Commercial Bank of Kuwait (CBK) warned of difficult times ahead as it posted a fourth-quarter loss yesterday and booked KD57.7 million (Dh718.29m) of provisions last year.
Banks across the Gulf, including Kuwait, have seen sharp declines in quarterly profits and some have made losses as a credit crisis hits their lending businesses, they book provisions for bad loans and write down investments.
"There are difficult times ahead and it is not easy to predict the future affects of the global financial crisis on the Kuwait economy and local companies," CBK Chairman Abdulmajeed Al Shatti said in a statement.
Fourth-quarter profit of Kuwait's third-biggest bank by market value was about KD4.17m, according to Reuters calculations based on full-year data provided by the bank. CBK's 2008 profit fell 16.3 per cent to KD100.73m, or 80.6 fils per share, from KD120.36m, or 95.1 fils per share, in 2007, it said. The bank said it booked KD57.7m of provisions for possible impairment in 2008 against loans and investments to offset the impact of the global credit crisis.
"This was expected because the financial crisis hit in the fourth quarter," said Mustafa Behbahani, a director at Kuwait's Gulf Consulting. "This could improve maybe by the second quarter… it all depends on the approval of the government rescue plans."
Earlier this month, Kuwait approved a KD1.5 billion economic stimulus package including state guarantees on fresh loans. Parliament is due to debate on the plan next month. But investor confidence has been shaky since it stepped in to rescue Gulf Bank last year.
The quarterly loss compared with a KD32.50m profit forecast by Global Investment House in a Reuters net profit survey in December.
Shatti, who said in November he hoped to achieve a 2008 profit growth goal of 20 per cent despite the global turmoil, could not be reached for comment.
CBK, which proposed a cash dividend of 40 fils per share but no bonus shares, said net interest income in 2008 advanced 31 per cent and income from fees and commission rose 18 per cent. Total loans and advances grew 10 per cent.