Kuwait’s CBK second quarterly profit drops as provisions bite again
H1 operating profit of 47.3 mln dinars wiped out by provisions; H1 net profit 0.45 mln dinars vs 1.46 mln dinars yr-ago; Political deadlock, weak investment firms weigh on bank sector; Q2 net profit 0.12 mln dinars vs 0.13 mln dinars in 2011
August 8, 2012 4:25 by Reuters
Commercial Bank of Kuwait (CBK), the country’s seventh biggest bank by market value, posted a 5.4-percent drop in quarterly profits on Wednesday as heavy provisioning once again wiped out earnings growth.
The lender had net profit of 122,000 dinars ($433,000) in the three months to June 30, compared with 129,000 dinars in the prior-year period, it said in a bourse filing.
An EFG Hermes analyst polled by Reuters had forecast net profit of 4.4 million dinars.
Net profit in the first half of 2012 fell to 451,000 dinars, down from 1.46 million dinars in the same period last year.
Heavy provisioning was to blame for the slumping profits, the bank said, noting first-half operating profit before impairments stood at 47.3 million dinars.
“The bank continues a prudent policy towards building up a strong provision base and consolidating its balance sheet,” Fowzi Al Ateeqi, general manager, investments, and secretary to the board, said in a statement.
CBK has endured steep declines in quarterly profits for more than a year. Its first quarter profits slumped 75 percent while it second-quarter numbers in 2011 showed a 91-percent fall in profit due to impairments.
Provisions have crimped earnings at other Kuwaiti banks, with Burgan Bank saying on Tuesday that impairments rose 16 percent year-on-year in the second quarter.
National Bank of Kuwait, (NBK) the country’s largest lender, was forced to take a $96.4-million provision in the second quarter, against potential deterioration in its operating environment.
That operating environment – a reference to political deadlock and slumping stock market – drew a rare public rebuke from NBK’s chief executive as the political paralysis cripples investor confidence and economic development in the major oil producer.
Members of parliament again boycotted a session of the country’s assembly on Tuesday, foiling an attempt to swear in a new cabinet and making new elections – Kuwait has had eight governments in just six years – more likely.
Banks in Kuwait are also suffering the fallout from the collapse in the country’s investment sector, where many firms borrowed cheaply in the mid-2000s to invest in local stocks and real estate projects.
However, the global financial crisis meant loans could not be refinanced and asset values plummeted – the Kuwaiti stock market has dropped more than 60 percent since its June 2008 peak – forcing local banks to restructure debt and provision accordingly.
Shares in CBK have fallen 7.6 percent year-to-date.
($1 = 0.2818 Kuwaiti dinars)
(Reporting by Rania El Gamal; Writing by David French; Editing by Amran Abocar)