(Updates with comment from chairman in third paragraph.)
Oct. 19 (Bloomberg) -- Commercial Bank of Kuwait SAK, the country’s third-largest lender, posted a 65 percent decline in third-quarter profit amid weak government spending and a “sluggish” performance of stocks.
Net income fell to 6.8 million dinars ($24.7 million), or 5.4 fils a share, from 19.6 million dinars, or 15.4 fils per share, in the year-earlier period, the bank said in a statement to the Kuwait Stock Exchange today.
“The downward trend is still predominating the performance of Kuwait’s economy as a result of weak government spending, sluggish performance of the Kuwait Stock Exchange and related negative impact on asset values,” Commercial Bank said in an e- mailed statement, citing Chairman Ali Yousef Al-Awadhi. “Improvement in the economic and business environment will positively reflect on the banking sector.”
The global credit crisis weakened lending and investment banking in the Middle East, pushing up provisions for loan defaults and led to a decline in the value of banks’ investments. Kuwait raised spending by about 11 percent to 19.44 billion dinars in the fiscal year that started April 1 as it steps up a $112 billion four-year development program that aims to boost energy output and modernize infrastructure.
Total assets reached 3.75 billion dinars at the end of September, Commercial bank said. The lender had a 14.9 percent rise in third quarter operating profit to 78.9 million dinars before provisions.
“This was allocated as provisions against the loan and investment portfolios,” resulting in net profit of 8.3 million dinars in the first nine months of the year, the bank said.
National Bank of Kuwait SAK, the country’s biggest bank, on Oct. 12 reported a 0.5 percent fall in third-quarter profit to 78.9 million dinars amid a weak operating environment.
Commercial Bank expects profit to drop this year as the lender “cleans up” its balance-sheet after setting aside money to cover bad assets, acting chief executive officer Elham Mahfouz said in an interview in June.
Commercial Bank shares have lost almost 11 percent this year, compared to a 15.4 percent decline in Kuwait’s benchmark index. The stock fell 4.7 percent to 820 fils at the close in Kuwait today.
--With assistance from Dahlia Kholaif in Kuwait. Editors: Tim Farrand, Peter Woodifield
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