The provisions for credit losses and the decrease in the value of investments carried in the profit/loss statement of Kuwaiti banks during 2020 witnessed a jump of 56% to a record 1.06 billion dinars, in light of the repercussions of the Corona pandemic on the economic sectors, the credit market, the corporate and individual loan portfolio, and the economic downturn.
However, according to a local Arabic daily, 2021 witnessed a significant improvement in the credit market situation and the quality of the credit portfolio and the reopening of economic and commercial activities, so that credit allocations returned to a decline by 39% to record the level of 619.6 million dinars, but despite their decline, the profits of banks was equivalent to 70% of the sector’s net profits for the year 2021.
The daily added, it was found that the allocations for the Kuwaiti banking sector was equivalent to about 22% of the sector’s net operating revenues for 2021, which amounted to 2.73 billion dinars, equivalent to 36.6% of the operating profit before allocations to the sector, which in turn recorded 1.62 billion dinars. With calculating the Kuwaiti banking sector allocations in 2021, the total allocations deducted by local banks since 2008 reached record numbers at the level of 10 billion dinars, compared to net profits for banks amounting to 9 billion dinars during the same period, as the provisions amounted to 106% of the net profits achieved in the last 14 years.
Despite the decrease in its provisions by 52% during the year 2021, the Kuwait Finance House (KFH) topped the list of banks that booked the most provisions for credit losses and the depreciation of investments, as it reserved provisions in the income statement at a value of 135.4 million dinars, compared to 284 million dinars carried during the year 2020.
The provisions amount to about 17% of the bank’s net operating income, which amounted to 811 million dinars, and 27% of the operating profit before credit provisions (operating profit = operating income – operating expenses) and is still pressing on the net profit despite the strong financial position and good financial performance of the bank.
The second highest provisions during 2021 were booked by the National Bank of Kuwait, with a total of 132.5 million dinars, compared to 246.4 million dinars for the year 2020, with a decrease of 46% over the previous year. Despite the continuation of provisions at high levels, their ratio to operating income is the best among Kuwaiti banks by 15%.
The third highest provisions booked by Burgan Bank, which amounted to 84.6 million dinars during 2021, an increase of 10% over the previous year. The provisions equal about 36% of the bank’s total operating income, and this percentage is among the highest among Kuwaiti banks and much higher than the sector average, which recorded 22 %. The bank’s provisions amounted to 60.5% of the operating profit before provisions, compared to the sector’s average, which recorded 36.6%.
Warba Bank’s provisions increased by 28% to record 59.8 million dinars, compared to 46.6 million dinars in 2020, and the provisions equal 56% of the bank’s total operating income, which amounted to 107.4 million dinars, and 78% of the operating profit before provisions, and they are still pressing on the bank’s profitability.
As for Boubyan Bank, during 2021, in the profit/loss statement, it carried provisions amounting to 50.8 million dinars, a decrease of 14% compared to 2020, where the provisions amounted to about 50.5% of the operating profit before provisions.
As for Gulf Bank, with provisions amounting to 47.6 million dinars, a decrease of 26% from 2020, which is still relatively high and negatively affects the bank’s financial performance, as provisions equal about 51.8% of the operating profit before provisions and 28% of the bank’s net operating income.
The credit provisions carried by Al Ahli Bank of Kuwait the income statement decreased during 2021 by 66.5% to reach 47.8 million dinars, and the reserved provisions equal 30% of the operating income for the year, which amounted to 154 million dinars, and 56% of the operating profit before provisions.
Ahli United Bank’s provisions decreased in 2021 compared to 2020 by 11.5% to record 23 million dinars, in conjunction with the stability of operating income at 91.4 million, where provisions equal 41.5% and 25% of operating profit before provisions and operating income, respectively.
The provisions of the Commercial Bank of Kuwait in 2021 amounted to about 24.15 million dinars, a decrease of 73.5%, compared to 91.39 million dinars in 2020.
The allocations of Kuwait International Bank (KIB) decreased by 47.5% to reach the level of 14 million dinars in 2021, compared to the level of 26.7 million dinars in 2020, say the sources.
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