‘National Bank of Kuwait is the safest bank in Mideast’ Lender focusses on regional mkts

KUWAIT CITY, Oct 3: With total consolidated assets of $43.1 billion at the end of March 2010, National Bank of Kuwait (NBK) is comfortably the largest bank in Kuwait, accounting for about 25% of the country’s total banking assets. Reaffirming the bank’s A+ rating with a stable outlook in June 2010, Standard & Poor’s (S&P) commented that this solid rating reflects NBK’s “leading commercial position in its domestic market, good pre-provision earnings capabilities, and strong capitalization.”
S&P adds that “NBK is one of the most profitable financial institutions in the Gulf, and has shown satisfactorycore operating performance resiliency amid the economic downturn.” That track record of impressive profitability was maintained in the first half of 2010.

“NBK’s strong performance in 2010 confirms the viability of the bank’s strategy,” says Ibrahim Dabdoub, NBK’s Group CEO.”We managed to grow net profits by 15% during the first half of 2010 despite unfavourable economic conditions in the domestic market as well as internationally.”
Dabdoub attributes much of NBK’s strength in 2010 and in previous years to its core business activities both in and outside the Kuwaiti market.The outlook for continued domestic growth has brightened following the announcement earlier this year of a $100 billion fouryear development plan. According to an update published by Fitch in August, this should “boost growth and create more opportunities for the private sector [in Kuwait].” Fitch believes that this plan, if implemented, has the potential to improve the performance of the banking sector over the medium term.”
Nevertheless, NBK has long recognized that regional expansion is a pre-requisite, given the obvious constraints of a home market with a population estimated at around 2.7 million in June 2009.NBK’s strategy has focused recently on regional markets; the bank has now operations in 17 countries.Ten of these are in the MENA region, where NBK has focused principally on opportunities in Turkey, Egypt and Qatar. S&P estimates that more than 21% of NBK’s net operating income was generated overseas in 2009.

“Most of our regional operations have done very well through the crisis, which has contributed to the overall group performance,” Dabdoub confirms. Egypt, he says, is becoming an especially important market for NBK, given the size of the economy and the growth potential of its banking industry. “NBK’s subsidiary in Egypt, Al Watany Bank (AWB), has been delivering a very strong performance,” he says. “The significant restructuring we have undertaken at AWB since we acquired it in 2007 underpinned an increase in net profits of 31% in 2009 and the bank continues to strengthen its position in the Egyptian market.”Today, AWB has 39 branches in Egypt.
Dabdoub also identifies NBK’s investment in International Bank of Qatar (IBQ) as a conspicuous success story.”Over the last three years, IBQ has doubled its net profits, quadrupled its customer base and built up a strong franchise in the Qatari market,” he says.

“Wecontinue to focus on strengthening our position in Qatar, which represents one of the key future markets for NBK.”
“Syria is the next growth story in the region”.
Selective overseas expansion will continue to be an important pillar of NBK’s strategy.”Beyond our existing markets, we have identified Syria, which we expect to be the next growth story in the region, as a potential new market for NBK,” says Dabdoub.”Indeed, NBK has already secured a licence to start operations in Syria.”
Beyond its international expansion, NBK is also focusing on diversifying its product range. It has recently increased its stake in the Islamic specialist, Boubyan Bank, to capitalize on growing demand for Shariahcompliant financial services. “With access to Islamic banking, NBK can now target a larger bankable population, diversify its product offerings and retain customers who could potentially haveswitched to Islamic banking providers,” says Dabdoub.

Following its investment in Boubyan and reflecting its continued commitment to enhancing the bank’s technology platform and developing alternative distribution channels, NBK is planning to bolster its capital via a rights issue in the second half of 2010.”NBK has always been well-capitalized, which is reflected in our ratings,”says Dabdoub.”The planned rights issue would help us to maintain a strong capital ratio in line with historical levels.”

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