earnings call 1q 2019-transcript eng final224dc321-9c6b-4f76-a6e1-cf96bb4e… · investor...

INVESTOR PRESENTATION

1Q2019 EARNINGS CALL TUESDAY

14:00 KST 07 MAY 2019

KUWAIT INTERNATIONAL BANK

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07-May-2019 2INVESTOR PRESENTATION 1Q2019

DISCLAIMERThis presentation has been prepared by KIB (Kuwait International Bank KSCP), is strictly confidential and is being furnished to each recipient solely for its own information. It may not be reproduced orredistributed to any other person, and it may not be published anywhere, in whole or in part, for any purpose. It is expressly forbidden to disclose the information in this presentation to any other person.

No representation or warranty, express or implied, is or will be made in relation to, and no responsibility, liability or duty of care is or will be accepted by the Bank and affiliated persons, or any directors,partners, officers, representatives, employees, advisers or agents of the Bank (“Relevant Persons”) as to, or in relation to, the accuracy, reliability, or completeness of this presentation or any informationherein. Accordingly, none of the Bank or any Relevant Persons shall be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on the accuracy of anyinformation or any statement in this presentation or any errors or omissions in this presentation. No responsibility, liability or duty of care is or will be accepted by the Bank or any Relevant Persons forproviding the recipient with access to any additional information, updating this presentation or correcting any inaccuracies herein which may become apparent.

IMPORTANT NOTICE

This presentation has been prepared by KIB and is subject to the applicable laws and regulations in the State of Kuwait. It is for information purposes only and it shall not be reproduced or redistributed toany other person without obtaining KIB’s prior written consent. It does not and shall not constitute either an offer to purchase or buy or a solicitation to purchase or buy or an offer to sell or exchange or asolicitation to sell or exchange any securities of KIB. Neither this presentation nor anything contained herein shall form the basis of any contract, commitment or advice whatsoever. This Presentation mustbe read in conjunction with all other publicly available information. To the maximum extent permitted by law, KIB and its directors, employees, agents, consultants, affiliates and subsidiary expresslyexclude all liability and responsibility for any loss or damage arising from the use of, or reliance on, the information contained in this presentation or the website whether or not caused by any negligent actor omission. Neither KIB nor any of its directors, employees, agents, consultants, affiliates, or subsidiary warrant or represent the correctness, accurateness or completeness of the information providedherein. This document is not to be relied upon in any manner as legal, tax or investment advice. Each recipient hereof shall be responsible for conducting its own investigation and analysis of theinformation contained herein and shall familiarize and acquaint itself with, and adhere to, the applicable local legislations. Except where otherwise expressly indicated herein, this presentation containstime-sensitive information which is based on currently available information to KIB as of the date stated or, if no date is stated, as of the date of this preparation and accordingly does not guarantee specificfuture results, performances or achievements. The information and the opinions contained herein are subject to change without notice. None of KIB/its subsidiary or affiliates assume any obligation toupdate or otherwise revise any such information to reflect information that subsequently becomes available or circumstances existing or changes occurring after the date hereof.

FORWARD-LOOKING STATEMENTS

All statements included or incorporated by reference in this presentation, other than statements or characterizations of historical fact, are forward-looking statements. Such forward-looking statements arebased on KIB’s current expectations, predictions and estimates and are not guarantees of future performance, achievements or results. Forward-looking statements are subject to and involve risks anduncertainties and actual results, performance or achievements of KIB may differ materially or adversely from those expressed or implied in the forward-looking statements as a result of various factors. Inaddition, even if KIB’s results of operations, financial condition and the development of the industry in which it operates are consistent with forward-looking statements contained herein, those results ordevelopments may not be indicative of results or developments in subsequent periods. KIB does not undertake to update any forward-looking statements made herein. Past results are not indicative offuture performance.

This presentation contains certain data based on internal management estimates, which may have not been independently verified by a third party. Information has been obtained from various sources andare provided to assist the recipient in the evaluation of matters described herein. They may be based on subjective assessments, adjustments and assumptions and may use one among alternativemethodologies that produce different results and to the extent they are based on historical information, they should not be relied upon as an accurate prediction of future performance.

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Index

07-May-2019

Strategy update 4

KIB - share price trend 6

Financial Performance 8

Dividends 14

Expectations 16

Q&A 18

Annexures 19

Contacts 25

3INVESTOR PRESENTATION 1Q2019

Strategy Update

07-May-2019 INVESTOR PRESENTATION 1Q2019 4

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Strategy Update (Snapshot)


KIB included in Premier Market segment

“An elite category, which will be occupied by high caliber companies with high liquidity and medium to large market

capitalization requirements”

US$ 250 MILLION SYNDICATION

MURABAHA OVERSUBSCRIBED

AFFIRMED LONG-TERM

ISSUER RATINGS A+

WITH STABLE OUTLOOK

April’18 October’18 June’18

NEW BRANDING

Best Islamic Deal in Kuwait - 2018

Share Price Performance


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170

190

210

230

250

270

290

310

330

Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19

(Fils

)

KIB Share Price Trend

07-May-2019

Share Price Performance YE 2017 to 31 March 2019


31 Dec’17

228 Fils

31 Mar’19

317 Fils

31 Dec’18

264 Fils

Financial Performance


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Financial Performance Highlights


1Q2019 1Q2018 %

Total Assets 'KD Billion' 2.2 2.0 14%

Financing Receivables 'KD Billion' 1.6 1.4 21%

Customer Deposits 'KD Billion' 1.4 1.3 7%

Financing Income 'KD Million' 24.6 20.5 20%

Net Profit 'KD Million' 6.3 7.7 (19%)

Earnings Per Share 'Fils' 6.40 7.93 (19%)

Financial Results for the period ended 31st March 2019

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7.7 6.2

1Q2018 1Q2019

(KD

mln

)

NET PROFIT

07-May-2019

Income/ Profitability Trend


(ATTRIBUTABLE TO SHAREHOLDERS)

20.5 24.6

1Q2018 1Q2019

(KD

mln

)

FINANCING INCOME

17.3 17.0

1Q2018 1Q2019

(KD

mln

)

OPERATING INCOME

9.9 8.8

1Q2018 1Q2019

(KD

mln

)

OPERATING PROFIT BEFORE PROVISIONS

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Key Balance Sheet Parameters


1,911 1,976 2,248

31-Mar-17 31-Mar-18 31-Mar-19

(KD

mln

)

TOTAL ASSETS

1,298 1,355 1,636

31-Mar-17 31-Mar-18 31-Mar-19

(KD

mln

)

FINANCING RECEIVABLES

1,199 1,288 1,373

31-Mar-17 31-Mar-18 31-Mar-19

(KD

mln

)CUSTOMER DEPOSITS

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24%19%21%

61%65%63%

3%3%3%

12%13%13%

31-Mar-1931-Mar-1831-Mar-17

LIABILITY MIX

Due to banks and OFI's Depositors account Other liabilities Equity

07-May-2019

Asset Liability Mix


IMPROVING ASSET LIABILITY STRUCTURE IN LINE WITH STRATEGIC INITIATIVES

17%20%20%

73%69%68%

6%7%7%

4%4%5%

31-Mar-1931-Mar-1831-Mar-17

ASSET MIX

Due from Banks Financing receivables Investments Others

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218.8%

152.0%167.7%

80% 90% 100%

1Q2017 1Q2018 1Q2019

LCR Regulatory Requirement

LCR

10.6% 10.5% 10.2%

3% 3% 3%

1Q2017 1Q2018 1Q2019

leverage ratio Regulatory Requirement

LEVERAGE RATIO

109.5%

105.0%103.7%

100% 100% 100%

1Q2017 1Q2018 1Q2019

NSFR Regulatory Requirement

NSFR

20.1%18.4%

16.5%

13% 13% 13%

1Q2017 1Q2018 1Q2019

CAR Regulatory Requirement

CAR (Basel III)

07-May-2019

Capital/Liquidity Analysis


Dividends


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20 19 2210 10 11

51% 53%

49%

- - 4

YE 2016 YE 2017 YE 2018

EPS (Fils) Dividends (fils/Share) Bonus shares (%) Divident payout ratio (%)

07-May-2019

Dividends


YE 2018 : 11% Cash Dividend (11Fils per shares) & 4% Bonus shares (4 shares for every 100 shares) .

The Annual General Assembly approved the issuance of Sukuk as per the principles of Islamic Sharia’a and capital adequacy requirements (“Basel III”) for Islamic Banks and delegated the Board of Directors to identify

the terms and conditions of these Sukuk. Currently, the Bank is to obtain the regulatory bodies approval to issue Sukuk.

Approved by shareholders during Annual General Assembly meeting on 28th March 2019

2019 EXPECTATIONS


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YE 2019 Expectations


Financing receivables continue to register significant growth

Total assets is targeted to grow in line with strategy

Deposits expected to register significant growth in 2019

Net profit for the year is expected to continue to increase in line with strategy

Operating expenses to marginally increase on account of new strategic initiatives being implemented

?Q&A


Annexures


KIB AT A GLANCE


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SNAPSHOT

BACKGROUND

• In business since 1973, KIB is a publically-traded Kuwaiti bank that in 2007 adapted all itsoperations and processes to fully comply with Islamic Sharia’.

• Nationwide network of 22 branches and 94 ATMs

AWARDS

• Best Islamic Deal in Kuwait – 2018 (IFN Awards)

• Best Islamic Bank in Kuwait and GCC – 2018 (World Finance)

• Best Customer Acquisition – 2018 (CPI.co)

• Best Sharia’ Compliant Bank MENA – 2018, 17, 16 & 15 (CFI.co)

• Fastest Growing Islamic Bank MENA – 2018, 17 & 16 (CFI.co)

• Best Branding in Kuwait – 2018 (CPI.co)

• Best Islamic Bank in Kuwait – World Finance 2017, 16, 15 & 14

• Best Customer Acquisition – World Finance 2017

• Best CSR in Islamic Banking – 2017, 16 & 15 (CPI Financial)

• Best Finance team – 2018 (MENA CFO Strategies Forum)

OWNERSHIP

• Listed on the Boursa Kuwait since 1984, Bukhamseen Group Holding & its affiliates hold35.87% shares of KIB. Govt. of Kuwait holds around 7.5% through PIFSS as of 31st March2019.

• KIB’s market capitalization at 31st March 2019 was KD 329 million.

OPERATIONS

• KIB’s business covers all Sharia compliant banking services including acceptance ofdeposits, financing, investments, Murabaha (auto, real estate and commodities), IjaraMuntahia Bittamleek (lease-to-own), Istisna’a, Tawarruq, credit cards, Wakala, and otherproducts in addition to corporate and project finance, treasury services, issuing letters ofcredit and letters of guarantee.

• Subsidiary : Ritaj Takaful Insurance Company, Kuwait

RATINGS • Long- Term IDR “A+” with “Stable Outlook“

07-May-2019

KIB AT A GLANCE


FINANCIAL SNAPSHOT

KD million 1Q2019 1Q2018

Total Assets 2,248 1,976

Financing Receivables 1,636 1,355

Customer Deposits 1,373 1,288

Total Equity 273 262

Operating income 17 17

Net Operating profit after prov isions 7 8

Net Profit attributable to shareholders 6 8

Net Profit Margin (%) 1.3% 1.8%

Return on Average Equity (%) 9.2% 11.9%

Tier 1 Ratio (%) 15.3% 17.3%

CAR (%) 16.5% 18.4%

No of Branches 22 25

No of ATMs 94 94

Consolidated Income Statement & Balance Sheet


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Income Statement Consolidated (3M - 1Q ’19 & ‘18)


KWD 000's 1Q2019 1Q2018

Financing income 24,565 20,537

Finance costs and distribution to depositors (11,140) (6,981)

NET FINANCING INCOME 13,425 13,556

Fees and commission income 2,491 2,544

Net gain from foreign exchange 192 503

Investment income 769 607

Other income 144 105

TOTAL OPERATING INCOME 17,021 17,315

Staff costs (4,779) (4,371)

General and administrative expenses (2,595) (2,542)

Depreciation (895) (540)

TOTAL OPERATING EXPENSES (8,269) (7,453)

Profit from operations before provisions and impairment losses 8,752 9,862

Provisions and impairment losses (2,173) (1,771)

PROFIT FROM OPERATIONS 6,579 8,091

Taxes, etc. (295) (359)

PROFIT FOR THE YEAR 6,284 7,732

Profit attributable to Shareholders of the Bank 6,212 7,700

Non-controlling interests 72 32

STATEMENT OF PROFIT OR LOSS (UNAUDITED)

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Balance Sheet Consolidated (As at 31 March ‘19 & ‘18)


KWD 000's 31-Mar-19 31-Mar-18

Cash and balances with banks 50,249 35,716

Due from Banks 377,374 395,246

Financing receivables 1,636,492 1,354,617

Investment securities 81,296 87,117

Investment in an associate 1,518 1,518

Investment properties 58,451 60,314

Other assets 13,158 14,561

Property and equipment 29,085 26,637

TOTAL ASSETS 2,247,623 1,975,726

Due to banks and financial institutions 546,328 367,494

Depositors' accounts 1,373,345 1,287,702

Other liabilities 54,792 58,196

TOTAL LIABILITIES 1,974,465 1,713,392

Share capital 103,732 103,732

Share premium 49,480 49,480

Treasury shares (45,234) (45,234)

Other reserves 161,694 151,002

Non-controlling interests 3,486 3,354

TOTAL EQUITY 273,158 262,334

TOTAL LIABILITIES AND EQUITY 2,247,623 1,975,726

STATEMENT OF FINANCIAL POSITION (UNAUDITED)

Thank you

07-May-2019 Private & Confidential

1Q 2019 Kuwait International Bank KSCP – Earnings Call

Edited transcript of KIB’s earnings call conducted on Tuesday, 07 May ‘19 at 02:00 pm (Kuwait); 7:00 am (New York) and 12:00 PM (London)

Corporate Participants:

Mr. Raed Jawad Bukhamseen Vice Chairman and Chief Executive Officer

Mr. Mohamed Said EL Saka Deputy Chief Executive Officer

Mr. Ajai Thomas General Manager - Financial Control & Planning/ CFO

Mr. Abdullah Alasouse Manager - Investor Relations & Financial Reporting

Host:

Ms. Janany Vamadeva Arqaam Capital

1Q 2019 KIB – Earnings Call

1 | P a g e

Janany Vamadeva Good afternoon everyone, and thank you for joining us today.

This is Janany Vamadeva and on behalf of Arqaam Capital, I am pleased to

welcome you to KIB’s first quarter 2019 (1Q’19) earnings conference call.

I have here with me today Mr. Raed Jawad Bukhamseen, Vice Chairman & Chief

Executive Officer, Mr. Mohamed Said EL Saka, Dy. Chief Executive Officer, Mr. Ajai

Thomas, General Manager Financial Control and Planning/Chief Financial Officer

(CFO) and Mr. Abdullah Al Asouse, Manager Investor Relations & Financial Reporting.

Without any further delay, I will now turn the call over to Mr. Abdullah.

Abdullah Al Asouse Thank you Janany for the brief introduction and good afternoon everyone.

Thank you all for joining us today on our first quarter 2019 conference call.

Please allow me to commence this call today by reading a brief disclaimer while full

disclaimer is available to read on the screens in front of you.

Disclaimer: Statements included or incorporated by reference in this presentation, other

than statements or characterizations of historical fact, are forward-looking statements.

Such forward-looking statements are based on KIB’s current expectations, predictions

and estimates and are not guarantees of future performance, achievements or results.

This presentation contains certain data based on internal management estimates,

which may have not been independently verified by a third party. In addition to the

disclaimer I have just read, I request you all to read the full disclaimer text on slide #2 of

our presentation. This concludes our disclaimer for today’s call.

Allow me to take you through the format for today’s call:

Mr. Raed Jawad Bukhamseen, our Vice Chairman & Chief Executive Officer provide a

brief update on the Kuwait’s current economic situation, KIB’s strategy updates and first

quarter financial performance for 2019, followed by a presentation from Ajai, our CFO.

Upon concluding the management presentation, we will address your questions

received through webcast platform. As the case may be, we will make every effort to

answer all the questions received. However, if any questions left unanswered due to

time constraints, or for any follow up questions that you might have, please feel free to

contact us through the KIB’s Investor relations email address, which you can find on our

website or on the last page of our presentation pack.


2 | P a g e

The presentation pack, which is being referred to, is also available for download from

KIB website.

With that said, I will now hand over the call to our Vice Chairman & CEO - Mr. Raed

Jawad Bukhamseen.

Raed Bukhamseen Good morning and good afternoon everyone.

Thank you for joining. It is my pleasure to welcome you to our earnings call for the first

quarter ’19 results.

I intend to briefly touch upon the current economic situation prevailing in Kuwait, our

strategy implementation and KIB’s financial performance.

Then Ajai will review in detail with you, KIB’s financial performance through the

presentation and we would be happy to answer your questions thereafter.

Global growth is set to be moderate in the near term and then pick up modestly as per

IMF’s recent estimates, the escalation of US-China trade tensions, tighter credit policies

in China and financial tightening alongside the normalization of monetary policy in the

larger advanced economies have all contributed to a significantly weakened global

expansion, especially seen in the second half of 2018. With this weakness expected to

persist into the first half of 2019, the global economy is projected to grow at 3.3% this

year, down 0.4 % from earlier forecast.

GCC growth expected at around 2% in 2019, driven mainly by public spending. Non-oil

growth seen at 3%, while oil sector growth expected to be marginal due to production

cuts. GCC debt issues estimates to reach about $50-60 billion this year, Saudi Arabia

being the largest borrower in 2019.

Kuwait’s economic performance is somewhat insulated from the global slowdown.

Non-oil growth seen at about 2.5% in 2019, helped by expansionary fiscal policy and

prudent monetary policy. Hydrocarbon output rose by 1.2% in 2018 after contracting in

2017. IMF, in its 2019 Article IV Consultation also welcomed the Kuwaiti banking system's

sound position and commended the authorities for prudent regulation and supervision.


3 | P a g e

As for the strategy and its update;

KIB’s strong topline financial performance reflects its strong growth in a number of

business areas, in line with its strategy. With KIB’s strategy implementation moving

ahead, we have been taking the customer banking experience to the next level,

always striving to meet the ever-changing needs of our customers. For this reason, we

adopt cutting-edge technology and digital solutions with a customer centric

perspective to satisfy our customers.

Our Bank’s financial performance for the first quarter of 2019 demonstrates our strength

in terms of core asset/liability and income generation.

KIB reported a net profit of approximately 6.3 million KD for the first quarter of 2019

supported by a robust topline growth registering 20% in financing income to reach

approximately 24.6 million KD compared to 20.5 million KD in the first quarter of 2018.

KIB’s total assets increased by approximately 272 million KD to reach approximately 2.25

billion KD, a growth of 14% compared similar period last year. Financing portfolio grew

by approximately 282 million KD reaching 1.6 billion KD with a double-digit growth of

21% over same period last year. Customers’ deposits grew by approximately 86 million

KD reaching approximately KD 1.4 billion witnessing a growth of 7% compared to 31

March 2018, yielding results of our offering on latest customer cutting-edge technology

and digital solutions that truly satisfy our customers.

I would now conclude my short briefing, and handover the call to Ajai to take you

through our quarterly results in detail and answer any questions that you may have.

Thank you very much.

Ajai Thomas Thank you, Mr. Raed.

Good morning and Good afternoon everyone.

KIB’s results shows the continuation of the strategy implementation which the Bank is

going through. We expect 2019 to be a year of improved performance considering the

healthy pipeline of financing proposals and Kuwait’s economic condition.


4 | P a g e

Global growth is slowing after strong growth in 2017 and early 2018 as mentioned by

Mr. Raed earlier. The global growth is expected to level off in the first half of 2019 and

will then firm up after that as per current forecasts. Depending on the ongoing buildup

of policy stimulus in China, recent improvements in global financial market sentiment,

the waning of some temporary drags on growth in the euro area, and a gradual

stabilization of conditions in stressed emerging market economies. GCC regions’

growth, however in 2019 looks stronger than 2018, with Saudi, Kuwait and Abu Dhabi

expected to continue to deliver significant fiscal stimulus this year.

KIB has shown impressive results and we expect to keep the momentum going forward.

This is supported by the current macro-economic conditions along with our consistent

efforts in meeting our strategic goals adopted in 2015.

Please allow me to take you through the presentation.

Slide #5 of the presentation pack provides a snapshot of our strategy updates.

Slide #7 provides performance of KIB share price and appreciation to investors’ value

compared to share price level as at YE’17. KIB’s share price as of 31 March 2019 stood

at 317 fils compared to 264 fils at 31 December 2018 and 228 fils at 31 December 2017

with return of 20% when compared to YE 2018 and 39% when compared to YE 2017

closing.

Slides #9 to # 13 provides details of financial performance during the 1Q 2019.

Navigating through slide # 9 & 10:

KIB reported net profit of KD 6.3 Mln for the first quarter of 2019. This was mainly driven

by the topline growth of financing income, which is 20%; to reach KD 24.6 Mln as

compared to KD 20.5 Mln in first quarter 2018, which resulted from strengthening of the

Bank’s core business over this period.

Net financing income comprised of approximately 79% of the total operating income

during the first quarter 2019 as compared to 78% a year ago reflecting strengthening of

core business activities as KIB does not operate an active investment trading book as

per it’s conservative risk appetite.


5 | P a g e

Increase in operating expenses is mainly to support business growth. Increase in staff

cost is partly reflective of Kuwait labor laws, while increase in depreciation is in line with

adoption of IFRS 16.

Slides #11, 12 and 13:

These slides show an overview of the key aspects of the bank’s core business showing

consistent growth over last two years. Our ALM has shown marked improvements over

previous years, which has always been our strategy to move towards a optimum

balance sheet structure.

In terms of our core assets/liabilities’ growth, KIB achieved growth in total assets by 14%

to reach KD 2.2 billion as at 31 March 2019 compared to KD 2 billion as at 31 March

2018. This was achieved through growth in financing receivables, which reached KD

1.6 billion, a growth of 21% as compared to KD 1.4 billion as at 31 March 2018.

KIB’s investment portfolio decreased by 5% to reach KD 141 Mln primarily through sale

of investment securities and maturity of various sukuks, compared to approximately KD

149 Mln as at 31 March 2018. Investment income, higher compared to 1Q 2018 is mainly

on account of upward revaluation of certain investment securities.

Customer deposits growth is in line to our various successful product launches and

campaigns supported by attractive profit rates; resulting in an increase of

approximately KD 86 Mln or 7% to reach approximately KD 1.4 billion compared to

approximately KD 1.3 billion as at 31 March 2018.

Continuing with the financial performance to Slide #13

KIB’s CAR stood at 16.5% as of 31 March 2019. Sound capital buffers in line with our

prudent risk management places KIB’s ratios well above the regulatory requirement of

13% in terms of Basel III CAR ratio. Shareholders on 28th March 2019 approved issuance

of Basel III compliant Tier 1 Sukuk to further boost our CAR ratio, which can fuel our

growth plan. The Bank is in the process of obtaining all regulatory approvals for a Basel

III compliant AT1 USD sukuk issuance for up to USD 300 Mln. Financial leverage ratio

stood at 10.2%, well above the 3% requirement. NSFR was also maintained at

comfortable levels compared to regulatory requirements.

Slide #15 shows our commitment to shareholders with an improved dividend payout

with 11 fils cash dividends in addition to 4% bonus shares for 2018, approved by the

Bank’s shareholders in March 2019.


6 | P a g e

Slide #17 summarizes expectations for YE 2019

Thank you. Handing over to the operator.

Operator

Thank you. Ladies and gentlemen, we will now start our question and answer session. If

you wish to ask a question, please type your question into the “ask a question text” area

then click the submit button. Thank you for holding, until we have our first question.

Abdullah Al Asouse We have our first question. KIB reported impressive NPL ratio of less than 1% for the year

ended 31 December 2018. Could you shed some light on asset quality during first

quarter of 2019?

Ajai Thomas

We are pleased with our conscious efforts bearing fruits in terms of improving our asset

quality over the years. We have been able to maintain NPL ratio at around 1% as of 31

March 2019. Our continuous monitoring and follow up of existing loan book and

onboarding healthy new exposures has resulted in one of the lowest NPL ratios in the

region.

Abdullah Al Asouse Operating expenses has grown 11%. Do you expect a similar trend going forward?

Ajai Thomas

Financing income increased by 20% during 1Q 2019 compared to 1Q 2018, as

mentioned in Slide 9, while our operating expenses shows a modest growth of 11%. We

expect a similar trend to continue going forward in 2019

Abdullah Al Asouse There is a decline in your investment portfolio while Bank registered higher investment

income compared to last year, is this offloading in line with your strategy?

Ajai Thomas

As mentioned during our presentation, KIB’s investment portfolio decreased by 5% to

reach KD 141 million as at 31 March 2019 compared to approximately KD 149 million as

at 31 March 2018, primarily on account of maturing of various sukuks. Higher investment

income compared to 1Q 2018 is mainly because of higher valuations of investment

portfolio. We are looking for opportunities to investment in high quality sukuks and

investments, which meet our criteria in line with strategy.

Abdullah Al Asouse What are the drivers of financing portfolio growth, which has shown strong growth in

the first quarter of 2019?


7 | P a g e

Ajai Thomas

Bank’s financing portfolio grew in excess of 280 million KD compared to 31 March 2018,

clocking impressive growth of 21%. We are actively participating in high quality

syndications in local and GCC markets with focus on oil & gas, telecom, aviation and

hospitality sectors which has helped us grow well above the market trend. We are

pleased with our growth and look forward to keep the momentum going forward

Abdullah Al Asouse Can you please comment on the decline in net interest margins. What are the

expectations going forward?

Ajai Thomas

Finance costs and estimated distribution to depositors has been rising to reach 11.1

million KD in 1Q 2019 compared to approximately 7 million KD in 1Q 2018. With the US

Fed now turning away from rate increases in 2019 and even a rate cut by 2019-end, will

bring some respite to the increasing CoF which should benefit the Bank going forward.

Abdullah Al Asouse What is the reason behind the increase in loan loss charges y/y? What is your CoR

outlook for 2019?

Abdullah Al Asouse The same question has been answered

Operator

Ladies and gentlemen, I would like to remind you. If you wish to ask a question, please

type your questions into the “ask a question text” area then click the submit button.

We have another question.

Abdullah Al Asouse Could you please elaborate on the higher provisions and impairment charges in 1Q

2019 compared to 1Q 2018?

Ajai Thomas

KIB’s asset quality matrices continues to be robust with NPL ratio as at 31 March 2019 at

around 1%. Provisions relating to the financing portfolio was around KD 1 Mln as

mentioned in note 4 of the financial statements with the rest contributed by other one-

off charges.

Abdullah Al Asouse After the issuance of Tier 1 sukuk, what would be the impact on KIB’s CAR ratio?

Raed Bukhamseen We have obtained our AGM approval and we are in the process of obtaining final

regulatory approvals for issuance of Basel III compliant Tier 1 sukuk to boost our CAR

ratio. Today we stand at 16.5% and after the issuance we expect a significant buffer to

boost our growth in the future.


8 | P a g e

Abdullah Al Asouse Would we expect an increase in 2019 dividends considering the dividends declared for

the year ended 31 December 2018?

Raed Bukhamseen As mentioned in page 15 of this presentation. KIB has increased its dividends for the

year ended 31 December 2018 compared to previous years as recommended by KIB’s

BoD and approved by shareholders and appropriate authorities (cash dividends

distributed is 11% (i.e. 11 fils per share) and bonus shares is 4% (i.e. 4 shares for each 100

shares)). This dividends reflects KIB’s financial performance realized during the year

2018, our future strategy hopes to maintain the momentum of this growth and

performance thus, enable us to distribute well dividends in the coming years to the

shareholders.

Abdullah Al Asouse What percentage of the bank's loan book is related to real estate segment?

Mohamed Said El Saka Being Islamic bank in addition to the fact that we used to be a Real estate bank, we

have a very acceptable ratio in terms of financing and investing in RE sector and also

we capitalize on our knowledge of having everything under one umbrella since our

strategy always mention one stop of real estate shop that actually consolidating

financing activities, appraisal, property management and RE advisory services.

Abdullah Al Asouse We have last question, what led to the decline in Q1 2019 compared to the same

period last year?

Mohamed Said El Saka As mentioned earlier, we note that financing income/the core business increased by

20% compared to the same period last year. In terms of financial position, the assets

grew by 14%, through increase in financing portfolio by 21%. Thus, slight decrease in

operating income by less than 2% which was due to increase in CoF and estimated

distributions to depositors’ as mentioned above, as well as an increase in operating

expenses and provisions over the same period last year.

Abdullah Al Asouse

Thank you all.

Ladies and gentlemen, we are nearing the close of our allotted time for the call. Please

feel free to get in touch with us at the investor relations contact provided at the end of

the presentation, and we will respond to your inquiries.

Any final words, Mr. Raed?


9 | P a g e

Raed Bukhamseen On behalf of KIB, I would like to thank all the participants and look forward to discuss

next quarter results.

Thank you very much for joining.

Operator This concludes today's conference call.

Thank you for your participation.

You may now disconnect.

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