Al Ahli Bank of Kuwait (ABK) recently hosted its analyst conference to discuss the results of the year ending 31 December 2023. The conference was attended by. Abdulla Al Sumait, Acting Group Chief Executive Officer; Shiamak Soonawalla, Group Chief Finance Officer; Abdulaziz Jawad, Chief Strategy Officer; and Yaqoub Almulla, Senior Manager of Investor Relations.

The conference entailed a review of ABK Group’s financial indicators, highlighting the key developments in 2023, as well as an outline of plans to bolster its competitive position in Kuwait’s banking sector and the markets it operates in, including the UAE and Egypt.

Strong Financial Results

Al Sumait expressed his satisfaction, stating, “I am delighted to present the impressive results of another successful year, demonstrating our resilience and unwavering commitment to strengthening our position. Our financial performance in 2023, which saw a 40% increase in Net Profit to KD 45.2 million, a 46% increase in EPS from 13 fils to 19 fils, and an improved Capital Adequacy Ratio of 16.74% and a healthy NPL ratio of 1.33%, highlights our capacity to adapt to economic shifts and effectively address local, regional, and global challenges.”

He added that ABK has maintained a positive momentum throughout the previous year, as evidenced by positive growth ratios in profitability, ROAA, ROAE, and improving asset quality ratios well above regulatory requirements, emphasizing its financial strength for the year.

Distinctive Position

Al Sumait noted, “The Group continues to leverage its distinctive position among Kuwaiti banks, particularly with our extensive geographic reach. This is instrumental in driving revenue, facilitating loan distribution, and gathering deposits. Notably, our international operations, including our UAE branches and ABK-Egypt subsidiary, contribute 41.6% of our Operating Income and 38% of our assets.”

Furthermore, the Group’s sustained efforts to implement its digital transformation plans, marked by the inauguration of the first hologram-powered digital branch in the Kuwaiti market at Al Khiran Mall, demonstrate the Group’s dedication to leveraging cutting-edge banking technologies. The Group plans to introduce additional digital branches in the future to provide seamless service to customers around the clock.

In terms of its regional footprint, Al Sumait revealed that the Group has expanded its presence in Egypt. This involves the opening of four new branches equipped with state-of-the-art technologies, aligning with the Group’s strategy to expand its presence and serve customers across Egypt.

Looking ahead, Al Sumait affirmed that the Group remains diligent and confident in its commitment to driving innovation, growth, and enhancing its market position in the banking sector by consistently delivering added value to its customers.

Growth Indicators

On his part, Soonawalla said, “In terms of operational performance, our Operating Income has reached KD 185 million, with an Operating Profit of KD 97.1 million. Regarding risk management and stability, the Group’s NPL ratio is 1.33% and the Group Loan Loss Coverage Ratio is 445%.”

He added, “We maintain excess provisions of KD 213 million, well above the IFRS requirements as per the guidelines set by the Central Bank of Kuwait, demonstrating our unwavering commitment to prudent financial practices.”

Furthermore, the Group has maintained operational stability with a Net Interest Margin of 2.2% and an Operating Profit to average assets ratio of 1.5%, indicating healthy performance and sustained growth across the Group’s diverse businesses.

Additionally, Soonawalla disclosed, “Our liquidity position remains strong, with a Net Stable Funding Ratio of 113%, a Liquidity Coverage Ratio of 225%, and a self-backed balance sheet supported by customer deposits totaling KD 3.8 billion, representing 68% of our total liabilities.”

He added that ABK is currently examining the key factors influencing changes in income, margins, and costs. He continued, “Total Operating Income has seen an 8% increase compared to 2022. Notably, the Group’s ROAE of 6.8% has risen by 36% compared to the previous year.”

Breaking down the Operating Income of KD 185 million, 49% comes from commercial banking, 43% from retail banking, and 8% from treasury operations. In terms of asset allocation, 58% is in commercial banking, 13% in retail, and 29% in treasury.

Soonawalla continued, “Total Interest Income for YE 2023 is KD 413.5 million, a significant growth of KD 144 million or 54% from the previous year. This growth is primarily attributed to increased asset levels and an improved interest rate environment.” Furthermore, the majority of non-interest income is derived from core banking activities, providing stability compared to more volatile income from trading activities. This, together with an increase in net interest earnings, has had a positive impact on operating profit, which increased by 7%. Excellent Investments

Soonawalla emphasized, “The Group’s commitment to excellence is evident in our ongoing investments in key business initiatives, digital technologies, and process enhancements, contributing to lowering operating expenses and improving operational efficiency.”

The cost-to-income ratio for 2023 is 47.5%, up from 47.2% in 2022. The Group has maintained a prudent and conservative approach in managing credit exposures and provisioning.

ABK’s geographical footprint plays a crucial role in driving revenue, facilitating loan distribution and gathering deposits. Soonawalla added that contributions from international operations, including the UAE branches and ABK-Egypt subsidiary, have been significant. As of the end of 2023, the Group’s Total Assets reached KD 6.3 billion, with Net Loans and Advances increasing by 5% from KD 4 billion in 2022 to KD 4.3 billion in 2023. Soonawalla stated, “We have diversified our funding sources, securing more long-term borrowings through international markets, enhancing the stability and reliability of our funding and improving balance sheet efficiency.” In summary, the financial results for 2023 demonstrate continuous improvements in key operational factors. These include increased loans, decreased provisions and impairments, a strong balance sheet, ample liquidity, and a solid capital base.

Promising Economic Forecast

Turning to the Chief Strategy Officer, Jawad emphasized that the global economy is displaying macroeconomic resilience, with the IMF forecasting global economic growth to 3.6% in 2024, up from 3.0% in 2023. Slight fluctuations are expected in the economic growth of advanced economies this year, driven by geopolitical challenges and uncertainties. However, this is expected to be offset by growth in other emerging economies, resulting in world GDP similar to 2023’s level.

He continued, “GCC economies are positioned favourably to demonstrate a promising economic forecast, while remaining cautious and exposed to the overall global backdrop. In the case of Kuwait, the economy presents a promising outlook and we are optimistic of the commitment to accelerate the awards pipeline across various projects.”

In 2023, project awards surpassed KD 2.5 billion, a remarkable achievement attributed to the backlog of awards from the pandemic era.

Jawad added, “The IMF forecasts a GDP growth rate for Kuwait slightly over 3.6%, surpassing both the global and GCC averages, with projections to more than KD 5-6 billion worth of project awards in the pipeline. These projects are primarily in the energy and oil sector, with additional growth in foreign investments.”

A New Phase

Jawad disclosed that ABK is committed to precisely implementing its strategy throughout 2024, positioning it to consistently create added value for stakeholders. He claimed, “ABK advances into a new phase of progress. Our steadfast commitment has been reaffirmed by credit ratings of A from Fitch in November, and A2 from Moody’s.”

He expressed the Group’s commitment to delivering enhanced value to shareholders, highlighting the Board’s proposal to distribute cash dividends of 9% equivalent to 9 fils per share, valued at KD 21.23 million as well as bonus shares of 5% equivalent to 5 shares for every 100 shares, valued at KD 11.87 million.

Jawad continued, “The implementation of our ABK2X strategy is yielding successful results, with 95% of critical milestones slated for delivery by 2023 completed as planned, and 102 initiatives executed so far. Our strategy is yielding tangible outcomes, driving significant market share growth across multiple products and expanding our customer base.”

He also discussed the introduction of Elite Plus to cater to the affluent segment, while targeted acquisition campaigns are capturing market share among key salaried Kuwaiti segments and higher-income expats. Furthermore, the successful launch of ‘ABK Advantage Rewards’ has led to increased customer adoption, prompting enhancements to credit card offerings to better meet evolving customer needs.

Nine Syndicated Loan Transactions

In the realm of international business, 2023 proved to be an exceptional year, marked by nine syndicated loan transactions, concluded by ABK-DIFC. These transactions spanned across various jurisdictions, including the GCC, Europe, and Asia.

Jawad shared, “As of 11 February 2024, ABK has been upgraded to the Premier Market, moving into a relatively larger and more liquid arena in Boursa Kuwait. The listing signifies the Bank’s successful compliance with the requirements of Kuwait Capital Market Authority.”

Sustainability and Governance Jawad emphasized ABK’s commitment to advancing its ESG and sustainability agenda through a 5-year group ESG strategy consisting of six pillars: Climate Resilience; Responsible Banking; Community Investment; Robust Governance Foundation; Empowering Our People; and Financial Inclusion. To ensure the proper integration of these elements, ABK implemented an ESG e-learning program for approximately 1,000 staff members in Kuwait and the UAE.

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