Kuwait City, Apr 28: Mr. Isam Al-Sager, the Vice Chairman and Group CEO of National Bank of Kuwait (NBK), said, “NBK continued recording solid performance and building on past year’s momentum as we advance in executing our diverse strategy and leveraging our flexible business model throughout the challenging macroeconomic landscape.”

On the sidelines of the Analyst Conference for the results of 1Q24, Al-Sager added, “We reported net profits of KD 146.6 million in the first quarter of the year, growing by 9.2%. Driven mainly by growth in core banking income, our revenue stream stems from a diverse operational mix that proved successful in mitigating risks and optimizing performance. We achieved a growth of 11.2% year on year in net operating income to reach KD 309 million.”

Strategic investments

“Our success is underscored by the strategic investments that are aimed at achieving sustainable growth, enhancing customer experience, and creating long-term value to shareholders which is evident in our performance measures. Our return on average assets for the reporting period reached 1.55% whereas our return on average equity reached 15.2%,” Al-Sager highlighted.

“The ongoing investments by the Group in innovation and technology will support our ability to meet the evolving needs and expectations of our clients. By such, we will further strengthen our leading franchise across all business sectors and continue to build on our trust-based relationship with stakeholders,” he continued.

Local market

Speaking on NBK’s performance in the local market, Al-Sager stated, “Our approach in Kuwait remains centred on strengthening our market position in key segments, growing our clientele through digital products, and providing exceptional customer service. From a corporate banking standpoint, we continue to lead Kuwait’s infrastructure program and are well-positioned for any revival of infrastructure spend.”

“Furthermore, our Islamic banking arm, Boubyan Bank, along with our international operations both continue to expand their contribution to the Group aiding in our diversification strategy. Notably, our international operations maintain a robust contribution to the Group’s operating income and net profit.”

“Also, and notably in wealth management, we will endorse our position and brand presence through a global network of operations with the launch of NBK Wealth. We will further solidify our value proposition in providing innovative solutions and services towards a best-in-class wealth management experience,” Al-Sager noted.

“Similarly, as a frontrunner in the ESG space, we will continue to play a role in fostering sustainable advancement in the communities where we operate and in being a key partner in the sustainable financing endeavors of our clients,” he affirmed.

Egyptian market

On a question about the Group’s operations in Egypt, Al-Sager replied, “On Egypt, we witnessed recently signals of economic stability which is considered of the largest economies in the region and enjoys big potential for growth. As soon as the confidence in the Egyptian economy is regained, we believe that there are substantial growth opportunities within Egypt, and we will continue to be optimistic in this regard.”

“Speaking of our operations in Egypt, it is a main growth market for us, and we are committed to grow our operations in the Egyptian market, as one of our most profitable markets.”

Kuwaiti economy

On the other side, Al-Sager said that the Kuwaiti economy ended the quarter on a relatively soft note indicating that in terms of historical trends, credit growth stood low while real estate activity weakened. Inflation has also eased and is trending lower on the back of cooling private demand.

“Likewise, project activity declined significantly following an improved 2023. This could be partly explained by seasonal effects in addition to the unexpected downturn in domestic politics. The project awards outlook for the remainder of 2024 should be better with a pipeline of KD 6.3 billion worth of projects to be awarded,” he added.

Underlying drivers

On his part, Mr. Sujit Ronghe, Group CFO of National Bank of Kuwait commented on 1Q24 financial results saying, “Underlying drivers for the robust bottom-line performance are a combination of yoy growth in business volumes, higher interest rates, and a stronger operating performance. Group loans and advances grew by 5.7% year on year. Investment securities also contributed strongly to Group assets with a growth of 15.6% compared to March 2023.”

“The Group’s Balance Sheet remains strong with a stable credit quality, solid capital base along with the ability to generate healthy operating profits. Total credit provisions and impairment losses for 1Q24 amounted to KD 25.5 m, a decrease of KD 2.6m over 1Q23.

“NBK Group continues to benefit from its unique position amongst Kuwaiti banks in terms of geographical spread through International Banking and the ability to conduct business in both Conventional and Islamic Banking,” he remarked.

Loans and deposits

On the loan outlook, Ronghe mentioned, “Corporate loan growth has been promising in the past twelve months both in our domestic and international locations. For that, growth in loans for the upcoming quarters will mainly stem from the growth anticipated in corporate loans. At the same time, as a nature of the Group’s international network, we remain well positioned to attract deposits at competitive rates while the local competition doesn’t impact NBK’s to the extent it does to other local banks.”

Lower cost of risk

“As a result of the marked growth in operating income and controlled cost growth, the 1Q24 cost to income ratio was at 36.1% compared to 36.5%, one year ago. The cost of risk for 1Q24 decreased to 44 bps compared to 53 bps in 1Q23. Considering the declining interest rate scenario as we go ahead into the further quarters of 2024, we do expect the cost to income ratio to increase slightly, but it should be below the 40% mark,” Ronghe explained.

“The Group’s NIM increased from 2.48% in 1Q23 to 2.64% in 1Q24, backed by a strong year-on-year growth in volumes and interest rates. Benchmark interest rates are expected to remain at current levels for a longer period, with rate cuts being forecasted in later quarters of 2024,” he added.

Cautious optimism

“Looking forward, ongoing regional and international geo-politics, prospects of ‘higher for longer’ interest rates are likely to result in a macroeconomic environment which is less conducive to growth. We, however, remain cautiously optimistic that the overall operating environment, although challenging, will remain generally stable during 2024.”