The Central Bank of Kuwait Governor Dr. Muhammad Al-Hashel said the financial statements of Kuwaiti banks for the year 2021 prove once again the flexibility of the banking sector, its high ability to overcome crises, and the continuation of serving the national economy with high efficiency without interruption, which indicates the strength of financial safety for the local banking sector.
The capital adequacy, liquidity, asset quality, and profitability, the Governor said, are supported by positive results of financial stress tests that the Central Bank regularly performs. The governor indicated that the consolidated budget of the Kuwaiti banking sector continued to grow from about 85.4 billion dinars to about 91 billion, thus reaching the highest level in history, with a growth rate of 6.5%, reports a local Arabic daily.
He added, that this increase in assets was driven by the positive growth rates of credit facilities balances, where the net amount of these facilities at the aggregate level are about 56 billion as at the end of 2021, an increase of 4.1 billion compared to 2020 and a growth rate of 8%.
In terms of financial safety indicators, starting with the quality of assets, the governor explained that they are in their best condition ever, as non-performing loans reached the lowest level historically at 1.4% in 2021 compared to 2% in 2020.
He explained that the abundance of provisions contributed to achieving this percentage, as banks used a portion of those provisions to write off bad loans. In the same context, the coverage ratio of provisions for non-performing loans, he said, increased to 310% in 2021, which is the highest level in history for this ratio as well.
He went on to say in terms of financial solvency, the capital adequacy ratio of Kuwaiti banks reached 19.2%, which clearly exceeds international requirements by 10.5%.
In this regard, the governor noted that the capital adequacy ratio for 2021 is the highest ever since the start of implementing Basel (3) instructions.
On the level of liquidity standards, Al-Hashel explained that the banking sector enjoys abundant liquidity supported by the prudent policy of the CBK at the level of interest and exchange rates, which enhances the localization of savings, and the regular and continuous flow of liquidity in the sectors of the national economy, and in this regard, the liquidity coverage standard for the year 2021 reached a percentage 183%, and the net stable financing criterion was 111%, both of which are above the minimum requirements of 100%.
Also, with regard to the profitability of the banking sector, the governor indicated that the banks’ net profits for the year 2021 are close to pre-pandemic levels, with net profits amounting to about 961 million dinars.
As part of his study of the results of the financial statements for the year 2021, and to further reassure the strength of the conditions of the banking system, the governor noted the Central Bank’s keenness to apply hedging stress tests according to a sophisticated mechanism that takes into account many variables at the financial level and at the level of the micro and macro economy, according to scenarios of varying severity and perspective.
The results of stress tests according to the most severe scenarios resulted in a high resilience of the Kuwaiti banking sector, as it maintained an average capital adequacy of 12.6% at the end of 2024, which is a relatively high level and exceeds international requirements, despite the severity of the applied scenarios.
Finally, the governor concluded his press statement by emphasizing that the Kuwaiti banking sector, after two years of the Corona pandemic is enjoying better conditions and more flexibility that enables it to face the challenges coming from a position of strength, as well as stressing the continuation of vigilant and close supervision of the Central Bank of Kuwait to fortify the banking sector units based on this proactive approach to strengthening the sector’s strength within a supervisory system directed at consolidating monetary and financial stability.
