Quarterly Result Update

• Gulf Bank (GBK) reported total operating income of KWD 38.11 million during 1Q11, down 32.3% YoY.
• Net profit for the period rose more than 17 times to KWD 9.78 million from KWD 0.52 million in 1Q10 on lower provisioning.
• We have revised our FY2011E operating income lower by 13.7%, incorporating lower non-interest income. However, we have increased our net profit estimate to KWD 83.39 million, anticipating lower-than-forecasted provisioning.
• We are reiterating our earlier UNDERWEIGHT recommendation on Gulf Bank, led by significant contribution of non-interest income in total operating income. Our revised target price stands at KWD 0.500, implying a downside of 9.1%.

Operating Income
Total operating income during 1Q11 was reported at KWD 38.11 million, declining 32.3% from KWD 56.31 million in 1Q10. Net interest income fell 2.0% to KWD 24.42 million from KWD 24.92 million in the prior-year quarter. Interest income slipped 10.2% YoY to KWD 41.89 million, while interest expenses reduced 19.5% YoY to KWD 17.47. Non-interest income decreased 56.4% YoY to KWD 13.70 million from KWD 31.38 million, led by declines in gains from disposal of available-for-sale investments to KWD 0.81 million from KWD 14.47 million in 1Q10. In addition, gains from foreign currencies and derivatives dropped 51.0% YoY to KWD 5.07 million from KWD 10.34 million in the year-ago quarter. Meanwhile, net fees and commission income rose 19.5% YoY to KWD 7.67 million, while other income surged 109.5% YoY to KWD 0.16 million.

Operating profit (before impairments and provisions) declined 41.3% to KWD 26.14 million from KWD 44.53 million in 1Q10. Net profit stood at KWD 9.78 million versus KWD 0.52 million in 1Q10. Adjusted annualised EPS stood at KWD 0.016, compared to KWD 0.001 during the year earlier period.

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