“Local banks head for increasing their capital in compliance with the requirements of the Central Bank of Kuwait (CBK) in relation to Basel III accord that requires larger capital, especially in light of the intention to exclude the real estate collateral from Basel III. By 2018, Real estate collateral will be entirely excluded when calculating capital adequacy, which therefore results in higher capital demands for banks” said Group Chief Executive Officer at Kuwait Finance House (KFH), Mazin Saad Al-Nahedh.
He added in an interview with Sky News TV conducted at KFH headquarters, that capital adequacy ratio (CAR) for Kuwaiti banks is 13%, indicating that this ratio is higher in some banks such as KFH for its size and reaches 15%. KFH’s CAR reaches 17% as of end Q1 2016.
Al-Nahedh illustrated that KFH had taken several measures to improve capital among of which exiting some capital-consuming assets, such as reducing its stake in ALAFCO which resulted in saving 1% of KFH capital. KFH is moving forward toward optimally using the capital.
The government started the process of sovereign debt issuance which contributes in absorbing the liquidity surplus for the banks, noting that there are other attributes for investment such as financing the mega projects which is a major attribute for KFH to make use of excess liquidity.
He said that Islamic banks account for 40% to 45% of Kuwait's banking assets. The Islamic banks are growing faster than the conventional ones and witnessing increasing demands. He indicated that the number of Islamic banks in Kuwait reached 5 and the Islamic finance industry is witnessing considerable improvement especially in terms of service quality and innovation in products and services.
Al-Nahedh foresaw the provisions for the second quarter to be the same of that of the first quarter. This is attributed to the bank’s endeavors to improve asset quality and lower the NPLs to less than 2% in collaboration with the CBK.
Moreover, Al-Nahedh reiterated that KFH focuses on reinforcing its market share in the markets it operates spanning Turkey, Bahrain, Malaysia and Saudi. This can be achieved by rendering high end products and services. KFH pursues investment policy of diversifying portfolios and mitigating risk.
He stressed KFH’s expansion efforts in Europe through KT Bank AG, clarifying the growth potentials in the German market as it encompasses 4 million Muslims, of whom 3 million are Turks, which are potential customers for KFH-Turkey.
He said that KFH-Turkey is achieving outstanding results thanks to the economy diversification that allows the banks to have wider financing options to encompass sectors of construction, textiles, food and other sectors that incarnate the genuine economy.