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Mon 21 Apr 2008 10:25 AM

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Kuwait's Gulf Bank warns on growth despite Q1 profit

Bank likely to see slower profit growth this year, says chief executive.

Gulf Bank, Kuwait's fourth-largest lender by market value, said profit growth resumed in the first quarter on more lending, but anti-inflation measures were likely to hit its full year growth.

Net income in the three months to March 31 rose 6.9% to 32.2 million dinars ($121.3 million), or 26.1 fils per share, compared with the year-earlier period, the bank said in a statement. There are 1,000 fils to the dinar.

In a survey by newswire Reuters last month, analysts at Global Investment House said they expected first-quarter net profit at 38 million dinars.

For the full-year, the bank will likely see slower profit growth due to the central bank's new restrictions on consumer loans, Chief Executive Louis Myers told Reuters in an interview.

"It is safe to say... that the rate of growth is likely to be slower this year," he said, when asked about net profit forecast. In 2007, net profit rose 23%.

Loans rose almost 27% to 3.3 billion dinars in the year to March 31, helped by corporate lending, while consumer loans' growth was in the low single digit area, he said.

Last month, the central bank tightened rules on consumer lending to try to rein in inflation.

"It is clear that we are entering a period of measured credit growth as a result of recent regulatory and monetary policy changes aimed at controlling inflation in Kuwait," Chairman Bassam Alghanim said in a statement.

Under new consumer lending rules, borrowers arranging fresh loans will be limited to monthly interest and repayment instalments equivalent to no more than 40% of their salaries, compared with 50% before.

Myers said the lender wanted to focus on its wealth management business, treasury products and advising small business clients and is mulling entering investment banking to offset a slower growth in consumer lending.

"We are looking for new sources of fee income," he said.

Gulf Bank would continue to focus on its local market and had no plans to enter foreign markets or make acquisitions as other Gulf lenders, he said.

"We believe there is still plenty of growth in Kuwait," he said.

Operating income advanced 10% to 46.4 million dinars in the first quarter, and assets 21.6% to 5.1 billion dinars, the bank said.

Return on assets was 2.6%, and return on equity was 30.2%. The country's biggest lender by assets, National Bank of Kuwait reported 2.87% and 21.7% respectively.

Shares of Gulf Bank are down 2.9% this year to Sunday's close, compared with a gain of 18.2% for the main stock index. (Reuters)

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