NBK measures up to leading regional banks: Fitch Ratings
National Fund program Bank enjoys a dominant market share in Kuwait
KUWAIT CITY, Feb 17: Fitch Ratings, the international credit rating agency, said that NBK is the flagship bank in the Kuwaiti sector and measures up to leading regional banks. The bank enjoys a dominant market share in Kuwait and is widely thought of as one of the region’s strongest franchises.
In its report published today, Fitch Ratings said: “It is difficult to compare NBK with domestic peers, due to the dominance of the bank’s domestic franchise and superior diversification”. The agency added: “We therefore view NBK’s closest peers as other leading GCC banks that are flagship banks within their domicile.” KUWAIT CITY, Feb 17: Gulf Bank has announced that it is taking part in the National Fund’s SME Debt Program; a program which has been developed by the Kuwait National Fund for SMEs Development (National Fund), established under law 98/2013, to encourage an entrepreneurship ecosystem in Kuwait through providing different forms of support to small-and mediumsize enterprises (SMEs).
The National Fund identified that one of the ways of helping it to achieve its objectives is by partnering with Gulf Bank and other local banks to leverage on the existing financial infrastructure and expertise to assist in providing growth capital in the form of debt.
Dr Mohammad M. Al-Zuhair, Executive Chairman of the Board at the National Fund for SMEs Development, said: “While the Fund envisages supporting the small- and medium-size enterprises in the areas of finance, education/training, legal, infrastructure, and other strategic /technical guidance, it has also identified that one of the means to achieve its goals is by partnering with local banks to leverage on the existing infrastructure and expertise.”
“The Fund, in collaboration with banks, will support SMEs by offering competitive loans to meet their full financing requirements. The banks will assess each business case on the basis of a list of eligibility criteria set out by the law, and agreed on with the National
Fitch affirmed that NBK’s business model is significantly more diverse than peers, geographically and particularly by activity. Like most banks in the sector, NBK is a universal commercial bank, with most of its income coming from the domestic market. However, NBK has managed to achieve some geographical diversification.
More importantly, in Fitch’s view, is the diversification that NBK has achieved domestically. Its acquisition of Boubyan in 2012 means that NBK is the only bank in Kuwait to offer both conventional and Islamic banking. The acquisition has brought synergies and expanded the bank’s customer base. From a low base, Boubyan is growing rapidly and per- Fund. Once a bank is satisfied with the credit requirements, the file will be sent to the National Fund for review and final approval. The bank then disburses the loan based on the approved product program, and will act as an agent for the National Fund’s portion of the credit extended to the borrowers.”
“This program, and other future ones, are designed in-line with the country’s direction to encourage the private sector in participating further in the economic development of Kuwait.”
Omar Kutayba Alghanim, Gulf Bank’s Chairman, said: “We are proud to be the first to take part in this important national initiative, to give direct and tangible support for Kuwait’s entrepreneurs and SME owners. SMEs and entrepreneurs are key drivers to diversifying Kuwait’s economy and ensuring a prosperous and stable future.”
“This is also a great opportunity to showcase our tailored SME services, as well as share ideas and help encourage young businesses to grow. We look forward to rolling this program out, with a fully trained and dedicated staff ready to receive loan applications from entrepreneurs and SMEs for swift processing using the National Fund’s procedures.”
Gulf Bank’s participation reflects its strategy to assist Kuwaiti nationals and promote Kuwait’s business community. It also reaffirms the Bank’s dedication to encouraging new ideas and developing a new generation of entrepreneurs. formance has improved markedly. Income is further diversified by the bank’s strong capital markets division and stable earnings from the bank’s treasury function. Fitch sees this increased diversification over peers as a major contributor to the bank’s sound and stable earnings base.
Fitch views NBK’s senior management as the most capable domestically. NBK’s senior management team has remained very stable and Fitch considers it to be one of the strongest in the region. Succession planning is well managed as evidenced by the transition following the retirement of the bank’s long-standing CEO in 1Q14.
Fitch highlighted that NBK’s strategy has centred on diversification, especially in light of the lack of government capital expenditure in Kuwait, upon which the economy is heavily reliant. The rating agency believes that NBK will continue to consider overseas opportunities on a case by case basis, but that this will take less of a priority as capital expenditure begins to increase domestically. Fitch does not see any major strategic changes as a result of the new senior management team, who have been with the bank for a long period.
Fitch added that “NBK has a strong track record of execution over a sustained time period. Financial metrics have remained sound and above peers for a significant period, particularly with respect to profitability and asset quality. The bank’s strategy of diversification has largely been successful.”
The report pointed out that “NBK has maintained sound asset quality metrics over a sustained period. This is a reflection of the bank’s access to quality transactions and a more diversified balance sheet than peers, whose metrics have tended to fluctuate more over time. With the operating environment set to improve somewhat, good quality growth may cause further improvement in asset quality metrics.”
Fitch affirmed that NBK’s earnings metrics are healthy. Earnings are very diversified compared to peers. Islamic banking at Boubyan is expected to grow rapidly, with further contributions from capital markets activities. This diversification helps to maintain the bank’s earnings base.
NBK enjoys the highest credit ratings by the major international rating agencies: Moody’s, Standard & Poor’s and Fitch Ratings. In their latest reports, the three rating agencies affirmed NBK’s credit ratings with a stable outlook. NBK also maintains its position among the 50 safest banks in the world for the ninth time in a row.