Kuwait's Gulf Bank returns to full-year profit in 2010

Kuwait’s second- biggest lender by market value earns net income of KD19.1m ($68.4m) last year after a loss of KD28.1m in 2009
Kuwait's Gulf Bank returns to full-year profit in 2010
By Bloomberg
Wed 02 Feb 2011 05:17 PM

Gulf Bank, Kuwait’s second- biggest lender by market value, returned to profit in 2010 after a loss the previous year as it benefited from an improved local economy and a new strategy to rebuild itself.

Net income was KD19.1m ($68.4m) last year after a loss of KD28.1m in 2009, the bank said in an e-mailed statement today. Gulf Bank lost about $1.3bn on derivatives trading in 2008.

“The general improvement in the national economic conditions” and projects in the government’s four-year development plan “had an obvious effect,” Chairman Ali Al- Rashaid Al-Bader said in the statement. The results also reflect an improvement in business and the new strategy of focusing on core banking activities, growth in the bank’s credit facilities and expansion in banking services,’’ he said.

Kuwait’s parliament in February last year approved a 30.8 billion dinar investment plan involving oil and gas production, construction of a rail network and metro, airport expansion, new cities, hospitals, roads and a port on Boubyan Island.

“Additional improvements in the bank’s business and results are expected for 2011, especially if active implementation of the plan continues,” Al-Bader said. “This will entail a tangible improvement in the levels of economic activity and will promote confidence of investors and businessmen.”

The global credit crisis weakened lending and investment banking, pushing up provisions for loan defaults and causing a decline in the value of banks’ investments in the Middle East. Kuwait was forced to guarantee all deposits at local banks in 2008 after Gulf Bank reported its loss and Global Investment House KSCC, the country’s biggest investment bank, defaulted on $2.8 billion of debt.

Operating profit last year of more than 135 million dinars included “non-recurring items” of 40 million dinars, the statement said. “In line with its conservative policy, however, the bank retained the largest portion of the profit to increase specific and excess general loan provisions,” the bank said.

Gulf Bank plans to maintain “aggressive” provisions for bad loans this year, Chief Executive Officer Michel Accad said in an interview last month. Specific provisions are likely to be reduced over time and provisions this year should be less than in 2010 and 2009, Accad said. The bank’s total credit provisions for 2009 were 109 million dinars.

Gulf Bank shares fell 1.8 percent 540 fils at the close in Kuwait today. The stock has declined 5.3 percent this year after climbing 90 percent in 2010.

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