Kuwait's NBK reports 38% drop in Q3 profit as provisions climb amid pandemic
Provision charges for credit losses more than double to 81m dinars
National Bank of Kuwait, the biggest lender in the country by assets, reported a 38 per cent drop in third-quarter profit on higher provision charges for bad debt and a downturn induced by the coronavirus pandemic.
Net profit attributable to shareholders of the bank for the three months to September 30 declined to 57.6 million Kuwaiti dinars ($188.54 million), the lender said in a statement to Boursa Kuwait, where its shares trade. Provision charges for credit losses and impairment losses more than doubled to 81m dinars during the period. Net interest income and net income from Islamic financing fell 11 per cent to 154m dinars.
“NBK’s operations are not fenced from the repercussions of the pandemic on economic activity," said Isam Al Sager, NBK group chief executive.
"However, our financial results demonstrate the success of our proactive strategy that we started years ago, aiming to diversify income sources and to increase our digital reach.”
The bank's nine-month net profit fell 44 per cent to 168.7m dinars from the year earlier period as provision charges for credit losses and impairment losses climbed 98 per cent to 207.6m dinars.
Net interest income and net income from Islamic financing dropped 9 per cent to 472.5m dinars.
Assets at the end of the nine-month period climbed 5.1 per cent year-on-year to 30.4 billion dinars and total loans and advances grew 7.8 per cent to 17.6bn dinars. Customer deposits during the period jumped 10.8 per cent to 17.5bn dinars.
"Despite the consequences of the crisis we remained committed to our conservative approach," Mr Al Sager said. "During the first nine months of the year, we continued building provisions in anticipation of the expected uncertainties and the difficult operating circumstances across many sectors”.
Banks in the Gulf region will increase merger and acquisition activity as they look to gain scale to offset the impact of lower oil prices and the pandemic on profit margins, according to Moody’s Investors Service.
Challenging operating conditions as a result of the global economic slowdown may drive an uptick in M&A activity, particularly among smaller banks, who face being crowded out by larger competitors, Moody’s said in its GCC banking report released earlier this month.
Updated: October 26, 2020 12:33 PM