Kuwait banks total assets reach historic highs
MEED magazine reported that Kuwaiti banks possess total assets amounting to $384.7 billion as of the end of the first quarter of 2024, which is their highest historically, as they have continued to rise since the first quarter of 2022 when they reached $326.8 billion, jumping to $382.8 billion by the end of 2023.
MEED indicated that the total loans granted by the local banking sector amounted to about 228.9 billion dollars, and in return, the total customer deposits with banks amounted to 297.6 billion dollars, the banks achieved revenues during the first quarter of the current year, amounting to 3.26 billion dollars.
The net interest margin was 2.87%, and it achieved a net income of $1.34 billion, pointing out that the banking sector was able to achieve good performance, benefiting from the stronger net Interest margins that flowed thanks to the rise in global interest rates in recent years.
The profits of the banking sector in general grew by 28.7% in 2023, according to the “Kamco Invest” report, and banks continued to achieve good growth rates during the current year, as the National Bank of Kuwait witnessed a 6.2% increase in Net Profits for the first half of 2024 to reach 292.4%. million dinars, while Kuwait Finance House (KFH) announced a 2.3% increase in net profits to 341.2 dinars for the same period.
The magazine stated that considering prudent financial regulations and supervision, Kuwaiti banks maintained strong reserves and buffers of capital and liquidity, while their profitability recovered from their lowest levels during the Corona pandemic, and non-performing loans remained low and well covered by provisions. MEED said that one of the challenges facing Kuwaiti banks is that the local market is still unable to provide sufficient lending opportunities to significantly impact the banks’ performance. This partly reflects familiar issues related to Kuwait’s unique political structure.
It pointed out that there is a possibility of another major local merger in Kuwait, with Boubyan Bank and Gulf Bank conducting a preliminary feasibility study for a possible merger, and further merger steps may lead to a traditional bank acquiring another that is compatible with Islamic Sharia, or acquire an Islamic branch. As of now, all options remain open.
The magazine stated that the net interest margin situation reflects Kuwait’s distinctive policy approach, as the Central Bank of Kuwait does not systematically follow the interest changes imposed by the US Federal Reserve, which means that banks still need more support, and usually, for every two or three changes made by the Federal Reserve, one change in Kuwait.
According to an analysis by Kuwaiti research firm Marmore, the approach of skipping interest rate adjustments means that while the gross net interest margin changed in line with the global interest rate, the magnitude of the change was smaller. For this reason, the net interest margin of all Kuwaiti banks may not decline in the expected next monetary easing cycle.
Marmore notes that while banks such as National Bank of Kuwait expect their net interest margin to stabilize this year, other banks have highlighted the difficulty of providing guidance for net interest margin given the uncertainty around the timing and size of interest rate cuts.
