Kuwaiti banks will see slower asset and profitability growth in 2008 due to regulatory and competitive pressures, but their fundamentals will remain sound, global rating agency Fitch Ratings said yesterday in a report.
Fitch said Central Bank of Kuwait's (CBK) measures in the first-half of this year to curb rapid growth in consumer lending may lead to margin compression, put pressure on profitability and inhibit growth, while constraining regulatory capital ratios. "Under the new regulations, banks face increased risk weighting for consumer loans, loans for share purchase and loans to the real estate sector, as well as tighter regulations on the maximum interest rates banks are permitted to charge on consumer loans," the report said.
Growth in consumer lending is further limited by the small size of the Kuwaiti population, with 16 banks competing to serve a population of around three million. The lifting of restrictions for foreign banks operating in Kuwait could result in increased competition.
Fitch said the corporate banking market in Kuwait is relatively mature and, with the CBK granting licences to foreign banks competition may also increase.