• Waleed Khaled Mandani:
  • The banking sector played a vital role in facilitating economic activities and supporting businesses through financing and lending activities, especially in support of major development projects.
  • I am pleased to say that our performance for the first quarter of the year 2024 reflects the resilience of our business model and ability to navigate through challenges.
  • With the completion of the new core banking system, Gulf Bank will be ready to leverage these foundational changes to streamline its operations and enhance customer experience.

• David Challinor:
  • First Quarter was a very strong quarter for loan growth and a great start to the year.
  • We have now established GB Invest, the banks wholly owned investment platform, which should help to drive fee income higher.
  • Cost to Income ratio it now stands at 44.9% which is lower than Q1 2023 which was 46.1%, and lower than the full year 2023 which was 45.6%.

Gulf Bank held its investors webcast on Monday 06, May 2024, to present and discuss the Bank's financial performance for Q1 - 2024. 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.  

Operating Environment

Mr. Waleed Mandani, Acting Chief Executive Officer of Gulf Bank, commenced the webcast with key updates regarding Gulf Bank’s operating environment during the first quarter of 2024. Mandani stated: “During the first quarter of 2024, the Kuwaiti economy has witnessed notable developments related to political changes and fiscal pressures, with the banking sector playing a pivotal role amidst dynamic market conditions which has impacted investor sentiment.”

Mr. Mandani added “I am pleased to say that our performance for the first quarter of the year 2024 reflects the resilience of our business model and ability to navigate through challenges. While the first quarter results may reflect a fall in net profit growth compared to the same period of last year, we have witnessed significant expansion in our loan book during the first three months of the year, displaying robustness and effectiveness in maintaining our market share and meeting the evolving needs of our customers. Moreover, we have improved our operating profitability lines, particularly in net interest income, operating income, and operating profit before provisions and impairments, reflecting our dedication to strategic growth and financial prudence.” He added: “Following the completion of the implementation of phase I of the new core banking system during 2023, we are currently in the process of launching and implementing phase II of our core banking system. Gulf Bank is now ready to leverage these foundational changes to streamline its operations and enhance customer experience.”

Credit Cost & Asset Quality

Gulf Bank’s Chief Financial Officer Mr. Challinor responded to questions related to credit cost and asset quality by saying: “Credit costs for Q1 came in at KD 11.4 million which was an increase from the Q4 level of KD 9.9 million. When we look at the asset quality indicators, we can see they are still holding strong. NPL percentage remains at 1.2% which is the same level Q4 23, and the stage 2 percentage is 3.4% which continues to be very low.”

Loan Growth

When questioned about the drivers for loan book growth during Q1 2024, Mr. Challinor noted: “Q1 was a very strong quarter for loan growth and a great start to the year. Total gross loans and advances grew by circa KD 180 million or 3.2%, which is the strongest growth the bank has seen in almost 2 years. In comparison, the full year growth in 2023 was 1.2%, so we’ve already significantly outpaced last year’s growth in just one quarter.” He added: “If we look specifically at customer loan growth (which excludes lending to banks) this was up 2.6%, with the vast majority coming from our corporate business.”

Margins

Regarding margins and trends going forward Mr. Challinor remarked: “For Q1 the margin was 214 basis points which was up 7 points from a year ago. However, the margin for the full year in 2023 was 217 points so we’ve seen a drop in Q1.” He added: “In terms of the outlook, the local market has healthy liquidity and new fixed deposits are being repriced lower than in previous periods, however we have seen some upward pressure on the cost of dollar funding primarily due to expectations of rate cuts being pushed out. So overall we could expect margin to be relatively stable if current dynamics continue. Obviously, the longer-term view on margin is going to be a function of benchmark rate moves but the timing and quantum’s continue to remain very uncertain.”

Operating Expenses

In terms of operating expense and targets for cost to income ratio Mr. Challinor mentioned: “Q1 Operating Expenses were KD 21.7 which was lower than the Q4 number of KD 22 and only 1% above where we were in Q1 last year.” He added: “In terms of the Cost to Income ratio it now stands at 44.9% which is lower than Q1 2023 which was 46.1%, and lower than the full year 2023 which was 45.6%. So, it’s all heading in the right direction in terms of it dropping. We also had another quarter demonstrating a positive JAWS ratio, as the operating income growth exceeded the operating expense growth by almost 3 percentage points.”

Non-Interest Income

In discussing non-interest income and areas of improvement Mr. Challinor stated: “As I said during the earlier presentation, the Q1 2023 comparative represented the highest quarter (in the 2023 year) for non-interest income due to a one-off fee we received in relation to our cards business. Our Q1 24 number is broadly in line with Q4 and also higher than Q2 and Q3 last year. Nevertheless, we are continuing to focus our efforts to improve this line item and our ongoing investment in transformation will allow for an expansion in new fee generating products and services. In addition, we have now established GB Invest, the banks wholly owned investment platform, which should help to drive fee income higher.”