable to Shareholders for the first six months ended 30th June, 2024 of KD 341.2 million higher by KD 7.8 million or 2.3 percent compared to H1 2023 of KD 333.4 million.
Al-Humairi added that the higher profits are mainly from the increase in total operating income and lower provision. Partly offset by higher net monetary loss that resulted from the application of IAS-29 "Financial reporting in Hyperinflationary Economies” on the financial statements of Kuwait Turkish Participation Bank (KTPB) and increase in operating expenses. Financing income has increased by KD 424.6 million or 42.9 percent compared to the same period last year mainly due to an increase in yield.
Net financing income at KD 558.8 million increased by KD 100.3 million or 21.9 percent compared to same period last year mainly due to increase in financing income by KD 424.6 million offset by increase in finance cost and distribution to depositors by KD 324.3 million.
Looking at the operating income profile, Al-Humairi said the contribution of net financing income to operating income increased from 62.4 percent in H1 2023 to 67.9 percent in H1 2024 due to an increase in net financing income and decline in investment income. Increase in fees and commissions by KD 22.3 million is mainly related to increase in transaction fee income due to increase in card income and increase in arrangement fee. Group NFM for H1 2024 at 3.02 percent is higher by 40bps compared to H1 2023. Average yield improved by 255bps while average COF also increased by 215bps. This was the result of both rate hikes and repricing of assets and liabilities during the period.
Looking at provisions and impairments, Al-Humairi explained that the group total impairment charge decreased of KD 19.5 million compared to H1 2023.
KFH’s cautious approach towards provisioning have contributed to financing provision balance exceeding ECL required as per CBK IFRS 9 by KD 544 million as of June 30, 2024. Moving to the Net Monetary Loss, application of IAS-29 on the financial statements of KTPB resulted in recognition of net monetary loss of KD 86.8 million in the current period an increase of KD 77.6 million compared to H1 2023 due to increase inflation and significant maturity of CPI linked sukuk.
Al-Humairi said that the total assets amounted to KD 36.4 billion. Net financing receivables at KD 19 billion decreased by 2.2 percent mainly due to sale of KFH Bahrain and foreign currency volatility during the period. Excluding this impact, group net financing receivable increased in H1 2024 by 4.5 percent. Investments in debt securities amounted to KD 6.1 billion.
Additionally, deposits for H1 2024 amounted to KD 19.5 billion. The contribution from CASA deposits to total group customer deposits as at the end of H1 2024 is 42.8 percent and on an overall basis group continues to benefit from a large pool of low-cost deposits. Contribution of customer deposits to total funding is 67.6 percent compared to 71.7 percent in 2023.