Led by banking and investment companies, Kuwait-listed firms saw heavy erosion in profits during the first quarter of 2009 compared to the same period last year due to poor bottom-line performance across all economic sectors, said a report.
According to Kuwait-based investment bank Global Investment House, a substantial portion of the decline was on account of investment firms posting significant losses in the first quarter while at the same time posting profits of almost the same magnitude in the same period of the previous year.
GIH believes Kuwaiti banks are not expected to show any marked improvement with heavy provisioning expected in the second quarter of 2009.
Aggregate profits for the 158 companies which announced their first quarter results stood at KD59.97 million (Dh763m) for the three-months ending on March 31 compared to KD986.19m for the same period in 2008.
Quarterly profits announced by all listed firms on KSE - excluding firms listed in the parallel market - stood at KD133.95m registering a decline of 88.22 per cent compared to the corresponding period of last year.
The financial crisis had its toll on the performance of heavyweight local banks. Aggregate profits of the banking sector stood at KD130.33m for the first quarter compared to KD293.57m reported in the same period in 2008, registering a decline of 55.61 per cent.
Two largest Kuwaiti banks, National Bank of Kuwait (NBK) and Kuwait Finance House (KFH) reported 22.62 per cent and 46.47 per cent decline in their first quarter profits, respectively.
The retreat in NBK's profits can be attributed to impairment losses for investment securities amounting to KD15.08m, whereas there was no corresponding loss in 2008. In addition to that administrative expenses jumped 75.89 per cent higher during this quarter, reaching KD30.01m. As for KFH's results, the decline in the Islamic bank's profits can be attributed to a 1,046.87 per cent rise in its impairment provisions which stood at KD45.93m for first quarter.
Two banks - Kuwait International Bank and Boubyan Bank - reported net losses for the period. KIB and Boubyan reported a loss of KD2.20m and KD11.70m respectively, compared to profits of KD5.15m and KD5.07m reported respectively for the same period last year.
The investment sector as a whole reported the steepest loss amongst the other sectors, with an aggregate loss of KD201.42m during the quarter, compared to net profit of KD225.70m for the corresponding period of last year. Only two firms in the sector eked out some profits.
Burgan Group Holding Company and Kuwait Bahrain International Exchange Company reported modest profits. Central Bank of Kuwait Governor Sheikh Salem Abdul Aziz Al Sabah, said earlier that investment companies are still faced with major challenges and need to maintain vigilance amid the current global economic crisis.
The services sector was the star performer, with profits reaching KD134.70m for the first quarter, down by 26.13 per cent.
The good performance of the sector as a whole can be attributed to the sound profits announced by the heavy-weight services companies like Zain - the biggest company listed on KSE in terms of market capitalisation. The telecom giant reported net profits of KD75.73m for the quarter, up 3.37 per cent.
Despite a decline in profits of Agility and National Mobile Telecommunications Company (NMTC), they both had solid results when compared to other firms listed within the same sector. Agility and NMTC reported a net profit of KD36.95mn and KD15.31mn respectively.
By Waheed Abbas
© Emirates Business 24/7 2009
