Moody's has a stable outlook on Kuwaiti banks. Andrew Henderson /The National
Moody's has a stable outlook on Kuwaiti banks. Andrew Henderson /The National

Kuwait banking system stable as economy grows, Moody's says



Kuwait’s banking system is stable as the country's robust economic growth boosts businesses and non-performing loans abate amid new accounting procedures for bad debt, according to Moody’s Investors Service.

“Non-performing loan levels will stabilise at around 2 per cent of gross loans,” said Alexios Philippides, an assistant vice president and analyst at Moody’s.

“We also believe that banks have cleaned up their portfolios before this year’s implementation of IFRS 9 accounting standards by mobilising the large pool of general provisions accumulated in recent years, which will help limit impairments going forward.”

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The rating agency is also forecasting buoyant credit growth over the next 12 to 18 months at around 6 per cent, that will largely be driven by households  due to higher pace of job creation. Corporate credit growth will be slower because of repayments for existing debt that businesses are making, as well as a slowdown in the development of projects.

Kuwait's non-oil gross domestic product is forecast to grow 3.5 per cent in 2018 and 4 per cent in 2019 amid greater government spending, according to Moody's forecasts.

The profitability of Kuwaiti banks, like most lenders in the region, will improve this year due to higher net interest margins as interest rates rise following a prolonged period of low rates. The ratio of net income to tangible assets will rise to about 1.3 per cent over Moody's outlook period from 1.1 per cent in 2017.

The rating agency said the main risks to its outlook include renewed weakness in the price of oil and adverse geopolitical developments.

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  • Malaysia bt Hong Kong by 3 wickets
  • Oman bt Nepal by 7 wickets
  • UAE bt Singapore by 215 runs

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  • Hong Kong bt Singapore by 5 wickets
  • Oman bt Malaysia by 2 wickets

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The struggle is on for active managers

David Einhorn closed out 2018 with his biggest annual loss ever for the 22-year-old Greenlight Capital.

The firm’s main hedge fund fell 9 per cent in December, extending this year’s decline to 34 percent, according to an investor update viewed by Bloomberg.

Greenlight posted some of the industry’s best returns in its early years, but has stumbled since losing more than 20 per cent in 2015.

Other value-investing managers have also struggled, as a decade of historically low interest rates and the rise of passive investing and quant trading pushed growth stocks past their inexpensive brethren. Three Bays Capital and SPO Partners & Co., which sought to make wagers on undervalued stocks, closed in 2018. Mr Einhorn has repeatedly expressed his frustration with the poor performance this year, while remaining steadfast in his commitment to value investing.

Greenlight, which posted gains only in May and October, underperformed both the broader market and its peers in 2018. The S&P 500 Index dropped 4.4 per cent, including dividends, while the HFRX Global Hedge Fund Index, an early indicator of industry performance, fell 7 per cent through December. 28.

At the start of the year, Greenlight managed $6.3 billion in assets, according to a regulatory filing. By May, the firm was down to $5.5bn. 

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