73% of Kuwait’s pop­u­la­tion has bank ac­counts: CBK gov­er­nor

CBK re­leases Fi­nan­cial Sta­bil­ity Re­port 2016

Kuwait Times - - FRONT PAGE -

KUWAIT: Gov­er­nor of the Cen­tral Bank of Kuwait Dr Mo­ham­mad Al-Hashel said yes­ter­day that 73 per­cent of Kuwait’s pop­u­la­tion, whose age above 15, have a bank ac­count­the high­est pro­por­tion at the re­gional level. Gov­er­nor Al-Hashel made the state­ment on the oc­ca­sion of re­leas­ing the fi­nan­cial sta­bil­ity re­port (2016), the fifth reg­u­lar re­port, is­sued by the bank as part of ef­forts to boost trans­parency, pub­li­cize data and doc­u­mented sta­tis­tics of the na­tional bank­ing and fi­nan­cial sec­tors.

He said that the re­port in­cludes mon­i­tor­ing and an­a­lyz­ing eco­nomic and fi­nan­cial de­vel­op­ments on ba­sis of their re­la­tion with the fi­nan­cial sta­bil­ity. They re­veal the bank­ing sec­tor ca­pac­ity to with­stand shocks and carry on with reg­u­lar ser­vices. The re­port, he added, in­cludes five chap­ters; the first tack­les per­for­mance by con­ven­tional and Is­lamic banks as fi­nan­cial bro­kers, along with shed­ding light on cred­its’ dis­tri­bu­tion trends and de­posit ac­tiv­i­ties.

The sec­ond chap­ter deals with as­sess­ing ba­sic haz­ards fac­ing the bank­ing sec­tor, the third ad­dresses in an an­a­lyt­i­cal man­ner trends of profit-mak­ing, cap­i­tal­iza­tion in the bank­ing sec­tor, its re­sis­tance, ac­cord­ing to sev­eral fi­nan­cial and eco­nomic pres­sure tests, the gov­er­nor added.

The fourth one sheds light on de­vel­op­ments in the money mar­kets, for­eign cur­rency ex­change, stocks and prop­er­ties and the fifth is an analysis about set­tling fi­nan­cial pay­ments in Kuwait.

Per­for­mance

De­spite chal­lenges, the CBK pre­cau­tion­ary mea­sures and hazard early warn­ing sys­tems have proven help­ful in main­tain­ing strength and reg­u­lar per­for­mance of the bank­ing sec­tor in 2016, he said.

More­over, they have con­trib­uted to main­tain­ing steady growth and pos­i­tive per­for­mance in sev­eral sec­tors that con­sti­tute foun­da­tions for fi­nan­cial sta­bil­ity. Fi­nan­cial bro­ker­age con­tin­ued im­prov­ing in 2016, though at a slower pace, as com­pared to 2015. The bank­ing sec­tor growth slowed in 2016, with the over­all as­sets grow­ing by 1.85 per­cent com­pared to 2.6 per­cent in 2015.

Lo­cal as­sets’ growth was rel­a­tively bet­ter, post­ing 3.1 per­cent, against back­drop of the lo­cal cred­it­ing growth which reached 2.9 per­cent, lower than the pro­por­tion of 2015 — 8.5 per­cent. Ba­sic bank­ing as­sets’ de­cline was largely at­trib­uted to the no­tice­able slow­ness in credit growth, with the loans port­fo­lio in the banks record­ing slight growth es­ti­mated at one per­cent, with a rise of KD 424 mil­lion (some $1.4 bil­lion) against growth that reached 1.7 per­cent in 2015. The growth was the low­est in the past years, largely as a re­sult of the de­cline of the bank­ing loans port­fo­lio in the GCC states, Asian and Euro­pean na­tions.

Credit growth bet­ter

Shed­ding fur­ther light on the do­mes­tic mar­ket, he said the credit growth was bet­ter, at a rate of 2.9 per­cent, dis­trib­uted over 70.5 per­cent of the to­tal loans, ma­tured in De­cem­ber 2016 for con­glom­er­ates, 24.2 per­cent for per­sonal loans and 5.3 per­cent for small and medium es­tab­lish­ments.

To­tal bank­ing de­posits in 2016 posted growth slow­ness by 2.4 per­cent com­pared to three per­cent in 2015. In spite of the record growth of the lo­cal de­posits, 4.8 per­cent, the gen­eral growth of the de­posits de­clined due to drop of the de­posits by com­pa­nies af­fil­i­ated to the banks or the banks’ ex­ter­nal branches. The bank­ing sec­tor con­tin­ues to en­joy sta­ble fi­nan­cial base, with the for­ward de­posits ac­count­ing to 63.6 per­cent of the to­tal, thus af­firm­ing sta­bil­ity of the fund­ing ba­sis for the bank­ing ap­pa­ra­tus and its abil­ity to re­main sta­ble, amid liq­uid­ity pres­sure.

On risks’ as­sess­ment, he said im­prove­ment at this level per­sisted, in the past year, with re­spect of the as­sets’ qual­ity, where ir­reg­u­lar lend­ing dropped by 2.2 per­cent in De­cem­ber 2016, com­pared to 2.4 per­cent in the pre­vi­ous year. This pro­por­tion is lower than that posted be­fore the global fi­nan­cial cri­sis, reach­ing 3.8 per­cent in 2007.

De­cline of these loans be­came pos­si­ble due to fruit­ful co­op­er­a­tion among the banks and their ad­her­ence to the CBK in­struc­tions, Gov­er­nor Al-Hashel ex­plained.

More­over, in this vein, there was tan­gi­ble im­prove­ment in the pro­por­tion of cov­er­ing al­lot­ments to the ir­reg­u­lar loans in 2016, ris­ing from 205 per­cent in 2015 to 237 per­cent in 2016, much higher than the pro­por­tion recorded ahead of the global cri­sis 87 per­cent-at a time liq­uid­ity lev­els re­mained ro­bust at the banks.

Prof­itabil­ity

Kuwaiti banks con­tin­ued to post net prof­its in 2016, though at a slower pace as com­pared to 2015, where the net earn­ings rose to KD 745.8 mil­lion (some $2.4 bil­lion), at a 5.6 per­cent in an­nual growth pro­por­tion. Cap­i­tal risk ad­e­quacy stood at 16.9 per­cent in 2015, 17.5 per­cent in 2015, 18.6 per­cent in 2016, he said, not­ing that the Kuwaiti banks’ main­tain­ing high cap­i­tals con­trib­uted to safe­guard­ing the fi­nan­cial sys­tem. The Cap­i­tal risk ad­e­quacy, he said, climbed due to ro­bust growth of the banks’ cap­i­tals — 10.3 per­cent-com­pared to as­sets’ growth, with pro­jected risks at four per­cent in 2016. The Kuwaiti banks main­tained high lev­els of cap­i­tals de­spite quar­terly stress tests, con­ducted in 2016.

The CBK, in De­cem­ber 2016, in­creased the dis­count in­ter­est rate by a quar­ter point, to 2.5 per­cent, the same level that ex­isted in Oc­to­ber 2012. Al-Hashel af­firmed that the de­ci­sion was taken in tan­dem with a dec­la­ra­tion by the Fed­eral Re­serve with re­spect of hik­ing the in­ter­est rate and for sake of main­tain­ing the Kuwaiti di­nar’s at­trac­tive­ness, na­tion­al­iz­ing sav­ings in the lo­cal cur­rency for sake of fund­ing var­i­ous sec­tors of the na­tional econ­omy and cre­at­ing an ad­e­quate en­vi­ron­ment for a sus­tain­able econ­omy growth.

Debt in­stru­ment

The Kuwaiti Gov­ern­ment, in light of the good liq­uid­ity lev­els, de­cided to is­sue gen­eral debt in­stru­ments. It is­sued KD 2.92 bil­lion ($9.6 bil­lion) worth of such in­stru­ments in 2016, against KD 1.25 bil­lion ($4 bil­lion) in 2015, as a re­sult of which pub­lic debts rose in 2016 to KD 3.3 bil­lion ($10.8 bil­lion). On the ex­change mar­ket, he said the Kuwaiti di­nar dropped against the US dol­lar by 0.9 per­cent in 2016, not­ing that the ex­change rate fluc­tu­a­tions were within a very lim­ited range (02.+)

Gov­er­nor Al-Hashel at­trib­uted the KD rel­a­tive sta­bil­ity against the green­back and other ma­jor cur­ren­cies to the state pol­icy of pegging the di­nar to a bas­ket of cur­ren­cies. As to Boursa Kuwait, he said that the bourse con­cluded the year bullishly where the bench­mark rose 2.4 per­cent com­pared to the de­cline posted in 2015, 14.1 per­cent. This im­prove­ment was caused by re­cov­ery of the oil prices in last quar­ter of 2016. Lo­cal realty sec­tor de­clined for the sec­ond year in a row, in terms of num­ber and value of trans­ac­tions, re­spec­tively 21.4 per­cent and 23.1 per­cent, Al-Hashel said. Prop­erty also dropped in terms of sec­tors, with sales in the hous­ing and in­vest­ment ones fall­ing re­spec­tively by 30.3 and 33.4 per­cent. But, com­mer­cial sales rose 26.3 per­cent. No­tice­able spread of in­for­ma­tion tech­nol­ogy and sub­stan­tial de­vel­op­ment in the sec­tor of au­to­mated ma­chines have re­sulted in in­creas­ing dig­i­tal bank­ing trans­ac­tions, he in­di­cated af­firm­ing the CBK vi­tal role to safe­guard the na­tional fi­nan­cial sys­tem in the con­clu­sion of his state­ment. — KUNA

The re­port in­cludes mon­i­tor­ing and an­a­lyz­ing eco­nomic and fi­nan­cial de­vel­op­ments on ba­sis of their re­la­tion with the fi­nan­cial sta­bil­ity. They re­veal the bank­ing sec­tor ca­pac­ity to with­stand shocks and carry on with reg­u­lar ser­vices. The re­port in­cludes five chap­ters; the first tack­les per­for­mance by con­ven­tional and Is­lamic banks as fi­nan­cial bro­kers, along with shed­ding light on cred­its’ dis­tri­bu­tion trends and de­posit ac­tiv­i­ties.

KUWAIT: A gen­eral view of the Cen­tral Bank of Kuwait build­ing in down­town Kuwait.

Dr Mo­ham­mad Al-Hashel

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