Kuwait Finance House (KFH) held the earnings webcast for highlighting the Bank’s financial performance during the first half of 2023.

AbdulWahab Al-Roshood, Acting Group Chief Executive Officer at KFH said “by the grace of Allah, KFH reported record net profit for its shareholders of KD 333.4 million (US 1.086 billion) for the first half of 2023, an increase of 141.4% compared to the same period last year. Earnings per share for the first half of 2023 reached 22.03 fils; an increase of 73.3% compared to the same period last year.”

Al-Roshood added that the record profits KFH achieved cement its standing and positively contribute to raising the performance of the Kuwaiti banking sector, indicating the outstanding profitability ratios confirm the benefits and significance of the acquisition deal and reflect the efficient operational performance, the flexible business model of KFH and the disciplined execution of KFH`s strategy. The distinct ratios also reflect the continuous momentum in all KFH`s business areas and the contribution of operations at the Group level.

He explained that KFH showed growth in all key financial indicators and maintained good ratios in terms of ROAA, ROAE, improving asset quality ratios as well as the coverage ratio of provisions for non-performing debt, cost to income ratio and other financial indicators.

Al-Roshood pointed out that KFH tops the Kuwaiti banks in terms of assets and market capitalization. It also ranked first among the listed companies on Boursa Kuwait in terms of market capitalization exceeding KD 11 billion. This means that KFH is the largest player in the private sector in Kuwait.

He indicated KFH sustained excellence in developing innovative products and services as well as financial and investment solutions, and in adopting FinTech and AI tools to enhance operations, customer experience, leadership, and market share. 

Al-Roshood said that KFH increased investment in green finance, and expanded ESG-linked investments, contributing effectively to building low-carbon economy for a sustainable future. KFH won Best Islamic Bank for ESG- global category 2023 award from Euromoney and Kuwait`s Best Bank for Sustainable Finance in 2023 from Global Finance. KFH received these awards in recognition of its spectacular efforts in adopting ESG principles in all its banking and business activities, the annual growth of sustainability products and green finance, becoming the first Bank in Kuwait to receive the Global Sustainability Assessment System GSAS – Gold Level Certificate in addition to the fruitful partnership with UNDP.

Al-Roshood pointed out that KFH plays an essential and influential societal role as it keeps executing strategic initiatives inside and outside Kuwait in collaboration with stakeholders, such as signing design and supervision contract for Al Mubarakiya reconstruction project with Gulf Consult Co. It is worth mentioning that KFH contributed around KD 8 million to this project.

Al-Roshood said that KFH has solid credit ratings, high liquidity ratios and strong capital base that support business growth and development plans in Kuwait and countries where KFH Group operates including Bahrain, Turkiye, UK, Germany, Egypt, Malaysia, and others.

He indicated KFH has made great strides in its digital transformation strategy where customers carried out more than 135 million e-banking transactions through KFHonline on mobile and website in H123, with a growth rate of about 40% compared to the same period last year.

Fahad Al-Mukhaizeem, Group Chief Strategy Officer

Meanwhile, Eng. 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 results for the first half of 2023.

Al-Mukhaizeem said “the latest International Monetary Fund (IMF) April 2023 forecasts Kuwait to register 8.2% GDP growth in 2022, and a growth is expected in 2023. The Inflation Rate in Kuwait remained unchanged at 3.70% in May from 3.70% in April of 2023.”

He added that the Central Bank of Kuwait raised the discount rate by 50 basis points from 3.5% to 4.0% effective January 26, 2023, bringing borrowing costs to their highest level since September 2019.

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.

Al-Mukhaizeem pointed out that a new indicator has emerged in the world of economics, called the Global Economic Diversification Index. Economic diversification is considered a major political topic for commodity-producing countries, aiming to stabilize the economy, achieve economic growth and development, create new job opportunities by stimulating the private sector, and enhance government finances sustainability to a greater extent. Countries were measured and classified based on their economic diversification from various angles, including diversity in economic activities, international trade, and government revenues (beyond reliance on natural resources or commodity revenues).

This index includes 105 countries, and their activities were analyzed over a period from the year 2000 to the years affected by the COVID-19 crisis. 

Al-Mukhaizeem indicated that despite Kuwait's diversification being less than 9%, significant progress is expected in economic diversification, especially after the completion of parliamentary elections and the formation of a new government. The new government has presented a reform program that will drive development in new economic sectors that are not dependent on oil, mainly by embracing the digital economy, among other efforts, to support the next phase of economic diversification in the region.  And Kuwait Finance House is also following this approach by focusing on “digitalization” and the use of modern technology as our Acting Group CEO will highlight.

Al-Mukhaizeem said 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 received the Sustainability award in Middle east by EMEA Finance, and Best Islamic Bank for ESG by Euromoney.

He indicated that KFH ranked first among the largest listed companies on Boursa Kuwait in terms of a market capitalization approximately KWD11bln at the end of H1-2023.

Jamal Al-Humiari, General Manager Financial Control, and Acting Group Chief Financial Officer (AGCFO).

Meanwhile, Jamal Al-Humiari, General Manager Financial Control, and Acting Group Chief Financial Officer (AGCFO), said the Group has achieved Net Profit After Tax attributable to Shareholders for the first six months ended 30th June 2023 of KD 333.4mn higher by KD 195.3mn or 141.4% compared to H1-22 of KD 138.1mn.

Al-Humiari added that the higher profits are mainly from increase in total operating income, and lower provisions, partly offset by increase in operating expenses and taxation.

He said that financing income has increased by KD 508.5mn or 105.5% compared to same period last year due to increase in yield and average profit earning assets.

Net financing income at KD 458.5mn increased by KD 138.3mn or 43.2% compared to same period last year mainly due to increase in financing income by KD 508.5mn offset by increase in finance cost and distribution to depositors by KD 370.2mn.

Net Operating income at KD 489.1mn increased by KD 180.7mn or 58.6% compared to same period last year; mainly from increase in net financing income by KD 138.3mn, increase in Investment income by KD 80mn, increase in Net gain from foreign currencies by KD 30.1mn and increase in fees and commissions by KD 18.1mn offset by increase in operating expenses by KD 96mn.

Al-Humiari explained that Total Operating Expenses at KD 245.3mn is KD 95.9mn or 64.2% higher than same period last year primarily due to consolidation of AUB .

Al-Humiari said:” Average Yielding Assets is up by 25.5% compared to FY2022 and 61.4% compared to H1-22, mainly from the growth in Financing receivables and debt securities .”

Al-Humiari said “Looking at provisions and impairments, group total impairment charge decreased by KD 19.4mn or 42.9% to reach KD 25.9mn for H1-23.  Gross credit provisions charge for H1-23 amounted to KD 61.6 mn higher by KD 32.1mn compared to KD 29.5mn in H1-22. This was mainly due to higher precautionary provision recorded during the current period in line with group’s conservative approach towards provisioning in view of high recoveries from written off financing receivables in H-1 2023.

Al-Humiari indicated that recoveries of written-off debts in H1-23 was KD 60.8mn an increase of KD 47.7mn compared to H1-22.

KFH cautious approach towards provisioning have contributed to credit provision balance exceeding ECL required as per CBK IFRS 9 by KD 562mn as of 30 June 2023.

Al-Humiari pointed out that Total Assets at KD 37bn marginally increased by KD 51mn or 0.1% in H1-23.

Net financing receivables at KD 19.1bn increased by KD 268mn or 1.4%. Growth in financing receivables was achieved mainly in corporate segment, in our international operations, highlighting the importance of geographically diversified group.

Investments in debt securities at KD 6.2bn has increased by KD 72mn or 1.2%

Additionally, deposits for H1-23 at KD 22.9bn are higher by KD 0.5bn or 2% compared to FY 2022.

Contribution of customer deposits to total funding reached 78% compared to 76.3% in 2022 due to increase in deposits during the current period.

In this slide looking at the key financial ratios which mainly reflects improvement in profitability.

• ROATE from 14.90% to 23.62%
• ROAA from 1.61% to 2.15%
• EPS from 12.71fils to 22.03 fils

Group NPL ratio reached 1.52% (as per CBK calculation) in H1-23 compared to 1.32% for 2022.

Provisions Coverage ratio for Group is 313% in H1-23 compared to 341% for 2022.