KFH improves productivity, profitability and asset quality: CEO – Coverage of NPLs increases to 220%, says Al-Nahedh

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KUWAIT CITY, Oct 26: Kuwait Finance House (KFH) CEO Mazin Saad Al-Nahedh said that the bank has achieved a net profit of KD 105.7 mln as of the end of the third quarter 2015 with an increase of 17.3% over the same period last year, indicating that the profits were specifically in the banking activities where net finance income increased by 10.5%, and total operating income increased by 6.3%. NPLs decreased from 2.46% to 2.27% as of end Q3, and the coverage of NPLs increased to 220% from 171%.

He added in an interview with CNBC Arabia TV conducted at KFH headquarters that the decrease in total assets was due to the impact of currency decline on the Group’s foreign investments, noting that by excluding this, total assets grew by 4% and the financing portfolio along with depositors’ accounts grew by 6%.

In reply to CNBC question about the restructuring and change policy at KFH, Al-Nahedh explained that the strategic goal is to improve all productivity, profitability indicators and asset quality in the bank in light of Basel III requirementsý that have been implemented in Kuwait end of last year. The  capital adequacy ratio (CAR) of Kuwait’s major banks; KFH and NBK will reach 15% end 2015. “This requirement behoves us to find best possible ways for capital increase. It can be through divesting certain assets that have greater consumption of the capital, thus optimally using the capital in low-risk investments with high yield” added CEO.

Regarding the contribution in bridging Kuwait’s budget deficit, Al-Nahedh reiterated that issuing bonds from the Central Bank of Kuwait on behalf of the Ministry of Finance isn’t a new event as the government issued bonds of around KD 3 mln ahead of the invasion of Kuwait. The country’s banks are over-stuffed with deposits that can be used in bonds, treasury bills or sukuk. He affirmed the capacity of local banks to help bridge the bulk of Kuwait’s budget deficit. “If the deficit continues, the government should conduct structural alteration in its income and expenses to bridge the deficit autonomously instead of borrowing” he added.

In reply to a question about KFH’s overseas presence, Al-Nahedh said that KFH has been operating in Turkey since 1989 where Turkey experienced prosperous and tough days. Now Turky is ranked 10th among the largest economies in the world and it is witnessing remarkable growth that lures foreign investors and KFH to continue operating in this promising market despite the decline that has lately affected the currency rates. KFH is now restructuring KFH-Malaysia. Bahrain is a GCC country where KFH has vital and residential projects in Bahrain which stimulates the economy there.

Moreover, Al-Nahedh revealed that talks are taking place with 3 parties to finance vital projects in the country. He didn’t disclose as a non-disclosure agreement is inked between the parties. It is projected to have these talks closed by end of the current year or the beginning of Q1 2016.

As for the real estate portfolio, he explained that the portfolios are properties of KFH and clients indicating that KFH’s divesture takes place upon client’s desire along with its own desire. Most real-estate divestures this year are empty lands for private residence. KFH divests in an attempt to offer nationals residential lands and also because they are non-return generating assets.

He stressed KFH is on track in increasing productivity and rationalizing costs which achieves clients’ and shareholders’ aspiration while maintains KFH’s prestigious status as a global leading Islamic financial institution.

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