Kuwait Finance House (KFH), the Gulf's second largest Islamic lender, reported on Monday a 61 percent fall in second-quarter net profit on provisions as the global financial crisis hit banks across the country.Net income in the first half of the year was 72 million dinars ($250 million), or 32 fils per share, KFH said in a statement without giving comparative figures. There are 1,000 fils in a dinar.
Reuters calculated second-quarter net profit of 32.7 million dinars based on previous financial data which showed KFH had first-quarter net profit of 39.3 million dinars. The lender made a net profit of 83.9 million dinars in the second quarter of 2008.
"These results come ... amid difficult circumstances that the region's markets are going through ... which made us raise the total provisions until the end of the first half," Chief Executive Mohammad al-Omar said in a statement. He did not say how much provisions were taken or for what purpose.
The quarterly results came below a forecast by EFG-Hermes that had expected KFH to post second-quarter net profit of 41 million dinars in a Reuters survey this month.
Last week, National Bank of Kuwait (NBK), the country's largest, posted a 32.7 percent fall in second-quarter net profit on provisions and a decline in the value of investments.
KFH, in which the country's sovereign wealth fund owns a 24.1 percent stake, said last month it has a minimal exposure to troubled Saudi Arabian conglomerates Ahmad Hamad Algosaibi and Brothers and Saad Group.
Regulators and bankers are grappling with the fallout from a multi-billion dollar debt restructuring at the two large family businesses, seen as the biggest blow to hit the Middle East since the start of the financial crisis.
Both local and international banks are estimated to bear about $10 billion in exposure to the two groups, but little information has been made available to investors.
Assets at the Kuwait Finance, which also operates in Malaysia and Turkey, rose 5 percent to 10.8 billion dinars in the first half compared with the same period last year, it said.
On Thursday, Standard and Poor's rating agency said it has kept its 'A-/A-2' rating but assigned the bank a negative outlook due to its exposure to the real estate and construction sector, and to local investment firms.
"The negative outlooks on KFH... reflect our expectation that increased credit risk is likely to weigh negatively on these banks' financial profiles," S&P said.
Shares of KFH have fallen 5.8 percent this year to Monday's close, compared with 3.14 percent for the main stock index. The earnings statement was released after trading hours. (Reuters)
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