Middle East

Kuwaiti Banks Expected to Increase in 2023 Profitability: S & P

Standard & Poor’s (S & P) points out that Kuwait’s balance sheet is heading towards higher interest rates and lower credit fees, supported by high profit margins, and in light of a full recovery in 2022 next year. We anticipate that the profitability of Kuwait Bank will increase. ..

S & P points out that the development of the real estate market is deteriorating the quality of Kuwait’s assets, with the total exposure of banks to the real estate and construction sector at the end of 2021 accounting for about 30% of total loans. Pointed out. The real estate sector (mainly offices) continues to be under demand pressure on office space as a result of the “Corona” pandemic and the shift to “online” sales due to oversupply, which agencies are most likely to be. We report daily in local Arabic to generate bad debts at banks, which we believe will be a high source of money.

In a report on international banks in the second half of 2022, the agency stated that Kuwait’s banks’ non-performing loans will gradually decline, with a slight reduction over the next 12-24 months, at the cost of risk. Suggested. Given that some provisions of the sector are technical according to the rules of the Central Bank of Kuwait, it remains at about 100 basis points.

Sources said the cost was lower than the 1.4% rate in 2020 and close to the 0.9% rate in 2021 (calculated based on the banks controlling 60% of the domestic market share). Banks’ high allocation buffer generally helps maintain a stable rate against the cost of risk by amortizing non-performing loans when new non-performing loans occur. Despite this, the investment real estate sector, primarily the sector that rents apartments to expatriates, is slow to recover and is expected to continue to recover in the next 12-24 months. This was driven by an improvement in the future economic outlook and the return of some expatriates.

Banking sector financing is strong, as individual deposits account for more than 40% of total deposits by the end of 2021 and banks’ net foreign assets have reached 14%. Authorities said they were backed by a local depositor base. The increase in domestic lending at the end of last year shows that this leads to weaker exposure to investor sentiment and an expected increase in the cost of foreign financing.

Regarding the willingness and capacity of the government to provide financial support to banks, the government has long been-the term finance strategy, despite rising oil prices that will help balance Kuwait’s finances and payments from 2022 to 2023. It remains uncertain as it is declining. The major liquidity reserves represented by the General Reserve Fund and the Public Debt Law have not yet been adopted.

However, despite long-term conflicts between the government and the legislature and delays in payments to suppliers, government agencies will be able to overcome institutional constraints and future generations if other options are not available. Assuming that it has a mechanism to access the fund, it states that it needs to be assisted in the price of general reserve fund assets that are currently exhausted during the pre-high oil period.

S & P has run a deficit of 15% of GDP each year over the past five years, and in 2022, supported by high oil prices and production, hoping that Kuwait will achieve a large budget surplus this year. He emphasized that growth should recover. However, S & P expects the budget to return to the red during the 2024-2025 fiscal year, given the easing of oil prices.

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https://timeskuwait.com/news/profitability-of-kuwaiti-banks-expected-to-increase-in-2023-sp/ Kuwaiti Banks Expected to Increase in 2023 Profitability: S & P

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