Continuing excellence and driving innovation key pillars of NBK's success: Shaikha Al-Bahar

29/04/2025 06:13 AST

In an interview with CNBC International, Shaikha Al-Bahar, Deputy Group Chief Executive Officer of National Bank of Kuwait (NBK) affirmed the Group's commitment to maintaining excellence and fostering innovation as key pillars of its success, while emphasizing the continued use of technology and data-driven strategies to seize emerging opportunities across NBK's growth markets.

Al-Bahar noted that, in Kuwait, the bank remains focused on developing digital services, diversifying its customer base, and enhancing the banking experience. Internationally, NBK is working to strengthen its presence in key markets, improve operational efficiency, explore sustainable financing opportunities, and expand cross-selling activities. She further highlighted that NBK Group is reinforcing its regional leadership through NBK Wealth, focusing on the enhancement of its financial advisory and investment services.

First quarter financial results
Commenting on NBK's financial results for the first quarter of 2025, Al-Bahar said: "We delivered solid profit growth in the first quarter of 2025, despite the impact of the newly implemented domestic minimum top-up tax ("DMTT") of 15 percent on the profits of Kuwaiti constituent entities of large Multinational Enterprises ("MNEs"). This tax, rolled out in different markets in which we operate in, raised the effective tax rate to 16.3 percent in the first quarter of 2025, compared to 9.2 percent in 2024".

She explained that this led to a drop in net profits by 8.5 percent year-on-year, adding that excluding the impact of the new tax regime, NBK achieved a growth rate close to 1 percent in pre-tax profits during the first three months of 2025, supported by robust growth in lending and investment activities, in line with the bank's diversification strategy. "The implementation of the DMTT tax system was not surprising, given that the related laws were introduced globally two years ago. We had anticipated their actual enforcement in 2025 across most of our regional markets," Al-Bahar said. She added that while this new tax structure will have a transitional impact on the bank's quarterly financials during 2025, its impact will fade beyond this year.

Al-Bahar underscored the strength of NBK's financial position, backed by a solid balance sheet, strong capitalization, high liquidity levels, robust asset quality, and a prudent approach to risk management. "Our NPL/gross loan ratio stood at 1.3 percent, while the NPL coverage ratio reached 251 percent," she said.

She underscored that the strong growth in non-interest income, which rose by 4.3 percent, helped offset the pressure on net interest income caused by lower interest rates and a shift in the asset mix. Al-Bahar added that the asset mix is expected to improve with the deployment of excess liquidity into anticipated government issuances, likely to materialize soon under the new financing and liquidity law that the market has long awaited. She emphasized that this move would enhance profit margins, as the bank continues to prioritize fee income to diversify its revenue streams and mitigate exposure to interest rate volatility.

Trade war
On the impact of the global trade war and geopolitical tensions in the MENA region, Al-Bahar stressed that the global economic environment remains highly volatile. She explained that, along with persistent geopolitical tensions and growing uncertainty surrounding monetary policies, the recent US tariffs have further clouded future economic prospects. Al-Bahar noted that while the region remains relatively protected due to the exemption of oil and gas exports from tariffs, the GCC economies are more vulnerable to oil price fluctuations. She added that oil price volatility is likely to persist in the short term as global economic growth projections continue to be revised downward, which in turn impacts oil demand.

"As for Kuwait, despite geopolitical tensions and the looming threat of a trade war weighing on growth prospects, we remain confident that the operating environment and overall economic performance will continue to improve, supported by sustained momentum in infrastructure spending and ongoing economic and legislative reforms," Al-Bahar added.

Commenting on NBK's exposure to risks from a potential decline in oil prices, Al-Bahar acknowledged that the level of uncertainty that prevails today, it is challenging to take a solid view of economic activity going forward, even in the region.

She noted that under a scenario of reduced oil price volatility, regional GDP growth could recover, supported by steady increases in oil production, which would boost economic performance across the GCC.

Optimistic outlook
Al-Bahar expressed an optimistic outlook for Kuwait, fueled by emerging opportunities and the ongoing progress of the government's strategic and legislative agenda. She highlighted that economic diversification remains a central focus, with increased support for the private sector and its active participation in driving economic growth, which will positively impact the banking sector. She conveyed her strong expectations and optimism about the country's continued positive trajectory.

On the potential effects of this environment on credit demand, Al-Bahar highlighted the anticipated launch of a series of mega projects. She shared her confidence in the continued momentum of project awards, noting that this would create significant opportunities for banks and revive credit activity. In the first quarter, contract awards reached $1.3 billion, with planned awards amounting to $33 billion, representing a substantial opportunity for banks to outperform last year.

Additionally, Al-Bahar pointed to the upcoming mortgage law, which is expected to facilitate home loans for customers, offering further avenues for lending. She noted that banks have strong liquidity that they hope to invest in the upcoming government issuance, particularly in alignment with the Finance and Liquidity Law. "We are extremely optimistic and confident that the business environment will show significant improvement compared to previous years. With the IMF forecasting a 4.2 percent growth for the GCC economy, this presents a tremendous opportunity for all banks," Al-Bahar explained.

Locally, the bank remains focused on advancing digital services, diversifying its customer base, and enhancing their banking experience

NBK seeks to strengthen its presence in key markets, improve operational efficiency, and pursue sustainable financing opportunities

Excluding the impact of the new tax, NBK's profits in the first quarter of 2025 recorded 1 percent year-on-year growth

The impact of the new tax regime on the Group's financial statements is transitional, with the annual effect expected to fade after 2025

We continue to focus on fee income to diversify revenue sources and reduce the impact of interest rate fluctuations

Global trade war and new US tariffs heighten uncertainty surrounding future economic prospects

NBK maintains an optimistic outlook for Kuwait, supported by emerging opportunities and government progress on strategic and legislative fronts

We expect the operating environment to continue improving locally, with strong infrastructure spending and economic reforms

The government's efforts to expand the role of the private sector are set to stimulate economic activity and support the banking sector

Kuwait Times