On behalf of the Board of Directors, I am pleased to present to you Gulf Bank’s Annual Report for 2018. The Bank’s commitment towards its core strategy of customer service excellence in the Kuwaiti market continues to accelerate and drive the performance and profitability of Gulf Bank.
Net profit increased from KD 48 million in 2017 to KD 57 million in 2018, an increase of 18%. This is the fifth straight year of double digit growth in net profit for the Bank.
Earnings per share increased to 20 fils per share and the Board of Directors is recommending a cash dividend of 10 fils per share for shareholders’ approval at the Annual General Meeting to be held in March, 2019.
Strong Assets Base
Loans and Advances to customers reached an all-time high of KD 4.2 billion at the end of 2018, an increase of nearly KD 0.5 billion or 13% over the last two years. This growth was well balanced as 57% came from the Bank’s Corporate segment and 43% came from the Bank’s Consumer segment.
Non-Performing Loans (NPL’s) reached an all-time low of 1%. This was driven mainly by the settlement of two legacy corporate loans in the second half of 2018, one of which led to a recovery of KD 36 million recorded in the fourth quarter of 2018.
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.
The Bank’s regulatory capital ratios remained strong as the Tier 1 ratio of 14.1% was 2.1% above the regulatory minimum of 12%, and the Capital Adequacy Ratio (CAR) of 17.5% was 3.5% above the regulatory minimum of 14%.
Business Environment & Growth
With a focused strategy to deliver excellent service and innovation to our retail and corporate customers, Gulf Bank has enabled both business segments to grow and maintain their market share.
To serve its retail customers, the Bank now has 58 branches in Kuwait and has plans to open more in 2019 and beyond. In addition, the Bank has enhanced its credit card offering by introducing a new range of credit cards with benefits tailored to each of its customer segments and a new cashback card to supplement the Bank’s popular rewards program. In addition, the Bank signed agreements with several retailers in Kuwait to offer an interest-free program to their customers to drive more sales for them and more customers for the Bank. Gulf Bank also launched the “WISE” investment platform for its wealth and priority customers, and a new state-of-the art website.
On the corporate side, Gulf Bank continued to deliver loan growth despite the challenging market environment during 2018. The Bank is actively financing government projects, particularly in the oil & gas and construction sectors. As an example, Gulf Bank participated in financing KNPC's Clean Fuels Project and the resultant new refinery at Al-Zour as well as the Jaber Al Ahmad causeway and the Sabah Al Ahmad housing project, to name just a few. The Bank has also financed the contractors building some of the iconic projects in Kuwait such as the Jaber Al Ahmad Cultural Center and the Abdullah Al Salem Museum. To focus on our corporate customer experience, Gulf Bank launched the Corporate Partner initiative, which provides a one-stop shop catering to clients’ needs in a holistic approach. This initiative aims to build long-term partnerships by enhancing the overall customer experience through improved services and product offerings, thereby increasing customer satisfaction and retention.
Kuwait Capital Market Development
During the year 2018, Kuwait witnessed major milestones in terms of developing its capital markets. Boursa Kuwait has completed its second stage of market development by classifying the market into three classes; Premier Market, Main Market and Over the Counter Market. Gulf Bank is classified under the Premier Market segment, the elite segment that is occupied by large companies in terms of liquidity and market capitalization. Being part of this segment provides our shareholders and investors with ample transparency and an increased level of disclosure, including quarterly conference calls with analysts and bilingual regulatory disclosures.
Another milestone is the inclusion of Gulf Bank shares in the MSCI Frontier Markets Index during its May, 2018 semiannual review. This event and similar international index inclusions will attract regional and international investors to support the liquidity and attractiveness of Gulf Bank’s shares.
During 2018, two additional sell-side equity research houses initiated coverage on Gulf Bank. In addition to Arqaam Capital, Gulf Bank is now covered by EFG Hermes and QNB Financial Services, both of which are well respected research houses that service reputable international and regional investors. For the first time in its history, Gulf Bank obtained ‘buy’ recommendations from all three of those research companies covering the bank during the year 2018.
“A” Ratings from the Four Major Credit Rating Agencies
The Bank maintained its ‘A’ ratings from the four major credit rating agencies. Moody’s Investor Service maintained a rating of A3 and upgraded the outlook of the Bank to ‘Positive’ from ‘Stable’ while Capital Intelligence upgraded the rating to ‘A-‘from ‘BBB+’. Fitch Ratings have also affirmed their ratings at ‘A+’ with a `stable` outlook and Global Ratings also affirmed the Bank rating at ‘A- ‘, with a ‘Stable’ outlook.
Sustainability has taken a lead in Gulf Bank’s success, playing an integral role in its corporate social responsibility initiatives. Gulf Bank’s social responsibility program supports events focusing on youth and education; women's empowerment; health and fitness and Kuwait’s heritage. We aim to engage with our partners to promote social and economic prosperity that drive sustainable growth and invest in our communities.
On behalf of the Board of Directors, we would like to express our gratitude to HH the Amir Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah, HH the Crown Prince, Sheikh Nawaf Al-Ahmed Al-Jaber Al Sabah, and HH the Prime Minister Sheikh Jaber Al-Mubarak Al-Hamad Al-Sabah for their wise leadership and vision for Kuwait. We would also like to extend our appreciation to the Central Bank of Kuwait and the Capital Markets Authority for their dedicated efforts in supporting and promoting Kuwait’s Banking sector.
I would like also to offer our sincere thanks to our valued customers for their continued trust in Gulf Bank as their business and loyalty is at the core of our success. Finally, I would like to thank the entire Gulf Bank team for their dedicated service. Our growing success is down to their commitment as part of the Gulf Bank family.