AbdulWahab Al-Rushood, Acting Group Chief Executive Officer at KFH highlighted the Bank’s financial performance during full year 2022.

Al-Rushood said “By the grace of Allah, KFH has reported net profit of KD 357.7 million attributable to the shareholders of the bank for the year ended 2022; an increase of 47.0% compared to 2021. Ahli United Bank - Bahrain contributed to the profit with an amount of KD 62.5 million equivalent to 17.5%. The KWD62.5mln represents the results of AUB for the period from the date of the acquisition on October 2, 2022, until the year end of 2022, following the successful completion of the acquisition of 100% of Bahrain`s Ahli United Bank by KFH, and the listing and trading of its shares on Bahrain Boursa on October 6, 2022.”

Al-Rushood added that the fourth quarter of 2022 witnessed a record growth of 101.7% in profits attributable to the shareholders of KFH compared to the same period of 2021. This came as a result of combining profits of AUB-Bahrain after the successful 100% acquisition of its shares, and the earnings per share for Q4 of 2022 increased from 7.74 fils to 10.70 fils, an increase of 38.2% compared to the same period last year.

He explained that earnings per share for the year ended 2022 reached 33.58 fils compared to 25.99 fils for last year; an increase of 29.2%.

Net Financing income for the year ended 2022 reached KD 800.5 million; an increase of 36.7% compared to last year.

Total operating income for the year ended 2022 reached KD 1.1 billion, an increase of 32.2% compared to 2021.

Net operating income for the year ended 2022 reached KD 723.3 million, an increase of 43.8% compared to 2021.

Total assets increased to reach KD 37.0 billion, an increase of KD 15.2 billion or 69.7% compared to last year.

 Financing receivables increased to reach KD 18.8 billion, an increase of KD 7.5 billion or 65.9% compared to 2021.

Depositors accounts reached KD 22.5 billion, an increase of KD 6.6 billion or 41.7% compared to 2021.

Shareholders’ equity reached KD 5.4 billion, an increase of 177.4% compared to 2021.

Al-Rushood pointed out that KFH successfully maintained its sustainable approach in achieving growth and profits in all main financial indicators. Also, KFH achieved positive ratios in terms of profitability, ROAA, ROAE, improving asset quality ratios as well as the coverage ratio of provisions for non-performing debt. Also, KFH maintained good ratios in terms of cost to income which confirms the flexible business model of KFH and its successful plans and strategy.

Al-Rushood explained that KFH enjoys strong liquidity ratios and solid capital base that support its business growth, in addition to strong operational performance resulting in growth in operating income, profits, financing portfolio, and customer deposits.

He added that KFH successfully completed the acquisition of Bahrain`s AUB in 2022, which represents a promising strategic project and historic and pivotal stage in KFH`s journey. The acquisition turns KFH into the largest bank in Kuwait, and the second largest Islamic bank in the world, and increases its market capitalization to KD 11 billion.

Al-Rushood pointed out that KFH maintains its distinction in providing financial solutions according to the highest quality standards, while moving forward in adopting the latest financial technology (FinTech) innovations, employing artificial intelligence in banking transactions and increasing investment in technology to solidify KFH's leading position and bring customer experience to new levels.

Al-Rushood illustrated that the annual rate of growth in the customers’ use of digital financial solutions provided by KFH through KFHonline exceeds 32%. This confirms the efficiency and quality of KFH services, both as provided through mobile or through other channels. KFHonline provides more than 150 services, while XTMs and KFHGo branches provide about 50 other services, which means that KFH customers have the opportunity to use around 200 e-services via mobile and various self-service channels.

Al-Rushood indicated that KFH is the first bank in Kuwait to apply artificial intelligence technology in its operations, and the first bank to provide personal financing request service using a digital signature through KFHonline app. Also, KFH was among the first institutions to join cross-border payment system (AFAQ) and among the first banks to launch Apple Pay service, along with many different digital initiatives.

Al-Rushood said that KFH`s efforts continue to provide corporate banking services, support SMEs and entrepreneurship and youth because they are elements of sustainability and are among the most prominent pillars of the Bank`s strategy in the foreseeable future, in addition to being within the framework of national and societal responsibility.

He added that KFH has a track record of social initiatives and various contributions, most notably: signing MoU with Kuwait Municipality for the design and reconstruction of damaged areas of Al Mubarakiya market at an estimated cost of around KD 8 million. In collaboration with the Ministry of Justice, KFH has executed an initiative to cover the payments on behalf of people with defaulted debts. The amount paid exceeded KD20 million, benefitting nearly 10,000 debtors. KFH also supported Kuwait Red Crescent Society in its relief and social initiatives inside and outside Kuwait. The total value of contributions during 2022 reached about KD 4.5 million.

Group Chief Financial Officer, Shadi Zahran

Meanwhile, Group Chief Financial Officer, Shadi Zahran presented the financial performance of KFH Group for the year ended 31 December 2022.

Zahran said that the Group has achieved Net Profit After Tax attributable to Shareholders for the year ended 31st December 2022 of KD 357.7mn higher by KD 114.3mn or 47% compared to previous year of KD 243.4mn.

He indicated the group consolidated results includes the contribution from AUB group for only last three months starting from 2nd October 2022 (being the date of acquisition) amounting to KD 62.5 million.

Zahran pointed out that the higher profits are mainly from increase in total operating income and lower provisions partly offset by the 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)

Financing income has increased by KD 450.8mn or 51.7% compared to last year due to increase in yield and average profit earning assets.

Net financing income at KD 800.5mn increased by KD 214.8mn or 36.7% compared to last year mainly due to increase in financing income by KD 450.8mn partly offset by increase in finance cost and distribution to depositors by KD 236mn.

Net Operating income at KD 723.3mn increased by KD 220.2mn or 43.8% compared to last year; mainly from increase in net financing income by KD 214.8mn, increase in Investment income by KD 27.8mn and increase in fees and commissions by KD 18.1mn partly offset by increase in operating expenses by KD 41mn.

Looking at the operating income profile, Zahran explained that the contribution of net financing income to total operating income reached 75% compared to 72% in 2021 due to increase in net financing income.

Total Operating Expenses at KD 349mn is KD 41mn or 13.3% higher than last year primarily due to consolidation of AUB.

Zahran said that cost to income ratio for 2022 was 32.55% compared to 37.97% for 2021. improvement in C/I ratio is mainly due to increase in operating income by KD 261.3mn.

Group C/I ratio is the best among the Kuwaiti banks for 2022 based on published results. 

He added that average Yielding Assets are up by 34.8% compared to FY2021 and 43.3% compared to FY2020, mainly from the growth in Financing Receivables and Debt Securities.

Looking at provisions and impairments, Zahran said that Group total impairment charge decreased by KD 73.3mn or 54.1% to reach KD 62.1mn for 2022.

He added that gross credit provisions charge for 2022 amounted to KD 39.1 mn lower by KD 108.1mn compared to KD 147.2mn in 2021. Reduction in provision on credit compared to 2021 is mainly due to lower precautionary provisions in view of continuous improvement in group asset quality and coverage ratio.

Recoveries of written-off debts improved further in 2022 was KD 36.2mn an increase of KD 13.5mn compared to 2021.

KFH conservative approach towards provisioning have contributed to credit provision balance exceeding ECL required as per CBK IFRS 9 by KD 517mn as of 31 December 2022.

Zahran said that during 2022 the Turkish economy was classified as Hyperinflationary economy. Application of IAS-29 on the financial statements of KTPB resulted in recognition of net monetary loss of KD 127.6 million in the current year.

He added that total Assets at KD 37.0bn increased by KD 15.2bn or 69.7% in 2022. AUB contribution to group total assets is KD 12.0bn or 32.5%.

Net financing receivables at KD 18.8bn increased by KD 7.5bn or 66%.

Growth in financing receivables is mainly from consolidation of AUB along with increase in Kuwait. Growth was achieved in both Corporate and Retail segments.

Investments in debt securities at KD 6.1bn has increased by KD 3.4bn or 122.5% mainly due to acquisition of AUB.

Zahran illustrated that deposits for 2022 at KD 22.5bn are higher by KD 6.6bn or 41.7% compared to FY 2021, mainly due to acquisition of AUB.

The group continues to benefit from favorable deposits mix with healthy contribution from CASA deposits at 46.1% of total group deposits as at the end of 2022.

Zahran indicated that concentration of customer deposits to total funding is 76.3% compared to 84.9% in 2021. which is still healthy. Funding mix shows more diversification due to consolidation of AUB.

The key financial ratios which reflects improvement in profitability as explained earlier.

• ROAE increased from 12.77% to 13.19%
• ROAA increased from 1.44% to 1.69%
• ROATE increased from 12.80% to 16.48%
• C/I ratio improved from 37.97% to 32.55%
• EPS increased from 25.99 fils to 33.58 fils

Zahran concluded: “Group NPL ratio improved to reach 1.32% (as per CBK calculation) in 2022 compared to 1.60% for 2021. Provisions Coverage ratio for Group is 341%in 2022 compared to 326% for 2021.”

Group Chief Strategy Officer, Fahad Al-Mukhaizeem

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-2022 results.

Al-Mukhaizeem said that inflation rates during 2022 reached record levels not witnessed since 2008. The causes of inflation are due to the repercussions of the Covid Pandemic, the War in Ukraine, logistics backlogs and energy prices globally which led to a rise of food and other goods.

Al-Mukhaizeem added: “In 2022 the Federal Reserve along with other central banks around the world were trying to defeat inflation by rapidly raising interest rates. The FED raised the target range for the fed funds rate by 25bps to 4.5%-4.75% in its February 2023 meeting pushing borrowing costs to the highest level since 2007, the last Federal Reserve raised in 2022 was in December when the fed funds rate increased by 50bps which was its eighth consecutive rate hike.

Al-Mukhaizeem pointed out that the Central Bank of Kuwait raised its key discount rate by 50 bps to 4% on January 25th  2023, bringing borrowing costs to the highest since September 2019. The Central bank of Kuwait raised the interest rate four times during 2022.

He indicated despite the economic slowdown Globally, the latest International Monetary Fund (IMF) October 2022 forecasts Kuwait to register 8.7% GDP growth in 2022, the highest growth among all the GCC countries, and better than their forecast in April 2022 which was 8.2%. The notable expected growth is supported by the high oil prices and large reserve funds.

Al-Mukhaizeem explained thar Standard & Poor's credit rating for Kuwait stands at A+ with stable outlook. Moody's credit rating for Kuwait was last set at A1 with stable outlook. Fitch's credit rating for Kuwait was last reported at AA- with stable outlook.

He added that KFH’s long term credit rating stands at “A” by Fitch with Stable Outlook, and at A2 by Moody’s with Stable outlook. In addition, KFH Group was recently named as the Best Islamic Financial Institution in the World and in the Middle East by Global Finance Magazine, and Best Treasury & Cash Management Bank in Kuwait by Global Finance Magazine. 

Al-Mukhaizeem pointed out that KFH ranked first among the largest listed companies on Boursa Kuwait in terms of a market capitalization reaching KD 11 billion.

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The earning webcast attendees are:

• CI Capital
• EFG Hermes
• Franklin Templeton
• Abu Dhabi Investment Authority ADIA
• HSBC
• SICO Bank
• Citi Group
• Ajeej Capital
• Al Rayan Investment
• Arqaam Capital
• Boubyan Bank
• Burgan Bank
• NBK Capital
• Markaz

Among other institutions as well…