Net income of Kuwait banks rises in H1

Lower loan loss provisions and recovering lending activity boosted the net income of Kuwait’s banks by about 20.7 per cent in the first half of 2010 and profits could remain high through the year, a local daily reported on Wednesday.

From around KD223 million (Dh2.78 billion) in the first half of 2009, the net earnings of the Gulf country’s nine banks surged to KD269.2m in the first half of 2010, 'Alqabas Arabic' language newspaper said.

Citing the banks’ balance sheets, the paper said they did not include half yearly results of Burgan Bank but that its second quarter profits were calculated as equivalent to the first quarter earnings.

“Analysts attributed the surge in the banks’ net profits to several factors, including a decline in the allocations for non-performing loan provisions and a gradual resumption of the banks’ lending activity,” the paper said.

“Based on indicators in the first half, banking analysts expect the second half to be an extension of the first half as many large projects have been announced by the government as part of its development plan. This will be a chance for the banks to boost business,” the paper said.

Kuwaiti banks were the star performers in the Gulf in 2009, when their net profits jumped by around 70 per cent to KD1.233bn from KD724m in the previous year.

But analysts said the sharp rise followed poor performance in the previous year because of the global fiscal distress.

In contrast with Kuwait, banks in Saudi Arabia dipped by around 9.4 per cent to SR11.72bn in the first half of 2010 from about SR12.94bn in the first half of 2009, according to their balance sheets, which did not include the non-listed National Commercial Bank, the kingdom’s largest bank.

In a recent study, a key Western financial group said Kuwaiti banks remain heavily exposed to the real estate and construction sectors as is the case of the UAE banking sector, the largest in the Arab region.

“In Kuwait, the banking portfolio is highly exposed to the real estate and construction sectors, which together account for close to 50 per cent of total loans,” the Washington-based Institute of International Finance (IIF) said.

“However, Kuwaiti banks are highly exposed to investment companies (12 per cent of total loans), which proliferated in recent years with inadequate controls.

"The stressed domestic investment companies have put strains on the banking sector during the current crisis.”

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