National Bank of Kuwait K P : Transcript of the Analysts Conference

PUBLIC

2Q/1H 2023 National Bank of Kuwait Earnings Call

Sunday, 23 July 2023

Edited transcript of National Bank of Kuwait earnings conference call that took place on Tuesday, 18 July 2023 at 3:00 pm Kuwait time.

Corporate participants:

Ms. Shaikha Al-Bahar - Deputy Group CEO, NBK

Mr. Sujit Ronghe - Group CFO, NBK

Mr. Amir Hanna - Head of Investor Relations and Communications, NBK

Chairperson:

Elena Sanchez - EFG Hermes

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Elena Sanchez:	Good afternoon everyone. This is Elena Sanchez and on behalf of EFG Hermes, I
	would like to welcome you all to the National Bank of Kuwait second quarter and
	first half earnings call for the year 2023. It is a pleasure to have with us in the call
	today Ms. Shaikha Al-Bahar, Deputy Group CEO, Mr. Sujit Ronghe, NBK Group CFO
	and Mr. Amir Hanna, Head of Investor Relations and Communications at NBK.
	At this time, I would like to handover the call now to Mr. Amir Hanna.
	Please go ahead Amir.
Amir Hanna:	Thank you Elena.
	Good afternoon everyone. Thank you for joining us for today's webcast to cover the
	financial results of NBK Group for the second quarter and first half of 2023.
	Like we always do, we will start today's call with the presentation disclaimer. I would
	like to bring to your attention that certain comments in this presentation may
	constitute forward-looking statements. These comments reflect the Bank's
	expectations and are subject to risks and uncertainties that may cause actual results
	to differ materially and may adversely affect the outcome and financial effects of the
	plans described herein. The Bank does not assume any obligation to update its view
	of such risks and uncertainties or to publicly announce the result of any revisions to
	the forward-looking statements made herein. Please refer to the full disclaimer in
	our presentation for today's call.
	Our Deputy Group CEO, Ms. Shaikha Al-Bahar, will start the presentation by giving
	some opening remarks on the operating environment and the highlights of the
	second quarter and first half. This will be followed by a detailed presentation on the
	interim financials by Mr. Sujit Ronghe, our Group CFO. Following the management
	presentation, we will answer any questions received through the webcast platform.
	And feel free to send any follow-up questions to our Investor Relations email
	address. Today's presentation is already available on our Investor Relations website
	for your convenience.
	Now let me handover the call to Ms. Al-Bahar for her opening remarks.
Shaikha Al-Bahar:	Thank you Amir.
	Good afternoon everyone. I am pleased to join you today for our second quarter
	earnings call and to update you on NBK's performance during the period and the
	outlook for the rest of the year.
	Globally, economic indicators have been gradually improving in most economies,
	refining the outlook and narrowing recession risks. Furthermore, the fallout from
	the recent banking crisis has dissipated, with no major deterioration seen so far in
	credit conditions following bank failures.

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The growth outlook for most advanced economies has improved in the last few months. While in China, post-Covid economic recovery has been disappointingly uneven, influencing external balances for many countries including the GCC and arguably oil prices too.

As for the GCC region, economic growth is set to moderate after a solid year in 2022. The IMF revised down its GCC growth outlook for 2023 from 3.58% to 2.86% citing lower oil and gas output after the OPEC+ production cut and the effect of a global economic slowdown as main drivers; albeit still decent non-oil growth.

In Kuwait, economic conditions, although solid, are expected to soften in 2023 as post-pandemic bounce fades alongside lower oil output in compliance with OPEC+ cuts. As for consumer activity, the underlying drivers remain solid, including sustained job gains, supportive government measures and favorable demographics. On the other hand, corporate activity started gaining some traction after a period of stagnation on the back of improved sentiment, which is supported by some revival of the project market. We forecasts GDP in Kuwait to be flat in 2023 before rebounding by 3.3% in 2024.

The proposed expansionary draft budget by the government is likely to support domestic consumption and economic activity despite cuts to budgeted capex. That said, if execution rates pick up, on the back of some political stability, we can see year on year growth in Capex figures even on a budgeted reduction. Project activity has been a strong leading indicator with year-to-date project awards reaching around KD 900 million; signaling a significant recovery compared to 2022 levels. Looking ahead to the rest of 2023, positive momentum could continue as the newly appointed government comes to prioritize an acceleration in the development plan execution.

As for NBK, we continued to deliver very strong profitability trends both for the quarter and year-to-date figures. We delivered solid performance during the six months ended June 2023, with net profits of KD 275.3 million, growing by 15.8% year on year. This outstanding bottom line growth was mainly driven by higher core banking income. As for the three months ended-June 2023; NBK posted year-on- year growth of 16.4% in net profits to reach KD 141.1 million, the highest quarterly profits on record for the bank. Moreover, NBK's Board of Directors has approved its second semi-annual dividend distribution of 10 fils per share.

More importantly, we continued to deliver very strong trends operationally, with our revenue growth surpassing the increase in our operating expenses and hence delivering very solid growth in our pre-provision income to reach KD 359.2 milllion, growing by 23.1% year on year.

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