Acting Group Chief Executive Officer (GCEO) at KFH- AbdulWahab Al-Roshood, said that KFH has, by the grace of Allah, reported a net profit of KD 101.2 Million until end of Q3 of 2020 for KFH shareholders; a decrease of 46.9% compared to the same period last year.
He added during Earnings Webcast Q3-2020, that earnings per share until end of Q3-2020 reached 13.31 fils; a decrease of 47.1% compared to the same period last year.
Net financing income until end of Q3-2020 reached KD 450.5 Million; an increase of 13.9% compared to the same period last year.
Cost to income ratio dropped to reach 35.5% as of Q3-2020, compared to 36.1% for the same period last year.
Total assets rose to reach KD 21.0 Billion, i.e. an increase of KD 1.6 Billion or 8.1% compared to end of last year 2019.
Financing portfolio until end of Q3-2020 reached KD 10.1 Billion, i.e. an increase of KD 794 Million or 8.5% compared to end of last year 2019.
Investment in Sukuk until end of Q3-2020 reached KD 3.2 Billion; an increase of KD 928 Million i.e., a growth of 40.5% compared to end of last year 2019.
Depositors’ accounts reached KD 14.9 Billion i.e., an increase of KD 1.4 Billion or 10.0% compared to the end of last year.
Al-Roshood explained that the capital adequacy ratio reached 16.25% which is above the minimum required limit.
He said “Despite of the negative economic trends, the bank’s recent financial results confirm the successful strategy of KFH Group, its solid financial position, and its ability to handle these exceptional market conditions. This has been achieved with the support of a conservative policy and the efficiency of KFH’s prudent approach to risk management.”
Al-Roshood indicated that profit rates fell in the first nine months of 2020 because of the challenging operating environment as a result of the pandemic, and the additional precautionary provisions taken by KFH to maintain the quality of financings and build solid buffers against crises.
With regards to the Acquisition, he said: “we have disclosed to the regulatory authorities and the market the latest developments in this regard. All these disclosures were published via the official website of Boursa Kuwait and any new development will be updated as and when it comes available.”
Fahad Al-Mukhaizeem- Group Chief Strategy Officer (GCSO)
Meanwhile, Group Chief Strategy Officer (GCSO) at KFH, Fahad Al-Mukhaizeem, highlighted the Kuwait operating environment with an overview on KFH. He also shared KFH's strategy, as well as Q3-2020 results.
Al-Mukhaizeem said that during the third quarter, Kuwait witnessed a sad event with the passing of His Highness the Amir of Kuwait Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, may Allah have mercy on his soul. It was a great loss to the Kuwaiti people as well as the international and regional community. Kuwait witnessed a smooth transition of authority, with the ascension of His Highness Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah as the Emir of Kuwait and His Highness Sheikh Mishal Al-Ahmad Al-Jaber Al-Sabah as the new Crown Prince, which brought the markets back to their recovery.
For interest rates, Al-Mukhaizeem explained that the Central Bank of Kuwait kept interest rate at 1.5% after the last cut of 100 basis points on the 16th of March 2020.
He added “On the other hand, according to the IMF latest forecasts, GDP growth is expected to witness a decrease in 2020 compared to a slight growth in 2019.”
Al-Mukhaizeem confirmed that “KFH” enjoys a high creditworthiness, indicating Fitch Ratings Affirmed Kuwait Finance House Long-Term Issuer Default Rating at 'A+' with a Stable Outlook, and Moody’s assigned A2 long-term deposit rating with a Stable Outlook. In addition, KFH Group has recently been named the number one safest Islamic Bank in the GCC by Global Finance Magazine.
He indicted that “KFH” has made a marked progress in the digital transformation strategy, adopting the state-of-the-art technological financial services “FinTech” and applying AI and robotic technology in banking transactions. This is a continuous process with long term benefits and efficiencies.
Further, he said that “KFH” continues to offer many advanced digital services on the mobile app, KFHonline, Web, XTMs and through various alternative channels including KFH Go “smart branches” in several areas of Kuwait. This helps enhance the customer’s digital experience as a leader in the digital development of the banking industry.
He emmphasiozed that KFH continues supporting the national economy, financing mega-projects (such as Oil and Gas) and contributing to the development plans and projects in Kuwait and the region.
Shadi Zahran, Group Chief Financial Officer (GCFO).
Group Chief Financial Officer (GCFO)- Shadi Zahran, highlighted the financial performance of Q3-2020. He explained that the Group has achieved Net Profit After Tax (NPAT) attributable to Shareholders for the period ended 30th September 2020 of KD 101.2mn lower by KD (89.3)mn or (46.9)% compared to 9M-19 of KD 190.5mn. The lower profits is mainly due to higher provisions including precautionary provisions on potential COVID 19 consequences considering the uncertainty from current unprecedented regional and global situation. We will explain later in this presentation on provisions.
Zahran added that the net financing income (NFI) has increased by KD 54.9mn or 13.9% compared to last year mainly on account of lower COF improved significantly in Kuwait and Turkey. The decrease in COF is mainly due to decrease in benchmark rates across the globe, lower distributable profits impacting distribution to depositors. In addition to the improvement in CASA deposits at Kuwait and group level.
He indicated that the net Operating income at KD 401.8mn increased by almost KD 9mn or 2.2% compared to same period last year; the increase is mainly from Net Financing Income by KD 54.9mn and Net gain from FX by KD 23.6mn offset by the decrease in Investment income by KD (57.6)mn and fees and commissions by KD (9.8)mn as a result of lower business and investment activities due to COVID 19 lockdown.
Zahran said that the decrease in investment income by KD (57.6)mn is mainly attributable to prior year gains, which led to decrease in investment income to total operating income to reach 6 % compared to 16% last year. However, the other non-yielding income contribution remained at 20 - 22%.
As a result the non-financing income dropped from KD 219.6mn last year to KD 172.3mn lower by )21.5%(
Total Operating Expenses at KD 221.0mn has decreased by KD (1.2)mn or (0.5)% compared to same period prior year.
Worth to mention the continuous efforts at all Group entities for containment of costs towards cost optimization and rationalization.
He said that cost to income ratio improved by a further 63bps to reach 35.48% due to increase in operating income, while maintaining the group operating expenses at the same level.
He added that at KFH-Kuwait, C/I ratio at 33.95% which is below both the local Islamic Banks average of 49.3% and local conventional Banks average of 40.5% (calculated from published financials for H1-20).
Zahran illustrated that Average Yielding Assets is up by 8.3%compared to Dec-19 and 9.0% compared to 9M-19, resulted from the growth in both Financing receivables and Sukuk. (avg. YoY financing receivables is up by KD 0.5bn and avg. Sukuk is up by KD 0.9bn)
Group NFM at 3.22% shows 8bps increase over 9M-19 average of 3.14%.
Average Yield decreased by (89)bps due to drop in DR by CBK and Fed rates. However, average COF decline by 97bps due to increase in CASA deposits in the major entities and drop in distributable profits.
with regards to provisions, he expalined that the group total provisions and impairment charge increased by KD 100.9mn or 69.6% to reach KD 245.9mn.
Higher financing receivables and investments provisions are mainly on account of conservative provisions on potential consequences of COVID 19.
Net Operating Income (before provisions) from banking activities improved by 6% to form 98% of Group Net Operating income.
Total Assets at KD 20.96bn increased by KD 1.6bn or 8.1% over 9 months period, (10.3% compared to Sep 19).
Financing receivables at KD 10.1bn increased by 8.5% over 9 months period (8.3% compared to Sep 19).
Zahran said that Significant portion of the corporate banking business growth in financing receivables was during the first quarter “pre-COVID-19” and contributed mainly from Kuwait and Turkey while third quarter witnessed more growth in Retail banking business.
Growth in financing receivables was mainly contributed from Kuwait, Turkey, then Bahrain, while other demonstrated slower growth with focus on asset quality.
Investments in Sukuk at KD 3.2bn increased by KD 0.9bn or 40.5% since Dec-19 (48.4% compared to Sep 19) with major growth contribution from Kuwait Turk Participation Bank in Sovereign Sukuk.
The growth in Sukuk portfolio is a response of growth in deposits in all markets in which we operate where limited good asset quality financing opportunities are available within the Group’s overall Risk appetite.
The group achieved significant growth in deposits in 9M-20 of KD 1.4bn or 10.0% (12.6% compared to Sep 19) with contribution from all banking operations reflecting depositors’ confidence in KFH group.
He added “Additionally, the favorable deposits mix continues to show very healthy contribution from CASA deposits which now represents 52.4% of total group deposits as at the end of September 2020 compared to 44.3% at the end of 2019.”
It is also worth to mention that KFH Kuwait dominates the saving accounts with market share of 40.4% (as per CBK latest published reports, August-20).
Customer deposits as a percentage of total deposits at 82.2% continues to improve reflecting healthy funding mix and shows robust liquidity.
In the last slide looking at the key performance ratios, the group compared to last year same period is as follow:
- ROAE from 13.41% to 6.94%.
- ROAA from 1.47% to 0.87%.
- C/I improved from 36.11% to 35.48%, and,
- EPS from 25.15 fils to 13.31 fils.
NPL ratio increased to reach 2.35% (as per CBK calculation) in Sept-20 compared to 1.88% for 2019.
Coverage ratio (provision) for Group is 209.7% in Sept-20 compared to 231.5% for 2019.
Coverage ratio considering the secured amounts (provision + collateral) for Group is 261.6% in Sept-20 compared to 284.5% for 2019.