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1 | P a g e
Kuwait International Bank –
Initiating Equity Coverage
Kuwait International Bank (Al Dawli) Category: Islamic
Change in the Business Strategy and Guard, Reflected in the Performance
*: 01 May , 2016
High Banking
in KWD
0.310
Upside Potential
52.5% to 55.0%
Margin of
SafetyIndustry
Intrinsic Value
Range
Grossly
Undervalued 0.200 0.305 to
KFH Capital
Rating
KFH Capital
OutlookCMP*
Chart 1
0.180
0.190
0.200
0.210
0.220
0.230
0.240
0.250
0.260
760
800
840
880
920
960
1,000
1,040
1,080
Apr-
15
May-1
5
Jun-1
5
Jul-15
Aug-1
5
Sep-1
5
Oct-15
Nov-1
5
Dec-1
5
Jan-1
6
Feb-1
6
Mar-
16
Apr-
16
May-1
6
KIB Price Movements with Indices
KSE Price Index KSE Banking KIB Price KWDAdj. Indices
Table 1: Stock Info
Parameters (Figures are in KWD)
Sector Islamic Banking
Reuters Code KIBK.KW
Market Price- (1 May-16) 0.200
No. of Issued Shares (Million) 1,037
Market Cap. (Million) 207.47
Beta 1.29
Par Value 0.100
52 Week High/Low 0.265/0.188
Earning Yield* 7.71%
P/E(x)* 12.96
P/BV(x) 0.85
Dividend Yield 4.50%
Return on Equity* 6.54%
*: Based upon FY15
Investment Idea
Sustained growth above Industry Average
KIB has been able to sustain growth in loans &
advances (financing receivables) above industry
average. We expect growth in advances will be
achieved from high yielding Personal Loans and
Corporate portfolio of the bank, on the back of
increasing investments, consumer pattern and
healthy industrial spike as announced by
governments for multiple economic aspects. Going
forward, we expect advances to grow at a CAGR of
10% for FY 2016-18.
Improving Margins
KIB has achieved a healthy Net Interest Margin (NIM)
of over 3% in past so many years. Since 2011, it is
progressive and it was 3.03% by FY 2015. Going
forward, we expect NIM to improve during next 3
years and will reach 3.4% by FY 2018. It will be
achieved primarily due to: -
a) Rising advances with a rate of 10% in totality
for next 3 years
b) Better asset allocation towards more
productive asset class
c) Better margin on lending and deposits
2 | P a g e
Kuwait International Bank –
Initiating Equity Coverage
Growing Fee Income
KIB has attained a high growth of average 25% in its
Fee & Commission Income in past 5 years, with an
exception of 2015 where it witnessed a growth of 3%
only. We foresee a constant mode of growth further.
Increased number of transactions for banking
services and treasury income remained key reasons
behind the offshoot. We expect a moderate fee
growth at 10-12% during 2016-2018 period, due to:
a) Mega projects being implemented by the
government
b) Growth in fee income in line with growth in
advances
Higher Productivity
Optimum utilization of available resources is the best
way to improve business aspects and to control the
cost. KIB has been a front runner to this, as its cost to
income ratio is one of lowest among the industry.
Though, it was quite high in 2010 and 2011 (above
50%) due to falling topline which in fact pulled down
overall total revenues. But the same has dropped
remarkably to 33% by FY 2015, and removing one
time gain it stood at 41%. Further, as per our talks
with the management, it will remain around 40-45%
in coming years too.
Widening Footprint
The lender had a network of 28 branches by year end
2015 and planning to add another 3 due to rising
banking opportunities, thus it will take total tally to 30.
We expect this addition will help to attract more
customer deposits at lower rate as well as tap new
small and large business clients.
Improving Asset Quality
Asset Quality has been a major concern for all
lenders in Kuwait and so for KIB. But with spurt in
economic growth and efforts taken by the bank to
recover and minimize any new slippages, we expect
NPL levels to range in comfortable zone. More
specifically, the lender may take Average 1.5% of
total advances & loans as “Provision for impairment”
to its Income Statement during 2016-18 period.
Improved recoveries, lower slippages and adequate
provisioning will further strengthen the financial
position of KIB.
Valuation
Based upon our conservative assumptions in loans at
around 10+%, earnings will grow and reach KWD 19
million in 2016 and inflated further to reach KWD 26
million by FY 2018. Asset quality will advance for
improvement, post the shocked era of financial crisis.
Summing up, amid healthy growth in topline, lower
payout to Customer Deposits and superb growth in
Fee & Commission, we believe KIB is trading at
discount with better return profile.
KIB is currently trading at 0.85x of P/BVx as against
the banking sector average of 1.41x. From 2018, it is
trading at 0.58x and the forward P/Ex is trading at
mere 7.96 times of FY2018 earnings. We initiate the
coverage on KIB with BUY and Target Price in the
range of KWD 0.305 to 0.310
Shareholding Structure
Table 2: Major Shareholders Type Holding (%)
Bukhamseen Holding Group Corporate 21.73%
The Public Institution for Social Security Government 9.13%
Al Hoda for Hotels and Tourism Company Corporate 7.25%
Al Barakah Kuwait General Trading & Contracting Co Corporate 5.83%
Public - 56.06%
Source: Zaw ya Website
3 | P a g e
Kuwait International Bank –
Initiating Equity Coverage
Lender Background
Incorporated in 1973, Kuwait International bank
(KIB), was formerly known as Kuwait Real Estate
Bank. The bank embraced Islamic Principles for its
business operations and instigated a new journey on
July 1st, 2007. As an Islamic bank, KIB’s business
covers all banking services including:
a) Acceptance of Deposits
b) Financing Transactions
c) Direct Investment
d) Murabaha (auto, real estate and
commodities)
e) Ijara Muntahia Bittamleek (Lease-to-own)
f) Istisna’a, Tawarruq, Credit Cards, Wakala
and other products.
Corporate projects and finance, Treasury Services,
Issuing Letters of Credit (L/Cs), Letter of Guarantee
(L/Gs) and Real Estate Dealings and Management of
Properties are another value added services the
lender operates amid its business segment.
Shariah Supervisory Board
A dedicated group of Islamic scholars entrusted to
review KIB’s new products, contracts and investment
transactions to certify that all KIB’s financial activities
are conducted in compliance with the principles and
provisions Islamic Shariah.
Corporate Social Responsibility
In the framework of Social Responsibility Program,
the Bank is actively filling and justifying its Corporate
Social Responsibility role. Women arena, schooling,
sports, excellence awards in various academic role
and multiple social fronts remain in limelight for the
lender, where KIB has played its CSR effectively.
Corporate Awards
KIB's successive achievements, honor and awards
are a clear recognition of its distinction and
excellence. KIB was awarded “Best Islamic Bank in
Kuwait” during 2014, 2015 and 2016 by World
Finance magazine in recognition of its unique
achievements over the past 3 years. The bank has
also received the Golden Medal Award of merit 2013
from Tatweej Academy for Excellence and Quality in
the Arab Region and the upgraded credit rating from
A- to A+ from Fitch due to its robust capitalization,
liquidity profile and strong capital ratios.
Investment Concerns
Building up of provisions, remain a key
operating concern for the bank. Being a Real
Estate Bank earlier, and carrying on a higher
exposure towards the troubled sector, is weighing
heavily on the performance. Though, the lender
has an adequate margin of safety as collateral for
all such advances, yet continuity in provisions is a
major concern. However, on the positive side, the
management is very keen to tackle this issue and
doing its best to grab. As a result, we have seen a
prominent decline in the provisions part in past 2
years.
Lower business growth due to any economic
shock and delay in new upcoming major projects,
can stress the profitability.
Lending Rate: Under pressure lending rate, will
continue to restrict a significant growth in the top
line unless the bank adopted an aggressive
growth plan on loans and advances, which is
highly unlikely amid quality concerns. However,
lending rate benchmark is influenced by the
Central Bank Discount Rate (CBDR).
4 | P a g e
Kuwait International Bank –
Initiating Equity Coverage
Financial Performance - 1Q-2016 & Full Year 2015 Performance
Table 3 :Income Statement Snapshot (Figures are in KWD million)
Parameters 1Q-16 1Q-15 y-o-y Chg. FY15 FY14 y-o-y Chg.
Income from Murabaha, Wakala & Ijara 16.70 14.28 16.9% 63.16 53.99 17.0%
Less: Distribution to Depositors & Finance Cost (5.17) (3.36) 54.0% (15.30) (11.39) 34.3%
Net Financing Income 11.53 10.93 5.5% 47.86 42.60 12.4%
Other Income (Investment, Fee etc.) 3.99 4.78 -16.6% 32.88 15.66 110.0%
Total Income 15.51 15.70 -1.2% 80.74 58.26 38.6%
Operating Expenses (6.45) (5.37) 20.0% (26.82) (25.40) 5.6%
Pre-Provision Profit 9.06 10.33 -12.3% 53.93 32.86 64.1%
Less: Provisions & Impairment (2.04) (4.23) -51.7% (36.64) (18.17) 101.7%
Profit before KFAS, Zakat & NLST 7.02 6.10 15.1% 17.28 14.69 17.7%
Less: KFAS, Zakat & NLST (0.28) (0.27) 1.8% (1.20) (0.95) 26.1%
Less: Non Controlling Interest (0.01) (0.04) -81.1% (0.08) (0.06) 34.5%
Net Profit Attributable to Shareholders 6.73 5.79 16.3% 16.00 13.68 17.0%
EPS (Fils) 7.21 6.20 16.3% 17.14 14.65 17.0%
Cost to Income 0.42 0.34 21.5% 0.33 0.44 -23.8%
Source: KIB Financials & KFH Capital
Q1-2016 PERFORMANCE
KUWAIT INTERNATIONAL BANK (KIB) declared its 1Q-
2016 results, where the Islamic lender reported an
improving performance with a net profit of KWD
6.73 million; a surge of 16.3% over the
corresponding last year results. Growth in
financing income (+16.9%), and a better asset
quality control through lower provisions (down
by 51.7%) were the key drivers for the bank’s
growth.
During the 1Q-2016, income from main stream line
“Murabaha, Wakala and Ijara” grew by 16.9% to
reach KWD 16.70 million from KWD 14.28 million a
year ago. In line, “Distribution to Depositors” surged
sharply by 54.0% to cost KWD 5.17 million compared
to KWD 3.36 million a year ago. Thus, growth in Net
Financing Income was limited to 5.5%, as it reached
KWD 11.53 million from KWD 10.93 million a year
ago.
Other Income reported a de-growth of 16.6% (y-o-
y), mainly due to lower investment income. Total
investment income dropped to KWD 0.42 million from
KWD 1.42 million; a decline of 75.1% y-o-y. However,
fees & commissions income edged up marginally by
2.95%. Following the trend, net foreign exchange
gains grew by 6.3% to KWD 0.252 million against
KWD 0.237 million in 1Q-2015.
Operating expenses increased by 20.0% (y-o-y),
mainly driven by a surge of 56.3% and 7.6% in
general & administrative and staff costs respectively.
Staff costs stood at KWD 3.63 million representing
56.3% of total expenses.
Due to the sharp increase in operating expenses
and lower investment income, the “Cost to Income”
ratio moved up to 0.42 from 0.34 in 1Q-2015.
On the provisioning front, the lender looked in a
perfect shape, as NPLs decreased to reach 1.29%
and provision coverage ratio increased to 225%.
Net Financing Income Margin (net financing
income over average earning assets) improved
marginally by 4 bps to stand at 3.07% (FY’15: 3.03%).
5 | P a g e
Kuwait International Bank –
Initiating Equity Coverage
FULL YEAR 2015 PERFORMANCE
KUWAIT INTERNATIONAL BANK (KIB / AL-DAWLI)
declared its FY-2015 results, where the Islamic
lender reported a net profit of KWD 16.0 million; a
growth of 17.0% over its previous year results.
Growth in financing income (+17.0%), surge in
investment income (+25.4%), and a settlement
gain of KWD 16.63 million were the key drivers for
the bank’s growth which was heavily affected and
limited by the sharp increase in distribution to
depositors (+34.3%) as well as the doubling
provisions.
During FY-2015, income from main stream line
“Murabaha, Wakala and Ijara” grew by 17.0% to
reach KWD 63.16 million from KWD 53.99 million a
year ago. Meanwhile, “Distribution to Depositors”
surged sharply by 34.3% to cost KWD 15.30 million
compared to KWD 11.39 million a year ago. Thus,
growth in Net Financing Income was limited to
12.4%, as it reached KWD 47.86 million from KWD
42.60 million a year ago.
Other Income grew prominently by 110% (y-o-y),
where a gain from final settlement of dues by a
corporate customer of KWD 16.63 million played a
vital role in the bank’s earnings and mitigated the
inevitable negative outcomes of soaring provisions.
Also, investment income improved by 25.4% to KWD
5.39 million compared to KWD 4.30 million a year
ago, and fees & commissions income edged up
marginally by 2.98%. However, net foreign exchange
gains dropped by 7.8% to KWD 0.91 million against
KWD 0.99 million in FY14.
Operating expenses increased by 5.6% (y-o-y),
despite of 33.1% decline in depreciation, which
remains the smallest constitute in operating
expenses by sharing around 7.7% of total expenses.
The increase in operating expenses was mainly
driven by a surge of 22.1% and 4.4% in general
administrative and staff costs respectively. Staff costs
stood at KWD 14.65 million representing 54.6% of
total expenses while General & Administrative
expense reached KWD 10.1 million sharing 37.6% of
total expenses in FY15.
Due to the sharp increase in total income, the “Cost
to Income” ratio improved and moved down to 0.33 in
FY15 from 0.44 a year ago. However, when the one-
time gain of KWD 16.63 million is removed from total
income, the ratio would stand at 0.42.
On the provisioning front, the expenses increased
hugely by 101.7% (y-o-y) to KWD 36.64 million in
FY15 compared to KWD 18.17 million a year ago.
This represented a heavy burden on the bank’s
earnings growth, as profit before provisions increased
sharply by 64.1% while net profit grew only by 17.0%.
Net Financing Income Margin (net financing
income over average earning assets) improved
marginally by 7 bps to stand at 3.03% during FY15.
Meanwhile, gross financing income on average
earning assets has risen profoundly to 4.0% from
3.75% a year ago.
Reasons to Invest
Sustained growth above Industry Average
959.79
1,081.60
1,341.53
1,495.51
1,630.98
-
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
1,600.0
1,800.0
2011 2012 2013 2014 2015
Loans & Advances KWD Million
Source: KIB Financials, KFH Capital Research
6 | P a g e
Kuwait International Bank –
Initiating Equity Coverage
KIB loans and advances have been at a higher
growth than industry average (Islamic) lately. KIB has
achieved a growth of 9.1% in 2015; higher than
industry average of 3.6%. On a five years’ scope, KIB
managed to add KWD 671.19 million (+69.9%) in its
books as total loans and advances touched KWD
1,630.98 million by 2015 opposed to KWD 959.79
million in 2010.
As per our talks with the management, the lender is
very keen to diversify its lending in the new economic
development and concentrating over all industries,
apart from its core focus of the Real Estate earlier.
Citing, the potential in infrastructure, services and
consumer services industry, the lender is poised to
improve its assets quality and will benefit from
economic turnaround in macro sense.
We expect the bank to clock 10%+ growth in this
portfolio for the period of 2016-2018.
Improving Margins
30.72
35.40
44.16 42.60
47.86 3.07%
3.43%
3.58%
2.96%
3.03%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
-
10.00
20.00
30.00
40.00
50.00
60.00
2011 2012 2013 2014 2015
Net Financing Income, Net Margin
Net Financing Income Net Profit Income (Margin)
KWD Million
Source: KIB Financials, KFH Capital Research
KIB has been able to maintain its Net Financing
Income Margin (NIM) above the Industry level during
the last three years. NIM stood at 2.91% in 2015
compared to the industry average of 2.85%. In the
previous two years, the bank’s NIM stood at 2.82%
and 3.23%, opposed to the Kuwait’s Islamic industry
average of 2.71% and 2.96% in 2014 and 2013
respectively.
The bank witnessed an 8.8% growth in its earning
assets in FY 2015 as they reached KWD 1.65 billion
from KWD 1.51 billion in FY 2014. And when
compared to 2011, the bank’s interest earning assets
grew sharply by 70.3% where industry’s growth was
59.0%.
Growing Fee Commission & Forex
4.86
5.91
7.50
9.08 9.25
-
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
2011 2012 2013 2014 2015
Fees & Commissions & FX GainsKWD Million
Source: KIB Financials, KFH Capital Research
Fees & Commissions combined with Foreign
Exchange Gains have grown sharply in past few
years as shown in the above graph. The total income
moed up by 90.2% from KWD 4.86 million in 2011 to
KD 9.25 million in 2015.
However, the growth recently was restricted to 2%
only. Increasing transactions services and adding
variety of services in past few years, has delivered its
best to KIB. The growth is in line to loans and
advances growth; which means that corporate
activities and market sentiments are improving. The
bank plans to further enhance non-fund based
business, to further enhance its non-fund based
activities.
7 | P a g e
Kuwait International Bank –
Initiating Equity Coverage
Improved Productivity
39.27 44.91
56.95 58.26
80.74
19.83 23.10 24.75 25.40 26.82
0.51 0.51
0.43 0.44
0.33
-
0.10
0.20
0.30
0.40
0.50
0.60
-
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
2011 2012 2013 2014 2015
Operating Revenues, Expenses and Cost to Income
Total Operating Income Operating Expenses Cost to Income
KWD Million
Source: KIB Financials, KFH Capital Research
KIB has been efficient in utilizing its available
resources in order to improve its business
performance and to control the cost, as its cost to
income ratio is lower than the industry average for
the past three years.
Throughout the past five years, operating income
grew by 105.6% from KWD 39.27 million in 2011 to
reach KWD 80.74 million in 2015, yet the growth
would be reduced to 63.3% when excluding the one-
time settlement gain of KWD 16.63 million realized in
2015. Meanwhile the cost grew just by 35.2% from
19.83 million to KWD 26.82 million, thus improving
the bank’s profitability.
In terms of business per employees, total revenue
stands at KWD 117,020 by 2015 while the expenses
stood at KWD 38,868; thus marking healthy 67%
margin productivity on staff.
Improving Asset Quality
Asset Quality has been a major concern for all
lenders in Kuwait and so for KIB. But with a spurt in
economic growth and efforts taken by the bank to
recover its bad quality loans as well as control on
fresh lending, brought cheer as the percent of NPLs
to overall Gross Loans came down drastically; from
9.3% in 2011 to 1.4% by 2015, Going forward, we
760.05
869.54
1,077.98
1,186.34
1,295.06
71.03 51.43 57.61 58.43 17.59
9.3%
5.9%5.3%
4.9%
1.4%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
-
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
2011 2012 2013 2014 2015
Gross Loans, NPLs and Ratio
Gross Loans NPL NPL to Loans
KWD Million
Source: KIB Financials, KFH Capital Research
expect the bank, will maintain the improved
performance on this front and we assume a 1.5% of
loans provisions for coming 3 years, to be on the
safer side.
Historical Financial Performance
Customer Deposits & Cost
694.51 784.76 939.27 988.74 1,018.05
1.79%
1.22%
0.76%
1.15%
1.50%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%
0
200
400
600
800
1000
FY11 FY12 FY13 FY14 FY15
KD
M
n
Customer Deposits Cost of Distribution to Depositors
Source: KIB Financials, KFH Capital Research
Customer Deposits have been in the growth phase
during the past five years as they surged by 46.6%
from KWD 694.51 in 2011 to reach KWD 1,018.1
million by 2015. On the cost of distribution front,
distribution to depositors has shrunk to 0.76% in
FY13 from 1.79% in FY11, and then it has rebounded
to 1.50% by FY15. Also, the bank managed to pay its
8 | P a g e
Kuwait International Bank –
Initiating Equity Coverage
customers less than the overall Islamic Banking
which is around 2.01% in FY15.
Earning Assets Growth & Topline
966.857 1100.221 1367.897 1513.131 1646.88
86.5%
88.1%
91.0%
91.0% 92.0%
80%
84%
88%
92%
96%
0
200
400
600
800
1000
1200
1400
1600
1800
FY11 FY12 FY13 FY14 FY15
KD
M
n
Earning Assets % of Total Assets
Source: KIB Financials, KFH Capital Research
In line with its Customer Deposits, the bank Earning
Assets, which are basically all assets except
Investments, Property & Equipment, and Other
Assets, grew prominently during the past five years
(+70.3%), as by 2015 they represented 92% of the
bank’s total assets opposed to 86.5% in 2011. The
three main items include Financing Receivables
(71.2% of Earning Assets), Due from Banks & Other
Financial Institutions (27.8%) and Cash & Balances
with Banks (1.0%).
Investment Income is on Surge
121.736 118.987 103.268 115.092 109.019
3.67 3.52
5.01
4.30
5.39
0.0
1.0
2.0
3.0
4.0
5.0
6.0
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
FY11 FY12 FY13 FY14 FY15
KD
M
n
KD
M
n
Total Investments Investment Income
Source: KIB Financials, KFH Capital Research
KIB’s Investments have been volatile during the past
five years as well as investment Income (as total
amount and as a percentage of total investments)
which affected the consistency of the lender’s bottom
line. Total Investments, which represents 6.1% of
total Assets, currently consists of four items;
Financial Assets Available for Sale (59.3% of total
Investments), Investment Properties (37.0%),
Investments in Associates (3.6%) and Investments
carried at fair value through IS (0.1%). As for
investment Income, it reached to KWD 5.39 million in
FY15 which is around 4.95% of total Investments; the
highest rate during the analyzed five-year period.
Operating Expenses on Rise; But Better Earnings
Restricting Adverse Impact
11.06112.403 13.202 14.03 14.65
4.7466.273
7.744 8.27110.097
4.026 4.425 3.8 3.0972.072
19.8
23.124.7 25.4
26.8
0.0
5.0
10.0
15.0
20.0
25.0
30.0
FY11 FY12 FY13 FY14 FY15
KD
M
n
Staff Cost General & Administration Depreciation Total expenses
Source: KIB Financials, KFH Capital Research
Operating expenses have soared by 35.2% from
KWD 19.83 million in FY11 to KWD 26.82 million in
FY15, yet Operating revenues grew at a higher pace
of 105.6% (63.3% excluding nonrecurring gains)
which made the bank able to maintain profitability
growth over the period.
9 | P a g e
Kuwait International Bank –
Initiating Equity Coverage
Provisions Continue to Mark their presence
760 870 1,078 1,186 1,295
67.62
87.72
98.19
113.67122.12
0
20
40
60
80
100
120
140
0
200
400
600
800
1,000
1,200
1,400
FY11 FY12 FY13 FY14 FY15
KD
Mn
KD
Mn
Financing Receivables and Loans & Advances (pre Prov)
Provisions (Inc. Deferred Profit)
Source: KIB Financials, KFH Capital Research
KIB’s Financing Receivables include Murabaha
(82.65% of Fin. Rec.), Ijara (15.79%) and Other
Receivables (1.56%) and Loans & Advances which
decreased to zero in FY13 as the bank had gradually
taken it off its books after it became an Islamic entity
in 2007. The total receivables grew notably by
23.97% and 14.41% in FY13 and FY12 respectively,
while the provisions climbed by 131.17% in FY13
while it has remained stable during FY12.
As a percentage of total receivables, Provisions
represents 1.64% in FY13 up from 0.88% of Fin. Rec.
in FY12 and it was in the highest level in FY09 at
3.12% which was around KWD 26.34 million.
Net Profit: No Look Back, Post 2009
10.8 13.2 13.2 13.7 16.0
11.61
14.10
14.15 14.65
17.14
0.0
4.0
8.0
12.0
16.0
20.0
0.0
5.0
10.0
15.0
20.0
FY11 FY12 FY13 FY14 FY15
KD
Mn
Net Profit EPS (as reported)
Fils
Source: KIB Financials, KFH Capital Research
KIB’s Earnings were volatile to some extent during
the period of five years with incurring net losses in
FY09 as the bank was adversely affected by the
financial crisis back then. Provisions played a major
role in the inconsistency of the lender’s bottom line as
the total operating revenue (profit before provisions
and taxes) was more stable during the same
analyzed period. EPS stood at 14.15 Fils in FY13 and
it was at the highest level of 17.94 Fils in FY10
mainly due to the reversal of provisions during that
period.
Profitability Ratios: Under Check
0.97% 1.05%0.88% 0.82% 0.89%
5.22%
6.08% 5.89% 5.75%
6.54%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
FY11 FY12 FY13 FY14 FY15
ROA ROE
Source: KIB Financials, KFH Capital Research
As for profitability of KIB in comparison to the overall
Islamic Banking (a group of five Islamic banks
including KIB), the lender’s ROA stood at 0.89 % in
FY15 slightly below the overall Islamic Banking ROA
of 0.92%. Further, the lender’s ROE was below the
group as it stood at 6.54% whereas the Islamic group
ROE stood at 8.63% in FY15. However, we believe
that post the conversion to Islamic entity; the bank
which was earlier having a huge exposure to the
troubled real estate sector; is in process to enhance
its exposure to other sectors while restricting its
exposure to the real estate with a pace as it used to
do earlier. Such a key strategy will simply garner
better returns in the coming time, and going ahead,
we believe the new lender can beat market returns
too.
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0.70% 0.74%0.80% 0.84%
0.92%0.97%
1.05%
0.88%0.82% 0.89%
0.00%
0.25%
0.50%
0.75%
1.00%
1.25%
1.50%
FY11 FY12 FY13 FY14 FY15
ROA
Overall Islamic Banking KIB
6.34%6.98%
7.10%
7.99%8.63%
5.22%
6.08%5.89% 5.75%
6.54%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
FY11 FY12 FY13 FY14 FY15
ROE
Overall Islamic Banking KIB
Source: KIB Financials, KFH Capital Research
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Intrinsic Valuation
We value KIB’S intrinsic value between KWD
0.305 (in Base Case Scenario) to KWD 0.310 (in
Best Case Scenario). Our valuation technique
comprises of 4 models – Discounted Cash Flow,
Price to Earnings, Price to Book Value and
Dividend Yield (Kuwait only) methodology.
** Discounted Cash Flow Valuation (DCF), where
we have calculated free cash flow available to equity
holders by adjusting the net profit, projected capital
expenditure and depreciation.
Our forecast for the net income is over next three
years till 2018. Our estimate for the Net Income is
KWD 18.98 million in 2016 and is estimated to reach
KWD 26.03 million by 2018. Our assumptions are
discussed in our forecast section.
We discounted all Future Cash Flow Estimated
(FCFE) at the calculated Weighted Average Cost of
Capital (WACC) at 11.72%, considering:
Perpetual growth rate 4.00%
Beta 1.29
Risk free Rate 3.98%
Equity Risk Premium 6.00%
Assumptions: Beta is as per data available since the
lender got listed; while Risk Free rate is calculated by
considering 10 Year US treasury and adjusting the
US inflation data to Kuwait Inflation data. For Equity
Risk Premium (ERP), the source is Aswath
Damodaran latest available stats.
Price to Book Value (P/BVx) and Price to Earnings
(P/Ex) are two very known and preferred
techniques by investors across the globe.
Considering the lenders operation reach, we have
assigned local market multiples only.
In order to arrive at an average Intrinsic Value, we
assign 70% weight to DCF Model and 20% to Price
to Book Value while 5% each to P/Ex and Dividend
Yield. The rationale for DCF method assigned higher
weightage is the predictability of income statement
and better asset allocation as planned under the new
“3-year business strategy”.
Forecast 2016-2018
The bank has improved its “earning-power” on its
earning assets in 2015 and it reached 3.84%. Under
the new management approach and restructuring of
the loan portfolio, where the retail and personal
advances will get more weightage, we are convinced
that the lender will easily achieve the similar or better
earning rate in next 3 years. For coming years, on the
Base case side, the lender can easily achieve an
earning rate of 3.90% on its total earning assets
which will get a pace, up by 7.5 basis points each
year from 2016. On the Best case side, the same can
spurt to 4.10% in 2018, amid improving asset quality
and revival of economic business cycle.
Also, growing loans and advances will further support
our assumption for a better lending in future. The
bank has seen a stupendous growth in its loan and
advances portfolio in 2013 (+25.3%), however the
momentum faced a slowdown later. In the new
developments of economy and meetings with the
management, we believe the bank can sustain at
least a double digit growth of 10% or more, during
2016 to 2018 era.
Rising provisions, remains a key concern and we
have adopted an aggressive provision allocation
policy for a better margin of safety, thus assigning
1.5% of Gross Receivables as new provisions every
year despite the management remains hopeful to
control this drain on the impairment.
Industry Analysis
The bright prospects of Kuwait’s banking sector,
which were floating before oil crisis, are in a bit dull
right now. With a steep fall in oil prices, the pressure
is surging on banking activities too. Undoubtedly, the
commercial banking will see undergo a notable
slowdown in deposit growth over the coming
quarters, with lending opportunities offered some
respite due to the government's development plans.
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Providing a sort of fear about the growth, which will
be muted over the coming quarters, given the lower
oil prices and the concomitant cutbacks in public, the
best thing happened in the crisis is the
government announcement of mega expenditure
plans, which has somewhat mitigated the impact
of slowing business confidence and consumer
spending.
The Budget Plan is already in full swing, which
envisages spending of around KWD 34 billion (USD
116 billion) on 521 development projects. The plan
covers spending on infrastructure projects, hospitals,
power stations, refinery and more than 100,000
residential housing units. The government, with a
relatively supportive parliament, has been able to
progress on long-stalled infrastructure development
projects and implement increases in public capital
expenditure. Indeed, capital spending stood at KWD
0.6 billion for the fiscal year to September, up 16% y-
o-y. It currently stands at 23% of the full-year budget,
five percentage points above the five-year average.
Annual credit growth in the private sector ticked up
slightly over the first eleven months of 2015 to 5.7%
as the government has embarked on its next five-
year development plan. (Data sourced through BMI)
The GDP forecast by Business Monitor group for
2016 and 2017 is revised to 1.2% and 1.9%
respectively, way lower than 3%+ before the oil
plunge.
Key Factors of Commercial Banking Sector:
SWOT Analysis of Kuwait’s Banking
Strengths
Well Established, Capitalized and Closely
Regulated
Fundamentally, all key ratios have improved
in past few years.
Remained relatively less impacted due to
global crisis because of its closed structure
and closely regulatory supervision.
Weakness
Due to the closed structure, majority of
lending are towards domestic projects only,
which impact its advances due to project
delay or political tussle.
Yet to find a bigger scale on International
Arena either locally or globally.
Opportunities
Islamic finance is growing too rapidly across
the globe, which can benefit Kuwait too by
becoming a major partner in Islamic deals as
all lenders are well placed in this category.
Lenders can play their role by participating in
various building-construction projects in Iraq
and other nearby states.
Threats
Many lenders are operating locally only, and
yet to face international/foreign competition in
local or global market.
Kuwait Banking Realities
Source: CBK, BMI
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
2010 2011 2012 2013 2014 2015e 2016f 2017f 2018f 2019f
Lending Oppotunities Better Insulated From Slowdown
Client loans, % y-o-y, CBK / BMI Client deposits, % y-o-y, CBK / BMI
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Lending rates are in better shape in the coming
years, where the annual credit growth in the private
sector ticked up slightly over the first eleven months
of 2015 to 5.7% as the government has embarked on
its next five-year development plan.
The three-month Kuwait Interbank Offered Rate
(KIBOR) has risen to 1.75% - the highest level in
more than four years, a significant increase from
0.75% in mid-2013. With Kuwaiti banks generally
linking their domestic lending rates to KIBOR, the
recent uptick in the interbank rate will therefore
increase costs for private sector borrowers and add
to the slight slowdown in economic growth.
Kuwait & GCC – Client Loans
Source: BMI & Respective Central Banks
Four Key Characteristics of the Kuwaiti
Banking Sector
Asset Quality: With non-performing loans (NPLs)
around 3.5% of total loans in the first half of 2015, the
credit quality of the sector remains strong. This figure
has fallen significantly since the 7.3% recorded in
2011. There is a substantial variety between banks
however, with some more vulnerable to the slump in
energy prices particularly in real estate. With a much
lower oil price environment it is likely that NPLs will
see a small rise over the coming years, but pose little
risk to the health of the banking sector.
FX Exposure: Kuwaiti banks are among the most
conservative in the Middle East and have a very
limited overseas presence, especially compared to
those of the UAE and Qatar. The FX risk is mitigated
by the fact that there is little FX exposure and those
that are abroad are almost solely focused in the rest
of the Gulf with open foreign exchange positions are
largely in US dollars - which makes the largest
component of the Kuwaiti dinar's basket.
Funding Structure: The decline in oil and gas prices
will continue to weigh on financial sector liquidity,
forcing Kuwaiti banks to rely more on external and
wholesale funding. Net interbank borrowing from
foreign banks has risen since H115 in expectation of
higher rates. Timely interventions by the monetary
authorities could help to mitigate these pressures, but
banks' funding costs are set to increase from 2016
onward.
Capital Adequacy: Kuwait banks’ adoption of Basel
III standards (completed by the end of 2015) will
continue to put some pressure on banks to
strengthen their capital positions. However, with the
Kuwaiti banking sector's average capital adequacy
ratio standing at 15.6% in Q315, compared to a
regulatory requirement of 10.5% under Basel III
(CBK’s requirement of 12% for YE 2015), the
commercial banking sector is well insulated against
potential shocks
Islamic Banking Growth Aspects
Internationally, we maintain our bullish outlook on the
global Islamic Banking sector over the coming years.
And such a hype growth will not come as a free lunch
but with numerous obstacles.
Growth in the Islamic banking will be driven by new
markets, and more established centers. However,
overall, expansion rates are likely to be lower over
the coming years on the back of higher base effects,
lower oil prices and several significant impediments.
Broadly, the end of the ultra-low interest rates and
huge monetary stimuli means that growth in most
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banking sectors will slow, affecting Islamic banking
as well as conventional finance.
Islamic Bonds & Sukuks: The oil price-trauma, has
already a marked impact on the Islamic banking
sector. Islamic bond issuance from the GCC has
plunged 53%, the steepest decline for the region
since at least 2007. About USD 5.5 billion has been
raised, compared to USD 11.7 billion in the same
period last year (as per the BMI report).
Over the coming years, GCC governments will try
their best to make GCC as regional hubs for the
Islamic banking industry as it grows, but there is little
coordination on a global level which combines with
lower expansion rate on the back of higher base
effects and several significant impediments.
New Group for Islamic Banking “QISMUT +3”
Qatar, Indonesia, Saudi Arabia, Malaysia, United
Arab Emirates and Turkey is named as QISMUT by
Ernst & Young in its recent report on World Islamic
Banking. The other three new entrants in the group
are Kuwait, Bahrain and Pakistan. The report
stresses the importance of the Islamic banking and
its robust growth factors.
Globally, Islamic banking assets are poised to grow
to USD 2.6 trillion by 2020 (source: DIEDC), mainly
due to stability in Islamic finance field, better
connectivity across high-growth markets and
enhancing capabilities and capacities of Islamic
banks across the globe.
Internationalization and operational efficiency across
the board will remain key factors to boost overall
Islamic banking profitability in coming years. EY
forecasts that Islamic banking pool profit can reach
USD 30.3 billion by 2020 across the group, out of
which USD 27.2 billion will from QISMUT. What is
more important is to see that customers are poised to
touch a mark of 70 million plus by 2018 from
estimated 38 million currently, which translates to
36% CAGR over the 5-year period.
Such a super growth is not a just number, but well
supported by the fact that in top 10 countries (for
corporate transactions and global venture capital
activities), does not have any GCC member or even
Islamic state. Malaysia comes at 25 position and
Saudi Arabia at 28, which leaves a huge potential to
tap for Islamic venture activities in future. Kuwait
stands relatively lower at 42 to its peers in the tally,
but emerging of Islamic entities will certainly provide
a boost to strengthening her position in next few
years.
On the local side, Kuwait basically is passing through
a transformation phase, where Kuwait Finance
House is well established entity across the region as
well as international arena, but many new entrants
have joined last years like Ahli United Bank, Kuwait
International Bank, Boubyan Bank and youngest
lender called Warba Bank. The lenders are trying
their best to provide quality services to its Islamic
clients in all possible manners especially if it comes
to new products, wealth management and
technological ease.
As per EY survey, the lenders are serious on three
main working aspects:
Cross Selling: Average product holding of 2.1 is well
below the class leading 4.9 products per customer by
conventional peers. A targeted product holding will
certainly boost overall profitability of Islamic
institutions.
Wealth Management: Islamic banks can provide
select products to all its wealthy clients which will
further strengthen its operational aspects and overall
product stream. Currently, very few institutions
provide such facilities, which drive potential bigger
clients away from the market.
Service Quality: Many lenders have launched a
service quality program where they are trying to
sharpen their employee’s skills so as to thrash
disadvantage on their cost to income ratio. Indeed,
we have seen lenders reducing their cost to income
ratio sharply, and KIB stands an excellent example
on the stage.
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Kuwait Islamic Banking Sector – On the
Right Path
Total Assets Growth
Islamic peer group has witnessed a solid and
consistent growth in terms of banking assets;
however, in the recent 2015, growth was limited to
1.74% compared to 3.94% in “Conventional” peers.
5.46%
14.10%
11.75%12.22%
3.94%
7.80%
9.22%
13.05%13.88%
1.74%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
2011 2012 2013 2014 2015
Total Assets Growth (Kuwait)
Conventional IslamicSource: KIB Financials, KFH Capital Research
Total banking assets reached KWD 70.39 billion by
2015; where the Islamic group shared 37% of assets
at KWD 26.13 billion while rest is shared by
Conventional. The share pie has gone down from
38.03% in 2011.
Islamic stream total assets reported a CAGR of 7.4%
in past five years, below its conventional peers which
reported a CAGR of 8.3%.
Total Loans & Advances Growth
4.51%
12.73%
5.96%
13.54%
1.72%
5.12%
10.38%
18.15%
14.99%
3.63%
0.00%
3.00%
6.00%
9.00%
12.00%
15.00%
18.00%
21.00%
2011 2012 2013 2014 2015
Total Loans & Advances Growth (Kuwait)
Conventional Islamic Source: KIB Financials, KFH Capital Research
As for the total Loans & Advances (L&A), Islamic
peer group has maintained a higher growth level in
past five years compared to Conventional banking
peers, except for year 2012.
Total Banking L&A reached KWD 51.24 billion by
2015; where the Islamic group shared 37.74% at
KWD 19.34 billion while rest is shared by
Conventional. The Islamic share has increased from
34.99% in 2011.
Islamic stream has surpassed its conventional
banking; as total L&A for the former achieved a
CAGR of 9.2% in past five years compared to 6.6%
CAGR reported by conventional peers and 7.6% by
total banking sector.
Total Customer Deposits Growth
5.92%
20.05%
12.13%
6.60%
2.71%
18.02%
7.84%
11.83%
11.45%
3.51%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
2011 2012 2013 2014 2015
Total Customer Deposits Growth (Kuwait)
Conventional IslamicSource: KIB Financials, KFH Capital Research
The Islamic peer group has seen slightly volatile
growth in its customer deposits where the highest
level was in year 2011 at 18.02% and the lowest in
2015 at 3.51%. Total banking customer deposits
stood at KWD 42.82 billion by 2015; where the
Islamic group shared 40.52% at KWD 17.35 billion.
Customer deposits for the Islamic group posted a
CAGR of 6.8% in past five years compared to 8.1%
CAGR reported by conventional peers and 7.6% by
total banking sector.
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Return on Average Assets
1.50%
1.33%
0.97%1.50%
1.09%
0.72%0.77%
0.85% 0.89%0.93%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
2011 2012 2013 2014 2015
ROAA (Kuwait)
Conventional Islamic Source: KIB Financials, KFH Capital Research
On profitability measures, the Islamic peer group has
been improving its Return on Average Assets
(ROAA) during the past five years as it increased its
ROAA from its lowest level of 0.72% in 2011 to
0.93% in 2015. When compared to Conventional
banking, the group is still underperforming its
Conventional peers where they had an ROAA of
1.09% in 2015.
Return on Average Equity
10.6%
9.8%
7.8%
9.4%9.5%
6.3%7.1%
7.8%8.2%
8.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2011 2012 2013 2014 2015
ROAE (Kuwait)
Conventional Islamic Source: KIB Financials, KFH Capital Research
As for the Return on Average Equity (ROAE)
measure, the Islamic group managed to enhance its
return to equity holders on a faster pace from 6.3% in
2011 to 8.8% in 2015. However, the Conventional
peers still have a marginally higher ROAE at 9.5%.
Cost to Income
0.31 0.30
0.34 0.33 0.34
0.50 0.49
0.45 0.49 0.45
-
0.10
0.20
0.30
0.40
0.50
0.60
2011 2012 2013 2014 2015
Cost to Income (Kuwait)
Conventional Islamic Source: KIB Financials, KFH Capital Research
The Islamic banking seems to be not that efficient in
terms of cost management as it has been incurring a
higher level of Cost to Income ratio than the
Conventional peers for the past five years in a row.
For instance, the Islamic banking had a cost to
income ratio at 0.45 in 2015 whereas the
conventional banking had the ratio at a lower level of
0.34.
Net Interest Margin
2.97%2.73% 2.82%
2.46%2.57%
4.06%
3.46%
2.96% 2.95% 2.85%
0.00%
0.65%
1.30%
1.95%
2.60%
3.25%
3.90%
4.55%
2011 2012 2013 2014 2015
NIM (Kuwait)
Conventional Islamic
The Islamic peer group had a relatively stable Net
Interest Margin (NIM) during the past three years and
was at 2.85% in 2015, yet it has declined from a
notably higher level 4.06% and 3.46% in 2011 and
2012 respectively. Even so, it is still surpassing the
Conventional peers which had NIM at 2.57% in 2015;
but the gap has been reduced as shown in the graph
above.
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Stock Rating Methodology
KFHCapital Rating KFHCapital Outlook Margin of Safety Current Market Price to IV*
Grossly Undervalued Huge Upside Potential of more than 30%
Fairly Undervalued High Upside Potential of 20-30%
Undervalued Average Upside Potential of 10-20%
Fully Valued Low Upside Potentialt of less than 10%
Overvalued None Upside Potential of more than 1%
*IV: Intrinsic Value
We, at KFHCapital, believe that purchasing blue chip businesses at superior discounts to their intrinsic value is
the guaranteed way to create wealth in the stock market.
In the process of a stock valuation, our team neither believes in a precise intrinsic value nor do we have any faith
in keeping a single-thought approach for any identified pick. Saying so, on intrinsic valuation part, our approach
varies from a base case scenario to a best case scenario, thus resulting in two intrinsic values which give a fair
valuation range to investors.
On valuation-model part, we prefer Discounted Cash Flow (DCF) model at the very first stance to value a stock
(or business), however in a bid to value a stock in a more healthy sense, we do consider other relative valuation
techniques like sector’s P/Ex, P/BVx, Dividend Yield, PEG ratio and similar decent methodologies, if applicable.
Once a fair value is arrived by applying a combination of various techniques, the next move is to calculate the
margin of safety between current market price and calculated intrinsic value. In normal terms, Margin of Safety is
the difference which allows an investment to be made with minimum downside risk.
For instance, company X’s share is worth KWD 1.000 and buying it at current market price of KWD 0.800 will
provide a cushion of high Margin of Safety (20% here), in case analysis turns out to be incorrect and the
company’s share worth only KWD 0.900.
On the rating scale of 1 to 5 stars, we assign 5 stars to the best stock which has a tremendous potential to
reward investors while spacing huge Margin of Safety while 1 star stands for the least potential stock with no
margin of safety. The rating is given on the Base Case valuation, not on Best Case valuation. In above
mentioned example, where company X is trading at a discount of 20.0% to its intrinsic value or in other words
carries 25.0% upside potential, and is assigned 4-stars, meaning that it is “Fairly Undervalued” and has “High”
Margin of Safety, according to our defined rating scale (refer to our table given above)
We hereby need to clarify that any rating affiliated to a particular stock at any given point of time, is analyzed by
its past performance with a combination of forecasting its business performance, by prevailing business factors.
It means that today’s stock valuation may not remain same in the future, depending upon the business trends of
that industry under which it operates.
Prepared By: Shoyeb Ali Maryam Al Qandi
Vice President Senior Financial Analyst
sali@kfhcapital.com.kw malqandi@kfhcapital.com.kw
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Annexure
Ratio Analysis 2011 2012 2013 2014 2015 2016 2017 2018
Growth
Net Income from Murabaha 11.3% 15.3% 24.7% -3.5% 12.4% 12.4% 14.1% 12.1%
Other Operating income 114.0% 11.1% 34.6% 22.4% 110.0% -57.9% 7.9% 8.2%
Total Income 24.3% 14.4% 26.8% 2.3% 38.6% -16.2% 12.8% 11.4%
Operating profit -33.4% 20.0% 2.4% 1.4% 17.7% 19.5% 14.9% 17.9%
Net Profit -35.3% 21.4% 0.3% 3.6% 17.0% 18.6% 15.5% 18.8%
Interest Earning Assets -6.5% 13.8% 24.3% 10.6% 8.8% 10.4% 9.0% 9.2%
Total Assets -2.1% 11.7% 20.3% 10.6% 7.7% 9.4% 8.2% 8.4%
Shareholders Equity 5.9% 4.3% 3.6% 5.9% 2.9% 26.2% 7.1% 7.9%
Asset Structure Ratios
Average Interest Earning Assets / Total Assets 89.5% 82.7% 82.1% 86.6% 88.3% 88.5% 89.8% 90.3%
Customer Deposits/ Total Assets 62.1% 62.8% 62.5% 59.5% 56.9% 54.6% 53.0% 51.3%
Deposits + Due to Banks & FI's/ Total Assets 79.5% 80.6% 82.8% 83.3% 83.9% 81.8% 81.9% 82.0%
Financing Receivables / Total Assets 61.9% 62.6% 65.2% 64.5% 65.5% 66.1% 67.5% 68.6%
Net Loans / Total Assets 85.8% 86.6% 89.2% 90.0% 91.1% 91.4% 92.7% 93.7%
Investment Assets / Total Assets 10.9% 9.5% 6.9% 6.9% 6.1% 5.4% 4.9% 4.4%
Shareholders Equity / Total Assets 18.6% 17.3% 14.9% 14.3% 13.7% 15.8% 15.6% 15.5%
Equity to Net Loans 21.6% 20.0% 16.7% 15.9% 15.0% 17.3% 16.8% 16.6%
Asset Quality Ratios
Provisions for Loans & Adv. / Gross Loans 0.7% 0.7% 1.2% 1.1% 2.1% 1.0% 1.0% 1.0%
Provisions for Impairment / Gross Loans 6.6% 7.5% 6.8% 7.1% 7.0% 6.8% 6.6% 6.4%
Non Performing Loans / Gross Loans 9.3% 5.9% 5.3% 4.9% 1.4% 1.4% 1.3% 1.2%
Provisions for Impairment/Financing Lease 1.01% 0.88% 1.64% 1.53% 2.83% 1.4% 1.4% 1.3%
Liquidity Ratios
Net Loans / Customer Deposits 138.2% 137.8% 142.8% 151.3% 160.2% 167.4% 174.9% 182.6%
Net Loans / Total Deposits 108.0% 107.4% 107.8% 108.0% 108.6% 111.8% 113.2% 114.3%
Customer Deposits/ Total Deposits 78.1% 78.0% 75.5% 71.4% 67.8% 66.8% 64.7% 62.6%
Liquid Assets/ Customer Deposits 39.5% 40.6% 41.3% 44.5% 46.6% 49.0% 49.3% 50.0%
Liquid Assets/ Total Deposits 30.9% 31.6% 31.2% 31.8% 31.6% 32.7% 31.9% 31.3%
Liquid Assets Ratio 24.5% 25.5% 25.8% 26.5% 26.5% 26.7% 26.2% 25.7%
Profitability Ratios
Return on Assets (ROA) 1.0% 1.1% 0.9% 0.8% 0.9% 1.0% 1.0% 1.1%
Return on Equity (ROE) 5.2% 6.1% 5.9% 5.8% 6.5% 6.1% 6.6% 7.3%
Return on Average Assets (ROAA) 1.0% 1.1% 1.0% 0.9% 0.9% 1.0% 1.1% 1.2%
Return on Average Equity (ROAE) 5.4% 6.2% 6.0% 5.9% 6.6% 6.9% 6.9% 7.6%
Margin Analysis
Interest Income/ Avg Int Earning Assets 4.3% 4.4% 4.2% 3.7% 4.0% 3.7% 3.8% 4.1%
Net Interest Margin 3.1% 3.4% 3.6% 3.0% 3.0% 2.9% 3.1% 3.3%
Distribution to Depositors/ Avg. Cust.Deposits 1.8% 1.3% 0.8% 1.2% 1.5% 1.5% 1.4% 1.3%
Contribution Analysis
Net Income from Murahaba / Total Income 78.2% 78.8% 77.5% 73.1% 59.3% 79.5% 80.4% 81.0%
Non Interest Income / Total Income 21.8% 21.2% 22.5% 26.9% 40.7% 20.5% 19.6% 19.0%
Cost To Income Ratio 50.5% 51.4% 43.5% 43.6% 33.2% 40.8% 40.9% 41.1%
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Balance Sheet 0 0 0 0 0 0
KD 2011 2012 2013 2014 2015 2016 2017 2018
Assets
Total Cash & balances w ith banks 7,066,000 18,624,000 26,365,000 17,618,000 15,904,000 28,715,388 19,522,781 12,724,081
Due from Banks & Other Financial Institutions 267,360,000 299,774,000 361,741,000 422,841,000 458,041,000 494,684,280 534,259,022 576,999,744
Receivables 692,431,000 781,823,000 979,791,000 1,072,672,000 1,172,935,000 1,294,929,494 1,428,339,997 1,575,483,306
Investments carried at fair value thorugh income statement1,715,000 1,627,000 100,000 68,000
Financial Assets Available for sale 65,835,000 67,475,000 57,599,000 60,978,000 64,663,000 65,401,600 65,911,640 66,434,431
Investments in associates 5,086,000 5,004,000 - 3,875,000 3,935,000 3,935,000 3,935,000 3,935,000
Investment Properties 49,100,000 44,881,000 45,669,000 50,139,000 40,353,000 37,269,768 34,040,081 30,656,985
Property & equipment 25,861,000 24,072,000 20,568,000 25,017,000 25,997,000 24,697,150 23,462,293 22,289,178
Other assets 3,915,000 6,216,000 11,710,000 9,339,000 8,151,000 7,947,225 7,748,544 7,554,831
Total Assets 1,118,369,000 1,249,496,000 1,503,443,000 1,662,579,000 1,790,047,000 1,957,579,905 2,117,219,359 2,296,077,556
Liabilities and Shareholders Equity
Due to banks & other Fin.Inst. 194,184,000 221,934,000 305,141,000 395,419,000 483,958,000 532,353,800 612,206,870 704,037,901
Depositors' accounts 694,509,000 784,756,000 939,272,000 988,744,000 1,018,050,000 1,068,952,500 1,122,400,125 1,178,520,131
Other Liabilities 22,047,000 26,233,000 31,647,000 37,600,000 40,235,000 44,258,500 48,684,350 53,552,785
Total Liabilities 910,740,000 1,032,923,000 1,276,060,000 1,421,763,000 1,542,243,000 1,645,564,800 1,783,291,345 1,936,110,817
Non Controlling Interest 3,021,000 3,122,000 3,151,000 3,151,000 3,151,000 3,151,000
Shareholders Equity:
Share Capital 103,732,000 103,732,000 103,732,000 103,732,000 103,732,000 103,732,000 103,732,000 103,732,000
Total Shareholders Equity 207,629,000 216,573,000 224,362,000 237,694,000 244,653,000 308,864,105 330,777,014 356,815,739
Total Liabilities & Shareholders' Equity 1,118,369,000 1,249,496,000 1,503,443,000 1,662,579,000 1,790,047,000 1,957,579,905 2,117,219,359 2,296,077,556
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Income Statement
KD 2010 2011 2012 2013 2014 2015 2016 2017 2018
Operating Income:
Murabaha and other islamic f inancing income 42,553,000 43,146,000 44,965,000 51,326,000 53,989,000 63,159,000 70,914,837 78,789,342 87,690,889
Distribution to depositors (14,944,000) (12,429,000) (9,561,000) (7,169,000) (11,391,000) (15,295,000) (17,103,240) (17,397,202) (18,856,322)
Net Income From Murabaha 27,609,000 30,717,000 35,404,000 44,157,000 42,598,000 47,864,000 53,811,597 61,392,140 68,834,567
Non Interest Income:
Investment income 154,000 3,536,000 3,444,000 4,674,000 4,301,000 5,333,000 3,366,064 3,386,466 3,407,377
Fees & commission income 3,019,000 3,859,000 5,379,000 6,607,000 8,096,000 8,337,000 9,218,929 10,242,614 11,399,816
Share of profits from associated companies 138,000 72,000 336,000 60,000
Net foreign exchange gain 531,000 1,001,000 535,000 897,000 985,000 908,000 953,400 1,001,070 1,051,124
Other Income 294,000 22,000 76,000 279,000 2,275,000 18,242,000 300,000 300,000 300,000
Total Other Income 3,998,000 8,556,000 9,506,000 12,793,000 15,657,000 32,880,000 13,838,393 14,930,150 16,158,316
Total Income 31,607,000 39,273,000 44,910,000 56,950,000 58,255,000 80,744,000 67,649,990 76,322,290 84,992,883
Expenses:
General & administrative expenses (3,398,000) (4,746,000) (6,273,000) (7,744,000) (8,271,000) (10,097,000) (10,147,499) (11,448,343) (12,748,932)
Depreciation (3,335,000) (4,026,000) (4,425,000) (3,800,000) (3,097,000) (2,072,000) (3,899,550) (3,704,573) (3,519,344)
Staff costs (10,611,000) (11,061,000) (12,403,000) (13,202,000) (14,030,000) (14,650,000) (13,529,998) (16,027,681) (18,698,434)
Operating expenses (17,344,000) (19,833,000) (23,101,000) (24,746,000) (25,398,000) (26,819,000) (27,577,047) (31,180,597) (34,966,711)
Operating profit before provision for impairment 14,263,000 19,440,000 21,809,000 32,204,000 32,857,000 53,925,000 40,072,944 45,141,693 50,026,172
Provision for impairment 3,437,000 (7,658,000) (7,665,000) (17,719,000) (18,168,000) (36,642,000) (19,423,942) (21,425,100) (22,056,766)
Operating profit 17,700,000 11,782,000 14,144,000 14,485,000 14,689,000 17,283,000 20,649,001 23,716,593 27,969,406
KFAS (76,000) (106,000) (127,000) (130,000) (137,000) (160,000) (200,365) (225,708) (250,131)
National labour support tax (443,000) (271,000) (420,000) (427,000) (375,000) (464,000) (601,094) (677,125) (750,393)
Board remuneration (177,000) (460,000) (275,000) (550,000) (300,000) (400,000) (550,000) (550,000) (550,000)
Zakat (250,000) (104,000) (157,000) (156,000) (142,000) (179,000) (240,438) (270,850) (300,157)
Non Controlling Interest (14,000) (58,000) (78,000) (80,000) (80,000) (80,000)
Net Profit for the year 16,754,000 10,841,000 13,165,000 13,208,000 13,677,000 16,002,000 18,977,105 21,912,909 26,038,726
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تنصل
من أي فإن ، هذا التقرير. وتبعا لذلك في دةالوار معلومات من أي عن لإلستثمار بيتك كابيتال شركة قبل من مستقلة بصفة التحقق يتم لم. وموثوقة دقيقة تكون ان يعتقد مصادر من هذا التقرير مستمدة في الواردة المعلومات إن
أوالشراء رويج أو التماس لإلكتتابدعوة أو ت أو ، عرض بأنها تفسر أن المعلومات لهذه ينبغى وال .المعلومات هذه دقة أو اكتمال أو موثوقية يضمنون أو يدعون أوممثليها أو موظفيها أو مسؤوليها ال لإلستثمار بيتك كابيتال شركة
.إلتزام أو عقد ألي سأسا تشكل أن شأنها من صفقة أو استثمارات أي في للدخول التوصية أو المشورة اطالقا تشكل ال أنها كما فى هذا التقرير، المذكورة المالية الكيانات من البيع أو االحتفاظ ألي أو
كن هذا االعتقاد ال يضمن صحة المعلومات التى تم االعتماد عليها ول يمكن أنه يعتقد عامة مصادر من عليها الحصول تم بناء على معلومات قد لعمالئها لإلستثمار بيتك كابيتال قبل شركة من أعدادها تم قد التقرير هذا في اآلراء
بيتك كابيتال شركة التقرير. حيث تقوم هذا في ورالمذك كيان مالي في أى ملكية أو أسهم بيع أو شراء تقرر دمالإلستثمارعن بيتك كابيتال شركة بها تأخذ أن يمكن التقرير في المنشورة االعتماد عليها العداد هذا التقرير. البحوث
فقد تقوم ذلك، إلى الطويل. وباإلضافة لمدىا على البيع أو بالشراء لإلستثمار بيتك كابيتال إستراتيجية شركة مع تتعارض أو تتوافق التي األجل القصيرة الفرص لتحدد الشركات من مختارة لنخبة تحليلي بحث بأجراء لإلستثمار
بناء العمالء من والشراء البيع و التقرير، هذا عم يتعارض نحو على األوراق المالية معامالت في الدخول أيضا ويمكن القصير المدى على المحللين اقتراحات نتيجة الخاص، لحسابها االتجار أو لالستثماربالتداول بيتك كابيتالشركة
.لالستثمار بيتك كابيتالعلى معايير اساسية تضعها شركة
سابق دون للتغيير وقابلة لإلستثمار بيتك كابيتال ركةش آراء عن بالضرورة تعبر ال وهي التقرير. هذا تاريخ من اعتبارا تقرير معد ال إليها توصل التي الحالية النتيجة التقرير هذا في الواردة التقديرات و والتوقعات اآلراء وتشكل
وت عدم صحة فى وقت الحق الى من اآلراء أو أو ثب تغيير أي أو التقرير، في تغيير أي عن القارئ إبالغ أو التقرير هذا تغيير أو تعديل أو لتحديث التزام أي لإلستثمار بيتك كابيتال شركة على ليس ، ذلك على وعالوة .إنذار
القرارات االستثمارية اتخاذ المستثمرين على ويجب ين،المستثمر لجميع مناسبة تكون ال قد التقرير هذا استخالصها في تم التي والنتائج نوقشت التي المالية المواضيع . إنالتقرير هذا في المبينة التوقعات أو التقييماتالتقديرات أو
المعلومات التاريخية في هذا التقرير لمستقبلية و ا النتائج على مؤشرا بالضرورة ليس الماضي في األداء وأهدافهم االستثمارية. الخاصة المالية أوضاعهم تناسب استثمارية قرارات التخاذ المستقلين مستشارينهم باستخدام و بأنفسهم
.المنشور هذا مضمون نم مستوحاة أو مماثلة صفقة أي في الدخول قبل والمالية القانونية براءالخ مشورة باتخاذ المستثمرين وينصح ، عن الشركات و األسواق و األدوات المالية ال تضمن أدائها المستقبلي
سؤولين عن أى يها أو مسئوليها ميها أو موظفلالستثمار أو ممثل بيتك كابيتالو لن تكون شركة إن استخدام أي معلومات وردت في هذا التقرير و اتخاذ أي قرارات إستثمارية عليها تعتبر من مسؤولية القاريء و من ضمن مخاطرته
رة. و غير مباشردة فى هذا التقرير سواء بصورة مباشرة أقرارات إستثمارية أو أضرار أو فرص فائتة أو خسائر ناتجة عن أو متعلقة بإستخدام المعلومات أو البيانات أو التحليالت أو االراء الوا
.التقرير من مقتطفة معلومة يأ نقل حالة في المصدر ذكر ويرجى لإلستثمار. بيتك كابيتال شركة من مسبقة خطية موافقة على الحصول قبل غرض وألي شخص أي قبل من نشره و توزيعه أو استنساخه يمكن ال التقرير هذا
ركتنا.شركتنا او نسخ شعار الشركة بأى شكل أو اسلوب أو وسيلة بدون موافقة خطية مسبقة من ش سنحتفظ بملكية حقوق الطبع و كل حقوق الملكية الفكرية االخرى. وال يجوز لكم استخدام اسم
اإلستشارية. والدراسات البحوث قائمة ضمن (www.kfhcapital.com.kwاإلنترنت ) بشبكة الشركة موقع على للجميع متاحة المعلومات وهذه
لحصري التابع لمحاكم دولة ارونى إلى القضاء موقع االلكتوُتقّدم كافة النزاعات الناشئة عن أو المتّصلة بهذا التنصل و المحتويات المتعلقة باآلراء و المعلومات المندرجة فى هذا الويخضع هذا التنصل القانوني لقوانين دولة الكويت.
نها الخاصة.أخرى تخضع لقواني بلدانأي مسؤولية في حالة إستخدام محتويات هذا الموقع في تثمارلالس بيتك كابيتالالكويت بما ال يتعارض وأحكام الشريعة اإلسالمية الغراء. وال تتحمل شركة
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