Au­dit Bureau re­port stresses need for fis­cal re­form

Kuwait Times - - BUSINESS -

KUWAIT: A few in­sti­tu­tions in the coun­try still ad­dress minds and feel its pain while an­a­lyz­ing its con­di­tions. The Au­dit Bureau is one of them and it recently is­sued a re­port on fi­nan­cial in­di­ca­tors de­rived from fig­ures of FY 2015/2016. Who­ever is con­cerned can in­fer how much -the Au­dit Bureau- is con­cerned with the fu­ture. Here we shall not re­view its re­port, but shall present some of its in­di­ca­tors. It states that the ac­tual deficit for the FY 2015/2016 scored KD 5.975 bil­lion up by about 119.6 per­cent from the ac­tual deficit for the FY 2014/2015. The deficit will drop to KD 4.612 bil­lion if the trans­ferred amount to the Fu­ture Gen­er­a­tions Fund is not de­ducted from the rev­enues, or it equals 11.4 per­cent of GDP with fixed prices for 2015, which is among the high­est rates in the world.

The fi­nan­cial deficit is known and sus­tain­able. Ac­cord­ing to the re­port, oil rev­enues for FY 2015/2016 de­clined by 58.8 per­cent and 46.3 per­cent below their lev­els for FY 2013/2014 and 2014/2015. Oil rev­enues rep­re­sent 88.6 per­cent of the gen­eral bud­get rev­enues. Not only that, the sup­port­ing rev­enues, ie non-oil rev­enues, also dropped for the same pe­riod by about 38.1 per­cent and 35.7 per­cent.

De­vel­op­ment of non-oil rev­enues was the goal of fi­nan­cial re­form poli­cies. The salary and wage bill within Chap­ters 2 and 5 amounted to KD 9.237 bil­lion and would score KD 9.695 bil­lion, if we added to them ex­penses of sup­port­ing in­dige­nous la­bor in non-govern­ment en­ti­ties. The cadres’ pol­icy dur­ing the oil mar­ket boom at­tracted na­tional la­bor to trans­fer from the pri­vate sec­tor to the pub­lic sec­tor con­trary to re­form pol­icy. The re­port also states that the cuts in ex­penses dur­ing the pe­riod came at the ex­pense of eco­nomic ac­tiv­i­ties which lost 29.3 per­cent and 38.2 per­cent re­spec­tively from the pre­vi­ous two fis­cal years lev­els, while com­mu­nity ser­vices ex­penses rose by 11.2 per­cent and 10.3 per­cent, re­spec­tively. De­fense ex­penses in­creased by about 3.4 per­cent and 9.5 per­cent re­spec­tively con­trary to the ob­jec­tives of eco­nomic re­form as well. The re­port states that the five-year de­vel­op­ment plan projects (2015/20162019/2020) adopt 368 projects: 106 devel­op­men­tal projects and 262 con­struc­tion projects. The Au­dit Bureau fol­lows them from ex­penses an­gle. But their re­la­tion­ship to de­vel­op­ment, ie cre­at­ing sus­tain­able job op­por­tu­ni­ties for the na­tive man­power or their role in de­vel­op­ing tax pot might be coun­ter­pro­duc­tive.

In sum­mary, the Au­dit Bureau records a lot of com­ments on that un­con­trolled fis­cal pol­icy and its wrong com­po­si­tion and al­ludes to the im­pos­si­bil­ity of sus­tain­ing it. It hopes to have a proac­tive role in ad­dress­ing its risks but un­for­tu­nately it can­not. Re­form re­quires pub­lic ad­min­is­tra­tion very dif­fer­ent from the re­cent govern­ment for­ma­tion which though some of its char­ac­ters changed and some 37.5 per­cent (60 per­cent for the Na­tional Assem­bly) but its core with the lead­er­ship key po­si­tions re­mained un­changed. There is no re­la­tion­ship be­tween its re­cent for­ma­tion and the re­sults of the elec­tion; it is the same con­tent which failed dur­ing the boom of oil mar­ket and failed dur­ing the be­gin­ning of its weak­ness era. It will re­peat the same er­rors in the fu­ture be­sides be­ing a fer­tile in­cu­ba­tor for cor­rup­tion. It is im­por­tant to know that the fi­nan­cial and eco­nomic in­di­ca­tors men­tioned by the Au­dit Bureau are real and sus­tain­able deficit in­di­ca­tors and its gaps will ex­pand and deepen if the pub­lic ad­min­is­tra­tion con­tin­ues its old ap­proach, which will in­evitably oc­cur, when treat­ment may not be avail­able by time.

Lo­cal Real Es­tate Mar­ket

The lat­est re­leased data by the Min­istry of Jus­tice -Real Es­tate Reg­is­tra­tion and Authen­ti­ca­tions Depart­ment- indi­cate rise in the real es­tate mar­ket liq­uid­ity dur­ing Novem­ber 2016 vis-a-vis October liq­uid­ity. To­tal value of con­tracts and agen­cies trad­ing scored KD 232.1 mil­lion which is higher in value by 40.8 per­cent than its coun­ter­part value in October 2016 which was worth KD 164.8 mil­lion. But it dropped by -24 per­cent com­pared with Novem­ber 2015 trad­ing.

Trad­ing dur­ing this month was dis­trib­uted be­tween KD 214.7 mil­lion for con­tracts and about KD 17.4 mil­lion for agen­cies. Num­ber of real es­tate deals struck in this month was 384 deals dis­trib­uted be­tween 367 con­tracts and 17 agen­cies. The high­est share per­cent­age from deals went to Ah­madi Gov­er­norate with 125 deals rep­re­sent­ing about 32.6 per­cent of the to­tal real es­tate deals. Hawalli Gov­er­norate came next by 72 deals rep­re­sent­ing about 18.8 per­cent. The low­est share went to Al Jahra Gov­er­norate by 23 deals rep­re­sent­ing about 6 per­cent of the to­tal.

Value of pri­vate res­i­den­tial trad­ing scored KD 74.8 mil­lion, down by about 14.3 per­cent com­pared with KD 87.3 mil­lion for October, rep­re­sent­ing 32.2 per­cent, of to­tal real es­tate trad­ing vis-a-vis 53 per­cent in October 2016. The monthly av­er­age value for pri­vate res­i­dence trad­ing in the last 12 months scored about KD 88.4 mil­lion. This means that trad­ing value in this month is lower by -15.4 per­cent com­pared with the av­er­age. The num­ber of deals for this ac­tiv­ity dropped to 257 deals (277 deals in October 2016). There­fore, the av­er­age value per deal of pri­vate res­i­dence ac­tiv­ity scored about KD 291 thou­sand.

In­vest­ment hous­ing ac­tiv­ity dropped to about KD 57.9 mil­lion, -7.1 per­cent, vis‡-vis KD 62.3 mil­lion in October 2016. Its per­cent­age out of to­tal liq­uid­ity dropped to about 24.9 per­cent (37.8 per­cent in October 2016). Trad­ing av­er­age value of in­vest­ment hous­ing dur­ing 12 months scored KD 75.7 mil­lion. This means that trad­ing value in this month was lower by 23.5 per­cent than the 12 months’ av­er­age. Like­wise, its deals rose to 112 (109 deals in October 2016). As such, the av­er­age deal value for in­vest­ment hous­ing scored KD 516.9 thou­sand.

Like­wise, com­mer­cial ac­tiv­ity trad­ing value rose to about KD 96.5 mil­lion, a rise by 861.9 per­cent com­pared with October 2016 when it scored KD 10 mil­lion. The rise is ex­cep­tional and none re­cur­rent. A main rea­son for this big rise is due to the sell­ing of two com­mer­cial pieces of land of 20,294 square me­ters at Sabah Al Ah­mad ma­rine area. Its per­cent­age out of to­tal real es­tate trad­ing value rose to 41.6 per­cent com­pared with 6.1 per­cent in October, 2016. Av­er­age value of com­mer­cial ac­tiv­ity trad­ing in 12 months scored KD 41.7 mil­lion. This makes this month’s trad­ing value higher by 131.4 per­cent com­pared with 12 months av­er­age. Its deals scored 13 deals (6 deals in October 2016). As such, the av­er­age value per one deal for the com­mer­cial ac­tiv­ity scored about KD 7.4 mil­lion. There were only two deals on ware­hous­ing trad­ing ac­tiv­ity in Novem­ber and were worth KD 2.9 mil­lion vis-a-vis 5 deals worth KD 5.2 mil­lion in October 2016. When we com­pare Novem­ber 2016 trad­ing with its coun­ter­part pe­riod in Novem­ber 2015, we note a drop in the real es­tate mar­ket liq­uid­ity from about KD 305.4 mil­lion to KD 232.1 mil­lion, i.e. -24 per­cent. The drop in­volved the in­vest­ment hous­ing ac­tiv­ity by -53.1 per­cent. Like­wise, the pri­vate hous­ing ac­tiv­ity dropped by -24.8 per­cent while the com­mer­cial ac­tiv­ity liq­uid­ity rose by 18.8 per­cent, i.e. from KD 81.2 mil­lion in Novem­ber 2015 to KD 96.5 mil­lion in Novem­ber 2016. If we com­pare to­tal trad­ing value since the be­gin­ning of 2016 un­til Novem­ber 2016 with its coun­ter­part pe­riod in 2015 we no­tice a drop in the to­tal real es­tate mar­ket’s liq­uid­ity from KD 3.027 bil­lion to about KD 2.194 bil­lion, 27.5 per­cent. As­sum­ing mar­ket liq­uid­ity would con­tinue in the re­main­ing one months of the year at the same level, mar­ket trad­ing -con­tracts and agen­cies-value would score KD 2.393 bil­lion which is lower by KD 924.9 mil­lion than last year’s to­tal, i.e. -27.9 per­cent than 2015 amount which scored KD 3.318 bil­lion.

Trad­ing Fea­tures at Boursa Kuwait

Kuwait Clear­ing Com­pany is­sued its re­port ti­tled “Trad­ing Vol­ume Ac­cord­ing to Na­tion­al­ity” for the pe­riod of 01/01/2016 to 30/11/2016, which was pub­lished on Boursa Kuwait of­fi­cial web­site. The re­port in­di­cated that in­di­vid­ual in­vestors are still the pre­vail­ing group though their share is de­clin­ing; they cap­tured 45.7 per­cent of to­tal value of sold shares (49.3 per­cent for the same pe­riod 2015) and 41.5 per­cent of to­tal value of pur­chased shares (45.9 per­cent for the same pe­riod 2015). In­di­vid­ual in­vestors sold shares worth KD 1.170 bil­lion and pur­chased shares worth KD 1.061 bil­lion with a net trad­ing, more sell­ing, by KD 108.973 mil­lion.

Cor­po­ra­tions and com­pa­nies sec­tor cap­tured 33.3 per­cent of to­tal value of pur­chased shares (29.7 per­cent for the same pe­riod 2015) and 26.8 per­cent of the same pe­riod 2015). As such, their net trad­ing, pur­chas­ing, by KD 19.934 mil­lion.

Other in­vestors share, out of to­tal value of sold shares scored 11.3 per­cent, (10.3 per­cent for the same pe­riod 2015), worth KD 288.903 mil­lion and they pur­chased shares worth KD 247.390 mil­lion, or by 9.7 per­cent of to­tal value of pur­chased shares (10.7 per­cent for the same pe­riod 2015); thus, their net trad­ing value, the only one sell­ing, by KD 41.513 mil­lion.

GCC In­vestors’ share, out of to­tal value of pur­chased shares scored 3.9 per­cent (4.4 per­cent for the same pe­riod 2015), worth KD 100.991 mil­lion, while their to­tal value of sold shares scored 3.1 per­cent (3.7 per­cent for the same pe­riod 2015), worth KD 79.411 mil­lion. Their net trad­ing was, more pur­chas­ing, by KD 21.579 mil­lion. Rel­a­tive dis­tri­bu­tion among na­tion­al­i­ties changed slightly from the pre­vi­ous pe­riod 86 per­cent for Kuwaitis, 10.5 per­cent for traders from other na­tion­al­i­ties, and 3.5 per­cent for GCC traders ver­sus 85.5 per­cent for Kuwaitis, 10.5 per­cent for other na­tion­al­i­ties and 4 per­cent for GCC traders, for the same pe­riod of 2015. This means Boursa Kuwait re­mained do­mes­tic though with more trad­ing by for­eign and in­vestors from out­side the GCC than from the GCC with trad­ing preva­lence to in­di­vid­u­als. Num­ber of ac­tive ac­counts be­tween the end of De­cem­ber 2015 and the end of Novem­ber 2016 dropped by -41.1 per­cent, (dropped by -56.7 per­cent be­tween the end of De­cem­ber 2014 and the end of Novem­ber 2015). Num­ber of ac­tive ac­counts in the end of Novem­ber 2016 scored 15,222 or 4.1 per­cent of to­tal ac­counts, ver­sus 15,458 ac­counts in the end of October 2016, i.e. about 4.2 per­cent of to­tal ac­counts for the same month, dropped by -1.5 per­cent dur­ing Novem­ber 2016.

Boubyan Bank Fi­nan­cial Re­sults

Boubyan Bank an­nounced re­sults of its op­er­a­tions for the first nine months of the cur­rent year, which indi­cate that the bank’s prof­its -af­ter tax de­duc­tions- scored about KD 29.7 mil­lion, a rise by KD 4.5 mil­lion, or by 17.8 per­cent, com­pared with KD 25.2 mil­lion for the same pe­riod of 2015. The rise in net prof­its is at­trib­uted to the rise in to­tal oper­at­ing in­comes by a higher value than the rise in to­tal ex­penses.

In de­tails, to­tal oper­at­ing in­comes of the bank in­creased by KD 9.2 mil­lion, or by 13.7 per­cent, and scored about KD 76.3 mil­lion vis-a-vis KD 67.1 mil­lion for the same pe­riod of 2015. This re­sulted from the rise in net fi­nanc­ing in­comes by about KD 7.5 mil­lion, to KD 65.4 mil­lion (rep­re­sent 85.7 per­cent of to­tal oper­at­ing in­comes) com­pared with about KD 57.9 mil­lion (about 86.3 per­cent of to­tal oper­at­ing in­comes). Item of net in­come from in­vest­ment in­comes rose by KD 1.6 mil­lion to KD 2.8 mil­lion com­pared with KD 1.2 mil­lion. Also, item of net in­comes from fees and com­mis­sions rose by KD 1.4 mil­lion and scored KD 7.7 mil­lion ver­sus KD 6.3 mil­lion. But the share of re­sults of as­so­ci­ates item achieved losses by KD 1.4 mil­lion ver­sus KD 509 thou­sand prof­its.

To­tal oper­at­ing ex­penses in­creased by less value than the rise in to­tal oper­at­ing in­comes, i.e. by KD 2.3 mil­lion, to KD 31.8 mil­lion ver­sus KD 29.5 mil­lion in the same pe­riod of 2015, or by 7.9 per­cent. The rise in­cluded all items of oper­at­ing ex­penses. Per­cent­age of to­tal op­er­a­tional ex­penses to to­tal op­er­a­tional in­comes scored 41.7 per­cent ver­sus 44 per­cent. To­tal pro­vi­sion for im­pair­ment in­creased by KD 2.2 mil­lion to KD 13.4 mil­lion ver­sus KD 11.3 mil­lion, a rise by 19.4 per­cent. This ex­plains the rise in the net profit mar­gin to 38.9 per­cent com­pared with 37.5 per­cent in the same pe­riod of 2015.

The bank’s fi­nan­cial state­ments indi­cate that to­tal as­sets in­creased by about KD 338.2 mil­lion, or by 10.8 per­cent, and scored KD 3.471 bil­lion (KD 3.133 bil­lion in the end of 2015). The rise in to­tal as­sets scored about KD 492.4 mil­lion, or by 16.5 per­cent, when com­pared with the same pe­riod of 2015, when it scored KD 2.979 bil­lion. Item of Is­lamic fi­nanc­ing to cus­tomers in­creased by KD 271.7 mil­lion, or by 12.5 per­cent, to KD 2.443 bil­lion (70.4 per­cent of to­tal as­sets), com­pared with about KD 2.172 bil­lion (69.3 per­cent of to­tal as­sets) in the end of 2015. It in­creased by 15.9 per­cent, or by KD 335.9 mil­lion, com­pared with KD 2.108 bil­lion (70.8 per­cent of to­tal as­sets) in the same pe­riod of 2015. Per­cent­age of Is­lamic fi­nanc­ing to cus­tomers to to­tal de­posits and other bal­ances scored 81 per­cent ver­sus 79.9 per­cent.

Fig­ures indi­cate that the Bank’s li­a­bil­i­ties (with­out cal­cu­lat­ing to­tal eq­uity) in­creased by KD 244.3 mil­lion and scored about KD 3.056 bil­lion (KD 2.812 bil­lion in the end of 2015). These fig­ures would be big­ger if we com­pared to­tal li­a­bil­i­ties with the same pe­riod 2015 and would be around KD 390.1 mil­lion, or rise by 14.6 per­cent, when they scored KD 2.666 bil­lion. Per­cent­age of to­tal li­a­bil­i­ties to to­tal as­sets scored about 88.1 per­cent ver­sus 89.5 per­cent. Re­sults of an­a­lyz­ing fi­nan­cial state­ments cal­cu­lated on an­nual ba­sis indi­cate that all the bank’s prof­itabil­ity in­dexes rose com­pared with the same pe­riod 2015. The re­turn on av­er­age eq­uity rel­e­vant to the bank’s share­hold­ers (ROE) in­creased to 12.1 per­cent (11.1 per­cent). Like­wise, the re­turn on av­er­age cap­i­tal (ROC) in­creased to 18.7 per­cent (16.7 per­cent). The re­turn on av­er­age as­sets (ROA) scored 1.20 per­cent (1.19 per­cent). (EPS) scored 13.7 fils ver­sus 11.6 fils. (P/E) scored 21.1 times, -im­proved- com­pared with 26.1 times, as a re­sult of in­crease in earn­ings per share by about 17.7 per­cent above its level in Septem­ber 2015 against a de­crease in the mar­ket price by 4.9 per­cent below its price on Septem­ber 30, 2015. (P/B) scored 2 times ver­sus 2.7 times.

Weekly per­for­mance of Boursa Kuwait

The per­for­mance of Boursa Kuwait for last week was more ac­tive com­pared to the pre­vi­ous one, where all in­dexes showed an in­crease, the traded value index, the traded vol­ume index, num­ber of trans­ac­tions index, and gen­eral index, Al Shall Index (value weighted) closed at 363.6 points at the clos­ing of last Thurs­day, show­ing an in­crease of about 5.9 points or about 1.6 per­cent com­pared with its level last week, while it de­creased by 2.3 points or about 0.6 per­cent com­pared with the end of 2015.

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