KUWAIT CITY, Apr 23: Mr. Isam Al-Sager, Vice Chairman and Group CEO of National Bank of Kuwait ‎‎(NBK), expressed unwavering confidence in the bank’s ability to swiftly adapt to the ‎evolving economic landscape, all while maintaining its leadership position in the local market.‎

On the sidelines of the analyst conference call for the first quarter of 2025, Al-Sager stated, ‎‎”We not only overcome these challenges, but we seize them as opportunities to build a ‎stronger and more sustainable future.” He emphasized that NBK continues to enhance its ‎flexibility, investment, and technology, all while maintaining a steadfast commitment to the ‎highest quality standards in addressing the evolving needs of its customers.‎

He highlighted that NBK’s regional and international presence remains a key factor in ‎mitigating risks, stabilizing revenue, and improving operational efficiency. He further stressed ‎that the Group’s ongoing goal is to drive value and profitability by strengthening the ‎integration of its businesses and expanding cross-selling opportunities across the various ‎markets in which it operates.‎

Al-Sager emphasized that the Group’s wealth management business will continue to leverage ‎its extensive experience in delivering a comprehensive approach to portfolio management, ‎advisory services, and investment opportunities. Meanwhile, its Islamic banking arm, ‎represented by Boubyan Bank, will further reinforce NBK’s distinctive position in the local ‎market and play a pivotal role in diversifying its sources of profitability.‎

He attributed the 8.5% year-on-year decrease in the bank’s net profit for the first three ‎months of 2025 primarily to the introduction of the new Domestic Minimum Top-up Tax ‎‎(DMTT), which took effect this quarter. This led to an increase in the effective tax rate to ‎‎16.3% in 1Q2025, compared to 9.2% in the corresponding period of 2024. He noted that, ‎excluding the impact of the new tax, pre-tax profit actually saw a 0.8% year-on-year increase, ‎reaching KD 173.4 million in the first quarter of 2025.‎

Al-Sager stated that the Group’s returns remained robust despite the impact of the new tax ‎system, with the return on average assets reaching 1.33% in the first quarter of 2025. ‎Meanwhile, the return on average shareholders’ equity stood at 13.1%. He also highlighted ‎that the Group’s loan portfolio is strategically allocated, with 70% originating from Kuwait ‎and 30% generated through its international presence.‎

‎“NBK reaffirms its unwavering commitment to sustainability and advancing its sustainable ‎financial agenda. The successful issuance of the first green bonds in 2024 stands as one of the ‎bank’s most significant achievements, attracting strong interest from international investors ‎and reaffirming the market’s confidence in our ESG strategy,” Al-Sager added.‎

He highlighted that the bank continues to make significant strides in integrating climate-‎related standards into its operations, with a particular focus on reducing the carbon footprint ‎of its investment portfolio and effectively managing climate risks. He noted that these efforts ‎align with leading international standards, strengthening NBK’s role as a key player in ‎supporting Kuwait’s commitment to achieving carbon neutrality, while also reflecting its ‎crucial role in driving the transition toward a low-emission economy.‎

Kuwait’s Economy

On the performance of the Kuwaiti economy, Al-Sager stated that despite the slowdown in ‎macroeconomic activity in 2024, the near-term growth outlook for 2025 remains optimistic. ‎He attributed this positive outlook to several key factors, including the anticipated easing of ‎voluntary production cuts by OPEC+, the gradual recovery of consumer spending, credit ‎growth, the resurgence of momentum in project market activities, and the potential ‎acceleration of public investment.‎

He explained that, supported by these factors, Kuwait’s GDP is expected to grow by 3.0% in ‎‎2025. ‎

Regarding the projects market, Al-Sager noted, “The market experienced some slowdown in ‎the first quarter of 2025, following a strong year of activity in 2024. The value of projects ‎awarded in the first quarter reached over KD 400 million. However, the outlook remains ‎promising, with projects in preparation estimated to exceed KD 10 billion, reflecting the ‎government’s strong commitment to advancing its development and reform agenda at an ‎accelerated pace”.‎

As for the short-term outlook for oil prices, Al-Sager remarked that as the government ‎continues to focus on implementing its development plan, oil price fluctuations have become ‎less impactful on capital spending. He explained that this type of spending now accounts for ‎less than 10% of the total government budget, reducing the likelihood of significant savings ‎should oil revenues face pressure. He also noted that the first two years of capital spending ‎will primarily focus on addressing infrastructure gaps, with the provision of basic services to ‎meet population growth remaining a key priority.‎

He stated that the recently approved Financing and Liquidity Law provides the government ‎with greater flexibility in managing its financial resources, enabling the issuance of debt ‎instruments worth up to KD 30 billion.‎

On the mortgage law, Al-Sager explained that several important meetings have recently been ‎held to approve the law, including discussions with the Public Authority for Population ‎Welfare to sign advisory service agreements with real estate developers. He indicated that the ‎law is expected to be approved due to its strategic importance, particularly given the more ‎than 100,000 pending housing applications and the growing population of Kuwaiti youth, ‎which adds approximately 10,000 new applications annually.‎

Furthermore, Al-Sager emphasized that the banking sector’s strong liquidity position ‎strengthens its ability to play a key role in addressing the housing problem in Kuwait.‎

The GCC & The Global Economy

Al-Sager pointed out that, supported by robust fiscal reserves, ambitious economic reform ‎programs, continued progress in major projects, and strong demand, the economies of the ‎GCC are expected to maintain relatively strong performance in 2025. However, he cautioned ‎that tightening global financial conditions could dampen investment and trade flows, increase ‎financing costs, and potentially lead to a decline in demand, along with volatile oil prices.‎

Regarding the global economy, Al-Sager noted that it has recently navigated a complex ‎environment marked by shifting monetary policies and escalating geopolitical tensions. He ‎pointed out that the recent trade war and tariffs imposed by the US administration have cast ‎a shadow over the economic landscape, potentially contributing to higher inflation rates and a ‎slowdown in growth, further deepening the uncertainty surrounding the global economic ‎outlook.‎

Robust Operational Performance

In the meantime, Mr. Sujit Ronghe, NBK Group Chief Financial Officer, stated that ‎despite the impact of the new tax regime, the Group maintained strong operating performance ‎in the first quarter of 2025, driven by significant growth in business activities, particularly in ‎lending and investment. He highlighted that the operating income mix remains well-balanced, ‎with non-interest income comprising 24% of total revenue sources.‎

Ronghe emphasized that NBK Group’s financial position remains robust, characterized by ‎high levels of credit quality, strong capitalization, and the bank’s ability to generate operating ‎profits that enhance its capacity to absorb credit losses. ‎

He further noted that the Group continues to leverage its unique advantage among Kuwaiti ‎banks, particularly through its broad geographical presence via a network of overseas ‎branches and subsidiaries, along with its ability to offer both conventional and Islamic ‎banking services.‎

He highlighted that operating income during the first quarter of 2025 was distributed across ‎key business segments, with overseas branches and subsidiaries contributing 26%, Islamic ‎banking 22%, consumer banking 20%, corporate banking 12%, and NBK Wealth 9%.‎

Ronghe further explained that overseas branches and subsidiaries accounted for 27% of the ‎Group’s net profit during the first quarter of 2025, while Islamic banking contributed 19%, ‎corporate banking 17%, consumer banking 16%, and NBK Wealth’s contribution reached ‎‎10%.‎

He also noted that IBG and Boubyan Bank collectively contributed 44% and 23%, ‎respectively, to the Group’s total assets, reinforcing the Group’s strategy of diversifying its ‎revenue sources.‎

Ronghe noted that the Group’s loans and advances saw impressive growth during the first ‎quarter of 2025, reaching KD 24.6 billion, reflecting a 9.9% increase compared to March ‎‎2024 and a 3.8% rise on a quarterly basis. This growth was driven by higher loan volumes in ‎both Kuwait and international markets, across conventional and Islamic banking services.‎

He further pointed out that, amidst the prevailing economic uncertainty, loan growth in 2025 ‎is expected to remain in the single-digit range. However, any improvement in global ‎conditions, a faster pace of project implementation, or the approval of the mortgage law in ‎Kuwait could significantly boost the growth of loan activities.‎

Regarding the recently implemented DMTT tax in Kuwait and its impact on the bank’s profits ‎for the current year, Ronghe stated: “The executive regulations of the law are expected to be ‎issued within six months of its adoption. In the absence of detailed regulations at this stage, ‎current estimates suggest that the effective tax rate for 2025 will range between 16% and ‎‎17% of pre-tax profits.‎

He pointed out that the net interest margin for the first quarter of 2025 was impacted, ‎reaching 2.45%, due to an unfavorable shift in the asset mix, along with the annual effect of ‎the depreciation of the Egyptian pound and the decline in historically high interest rates. ‎However, the recent approval of the Finance and Liquidity Law in Kuwait boosts ‎expectations for the upcoming issuance of sovereign debt instruments this year, which will ‎allow the bank to repurpose liquidity into interest-bearing assets.‎

He emphasized the bank’s capacity to provide the necessary financing for development ‎projects currently in the pipelines, supported by its diversified and stable financing base, ‎which aligns with NBK’s strategy for sustainable growth.‎

Regarding his outlook for the operating environment, Ronghe stated: “Despite the prevailing ‎uncertainty in the economic landscape, we remain cautiously optimistic that the overall ‎operating environment, although challenging, stabilize in due course during 2025”.‎