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Q3'19 Earnings Call: Burgan Bank's performance driven by strong growth in Kuwait business

Q3'19 Earnings Call: Burgan Bank's performance driven by strong growth in Kuwait business

Saturday, November 16, 2019/ Editor -  

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Kuwait – 16 November 2019:   Mr. Raed Al-Haqhaq, Burgan Bank Deputy Group CEO and CEO-Kuwait, stated that Q3’19 was one of the strongest third quarters for the bank. In Q3’19, Burgan Bank generated Net Income of KD 22.7mn, Y-o-Y growth of 10.7%.

The financial results of first 9 months of 2019 (9M 2019) was also solid with Group Revenue of KD 178.3mn and Group Net Income of KD 67.5mn. Loan book of the bank grew to KD 4.2bn while total deposits increased to KD 4.0bn as on 30th Sep 2019. Burgan Bank achieved these results in spite of including only 8 months of subsidiaries’ results instead of 9 months, as included in the prior periods.   


Burgan has been pursuing a selective growth strategy with focus on growing Kuwait business and cautious approach to its subsidiaries’ business. This reflects the bank’s proactive measures to manage the challenges in some of its subsidiaries’ markets. Mr. Raed highlighted this during the earnings call and stated “We can see that Kuwait grew by 7.7% against a reduction of 4.8% for the same period last year. As a group, the overall growth this year is 1.5% against a reduction of 6.6% last year”.


Maintaining stable margins has been another key focus point for Burgan. During 9M 2019, the Bank maintained its margins at similar levels as last year despite rise in cost of funds in Kuwait. During the earnings call, Mr Raed Said, “At a group level, the margins are almost at the same level at 2.8% this year against 2.9% last year”. Group NIM of 2.8% is one of the highest in Kuwait and Burgan has been able to maintain these margin levels  over the last few years. 


Burgan continues to deliver on operating efficiency. During the earnings call, Mr Naveen Rajanala, Group Head of Strategy and Capital, said, “Burgan’s operating expenses both at Group and Kuwait levels are lower than previous period”. Burgan has reported Operating Profit of KD 103.6mn for 9M 2019. 


Burgan Bank’s Cost of Credit reduced  significantly to 0.8% in 9M 2019 from 1.4% in the same period last year. Mr. Raed highlighted Burgan’s strong risk management framework and said “In the first 9 months of 2019, Kuwait Cost of Credit is at KD 6mn with a total Group Cost of Credit of KD 26mn. In comparison, cost of credit in Kuwait was KD 15mn last year with a total of KD 45mn achieving reduction of 43% Y-o-Y”. 


The improvement across all these metrics contributed to achieving strong Net Income for 9M 2019. During the call, Mr Raed said, “In terms of Group Net income, we have reported KD 67mn this year against KD 71mn last year. The dip is primarily due to the one-month lag in our subsidiaries reporting whereas the Net Income from Kuwait business grew strongly from KD 51mn to KD 67mn.” Burgan’s Kuwait business Net income grew impressively by 32%. 


Burgan is placed quite comfortably in terms of its capital and liquidity levels. On this topic, Mr Naveen said, “Burgan continues to be a capital efficient organisation.  Our CET1 is currently at 11%. At year end, we expect our CET1 to be about around 11.5%”. Regarding the liquidity levels, he said, “Burgan  continues to be comfortable on both short term and long-term liquidity ratios.”


Going Forward, Burgan Bank remains generally optimistic about the prospects of growth of the Kuwait economy. Mr Raed said, “Our target in Kuwait this year was a growth of 7% to 8% which we have achieved and this will continue to be our target even for next year”. 


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