Asset turbulence in Kuwait’s banking sector: What lies ahead?

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KUWAIT CITY, Oct 9: Local banks’ managed assets, which include funds managed for third parties, exhibited annual growth, increasing by 0.6 percent to reach a value of 179.8 dinars by the end of August. This was a slight uptick from the 31.21 billion dinars recorded in August 2022, bringing the total to 31.39 billion dinars. However, on a monthly basis, these assets decreased by 1.9 percent or 600.8 million dinars, down from 31.99 billion dinars in July.

According to data from the Central Bank of Kuwait for August, assets managed by banks during the first eight months of 2023 experienced a significant decline of 11.3 percent, totaling approximately 4.014 billion dinars. This marked a considerable decrease from the 35.404 billion dinars reported at the end of December 2022.

Throughout 2023, bank-managed assets witnessed a continuous decline, starting at 35.404 billion dinars in December, then rising slightly to 32.3 billion in February, before falling again to 31.1 billion in May. They subsequently increased in June to 31.3 billion dinars and further rose in July to 31.99 billion dinars.

Asset Distribution: Among the 12 items comprising bank-managed assets, the managed portfolios item decreased by 2 percent on a monthly basis, amounting to 1.299 billion dinars in August, compared to 1.326 billion dinars in July. Nevertheless, it increased by 9.8 percent from the beginning of 2023, reaching a value of 116 million dinars, in contrast to 1.183 billion dinars in December 2022.

The locally managed investment funds item saw a substantial 84 percent decrease, amounting to 16.8 million dinars in August, down from 105.4 million dinars in December. This item remained relatively unchanged on both a monthly and annual basis.

Assets managed as trusts decreased by 4.9 percent, totaling 4.63 billion dinars in August, down from 4.868 billion dinars in July. On an annual basis, these assets decreased by 9.7 percent to 497.2 million dinars, compared to 5.127 billion dinars in August 2022.

Total contingent liabilities stemming from indirect financing operations declined by 2 percent to 14.52 billion dinars in August, compared to 14.65 billion dinars in July. These obligations encompassed documentary letters of credit, letters of guarantee, bank acceptances, irrevocable obligations, and restricted investment deposit placements.

Documentary Credits: Documentary credits decreased by 7.3 percent, amounting to 1.099 billion dinars in August, down from 1.18 billion dinars in July. In contrast, the letters of guarantee item experienced a slight increase of 0.01 percent, reaching 11.276 billion dinars in August, compared to 11.275 billion dinars in July. Over eight months, this item saw a 4.1 percent rise, totaling 452.1 million dinars, compared to 10.824 billion dinars in December.

Bank acceptances increased by 10.5 percent, reaching 858.8 million dinars in August, up from 777.1 million dinars in July. Irrevocable obligations, on the other hand, decreased by 9.2 percent, amounting to 1.285 billion dinars in August, down from 1.417 billion dinars, but they increased by 160 percent from the beginning of the year, reaching about 792.8 million dinars. Investments and restricted investment deposits remained stable, while other assets increased by 1.2 percent, totaling 829.9 million dinars in August, up from 819.4 million dinars.

Local banks’ investments in financial derivatives declined by 2 percent in August, reaching a value of 10 billion dinars, down from 10.3 billion dinars in March.

By Ahmad Fathi

Al-Seyassah/Arab Times Staff

This news has been read 3388 times!

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