Kuwaiti banks will experience better operating conditions this year due to higher oil prices and continued recovery from the pandemic, S&P Global Ratings said. 

However, the banks’ high exposure to real estate and construction continues to be a “key risk”. Other constraints also persist, as the government’s general reserve fund (GRF) has diminished substantially and the country’s fiscal funding strategy remains uncertain. 

The ratings agency said it now expects banks to record improved earnings in 2022 and that non-performing loans (NPLs) and cost of risk (CoR) are likely to gradually normalise, thanks to a more supportive environment, as well as higher interest rates. 

Funding conditions also remain favourable, underpinned by stable deposits from the retail sector and government-related entities. 


Banks in Kuwait have high exposure to the real estate and construction sectors, which accounted for approximately a third (30 percent) of total lending in the country at the end of last year. 

However, given that part of the exposure is to companies with diversified income streams, NPL formation is likely to taper off, S&P noted. 

Overall, NPL ratio is expected to fall slightly over the next 12 to 24 months, while CoR is forecast to be stable at about 100 basis points (bps). The forecast CoR is below the 1.4 percent CoR in 2020 and is comparable to 0.9 percent in 2021. 

As for their financial performance, banks will see their earnings fully recover this year on the back of higher margins. 

“The macroeconomic outlook, higher oil prices and rising interest rates are smoothening the recovery path for Kuwaiti banks,” S&P said. 

(Writing by Cleofe Maceda; editing by Seban Scaria)