Reuters logo
Fitch: Kuwaiti Banks' Asset Quality Improving; Highest Reserve Coverage in GCC
August 30, 2017 / 8:10 AM / 3 months ago

Fitch: Kuwaiti Banks' Asset Quality Improving; Highest Reserve Coverage in GCC

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Kuwaiti Banks' Results Dashboard here LONDON, August 30 (Fitch) Fitch Ratings says in a new report that asset-quality metrics for Kuwaiti banks improved in 2016 and reserve coverage is the highest in the Gulf Cooperation Council (GCC). Lower loan impairment charges (LICs) resulted in improved profitability ratios while liquidity pressures have eased. The average net interest margin was stable in 2016 as higher funding costs due to rising interest rates were met by equal loan book repricing. Operating profitability metrics improved (operating profit/risk-weighted assets improved to an average 1.8%) owing to lower LICs. The sector average cost/income ratio was almost flat owing to tight cost control. Asset-quality metrics are now at their best level since the financial crisis. The average impaired loans ratio was 2.1% at end-2016. Average loan-loss reserve coverage of impaired loans has improved to a significant 323% (and about 5% of gross loans), the highest by a significant margin in GCC. LICs/average gross loans ratios have been falling (to an average of 0.9% in 2016) as a result of several Kuwaiti banks completing loan book clean-ups. Tighter liquidity from 1H15 eased slightly in 2016. Banks have been actively managing their loans/deposits ratios below the 90% regulatory cap. The Fitch-calculated sector average gross loans/deposits ratio was almost flat (about 84% at end-2016). Term corporate customer deposits remain the main source of funding. Market funding is increasing slightly. Kuwaiti banks have proven their ability to extend funding maturity through wholesale issuance, but large asset-liability mismatches remain. Kuwaiti banks are typically interbank placers. Deposit concentration remains high. Slowing loan growth and reasonable internal capital generation have helped the Kuwait banks maintain adequate capital ratios for their risk profiles. Additional Tier 1 capital issuance (not included as part of Fitch Core Capital) has also benefited the ratios. The average Fitch Core Capital ratio was 16.5% at end-2016. The average total capital adequacy ratio was 18%, giving a 5% buffer over regulatory minima (excluding D-SIB). LICs should reduce in 2017 as banks have already built significant loan-loss reserves, which should further benefit profitability metrics. Loan growth is expected to be in the mid-single digits in 2017. The current level of government spending is expected to continue, although this will still be lower than in other GCC countries. High levels of loan-loss reserves at Kuwaiti banks should mean that the implementation of IFRS 9 on 1 January 2018 is manageable for all Kuwaiti banks and may even result in excess loan-loss reserves, although Fitch does not expect the central bank to allow the banks to release loan-loss reserves. It is more likely that excess loan-loss reserves will be transferred to non-distributable equity reserves. Excluding this, capital ratios are expected to remain stable. More information is available in "Kuwaiti Banks - Results Dashboard", available at www.fitchratings.com or by clicking the link above. Contact: Redmond Ramsdale Head of GCC Bank Ratings +44 20 3530 1836 Fitch Ratings Limited 30 North Colonnade London E14 5GN Gilbert Hobeika Associate Director +44 20 3530 1004 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below