AbdulWahab Al-Rushood, Acting Group Chief Executive Officer at Kuwait Finance House (KFH) highlighted the Bank’s financial performance during Earnings Webcast Q1-2022.

He said that KFH reported net profit for KFH shareholders of KD 69.5 Million for Q1-2022; an increase of 39.0% compared to the same period last year.

Al-Rushood added that earnings per share for Q1-2022 reached 7.55 fils; an increase of 39.0% compared to the same period last year. Net financing income for Q1-2022 reached KD 159.0 Million; an increase of 3.5% compared to the same period last year. Financing receivables as of the end of Q1-2022 reached KD 11.9 Billion, i.e. an increase of KD 496.5 million or 4.4% compared to end of year 2021. Investment in Sukuk as of the end of Q1-2022 reached KD 3.0 Billion; an increase of KD 228.6 million or 8.4% compared to end of year 2021. Total assets as of the end of Q1-2022 reached KD 22.2 Billion i.e., increase of KD 375.3 million or 1.7% compared to end of year 2021. Depositors’ accounts as of the end of Q1-2022 reached KD 15.8 Billion. Shareholders’ equity as of the end of Q1-2022 reached KD 1.9 Billion

Al-Rushood indicated KFH has successfully achieved solid financial results and growth in all key financial indicators for the first quarter 2022 despite local and global economic challenges. This emphasizes the efficient strategy and plans set by KFH.

He mentioned that KFH maintained positive ratios in terms of ROA, ROE, profitability, and asset quality as well as the coverage ratio of provisions, indicatng KFH`s competitive performance on a Group level attracted more customers and investors.

Al-Rushood said that KFH enjoys high liquidity ratios, creditworthiness and a diversified financing portfolio that support its business growth and enhances the investment and financial capabilities of the Bank in Kuwait and the countries where Group subsidiaries operate (Turkey, Bahrain, Germany, Malaysia and Saudi Arabia).  KFH is the largest Islamic bank in Kuwait and the second-largest bank overall, with a market share of 22.4% by local assets at end-2021.

He reiterrated that KFH proved its CSR leadership through millions in contributions to many strategic social initiatives, in addition to that KFH signed agreements with the Kuwait Red Crescent Society to execute several relief, medical, and humanitarian projects inside and outside Kuwait leading to KFH winning the "Corporate Social Responsibility in the Middle East" Award from EMEA Finance magazine.

Shadi Zahran, Group Chief Financial Officer

Meanwhile, Group Chief Financial Officer- Shadi Zahran presented the financial performance of KFH group for the first quarter of 2022.

He said that the Group has achieved Net Profit After Tax attributable to Shareholders for the quarter ended 31st March 2022 of KD 69.5mn higher by KD 19.5mn or 39% compared to Q1-21 of KD 50.0mn.  The higher profit is mainly from increase in total operating income and lower provisions

Zahran added that financing income has witnessed an increase by KD 5.6mn or 2.5% compared to same period last year mainly due to increase in average profit earning assets.

Net financing income at KD 159mn increased by KD 5.4mn or 3.5% compared to same period last year mainly due to increase in financing income while COF remained at Q1-21 level of KD 71.2mn.

Net Operating income at KD 148.2mn increased by KD 20.6mn or 16.2% compared to same period last year; mainly from higher net gain from foreign currencies by KD 15.1mn and Investment income by KD 8.4mn.

Zahran highlighted that contribution of net financing income declined from 76% in Q1-2021 to 70% in Q1-2022. This is mainly due increase in contribution of investment income and other non-yielding income as compared to net financing income.

He pointed out that non-financing income at KD 69.1mn is 38.9% higher compared to same period last year due to higher net gains from foreign currencies and investment income.

He explained that increase in net gains from foreign currencies by KD 15.1mn is due to higher FX trading income mainly from our subsidiary in Turkey due to the increase in volume as a result of volatility in Turkish Lira during the period while increase in investment income by KD 8.4mn is mainly due to lower losses incurred on Islamic derivative transactions (mainly currency swaps) entered by our subsidiary Kuwait Turk to fund TL short position.

Zahran noted that total Operating Expenses at KD 79.9mn are KD 4.2mn or 5.5% higher than same period last year mainly due to increase in staff cost by KD 3.6mn and G&A by KD 2mn. Increase is attributable to increase business activity and operations.

Cost to income ratio for Q-1 2022 was 35.04% compared to 37.26% for Q-1 2021. Reduction in C/I ratio is mainly due to increase in operating income by KD 24.8mn or 12%.

C/I ratio of KFH-Kuwait for Q-1 2022 was 30.40% which is below both the local Islamic Banks average of 44% and local conventional Banks average of 41.5% (calculated from published financials for 2021)

Average Yielding Assets is up by 4% compared to FY2021 and 7.6% compared to Q1-2021, mainly from the growth in Financing receivables (avg. financing receivables is up by KD 0.6bn compared to 2021 and by KD 1.1bn as compared to Q1-21)

Group NFM for Q-1 2022 at 3.14% is lower by (1)bps compared to Q-1 2021. Average Yield decreased by (4)bps while average COF declined by 3bps. However, comparing to Full Year-2021, Zahran said that NFM for the current period is higher by 22bps. This is due to increase in average yields mainly in Turkey with the impact of inflation linked Turkish Sukuk in addition to the positive impact resulted from increase in benchmark rates.

He indicated impact of increase in benchmark rates on COF, was mitigated due to better liquidity management and group benefitting from large pool of CASA deposits.

Zahran mentioned that the group total impairment charge decreased by KD 15.7mn or 28% to reach KD 40.4mn for Q1-22 due to lower impairment charge on credit as a result of improvement in economic conditions in 2022.

Credit provisions charge net of recoveries for Q1-22 amounted to KD 20.8mn lower by KD 27.1mn compared to KD 47.9mn in Q1-21.

Impairment related to investments and others for Q1-22 amounted to KD 19.6mn, an increase of  KD 11.4mn compared to charge of KD 8.2mn recorded in Q1-21.

Zahran emphasized that KFH adopts cautious approach towards provisioning. This has contributed to credit provision balance exceeding ECL required as per CBK IFRS 9 by KD 389mn as of 31 March 2022.

He mentioned that Total Assets at KD 22.2bn increased by KD 0.4bn or 1.7% in Q1-22.

Net financing receivables at KD 11.9bn increased by 4.4%.

Growth in financing receivables is mainly in Kuwait in both; Corporate and Retail while growth in Turkey suffered from 21.3% devaluation of Turkish Lira during the current period. Overall growth in financing receivable in Q-1 2022 without impact of TL devaluation was around 7.2%.

Investments in Sukuk at KD 3.0bn is up KD 0.2mn or 8.4% during Q1-22.

Deposits as of end of March 2022 stood at KD 15.8bn which is marginally lower by KD (0.1)bn or (0.5)% compared to Dec 2021 level. This was due to impact of Turkish Lira devaluation and maturity of certain corporate deposits. Growth in deposits without impact of decline in Turkish Lira was 1.5%.

Zahran explained that the group continues to maintain favorable deposits mix with healthy contribution from CASA deposits at 54.0% of total group deposits as at the end of Q1-22.

Customer deposits as a percentage of total funding at 83% reflects healthy funding mix and shows robust liquidity.

Zahran noted that all key performance ratios have improved due to improvement in profitability as explained earlier.

• ROAE from 10.67% to 14.90%
• ROAA from 1.17% to 1.61%
• C/I ratio from 37.26% to 35.04%
• EPS from 5.43 fils to 7.55 fils

He said that NPL ratio improved to reach 1.43% (as per CBK calculation) as of 31 March 2022 compared to 1.60% as of 31 December 2021. Provisions Coverage ratio for Group is 349% as of 31 March 2022 compared to 326% as of 31 December 2021.

Fahad Al-Mukhaizeem, Group Chief Strategy Officer

Meanwhile, Fahad Al-Mukhaizeem, Group Chief Strategy Officer highlighted the Kuwait operating environment with an overview on KFH's strategy.

He added that due to the uncertainty with the outbreak of the war in Europe between Russia and Ukraine, The International Monetary Fund (IMF) reduced its growth forecast on the global economic outlook from 4.4% to 3.6% for 2022. The Middle East region remains a region strongly correlated with the oil market conditions. Since it includes many oil and gas exporting countries. The IMF expects the Middle East region to grow at 4.6% in 2022 because it is a year in which oil prices are booming. IMF expects Kuwait GDP growth to reach 8.2% in 2022, which is the highest growth rate among all the GCC countries.

Al-Mukhaizeem added that the Central Bank of Kuwait raised its key discount rate by 25bps to 1.75% on March 16th  2022, tracking a rise in the Federal Reserve funds rate.

Kuwait's Long-Term Issuer Default Rating (IDR) remained solid as Moody’s rating was fixed at “A1” with a stable Outlook (Sep. 2020), and S&P affirmed at “A+” with a negative Outlook (April. 2022), while Fitch rates Kuwait at “AA-” with Stable Outlook (Jan 2022).

He pointed out that KFH’s long term credit rating stands at “A” by Fitch with Stable Outlook, and at A2 by Moody’s with Stable outlook. In addition, KFH Group was recently named as the Best Islamic Financial Institution in the World and in the Middle East by Global Finance Magazine, and Best Treasury & Cash Management Banks in Kuwait by Global Finance Magazine.  Over the quarter KFH led the premier market at Boursa Kuwait with the highest market capitalization. 

Al-Mukhaizeem said that KFH is moving forward with its digital transformation efforts and offering unique digital financial solutions that exceed customers’ expectations. This is a major pillar of the bank’s strategy which is being implemented across the group, and represented by the continued double digit increase in the growth rate of online users.