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Sun 19 Oct 2008 04:20 PM

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Kuwait Gulf Bank Q3 profit falls 13.8%

UPDATE 1: Gulf state's fifth largest bank cites single ailing credit client, investment revaluation.

Kuwait's Gulf Bank posted a 13.8 percent fall in third-quarter net profit as a downturn of global stock markets weighed, but it narrowed a profit fall from the second quarter.

Kuwait's fifth-biggest bank by market value is the second lender in the Gulf Arab state to take a hit after National Bank of Kuwait , the country's biggest bank by assets, reported an almost 10 percent decline in third quarter earnings on the back of declining Gulf stock markets.

Net income in the three months to Sept. 30 was 29.925 million dinars ($111.4 million), or 25 fils per share, down from 34.715 million dinars, or 28 fils per share, in the same period in 2007, Gulf Bank said in a statement on the bourse website.

Global Investment House had forecast Gulf Bank's third-quarter net profit at 36.20 million dinars.

"The results... reflect the recent downturn in global financial markets and its wide-reaching effects which have been felt by banks worldwide," the lender said in the statement.

The bank cited problems with one single ailing credit client despite an overall well-performing credit portfolio apart from its investment portfolio hit by a global downturn.

"When adjusted for these terms, the bank's core earnings would have been on par with 2007," Chief Executive Louis Myers said in the statement.

In the second quarter, earnings had fallen by 41 percent due to the same reasons. It had took provisions of 18.5 million dinars, some two-thirds of it to write off bad debt for one ailing business client.

Return on assets was 2.2 percent in the nine months to Sept. 30, while return on equity was 26.5 percent, the bank said.

Having no foreign operations, Gulf Bank has been affected by tougher lending rules imposed by Kuwait's central bank more than other local lenders, analysts have said.

The central bank restricted consumer lending in March to combat inflation hitting a near-record level of 11.35 percent in June.

Earlier this month the central bank eased some restrictions on credit growth to boost liquidity and strengthen the banking sector in the wake of the global credit crisis.

The bank has said it might pursue business opportunities in the region to offset slower growth at home. Myers said in July the bank expected much slower growth in 2008 than last year. (Reuters)

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