KUWAIT CITY, Feb 16: Gulf Bank held its year-end 2024 earnings webcast on Thursday 13th February 2025, to present and discuss the Bank's financial performance. The webcast was organized by EFG Hermes and presented by Waleed Mandani, Acting Chief Executive Officer of Gulf Bank, and David Challinor, Chief Financial Officer of Gulf Bank. The discussion was moderated by Dalal AlDousari, Head of Investor Relations at Gulf Bank.

Operating Environment

Mr. Waleed Khaled Mandani, Acting Chief Executive Officer of Gulf Bank, commenced the webcast with key updates regarding Gulf Bank’s operating environment during the year 2024. Mandani stated: “The global economic landscape in 2024 experienced considerable fluctuations. Central banks worldwide started to recalibrate monetary policies to address shifting financial conditions. However, Kuwait’s financial system continues to demonstrate resilience, supported by stable oil prices, ambitious government initiatives toward economic diversification, and a commitment to fiscal reform.”

Mr. Mandani added “Against this backdrop, Gulf Bank has played a key role in supporting Kuwait's economic development and Vision 2035 aspirations. Operationally, we have achieved remarkable progress in enhancing efficiency and elevating customer experiences. A key milestone was the successful completion of Phase II of our core banking system. Our digital transformation efforts have been further reinforced by the launch of a new mobile banking application, designed to provide a secure and intuitive platform that caters to the diverse needs of our clients. In parallel, we have made meaningful progress in improving operational efficiency, which will remain integral to our strategic approach.”

He added: “Looking ahead to 2025, we remain steadfast in pursuing our strategic goals. A key focus will be the continued exploration of the feasibility of transforming Gulf Bank into a Sharia-compliant institution. Simultaneously, we will work to expand our product offerings, enhance our competitive position, and maintain our robust financial performance.”

Loan Growth

When questioned about the loan growth during the year 2024, Mr. Challinor noted: “Gross loans and advances have grown 4% this year. And the growth this year has been dominated by our corporate book which grew almost 10%, a significant turnaround from 2023 where we saw a degrowth in corporate of 1%. In terms of the market growth, we saw corporate grow by around 9.3%, so we’ve outperformed the market.” He added: “On the retail side, the market has been slow which is a function of the higher rate environment as the retail loans are fixed rate. Looking forward into 2025, I’d expect full year loan growth to be around mid-single digits.”

Operating Expenses

In terms of cost to income ratio Mr. Challinor mentioned: “We guided at the beginning of the year that we would look to move this lower in 2024. And when you look at this ratio for the first 9 months of the year, it was in line when compared to 2023. But in Q4 we did see a step up in the quarterly costs, which meant that for the full year 2024, our cost to income ratio exceeded where it was in 2023.” He added: “Now, looking forward into 2025 we will continue our cost optimization journey and are targeting a fall in the full year cost to income ratio, but as I said we may experience elevated levels in the other expense category for a while.”

Margins

Regarding margins and the impact from the recent rate cut, Mr. Challinor remarked: “Clearly the biggest driver of margin going forward will be the timing and size of rate cuts. We’ve disclosed in our financial statements the impact of a 25-basis point change to our net interest income. And for our KD book this is 1.5 million and for our USD book its 1.1 million. Which gives a total of 2.6 million KD for every 25 points. And this also assumes a parallel shift across both sides of the balance sheet. So, in 2025 we will likely see further margin reductions driven by benchmark rate cuts, but to provide guidance on the quantum of such reductions, given the uncertainties around size and timing, is very difficult.”

Credit Cost

When asked about the credit cost and reasons behind the pickup this year, Mr. Challinor noted: “In 2024 there’s been a lot of dynamics and complexity at play when we look at the banks credit costs. However, just to recap they were higher by 13.3 million or 46% than in 2023. And our full year cost of risk was 75 basis points which exceeded the top end of the guidance we gave at the start of the year of 70.” He added: “However, our stage 2 percentage went from 4.6% at the end of 2023 to 2.8% at the end of 2024. And not only is this the lowest the bank has seen since the introduction of IFRS 9, but it’s the lowest of any bank in Kuwait. Looking forward into 2025 I think credit costs may be lower than what we saw in 2024. I’d expect the corporate book to perform better given many of the legacy accounts are now behind us, however retail may remain elevated for some time. So, on balance I think an annual credit cost in the 60-70 basis point range could be achievable.”

Conversion to a Sharia compliance

Mr. Challinor commented on a question regarding the potential conversion to Islamic banking by stating: “Currently, the feasibility study is underway. Upon completion, the findings will be presented to the Board of Directors and then to the Central Bank of Kuwait. Ultimately, the decision will be brought to our shareholders at the AGM for their approval.”