Kuwait Finance House (KFH) held the earnings webcast for highlighting the Bank’s financial performance during Q1-2024.

AbdulWahab Al-Roshood, Acting Group Chief Executive Officer

AbdulWahab Al-Roshood, Acting Group Chief Executive Officer at KFH said “By the grace of Allah, KFH has reported a record net profit for its shareholders of KD 162.8 million for the first quarter of 2024, representing an increase of 0.5% compared to the same period last year and an increase of 32.4% compared to Q4 2023.”

Al-Roshood added that the first quarter results are mainly from core banking earnings, as last year’s first quarter includes investment income of KD 74.3mn that didn’t occur in this period. Earnings per share for the first quarter of 2024 reached 10.24 fils; an increase of 1% compared to the same period last year. KFH's Q1 2024 financial statements demonstrate financial soundness and growth. This is evident in strong financial indicators, such as profitability, value and quality of assets, capital adequacy, and liquidity ratios.

KFH is focused on achieving sustainable profitability by pursuing a strategy of innovation and digital transformation to create added value. The bank also expands its customer base and promotes harmony among its Group subsidiaries across 12 geographies, including Kuwait, Bahrain, Turkiye, Egypt, the UK, Germany.

Al-Roshood pointed out that on 22 February 2024, the Group completed the business merger between KFH Kuwait and AUB Kuwait and announced the customer day one immediately after the national days on Feb 27th. The integration of the two banks in Kuwait is expected to bring significant synergies to the group.

He added: “on 31 March 2024, KFH Kuwait and Al Salam Bank B.S.C. have entered into an agreement for the sale and purchase of the entire issued share capital of Kuwait Finance House (Bahrain) B.S.C. (c) (‘KFH Bahrain’). The completion of the transaction is subject to obtaining the required regulatory approvals.”

He confirmed KFH’s commitment to providing financing to companies and mega projects locally and regionally, as well as supporting SMEs and micro-enterprises. During the first quarter of the year, KFH successfully implemented several financing projects. Notably, KFH acted as the lead financier for the Beyout Plus project, a KD 100 million complex with a commercial area of 250,000 square meters in Mutlaa Residential City.

Al-Roshood explained that KFH is leveraging cutting-edge technologies in the banking industry such as robotics and AI to streamline back-office operations, utilizing big data analytics for innovating products and services that meet customer’s aspirations. KFH maintains its excellence in digital transformation strategy and leadership in offering innovative digital services and financial solutions. These solutions are available through KFH Online, XTMs, and KFH-GO branches. KFH’s launch of TAM, the first Islamic digital bank in Kuwait and Zaheb the digital payment platform are just a few examples of KFH's commitment to providing a convenient and exceptional banking experience for its customers.

“KFH's prominent role in social responsibility emphasizes its efforts in reinforcing strategic social initiatives with significant added value. These initiatives include an additional contribution of KD 7 million during the current period to help defaulting debtors in coordination with the Ministry of Social Affairs. Additionally, KFH partnered with the Kuwait Food Bank, pledging KD 1 million to support underprivileged families in Kuwait”, Al-Roshood said.

He added that KFH strengthens its leadership position by prioritizing sustainability within its core business in Kuwait and its subsidiaries. The bank has a proven track record in leading and arranging green Sukuk issuances. It has also financed and participated in numerous environmentally friendly projects and deals. These actions align with KFH's vision of providing sustainable financial solutions and creating positive social and economic impacts.

Moreover, KFH maintained its leading position in the primary and secondary markets for the Sukuk issuance of the International Islamic Liquidity Management (IILM) Sukuk Program. KFH achieved the top rank amongst the IILM primary dealers. Further KFH successfully issued a 5-year Senior Unsecured Sukuk of US$1 bn, which was the first issue under KFH US$ 4 bn Sukuk Program.

Eng. 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 Q1-2024 results.

Al-Mukhaizeem said: “As part of the ongoing monitoring of the economic, monetary and banking indicators and the geopolitical as well as the global trends, the last update of Kuwait’s Central Bank (CBK) discount rate in 2023 was an increase of 75 basis points to reach 4.25%. The CBK's decisions on the formulation and implementation of monetary policy are informed by a gradual and balanced approach aimed at consolidating monetary and financial stability of the CBK-regulated entities, preserving attractiveness of the national currency, and providing an environment supportive of sustainable economic growth.”

Al-Mukhaizeem pointed out that Kuwait's GDP is estimated to reach KWD 40.8 billion in 2024, according to the most recent International Monetary Fund (IMF) report. The annual average inflation rate is expected to decline to 3.08% in 2024.  Kuwait’s crude oil price stood at USD 86.32 per barrel as of the end of March 2024, up by 8.9% from the same period the previous year.

Fitch Rating Agency affirmed Kuwait's stable outlook along with a rating of - AA which is supported by its exceptionally strong fiscal and external balance sheets.

Kuwait's economic outlook in 2024 is driven by the need to implement economic reforms, diversification, becoming a financial and commercial center, and increasing attractiveness for foreign investors in the strategic sectors including information technology, renewable energy, electricity and water, tourism, healthcare, and education.

Al-Mukhaizeem explained that Kuwait has solid economic fundamentals going into 2024, due to improved financial balances as well as increased foreign investments. Since late 2023, there have been opportunities for economic policymakers to support long-term, sustainable growth; but there are some challenges that local markets need to overcome.

In terms of the economy, Kuwait anticipates opportunities in 2024 notably in terms of diversification, strategic investments, and financial and structural changes. A four-year government program is an example of initiatives essential for boosting the economy and drawing investment.  Kuwait's improved financial and external balances mean that its financial prospects are still favorable overall.

Al-Mukhaizeem said that KFH continued its strategy, resulting in achieving stable financial performance and launching numerous products, services and initiatives that contributed to maintaining KFH’s leadership and meeting customers’ needs and satisfaction as one of our ultimate objectives. KFH succeeded in attaining the key objectives of its strategy, overcoming the challenges of the operational environment.

KFH’s long term credit rating stands at A by Fitch with Stable Outlook, and at A2 by Moody’s with Stable outlook.

He added that KFH ranked first among the largest listed companies on Boursa Kuwait in terms of a market capitalization approximately KWD 12.1 BLN as of the end Of March 2024. KFH has recently been recognized with five prestigious awards at the 16th Annual EMEA Finance Middle East Banking Awards. This achievement highlights KFH's leadership in the banking industry, its commitment to providing exceptional financial services and products, innovative solutions, and the positive impact of its social responsibility initiatives. The awards recognize KFH's business quality, performance efficiency, and excellence that cater to the evolving needs of its diverse clientele. KFH secured the following accolades: Best Islamic Bank - Middle East, Best Bank – Kuwait, and Best Islamic Bank – Kuwait, Best Product Launch (Zaheb)- Middle East, and Corporate Social Responsibility – Middle East Award.

Jamal Al-Humairi, Acting Group Chief Financial Officer (AGCFO) and General Manager Financial Control and Regulatory Reporting

Jamal Al-Humairi, Acting Group Chief Financial Officer (AGCFO) and General Manager Financial Control and Regulatory Reporting presented the financial performance of KFH group for the first quarter of 2024.

He said that the Group achieved Net Profit After Tax attributable to Shareholders for the quarter ended 31st March 2024 of KD 162.8mn higher by KD 0.7mn or 0.5% compared to Q1-23 of KD 162.1mn.

The higher profits are mainly from the increase in total operating income and lower provision. 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.

Al-Humairi pointed out that financing income has increased by KD 182.3mn or 36.8% compared to same period last year mainly due to increase in yield.

Net financing income at KD 263.4mn increased by KD 37.4mn or 16.6% compared to the same period last year mainly due to an increase in financing income by KD 182.3mn offset by an increase in finance cost and distribution to depositors by KD 144.9mn.

Looking at the operating income profile, Al-Humairi said that the contribution of net financing income to operating income increased from 60% in Q1-23 to 67% in Q1-24 due to an increase in net financing income and decline in investment income.

The increase in net gains from foreign currencies by KD 32.5mn is mainly due to higher FX trading income mainly from Kuwait Turk due to increase in volume and margin as a result of volatility in Turkish Lira during the period and AUB FX revaluation gain from AUB Egypt.

The increase in fees and commissions by KD 15.4mn is mainly related to the increase in transaction fee income due to increase in card income and increase in arrangement fee.

Group NFM for Q1-24 at 2.89% is higher by 33bps compared to Q1-23. Average yield improved by 225bps while average COF also increased by 192bps. This was the result of both rate hikes and repricing of assets and liabilities during the period.

Looking at provisions and impairments, he pointed out that the Group total impairment charge for Q1-24 was a reversal of KD (4.6) mn, a decrease of KD (28.2)mn compared to Q1-23.

Al-Humairi confirmed that KFH’s cautious approach towards provisioning has contributed to financing provision balance exceeding ECL required as per CBK IFRS 9 by KD 556mn as of 31 March 2024.

Moving to the Net Monetary Loss, he said that the application of IAS-29 on the financial statements of KTPB resulted in recognition of net monetary loss of KD 51.5mn in the current period an increase of KD 42.4mn compared to Q-1 2023 due to increase inflation and significant maturity of CPI linked sukuk.

Moving to financial position, Al-Humairi added that net financing receivables at KD 18.9bn decreased by KD (536) mn or (2.8) % mainly due to classification of net financing receivable of KFH Bahrain as part of assets held for sale and foreign currency volatility during the period. Excluding this impact, group net financing receivable increased in Q-1 2024 by 3.7%.

Investments in debt securities at KD 6.3bn has decreased by KD (708)mn or (10.1)%

The contribution from CASA deposits to total group customer deposits as at the end of Q1-24 is 43.4% and on an overall basis group continues to benefit from a large pool of low-cost deposits.

Contribution of customer deposits to total funding is 70% compared to 71.7% in 2023.