Al-Bahar: Kuwait's operating landscape is promisingIn an interview with CNBC International

Kuwait Times

3 days ago

'We remain optimistic about sustained momentum into H2 2025'
KUWAIT: Shaikha Al-Bahar, Deputy Group Chief Executive Officer at National Bank of Kuwait (NBK), affirmed that the Bank delivered a strong quarterly performance, recording a 24 percent increase, while profitability for the first half of the year grew by 7.8 percent year-on-year. In an interview with CNBC International, Al-Bahar noted that second-quarter profits were supported by provision recoveries and lower credit provisions, in addition to a healthy mix of interest income, which grew by 1.5 percent year-on-year, and a strong 8.9 percent increase in non-interest income.
Al-Bahar pointed out that net operating income grew by 3.1 percent, as the Bank delivered solid year-on-year growth in business volume, an outcome that underscores the success of its diversification strategy. She noted that this performance was fueled by continued momentum across various business segments and the Bank's branch network, adding that the loan portfolio grew by 12.1 percent as of June 2025. Al-Bahar stated that the government has recently issued the executive regulations of the new corporate tax law, indicating its effective implementation in 2025. She explained that, as NBK Group is classified as a multinational entity under the new law, its effective tax rate rose from 9.2 percent in the first half of 2024 to 16 percent. This impact will be reflected in the Group's quarterly reports throughout the year, though its effect on full-year results is expected to fade beyond 2025.
Dividend distribution
Commenting on the decision to retain interim dividends, Al-Bahar said: 'NBK remains committed to rewarding its shareholders while maintaining a focus on long-term value creation. The decision to carry forward first-half profits to the end of the year and prioritize final dividend distribution was driven by the promising development opportunities across our markets, as well as the anticipated uptick in local activity. Kuwait is currently entering the execution phase of several mega projects, which will present significant opportunities for the banking sector, and for NBK in particular.'
Al-Bahar added that the temporary capital ratio constraints resulting from an interim distribution would have limited the Bank's growth prospects over the course of the year.
Kuwait's operating environment
Responding to a question on the outlook for the operating environment in Kuwait, Al-Bahar stated that conditions remain highly favorable, with a very positive outlook for the period ahead. She added that the current economic climate presents promising opportunities for the Bank both in Kuwait and across other markets where it operates.
Commenting on the impact of the new tariffs and taxes imposed by the US administration, Al-Bahar emphasized that GCC economies are closely tied to fluctuations in the oil market. Fortunately, she noted, the tariffs do not extend to oil and gas, although some price volatility may persist due to ongoing adjustments in the global economic growth outlook.
Al-Bahar stressed that a prolonged decline in oil prices could pose challenges to the fiscal positions of GCC countries. However, she pointed out that most of these countries possess substantial sovereign reserves, which would significantly support the financing of major projects and business opportunities.
Kuwait's economic outlook
Regarding the prospects of the Kuwaiti economy, Al-Bahar reiterated her optimistic outlook, noting that the outlook remains highly positive, driven by emerging growth opportunities, steady progress in implementing strategic government plans, and strong momentum to empower the private sector. She added that the government continues to stimulate the economy, which will generate significant benefits for the banking sector.
Furthermore, she explained that a near-term challenge for banking sector profitability may stem from tightening margins. Despite some liquidity declines in other markets, margins remain compressed, and the anticipated shift by the US Federal Reserve toward lower interest rates will undoubtedly place additional pressure on spreads and, consequently, profitability. That said, this impact may be mitigated by stronger economic momentum and broad-based growth across multiple sectors.
She explained that NBK's regional and international growth plays a vital role in diversifying income streams and reinforcing the strength of its business operations.
H2 2025 forecast
Commenting on the outlook for the second half of the year, Al-Bahar emphasized that the government's approval of the Financing and Liquidity Law marks a positive step for the economy, as it supports the government's ability to implement its expansionary plans. She noted that following the law's approval, the Central Bank began issuing local debt instruments on behalf of the government amounting to KD 700 million — a move that enables the deployment of previously non-interest-bearing deposits with the Central Bank and significantly boosts the Bank's profitability.
'We look forward to continued issuances through year-end as a means to effectively deploy excess liquidity,' Al-Bahar said. 'Our optimism is further reinforced by the government's stated intention to issue between KD 3 billion and KD 6 billion in debt instruments over 2025–2026. Similarly, Kuwait Investment Authority (KIA) has issued RFPs to international parties, signaling the potential issuance of sovereign bonds worth up to $6 billion. All of this points to a wealth of promising opportunities for banks operating in Kuwait.'
• We recorded substantial growth in business volumes, fueled by sustained momentum across multiple sectors and our international branch network
• Our ongoing regional and international expansion continues to diversify revenue streams and reinforce the Group's operational strength
• The economic outlook remains positive, supported by emerging growth opportunities and steady progress on government-led reform initiatives
• We have a lucrative dividend policy - one that strikes a balance between delivering attractive returns to shareholders and managing capital ratios prudently