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Al-Sager highlights Group’s stellar performance in 2022
KUWAIT CITY, Jan 31: Isam Al-Sager, Vice Chairman and Group CEO, National Bank of Kuwait said that NBK achieved the highest annual profits in the Bank’s history, refl ecting the soundness of our prudent strategy and solid financial position. “The Group achieved year on year growth of 40.5% in net profits for 2022 to reach KD 509.1 million, driven by solid operational performance and improving cost of risk,” Al-Sager said on the sidelines of the analysts’ conference for NBK Group 2022 financial results. Al-Sager highlighted that the Group’s stellar performance is a testament to its successful proactive approach, the resilience of its business model and its ability to capture opportunities.
Al-Sager pointed out that the board of directors has recommended a distribution of 25 fils per share for the second half of 2022, bringing our total cash distribution for the year to 35 fils per share, in addition to 5% bonus shares. Speaking on the Group’s strategy, Al-Sager said: “We continue to focus on balancing long-term investments with meeting current financial commitments to drive growth in today’s challenging economic environment” , explaining that NBK Group has strengthened its foundation through strategic investments in people, processes, technology, and products.
Moving on to the local market, Al-Sager said: “In Kuwait, we will build on our market position to benefit from the anticipated pickup in activity that will reflect positively on wholesale banking, the strong consumer sentiment and spending and our ability to deliver innovative products and services.” Al-Sager also highlighted that the Group continues to grow across key growth markets and segments, adding that: “In 2022, banking on NBK Group’s strong reputation, our international operations maintained a solid pipeline of business activity while executing transactions in line with our strategic initiatives to maintain a diversified credit portfolio and funding base.”
As for wealth management, Al-Sager emphasizes the Group’s focus on expanding its wealth and asset management market share in both the local and international markets, with a keen focus on the Saudi market. Al-Sager also noted that 2022 marks a turning point in NBK Group’s sustainability journey. During the year, the Bank transformed its ESG strategy to re-envision its focus on embedding ESG across all its operations and business and introduced its Sustainable Financing Framework.
“In 2022, we increased our transparency by becoming the only financial institution in Kuwait to disclose the environmental impact of our activities through CDP. We received a CDP score of “C”, which is one of the highest scores among all financial institutions in the GCC. Moreover, recognizing our role at the forefront of enabling sustainable economic development and supporting New Kuwait Vision 2035, we recently announced our commitment to become carbon neutral by 2060, in line with the State’s earlier announced pledge; and we have set interim targets to reduce gross operational emissions by 25% by 2025,” Al-Sager said.
When asked about Egypt’s contribution to the Group’s balance sheet and its profitability, Al-Sager responded: “NBK Egypt represents as a total less than 5% of our balance sheet so its not that significant. But in the meantime, the impact of the Egyptian devaluation with Egypt going through a challenging time considering the recent devaluation of the currency. Our operations in Egypt remain very lucrative and the profitability trends are still convincing and supportive of a better outlook. That said, I would say the conversion of local profit into our consolidated USD based financial has taken a hit and Egypt’s contribution has gone down and that has been the main impact on our financials from the devaluation”.
Discussing the project award market in Kuwait, Al-Sager explained that the political scene will remain the main driver for projects awarding. On the projects side, awards for the year were 32.5% lower compared to the year before, which was already at the low end. Both years saw several legislative delays, supply-chain disruptions and higher costs attributable to materials and labor. Al-Sager explained that total project awards for the year reached KD 832 million but what’s promising was the fourth quarter projects activity which picked up in pace recording more than KD 380 million of the total 2022 awards.
As for the Groups distributions, Al-Sager noted that this year 35 fils/share distribution remains within the Bank’s target payout ratio; ranging between 50-60%, adding that the dividend policy is determined after considering total capital requirement to maintain a healthy capital buffer.
When asked about the mortgage law, Al-Sager stressed on the importance of the mortgage law or the debt law for the Kuwaiti economy, confirming that passing both laws is dependent on the improvement in the political scene. “We have not changed our view on the importance of both laws and the opportunities embedded in both. As for the mortgage law, it is vital as a financing tool for the housing market in Kuwait, which is currently going through a financing bottleneck, especially the residential side,” Al-Sager said. Al-Sager explained that the challenges to approving the law will continue until we witness an improvement in the political scene and this will happen sooner or later.
Meanwhile, Sujit Ronghe Group CFO, said that NBK’s 2022 results refl ected improved underlying operating drivers, strong asset growth, lower provisions and impairments, a healthy balance sheet, sound liquidity levels and a solid capital base.
“As for loan growth, the Group reported a net loan growth of 6.5% during 2022, adversely affected to an extent because of currency movements. Although the Group has a strong pipeline of loans, given prevailing global dynamics and the resulting uncertainty in timing of actual drawdowns, we are expecting loan growth in 2023 to be in the mid to high single digit range,” Ronghe said. He added that in 2022, NBK saw a mix of loan growth from different sectors retail, corporate, conventional, Islamic across the network, and expected this trend to continue in 2023, which is going to be a mix of retail and corporate in Kuwait and outside Kuwait, as the Bank has a strong pipeline of approved credits, which can be expected to materialize in 2023.
As for his expectations on the cost of risk going into 2023, Ronghe replied that in 2022, the Group benefitted from a significant drop in provisions stemming from recoveries of provisions made during earlier years. The 3 bps cost of risk is not representative of what to expect in the future. “While being cognizant of global uncertainties that lie ahead, we expect our baseline cost of risk at a level materially lower than the 60s bps that we saw in 2021. The loan book continues to exhibit a sound credit quality that would refl ect on the cost of risk going forward,” Ronghe concluded.