Following is a message from Ali Mousa
Al Mousa, Chairman of Commercial Bank of Kuwait during the Bank’s AGM – Editor
|In the name of Allah the Most Gracious, the Most Merciful|
Our valued shareholders, our respectable attendees
On behalf of myself and the Board of Directors, I am pleased to present an overview of the Bank’s financial results. The attached financial statements provide detailed information on results and disclosures required by the law, regulatory authorities and address issues that are of concern to the various stakeholders of the Bank.
I: Main Contents of the Financial Statements
The Bank’s financial statements depict the contracting policy adopted by the Bank’s Management from mid 2014 till 2015. This was related to the Bank’s operations and assets in order to improve asset quality and enhance the Bank’s ability to avert and overcome any future risks. However, the impact of the tumbling oil prices on Kuwait’s economy is a factor beyond control and has impacted the Bank too.
The statements reflect an improvement in the Bank’s shareholders’ equity, along with higher retained earnings. The Bank successfully managed to absorb the shock caused by the sudden state of instability suffered by some of its customers without much impact on the Bank’s profitability except for the contracting trend that prevailed in its activities.
- Total Assets & Growth
The total assets decreased by 4.2% to reach KD 4,037 million at the end of December 2015, compared with KD 4,213 million at the end of December 2014. This contracting trend was triggered by the Bank’s Senior Management’s decision to restructure the Bank’s assets & liabilities to improve assets quality and associated income on these assets. This led to improvement of profitability of certain divisions at the Bank, particularly Treasury & Investment Division and International Banking & Syndication Loans Division. This contracting trend was also a by-product of Bank’s policy targeting to off-load the doubtful debts. This issue will be illustrated further on.
The Bank’s total loans portfolio of KD 2,297 million as at the end of December 2015 was lower by 0.99%, compared with KD 2,320 million at the end of December 2014. This decrease was driven by the Bank’s continues strategy to target improvement in loans portfolio quality and off-loading non-performing loans from the Bank’s record without waiving off any legal rights to its debtors. The accumulated balance of off-loaded debts amounted to KD 601.7 million, such information is not normally published in the financial statements. The Bank continues to initiate the required procedures towards the debtors who obtained such loans so that the Bank can recover the maximum possible amount from such loans. However, the off-loaded debts are one of the reasons behind decrease in the Bank’s total assets.
It is worth noting that the percentage of the non-performing loans to total loans portfolio stood at 0.9% at the end of December 2015, which is amongst the best NPL ratios in the banking industry of Kuwait.
Over the past years, the Bank adopted a conservative approach for building up the required provisioning base (general and specific). The Bank continues with this approach which primarily aims to hedge against customers’ defaults or impairment of the Bank’s investments, thus solidifying the Bank’s balance sheet to avert any potential risks that may arise in the future. The Bank’s provisions amounted to KD 125 million and the provision coverage ratio for NPL stood at 571.4%.
- Profitability & Shareholders’ Equity
Total operating income of KD 136.2 million was lower by approximately 5.7%, compared with KD 144.4 million for 2014. The net profit amounting to KD 46.2 million (32.7 fils per share) for the year 2015 was 5.98% lower than KD 49.2 million (34.9 fils per share) compared with 2014. It is to be noted that the net profit declined as the Bank off-loaded some doubtful loans as a precautionary measures.
Return of Assets (ROA) stood at 1.12% and Return on Equity (ROE) stood at 8.52% for the year 2015, compared with 1.21% and 9.09%, respectively for 2014.
The accumulated retained earnings as at year end December 2015 amounted to KD 152.1 million with an increase of KD 19.4 million (14.7%) during 2015, compared with KD 132.6 million at the end of 2014. This was the main reason of increase in the Bank’s shareholders’ equity from KD 527.3 million at the end of December 2014 to KD 557.4 million at the end of December 2015, increasing by 5.7% (KD 30.1 million).
- Capital Adequacy & Leverage Ratios
The capital adequacy ratio stood at 18.39% at the end of December 2015, compared with 18.15% at the end of 2014, and this ratio comfortably exceeds the minimum requirement mandated by the Central Bank of Kuwait.
Furthermore, leverage ratio stood at 11.5% and liquidity coverage ratio reached 138.5%, which also exceed the minimum requirements set by the Central Bank of Kuwait.
II: Future Challenges
All the economists and financial experts were monitoring the volatile economic conditions during 2015 with major concern. These were mainly triggered by continuous decline in oil prices at the end of 2014, downward financial indicators and a state of disruption in the Chinese economy, which is the world’s second largest economy and one of the largest industrial products & commodities exporting countries as well as one amongst the largest importers of raw materials in all its forms. In addition, the European Union market is still struggling to establish a mechanism for reviving an economic growth.
In light of the above, we have experienced and undergone a state of uncertainty and doubts that the global economy may slip into recession. All these negative signs were reflected on the domestic economy with the prices of quoted shares dramatically falling, apart from the real estate market which plummeted leaving huge drop on real estate prices.
Despite the above negative indicators, government spending remains a main factor in enhancing the local economy and this is positively reflected in the Banks’ business results where the Bank endeavours to seize the available investment opportunities, along with its efforts to develop the products and services provided to its customers.
In conclusion, the Board of Directors would like to extend its thanks and appreciation to the Bank’s shareholders, customers, employees and all stakeholders, wishing them all success and progress.