Waleed Khaled Mandani:

• Despite the headwinds, Gulf Bank’s underlying fundamentals remain strong, supported by a resilient balance sheet, sound risk management, and a clear strategic direction.
• As we progress through 2025, Gulf Bank remains focused on executing its strategic priorities with discipline and resilience.
• We have initiated the groundwork for the potential conversion to a Sharia-compliant institution, subject to obtaining relevant regulatory approvals.

David Challinor:

• We managed to reduce operating costs by 2.1 million or 8% when compared to Q4 2024.
• We had loan growth in Q1 of 2.8% year to date or almost 160 million which was a strong start to the year.
• The credit costs for the corporate loan book is in excellent shape and we are very comfortable with its overall asset quality.

Kuwait, 6 May 2025: Gulf Bank held its first quarter 2025 earnings webcast on Monday 5th May 2025, to present and discuss the Bank's financial performance. The webcast was organized by EFG Hermes and presented by Waleed Khaled Mandani, Acting Chief Executive Officer of Gulf Bank, and David Challinor, Chief Financial Officer of Gulf Bank. The discussion was moderated by Dalal AlDousari, Head of Investor Relations at Gulf Bank.

Operating Environment

Mr. Waleed Khaled Mandani, Acting Chief Executive Officer of Gulf Bank, commenced the webcast with key updates regarding Gulf Bank’s operating environment during first quarter 2025. Mandani stated: “Gulf Bank’s financial performance in the first quarter of 2025 reflects the ongoing challenges facing the financial sector. Despite the headwinds, Gulf Bank’s underlying fundamentals remain strong, supported by a resilient balance sheet, sound risk management, and a clear strategic direction”

Mr. Mandani added “As we reflect on our performance in the first quarter of 2025, we remain focused on delivering long-term value, despite the pressures of the macroeconomic landscape. While our financial performance was impacted by sector-wide factors, we made meaningful progress on several strategic fronts that reinforce the Bank’s underlying strength and long-term direction.”

He added: “As we progress through 2025, Gulf Bank remains focused on executing its strategic priorities with discipline and resilience. In line with our long-term vision for sustainable growth, we have initiated the groundwork for the potential conversion to a Sharia-compliant institution (subject to obtaining relevant regulatory approvals), an important step aligned with our long-term vision for sustainable growth.”

Margins

When questioned about on the drivers of the decline in net interest margins and the outlook for Q2-2025, Mr. David Challinor, Chief Financial Officer of Gulf Bank remarked: “In Q1 we did see downward pressure in the Bank’s net interest margin. There’s obviously a lot of dynamics at play but I’ll start with the main driver which was the drop in income yields. Now, these were significantly impacted by asset repricing in both the Corporate and Treasury books due to the rate cuts we saw throughout the September to December period. Benchmark rates fell 25 basis points for KD and 100 basis points for USD. And over the past year we’ve been growing in corporate, as opposed to retail, so the asset mix has moved away from the higher margin retail business due to muted market growth in retail.” He added: “Going into Q2, and as long as there’s no reduction in benchmark rates, we’d expect an increase in net interest margin which will obviously have a positive impact on top line income and work to restore overall profitability.”

Operating Expenses

In terms of operating expenses Mr. Challinor mentioned: “Total operating expenses were up 7% or 1.5 million year-on-year. And the biggest driver of the increase was in the “other expense” category. However, we managed to reduce costs by 2.1 million or 8% when compared to Q4 2024. And that was after booking various consulting costs relating to the potential merger with Boubyan, which was cancelled early in the quarter.” He added: “Now clearly the cost-to-income ratio has stepped up in Q1, but this was primarily due to the drop in margin. And as I said earlier, I’d expect the margin to increase in Q2 so combined with relatively stable costs we should expect an improvement in the cost to income ratio from current levels.”

Credit Cost

When asked about the credit cost and the outlook for the remainder of the year, Mr. Challinor said: “The credit costs for Q1 came in at 10.1 million which represented a year-on-year decrease of 1.3 million or 11%. Now I’ve said several times before that the retail credit costs have been elevated, and we saw a continuation of this during Q1, as almost all the credit costs in Q1 related to retail. In terms of corporate, we’re in excellent shape after the significant cleanup of legacy accounts we undertook in 2024 and we’re very comfortable with the overall asset quality of our corporate book.” He added: “In terms of the outlook, our full year 2025 guidance for credit costs was in the 60 to 70 basis point range and Q1 came in around the top end of that range. So, even though we think that retail credit costs could be elevated for some time, we still think the full year guidance is appropriate.”

Loan Growth

When questioned about the loan growth during the first quarter 2025, Mr. Challinor noted: “We had loan growth in Q1 of 2.8% year to date or almost 160 million which was a strong start to the year. Although, most of the growth was booked late in the quarter which impacted margin. Like we’ve seen in recent quarters, all the growth was in the corporate space. And we saw more local deals being booked, which is a focus area for the Bank.” He added: “ According to the CBK data the total system grew 1.4% for the first quarter versus our growth of 2.8%. So in Q1 we’ve managed to double the system growth. Now, in terms of the outlook for the full year 2025 we’d guided mid-single digit loan growth, and we continue to see that as being achievable but with the potential scope to exceed it.”