Kuwait: Underlining the sustained resilience of the banking sector in the region, KPMG published the ninth edition of the GCC listed banks’ results. The report, titled Adaptation and growth, offers a succinct analysis of the leading listed commercial banks’ financial results for the year-ended 31 December 2023 versus the previous year (year-ended 31 December 2022).

The solidity of the GCC economies shined through despite global economic challenges as the region lodged double-digit growth (23.1%) in terms of net profit to reach USD53.2bn in 2023. Total assets and share prices in the region were also among growth, increasing by 8.1% and 7.7%, respectively.

Also, in the green, albeit marginal, were capital adequacy ratio, cost-to-income ratio, net interest margin (NIM), return on equity and return on assets. The region saw a decrease in the overall non-performing loan (NPL) ratio, driven by banks conservative approach to credit risk management.

Findings from the report highlighted that these numbers were a result of eight primary financial trends that reflected in KPMG’s analysts’ outlook of the GCC region’s banking sectors. They were: (i) robust asset growth; (ii) significant profitability increase; (iii) improved NIM; (iv) lower NPL ratio; (v) reduced loan impairment; (vi) stability in cost-to-income ratio; (vii) strengthened capital adequacy; and (viii) rising share prices.

Bhavesh Gandhi, Head of Financial Services, KPMG in Kuwait, said, “Kuwait’s banking sector witnessed healthy year-on-year growth, observing notable increase across multiple identified KPIs such as net provision charge on loans, capital adequacy ratio, and coverage ratio on stage 3 loans. While more work remains to be done on a regional level, the results points at the efficacy of Kuwaiti banks’ forward-looking approach and offer more reason for them to continue building on it in 2024.”

Kuwait exhibited the best year-on-year (y-o-y) growth in terms of net provision charge on loans (28.8%), capital adequacy ratio (1.0%), and coverage ratios on stage 3 loans (2.7%). According to the analysis, Kuwait also registered the highest growth by value in terms of stage 3 loans subject to expected credit loss (ECL) (1.5%).

On a bank level, National Bank of Kuwait S.A.K.P. had the highest y-o-y growth in net provision charge on loans (1324.1%), nearly four times that of the bank that came in second. In terms of coverage ratios on loans, Kuwait International Bank K.S.C.P. had the highest y-o-y growth (20%) among all 52 banks included in the report. When it came to growth by value, Gulf Bank K.S.C.P. performed the best w.r.t coverage ratios on loans (110.2%) and Boubyan Bank K.S.C.P. w.r.t stage 3 loans subject to ECL (1.0%).

The report drives home the point that effective government support, coupled with banks’ proactive and in-time initiatives, propelled the continued resilience of the GCC region’s banking sector. The main highlight of the report remained the positive trend in each of the identified financial KPI, helmed by effective management, digital transformation, and improved return on investments.

Looking ahead, KPMG professionals predict effective NPL management, rapid balance sheet growth, healthy NIMs and measures to maintain cost control. They also anticipate that, in 2024, the banking sector will see a rise in the prominence of ESG, focus on AI and Regtech, and consolidation.

This edition of the publication aims to offer insights and predictions to support putting in place measures and strategies that will help shape the future of the banking industry in the GCC region.

To read the full report, visit kpmg.com/kw.