On the sidelines of the Analyst Conference for the results of 1Q24, Al-Sager
added, “We reported net profits of KD 146.6 million in the first quarter of the
year, growing by 9.2 percent. Driven mainly by growth in core banking income,
our revenue stream stems from a diverse operational mix that proved successful
in mitigating risks and optimizing performance. We achieved a growth of 11.2
percent year on year in net operating income to reach KD 309 million.”
“Our success is underscored by the strategic investments that are aimed at
achieving sustainable growth, enhancing customer experience, and creating
long-term value to shareholders which is evident in our performance measures.
Our return on average assets for the reporting period reached 1.55 percent
whereas our return on average equity reached 15.2 percent,” Al-Sager
highlighted.
Local market
Speaking on NBK’s performance in the local market, Al-Sager stated, “Our
approach in Kuwait remains centered on strengthening our market position in
key segments, growing our clientele through digital products, and providing
exceptional customer service. From a corporate banking standpoint, we
continue to lead Kuwait’s infrastructure program and are well-positioned for
any revival of infrastructure spend.”
“Furthermore, our Islamic banking arm, Boubyan Bank, along with our
international operations both continue to expand their contribution to the
Group aiding in our diversification strategy. Notably, our international
operations maintain a robust contribution to the Group’s operating income
and net profit.” “Also, and notably in wealth management, we will endorse
our position and brand presence through a global network of operations with
the launch of NBK Wealth. We will further solidify our value proposition in
providing innovative solutions and services towards a best-in-class wealth
management experience,” Al-Sager noted.
“Similarly, as a frontrunner in the ESG space, we will continue to play a
role in fostering sustainable advancement in the communities where we
operate and in being a key partner in the sustainable financing endeavors of
our clients,” he affirmed.
Egyptian market
On a question about the Group’s operations in Egypt, Al-Sager replied, “On
Egypt, we witnessed recently signals of economic stability which is
considered one of the largest economies in the region and enjoys big
potential for growth. As soon as the confidence in the Egyptian economy is
regained, we believe that there are substantial growth opportunities within
Egypt, and we will continue to be optimistic in this regard.” “Speaking of
our operations in Egypt, it is a main growth market for us, and we are
committed to grow our operations in the Egyptian market, as one of our most
profitable markets.”
Kuwaiti economy
On the other side, Al-Sager said that the Kuwaiti economy ended the quarter
on a relatively soft note indicating that in terms of historical trends,
credit growth stood low while real estate activity weakened. Inflation has
also eased and is trending lower on the back of cooling private demand.
“Likewise, project activity declined significantly following an improved
2023. This could be partly explained by seasonal effects in addition to the
unexpected downturn in domestic politics. The project awards outlook for the
remainder of 2024 should be better with a pipeline of KD 6.3 billion worth
of projects to be awarded,” he added.
Underlying drivers
On his part, Sujit Ronghe, Group CFO of National Bank of Kuwait commented on
1Q24 financial results saying, “Underlying drivers for the robust
bottom-line performance are a combination of y-o-y growth in business
volumes, higher interest rates, and a stronger operating performance. Group
loans and advances grew by 5.7 percent year on year. Investment securities
also contributed strongly to Group assets with a growth of 15.6 percent
compared to March 2023.”
“The Group’s Balance Sheet remains strong with a stable credit quality,
solid capital base along with the ability to generate healthy operating
profits. Total credit provisions and impairment losses for 1Q 24 amounted to
KD 25.5 million, a decrease of KD 2.6 million over 1Q 23.
“NBK Group continues to benefit from its unique position amongst Kuwaiti
banks in terms of geographical spread through International Banking and the
ability to conduct business in both Conventional and Islamic Banking,” he
remarked.
Loans and deposits
On the loan outlook, Ronghe mentioned, “Corporate loan growth has been
promising in the past twelve months both in our domestic and international
locations. For that, growth in loans for the upcoming quarters will mainly
stem from the growth anticipated in corporate loans. At the same time, as a
nature of the Group’s international network, we remain well positioned to
attract deposits at competitive rates while the local competition doesn’t
impact NBK’s to the extent it does to other local banks.”
Lower cost of risk
“As a result of the marked growth in operating income and controlled cost
growth, the 1Q 24 cost to income ratio was at 36.1 percent compared to 36.5
percent, one year ago. The cost of risk for 1Q24 decreased to 44bps compared
to 53bps in 1Q23. Considering the declining interest rate scenario as we go
ahead into the further quarters of 2024, we do expect the cost to income
ratio to increase slightly, but it should be below the 40 percent mark,”
Ronghe explained.
“The Group’s NIM increased from 2.48 percent in 1Q23 to 2.64 percent in
1Q24, backed by a strong year-on-year growth in volumes and interest rates.
Benchmark interest rates are expected to remain at current levels for a
longer period, with rate cuts being forecasted in later quarters of 2024,”
he added.
Cautious optimism
“Looking forward, ongoing regional and international geo-politics, prospects
of ‘higher for longer’ interest rates are likely to result in a
macroeconomic environment which is less conducive to growth. We, however,
remain cautiously optimistic that the overall operating environment,
although challenging, will remain generally stable during 2024.”
“The ongoing investments by the Group in innovation and technology will support
our ability to meet the evolving needs and expectations of our clients. By such,
we will further strengthen our leading franchise across all business sectors and
continue to build on our trust-based relationship with stakeholders,” he
continued.