Kuwait’s development plan moving on fast-track: NBK
More activity in project awards since 2014: Shaikha Al-Bahar
Implementation of Kuwait’s development plan has been moving more rapidly in the last few years. The country’s needs are more urgent, and the government is, and has been, more dedicated, said Shaikha AlBahar, Deputy Group Chief Executive Officer, National Bank of Kuwait, in an interview during the Euromoney Conference Kuwait yesterday. “Indeed, we have seen more activity in project awards since 2014 than we had before and $18 billion has been awarded last year and $7 billion in 1H17,” she said.
As a result, project financing opportunities have been more plentiful, in oil and nonoil areas. The sectors that benefited the most are construction, power and oil. The government is moving ahead with a number of roadwork projects and new residential areas. At the same time, investment in Kuwait’s power and water capacity has been ramped up thanks to a series of PPP projects, one of which has already been completed. Of course, it’s also been a priority for the government to develop the oil and gas sector, both upstream and downstream. Excerpts from the interview:
Question: Is NBK innovating a new way of financing new style projects - smart grids, communications infrastructure, education and healthcare?
Al-Bahar:
NBK is one of the few financial institutions in the country to have a specialized project finance department to assist in origination, structuring and distribution of non-recourse or limited recourse assets. The department is manned by officials with large experience in financing of projects. NBK has been supporting most of the project financings in the country. Historically, NBK was the main institution to support the first BOT project of Sulabiya Waste Water Treatment Plant in 2002, which was quite an innovation for the financing in the country at that time. In 2014 NBK lead arranged the expansion financing of Sulabiya Waste Water Treatment Plant. The facility was structured, arranged and distributed to local banks by NBK.
Recently NBK has played a lead role in using innovative solutions for financing in the country such as:
Structured financing for Projects - Clean Fuel Project
NBK has been using structured financing to support the projects. To illustrate the KD 1.2 billion Clean Fuel Facility to KNPC, envisages cash flow superiority for repayment of institutional loans over large feedstock payments to KPC. The facility was structured, originated and distributed to local banks by NBK.
Public Private Partnership - financing Innovations
NBK is a leading player in all project financings in Kuwait and has supported most of the consortia in their bids for infrastructure projects such as AZN 2 IWPP and Kabd Waste to Energy project. The PPP projects are governed under the PPP law of 2014 and its executive regulations. The financing structure of the project is explicitly specified under guidelines laid down by Kuwait Authority of Partnership Projects (KAPP). NBK has been engaging regularly with KAPP on finding innovative solutions to financing. The Kabd Waste to Energy project, based on suggestions of the bank has a local currency financing component.
Question: What impact will new technologies have on the way banking works in Kuwait? What is NBK doing and why?
Al-Bahar:
New technologies have a direct impact on the way banking works in Kuwait. NBK is investing in technology and innovation as these are the basic means on the journey towards digital maturity. We use innovation and technology to digitally transform our offered services and the culture of the organization. We observe everything through the prism of innovation, product development, services, methodologies and processes.
New technologies are and will continue to have significant and disruptive impact on our customers’ lifestyle; on the way they grow up, socially interact, travel, work, shop, bank and pay each other and for goods and services they buy; customers, especially the new millenniums, seek instant gratification and in the new world of social media are both the creators and consumers of news content.
To meet this challenge, we at NBK are focusing on our twin objectives of strengthening the already strong leadership position in the market and to make NBK future safe. Bank is very fortunate to have the largest market share in the country and also a strong product-segment continuum, with the ability to be relevant t to the entire community across the strata of the society.
We have products and services for the youngest starting from Zeina account for kids to products and services for our youth (students without and with allowances), first jobbers, mass market, mass affluent, affluent, and right up to private banking, business banking, and corporate banking.
NBK is the largest and most significant banking player in all major social media platforms. We have one of the strongest instant gratification program for the new millennials. We have transformed the payment industry and continue to do so. We have the largest POS network in the industry and one of the largest e-Payment gateways in the private sector and have within a record period of three months, launched NFC technology for the ease and convenience of the customers, with NBK Tap and Pay. We are proud to be the first bank in GCC to launch Tap and Pay NFC wearables.
We continue to innovate across products and services with the first in Kuwait to launch special needs ATM. We continue to be focused on simplifying our customers’ life. Strategically we target cash and paper, both as our enemies and opportunities
With customers, especially new millennials, more comfortable with transacting online, we would like to continuously focus on changing the habits of our customers from cash usage to digital money.
And every time we spot paper, we would like to automate the process and eliminate paperwork in order to provide our customers with efficient and secure seamless customer experience.
This along with MOBILE FIRST will continue to be our governing strategy going forward.
BANK IN YOUR HANDS is what we constantly aspire towards.
Question: The region remains both economically and geopolitically challenging - what does this mean for NBK’s regional strategy?
Al-Bahar:
The Middle East region has always been characterized by being a relatively higher risk market, economically or geopolitically. We, at NBK, view this as a normal characteristic for all frontier and emerging markets globally. But that said, this relatively higher risk profile is what leads to higher returns and more attractive growth opportunities.
NBK was among the first banks in the region to capture those opportunities as we started our expansion strategy in early years and we are today present in 15 countries of which 9 are in the Middle East. This is key to our diversification strategy and positions us ahead of competition with most consolidation and merger risks behind us. We now reap the benefits of these earlier expansions.
NBK strengthened its position in the region few years back, where its expansion was part of a strategy to diversify revenue streams and to achieve growth. More recently, we made further consolidation of our regional operations, bringing the full benefits of the unrivalled core management and treasury functions to extract synergies and enable closer integration.
Our regional operations are very stable as we continue to focus on less volatile markets with emphasis on GCC countries. As I mentioned earlier Kuwait remains our top priority market considering the improved operating environment and the existing growth opportunity on the back of infrastructure spending. Nevertheless, we focus regionally on Saudi Arabia, where we have one Branch in Jeddah (with a potential for expansion) and United Arab Emirates, where we have one branch in each of Dubai and Abu Dhabi. Our offering in those two markets is mainly focused on the general macroeconomic backdrop with more emphasis on wholesale banking while building corporate relationships with blue chip companies and GREs. We also have a niche affluent retail offering as well as efforts for potential private banking market penetration to capture the wealth management opportunity with the growing number of HNWIs. Other than our GCC offering, Egypt represents a strong growth opportunity going forward. NBK emphasis in Egypt is on positioning itself for growth as Egypt emerges from a period of instability and while the economic reform program starts to deliver stability and attracts foreign investments. Egypt is among the largest Middle Eastern markets, with a well-diversified economic base and the largest population in the region. That offers us a great opportunity in Egypt especially with the very low banking penetration rate that currently exists. We have been in Egypt since 2007 and have done tremendous work improving our operations there with focus on both retail as well as whole sale products.
Otherwise, and under our presence in international key markets (London, New York, Paris and Singapore), we continue to see a strong inflow of capital and deposits from HNWIs, financial institutions, oil companies, correspondent banks and government agencies, all seeking the safety and stability of NBK. We continue to leverage our strong franchise along with our high credit ratings to attract funds in international markets. The recent debt issuance under our GMTN program was a great testimony to the attractiveness on NBK’s name among global investors, where we raised $750 million of senior unsecured debt paying one of the lowest rates regionally in recent history. It also confirms NBK’s access to international markets and the availability of high quality funding if and when needed.
To conclude and going back to the core of the discussion, since we operate in relatively higher risk markets, diversification is key to our strategy as I mentioned. In addition to geographically, we also tend to be welldiversified by business segment. In addition to our conventional domestic offerings of corporate, consumer and private banking, we have recently made significant inroads in Islamic banking and investment banking.
Boubyan Bank, NBK’s 58.4 percent owned sharia-compliant subsidiary allows the bank to leverage opportunities in the growing importance of Islamic Finance in Kuwait. Moreover, our ambitions to develop a regional investment bank are executed through our investment banking arm, NBK Capital. NBK Capital has offices in Kuwait, Dubai, Cairo and Istanbul and offers the highest standards in investment products and financial services under three main divisions; Asset Management, Investment Banking, and Brokerage. The company’s role grew recently in the financial advisory services in Kuwait as we have supported some of the major private and public sector players in their initiatives and advised on several mega transactions across different industries.