‘Kuwaiti Banks are well-placed for potential risks and shocks’, says KIB

Transcript

Kuwait’s banking sector hit record highs in the first half of 2014, reaching profits of $13.3bn. World Finance speaks to Mourad Mekhail, Board Advisor of Kuwait International Bank, to discuss what’s driving the country’s banking industry success.

World Finance: Well Mourad, Kuwait ranks fifth in the world in terms of highest density of millionaires. Would you say this is a good representation of the country’s economy as a whole?
Mourad Mekhail: Indeed: Kuwait has a strong and solid economy, driven by oil and linked to the oil price.

The high growth in private wealth is driven by the high growth of the saving rates. Kuwait International Bank is always developing new, innovative products to accommodate and exceed the needs of these high-net-worth and ultra-high-net-worth individuals.

Kuwait has a strong and solid economy, driven by oil and linked to the oil price

World Finance: Well how well developed would you say the banking sector is in Kuwait, and what do you think is driving the profits?
Mourad Mekhail: The Kuwaiti banks are well-regulated by the Central Bank of Kuwait. Driving forces are high liquidity, high capitalisation – which, by the way, exceeds the international requirements of Basel III.

Again, high-improved asset quality, high provisioning, declining of non-performing loans, and continual profitability.

By the way, these factors and these criteria: they were the driving forces for our bank at the beginning of the year to receive the upgrade for its rating to A+.

The results of stress test exercises by the Central Bank of Kuwait shows that Kuwaiti banks are really solid and well-placed for potential risks and shocks.

World Finance: What’s Kuwait International Bank’s share value, and what keeps it competitive?
Mourad Mekhail: The share value is increasing tremendously in our bank, and comparing to the last four years we have doubled it. We have achieved a record high of 320 fils (KWD 0.32; $1.10).

I really take this opportunity to congratulate everyone in my bank for these achievements, and in particular Sheikh Mohammad Al-Sabah. He managed and succeeded again and again to optimise the performance and the share value of multiple institutions – among them is Kuwait International Bank – by taking wise decisions and managing certain crises in his banking career, bringing the share price of the bank to that level and value.

World Finance: So what’s your approach to crisis management? Especially considering the amount of political instability in the region?
Mourad Mekhail: Kuwait International Bank is a transaction and profit-oriented bank. We are always pursuing certain transactions which we feel that we have competitive advantages in these transactions.

I really take this opportunity to congratulate everyone in my bank for these achievements

Competitive advantages in terms of: that we understand these transactions, we understand the risks embedded in these transactions, we know how to mitigate and hedge the risk in these transactions. Also in certain markets that we feel that we don’t have high competition, and if we have all of these last three factors we are in a position to achieve higher returns.

World Finance: Well finally, what do you see to be the trends that will affect the banking sector in Kuwait in the future, and what are you targeting for growth?
Mourad Mekhail: The Kuwaiti market is a small, very highly competitive market.

Nevertheless, in the local and domestic market there are big opportunities, alongside the ambitious governmental development plan, which is very important for the next few years.

Kuwaiti banks have to continue adopting the universal banking model; holistically offer retail, private and corporate banking to their potential clients; also beyond the domestic market.

Expanding internationally will bring them to a position where they are reducing their risk and increasing their return, which will be reflected in the share value of their banks.

World Finance: Mourad, thank you.
Mourad Mekhail: Thank you.