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Thu 8 Apr 2010 01:14 AM

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CBK investors delay old board's exit to examine pay

Old board resigned in January, with six new board members coming in to replace them.

CBK investors delay old board's exit to examine pay
NEW BOARD: CBK elected a new board on Wednesday, but did not release the old board due to an inquiry into their pay. (Getty Images)

Commercial Bank of Kuwait (CBK) shareholders elected a new board on Wednesday but did not release the old board at the request of a shareholder who asked for their pay to be examined.

Separately, Standard and Poor's cut its long term rating on the Gulf Arab state's third largest lender to BBB from A- and affirmed its A-2 short term rating.

The CBK board resigned in January, but the bank did not give a reason for their departure.

Six of the of the seven members of the new board are new, a bank spokesman said.

Shareholders voted to delay releasing the old board from its responsibilities at the request of a shareholder who asked for the board's pay to be examined.

Outgoing board chairman Abdulmajeed al Shatti said board members had not received any bonuses but the shareholder asked for the matter to be looked into.

After the meeting, Shatti would not give any further comment to reporters.

CBK made a 2009 net profit of just $526,500, down from $348.79 million the previous year, after taking $648 million in provisions to cover loans and investments.

In a note Nicolas Hardy, S&P credit analyst, said: "The rating action reflects our view that CBK's asset quality has materially deteriorated, and is likely to continue its negative trend in the coming quarters, weighing heavily on CBK's bottom line profitability."

The note also said: "In addition, we believe that CBK's funding profile weakened in 2009 because of an increased reliance on noncore customer deposits."

It added: "In our view, CBK appears heavily exposed, directly and indirectly, to the real estate and construction sector, as well as to the performance of the local stock market."

S&P and ratings agency Moody's said in February that they expected banks in Kuwait and Dubai to endure a tougher 2010 than their Gulf peers as lenders in the region continue to take provisions against bad credit, which will curtail profits.

In March, CBK's Chairman Abdulmajeed al Shatti told Reuters the bank would continue with its conservative approach in 2010, but expected to see profit growth in the second half of the year. (Reuters)

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