Group General Manager Private Banking at Kuwait Finance House (KFH), Waleed Khaled Mandani said that Kuwaiti Banks are the best regionally and globally in in setting aside high levels of precautionary provisions, which ensures immunity of the banking sector, while constitutes solid cushion against any risk. “This comes in line with the instructions and directives of the Central Bank CBK and the full compliance with the international regulations such as Bazel III accord” he added.
Speaking to Sky News TV, he stated that the Kuwaiti Banks have enough precautionary provisions to hedge the exposure to the real estate market that will not lead the banks to set aside any additional provisions in the coming period.
Mandani affirmed the stability and quality of KFH’s real estate portfolios in light of the pace of decline in the real estate market, indicating that KFH continues its methodology of offering a vast array of high-end services to clients including the real estate assessment, management, supervision and construction work, yet it diversifies the channels of services to encompass banking, financial and real estate services.
He said that the banks’ exposure to the real estate sector have become more prudent in line with the CBK’s requirements and in accordance with the Capital Adequacy Ratio CAR Bazel III accord that requires larger capital, especially in light of the intention to exclude the real estate collateral from Basel III accord.
He illustrated that offering credit facility is based now on assessing the cash flow of the client, his solvency and his obligation to pay rather than the value of the property he possesses, which contributes in mitigating risk in KFH’s real estate portfolios.
“The decline in the real estate trading in Kuwait comes on the back of the drop in oil prices, the geopolitical circumstances, and the predictions of the global interest rates. The Kuwaiti market relies on two major sectors; the stock and the real estate markets” he continued, indicating that the economic cycle of real estate is long and might take years unlike the cycle of the stock market. 2016 witnessed slower pace of real estate trading compared to 2015, yet investors’ appetite is up as this sector records high returns ranging between 6.5-8.5% according to the category of the property.