KFH net profit for H1 rises 13.1% to KD 107.7mn
Total finance income reaches KD 460.5 mln, up 8.6%; Total assets rise 5.5% to KD 18.747 bln
Washington has since reimposed draconian sanctions to throttle Iran’s oil trade in a “maximum pressure” policy to force Tehran to agree stricter limits on its nuclear capacity, curb its ballistic missile program and end support for proxy forces in a regional power struggle with US-backed Gulf Arabs.
Fears of direct US-Iranian conflict have risen since May with several attacks on oil tankers in the Gulf, Iran’s downing of a US surveillance drone, and a plan for US air strikes on Iran last month that Trump called off at the last minute.
Iran’s supreme leader on Tuesday said Tehran would keep removing restraints on its nuclear activity in the deal – struck with Britain, China, France, Germany Russia and the United States – and retaliate for the seizure of an Iranian oil tanker.
Ayatollah Ali Khamenei, Iran’s ultimate authority, accused Britain, Germany and France of failing to uphold obligations under the deal to restore Iranian access to global trade, especially for Tehran’s oil exports blocked by US sanctions.
“According to our foreign minister, Europe made 11 commitments, none of which they abided by. We abided by our commitments and even beyond them. Now that we’ve begun to reduce our commitments, they oppose it. How insolent! You didn’t abide by your commitments!” Khamenei said, according to his website.
“We have started to reduce our commitments and this trend shall continue,” Khamenei said in remarks carried by state television.
United Nations nuclear inspectors last week confirmed Iran is now enriching uranium to 4.5 percent fissile purity, above the 3.67 percent limit set by its deal, the second breach in as many weeks after Tehran exceeded limits on its stock of low-enriched uranium.
The level at which Iran is now refining uranium is still well below the 20 percent purity of enrichment Iran reached before the deal, and the 90 percent needed to yield bomb-grade nuclear fuel. Low-enriched uranium provides fuel for civilian power plants.
Khamenei has previously upbraided European powers for not standing up to Trump and circumventing his sanctions noose.
But it was the first time Khamenei explicitly pledged to press ahead with breaches of the nuclear deal, spurning European appeals to Iran to restore limits on enrichment aimed at obviating any dash to development of atomic bombs.
“So far, efforts to win gestures from Iran to de-escalate the crisis are not succeeding (as) Tehran is demanding the lifting of sanctions on its oil and banking sectors first,” a European diplomatic source told Reuters.
Iran denies any intent to acquire nuclear weapons, and has said all its breaches could be reversed if Washington returned to the deal and its economic dividends were realised. Tehran has accused Washington of waging “economic war.”
“Western governments’ major vice-is their arrogance,” Khamenei said. “If the country opposing them is a weak one, their arrogance works. But if it’s a country that knows and stands up against them, they will be defeated.”
US officials say they are unsure whether an oil tanker towed into Iranian waters was seized by Iran or rescued after facing mechanical faults as Tehran asserts, creating a mystery at sea at a time of high tension in the Gulf.
The MT Riah disappeared from ship tracking maps when its transponder was switched off in the Strait of Hormuz on July 14. Its last position was off the coast of the Iranian island of Qeshm in the strait.
Iran says it towed a vessel into its waters from the strait after the ship issued a distress call. Although Tehran did not name the vessel, the Riah is the only ship whose recorded movements appear likely to match that description.
Iranian navy vessels came to the assistance of a disabled foreign oil tanker in the Gulf that needed repairs, Iran’s foreign ministry spokesman was quoted as saying on Tuesday by the semi-official news agency ISNA.
KUWAIT CITY, July 17: Chairman of Kuwait Finance House (KFH), Hamad Abdulmohsen Al-Marzouq said that KFH has, by the grace of Allah, reported net profits of KD 107.7 million for the first half of 2019 for KFH shareholders compared to KD 95.2 million for the same period last year i.e. an increase of 13.1%.
Total finance income for H1 this year reached KD 460.5 million an increase of 8.6%; and net operating income reached KD 240.7 million i.e. a growth of 2.1% compared to the same period last year.
Cost to income ratio dropped to reach 38.7% for H1 2019, compared to 39.5% for the same period last year.
Earnings per share for H1 of 2019 reached 15.64 fils, compared to 13.84 fils for the same period last year i.e. an increase of 13%.
Total assets increased by 5.5% compared to the end of last year to reach KD 18.747 billion, i.e. an increase of KD 976.8 million at the end of H1 this year.
Finance receivables reached KD 9.237 i.e. an increase of 0.5% compared to end of last year.
Investment in Sukuk reached KD 2.145 billion an increase of KD 582 million i.e. a growth of 37% compared to end of last year and the majority of the balance represents investments in Sovereign Sukuk.
Depositors’ accounts reached KD 12.837 billion i.e. an increase of KD 1.057 billion or 9% compared to the end of last year.
Al-Marzouq said that the positive financial results stemmed from the focus on the core banking activities. They were in line with the set plans and a reflection of the stable and sustained growth of profitability, encompassing all indicators. This testifies to the success of KFH strategy and its solid financial position of the bank, despite the tough adverse economic and political developments.
Al-Marzouq pointed out that over the last five years KFH has succeeded in increasing the overall assets value, while maintaining their highest possible standard of quality and diversity to limit risks, and also explained that the continued rise in net profit attributable to shareholders of the bank is due to the increase in total operating income and continuous decrease in the operating expenses, as well as the steady growth rate of the total assets.
He asserted that efforts are focused on maintaining the profit rate growth, the credit facilities return and other financial indicators as well as implementing the best banking practices, full compliance with supervisory and sharia rules and directives and the best operational parameters. This will be accompanied by continuous improvement in the cost-income ratio, taking advantage of technology and administrative and organizational plans. These plans include raising employee efficiency, innovation, operational quality and customer care, ensuring the interests of the shareholders and depositors and increasing the return on their investments.
Al-Marzouq confirmed that several initiatives were launched in the first half of the current year reflecting great interest in strengthening KFH’s position, value and name in the local market with a view to expanding market share, enhancing the national economy and realizing the “Kuwait Vision 2035”.
He called for launching more initiatives and executive plans that translate Kuwait’s future vision into concrete steps and real projects leading to comprehensive development and reestablishing Kuwait as one of the best and most vital commercial regional and international hubs.
Al-Marzouq stressed the necessity of having a strong market for projects capable of absorbing banks liquidity and employing Kuwait’s ideal potential and many abilities whereby the private sector has the largest part. This will expand its role and achieve comprehensive economic returns through energizing the market, solidifying the economic structure, boosting competition with the subsequent social returns of developing national strengths and expertise and creating job opportunities outside the public sector.
He pointed that toward this goal, “KFH Auto” Showroom was opened in Shuwaikh. Being the largest and newest Showroom in the Middle East, it includes more than 30 brands of cars, motorcycles and boats. As an integrated city, customers can also sell and purchase new and used cars at “KFH Auto”. Car rental, valuation, traffic and insurance services are also offered at the showroom. In line with intelligent building systems, “KFH Auto” includes charging station for electric vehicles and special section for ladies. This achievement strengthens KFH’s role in serving the national economy and the retail market as well as boosting traders and agents sales in a context of cooperation and partnership.
As for the customers segments, he added that KFH introduced quality services for several segments with the aim of developing relationships with them and meeting their requirements. KFH was the first Kuwaiti bank to launch the exclusive Infinite Credit Card for the private banking customers, in addition to introducing the “Car financing service outside Kuwait”, making Turkey the fourth country in the service that includes Jordan, the USA and Egypt. It also introduced money transfer service in Egyptian pound to Egypt. The service is available online or through branches. KFH also offered prizes and benefits to its customers. He pointed out that the bank is striving to make its services the best and most efficient to its customers, thereby boosting its competitive edge and market leadership.
In line with its vital role in the local economy, Al-Marzouq stressed on KFH continuing pursuit to be a leader in the major infrastructure projects in terms of finance and support. As per the regulations and instructions, KFH provided funding to several companies that implement major economic and development projects. In addition, KFH is strengthening its position as a leader in financing small and medium-sized enterprises (SMEs).
Al-Marzouq said that the FinTech current trends in the banking industry are the most important and critical developments in the banks history. These trends pose challenges that would change the traditional banking industry model.
“As a strategy, KFH uses state of the art technology in the digital banking realm, considering customers` expectations as well as innovating the appropriate products and services. With Technology development, KFH is enhancing the products and services, creating new innovative dimensions while reducing expenses”, He explained.
Al-Marzouq added that Blockchain helps to overcome the traditional bottlenecks and administrative requirements in the payment systems and achieve flexibility, reliability and financial inclusion. As it successfully enables people to access several banking services around the world, the accessible “smart phone” has become a key and active component in KFH banking services.
JReport prepared by NBK
une saw oil prices whipsawed by opposing bullish and bearish forces, falling earlier in the month to their lowest levels since late January before rising to end higher at $66.6/bbl (Brent) and $58.5/bbl (WTI). Brent and WTI’s year-to-date gains stood at 24% and 29%, respectively, by June’s close.
Brent initially fell to a low of $59.97/bbl in early June largely on concerns about weakening global economic growth, catalyzed by the deteriorating US-China trade tariff dispute. Prices were also under pressure by above-seasonal crude stock builds in the US, which came despite Saudi Arabia’s efforts to curb crude exports to that market. Past midmonth, oil prices then posted two consecutive weeks of gains, propelled by a combination of heightened geopolitical tensions relating to the attack on Saudi and international tankers off the Strait of Hormuz and by easing global trade anxieties as Presidents Trump and Xi resumed trade negotiations. The downing of a US drone by Iran and the subsequent abortive US airstrike and sanctioning of Iran’s Supreme Leader Ali Khamenei served to further raise oil’s geopolitical risk premium.
Going into July, however, market sentiment appears to have weakened at a time when it was expected to turn more bullish. While prices were indeed buoyed by the long-awaited drawdown of US crude stocks by US refineries ahead of the summer driving season, the reaction to the OPEC+ decision on 1-2 July to extend the production cut agreement for a further nine months to March 2020 was lukewarm initially before turning negative. Brent declined the next day by 4% to $62.4/bbl, likely due to a combination of still high global inventories (16.3 mb above the 5-year average in April according to the IEA), record US shale production growth and weakening global economic growth. These are the very reasons that influenced the OPEC+ decision to extend.
Moreover, while the crude inventory decline in the US was more than expected (-12.8 mb), pointing to strong domestic demand, the EIA’s data release also revealed an eye-catching year-to-date increase in US crude exports of 69%, to a record high of 3.7 mb/d. US shale therefore appears to be challenging OPEC and its allies’ traditional market dominance as these oil producers continue to hold down their own output, a concern frequently expressed by Russia and others.
Softer data leads to oil demand growth downgrade
Concerns about the trajectory of the global economy have been fueled partly by softer data and by the contining US-China trade dispute. The International Energy Agency (IEA) downgraded in June, for the second month in a row, its estimate for global oil demand growth. It now expects growth to be 1.2 mb/d, 100 kb/d lower than its May estimate. The agency cites slower economic growth – a nod to the recent global economic outlook downgrade, in which trade tensions were a significant factor, to 3.2% for 2019.
Slower petrochemicals activity and warmer northern hemisphere weather were also contributory factors. Oil demand growth will rebound, though, to 1.4 mb/d in 2020. This will be partially offset by robust non-OPEC supply growth, which the IEA expects to accelerate from an estimated 1.9 mb/d in 2019 to 2.2 mb/d in 2020.
This year, even in the context of weaker oil demand, there is a good chance that supply growth will lag demand growth with OPEC+ extending its cuts. This should lead to a roughly balanced market, with a maginal crude stock draw on average for the year, according to our calculations.
OPEC supply falls to lowest level in 5 years
OPEC, for its part, has commendably stuck to its task of paring back output in an attempt to clear the supply overhang. According to OPEC secondary sources, aggregate production fell to 29.9 mb/d in May, the lowest level since 2014, led by continued declines in Saudi Arabia, Venezuela and Iran.
Saudi Arabia continues to do the heavy lifting for the OPEC-11 nations, cutting its production for the sixth consecutive month in May, to a low of 9.69 mb/d, a cut of 621 kb/d more than is required by its allocation (achieving record 293% compliance).
For other OPEC countries, Kuwait and the UAE also continue to overcomply, by 116% and 111%, respectively. In contrast, Iraq has yet to achieve its quota obligation and has, in fact, been increasing production in recent months. Output in Iran and Venezuela, meanwhile, continues to decline due to the impact of US sanctions and/or economic mismanagement.
Overall OPEC+ compliance was 151% compared to OPEC-11 compliance of 143% in May. Among the large non-OPEC oil producers, Russia finally hit its target during the month to join over-compliers Mexico and Kazakhstan. Russia’s reduced output of 11.4 mb/d in May (132% compliance) was also partly a result of the Druzhba pipeline contamination.
OPEC+ agreeing to extend until March 2020 could establish a price floor. As we have seen over the last several months, the geopolitical context does have the capacity to raise the risk premium on oil prices. Looking ahead, though, it seems likely that it will be the global economy narrative and once again the US shale growth story that will command most of the markets’ attention.
“A full package of KFH’s digital services is becoming more integrated and is supported by the use of robotics and artificial intelligence in the operations for the first time in Kuwait and the launch of the smart e-branch (KFH-Go). Through KFH-Go branches in Ishbiliya and Jabriya, customers can do 90% of their traditional banking transactions. KFH also added new services to KFH-Online smartphone app and introduced the first ever Mobile Deposit of Cheques in Kuwait, through KFH Online app.” He explained.
He noted that KFH has a regional and global leading role in Sukuk issuances and Islamic finance services. KFH Group has succeeded in consolidating its position in Sukuk market, indicating that Sukuk is one of the most important Islamic financial products. Since the beginning of the year, the bank has arranged issuances worth more than USD 5 billion for companies and governments.
KFH Capital, the investment arm of KFH Group, has recently succeeded in arranging Sukuk issuances for Turkey, the Emirate of Sharjah and Saudi Telecom Company, in addition to launching a new index to follow and analyze dollar- denominated Sukuk issuances in the global markets.
By strengthening coordination at the Group level, KFH succeeded in achieving high results. Moreover, KFH focuses on human resources, especially