Kuwait Finance House (KFH) held its webcast for the financial results up to the end of Q3-2023 .

Shadi Ahmed Zahran, Acting Group Chief Executive Officer said “by the grace of Allah, KFH has reported a record net profit for its shareholders of KD 461.5 million (equivalent to USD 1.5 billion) for the period ended 30th of September 2023, with an increase of 124.3% compared to the same period last year. Earnings per share reached 30.81 fils; an increase of 61.1% compared to the same period last year. KFH achieved highest ever profit for the nine months period in history of Kuwaiti banking sector.”

Zahran added that the record earnings achieved by KFH strengthen its regional position and contribute towards development of the Kuwait and Bahrain banking sector.

He added that the outstanding results confirm the benefits and significance of the acquisition of Ahli United Bank as being realized. It also confirms effectiveness of KFH strategy which focuses on growth in sustainable earnings along with geographical diversification and its efficient execution by the management despite many challenges including high inflation, geopolitical tensions, and fears of imminent recession.

On 30th July 2023, Zahran pointed out that KFH - Kuwait reached an initial agreement with AUB - Kuwait to enter a merger transaction by combination through share swap. During October 2023, KFH received the CMA approval on the initial merger agreement. According to the fairness opinion of the independent investment advisor and the results of the valuation study by an independent assets valuator, the Swap ratio was calculated and disclosed recently at Boursa Kuwait.

He added that the merger is subject to the approvals of the extraordinary general assemblies of both banks and completing the remaining relevant regulatory procedures and approvals. Merger of business and operations in Kuwait will further improve the target synergies.

Conversion of AUB conventional business to Sharia compliant is progressing well and ahead of the plan. As of 30th September 2023, only 7.9% of KFH group financing receivable are conventional loans and advances. Further integration of business and operations is on track for all workstreams, and we are confident of meeting all key milestones and targets.

KFH ranked first among all the listed companies on Boursa Kuwait in terms of market capitalization exceeding KD 10.5 billion. Further KFH consistently ranks number 1 in terms of number and volume of trades of all listed shares on Boursa Kuwait.

KFH enjoys strong credit ratings, high liquidity ratios and healthy capital buffer to support business growth and expansion both locally and globally.

According to Fitch latest update, KFH Long-Term issuer default rating (IDR) stands at ‘A’ with Stable Outlook. In addition, Moody’s rating for the long-term deposit stands at A2 with a Stable Outlook.

KFH continues to invest in digital transformation with the aim of enhancing customer experience and exceeding the expectations of our customers. KFH has made great progress in this area as evident by substantial increase in digital banking transaction conducted via KFH online on mobile and website. The total number of online transactions exceeded 152 million during the nine months period ended 30th September 2023, representing a growth of 40% compared to the same period last year.

KFH has played a vital role in green finance and linking investments to Sustainable development goals. KFH efforts were recognized in the form of various awards it has received including “Best Islamic Bank for ESG- global category 2023” from Euromoney magazine and “Kuwait`s Best Bank for Sustainable Finance” award from Global Finance magazine.

Zahran concluded: “at KFH, we acknowledge the importance of investing and development of SME’s and supporting entrepreneurship by offering financing solutions for development and growth of this sector. Further KFH continues to play unprecedented role in social commitment and executing strategic community initiatives inside and outside Kuwait.

Mr. Fahad Al-Mukhaizeem:

Meanwhile, Fahad Al-Mukhaizeem, Group Chief Strategy Officer (GCSO), covered highlights of the Kuwait operating environment with an overview on KFH. He also shared KFH's strategy, as well as the results for the 3rd Quarter of 2023.

Al-Mukhaizeem said: According to the most recent International Monetary Fund (IMF) forecast for September 2023, Kuwait's GDP growth reached 8.8% in 2022 and slower growth in 2023. Kuwait's annual inflation rate in 2023 is forecasted to be 3.4%. Kuwaiti Crude Oil Price stood at USD 97.9 by the end of September 2023, up by 1.9% from the same period the previous year. Kuwait's credit rating is A+ with a stable outlook, according to Standard & Poor's. Kuwait's credit rating was last established at A1, with a stable outlook, by Moody's. Kuwait's credit rating was recently published by Fitch at AA- with a stable outlook. Central Bank of Kuwait (CBK) decided to raise the discount rate by 0.25% from 4.0% to 4.25% effective July 27, 2023.

He added that Kuwait's economic recovery is continuing, and inflation is under control, due to strong oil prices. Financial soundness indicators and stress tests conducted by the regulators indicate that the banking system is robust and resilient to severe shocks. Banks are adequately financed and liquid. Non-performing loans are still sufficiently provisioned. Profitability is also improving. The economic recovery continues, but there are significant elements that need to be taken into consideration. Non-oil growth stays strong in 2023, with headline inflation falling and an expected current account surplus. Nonetheless, other factors surround the baseline economic forecast, particularly those connected with oil prices and production volatility caused by global forces.

Al-Mukhaizeem pointed out 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 explained that KFH ranked first among the largest listed companies on Boursa Kuwait in terms of a market capitalization exceeding KD 10.5 billion.

Mr. Jamal Alhumiari:

Jamal Al-Humairi, General Manager Financial Control and Acting Group Chief Financial Officer said the Group has achieved Net Profit After Tax attributable to Shareholders for the first nine months ended 30th September 2023 of KD 461.5mn higher by KD 255.7mn or 124% compared to 9M-22 of KD 205.8mn.

Al-Humairi added that the higher profits is mainly from increase in total operating income, lower provisions and lower 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). Partly offset by increase in operating expenses and taxation.

He said that financing income has increased by KD 780mn or 98.4% compared to same period last year due to consolidation of AUB during the current period and increase in yield and average profit earning assets.

Net financing income at KD 713.9mn increased by KD 205.4mn or 40.4% compared to same period last year mainly due to increase in financing income by KD 780mn offset by increase in finance cost and distribution to depositors by KD 574.6mn.

Net Operating income at KD 739.8mn increased by KD 276.4mn or 59.7% compared to same period last year; mainly from increase in net financing income by KD 205.4mn, increase in Investment income by KD 124.7mn, increase in Net gain from foreign currencies by KD 58.4mn and increase in fees and commissions by KD 33.1mn offset by increase in operating expenses by KD 141.3mn.

Total Operating Expenses at KD 376mn is KD 141.3mn or 60.2% higher than same period last year primarily due to consolidation of AUB Group and increase due to high inflation mainly in Turkey.

Average Yielding Assets is up by 24.1% compared to FY2022 and 58.8% compared to 9M-22, mainly from the growth in Financing receivables and debt securities.

Looking at provisions and impairments, group total impairment charge for 9M-23 at KD 23.5mn decreased by KD 36.1mn or 60.5% compared to same period last year.

Gross credit provisions charge for 9M-23 amounted to KD 64.6 mn higher by KD 36.8mn compared to KD 27.8mn in 9M-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 9M 2023.

KFH cautious approach towards provisioning have contributed to credit provision balance exceeding ECL required as per CBK IFRS 9 by KD 561mn as of 30 September 2023.

-       Al-Humairi highlighted that total Assets at KD 37.1bn marginally increased by KD 99mn or 0.3% in 9M-23.

-       Net financing receivables at KD 19bn increased by KD 155mn or 0.8%.

-       Investments in debt securities at KD 6.3bn has increased by KD 251mn or 4.1%

-       Additionally, deposits for 9M-23 at KD 21.1bn are higher by KD 46mn or 0.2% compared to FY 2022.

-       The contribution from CASA deposits total group customer deposits as at the end of 9M-23 is 40% and on overall basis group continues to benefits from a large pool of low cost deposits.

•       looking at the key financial ratios which reflects improvement in profitability

-       ROATE increased from 14.54% to 21.78%

-       ROAA increased from 1.49% to 1.88%

-       EPS increased from 19.13fils to 30.81 fils

•       Group NPL ratio reached 1.71% (as per CBK calculation) in 9M-23 .

•       Group CAR ratio as of 30 September 2023 was 16.44%