Kuwait oil prices still above $100 pb
Total oil revenues seen KD 17.7 bln higher than estimate
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the end of February 2013, the first 11 months of the current fiscal year 2012/2013 have passed and Kuwaiti oil prices are still high and above the $100 per barrel level except for June ($92.8 per barrel) and July ($98.6 per barrel). Kuwaiti oil price for February 2013 was about $111.9 per barrel, which is the second highest level for the current fiscal year. April 2012 level scored the highest price at $116.9 per barrel. April 2013 price achieved a noticeable rise by $4 per barrel over January 2013 price of $107.9 per barrel after continued signs implying recovery of the global economy. With this month, the Kuwaiti oil price for the first 11 months of the current fiscal year — from April 2012 to February 2013 — was about $106.7 per barrel, an increase by $41.7 per barrel, (64.2%) over the new hypothetical price for the current budget at $65 per barrel. The price for the past part of the current fiscal year is still less by $-3.2 than last fiscal year price of $109.9 per barrel, says Al-Shall Economic Report prepared by Al-Shall Consulting Co headed by Jassem AlSaadoun.
According to figures released in the monthly follow up report of the State’s financial accounts — December 2012 — issued by the Ministry of Finance, Kuwait achieved actual oil revenues until the end of December 2012 — 9 months — of KD 22.841 billion and during the months of January and February 2013 an amount of KD 5.1 billion. Therefore, anticipated oil revenues during 11 months will rise to KD 28 billion and perhaps more if we take into account selling refined products, i.e. higher by 120% than the estimated oil revenues in the budget for the entire current fiscal year in the amount of KD 12.7682 billion.
Assuming production levels and prices would continue at their current level, probable total oil revenues would be about KD 30.5 billion for the entire current fiscal year, which is KD 17.7 billion higher than the budget estimate. Adding KD 1.7 billion in non-oil revenues, of which KD 1.420 billion have been collected until 31/12/2012, total budget revenues (hypothetical) for the current fiscal year would be about KD 32.2 billion. Compared with expenditures allocations figure in the amount of KD 21.240 billion, the outcome will be a hypothetical surplus by about KD 11 billion for the 14th fiscal year in a row.
We do not know exactly the developments of the issue of forgiving interests on citizens’ loans. We, however, hear some statements attributed to deputies about an agreed solution with the government. Every now and then we read some implied government statements in conflict with the statements of the Minister of Finance in his determination on the Defaulters Fund option only. In what seems like a bad deal, most of the statements and the hints about forgiving interests came after the majority — deputies and ministers — voted for postponing grilling of the ministers until the next convening term. The government has circulated that the outcome of the one vote-elections will come with a quiet and cooperative national assembly prevailed by the support to achieve the retreating development project.
The Minister of Finance estimated cost of forgiving loans interests by KD 3.2 billion. On attempting to reduce its cost, we were told that the forgiving would involve borrowers until the first of April 2008 and that those interests will be deducted and rescheduled without interest. What missed discussion is the principle. If the borrowing error was the borrower’s mistake in managing his financial affairs, he should bear the consequences and the prudent citizen should not be penalized. But if the error was committed by a bank or the Central Bank, the wrong-doer is the one to be punished, and not the State’s treasury or the positive values in society. If what is rumored about forgiving interests becomes true, the matter will extend to the controversy will extend to justice among borrowers, i.e. the benefit extent to each borrower, then to borrowers after April 1, 2008, then to those who did not borrow. Finally, those who are young and those who are not born yet in this homeland, may Allah be with them.
Certainly, this project is the worst in terms of its negative impact on any development effort. In addition to wasting resources and using it as a pretext to mitigate the dose of the widespread corruption, it eliminates the relationship between effort and award, and negates the principle of prudent planning both on the individual and the State levels, which are the foundation of any development project. We still hope that what we hear is just wishes and a position will crystalize to stop it completely. We are aware that there is a limited number of ministers who have a decisive opinion against this direction. Perhaps it is now time to transform this stance to a decision. The homeland remains more important than any job post.
KSE performance during February 2013 was mixed, with market liquidity measured by the daily trading value, volume and daily trading increasing, while the general index dropped by 1.4% and settled at 448.1 points (454.5 points in the end of January). AlShall Index registered its highest reading during the month transactions at 451.7 points on Tuesday, February 5, 2013. It scored its lowest at 444.7 points on Wednesday, February 20, 2013.
Value of traded shares (17 work days) scored about KD 594.7 million ($2.1 billion) down by KD 56.2 million (8.6%) below the preceding month which scored KD 650.9 million (31%) from its amount in the same month last year. But market liquidity continued to rise as in January, where daily trading volume was KD 34.9 million, an increase by 12.9% increase over last January but it continued its retreat by 26.9% from February 2012 amount.
Total volume of traded shares during the month increased by 410.3 million shares (5%) and scored about 8.7 billion shares (8.2 billion shares in January). The daily average of the number of traded shares rose by 116.5 million shares (29.7%) from January 2013. This means dominance of speculation, and a drop by 16% from the daily average in the same month last year. Number of deals during the month retreated to 125.9 thousand deals but the daily average scored 7.4 thousand deals up by 13.4% than in January 2013 of 6.5 thousand deals.
Total market capitalization for all listed companies — 198 companies — in the end of February 2013 scored about KD 29.835 billion In comparison with 198 companies (common) between January and February of 2013, the value dropped by KD 30.1 million (0.1%) vis-à-vis KD 29.865 billion in January 2013. The number of gainers was 101 (out of 198), losers were 57 companies and values of 40 companies did not change.
Compared with the end of December 2012, the market achieved a rise by KD 1.05 billion, 3.6%, vis-àvis KD 28.786 billion on 31/12/2012. The number of gainers in market capitalization from the end of December 2012 to the end of February 2013 was 134 companies out of 198 companies, 38 companies were losers and value of 26 companies did not change.
Kuwait International Bank announced results of its operations for the fiscal year ending December 31, 2012. Al Dawli achieved profits in the amount of KD 13.2 million vis-a-vis KD 10.8 million profit in 2011, a rise by 21.4% or KD 2.3 million. Gross profit margin scored 24.2% up from 21% in 2011. This rise is due to a rise in operation revenues by KD 2.8 million when they rose from KD 51.7 million to KD 54.5 million in 2012.
In details, item of murabahat and Islamic financing revenues rose by 4.2%, about KD 1.8 million, and rose from KD 43.1 million in 2011 to KD 44.9 million in 2012. Item of net fees and commissions rose by KD 1.5 million, or 39.4%, and scored KD 5.4 million (KD 3.9 million in 2011). Item of net gain from foreign exchange retreated by KD 466 thousand to KD 535 thousand (KD 1 million in 2011).
Operational expenditures of Al Dawli increased slightly by KD 400 thousand (1.2%) due to the resemblance in the rise and fall in the items of operational expenses which cause this slight rise. Item of general and administrative charges rose by KD 1.5 million and scored KD 6.3 million (KD 4.7 million in 2011). Staff costs increased by KD 1.3 million, while distributions to depositors retreated by KD 2.9 million and scored KD 9.6 million (KD 12.4 million last year).
On the other hand, the bank’s total assets increased by KD 131.1 million (11.7%) to KD 1249.5 million (KD 1118.4 million in the end of 2011). Item of financing receivables rose by 13% (KD 89.9 million) to KD 781.3 million (KD 691.3 million in 2011). Item of dues from banks and other financial institutions rose by 12.1% (KD 32.4 million) to KD 299.8 million in 2012 (KD 267.4 million in 2011). Cash and balances with banks and financial institutions increased by KD 11.6 million to KD 18.6 million (KD 7.1 million in 2011). Investment properties retreated by 8.6%, KD 4.2 million, to KD 44.9 million in 2012 vis-à-vis KD 49.1 million in 2011, which is a positive development.
All the bank’s financial indexes rose. Return on average equities index (ROE) scored 6.2% from 5.4% in 2011. Likewise, return on average assets index (ROA) scored 1.1% (1% in 2011), and the return on average capital index (ROC) also rose to 12.7% (10.5% in 2011). The closing price scored 295 fils (255 fils in 2011). EPS scored about 14.1 fils (11.6 fils per share in 2011). Price multiplier to the earnings (P/E) retreated (improved) in the end of 2012 to 20.9 times versus 22 times in 2011. Price multiplier to the book value P/B scored about 1.4 times (1.3 times in 2011). Therefore, the bank management announced intention to distribute cash dividend by 7% of the nominal share value (7 fils) vis-à-vis 5%, 5 fils, in 2011.
The performance of Kuwait Stock Exchange (KSE) for the last week was less active, where all the indices showed a decrease, while the general index stays stable. AlShall Index (value weighted) closed at 448.1 points at the closing of last Thursday, showing no change, while an increase of 9.9 points or about 2.3% compared to the end of 2012.
The following tables summarize last week’s performance of KSE