Gulf Bank’s kaleidoscopic future
Even as Kuwait’s Gulf Bank struggles to recover from its losses and gets a $1.4 billion bailout, its head promises expansion and high growth rates in the coming months.
December 3, 2008 11:31 by kippreport
Investors in Kuwait’s Gulf Bank have approved a $1.4 billion bailout plan proposed to revive the bank, which suffered severe losses because of currency derivatives (a currency derivative gives its owner the right to buy or sell a block of currency over a given period at a fixed exchange rate).
The emergency plan will raise the required sum through a 100 percent rights issue, and by selling the bank’s shares on the Kuwait Stock Exchange. Shares that have not been sold by the end of the 15 day legal subscription period will then be sold to the Kuwait Investment Authority.
Gulf Bank, which posted losses of $1.05 billion in the first 10 months of 2008, is the only bank in the GCC to be rescued by the state due to the global credit crisis.
The bank’s chairman Kutayba al-Ghanim, listened to hours of complaints by shareholders demanding answers, reports Reuters.
“Where is the money, how did it happen?” one shouted.
Despite the troubles, Ghanim seemed positive about the future, and said the bank would seek opportunities in and outside Kuwait.
“I’m convinced Gulf Bank will be one of the best banks in Kuwait and the countries of the Gulf Cooperation Council after the restructuring,” he said, predicting growth rates of 10 percent in coming years.
A growth rate of 10 percent and expansion plans abroad seem overly-optimistic and over-ambitious considering the bank’s current situation.
Ghanim recently told state news agency KUNA that although the bank received “numerous” merger offers, the time was not right for a deal. “It is not the right time to discuss any such attempts for Gulf Bank due to the fact that right now the bank will be the weaker rather than the stronger party,” he said.
Ghanim blamed the current management for the crisis, saying that “complicated financial deals were made that were not fully studied and the global financial crisis increased the loss. This could have led to the bank’s death.” But is it possible to take too many wrong decisions, all at the same time?
While the Kuwaiti government has guaranteed all deposits at banks, investors in Gulf Bank, and even its customers are going to be asking questions.
While Ghanim has promised to restructure the bank’s management, will that be enough to answer al these questions and reach achieve the bank’s expansion goals?- AN