Kuwaiti lenders National Bank of Kuwait (NBK), Boubyan Bank and Warba bank could be the main beneficiaries of a decision earlier this month by the Central Bank of Kuwait (CBK) to raise the consumer lending limit and introduce new loan regulations, an analyst said.

In a press release published on Saturday, November 10, the CBK said it has increased the maximum amount of loans and Islamic financing for consumer purposes to a limit not exceeding 25 times the net monthly salary of the borrower or a maximum of 25,000 Kuwaiti Dinars ($82,275), up from 15,000 Kuwaiti Dinars previously.

Chiro Ghosh, lead research analyst for financial institutions at SICO, said in a note sent to the media “a large share of consumers are already around their approved limit and they tend to even top up their loan after couple of years, as their outstanding principle partially reduces on repayment.”

“This indicates a potential borrowing appetite and we thus expect to see a surge in consumer credit demand, with the implementation of the new regulation.”

The banking sector in Kuwait has been pushing the index higher so far this year. A Thomson Reuters index of Kuwaiti banks has increased 14.07 percent so far since the start of the year.

“The borrowing capacity would continue to be constrained by the borrower’s salary. However, we estimate, any customer with salary higher than KWD 600/ month (KWD 15,000/25x) can opt to increase their borrowing, which we believe would encompass majority of the customers,” SICO’s Ghosh added.

On April 1 this year, Kuwait divided its stock market into three segments as part of a reform programme aimed at improving the attractiveness of the exchange to investors.

The three market segments are the premier market, the main market and the auction market. Since the segmentation, the premier market index has gained 6.57 percent.

The premier market ended the day marginally lower on Tuesday, dropping 0.34 percent, as most markets in the region dropped tracking a retreat in oil prices and global markets.

“NBK, Boubyan and Warba would be the prime beneficiary of the growth potential, with a likely 11 percent lending book growth over the medium term. We recommend taking fresh stake in NBK with a target price of KWD 0.9/share,” Ghosh added.

For the estimate, SICO assumes 50 percent of the customers would opt to raise their borrowing limit and noted that if only 25 percent of customers is assumed, then that will also present a healthy growth opportunity.

Elsewhere in the region, Dubai’s index dropped 1.21 percent, Abu Dhabi’s index fell 1.63 percent, and Qatar’s index dropped 1.25 percent.

By 14:31 GST, Saudi Arabia’s index was trading 0.27 percent lower.

Markets in Egypt, Oman and Bahrain were closed for religious holidays. 

(Reporting by Gerard Aoun; Editing by Shane McGinley)
(Gerard.aoun@refinitiv.com)

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