Al-Ahli Bank of Kuwait Group holds Q1 2024 analyst conference call
KUWAIT: Al-Ahli Bank of Kuwait (ABK) recently hosted its Q1 2024 analyst conference attended by Abdulla Al-Sumait, Acting Group Chief Executive Officer; Shiamak Soonawalla, Group Chief Finance Officer; Abdulaziz Jawad, Chief Strategy Officer; and Yaqoub Almulla, Senior Manager of Investor Relations.
Abdulla Al-Sumait.
The conference entailed a review of the Group’s financial indicators during the quarter, as well as the expectations and upcoming projects, with the aim of maintaining its leading position in the banking sector and improving customer service according to the highest standards in the industry.
Al-Sumait claimed, “ABK is poised to capitalize on growth opportunities in the market with a commitment to continue to drive innovation, invest in technology, and enhance our product and service offerings to meet customers’ evolving needs.”
He added, “Regarding our key financial highlights and performance during this period, we have achieved a 35 percent rise in net profit amounting to KD 14.5 million, a 50 percent increase in EPS to 6 fils, and an NPL Ratio of 1.34 percent. These figures highlight our resilience and proven track record in navigating economic fluctuations and effectively addressing local, regional, and global challenges.”
Al-Sumait affirmed that the Group maintained positive momentum during the quarter, reflected in its improved profitability and asset quality ratios. “We remain confident in our ability to seize growth opportunities and strengthen its position in the banking sector,” he said.
Dedication and excellence
Al-Sumait elaborated that the Group continues to benefit from its local and tactically widespread international presence. He said, “Notably, our international operations significantly contributed to our operating income and asset portion. By expanding our regional presence, the Group has achieved significant success in Egypt through securing important investment and financing deals. Furthermore, ABK continues to take precautions and develop prudent plans to address the economic challenges in Egypt.” The Group also persists in its efforts through its Dubai International Financial Center (DIFC) branch to gain the trust of global investors, secure loan deals, and enhance financial performance.
Al-Sumait highlighted that the Group’s strong commitment to implementing digital transformation plans remains steady, as it continues to integrate cutting-edge technologies into banking systems. He shared, “We are pleased to announce the full renovation and re-opening of our Al-Jabriya branch, demonstrating our dedication to providing our customers with innovative banking solutions. We are planning to introduce more digital branches in the future to offer seamless service to our customers.”
In Q1 2024, the Group signed a $250 million credit facility agreement with South Korea’s Daewoo Engineering and Construction Company. This partnership, in collaboration with Commercial Bank of Kuwait and Burgan Bank, underscores the strong relationships and trust that the Group has cultivated with global institutions across different sectors, thanks to its unique solutions, professional approach, and ability to meet diverse needs.
Furthermore, the Bank launched a series of new and uplifted products and services, of which included the unique cash back credit card proposition and increase in affluent elite and youth segments. Commenting on this success, Al-Sumait said, “As we reflect on our accomplishments in Q1 2024, we remain committed to investing in the growth and development of our workforce.”
Financial performance
On his part, Soonawalla commented, “Our financial performance shows significant enhancements in profitability, efficiency, asset quality, and strong capital position. We have made a good beginning and, at this stage, remain optimistic about our performance for the remainder of the year.”
In terms of operational performance, our operating income has reached KD 51.9 million an increase of 21 percent, while our Operating Profit of KD 27.8 million has increased by 25 percent. With regards to asset quality, non-performing loan ratio stood at 1.34 percent, while the loan loss coverage ratio was at 462 percent, reflecting ABK’s prudent provisioning quality and strong credit metrics. Furthermore, it currently holds KD 223 million of provisions in excess of IFRS requirements, providing adequate protection against downside risks.
Soonawalla shed light on the fact that the Group continues to improve on its operational efficiency, with a net interest margin of 2.3 percent and an operating profit to average assets ratio of 1.74 percent reflecting the Group’s strong performance and greater emphasis on profitability. Additionally, Return on Average Equity reached 9.6 percent, a 60 percent increase compared to the same period in 2023.
He added that the Group’s total interest income reached KD 116.2 million, marking a substantial increase of KD 20.4 million or 21 percent compared to the same period in 2023. Soonawalla claimed that this growth can be largely attributed to higher asset levels and a more favorable interest rate environment. During the same period, the Group’s interest expense increased by 24 percent to KD 79.2 million as deposits got repriced at a higher rate in line with interest rate hikes during 2023.
Soonawalla further discussed that the Group’s assets reached KD 6.5 billion, a 7.4 percent noticeable increase, and its loan portfolio grew by 6 percent to KD 4.3 billion, reflecting a strong and robust balance sheet. Additionally, total deposits amounted to KD 3.9 billion, accounting for 66.1 percent of total liabilities. Meanwhile, the liquidity position remains robust, with a net stable funding ratio of 113 percent and a liquidity coverage ratio of 260 percent, well above regulatory requirements.
The Group CFO also discussed the important factors impacting changes in income, margins, and costs, highlighting that the total operating income has experienced a notable 21 percent.
Furthermore, fees and commissions made a significant contribution to earnings, with a noticeable growth of 45 percent, amounting to KD 11.1 million in Q1 2024. Soonawalla disclosed that the Group’s fees and commissions come from a variety of sources across different regions and business sectors, with the majority stemming from core banking operations.
Economic indicators
On his part, Jawad said, “Global recovery shows elasticity once again, changing by region with a baseline forecast for the world economy to continue growing at the same pace as last year by 3.2 percent according to the IMF. S&P Global Market Intelligence’s forecast of global growth has also been revised upward in comparison to last year, with annual real GDP growth now projected at 2.6 percent, up from 2.3 percent at the beginning of the year. This upward revision also reflects slightly higher forecasts for growth in several countries internationally.”
He added that nevertheless, growth in GCC countries remained remarkably resilient, including during challenging political scenarios. This was a result of higher energy prices and strong capital inflows in the region. Jawad pointed out that the GCC also witnessed expansions in the non-oil sector as per PWC, which is estimated to have grown by 4.3 percent as to date with government investments linked to various economic diversifications taking place across the GCC in 2024.
Moving to Kuwait, the Chief Strategy Officer shared, “IMF forecasts a slight real GDP reduction of -1.4 percent this year as a result of OPEC oil production cuts, and faces lower inflationary pressures which are expected to ease to 3.0 percent this year as per S&P. Projects have also been temporarily halted due to unforeseen changes in the domestic political scene, but is expected to pick up gradually towards the second half of 2024 with a planned project pipeline of KD 6.3 billion.”
A journey of growth
Transitioning to ABK, this quarter witnessed sizable growth and notable achievements. Jawad stated, “Our dedication remains on path and stable by reaffirmed ‘A’ ratings from Fitch and ‘A2’ ratings from Moody’s.” He was also pleased to report that this growth journey remains successful in line with the ABK2X strategy where some initiatives have been extended to the broader group entities, expanding the impact beyond the initial scope and creating effective synergies between subsidiaries.
Jawad added, “Our ABK2X strategy continues to drive tangible outcomes with growth across our products and customer base. ABK introduced the new Elite Plus segment in January 2024 to expand our offering to the Elite segment and also successfully launched two more card products to the market, the ABK cashback credit card and the Elite Plus credit card. We have received great market feedback, witnessed our highest-ever monthly credit card sales where it and our market share growth of new credit cards more than doubled vs. Q1 2023.”
Furthermore, ABK’s targeted acquisition campaigns resulted in increasing market share among key salaried Kuwaiti segments and expats. By focusing on key segments, it was able to improve its share of the incremental loan market to reach +15 percent during Q1 2024. Jawad added, “We also launched an upgraded A+ youth segment offering to increase our share of youth.”
Egypt and the UAE
On the international business side, the Egyptian economy experienced a recent flotation of the EGP and a sharp raise of the local interest rate, which is meant to combat inflationary waves and attract foreign investments. These factors will, in turn, result in an improved operating environment for ABK-Egypt.
Shifting to the UAE, Jawad claimed, “We are proud to announce that ABK-UAE has received CBK approval to market their products in Kuwait. It has also launched a new mortgage lending program catering to customers’ financial needs in both UAE and Kuwait.”
ABK Capital and sustainability
Jawad also highlighted that the Bank’s investment arm, ABK Capital, has initiated the revamp of its 5-year strategic plan, aimed at enhancing growth opportunities and solidifying its market position as a leading player in the financial services industry.
He also shared, “We have recently achieved a new milestone with the recent approval of our enhanced 5-year group ESG strategy, built on six fundamental pillars. This is in addition to our persistent efforts in equipping staff with the knowledge and skills necessary to effectively integrate sustainability and ESG principles into daily operations. Doing so enables us to further foster a culture of sustainability and responsible banking practices throughout the organization,” he said.
Jawad also disclosed that ABK is currently conducting internal data collection to evaluate its progress this year, all of which should be published in our upcoming sustainability report. Concluding his statement, Jawad said, “ABK is committed to meticulously executing its strategy, positioning the Bank to generate lasting value and foster prosperity for all stakeholders as we look forward to the first half of 2024.”
