Kuwait: KPMG recently released the seventh edition of its Gulf Cooperation Council (GCC) listed banks’ results report which analyzes and compares the financial outcomes and key performance indicators for the leading listed commercial banks to the previous year. This report provides banking industry leaders with succinct analysis along with insights and forward-looking views. The report titled ‘A new reality’ highlights some of the major financial trends identified in the banking sector across the region. Through this publication, KPMG aims at sharing the views of the Heads of Financial Services from its member firms in the six GCC countries where they share insights on their respective banking markets, specifically on the financial results of the leading listed banks. In addition, KPMG trusts that its analysis, insights and predictions will continue to help drive banking strategies and shape the industry across the region.

The report highlights that proactive and timely measures combined with government aid helped the GCC banking sector become more robust and resilient, leading banks to shift their focus toward the digitalization of business processes, prioritization of environmental, social and governance (ESG), effective management of non-performing loans (NPL), and adoption of agile working practices, among others.

Speaking on the overall trends in the GCC banking sector, Bhavesh Gandhi, Head of Financial Services, KPMG in Kuwait stated, “In the last two years, the banking sector has witnessed cautious growth as banks focused on embracing technology and reducing costs. This strategy turned out to be the correct one, as the sector has gone through unprecedented growth and profits exceeded expectations this year. The banks within the GCC continue to accelerate digital investments, providing a digital-first approach to the customers and partnering with various fintech firms to make banking more accessible to all.”

The GCC listed banks’ results called attention to the 35.8% increase in profitability, which was led by the growth surge in loan book, reduction in the costs of funds and a laser-focused approach toward cost efficiencies. Moreover, listed bank share prices also witnessed a 36.6% rise, while the total assets, return on equity (RoE) and return on assets (RoA) grew by 6.4%, 2.8% and 0.3%, respectively. The banking sector in the region also saw an increase in the capital adequacy ratio (CAR) to a sector average of 19% and a reduction in the cost-to-income ratio by 0.3%.

Kuwait remained on top in terms of net profit by average and RoE and had the second-best RoA after Saudi Arabia in the GCC region. Kuwait International Bank and Warba Bank were among the top-performing banks with respect to net profit, recording a y-o-y growth rate of 1,081,069% and 181%, respectively, while Al Ahli Bank of Kuwait had an 18% y-o-y growth rate in terms of RoE — the second highest in the GCC.

Some of the key highlights that emerged from the report have been listed below:

  • Total assets in Kuwait grew from USD 301.6b in 2020 to USD 320.7b in 2021, climbing by about 6.3%.
  • Kuwait’s total net profit witnessed a rise of about 91.4% and shot up to USD 2907.7m from 2020’s USD 1519.5m.
  • The country’s average CAR and RoA also rose marginally by 0.4% to 18.3% and 0.9%, respectively.
  • In addition, return on equity in the country increased to 8.9%, rising by 4.5%.
  • Lastly, Kuwait’s cost-to-income ratio and coverage ratio for stage three loans improved marginally with a y-o-y growth rate of 1% and 2%, respectively.

“From a dip of more than 50% in the total net profit in 2020 to a profit growth of nearly 92% in 2021, banks have witnessed a V-shape recovery in Kuwait. The sector continues to be well capitalized with the average CAR at 18.3%, which is comfortably higher than the requirements of the Central Bank of Kuwait. Furthermore, the rising interest rate environment and effective NPL management is likely to help drive profitability and growth. With the economic recovery, supported by higher oil prices, the Kuwaiti banks can expect to see strong growth in credit, especially in the infrastructure and related sectors.” added Bhavesh.

The report concluded with some predictions from the KPMG Financial Service leads who believe that the banking environment in GCC might see an increased regulatory oversight driven by global developments and use of technology. Furthermore, the GCC banks will see an increase in consolidations and M&A would be one of the focus areas for the board as the banks continue to grow bigger. KPMG experts also predict, ESG to take the center stage as the regulators plan to create policies around a common ESG reporting system. Sustainability will not only be focus for the banks but for all the stakeholders including investors and customers. Besides these, continued digital transformation approach along with a focus towards reducing the operational costs will shape the industry in the coming year.

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

-Ends-

About KPMG Kuwait

KPMG in Kuwait operates through its member firms KPMG Safi Al-Mutawa & Partners and KPMG Advisory W.L.L., providing a full range of audit, tax and advisory services to a portfolio of clients which include major corporations, government institutions, public sector agencies, and not-for-profit organizations.

With over 175 employees and eight partners based in Kuwait, we form part of a global network of KPMG firms operate in 145 countries and territories with more than 236,000 partners and employees working in member firms around the world, drawing on global industry insights to complement our strong local knowledge.

Legal Disclaimer

© 2022 KPMG Safi Al Mutawa & Partners, Kuwaiti Public Accountant and KPMG Advisory W.L.L., Kuwaiti limited liability company, are member firms of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the situation.

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization.