Bloomberg News

Gulf Bank Sees ‘Slight’ Improvement With Every Quarter

October 26, 2011

(Updates with comment on provisions in fourth paragraph.)

Oct. 26 (Bloomberg) -- Gulf Bank KSC, Kuwait’s third- biggest lender by market value, expects a “slight” improvement with every quarter and to take less provisions this year than last, Chief Executive Officer Michel Accad said.

“We were hoping to do even better,” Accad said in a phone interview from Kuwait City today, after the bank released its financial results. “We had hoped for a faster recovery in the global market, as well as in Kuwait and the Gulf Cooperation Council” regional bloc.

Net income in the third quarter rose 8.3 percent to 9.1 million dinars ($33 million), or 4 fils a share, the bank said today. Nine-month net income this year more than doubled to 27.4 million dinars. The results showed “stable growth of the bank’s customer base and continued growth of net profits and core earnings,” Chairman Ali Al-Rashaid al-Bader said in an e-mailed statement.

The lender, which lost about $1.3 billion on derivatives trading in 2008, expects to take “considerably less” provisions this year than last, though more than initially anticipated, he said. Provisions in 2011 will be “mostly general precautionary provisions, not specific,” Accad said.

Guarantees to Deposits

The global credit crisis weakened lending and investment banking, pushing up provisions for loan defaults and causing a decline in the value of banks’ investments in the Middle East. Kuwait was forced to guarantee all deposits at local banks in 2008 after Gulf Bank reported its loss and Global Investment House, the country’s biggest investment bank, defaulted on $2.8 billion of debt.

“I think we have to be extremely vigilant, extremely careful,” Accad said. “We’ll improve but improvement will be by small steps.” Non performing loans to gross loans ratio declined to 10.5 percent for the nine months ended September from 16 percent a year earlier, according to Accad.

“Everyone is waiting for the development plan to kick in, and the Kuwait Stock Exchange and commercial real estate are at a low point,” Accad said. “Conditions are difficult.”

Kuwait’s parliament in February 2010 approved a 30.8 billion dinar investment plan aimed at modernizing and restructuring the country’s oil-based economy. The plan involves boosting energy production, construction of a rail network and metro, airport expansion, new cities, hospitals, roads and a port on Boubyan Island.

Shares of the bank were unchanged at 540 fils at the close in Kuwait today. The stock has lost 5.3 percent this year, compared with a 15 percent decline in Kuwait’s benchmark index. The shares climbed 90 percent in 2010, when Gulf Bank returned to profit.

--Editor: Maher Chmaytelli

To contact the reporter on this story: Fiona MacDonald in Kuwait at

To contact the editor responsible for this story: Shaji Mathew at

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