Average price for Kuwaiti oil in August scores $60.2 pb

Performance of Boursa Kuwait for last week less active

Oil and Public Finance August

2019

By the end of August 2019, the 5th month of the current fiscal year 2019/2020 ended and the average price for Kuwaiti oil for most August scored US$ 60.2 per barrel, higher by US$ 5.2 per barrel or 9.5% than the new hypothetical price estimated in the current budget at US$ 55 per barrel. It is also higher by US$ 10.2 than the average hypothetical price for the past fiscal year in the amount of US$ 50 per barrel. The average oil price for the Kuwaiti oil during the past fiscal year 2018/2019 scored US$ 68.5 per barrel. The average price for August is lower by 12.1% than the average price for the past fiscal year and lower by US$ 19.8 per barrel than the budget’s parity price at US$ 80 per barrel, according to the Ministry of Finance after deducting 10% to the future generations’ reserve, says Al-Shall Economic Report prepared by Al-Shall Consulting Co headed by Jassem Al-Saadoun.

Kuwait is supposed to have achieved actual oil revenues in August of about KD 1.3 billion. Assuming that production and prices would continue at the current levels – an unrealistic assumption – Kuwait’s oil revenues for the entire current fiscal year would score nearly KD 17.1 billion, after deducting production cost for the entire year. This is KD 2.6 billion higher than the estimated for the current budget in the amount of KD 14.5 billion. Adding KD 1.9 billion in non-oil revenues, total budget revenues for the current fiscal year would score KD 19 billion.

Comparing this figure with the expenditures allocations in the amount of KD 22.5 billion, it would be likely that the public budget would score a deficit by KD 3.5 billion. However, five months are only good enough to be used as an indicator to the hypothetical deficit of the budget. The actual deficit will be a variable subject to the movement of oil prices and production levels during the remaining part of the year.

The Monthly Report of the State, Financial Administration

Accounts – March 2019

In its monthly follow-up report for the State’s Financial Department until the end of the fiscal ended at March 2019 (as published on its website), the Ministry of Finance indicates that total received revenues until the end of the fiscal year 2018/2019 was at KD 20.559 billion, higher by 36.2% out of total estimated revenues for the entire fiscal year in the amount of KD 15.089 billion.

In details, actual oil revenues until 31/03/2019 scored approximately KD 18.428 billion, i.e. higher by 38.4% of the oil and gas revenues estimated for the entire fiscal year in the amount of KD 13.317 billion, or 89.6% of total collected revenues. The average Kuwaiti oil price for the fiscal year 2018/2019 scored US$ 68.5 per barrel. An amount of KD 2.130 billion was collected from non-oil revenues during the same period, a monthly average of KD 177.513 million, while the total estimated amount for the entire fiscal year was about KD 1.772 billion. This means that the realized amount was higher for the entire fiscal year by about KD 358.6 million than the estimated, which is a good matter despite its relative importance.

Allocated expenditures for the fiscal year 2018/2019 were estimated at KD 21.5 billion and then increased to KD 22.773 billion, higher by 14.4% than the allocated expenditures for the FY 2017/2018 in the amount of KD 19.9 billion, of which an amount of KD 21.849 billion has been actually spent according to the bulletin – until 31/03/2019, with a monthly average of KD 1.821 billion. Though the bulletin concludes that the budget achieved at the end of the 12th month of the fiscal year 2018/2019 a KD 1.290 billion deficit before deducting the 10% of revenues to the interest of the Future Generations Reserve, and a deficit by KD 3.346 billion after deducting the FGR, this is consistent with the press release of the Minister of Finance regarding the final account of the fiscal year 2018/2019.

Performance of Boursa Kuwait

August 2019

August’s performance was less active compared with July’s performance. Traded value, i.e. Boursa’s liquidity declined alongside a negative performance regarding all indices. The Premier Market index decreased by -3.2%, Main Market index decreased by -1.9%, and the All Share Market index (the outcome of the two markets’ performance) by -2.9%. Also, Al Shall index also declined -2.6%.

Boursa liquidity during August achieved a lower level than that of July’s liquidity. The traded value was KD 490.3 million, declining from KD 979 million liquidity in July, perhaps it was affected by the great decline in the global markets. The average daily trading value of August scored KD 27.2 million versus KD 42.6 million in July, reflecting a -36% decrease below July’s average. Traded value in the first eight months of 2019 (162 working days) scored KD 5.316 billion, with an average daily trading value of KD 32.8 million. This represents a 119.6% rise compared with the same average of the same period of 2018 at KD 14.9 million. It also rose by 94.7% when compared with the same average of the entire previous year at KD 16.8 million.

Liquidity directions since the beginning of the year indicate that half of the listed companies obtained only 0.8% of that liquidity including 50 companies which captured only 0.1% of that liquidity, and 3 listed companies without any trades. As for liquid companies, 12 companies whose market value equals 4.5% of the listed companies’ value obtained nearly 6.9% of the Boursa liquidity. This means that major liquidity activity still deprives almost half of the listed companies from liquidity. On the contrary, it favors companies with smaller value. Liquidity distribution among the three markets during August 2019 was as follows:

The Premier Market (19 Companies)

It scored KD 386.4 million or 78.8% of Boursa liquidity, and 50% of its companies (9 companies) captured 84.3% of its liquidity and 66.4% of the entire Boursa liquidity. The other half of its companies (10 companies) captured what is left or 15.7% of its liquidity. Its liquidity concentration was high as 8 of its companies obtained 79.6% of its liquidity.

It achieved KD 103.9 million or 21.2% of Boursa liquidity, and 20% of its companies obtained 83.4% of its liquidity while 80% of its companies obtained only 16.6% of its liquidity. It is good to recall that its companies’ weak liquidity was the primary factor for their classification within the Main Market which is open for evolution with the rise of liquidity of any of its companies.

It captured KD 39 thousand only, about 0.008% of the Boursa liquidity which is within anticipation. The main goal is to give those companies a liquidity regulating outlet even if they are left without any trading except at remote intervals. We may witness a single surge in their trading value every now and then.

Warba Bank Financial Results

First Half 2019

Warba Bank announced results of its operations for the first half of the current year, which indicate that the bank’s net profit (after tax deductions) scored KD 6.50 million, compared with KD 5.20 million for the same period of 2018, indicating that the bank continued its positive performance achieving growth net profits by KD 1.30 million or by 25%. This is due to the absolute rise in total operating income by higher a value than the rise in total operating expenses. Therefore, the bank’s operating profit rose by KD 2.07 million, reaching KD 16.36 million compared with KD 14.29 million in the same period of last year.

In details, total operating income increased by KD 4.04 million or by 17.7%, and scored KD 26.88 million compared with KD 22.84 million for the same period of 2018. This resulted from the rise in the item of net financing income by KD 3.21 million or by 19.8%, reaching KD 19.41 million versus KD 16.20 million. Also, item of net investment income and net fees & commission increased by a total of KD 1.01 million.

On the other hand, total operating expenses increased by a lesser value than the increase in total operating income. It rose by KD 1.98 million or by 23.1% and scored a total of KD 10.52 million, compared with KD 8.54 million. The increase included the items of staff costs and depreciation expenses by KD 2.51 million, while item of general & administrative decreased by KD 529 thousand. Percentage of total operating expenses to total operating income scored 39.1% compared with 37.4%. Item of provision for impairment increased by KD 701 thousand and scored KD 9.55 million, compared with KD 8.85 million in the same period last year. This explains the rise in the net profit margin to 24.2% in the first six months of current year, compared with 22.8% in the same period last year.

The bank’s financial statements indicate that total assets increased by KD 525.8 million or by 24%, reaching KD 2.720 billion versus KD 2.194 billion in the end of 2018. Total assets increased by KD 773.8 million or by 39.8%, if compared with the same period of 2018 when it scored KD 1.947 billion. Item of financing receivables rose by KD 322.7 million or by 20.1%, reaching KD 1.931 billion (71% of total assets) versus KD 1.608 billion (73.3% of total assets) in the end of 2018. It rose by KD 543.2 million or by 39.1%, compared with KD 1.388 billion (71.3% of total assets) in the same period of 2018. Percentage of total financing receivables to total deposits scored 80.9% versus 79.9%.

Figures indicate that the bank’s total liabilities (excluding total equity) increased by KD 515.1 million or by 26.8% and scored KD 2.439 billion, compared with KD 1.924 billion in the end of 2018. It increased by KD 670.4 million or by 37.9%, compared with the total in the same period of last year when it reached KD 1.768 billion. Percentage of total liabilities to total assets was at 89.6%, compared with 90.8%.

Results of analyzing financial statements calculated on annual basis indicate that most bank’s profitability ratios declined compared with the same period of 2018. The average return on shareholders’ equity relevant to the bank shareholders (ROE) decreased to 6.5% compared with 10.3%. Average return on capital (ROC) decreased to 8.7% versus 10.4%. Likewise, the average return on bank’s assets (ROA) decreased slightly to 0.53% compared with 0.56%. Earnings per share (EPS) scored 2.69 Fils versus 2.54 Fils. (P/E) scored 46.1 versus 42.5, due to the rise in the EPS by 5.9% against a greater rise in the share market price by 14.8%, compared to their levels in the same period of last year. (P/B) scored 1.3 times compared with 1.2 times.

The Weekly Performance of

Boursa Kuwait

The performance of Boursa Kuwait for last week was less active compared to the previous one. Where the traded value, traded volume, number of transactions and the general index (Al Shall index) decreased. Al Shall Index (value weighted) closed at 522.2 points as of last Thursday, showing a decrease by 6.1 points or by 1.2% compared with its level last week. While it increased by 93.2 points or by 21.7% compared with the end of 2018.