The Commercial Bank of Kuwait (CBK) earned an operating profit of KD 73.5 million, before provisions for the nine months period ended as at 30th September 2014 (KD 72.8 million in same period of 2013).
KD 47.0 million of these profits was allocated as specific and judgmental provisions against the loan and investment portfolios, leading to a net profit of KD 25.3 million for nine months ending 30th September 2014, which was KD 17.6 million (228 percent) higher than that in the same period last year (KD 7.7 million). The earnings per share reached 18.0 fils against 5.5 fils for the corresponding period of the previous year.
CBK Chairman Ali Mousa Al Mousa stated that the NPL to total loan portfolio ratio dropped to 0.90 percent in September from 1.75 percent in September 2013 (December 2011: 6.69 percent, December 2012: 2.76 percent and December 2013: 1.35 percent).
Al Mousa indicated the Bank's efforts to maintain the lowest ratio during the current year, as it is the key indicator of loan portfolio quality with banks. He highlighted that this ratio is significantly lower than the 3.2 percent that of the Kuwait banking sector at the end of 2013.
As on 30 September 2014, the total provisions against loan portfolio held with the bank were KD 141.3 million, with a provision coverage ratio of 603 percent against problem loans (December 2011: 92 percent, December 2012: 169 percent and December 2013: 367 percent). Not only does this exceed the average ratio in the banking sector, it is also the best in Kuwait banking system. This is in line with the bank's aim is to build a strong provision base by underpinning its provisions, and to proactively recognize any problems regarding loan and investment portfolios, he said.
Al Mousa added that the total assets reached KD 3.9 billion (the same as in December 2013), with shareholders equity of KD 578.4 million (KD 553.0 million in December 2013). The minimum capital adequacy ratio mandated by the Central Bank of Kuwait (Under Basel II 12 percent) was exceeded with a ratio of 18.16 percent at the end of September 2014. This is also more than twice the minimum ratio required by Basel Committee (Basel II).
Additionally, after obtaining approval of Central Bank of Kuwait and Capital Market Authority, the bank has invited it shareholders and investors to subscribe to a subordinated bonds issue of up to KD 120 million with a closing date of 30th October 2014. This will solidify the Bank's capital base and give further boost to its business activities and operations, he added.
It is worth mentioning that this issue is the largest ever in Kuwait and the first Basel III compliant issue qualified for inclusion in the tier 2 capital. These subordinated bonds are issued to satisfy the capital adequacy ratio requirements under Basel III, and not to manage the liquidity, he noted.
The Central Bank of Kuwait has recently introduced leverage ratio for banks (minimum required level - 3 percent) to be effective from 31st Dec 2014. However the Bank has been monitoring this ratio since BIS came out with their revised recommendation for leverage ratio in January 2014 and as on 30th September 2014 the Bank's leverage ratio was at 10 percent, which is more than three times the minimum required level.
Commercial Bank of Kuwait continues to demonstrate its operational efficiency and cost leadership, with a cost to income ratio of 26.9 percent for the first nine months of 2014.
Al Mousa concluded his statement by explaining that the growth in profitability, assets quality, and other financial indicators is due to the prudent and conservative strategy adopted by the bank's management during the previous years which started to reap good results. He emphasized that the bank shall continue to pursue a balanced strategy to maintain and solidify those indicators to achieve the goals and aspiration of its shareholders.