Deposits at local banks rise KD 403.3 mn in Sept
Total value of real estate contracts hits KD 223.5 mn, up 36.1% in Oct
The latest released data by the Ministry of Justice — Real Estate Registration and Authentications Department — (after excluding the handicrafts, exhibitions, and the Coastal Strip System) indicate rise in real estate market liquidity in October 2017 vis-a-vis September 2017 liquidity. Total value of contracts and agencies trading scored KD 223.5 million which is 36.1% higher than its counterpart value in September 2017 which scored KD 164.2 million. And it rose by 35.6% compared with October 2016 liquidity, says Al-Shall Economic Report prepared by Al-Shall Consulting Co headed by Jassem Al-Saadoun.
Real Estate trading during this month was distributed between KD 216.9 million in contracts and about KD 6.6 million in agencies. Number of deals scored 490 of which 469 contracts and 21 agencies. The highest rate in real estate deals belonged to Ahmadi Governorate by 118 deals representing about 24% of the total number of real estate deals. Mubarak Al Kabir Governorate came second by 114 deals, or about 23.2%. The lowest share went to Al; Jahra Governorate which got 37 deals, about 7.5% of the total.:
Value of private residential activity scored KD 116.8 million, up by about 36.2% compared with KD 85.5 million in September 2017 representing 52.3% of the total real estate trading vis-a-vis 52.2% in September 2017. The monthly average value for private residence trading in 12 months scored about KD 107.6 million. This means that this month trading value is higher by 8.6% than the average. The number of deals for this activity also rose to 378 deals in this month versus 259 deals in September 2017. Therefore, the average value per deal of private residence activity scored about KD 309.1 thousand.
Investment housing activity dropped to about KD 60.1 million, down by -13.7% from KD 69.7 million in September 2017. However, its contribution to total liquidity dropped to about 26.9% versus 42.4% in September 2017. Monthly trading average value of investment housing during 12 months scored KD 62.1 million. This means that trading value in this month was lower by -3.2% than the 12 months’ average. But its deals rose to 105 compared with 86 deals in September 2017. Therefore, the per deal average value for investment housing scored KD 572.6 thousand.
Commercial activity trading value rose to about KD 46.5 million, up by 520.1% compared with KD 7.5 million in September 2017. Its percentage out of total real estate trading value rose to 20.8% compared with 4.6% in September 2017. Average value of commercial activity trading in 12 months scored about KD 43.6 million. This means total trading in this month is higher by 6.7% compared with 12 months’ average. Its deals rose to 7 deals (1 deal in September 2017). Warehousing activity did not score any deal in October 2017.
When we compare October 2017 trading with its counterpart period in 2016, we note rise in the real estate market liquidity from about KD 164.8 million to KD 223.5 million, i.e. 35.6%. The rise included the commercial activity by 363.6% and the private residential activity liquidity by 33.9% while the investment housing activity dropped by -3.6%.
When we compare total trading value since the beginning of the year until October 2017 with its 2016 counterpart, we note a slight rise in total real estate market liquidity from KD 1.96 billion to KD 2.03 billion, i.e. 3.7%. If we assume continued market liquidity at the same level during the remaining 2 months of the year, market trading value would score KD 2.44 billion, which is KD 56.2 million lower than the total trading for last year, i.e., KD 2.5 billion, or about a decrease of -2.3%.
In its monthly statistical bulletin for the month of September 2017, published on its website, the Central
File photo shows traders on Boursa Kuwait floor.
Bank of Kuwait (CBK) stated that the balance of the total public debt instruments (bonds and tawarruq operations are included since April 2016) rose by KD 1 billion compared with its level in the end of June 2017, to reach KD 4.967 billion in the end of September 2017, about 14.8%, of the nominal gross domestic product (GDP) for 2016 at about KD 33.5 billion. The average interest rate (return) on public debt instruments for one year was 2.000%, 2.250% for two years, 2.500% for three years, 3.000% for five years, 3.375% for seven years, 3.875% for ten years. Local banks capture 100% of the total public debt instruments.
The CBK bulletin stated that total credit facilities to residents offered by local banks in the end of September 2017 scored about KD 35.823 billion, about 56.7% of total local banks’ assets, a rise by about KD 281.5 million, above their value in the end of June 2017, a quarterly growth rate by about 0.8%. Total personal facilities scored about KD 15.032 billion, or 42% of total credit facilities (about KD 14.754 billion in the end of June 2017), a quarterly growth rate of about 1.9%.
Total value of installed loans there from scored about KD 10.733 billion, or 71.4% of the total value of personal facilities. An amount of KD 2.860 billion there from, about 19% of the total, went for the purchase of securities. Consumer loans amounted to about KD 1.106 billion. Credit facilities to the real estate sector amounted to about KD 8.017 billion, or 22.4% of the total, (about KD 8.012 billion in the end of June 2017), about twothirds of the credit facilities go to personal and real estate facilities. KD 3.402 billion, 9.5%, went to trade sector (KD 3.401 billion in the end of June 2017). KD 2.014 billion, 5.6%, went to the contracting sector (KD 2.070 billion in the end of June 2017). KD 1.933 billion, 5.4%, went to the industry sector (KD 1.923 billion in the end of June 2017). KD 1.326 billion, 3.7%, went to the non-bank financial institutions (KD 1.317 billion in the end of June 2017).
The bulletin also indicated that total deposits at local banks scored about KD 41.995 billion, representing about 66.5% of total local banks liabilities, a rise by about KD 403.3 million above their value in the end of June 2017, a quarterly growth rate by about 1%. About KD 34.945 billion, 83.2%, belong to clients of the private sector in the comprehensive definition including major institutions like the Public Institution for Social Securities — does not include the government. About KD 32.421 billion thereof in Kuwaiti dinars, 92.8%, went to private sector clients and the equivalent of KD 2.524 billion were in foreign currency to private sector clients, too.
As for the average interest rates on customers time deposits, both in the Kuwaiti dinar and the US dollar, vis-a-vis the end of June 2017, the bulletin stated that it continued its rise on both of the KD & US$ deposits. The difference in the average interest rates on customers’ deposits for a term is still in favor of the Kuwaiti dinar in the end of the two periods. It scored about 0.805 point for 1- month deposits, about 0.811 point for 3- month deposits, about 0.817 point for 6- month deposits, and about 0.732 point for 12-month deposits. The difference in the end of June 2017 was about 0.710 point for 1-month deposits, about 0.718 point for 3-month deposits, about 0.729 point for 6-month deposits, and about 0.679 point for 12-month deposits. The monthly average exchange rate for the Kuwaiti dinar against the US dollar in September 2017 was about 301.380 Kuwaiti fils for each one US dollar, a slight increase by 0.66% compared with the monthly average for June 2017 when it scored about 303.370 fils per one US dollar.
The general and correct principle for establishing sovereign funds is divided into two parts. The first is that whatever the surplus in the balance of any state may be its sustainability cannot be guaranteed. The second is restricting the spending of that surplus by forwarding it to these funds so as not to destroy the competitiveness of that economy as a result of that spending. States with sovereign funds’ surplus are of two types. The first type includes the surplus states which export manufactured goods or superior services like China, Japan, Singapore and S. Korea. The second type which is our concern is the states that export the only raw commodity — oil— which are supposed to be more prudent in respecting the general principle of its two parts underlying the establishing of funds.
The Sovereign Wealth Funds Institute (SWFI) issued a report in early November which listed the wealth of these funds. We selected the largest 20 funds and some countries have more than one as in the attached Table (1), though we do not confirm their figures’ accuracy.
The oil producing states’ experience in respecting the general principle in its two parts differs considerably. Some comply with it strictly as in Norway whose fund value scored one trillion dollars in less than half of the time of other funds’ age in addition to transparency, prudent management and restricting its financing to public expenditures by no more than 4%. Investing its funds internally is prohibited. The opposite is the Venezuelan Fund, which opposed the norm and lost everything. We present all of this for comparison after the recent futile debate in Kuwait about whether Kuwait’s Fund lost or won in FY 2016/2017. The debate is an evidence of lack of transparency and the absence of the goal which will raise much of that futile debate in the future while conditions have changed essentially which warrants a professional revolution in dealing with it.
The first requirement is an essential change in its function. It is certain that oil is no longer able to cover public expenses which have doubled 5 times in 17 years due to non-commitment to the two parts of the general principle. The Fund’s revenues should become -without touching its asset- the sustainable source to finance the public finance. Transparency is the second requirement. What is happening now in the maximum is to present the public finance to the National Assembly once a year with generalities whose accuracy cannot be confirmed and achievement of their goal cannot be judged. The third controversial requirement is how to calculate profits or losses and whether they include obligations like loans and other requirements like the growing amounts for social securities. Projections should be made on the impacts of those obligations (loans repayment and their interests) in future when they are added to the figures of public spending as long as we are talking about a pension fund that needs calculated cash flows. In the absence of the foregoing, the waste time in the futile debate will not be the major cost but the flow of unpleasant surprises in the future.
The Commercial Bank of Kuwait (CBK) announced results of its operations for the first nine months of the current year, which indicate that the bank’s net profits, after tax deductions, scored about KD 14.5 million compared with KD 27.5 million for the same period 2016, reflecting a drop in profits by KD 13 million, or by 47.3%. This drop in net profits is due to the rise in total provisions by 30.7%. While the bank achieved KD 75 million in operational profit prior to deducting provisions, rose by KD 500 thousand, or by 0.7%, vis-à-vis KD 74.5 million. This means that the more dominant influence belonged to the rise in provisions.
In details, total operational incomes increased by KD 6.3 million, or by 6.1%, and scored KD 110.9 million compared with KD 104.5 million for the same period 2016. This resulted from rise in the item of net interest income by KD 6.1 million and scored KD 69.2 million, (representing 62.4% of total operational incomes), compared with KD 63 million (60.3% of total operational incomes). Item of fees and commissions rose by KD 2 million and scored KD 29.7 million compared with KD 27.7 million. While, item of gain profit from dealing in foreign currencies dropped by KD 2.8 million and scored KD 2.4 million compared with KD 5.2 million.
Total operational expenses increased by less value than the rise in total operational incomes, which rose by KD 5.9 million and scored KD 35.9 million compared with KD 30 million for the same period 2016. Total provisions rose by KD 14.1 million, or by 30.7%, and scored KD 60 million compared with KD 45.9 million. Therefore, net profit margin dropped to 14.7% compared with 30.8% for the same period 2016.
Total bank’s assets scored KD 4.370 billion, a rise by 5.9%, compared with KD 4.125 billion in the end of 2016. They increased by 8% if compared with total assets in the same period of 2016, that scored KD 4.047 billion. Item of dues from banks and other financial institutions rose by KD 135.3 million, or by 28.7%, and scored KD 607.3 million (13.9% of total assets) versus KD 472.1 million, (11.4% of total assets), in the end of December 2016. It rose by 31.1% when it is compared with the same period of 2016, that scored KD 463.1 million (11.4% of total assets). Item of loans and advances portfolio dropped by KD 51.3 million, or by 2.3%, and scored KD 2.199 billion (50.3% of total assets) compared with KD 2.250 billion (54.6% of total assets) in the end of December 2016. It dropped by 3.7% if compared with the same period of 2016, when it scored KD 2.283 billion (56.4% of total assets). Percentage of total loans and advances to total deposits scored 62.2% compared with 68.1%.
Figures indicate that the bank’s liabilities (without calculating total equity) increased by KD 223.2 million, or by 6.3%, and scored KD 3.745 billion compared with KD 3.521 billion in the end of 2016. It increased by KD 270.4 million, but dropped by 7.8% if compared with the total in the same period of last year. Percentage of total liabilities to total assets scored 85.7% compared with 85.8%.
Results of analyzing of the bank’s financial statements calculated on annual basis indicates that all bank’s profitability indexes dropped compared with the same period of 2016. The average return on the bank’s capital (ROC) dropped to 12.3% versus 25.2%. The average return on equities relevant to bank shareholders (ROE) dropped to 3.1% compared with 6.4%. Likewise, the average return on the bank’s assets (ROA) decreased to 0.5% versus 0.9%. (EPS) dropped to 8.8 fils versus 16.8 fils for the same period of 2016. (P/E) scored 35.4 times versus 18.3 times, due to the drop in EPS by about 47.6% below its level on 30 September 2016 versus rise in the market share price by 1.2% above its price on 30 September 2016. (P/B) scored 1.09 times compared with 1.07 times.
The performance of Boursa Kuwait for last week was mixed, where the indices of traded value, volume, and number of transactions showed a decrease, while the general index showed an increase. AlShall Index (value weighted) closed at 393.3 points at the closing of last Thursday, showing an increase of about 8.8 points or about 2.3% compared with its level last week, and increased by 30.3 points or about 8.3% compared with the end of 2016.
Most Active Sectors & Companies