Banking and Finance

Kuwait is now home to a number of successful local and foreign financial-sector companies offering the highest quality banking and other financial services. Banking in Kuwait meets international standards and has been becoming increasingly competitive thanks to the government’s decision to open the banking sector to foreign interests. Private banks are relatively free of government control, although their operations are overseen by the Central Bank of Kuwait.

New role as regional financial hub

The Central Bank is charged with ensuring efficient and high-quality operations throughout the financial sector as well as with serving as the banker for the government and advising the government on financial policies. The Central Bank, which has earned high praise from international funding organizations, has five million Kuwaiti Dinars in paid-up capital.

Kuwait’s commercial banks provide savings accounts, traveler’s checks, credit cards, money-market accounts, remittances, and more. Many Kuwaiti banks work in partnership with banks in the United States, including Citibank, Bankers Trust and Chemical Bank. In addition, United States companies are now providing investment advice, credit-card processing, traveler’s-check processing and foreign-exchange trading services in the Kuwait market, while a number of non-United States banks with international networks provide links between Kuwait and the United States as well.

Three specialized government banks include the Industrial Bank of Kuwait, which finances industrial and agricultural projects; the Kuwait Real Estate Bank (KREB), which finances real estate projects; and the Credit and Savings Bank, which offers services for individual Kuwaitis.

Kuwait’s increasingly international financial sector is earning the country a reputation as a dynamic regional financial hub.

Central Bank

“Financial sector operations meet highest international standards.”

Kuwait is establishing a role for itself as a vibrant international financial center and base for business. As Sheikh Salem Abdulaziz Al-Sabah, Governor of the Central Bank, explains, “Kuwait may be small, but its economic and geopolitical role transcends far beyond its geographic boundaries. Its highly liberal trade policy and modern financial and physical infrastructure offer investment opportunities in abundance.”

Kuwait’s financial sector includes 10 banks, 41 investment companies, 32 exchange companies, and 54 investment funds, all overseen by the Central Bank, which has proved instrumental in earning for Kuwait high praise from the International Monetary Fund. As Al-Sabah notes, “The state-of-the-art technologies employed by these units in providing their services make them highly efficient and competitive and their services meet international standards.”

Kuwait has made steady progress concerning economic reforms. As Al-Sabah points out, “The government’s reform program is designed to reduce the state’s role in the economy and expand the role of the private sector, open up the economy to foreign competition, trim bureaucracy, and diversify sources of national income. The pace of progress has been understandably slow but confidently firm and sure.”

Now, thanks to the Trade and Investment Agreement between Kuwait and the United States, Kuwait is even more attractive for American investors. Al-Sabah says, “This agreement will serve as an essential element in implementing the Middle East Free Trade Area initiative within a decade. It offers many opportunities for United States investors to use Kuwait as an investment hub and a strategic trade gateway to the region.”

Investment Dar

“Together we will be profitable in business.”

Investment Dar is one of the largest finance institutions in Kuwait, dedicated to financial activities firmly within the boundaries of Islamic Shari’ah principles. Under the guidance of Adnan Abdul Qadir Al-Musallem, Investment Dar has grown considerably since its inception in 1994 and maintains a distinct approach.
He explains, “Our approach is one of consistency and deliberation. We make purposeful investment decisions in line with Shari’ah principles.” Investment Dar represents for clients and shareholders a safe investment haven for long-term strategic investment. Its clients benefit from a low risk investment portfolio with a consistent and handsome return on investment.

Recent turbulence in world markets and regional instability has not affected the performance or standing of this company. Investment Dar has acquired a higher rating from Capital Intelligence, indicating its credibility and sound financials in the credit market. Furthermore, it has achieved record levels of performance in recent years.

In 2003, Investment Dar’s traded shares reached 527 million, with a trading value of KD 121.2 million and share turnover ratio of 216 percent. Net profit has increased 37 percent over this past year to KD 4.094 million, and the company’s asset base has increased by 31 percent.

These achievements are testament to Al-Musallem’s unique approach to the finance industry, and have made Investment Dar one of the market leaders in Kuwait. As he explains, it comes down to “finding the right combination between Islamic Sharia and the profit incentive. Our dedication to the first has made us successful.”

In this way Investment Dar represents a new generation of global finance institutions that have created an innovative approach to serving the sensitive religious concerns of Islamic investors. It can combine interest-building and high-risk investments with their desire to be pro-active investors. Investment Dar is proof that this is a successful and profitable combination.

Al-Musallem’s plan for the future sees him further streamline the company’s organizational structure to provide for the direct management of investment portfolios and funds by managers. Several real estate investments are also planned, which will diversify the company’s asset base. Investment Dar is also continuing its expansion into automobile leasing and financing.

The company also plans additional expansion into the GCC, especially Qatar. Investment Dar is also actively involved in the modernization of its service divisions, introducing innovative new mechanisms to facilitate the communication between consumers and suppliers.

For foreign investors and businesses, Investment Dar is a one-stop-shop. Al-Musallem explains, “Those interested in doing business here need a strong local partner to help them with Islamic finance.”
For companies interested in further expansion in the region and involved in Iraq’s reconstruction, Investment

Dar is the first and only destination for those needing local expert advice, financial management and a long-term partner. Al-Musallem comments, “We are ready, our record speaks for itself, and we are happy to share our success with you. Together we will be profitable in business.”

Global Investment House

“Try Global Investment House with 1 transaction and you will never regret it.”

Global Investment House is a young company that has already established a formidable track record and a solid reputation for success as a modern Kuwaiti Investment Bank. Under the stewardship of Maha K. Al-Ghunaim and a team of executives, Global Investment House has grown immensely since its inception in 1998 to develop assets under management worth USD 2.7 billion, profits in 2003 of USD 42.3 million and a diversified range of pro-ducts for local and international investors.

For the international investor, Global Investment House acts as a gateway to the thriving economies of the GCC. The attractiveness of the region stems from the composition of GCC economies in relation to the rest of the world. As Mrs. Al-Ghunaim explains, “The current performance of GCC economies shows how these countries can be independent from global trends.” To cater for this market, Global Investment House has several small and large cap funds under management that invest in the Kuwait stock market, Kuwaiti companies and the economies of other GCC countries. Most notable is the Global Al Ma’amoun Fund specializing in Kuwaiti stocks which has seen an 88.10 percent R.O.E since its inception in mid 2001 and the Global Local Fund with a 44.40 percent R.O.E since inception in January 2003. Global Investment House’s other funds are mainly indexed, fixed income or money market funds focused on the Kuwait market. It prides itself in playing a major role in Kuwait’s booming capital market by helping the transformation of the market from mostly private to institutional investors.

In terms of corporate finance, Global Investment House is committed to the regional bond market and has played a significant role in re-activating this market. With its corporate advisory expertise, it has managed and co-managed over 75 percent of bond issues in the Kuwaiti market, and is the first company to structure and manage a dual currency issue with a four tranche principal payment. This reflects Global Investment House’s commitment to innovation and market leadership, and the reason why it has been responsible for many market firsts.

Internationally, Global Investment House offers several secure investment options mainly through third party United States, European and Asian hedge and index funds. In this way, Global Investment House offers a diversified portfolio of domestic, regional and international investment opportunities targeted at high-net worth investors. It is proud to be a local company that lives up to international standards and wants to be the preferred investment bank in the Middle East, as Mrs. Al-Ghunaim explains, “We speak the same language as the international investors.”

One of the main strengths of the company is its in-house research and analysis capabilities that provide incisive analysis into over 50 percent of Kuwaiti listed companies. Additionally, Global Investment House has begun to publish Economic and Strategic Outlook reports on the economies of Saudi Arabia, Bahrain, Qatar and Oman, and equity research on several companies in these countries. It was one of the first companies to publish an econo-mic report on Iraq; one which was well received by the investment community worldwide. These new initiatives stem from one of Global’s founding principles, to overcome the lack of transparency in listed companies. In this way, Global Investment House can provide high quality advice to its clients about investment decisions domestically and regionally.

With a far-sighted approach to capitalize on the opportunities presenting itself in Iraq, Global Investment House has established the ‘Iraq Holding Company’ with a capital of USD 200 million. The purpose of this company is to build bridges between international companies and local Iraqi partners to invest in private ventures. As Mrs. Al-Ghunaim explains, “We are here for the long-run, this is not a short-term project.” She expects her key projects to be in the development of Iraq through micro projects.

Mrs. Al-Ghunaim’s predictions for the future are optimistic and bullish. She expects the current upward trend in the Kuwaiti economy to sustain itself over the coming years and aims to position Global Investment House at the forefront of these developments. Asked what she expects from to achieve in the years ahead the answer is clear: to be the number one GCC investment company.

Gulf Investment Corporation

“The region is promising and I encourage investors to participate in the development of the region and enjoy the results.”

Gulf Investment Corporation was established in 1983 under the auspices of the Gulf Cooperation Council and is equally owned by the six member states. Its main objective is to promote investment opportunities in the Gulf region and facilitate the development of private enterprise and economic growth. Furthermore, it provides for its customers international investment opportunities through third party hedge, equity and other investment alternatives.

GIC is one of the highly capitalized financial institutions in the region with an authorized capital base of over USD 2.1 billion and shareholders funds of USD 1.58 billion by the end of 2003. Its total asset base has grown remarkably in the last year by 15.3 percent to close off 2003 with USD 6.7 worth of assets spread across the GCC region and international markets. Under the guidance of Hisham A. Al-Razzuqi, Chief Executive Officer, GIC has seen a third consecutive year of increased profitability, productivity and efficiency. Return on shareholder’s equity increased from 7.3 percent in 2001 to 11.3 percent in 2003, and net income went up from USD 90.3 million in 2002 to USD 125 million in 2003. The core of GIC’s business is to make equity investments in GCC ventures in addition to capital market investments in the expanding regional markets.

Principal investments are made into several sectors that include utilities, electricity and manufacturing. These investments are aimed at diversifying the region’s economies. As a project or venture investor GIC facilitates the transfer of technology and foreign expertise to the region. The international capital markets business is aimed at investing in global markets in both debt and equity and also in alternative investments. GIC has also been active in establishing a GCC equity fund for international investors looking to diversify their portfolios in this emerging region. Furthermore, with GIC’s in-house expertise, its advisory services are a pre-eminent first-stop for foreign investors looking to expand into the region. GIC’s long experience in working with international partners through joint-ventures, devising investment solutions for international projects combined with its pan-GCC reach, underpins its strategy to become the premiere investment bank in the region.

Mr. Al-Razzuqi’s prediction for the future of the region is positive and bullish. He expects the current economic upswing in the GCC economies to continue for the foreseeable future and Iraq to offer huge investment potentials in the coming years. As one of the most active investment banks in the GCC, GIC is the right partner for those seeking to capitalize on the opportunities presenting themselves in the coming years. As Mr. Razzuqi explains: “The region is promising and I encourage investors to participate in the development of the region and enjoy the results.”

Al Ahli Bank of Kuwait (ABK)

“We aspire to be amongst the top banks in the country.”

Al Ahli Bank of Kuwait (ABK) is undergoing a dynamic turnaround to establish itself as one of Kuwait’s leading banks. A new executive management is in place and a new strategy has been developed to restructure ABK’s operations. This strategy has already been paying di-vidends in performance terms.

Dynamic turnaround
The improvement in ABK’s financial performance over the last four years has been due to the focus on improving asset quality and operational efficiency. Added to this there has been an implementation of an effective and all-round risk management policy. These new strategies and new practices have improved the bank’s financial performance significantly in recent years.

Greater emphasis on fee-based income structure, and increase in asset quality and operational efficiency, has seen ABK increase in net profit of 14.7 percent, from KD 19.2 million in 2002 to KD 22.1 million in 2003. Net profit has more than doubled since 2000.

ABK has also increased its average return on shareholder value from 11.7 percent in 2002 to 12.29 percent in 2003. Despite challenges still remaining as it overturns its share of non-performing loans, ABK has set a clear precedent for its future direction.

Conservative credit lending policy
ABK has focused on reducing its non-performing loans by diversifying its customer base – both retail and corporate – and by employing conservative credit lending regulations. The bank has aggressively zeroed in on large corporations and international companies to enhance the quality of its assets and its regional profile.
The bank’s improved monitoring and recovery capabilities, and increased emphasis on risk management, have generated a reduction in non-performing loans as a percentage of gross loans (excluding pre-invasion) to 2.17 percent as of the end of June 2004 with total coverage (collaterals and reserves) covers more than 100 percent of total non performing loans.
Operational improvements

Operationally the bank has increased productivity and efficiency by reengineering of processes, improved automation that has rationalized staff numbers and contributed to reducing operating expenses by 3.5 percent in 2003. ABK has also shifted its services towards electronic-based solutions for its clients.

ABK has become an emerging leader in the local banking sector through its far-reaching strategic vision and new reorganization. By enhanced asset quality, increased operational efficiency and implementation of a regulated credit lending guideline, the bank has set out achievable goals. As Deputy Chief General Manager, Abdullah M. Al Sumait explains, “We have a clear target and know where we are going. We want to be one of the top banks in Kuwait.”

Diverse products and services
As a bank for both local and international clients, ABK has launched a diverse range of new products and services. ABK’s Investment Division has revised its investment policy, continued to diversify its asset management services, further rebalancing its investment portfolios to achieve a low risk, high return earnings profile.

ABK offers many investment products to its customers, ranging from fixed income and equity, to collective investment vehicles such as managed and mutual funds. The Investment Division recently launched two new equity funds, Al Ahli Kuwaiti Fund and Al Ahli Gulf Fund. The Kuwaiti Fund focuses on achieving above-market capital growth, with an acceptable level of risk by investing in the shares of select companies listed on the Kuwait Stock Exchange.

The Gulf Fund seeks capital growth by investing in the securities of companies listed on GCC stock exchanges. Both funds have been highly successful, and are the first of their kind to be managed completely in-house by ABK.

Corporate banking with a regional focus
ABK’s Corporate Banking Division has undergone a significant restructuring to offer more sophisticated and diversified range of services. It has begun advising and cross-selling products to satisfy broader demands, and has established numerous specialized units. Contract financing, small business, trade finance and commercial units have all been set up to provide a greater specialization in services.

The Corporate Banking Division established a specialist unit in 2003 to undertake financing for infrastructure and trade finance projects related to Iraq’s reconstruction. This makes ABK a key strategic partner for those companies involved in Iraq that require specialized financial services.

As Ibrahim M. Ibrahim, General Manager International Banking Division, highlights: “We are open for international companies, to be their local bank.” With a fresh focus on international corporate clients, ABK has created the infrastructure to meet their regional needs.

Greater choice for local customers
For local clients ABK offers a range of new retail and treasury products. It plans to introduce off-site ATMs, more sophisticated credit card facilities, on-line banking services and prepaid cards. The bank has successfully launched a Call Center to facilitate quality customer service. ABK’s co branded ABK-Emirates Visa and Master cards offering Skywards miles are popular modes of payment. It has also established Al Amil salary accounts to cater to the needs of the expatriate market.

ABK has introduced several high profile current account products to diversify its product base, and attract new deposits and clients. It is actively marketing itself locally to highlight its corporate image and establish itself as one of the most recognized Kuwaiti banks.

ABK plans to refurbish existing branches, and open four new branches. Over the last year, ABK’s current account deposits increased by 40.3 percent, and overall total retail deposits increased by 20.6 percent, out-performing Kuwait’s banking sector.

The future for ABK
Al Ahli Bank is in transition, and moving up among Kuwait’s banking institutions. It maintains an open approach to its development and welcomes expertise and knowledge from outside. “We are open to strategic partnerships with international banks,” comments Ibrahim.

ABK’s recent history has shown it to be proactive in bolstering its performance through a disciplined strategy, and focusing on high quality, sophisticated and specialized products for its clients. As Al Sumait says, “We want to increase our market share and be amongst the leading financial institutions in the country.” With the new executive management team in place, the bank’s recent performance indicates that it is well positioned to achieve this goal.

National Investments Company

“We are one of the leading investment companies in Kuwait.”

National Investments Company (NIC) is one of Kuwait’s leading financial institutions, having earned a strong reputation for its expertise in local, regional and international markets. Established in 1987, the firm initially concentra-ted on handling real-estate and private-equity investments, but diversified rapidly following its re-listing on the Kuwaiti Stock Exchange in 1994. Today, NIC provides a broad range of services ranging from fund and portfolio management to treasury, international brokerage and corporate finance services. NIC’s commitment to creating shareholder value means it offers creative and flexible wealth-generation solutions for both private and institutional investors.

Under the management of Chairman and Mana-ging Director Asaad Ahmad Al-Banwan, NIC is run by a management team that has a long history in Kuwait’s financial sector. As Lena Khajah, Marketing Manager, explains, “One of the strengths of the company is that the management team has worked together for 20 years.” This close-knit management team made up of highly experienced professionals gives NIC in-depth market knowledge and experience, allowing it to hold a strong position in the local market and to find promising opportunities in a wide range of economic sectors.

The key strength of NIC is its in-house research, analysis and execution capabilities. As Khajah explains, “This is an intellectual company with strong in-house capabilities. It prides itself on delivering high-quality solutions for clients in a swift and effective way.” All funds are managed in-house, relying on the expertise of a highly trained team of professionals with strong business, financial, analytical and research acumen.
In the highly competitive Kuwaiti market, NIC sets itself apart by offering the highest level of service, striving to find creative and flexible solutions for all investors’ needs, and maintaining a low fee structure to maximize shareholder value. Its long history in Kuwait has seen it performing throughout the country’s good and bad times. As Khajah explains, “We have proven ourselves by performing above the market average when economic indicators were down.” This is attributable to a shrewd management approach that is adaptable to all economic circumstances.

NIC had a particularly successful year last year, with net profits soaring 125 percent, to USD 61 million, and with an average return on equity growing from 15 percent in 2002 to 30 percent only a year later. In the same period, return on assets rose from 10 percent to an impressive 18 percent. These outstanding results are attributable to NIC’s active establishment of a range of new funds and to successful new investments.
NIC’s asset and portfolio management division has been active in expanding its range of products. Offering discretionary, non-discretionary and custodial accounts for private and institutional high-net-worth investors, NIC seeks to deliver customized investment solutions to suit each investor’s specific needs.

NIC portfolio management services are open to international clients looking to diversify their portfolios and invest in a reputable company in a fast-growing region. Over the past year, NIC has established several funds to capitalize on the boom in Kuwait’s economy and has successfully expanded its assets under management to USD 2.8 billion. The Al-Darij Islamic equity fund, for example, was launched in July 2003 and as of 31st May achieved a rate of return of 40 percent, while the Wataniya Investment Fund, launched in June 2001, has realized a return of 122 percent since its inception.

Significantly, NIC’s new H-fund, the Al-Tahawut Fund, began subscription in May 2004, and involves a market-neutral portfolio (delta neutral) using short-term exchange traded options and futures on United States indices to provide consistent returns with low volatility. Under the management of Muhammad Al-Ghariba, who has 18 years’ experience in the international securities market, it is the first fund of its kind in Kuwait. Additionally, the Al-Tahawut fund is the first fund that utilizes in-house software technology.
The firm’s treasury and international securities department offers clients customized solutions to money-market and foreign-exchange transactions by providing highly specialized advisory services to meet clients unique investment guidelines. NIC offers international execution and advisory brokerage services in equities, commodities, options markets and futures contracts.

NIC has always been an active investor in real estate in Kuwait as well as in the Gulf region and internationally, and has broadened its services to include real-estate management and advisory services for its clients. Furthermore, in private equity, NIC is active in investing in small companies in emerging markets and targets those companies with large growth potential in their respective fields. It has established a number of holding companies to facilitate investments in emerging markets and sectors throughout the region, all of which have been oversubscribed.

All NIC’s services are built upon a strong in-house research capability, which has helped NIC play a leading role in increasing the transparency of the Kuwaiti Stock Exchange and of Kuwait’s financial markets. NIC also publishes a well respected investor pocket guide each year that provides analysis on all listed Kuwaiti companies.

As for the future, NIC’s strategy is to continue its aggressive expansion and diversification program and to continue to offer international investors a wide range of services, including providing a gateway to the booming Gulf region. As Khajah explains, “We are open to new investors from New York. We are one of the leading companies in Kuwait and our performance proves our strong position in the market.”