Kuwait’s banking industry has emerged from the economic and political troubles outside of its borders relatively unscathed in the recent years. Despite the political turmoil in nearby Syria and Egypt, Kuwait’s banking sector has enjoyed steady growth over the last couple of years, bucking the trend of many affected markets. Although the country’s economy has continued to be dominated by the large amounts of crude oil on its borders, the government has been actively trying to diversify things in recent years.
With the industry in Kuwait enjoying a series of opportunities that have sprung from the government’s colossal $130bn national development plan, financial institutions like Burgan Bank Group are well positioned to help the country transform its economy. At the same time, the wider GCC region has been resilient to outside pressures due to its high liquidity and the sensible financial measures taken by many governments. 2013 saw solid performances from a number of institutions, but leading firm Burgan, which enjoyed a particularly strong year, outshone all.
Burgan Bank revenue
$581m
2010
$900m
2013
Founded in 1977, the bank is the youngest commercial bank and third-largest in terms of assets in Kuwait. Its main focus has been on serving corporate clients and financial institutions, while it has also been growing its retail and private banking customer base. The group has five majority owned subsidiaries that are spread across the region. These are the Gulf Bank Algeria, the Bank of Baghdad, Jordan Kuwait Bank, the Tunis International Bank, and the fully owned Turkish subsidiary known as Burgan Bank. It is also looking to expand into new markets, provided they meet the strict criteria that the board has set out.
Speaking to World Finance, Bashir Jaber, Burgan Bank Group’s Head of Corporate Communications, said that a good deal of the bank’s success has been down to its implementation of what it calls its ‘4×4 strategy’. Jaber says that this strategy has pushed it into new markets, as well as solidifying the bank’s position as a trusted financial powerhouse in the region.
How has Burgan Bank Group’s strategy changed in recent years, in light of the difficult economic climate?
Having accepted the current challenging financial climate in the region and the volatility of the markets, we built our long-term corporate strategy around one core idea – to smartly grow in all areas. After steering the brand, group corporate communications and investor relations activities for the past three years, I can proudly say that the bank has grown into a regional commercial banking powerhouse, which has managed to continue to grow faster than the market, achieving solid year-on-year growth. Considered one of the largest regional networks and leading financial brands, Burgan Bank Group offers a superlative range of corporate and private banking services, in addition to a growing retail banking franchise across more than 231 branches in eight countries. We are therefore well positioned for smart growth on both the domestic and international fronts.
Between 2010 and 2013, Burgan Bank has undertaken a successful turnaround in the group’s profitability. We have launched innovative and unique products, advocated best practices and excellence in many areas and, most importantly, delivered a total shareholder return that is higher than the industry average. With a resilient and prudent regional strategy – combined with focused execution – each of our subsidiaries continues to perform well and deliver even in non-expansionary cycles. This is being done despite the tough operating environment, which is characterised by volatility, low investment and low job creation.
In what ways has the company’s strategy remained strong?
Throughout its growth journey, the group proved the strength of its operating model and the resilience of its formula. Through the period 2010-13, we delivered a strong financial and operating performance supported by solid balance sheet growth. This can be seen by the fact that revenues grew from $581m in 2010 to $900m at a compound annual growth rate (CAGR) of 15.4 percent, while underlying net income grew from $16m in 2010 to $258m in 2013. Loans and advances also grew from $7.6bn in 2010 to $14bn in 2013, at a CAGR of 22.6 percent, while total assets grew from $14.8bn to $25bn. Deposits increased from $9.1bn in 2010 to $16.4bn in 2013 at a CAGR of 21.6 percent and total liabilities grew from $12.8bn in 2010 to $23.2bn in 2013 at a CAGR of 21.7 percent.
[T]he bank has grown into a regional commercial banking powerhouse, which has managed to continue to grow faster than the market
In addition to solid financial and operating performance, the company’s risk position has been significantly improved – non-performing assets (NPA) to gross credit facilities has dropped from 7.3 percent in 2010 to 3.4 percent in 2013, while the coverage ratio was at 123 percent at the end of 2013. NPAs, net of collateral to gross facilities, stands at 1.6 percent, and coverage net of collateral at 256 percent.
In 2013, international operations contributed 54 percent of Burgan Bank’s revenue, reaping the benefits of a successful diversification strategy into faster growth markets. In recognition of its achievements and consistent performance, Burgan Bank was awarded the Best Banking Group in Kuwait, 2013 award by World Finance. The group has also won a number of other prestigious awards that recognise the way in which it has grown in recent years, as well as the service it is offering clients across Kuwait and through its international subsidiaries. Many of these awards have recognised its role in the MENA region, and the way it has helped to shape and modernise the industry.
Burgan Bank has also seen its strategic brand management propel it up the chart of another highly regarded index. Our approach has delivered a strong brand position in the top 500 league of banking brands worldwide in the Brand Finance Report published in the FTs’ The Banker magazine. Burgan Bank’s brand rating has been re-affirmed as AA for the second consecutive year with a positive outlook, making it the highest rated banking brand in Kuwait. Our brand value has also increased to $234m, in comparison to 2012’s value of $175m, representing a CAGR of 15 percent. This also saw the group jump 43 positions in the rankings of the top 500 banking brands across the world. What’s more, the Burgan Bank brand was recognised in 2012 when it won the Best Banking Brand in the Middle East award from The Banker’s Middle East division.
Which areas have produced the best performance, and in what ways is Burgan Bank Group looking to expand?
Despite the challenging operating environment, we have managed to grow locally and acquire market share with profitability thanks to a number of various initiatives. Firstly, our teams have worked to introduce new products and support the current product range through varied sales and marketing campaigns. That successful mix, along with a growing sales-force, managed to grow our loans and deposits books.
Over the years, Burgan Bank’s Kuwait business has grown to become a leading corporate banking service provider, achieving various accolades by offering a wide range of specialised products and services that provide cost-effective end-to-end banking solutions.
Moreover, our retail banking operations delivered fruitful results; 2013 was the year our retail operations returned to profitability. The retail bank contributed 17.5 percent to the revenue line in 2013, reflecting a growth of 52 percent year-on-year. The total number of accounts in 2013 stood at 154,436: a 21 percent growth year-on-year. The bank’s retail operations have also seen it awarded the Best Domestic Retail Bank of the Year, 2013, by the annual ‘Service Hero’ customer survey, which also shortlisted the bank as a top retail-banking brand in Kuwait.
How does the company’s strategy differ to its competitors?
We like to describe ourselves as a luxurious yet powerful 4×4, because we stick to our resilient formula on rough bumps as well as smooth roads. It is a formula that has proven resilient, and has resulted in a solid financial and operating performance together with effective risk management and internal controls, which is enabling us to strike the right risk-return balance.
The last three years have served as a successful platform for us and so we will continue on the same path of smartly growing the business. Our objective remains to plough ahead in uncertain times through innovation and flexibility.
