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Positive outlook for Kuwait banks says Capital Intelligence

Capital Intelligence, an emerging markets rating agency, completed its latest review of the Kuwaiti banking system and the six Kuwaiti commercial banks. The rating agency reports that overall trends within the sector are positive with a significant improvement in asset quality.

Capital Intelligence, an emerging markets rating agency, completed its latest review of the Kuwaiti banking system and the six Kuwaiti commercial banks. The rating agency reports that overall trends within the sector are positive with a significant improvement in asset quality. Five of the banks reported a lower percentage of non-performing loans (NPL). Provision and collateral coverage remains very strong.

As in previous years, the rating agency stated that all Kuwaiti banks displayed strong capital ratios. With an average RAR of 20%, the ratio is particularly strong in comparison to most other banking systems. Liquidity remains strong in the system as a whole. Profits increased at all banks, although profitability ratios slipped a little at some.

The banking system as a whole benefits from a sound regulatory system and conservative approach to risk by the central bank. After several years of slow activity in the domestic economy, the rating agency reported that increased government spending and inflows of UN compensation monies have increased domestic demand. All banks are benefiting from these developments.

As a result of improved performance, a number of ratings were adjusted upwards. There were no downgrades. The current ratings are:

The Kuwaiti economy is expected to enjoy another good year in 2002, barring adverse external political events. Although oil prices were a little soft during the early months of the year, they have showed a firmer tone in recent weeks. Although this increase may be temporary, economic recovery in the US and in parts of Asia is likely to translate into increased demand later in the year. Government spending plans indicate that project expenditure should increase significantly this year.

Consumer demand is strong, reported the agency, and are therefore favourable for the banks which are expected to show another year of improved performance in 2002.

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