Kuwait Finance House (KFH) held the Analysts Conference for Q3 2024 with the participation of KFH Group Senior Deputy CEO – Finance, Dr. Shadi Zahran, KFH Group Chief Strategy Officer, Fahad Al-Mukhaizeem, KFH Group Acting CFO and General Manager Financial Control and Regulatory Reporting, Jamal Al-Humairi.

KFH Group Senior Deputy CEO – Finance, Dr. Shadi Zahran commenced the conference by highlighting the Bank’s financial performance up till the end of Q3-2024. He said that KFH has achieved a net profit for its shareholders of KD 482.9 million, reflecting an increase of 4.6% compared to the same period last year. This remarkable performance marks the highest-ever quarterly profits in KFH’s history and in the Kuwaiti banking sector. KFH’s earnings per share up to the end of Q3-2024 reached 29.62 fils, representing an increase of 4.8% compared to the same period last year. ROAE increased from 11.72% to 12.11%. ROAA stood at 1.85%. Net financing income up to the end of the third quarter of 2024 reached KD 835.1 million; an increase of 17.0% compared to the same period last year. And net operating income up to the end of Q3-2024 increased to reach KD 754.0 million; an increase of 1.9% compared to the same period last year.

He added: “KFH has achieved record financial results by the end of the third quarter of 2024, with growth in most of the key financial indicators. This success is attributed to the strong performance and disciplined implementation of KFH's strategy, along with a cautious approach to risk management. The bank has also focused on diversifying the financing portfolio, improving the quality of assets, along with capital optimization enhancing the capital base, and to ensure KFH`s ongoing financial strength and solid creditworthiness.”

Zahran further commented: “Achieving these outstanding financial results was in conjunction with completing the merger of KFH and (formerly) AUBK. This marks the beginning of a new successful phase for KFH. The merger has become a successful model in the region, creating a major financial entity in the Islamic finance industry locally, regionally, and globally. It solidified KFH's position as a benchmark in the industry and sets the stage for its goal to be listed among the top 100 banks in the world.

He went on saying: “In the third quarter of this year, KFH successfully finalized the largest merger in Kuwait's banking history between KFH and AUBK. The integration of operations was accomplished in 6 months, the shortest time frame among similar transactions in the region, while maintaining a high level of efficiency. This achievement supports KFH's role as a leading benchmark for banks in Kuwait and the region. The significant merger has resulted in the establishment of a major financial entity within the Islamic finance sector, extending its influence across local, regional, and global markets. The process of merging and integrating these two institutions has been a notable success, ensuring a seamless transition for customers, employees, and shareholders, without compromising the customer experience. Also, during third quarter 2024, KFH group completed the conversion of AUB-Egypt and AUBUK successfully to sharia compliant banks.”

Zahran affirmed that KFH Group has demonstrated its capability in advancing the future of Islamic finance worldwide by the accelerated and successful conversion of the operations of AUB group to Sharia-compliant banking services. This supports KFH Group's strategy to contribute to expanding the Islamic finance sector on a local, regional, and global scale.

He noted: “Additionally, KFH’s commitment to sustainability is exemplified by the transparent framework aimed at creating a more sustainable banking model that incorporates environmental, social, and governance (ESG) aspects. KFH is continuously progressing on sustainability initiatives, focusing on achieving new milestones and further integrating sustainable practices into operations. KFH’s recent inclusion in the FTSE4Good Index Series and KFH’s "A" rating on the MSCI ESG Index underscores KFH’s dedication to ESG standards.

Zahran pointed out that KFH’s support for Kuwaiti businesses and development plans stems from its significant national role and distinguished economic position as Kuwait's largest bank by market capitalization and the world's second-largest Islamic bank. KFH’ financing activities have diversified across various sectors, including oil, petrochemicals, energy projects, infrastructure, startups, environmentally friendly ventures, and real estate development. KFH’s have been a strategic partner in funding all major development projects.

He stressed KFH’s commitment to upholding its role as a leading example of social responsibility, actively participating in strategic community projects that fulfill its social purpose. As a major banking entity, KFH operates approximately 617 branches across 9 countries, surpassing all other Kuwaiti banks in terms of market capitalization, which reached about KD 12 billion.

With regards to digital transformation, Zahran mentioned that KFH has made remarkable steps achieving global recognition for its efforts. A key focus of its digital development has been the implementation of Artificial Intelligence (AI) across several critical areas, including cybersecurity and risk management, as well as Robotic Process Automation. This has been accomplished through collaborations with Fintech companies to enhance systems security, efficiency, and products and services. Additionally, KFH has invested in the infrastructure of flexible smart systems and programs designed to provide customers with a seamless banking experience. The success of Tam Bank, Kuwait’s first Shariah-compliant digital bank, along with the digital payment platform “Zaheb” for merchants, proves KFH's commitment to delivering leading-edge digital financial solutions.

He indicated that KFH continues to receive esteemed international ratings and awards, strengthening its position as a top financial institution in the region. KFH have been awarded Kuwait's Best Bank, Kuwait's Best Digital Bank – Tam Digital Bank, and Kuwait's Best Bank for ESG by Euromoney.

Furthermore, KFH were recognized as the top listed company in Kuwait and ranked tenth in the Middle East by Forbes Middle East in their 2024 ranking of the top 100 listed companies. KFH has also ranked first in the Kuwaiti banking sector in terms of growth and return on risk for this year’s Top 100 Arab Banks Rankings from The Banker. These accomplishments, along with numerous other international awards, further establish KFH's significant role in the Islamic finance industry.

KFH Group Chief Strategy Officer - Fahad Al-Mukhaizeem

Meanwhile, KFH Group Chief Strategy Officer, Fahad Al-Mukhaizeem discussed the key highlights of the current operating environment in Kuwait, along with an overview of KFH, its strategic direction, and the results for the third quarter of 2024.

Al-Mukhaizeem said: “According to the latest issued data, Kuwait saw an easing of the headline inflation rate driven by reductions in housing and transportation costs. By the end of September 2024, the Kuwaiti Crude Oil Price stood at USD 74.3 per barrel, reflecting a decrease of over 24% compared to the same period last year.  Nevertheless, the current developments suggest potential for economic recovery and stabilization in the coming year where GDP growth is expected to reach 3.8% in 2025.

The Central Bank of Kuwait (CBK) has announced a reduction in the discount rate of 25 basis points, lowering it from 4.25% to 4.00%, effective September 19, 2024. This decision comes as a result of careful observation of both domestic and international economic conditions and marks the conclusion of the monetary tightening cycle that began in March 2022 by many global central banks.

He added: “In terms of credit ratings, Kuwait maintains a robust profile with an A+ rating and a stable outlook from Standard & Poor's, an A1 rating from Moody's, and an AA- rating from Fitch, all with stable outlooks.

Al-Mukhaizeem said: “Kuwait has an opportunity to implement key economic reforms that can lead to a more diverse and resilient economy. Possible actions include enhancing the business environment, simplifying regulations, improving transparency, and diversifying revenue sources.  This will have a positive impact which will attract foreign investment and stimulate private sector growth paving the way to a more dynamic economy that thrives beyond oil dependency.

He further noted that within the banking sector, KFH also continues to strengthen its position, with a long-term credit rating of A from Fitch and A2 from Moody's, both with stable outlooks. Additionally, KFH is proud to announce that it has been recently recognized as Kuwait's Best Bank and Kuwait’s Best Digital Bank by Euromoney Magazine. KFH has been also awarded an "A" rating by MSCI for its exemplary performance in environmental, social, and governance (ESG) practices. This rating underscores KFH's commitment to sustainable finance and its leadership in integrating ESG principles into its operations and strategic initiatives.

Al-Mukhaizeem added: “As of the end of Q3-2024, KFH ranks first among the largest listed companies on Boursa Kuwait, with a market capitalization of approximately KWD 11.9 billion. This solid performance underscores our commitment to delivering value to our shareholders and clients alike.”

KFH Group Acting CFO and General Manager Financial Control and Regulatory Reporting -  Jamal Al-Humairi

KFH Group Acting CFO and General Manager Financial Control and Regulatory Reporting, Jamal Al-Humairi presented the financial performance of KFH group for the nine months period ended 30 September 2024.

He said: “The Group has achieved Net Profit After Tax attributable to Shareholders for the first nine months ended 30th September 2024 of KD 482.9mn higher by KD 21.4mn or 4.6% compared to 9M-23 of KD 461.5mn.

Al-Humairi explained that the higher profits are mainly from the increase in net operating income and lower provisions. Partly offset by higher 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) and increase in operating expenses.

He added: “Financing income has increased by KD 558.3mn or 35.5% compared to same period last year mainly due to increase in yield. Net financing income at KD 835.1mn increased by KD 121.2mn or 17% compared to same period last year mainly due to an increase in financing income by KD 558.3mn offset by increase in finance cost and distribution to depositors by KD 437.1mn.

Looking at the operating income profile, Al-Humairi said that the contribution of net financing income to operating income increased from 64% in 9M-23 to 70% in 9M-24 due to an increase in net financing income and decline in investment income.

Increase in fees and commissions by KD 26.3mn is mainly related to increase in transaction fee income mainly from our subsidiary in Turkey.

Al-Humairi noted that Group NFM for 9M-24 at 2.97% is higher by 28bps compared to 9M-23. Average yield improved by 225bps while average COF also increased by 197bps. This was the result of both rate hikes and repricing of assets and liabilities during the period.

He added: “Looking at provisions and impairments, group total impairment charge decreased of KD (17.3)mn compared to 9M-23.

Al-Humairi confirmed that KFH cautious approach towards provisioning have contributed to financing provision balance exceeding ECL required as per CBK IFRS 9 by KD 514mn as of 30 September 2024.

As for the Net Monetary Loss, application of IAS-29 on the financial statements of KTPB resulted in recognition of net monetary loss of KD 117.8mn in the current period an increase of KD 38.6mn compared to 9M 2023 due to inflation and significant maturity of CPI linked sukuk during last quarter of 2023.

Financial position:

Total Assets at KD 36.3bn decreased by KD (1.8)bn or (4.6)% in 9M-24.

Net financing receivables at KD 19.1bn decreased by (1.5)% mainly due to sale of KFH Bahrain and foreign currency volatility during the period. Excluding this impact, group net financing receivable increased in 9M 2024 by 5.6%. Investments in debt securities at KD 6.4bn.Deposits for 9M-24 at KD 19.9bn.

The contribution from CASA deposits to total group customer deposits as at the end of 9M-24 is 42.8% and on an overall basis the Group continues to benefit from a large pool of low-cost deposits.

Contribution of customer deposits to total funding is 69.6% compared to 71.7% in 2023.