KUWAIT CITY, Feb 6: The Effect of Competitiveness of Kuwaiti Banks on Risk Profile and Profitability study by the Institute of Banking Studies Research covers several topics, of which the main one is investigating the impact of competition on profitability and risk profile in the Kuwaiti banking sector, in addition to other related relevant subjects. Other topics include COVID-19 and the impact of the geo-political environment on banking competition, the talent war among banks and its implications for banks’ performance from a cost-to-income perspective, new payment technologies and their implications for fee income for banks, the implications of digital banks and new Telco market penetration for the banking and financial services landscape.

The following bullet points summarize the findings of the study:
■ Competition among Kuwaiti banks is not significantly high due to the significant concentration in the Kuwait banking sector.
■ Competition generally affects the profitability and risk profile of Kuwaiti banks.
■ Concentration has a favorable significant impact on profitability and the risk profile of banks in the Kuwaiti banking sector.
■ Interest rate spread increases banks’ profitability while it slightly increases credit risk, but not liquidity and capital risk.
■ Income diversification slightly increases risk exposure due to monitoring difficulties across the sectors engaged.
■ Coping with the new post-pandemic trends reshaping the future of the banking industry landscape, namely new monetary and fiscal policies, digitalization, regulation, economic growth, new entrants, and the competitive landscape is mainly the responsibility of the government and regulatory authorities.
■ About the talent war, banks need to improve their training programs and culture to keep their employees energized and engaged. In addition, they also need to make their employees feel valued, grant them recognition and growth opportunities, and provide them with a flexible, healthy, diverse, and transparent workplace to keep them committed.
■ In the current digital environment, banks are recommended to create a synergy with fintech firms in the form of fintech-bank collaboration. This will benefit both parties; banks will be empowered to increase fee-based income and profits, and fintech firms will be able to secure funds for larger investments and build a trustworthy reputation through banks.

■ Embracing digitalization will assist incumbent banks to stay competitive in the face of digital players. They will be enabled to provide enhanced digital financial services that improve client well-being both directly and indirectly by enabling a broader ecosystem.