NBK Group CEO, on the sidelines of the analysts' conference for the results of 9M2020

Al-Sager: We gave an example to follow for crisis management, and our results reflect our flexible business model

Mr. Isam Al-Sager

Mr. Isam Al-Sager

  • Continuing to diversify the Group’s income sources and accelerating digital transformation are top priorities
  • The pandemic proved the success of our contingency plans and the excellence of our digital banking channels
  • Following our conservative policy, we continue to build provisions despite the signs of recovery in Q32020
  • Banks are able to withstand the pandemic’s fallout and the drop in oil prices, thanks to their solid financial positions
  • We continue our investments to achieve our strategic goals while implementing cost-cutting initiatives
  • NBK’s human capital is our most valuable resource and the key pillar for sustaining its success and excellence in the future


  • Our financial results are very positive despite the doubled provisioning and the significant drop in benchmark interest rates
  • Our business growth contributed to mitigate the impact of the record drop of discount rate on interest income

Mr. Isam Al-Sager, the CEO of National Bank of Kuwait Group, said on the sidelines of the Analysts' Conference for the Results of 9M2020: “We are still operating in extraordinary circumstances, and the impact of the Covid-19 pandemic can be felt across the world – including in Kuwait. During the third quarter of the year we started to see a gradual recovery compared to the trends we experienced in the second quarter. While the outlook remains challenging, we are cautiously optimistic on improving macroeconomic conditions.”

“During Q32020, our diversification strategy has continued to demonstrate the resilience of the Bank in the face of adverse conditions. We remained focused on accelerating the digitization of back- and front-end operations, while carefully managing costs. This will continue to be a priority for the remainder of the year, and into 2021. On the other hand, we demonstrated our unwavering commitment to people. In particular, the dedication we have shown to customers, colleagues and to the society and government of Kuwait,” Al-Sager added.

Strong Banking Sector

Al-Sager indicated that the negative effects of the Covid-19 pandemic remain a major challenge for Kuwait and for the regional and global economy. In Kuwait, as in other GCC countries, the impact on economic activity has been made more severe by lower oil prices, which have put pressure on the country’s fiscal position. Kuwait’s budget deficit for the year is expected to peak to more than 30% of GDP.

Despite this challenging operating environment and its unavoidable impact on the profits of the banking sector, NBK’s operations across geographies saw some recovery in the third quarter as governments started lifting movement restrictions and gradually opened up economic activity. Although the Group’s profits dropped by 44.2% year-on-year, this decrease is proportionate to the scale of the challenges and overall impact on the banking sector and the economy.

The Kuwaiti banking sector is much stronger than it was a decade ago, which improves its ability to withstand the impact of this double challenge represented in the pandemic’s fallout combined with the drop in oil prices, he noted.

Conservative Policy

Amidst these challenging operating conditions, Al-Sager affirmed that NBK remained committed to a conservative approach to risk, as the Bank continues building provisions in anticipation of prevailing uncertainty and the difficult operating conditions that will prevail across many sectors. We increased provision charges by 98.41% year-on-year for the nine months period, leading to a negative impact on our net profits.

NBK continued to monitor costs closely with sustained focus on cost cutting initiatives that we started earlier in the year. This helped us maintain operating expenses at an appropriate level, with potential for further improvement going forward. The Bank’s approach to cost management is to strike a balance between strategic efficiency initiatives at the Group level to mitigate the impact on profitability, while continuing to invest to achieve our strategic expansion goals in key markets we are operating in, he continued.

Al-Sager added that although the pandemic is not over and we remain in the midst of an economic crisis, we are confident in the Bank’s ability to absorb the impact thanks to our solid position, built over many years. We also benefit from a dynamic business model and strategy for growth. NBK continues to enjoy very strong balance sheet metrics as demonstrated by a solid capital ratio, healthy asset quality and comfortable liquidity levels. These underpin our ability to withstand the fallout of the crisis, and to continue growing our profits as we gradually move to a recovery phase.

Public Debt

On a question about the new Public Debt Law, Al-Sager mentioned that the government has limited solutions if the new parliament doesn’t approve the passing of the debt law, they have to go back to the Future Generation Fund; which is even more difficult to do so.

The approval of Public Debt Law has become a political issue that will be determined when the new parliament is elected within the coming weeks. In addition, in view of the economic fallout posed by the pandemic, and the limited funding options for the government, it is expected that the Debt Law will be approved by the new parliament.

Cash Dividends

On cash dividends distribution for this year, Al-Sager pointed out that it is still too early to have a clear view on the dividends. We still have 3 months till the year ends. However, we will follow our normal approach as we look at the year-end profits. We assist our future capital needs and accordingly decide on the distribution. That is followed by the Board’s proposal and approval from the General Assembly.

Al-Sager emphasized that the bank’s capital position is in a very strong across all capital levels, with a comfortable buffer and ahead of any regulatory requirements, with CAR reaching 17% as of end-September 2020.

Al-Sager concluded by emphasizing that NBK’s ability to function fully remotely, its disaster recovery procedures, contingency plans, as well as digital channels have all proved to be critical differentiators during these unusual times.

Al-Sager extended his thanks and appreciation to all NBK employees for their continued efforts and dedication, stressing that the bank’s human capital is truly our most valuable resource and the key factor for its success.

On his part, Sujit Ronghe, NBK’s Group Financial Controller commented: “As we know, the ongoing Covid-19 pandemic and the resulting shut downs, travel restrictions etc. have adversely affected business activities across many industries, including Banking and FSI. The partial opening up of economies in Q32020 did result in a small improvement in the operating environment, but overall uncertainty with respect to the pandemic still prevails.”

The bank’s profit was resilient despite the uniquely challenging business environment, which demonstrates the bank’s flexible business model amidst the significant drop in benchmark interest rates, lower economic activity which affected business volumes leading to doubling provisions for 9M2020, he noted.

On a question about the impact of Central Bank of Kuwait’s cut on CBK’s assets interest rate by 0.125% on the bank’s income, Ronghe said that the discount rate was left unchanged, which is more important to us than this small cut on other rates.

Regarding expected formation of NPLs in the future, Ronghe mentioned that it would be wise to wait and see the finishing of the deferral program for corporate loans. That is when we will see get to see how NPLs are coming up, noting that the increase in NPL ratio from 1.1% in December to 1.89% was, in part, due to the accelerated and precautionary credit provisioning which required certain loans to be classified as NPLs.


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