AbdulWahab Al-Rushood, Acting Group Chief Executive Officer at Kuwait Finance House (KFH) highlighted the Bank’s financial performance during 2021.

He said during the earnings Webcast FY-2021, that KFH has, by the grace of Allah, reported net profit attributable to shareholders of KD 243.4 million for 2021; an increase of 64.0% compared to 2020.

Earnings per share for the year ended 2021 reached 28.59 fils compared to 17.74 fils for last year; an increase of 61.2%.

Total operating income for 2021 reached KD 811.0 million; reflecting an increase of 1.9% compared to last year.

Financing portfolio increased 5.7% to reach KD 11.4 billion, with an increase of KD 608 million compared to 2020.

Total assets increased 1.3% to reach KD 21.8 billion, with an increase of KD 286 million compared to last year.

Depositors’ accounts reached KD 15.9 billion, with an increase of KD 550 million or 3.6% compared to 2020.

The Board of Directors has proposed 12% cash dividends to shareholders and 10% bonus shares subject to general assembly and concerned authorities’ approval.

Al-Rushood said that the positive financial results for the year 2021 confirmed KFH`s success in achieving its strategic goals relating to the sustainability of profits and its ability to deal and the challenges with high professionalism. KFH has taken proactive steps to deal with the conditions imposed by the pandemic, whether in terms of services and products or human resources.

He added that KFH maintains its efforts to maximize profitability and ROE, improve asset quality, manage costs, and develop policies for granting credit across all KFH`s subsidiaries in Turkey, Bahrain, Malaysia, and Germany. We are increasing investment in green Sukuk, diversifying the financing portfolio and continuing the strategy of focusing on the core banking business.

Al-Rushood pointed oit that KFH achieved positive results in all key financial indicators, and maintained good ratios in terms of the cost to income, NPFs, debt coverage ratio as well as other financial indicators. Also, KFH successfully maintained the Group's capital support and improvement of asset quality, through a robust business model and disciplined implementation of plans and strategy.

He explained that KFH maintained strong liquidity and operational performance and achieved a growth in the financing portfolio for the retail and corporate sectors. In addition to the increase in customers deposits.

He said: “By providing a wide range of banking and financing solutions for retail and corporates as well as the SME sector, KFH is moving forward in its developmental role and in supporting government initiatives.”

Al-Rushood added that KFH has expanded investment and trading activities in the primary and secondary capital markets, where KFH Group Treasury executed Sukuk deals worth over US $16 billion during 2021. KFH maintained its position at the top of the main dealers in the issuances of the International Islamic Liquidity Management (IILM) of the Primary Sukuk Market. The bank also topped the Secondary Market Dealers list. It is worth noting that this is the first achievement whereby a financial institution tops the two lists in the Sukuk primary and secondary markets.

He pointed out that KFH's social contributions and initiatives are a milestone and consolidate KFH's position in this field. The Bank has contributed to many strategic community initiatives such as: paying, in collaboration with the Ministry of Justice, over KD20 million in debts to release approximately 10,000 defaulting debtors; KFH signed an agreement with the Kuwait Red Crescent Society (KRCS) to implement relief and medical projects in collaboration with the Jordan Red Crescent. Moreover, KFH signed two agreements with the King Hussein Cancer Foundation and the KRCS to treat cancer patients among refugees in Jordan. KFH also signed a partnership agreement, the first of its kind in the Kuwaiti banking sector, with Kuwait Society for the Handicapped to support people with special needs, not to mention many environmental and sustainable initiatives, supporting youth as well as many other initiatives.

Shadi Zahran, Group Chief Financial Officer

Shadi Zahran, Group Chief Financial Officer presented the financial performance of KFH group for 2021.

Zahran said that the Group has achieved Net Profit After Tax attributable to Shareholders for the year ended 31st December 2021 of KD 243.4mn higher by KD 95mn or 64% compared to LY 2020 of KD 148.4mn.

The higher profits are mainly from increase in total operating income and lower provisions

Zahran pointed out that net Operating income at KD 503.1mn increased by KD 3.5mn or 0.7% compared to last year; the increase is mainly from higher both Investment income and net gain from foreign currencies.

Total Operating Expenses are KD 11.9mn or 4.0% higher than last year is due to increase in economic activity compared to the situation that occurred last year. The increase in operating expenses resulted in a slight increase in group Cost to income ratio to reach 37.97%.

Zahran mentioned that at KFH-Kuwait, C/I ratio at 30.30% is still below both the local Islamic Banks average of 44% and local conventional Banks average of 41.1% (calculated from published financials for third quarter 2021)

Average Yielding Assets is up by 6.3% compared to FY2020 and 15.8% compared to FY2019, resulted mainly from the growth in Financing receivables (avg. financing receivables is up by KD 0.8bn compared to 2020)

Looking at provisions and impairments, Zahran said that group total impairment charge decreased by KD 148.7mn or 52.3% to reach KD 135.4mn for 2021 and that is due to lower impairment charge on both credit and investments as a result of improvement in economic conditions in 2021.

Credit provisions charge net of recoveries for 2021 amounted to KD 124.5mn lower by KD 34.5mn compared to KD 159mn in 2020.

Impairments related to investments and others reduced by KD 114.2mn. This decline is mainly due to lower precautionary provision on investments as compared to last year in addition to partial reversal of ECL on Sukuk portfolio.

Zahran emphasize that at KFH as we adopt cautious approach towards provisioning with focus on assets quality and sustainability. This has contributed to KFH Group credit provisions balance exceeding ECL required under IFRS 9 in accordance with CBK by KD 367mn as of Dec 2021.

Total Assets at KD 21.8bn increased by KD 0.3bn or 1.3% in 2021.

Financing receivables at KD 11.4bn increased by 5.7%

Zahran said: “Growth in financing receivables mainly in Kuwait in both; Corporate and Retail, while a decline in Turkey mainly due to devaluation of Turkish Lira.

Investments in Sukuk at KD 2.7bn is maintained at the 2020 level.

Additionally, deposits for 2021 at KD 15.9bn are KD 0.5bn or 3.6% above 2020 level.

He added that the group was able to maintain favorable deposits mix with healthy contribution from CASA deposits at 54.6% of total group deposits as at the end of 2021 compared to 53.3% in 2020.

He said that customer deposits as a percentage of total funding improved further to reach 84.9% reflects healthy funding mix and shows robust liquidity.

In the last slide looking at the key performance ratios which reflects improvement in profitability.

ROAE from 7.63% to 12.77%

ROAA from 0.90% to 1.44%

EPS from 17.74 fils to 28.59 fils

We noticed here that all of them are back to 2019 level

NPL ratio improved to reach 1.60% (as per CBK calculation) in 2021 compared to 2.20% for 2020.

Provisions Coverage ratio for Group is 326% in 2021 compared to 223% for 2020.

Fahad Al-Mukhaizeem, Group Chief Strategy Officer

Meanwhile, Fahad Al-Mukhaizeem, Group Chief Strategy Officer covered highlights of the Kuwait operating environment with an overview on KFH. He also shared KFH's strategy, as well as FY-2021 results.

Al-Mukhaizeem added: “A rebound in international oil prices, driven by global demand for oil, will help to restore economic output to pre-pandemic levels by the end of the 2021/22 fiscal year. The Kuwaiti economy will benefit from strong oil prices in 2022-2023 as the government is expected to boost its support for capital-intensive projects under the New Kuwait Vision 2035 plan.   Furthermore, the latest forecasts from the IMF (International Monetary Fund), expect Kuwait GDP growth to accelerate to 4.3% in 2022, helped by rising oil production and healthy global oil prices, as well as a recovery in the non-oil sector.”

Refarding interest rates, Al-Mukhaizeem said that the Central Bank of Kuwait kept the interest rate at 1.5% after the last cut of 100 basis points on the 16th of March 2020.

He added that “KFH” enjoys a high creditworthiness, Moody’s assigned an A2 long-term deposit rating with a Stable Outlook in September 2021, Fitch Ratings has downgraded Kuwait Finance House  (KFH) Long-Term Issuer Default Rating (IDR) to A from A+ and revised its outlook to Stable from Negative. The rating actions follow a similar action on Kuwait's sovereign rating on 27 January 2022.

In addition, KFH Group has recently been named as the Best Islamic Financial Institution in the World by Global Finance Magazine, the Bank of the year in the Middle East and in Kuwait by The Banker, the Best Domestic bank in Kuwait by AsiaMoney, and Best Treasury & Cash Management Banks in Kuwait by Global Finance Magazine.

Al-Mukhaizeem explained that KFH is moving forward in leading the Islamic finance industry and contributing to attracting new players and developing products and services to become an active pillar in implementing economic visions, providing greater support for growth and sustainability, and taking into account environmental, social and governance (ESG) standards.

Al-Mukhaizeem continued: “KFH is keen on the sustainability front through the issuing of Green Sukuk and the successful arrangement of USD 350 million of sustainability Sukuk transaction for KFH-Turkey. The issuance is considered to be the first of its kind to be issued by an Islamic financial institution and the first tier 2 sustainability Sukuk issuance transaction globally. Also, KFH launched a comprehensive report on sustainability highlighting the leading role of the Bank on that front.”  

He added that KFH has proven its competence while navigating through the pandemic repercussions while continuing to provide integrated financial services to its customers without interruption. This confirms KFH’s resilience, and the efficiency of its digital services and IT infrastructure as well as the capability and expertise of our staff. During 2021, KFH customers executed almost 160 million digital banking transactions through KFHOnline, with 25% growth compared to 2020. This reflects customer confidence in our innovative digital banking solutions which KFH provides to enhance the banking experience of its customers.