Robust economy to support credit growth of Kuwaiti banks: Moody's

Steady non-oil economic growth and solid financial fundamentals will support the credit growth of Kuwaiti banks over the next 12 to 18 months, as it maintained stable outlook rating for the country's banking system, Moody’s Investors Service said in a new report.

“Nonperforming loan levels will stabilize at around 2 percent of gross loans amid favorable domestic conditions,” said Alexios Philippides, an Assistant Vice President and analyst at Moody's.

“We also believe that banks have cleaned up their portfolios before this year's implementation of IFRS 9 accounting standards by mobilizing the large pool of general provisions accumulated in recent years, which will help limit impairments going forward,” he said.

Bank profitability will also improve on wider net interest margins and lower credit costs, the report said, adding, the ratio of net income to tangible assets will rise to around 1.3 percent over the next 12 to 18 months, from 1.1 percent in 2017, the report noted.

However, Moody's predicted corporate credit growth will be slower, due to corporate repayments and moderation in the development project space.  Other risks that could dampen confidence and subdue equity markets include adverse domestic political and geopolitical developments or renewed weakness in oil prices.

Meanwhile, Moody's said the annual domestic credit growth is expected at around 6 percent over the next 12 to 18 months, driven by household credit growth on the back improving economic sentiment and steady employment increase.

Non-oil GDP growth of 3.5 percent in 2018 and 4.0 percent in 2019, supported by growing government spending, the report said.