Real estate market liquidity down in Jan

Balance of public debt instruments decreases by KD 1.225 bln

Local Real Estate Market

– January 2019

The latest released data by the Ministry of Justice – Real Estate Registration and Authentications Department(after excluding the crafts activity and the coastal strip system) indicate a decrease in real estate market liquidity during January 2019 versus December 2018 liquidity, says Al-Shall Economic Report prepared by Al-Shall Consulting Co headed by Jassem Al-Saadoun.

Total value of contracts and agencies traded during January scored KD 271.4 million which is a -48% decrease than its counterpart value in December 2018 which scored KD 521.5 million. While liquidity increased by 11.4% when compared with January 2018 liquidity that totalled KD 243.5 million.

Trading during January 2019 was distributed between KD 246.1 million to contracts and about KD 25.4 million to agencies. Number of real estate deals in this month amounted 521 deals made up of 473 contracts and 48 agencies. The highest share in real estate deals went to Al-Ahmadi Governorate by 142 deals representing about 27.3% of the total number of real estate deals. Mubarak Al-Kabeer Governorate came second with 134 deals and representing 25.7%. The lowest share went to Al Jahra Governorate with 28 deals, representing 5.4% of the total.

Value of private residential activity scored KD 126.4 million, lower by -17.6% compared with KD 153.4 million in December 2018. Its contributary percentage increased to 46.6% of the total real estate trading versus 29.4% in December 2018. The monthly average value for private residence trading in the last 12 months scored KD 117.9 million. This means that January trading value is higher by 7.2% than the average. The number of deals for this activity decreased to 386 deals versus 459 deals in December 2018. Accordingly, the average value of private residence activity deal scored about KD 327 thousand versus KD 334 thousand in December 2018, indicating a -2% decrease.

Value of investment housing activity scored KD 96.4 million, lower by -56.5% from KD 221.6 million in December 2018. Its contribution to total liquidity decreased to about 35.5% versus 42.5% in December 2018. Monthly trading average value of investment housing during 12 months scored KD 134.7 million. This means that trading value during January 2019 was lower by -28.4% compared with 12 months’ average. In addition, its deals decreased to 123 deals compared with 196 deals in December 2018. Therefore, the average value per deal for investment housing scored KD 784 thousand versus KD 1.1 million in December 2018, i.e. -30.7% decrease.

Commercial activity trading value declined to KD 47.5 million, or by -67.6% compared with KD 146.6 million in December 2018. Its percentage out of total real estate trading value decreased to 17.5% compared with 28.1% in December 2018. Average value of commercial activity trading in 12 months scored about KD 50.7 million. This means that total trading value in January was lower by -6.4% than the last 12 months’ average. Its deals totalled to 11 deals compared with 24 deals for December 2018. The average value per deal for January 2018 scored KD 4.3 million versus KD 6.1 million average for December 2018, a -29.3% decrease.

When we compare total January 2019 trading with January 2018, we note that liquidity increased in the real estate market from KD 243.5 million to KD 271.4 million, i.e. 11.4% increase as mentioned previously. The increase included the liquidity of the commercial activity by 192.9% and the private residential activity by 33.8%, while liquidity of the investment housing activity decreased by -26.8%.

The Monthly Report of

the State, Financial Administration Accounts

–December 2018

In its monthly follow-up report for the State’s Financial Department until December 2018 (as published on its website), the Ministry of Finance indicates that total received revenues until the end of the ninth month of the current Fiscal Year 2018/2019, scored KD 15.686 billion, about 104% of total estimated revenues for the entire fiscal year in the amount of about KD 15.089 billion.

In detail, actual oil revenues until 31/12/2018 scored about KD 14.659 billion, i.e. 110.1% of the estimated oil revenues for the entire current fiscal year in the amount of KD 13.318 billion, or about 93.5% of total collected revenues. The average Kuwaiti oil price for the past part of the year scored $70 per barrel. An amount of KD 1.027 billion was collected from non-oil revenues during the same period, a monthly average of KD 114.113 million, while the total estimated amount for the entire year was about KD 1.772 billion. This means that the realized amount, if it continues at the same level, will be less for the entire fiscal year by about KD 402.2 million than the estimated.

Expenditures allocations for the current fiscal year were estimated at about KD 21.5 billion, of which an amount of KD 9.913 billion has been actually spent according to the bulletin-until 31/12/2018. An amount of KD 2.196 billion has been obligated and is deemed spent which raises the total expenditures -the actual and equivalencies – to KD 12.109 billion. The monthly average expenditure scored about KD 1.345 billion.

Though the bulletin concludes that the budget achieved at the end of the 9th month of the current fiscal year KD 3.578 billion surplus before deducting the 10% of revenues to the interest of the Future Generations Reserve, we publish it without recommending relying on it. It is known that the monthly spending average will increase significantly by the end of the fiscal year. The surplus figure in the end of the fiscal year relies mainly on oil prices and production volume in the remaining 3 months of the fiscal year. We expect it to drop to KD 1 billion to KD 1.5 billion as a result of oil prices continuing at their current low level.

Financial and Monetary Statistics – December

2018

In its monthly statistical bulletin for December 2018, as published on its website, the Central Bank of Kuwait (CBK) stated that the balance of total public debt instruments (including securities bonds and transactions since April 2016) has decreased by KD 1.225 billion compared to its balance in the end of December 2017 and has become KD 3.542 billion in the end of December 2018, 8.8% of estimated GDP for 2018 which will score KD 40.2 billion (EIU estimates). The average interest rate (return) on treasury bonds for a one-year term was 3.250%, 3.375% for two years, 3.375% for three years, 3.5% for 5 years, 3.625% for 7 years, and 3.875% for 10 years. Local banks capture 100% of the total public debt instruments (100% in the end of December 2017).

The CBK bulletin states that total credit facilities for residents offered by local banks in the end of December 2018 scored about KD 36.906 billion, about 55.4% of total local banks’ assets, up by about KD 1.535 billion, a growth rate by about 4.3%, over its level in December 2017. Total personal facilities scored about KD 15.852 billion, or 43%, of total credit facilities (about KD 15.067 billion in the end of December 2017), by 5.2% growth rate.

Total value of installment loans scored about KD 11.723 billion, or 74% of the total value of personal facilities. Share of facilities provided for the purchase of securities scored KD 2.699 billion there from, 17% of total personal facilities. Value of consumer loans amounted to about KD 1.063 billion. Credit facilities to the real estate sector amounted to about KD 8.263 billion, or 22.4% of the total, (about KD 7.945 billion in the end of December 2017). This means that about two-thirds of the credit facilities go to personal and real estate facilities. About KD 3.284 billion, 8.9%, went to the trade sector (KD 3.342 billion in the end of December 2017). KD 1.994 billion, 5.4%, went to the industry sector (KD 1.876 billion in the end of December 2017). KD 1.992 billion, 5.4%, went to the construction sector, (KD 1.858 billion in the end of December 2017), and KD 1.066 billion, 2.9%, went to the non-bank financial institutions (KD 1.319 billion in the end of December 2017).

The bulletin also indicates that total deposits at local banks scored about KD 43.484 billion, representing about 65.3% of total local banks liabilities, up by about KD 1.346 billion above its amount in the end of December 2017, a growth rate by about 3.2%. About KD 36.867 billion, 84.8% belong to clients of the private sector in its comprehensive definition including major institutions like the Public Institution for Social Securities which does not include the government. About KD 34.251 billion thereof, 92.9%, and the equivalent of KD 2.617 billion in foreign currency, went to private sector clients.

As for the average interest rate on customer deposits for a term, both in the Kuwaiti Dinar and the US Dollar, compared to the end of December 2017, the bulletin states that the difference in average interest rate is still in favor of the Kuwaiti Dinar in the end of the two periods. It scored about 0.787 points for 1-month deposits, about 0.658 points for 3 months, about 0.594 points for 6-month deposits, and about 0.530 points for 12-month deposits. The difference in the end of December 2017 was about 0.720 points for 1 month deposits, about 0.718 points for 3-month deposits, about 0.716 points for 6-month deposits, and about 0.632 points for 12-month deposits. The monthly average exchange rate for the Kuwaiti Dinar against the US Dollar in December 2018 scored about 303.762 Kuwaiti fils for each US Dollar, a drop by -0.6%, compared with the monthly average for December 2017 when it scored about 301.908 fils per one US Dollar.

Gulf Bank Financial

Results 2018

The Gulf Bank announced its results for the fiscal year ending Dec 31, 2018, which indicate that the bank achieved profits (after tax deduction) by KD 56 million, rising by KD 8.7 million or by 18.2% compared with KD 48 million for 2017. This rise in bank profits is due to a rise in total operating income by a higher value than the rise in total operating expenses. Therefore, the operating profit rose by 8.8% and scored KD 127.4 million compared with KD 117.1 million in 2017. The following graph displays the development in the bank’s profits during the period 2008-2018:

In details, total operating income of the bank scored KD 194.45 million, rising by KD 13.07 million or by 7.2% compared with KD 181.38 million in 2017. This increase is due to the rise in the item of net interest income by KD 20.4 million reaching KD 152.6 million versus KD 132.2 million. While the bank didn’t achieve any realized gains from disposal of investment securities, versus KD 2.8 million achieved in 2017.

Total operating expenses of the bank rose by a less value than the rise in total operating income by KD 2.7 million and scored KD 67 million compared with KD 64.3 million in 2017, due to the rise in all items of operating expenses. Percentage of total operating expenses to total operating income scored 34.5% compared with 35.4%. Total provision increased by KD 1.2 million or by 1.8%, scoring KD 67.9 million compared with KD 66.9 million. Therefore, the bank’s net profit margin slightly increased to 23.38% compared with 23.31% in 2017.

The financial statements show that the bank’s total assets increased by KD 332.9 million or by 5.9%, and scored KD 6.016 billion versus KD 5.683 billion in 2017. Item of loans and advances to customers rose by KD 141.3 million or by 3.7% and scored KD 3.950 billion (65.7% of total assets) versus KD 3.809 billion (67% of total assets) in 2017. Also, item cash & cash equivalents by KD 266.7 million or by 56.1%, scoring KD 742.1 million (12.3% of total assets), compared with KD 475.4 million (8.4% of total assets). While item of treasury bills & bonds dropped by KD 171 million, and scored KD 395.7 million (6.6% of total assets) versus KD 566.8 million (10% of total assets) in 2017.

Figures indicate that the bank’s liabilities (excluding total equity) rose by KD 305.5 million or by 6%, scoring KD 5.388 billion versus KD 5.082 billion in 2017. Percentage of total loans and advances to customers, to total deposits and other balances scored 76.6% compared with 78.2%. Percentage of total liabilities to total assets scored 89.55% compared with 89.42% in 2017.

Results of analyzing financial statements indicate that all bank’s profitability indexes increased compared with the end of 2017. Average return on capital (ROC) increased to 18.6% versus 15.8%. Average return on equities (ROE) rose to about 9.2% compared with 8.2%. Average return on assets (ROA) rose slightly to 0.97% versus 0.86%. Earnings per share (EPS) rose to 20 fils compared with 17 fils in the end of 2017. (P/E) scored 12.6 times (improved) compared with 14.0 times as a result of increased EPS by 17.6% against a lower increase in the share market price by 5.9%. P/B scored 1.22 times versus 1.21 times in the end of 2017. The bank announced its intention to distribute 10% in cash dividends, i.e. 10 fils per share which means that the share achieved a cash yield of 4.0% on the closing price at 252 fils in the end of December 2018. Cash dividends was 9 fils per share in 2017, which means that the bank increased its distributions in 2018.

The Weekly Performance

of Boursa Kuwait

The performance of Boursa Kuwait for last week was mixed compared to the previous one, where the traded value and traded volume decreased, while number of transactions and the general index (AlShall index) increased. AlShall Index (value weighted) closed at 437.5 points at the closing of last Thursday, showing an increase by 2.0 points or by 0.5% compared with its level last week. While it increased by 8.5 points or by 2% compared with the end of 2018.