ShareKUWAIT: Al-Ahli Bank of Kuwait (ABK) successfully held its analyst conference call, showcasing the Group’s impressive results for the first nine months of 2023. The conference brought together key executives including Abdulla Al-Sumait, Acting Group Chief Executive Officer; Shiamak Soonawalla, Group Chief Finance Officer; and Abdulaziz Jawad, Chief Strategy Officer. The call was operated by Yaqoub Almulla, Senior Manager of Investor Relations.
The call provided a comprehensive overview of ABK’s financial indicators, highlighting the significant progress made during the first nine months of the year. It also outlined future strategies aimed at bolstering the Group’s competitive position in the banking sectors of the countries it operates in, namely Kuwait, the United Arab Emirates (UAE) and Egypt.
Al-Sumait expressed his satisfaction with ABK’s robust performance, accrediting this success to the unwavering commitment of employees in delivering value to both customers and shareholders. He further emphasized that the Group remains well above the Central Bank of Kuwait’s minimum requirement of a 9.5 percent CET1 ratio and 13.5 percent Capital Adequacy Ratio (CAR).
Additionally, Al-Sumait underscored the Group’s continuous growth in its core markets, expressing confidence in maintaining exceptional performance for the remainder of the year. He specifically highlighted the significant progress made in digital transformation, which has streamlined operations and enhanced customer experiences. Aligned with its dedication to innovation, ABK remains focused on offering distinctive banking solutions and driving business growth through its strategic plans.
The Group intends to inject further investments to generate long-term value for stakeholders. Al-Sumait acknowledged the Group’s sustainable approach, with positive growth and profits evident in most key financial indicators. He also highlighted that ABK maintained positive ratios in terms of profitability, Return on Average Assets (ROAA), Return on Average Equity (ROAE), and witnessed improvements in asset quality ratios and coverage ratios.
Furthermore, Al-Sumait discussed the Group’s strong commitment to social, environmental, institutional, and corporate governance responsibilities, demonstrated through its active participation in various societal, relief, and humanitarian initiatives both locally and abroad.
Financial stability
Regarding financial stability, Soonawalla announced that ABK achieved a net profit of KD 32.6 million, marking a 19 percent growth during the first nine months of the year. Earnings per share (EPS) also saw an 18 percent rise annually, reaching 13 fils. Meanwhile, Operating Income reached KD 136.8 million, with operating profits at KD 71.2 million.
He highlighted that the non-performing loan (NPL) ratio stabilized at 1.34 percent, with an NPL coverage of 420 percent. Additionally, the Group maintains excess provisions amounting to KD 216 million. He underscored the Group’s commitment to a conservative approach in financial risk management and prudential provisioning.
Soonawalla noted ABK’s consistent operational excellence, evidenced by a Net Interest margin of 2.1 percent and an Operating Profit to Average Assets ratio of 1.5 percent. These figures reflect the commendable performance and sustainable growth across ABK’s various operations. He added that, during the quarter, ABK successfully completed the right issuance of KD 100 million and exercised the option to recall $300 million of its AT1 bond in line with the market conditions resulting in a CET1 ratio of 12.4 percent. Total capital adequacy ratio (CAR) at the end of September 2023 was recorded as 14.7 percent.
Soonawalla stated, “Our KD 136.8 million operating income is divided into 49 percent for corporate banking services, 44 percent for retail banking services, and 7 percent for treasury operations. As for asset distribution, 59 percent is allocated to corporate banking services, 13 percent to retail banking services, and 28 percent to treasury operations.”
He proceeded to highlight that the majority of income is derived from non-interest activities of core banking activities, ensuring stability. He also mentioned that the Group’s operating expenses reflect its ongoing investments in core business initiatives, digital technologies, and process development. This strategic approach facilitates the delivery of top-tier services to customers, while enhancing resources to elevate ABK’s operational efficiency.
Strongly positioned
Moreover, Soonawalla emphasized the Group’s continuous efforts to strengthen its position among Kuwaiti banks, particularly through its broad geographic presence. This diversification serves as a strong competitive edge, offering a high degree of flexibility in terms of profitability. ABK’s broad market presence also plays a pivotal role in increasing revenues and facilitating the distribution of loans and the collection of deposits. He pointed out that ABK’s international operations include the UAE and Egypt through ABK-Egypt. He emphasized that the Group has effectively diversified its funding sources and secured additional long-term loans from international markets, thereby enhancing stability in its financial operations.
Operational improvements
Soonawala also observed that ABK’s performance during the first nine months of 2023 reflects continuous improvement in its core operating drivers, strong loan growth, decreased provisions and impairment losses, maintenance of a robust general budget, comfortable liquidity levels, thanks to a solid capital base. He conveyed his optimism about the potential for further enhancement in the overall operating environment, considering the upward trajectory of oil prices. Anticipations suggest that the Group will benefit from the increased interest rate, in light of the expectations of the Federal Reserve’s interest rate hike later this year.
Important changes
Jawad discussed that the Group has implemented significant adjustments to its strategy, aligning with the challenges affecting the banking industry, to enhance its performance. He also highlighted the ongoing success of the ABK2X strategy across all operations, especially in terms of retail banking.
Furthermore, Jawad revealed the Group’s focus on credit growth, utilizing sound risk management practices through corporate banking services, in line with its efforts to ensure steady and sustainable growth in its indicators and operations.
He underlined ABK’s unwavering dedication to investments, aimed at delivering long-term value for shareholders. The Group’s prudent approach, cautious risk management, and commitment to enhancing the quality of our balance sheet have contributed to its credit ratings of A2 from Moody’s and A from Fitch.
Jawad mentioned that ABK recently witnessed a successful capital increase of KD 100 million, with KD 50 million share capital and KD 50 million share premium to reach a total capital of KD 237.4 million. The transaction was oversubscribed by over 3.3 times achieved mainly from 95 percent of existing shareholders, demonstrating a high level of trust and support towards ABK.
Meanwhile, ABK continues to demonstrate strong performance in the UAE, achieving significant accomplishments. This includes participation in two syndications involving prominent and strategically important government-related entities (GREs) in the UAE, where ABK acted as the Senior Mandated Lead Arranger in one of these syndications.
Expected growth
Jawad also indicated that ABK expects to be upgraded to the Premier Market of the Boursa Kuwait. This advancement reflects its continuous adherence to the requirements of the Capital Markets Authority, enabling ABK to efficiently access capital markets, attain higher ratings, lower funding costs, and improve liquidity. Moreover, the move will garner increased attention from global investors, as well as local and foreign institutions. Jawad emphasized that environmental, social, and governance (ESG) principles constitute a fundamental component in ABK’s pursuit of adopting and implementing responsible banking practices. He also mentioned the imminent release of ABK’s third annual sustainability report.
Additionally, he explained that ABK is in the final stages of developing its strategy for the next five years, which involves integrating ESG elements into its daily operations and long-term vision. Jawad also revealed that ABK is working on establishing a sustainable financing framework, paving the way for issuing its first green and sustainable bonds.
