Commercial Bank of Kuwait (CBK) is counting on boosting non-interest income to maintain its profit this year, which will be affected by low oil prices and tightening of liquidity in the banking sector.
“It [profit] will be nearly the same [as in 2015],” the bank’s chief executive, Elham Mahfouz, said this week. “The first quarter looks fine compared to the first quarter of 2015. The change of the structure of the business we have in the balance sheet has helped to improve income.”
Last year, the bank’s net income dipped 6 per cent to 46.18 million Kuwaiti dinars from 49.12m dinars a year earlier. Interest income fell 0.7 per cent to 108.4m dinars from 2014. Other income rose 2.2 per cent to 40m dinars.
“The business change is concentrating on the fees and commission especially with the projects we have in Kuwait,” Ms Mahfouz said. “We have increased the non-cash facilities and we participated in many projects in Kuwait under the development plans, which enhanced the fees and commission.”
The bank has been trying to reduce costs through the use of technology, she said, and its cost to income ratio of 28 per cent will help earnings.
Banks in Kuwait and more broadly across the Arabian Gulf countries are suffering from tightening liquidity as governments withdraw deposits to plug fiscal deficits. This is expected to impact bank earnings this year.
Deposit growth rates in the GCC slowed to 3 per cent last year from about 10 per cent in 2014, Moody’s said in a report published last month, warning that money was likely to remain tight in 2016 and might become tighter if governments are less willing to spend as deficits widen.
That would limit the ability of companies to grow, Moody’s said, and act as a dampener on economies around the region.
Ms Mahfouz said that she expects credit growth at the bank to average 5 to 7 per cent this year as the economy slows down.
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