MAJOR FINANCIAL HIGHLIGHTS
Net profit increased from KD 48.0 million in 2017 to KD 56.7 million in 2018, an increase of 18%. This is the fifth straight year of double digit net profit growth.
Earnings per share increased to 20 fils per share and the Board of Directors has recommended a cash dividend of 10 fils per share for shareholders’ approval at the Annual General Meeting to be held in March, 2019.
Loans and Advances to customers reached an all-time high of KD 4.2 billion at the end of 2018, nearly KD 0.2 billion or 5% higher than 2017 year-end and an increase of nearly KD 0.5 billion or 13% over the last two years. The growth over the last two years was well balanced as 57% came from the Bank’s Corporate segment and 43% came from the Bank’s Consumer segment.
Shown below are the major variances in net profit from 2017 to 2018 (KD millions):
The Bank’s 2018 net profit growth of KD 8.7 million was mainly driven by higher net interest income of KD 20.4 million (+15%) offset partially by non-recurring other income earned in 2017, higher operating expenses, slightly higher provisions/ impairment losses, and slightly lower net fees and commissions.
Net interest margin improved 25 basis points from 2.36% in 2017 to 2.61% in 2018.
Return on average assets improved 11 basis points to 0.97% and return on equity improved from 8.3% to 9.4%.
The Bank’s cost to income ratio improved to 34.5% in 2018 compared with 35.4% in 2017.
The Bank’s regulatory capital ratios remained strong as follows:
Tier 1 ratio of 14.1%, 2.1% above the regulatory minimum of 12%.
Capital adequacy ratio of 17.5%, 3.5% above the regulatory minimum of 14%
NON PERFORMING LOANS
NON-PERFORMING LOANS reached an all-time low of 1%. This was driven mainly by the settlement of two corporate loans in the second half of 2018, one of which led to a recovery of KD 36.5 million recorded in the fourth quarter of 2018 and KD 19.7 million in potential interest income pending a final court judgement.
THE IFRS9 accounting standard on credit facilities was implemented by the Central Bank of Kuwait in 2018 and, as of year-end 2018, the Bank’s total credit provisions of KD 312 million were greater than the IFRS9 requirements by KD 112 million.
Gross credit costs in 2018, defined as specific provisions plus write-offs, were KD 17 million lower (-19%) than 2017.
Total credit costs plus impairments were KD 18 million in 2018, KD 67 million or 79% lower than the amount of KD 86 million incurred in 2017.
Total provisions and impairment losses of KD 68 million were incurred in 2018, which represented 1.2% of average total assets, the same ratio as 2017.
The Bank’s general provisions on the Balance Sheet stood at KD 247 million at the end of 2018, an increase of KD 50 million or 25% compared to the end of 2017. This represents 5.8% of total gross customer loans (4.9% at the end of 2017) and 39% of total book equity (33% of total book equity at the end of 2017).