Kuwait-Mubasher: The governor of the Central Bank of Kuwait (CBK) Mohammad Al-Hashel announced the Financial Stability Report (FSR) for 2015 which showed that the banking system in Kuwait remained sound and stable during the year under review.
The report said that Kuwait’s banking system posted a much slower expansion when viewed on a consolidated basis; assets grew by 2.6% during 2015, while domestic assets increased by 5.7% on the back of strong growth in domestic credit which was up by 8.5% as compared to 6.3% in 2014.
“Lending to the households was particularly strong at 10.6%; household sector turned out to be the top recipient for bank credit in 2015, surpassing the real estate sector. However, as the bulk of lending to households (83.8% in 2015) has been in terms of installment loans for repair and purchase of private homes, banks’ combined exposure to real estate sector reached almost half of their total credit portfolio,” according to CBK’s report.
On the liability level, growth in banks’ consolidated deposits was down to 3% when compared to 7.8% in 2014. Meanwhile, domestic deposits grew to 3.3% in 2015; however, the banking system continued to enjoy a stable funding base with 63% of the total placed deposits.
The gross non-performing loan ratio (NPLR), on a consolidated basis, fell to 2.4% (1.9% on domestic, Kuwait- only basis) as of December 2015; lower from 3.8% last observed in 2007 before the global financial crisis struck.
“The impressive progress in bringing down the NPLR in the last few years is particularly visible if the existing NPLR (2.4%) is compared with the double-digit NPLR (11.5%) recorded in 2009,” according to the recent report.
Banks’ exposure to the equity markets has been on a steadily declining trend, as equity investments that accounted for around 22.8% of banks’ total investments, as well as the use of firms’ shares as collaterals formed 22% of banks’ gross collaterals.
“Banks’ liquidity levels have remained healthy despite some tightening in the interbank market,” the report said, adding “Banks’ net income, on consolidated basis, grew by a modest 7% in 2015, at a much slower pace compared to 26.5% in 2014.”
Capital adequacy ratio (CAR) of the banking sector in Kuwait has improved to reach 17.5%, higher from the central bank’s 12.5% requirement for 2015.
