Gulf Bank expects profit boost in Q3 2011 year of recovery: Accad

KUWAIT CITY, July 27, (RTRS): Gulf Bank expects to boost its profits in the third quarter and sees 2011 as a year of recovery, as the lender leaves its aggressive provisioning policy behind it, Chief Executive Michel Accad said.
Gulf Bank, which was rescued by the Kuwaiti central bank in 2008, after about 260 million dinars ($902.1 million) of derivatives losses, is completely provisioned against bad loans and on track for a comeback, Accad said.
The bank’s troubles prompted the government to guarantee all deposits in local banks to restore confidence.
Accad told Reuters in an interview on Tuesday that the fourth largest Kuwaiti bank by market value had made it out of “intensive care” in 2009 from the derivatives trauma.
“I think I’m going out of (the) hospital from the end of the second quarter, because now we have shown our first profit,” Accad said.
The bank, booked 85 million dinars ($294.9 million) in provisions against bad loans in the first half, clearing the way for lower provisions, he said.
Kuwait’s central bank has imposed a strict provisioning policy on local lenders since the outbreak of the financial crisis to protect the banking sector, in addition to specific provisions that each bank might need to book against bad loans or investments.
“I believe that from the third quarter...(the bank) will show operating profit and the level of the provision will be much smaller, therefore our (net) profit should be higher,” Accad said.
On Monday, the lender swung to a second-quarter net profit of 1.48 million dinars from a loss of 9.1 million dinars a year earlier, buoyed by a one-off disposal.
Gulf Bank, in which sovereign wealth fund Kuwait Investment Authority (KIA) owns a 16 percent stake, made an operating profit of 87.1 million dinars in the first half, 22 million dinars of which came from selling a hedge fund.
“These were direct investments that were not part of our core business and that we’ve always wanted to exit ... and the time was absolutely right,” Accad said.
The bank plans to exit all its funds investments “completely but gradually”, he said, adding that the lender has disposed of all high-risk funds.
The chief executive said the bank’s focus is going back to its “core strengths,” seeing it too early for expansion.
“Our core competency was actually conventional banking, retail banking and the wholesale banking, not investment banking, not Islamic banking, not brokerage, not direct investments,” he said.

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