• We Are Investing Heavily in Positioning NBK for the Future of Digital Banking
  • The improved economic outlook to generate more opportunities and specifically strengthen the demand for business credit
  • The Bank’s dividend policy is stable thanks to strong capital ratios and solid financial position
  • Our efforts in the ESG space are topping the Group’s agenda
  • With our diversified and low cost funding base we afforded to defend our market share
  • We focus on utilizing data analytics, robotics and machine learning to improve our operational efficiency
  • Weyay achievements are way beyond the targets, and soon it will be a comprehensive platform for our clients
  • We expect a bigger role for the private sector in Kuwait’s infrastructure development plan

Ronghe:

  • The growth of our fees and commissions is driven by a well-diversified pool of geographies and lines of business
  • Building precautionary provisions has been a feature of our provisioning regime since the global financial crisis

Ms. Shaikha Al-Bahar, Deputy Group CEO of National Bank of Kuwait (NBK) emphasized that the Bank remains on course with its strategic priorities. “In Kuwait, we expect the improved economic outlook to generate more opportunities and specifically strengthen the demand for business credit, while we gradually see a revival of project tendering and award activity,” she said.

On the sidelines of the Analyst Conference for the results of 2Q 2022, Al-Bahar mentioned: “We will continue to grow our international operations with more focus on key growth markets, most importantly GCC and Egypt as we target further diversification of our balance sheet and income streams and grow the contribution of international operations to the Group’s bottom line.”

“Our business diversification continues to serve us as we benefit from the region’s economic recovery and NBK’s wide spectrum of product and service offerings,” she added.

Digital excellence

Al-Bahar stated: “We continued to invest in positioning NBK for the future of banking, and building a next generation digital banking experience. We have made great efforts in uplifting various channels with regular enhancements to the digital journey for our customers, the number of services we provide digitally, most importantly through mobile banking application.”

“While utilizing data analytics, robotics and machine learning to improve our operational efficiency and offer personalized experience to meet the evolving banking needs of our clients. Our digital transformation efforts are group wide as we have been upgrading the digital experience of our customers across various business segments and in all our key strategic markets,” she elaborated.

Sustainable growth

Al-Bahar pointed out that the efforts in the ESG space are topping the agenda of the Group. We will continue improving our ESG-related operational practices, integrating ESG into our business decision-making processes and growing our pledge to global sustainability reporting.

During the period, we continued to deliver on our six pillars of sustainability and working our way towards achieving our predetermined sustainability targets, she added.

Market leader

Al-Bahar stated: “As we started seeing the recovery of post pandemic growth, the competitive landscape in retail lending became more aggressive. As banks started competing on acquiring market share we witnessed an increased focus on price competition. As the market leader and one of the largest players in the retail sector, we opted to defend our market share through offering zero interest loans in the market earlier this year.”

“With our diversified and low cost funding base we can afford to aggressively defend our market share through lower pricing and we have been extremely successful in doing so in recent months.”

“This is not an ideal operating landscape as it puts some pressure on margins in the short term especially considering the current environment of increasing rates but we will continue to defend our market leadership with focus on customer acquisition.”

Weyay

Al-Bahar said: “Our core markets have young population (Kuwait, GCC and the Arab world in general) so this required special attention to the youth. So we are well established across our markets and there is a lot of upside potential for us to drive from our presence in the region, so we successfully launched Weyay as we were and still are targeting the youth.”

“The achievement so far is way beyond the targets, it is very successful and we are offering products and soon it will be a comprehensive platform for our clients.”

“Digital banking is the future and we are investing heavily in technology and IT investments and so on,” she noted.

Dividend distribution

Commenting on NBK’s distribution of interim dividends, Al-Bahar said: “The Bank’s dividend policy is determined, in view of capital requirements amongst other factors. The bank has always had a very stable dividend policy as we have always targeted a payout ratio in the range of 50 to 60%.

“Our Capital ratios remain very strong in line with our internally set targets and buffers and this allows us to continue to maintain a healthy payout ratio.”

“Our interim dividend distribution is not an indication of any changes to our divined policy and the year-end distribution will follow the same guidelines in the context of our specified dividend policy,” she added.

Infrastructure gap

On a question about her expectations for the pace of project awarding, Al-Bahar explained: “The improved health situation and the ease of restrictions post pandemic have lifted project activity in 2021 where project awards reached KD 1.5 bn.With the recent hike in oil prices and the expected surpluses, we expect the government to continue with its commitment to spend on infrastructure and accelerate project tendering and awards to compensate for the slower execution during the past 2 years and the impact of the pandemic.”

Al-Bahar expected a bigger role for the private sector in Kuwait’s infrastructure development plan going forward. Recent discussion and engagements with various government agencies along with the discussed tenders affirms the government’s intensions to give a bigger role to the private sector in future development projects.

“This of course creates opportunities for banks to lend across different models of financing; being a PPP or a BOT project. For that, we are optimistic about the projects pipeline and its outcomes,” she added.

Diversified income

On his part, Mr. Sujit Ronghe, Acting Group CFO said that NBK’s results for the first half reflected focus on core banking activities, diversified income, and the ability to generate profits from these activities.

Ronghe mentioned: “Net interest income of KD348.3m for 1H22, a growth of 4.4% over 1H21 was largely driven by higher volumes of loans and other interest earning assets across segments and geographies.”

“Fees and commissions income was also 10.8% higher than 1H21 reflecting strong contributions from a well-diversified pool of geographies and lines of business”

Cost of risk

On the expectations for the cost of risk, Ronghe said: “second quarter or first half-year cost of risk is in no way an indicator of what could happen in the future, because it was a fallout of recoveries made during the period. We expect this year to benefit from the recoveries we saw in the first six months and I would say the cost of risk would be materially lower than what we saw last year.”

Ronghe explained: “A healthy buffer helps the Bank to not only comply with the provisions required by the Central Bank of Kuwait, but also for any ECL challenges going forward.”

“As regards the tightened credit provisioning, judgmental or precautionary general provisions has been a feature of our provisioning regime since the global financial crisis. Our provision coverage ratio even in earlier years was higher than 300, which is in line with the Bank’s conservative credit provisioning policy,” he noted.

-Ends-