KFH Q2 net profit dives 61% on provisions

Kuwait Finance House (KFH), the Gulf's second largest Islamic lender, posted a 61 per cent fall in second-quarter net profit on provisions as the global financial crisis hit banks across the country. Net income in the first half of the year was KD72 million (Dh919.89m), or 32 fils per share, KFH said in a statement without giving comparative figures. There are 1,000 fils in a dinar. Reuters calculated second-quarter net profit of KD32.7m based on previous financial data which showed KFH had first-quarter net profit of KD39.3m. The lender made a net profit of KD83.9m in the second quarter of 2008. "The results come amid difficult circumstances that the region's markets are going through… which made us raise the total provisions until the end of the first half," Chief Executive Mohammad Al Omar said in a statement. He did not say how much provisions were taken or for what purpose. The quarterly results came below a forecast by EFG-Hermes that had expected KFH to post second-quarter net profit of KD41m in a Reuters survey this month. Last week, National Bank of Kuwait (NBK), the country's largest, posted a 32.7 per cent fall in second-quarter net profit it on provisions and a decline in the value of investments. KFH, in which the country's sovereign wealth fund owns a 24.1 per cent stake, said last month it has a minimal exposure to troubled Saudi Arabian conglomerates Ahmad Hamad Algosaibi and Brothers and the Saad Group. Regulators and bankers are grappling with the fallout from a multi-billion dollar debt restructuring at the two large family businesses, seen as the biggest blow to hit the Middle East since the start of the financial crisis. Both local and international banks are estimated to bear about $10 billion (Dh36.73bn) in exposure to the two groups, but little information has been made available to investors. Assets at Kuwait Finance, which also operates in Malaysia and Turkey, rose five per cent to KD10.8bn in the first half compared with the same period last year, said the lender. On Thursday, Standard and Poor's rating agency said it has kept its A-/A-2 rating but assigned the bank a negative outlook due to its exposure to the real estate and construction sector, and to local investment firms. "The negative outlooks on KFH reflect our expectation that increased credit risk is likely to weigh negatively on these banks' financial profiles," said S&P. Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here .