06/05/2026 05:43 AST
Gulf Bank held its first quarter 2026 earnings webcast on Monday, May 4, 2026, to present and discuss the Bank's financial performance. The webcast was organized by EFG Hermes and presented by Sami Mahfouz, Acting Chief Executive Officer of Gulf Bank, and David Challinor, Chief Financial Officer of Gulf Bank. The discussion was moderated by Dalal AlDousari, Deputy General Manager of Investor Relations at Gulf Bank.
Operating environment
Sami Mahfouz, Acting Chief Executive Officer of Gulf Bank, commenced the webcast with key updates regarding the operating environment and Gulf Bank's overall position during the first quarter of 2026. Mahfouz stated: "As we all know, we have been operating in an exceptionally challenging environment, as Kuwait and the whole region have been facing hostile security developments and heightened regional tensions since late February 2026. While these conditions have weighed on market sentiment and affected parts of the local and regional economic landscape, the State's institutional strength, and the timely and adequate policy response, have supported the stability of economic activity."
Mahfouz added: "During the first quarter of this year, key sovereign indicators remained robust as Kuwait's credit ratings were reaffirmed by leading credit rating agencies, reflecting the country's strong financial position and external resilience. Kuwait continues to benefit from funding flexibility supported by domestic market depth and access to international capital markets."
He added: "Operationally, Gulf Bank swiftly activated its business continuity and risk management protocols in line with established frameworks and directives from the Central Bank of Kuwait. This ensured the uninterrupted operation of our systems and the continued delivery of services across all channels. We also continued to advance our digital capabilities, enhancing the accessibility, security and efficiency of our services. At the beginning of the year, Gulf Bank announced the launch of its new mobile application dedicated to SME and Corporate banking clients, designed to meet the evolving needs of businesses across various sectors."
Margins
Commenting on net interest margin, David Challinor, Chief Financial Officer of Gulf Bank stated: "The margin contracted 9 basis points in Q1 and now it's sitting at 1.82 percent. The contraction which was expected was primarily driven by the full quarter impact of the benchmark rate cuts that happened in December. Now, we did see cost of funds fall during the quarter, but it wasn't enough to offset the income yield drop. We've seen deposit pricing in the local market continue to be relatively sticky in response to recent rate cuts, and the geopolitical events exacerbated this dynamic. In terms of outlook, at the beginning of the year we didn't provide any margin guidance for the full year 2026 due to many moving parts and uncertainty around benchmark rate movements. Although we did indicate that in the short term we would expect a contraction and that's what we saw. Now the key driver of the margin is movements in benchmark rates."
Loan growth
In regard to loan growth, Challinor noted: "We had an exceptionally strong start to the year in terms of loan growth. Net loans and advances grew by 326 million, which was almost 6 percent growth in just one quarter, and the highest growth for a number of years. And when we look at total customer loan growth year to date, which excludes lending to banks, our growth was 5.3 percent for the quarter, versus the market, which was 1.9 percent to the end of March. And for the corporate segment we grew 9 percent versus the market, which was 2.8 percent. This is testament to our very strong corporate franchise. However, the retail growth in the system remains very slow and subdued, increasing by only 0.1 percent year to date as per CBK data, and this reflects a very challenging and competitive environment in retail. In terms of outlook, on the Q4 call we guided high single digit loan growth for the full year 2026. And we would expect this to be achieved with the possibility of potential upside."
Cost of risk
On Cost of risk, Challinor, remarked: "Credit costs totaled 9.4 million in Q1 2026, reflecting a decline of 0.7 million, or 7 percent, compared to the same period last year. This was primarily attributable to the sustained strength and resilience of the corporate portfolio's asset quality. And a similar theme has continued, which is that almost all the credit costs relate to retail. And we've mentioned before that the retail credit costs have remained elevated for a prolonged period, but we could expect some normalization to occur as our underwriting amendments coupled with enhancements to the collections process, both work to deliver positive results. Now in terms of outlook, at the beginning of the year we gave guidance for the full year cost of risk to be in the 50 to 60 basis point range. At Q1, we were 61 basis points so we would expect, at this stage, for the guidance to still hold."
Operating expense
On operating expense Challinor mentioned: "Operating expenses grew only 1 percent year on year, and we achieved a positive JAWs ratio of 1.2 percent in Q1 2026 which reflected our ongoing cost discipline in relation to our business-as-usual cost base. And our cost-to-income ratio was 51.9 percent in Q1 26 versus last year Q1 25 which was 52.6 percent so there has been a reduction there. Now clearly, we are advancing several strategic projects such as the Islamic conversion and potential merger. And we've indicated before that the year 2026 will bear the majority of these costs. In terms of guidance, we previously said the absolute cost growth for the full year could be around the mid-to-high single-digit range and that estimate still holds.
Kuwait Times
Please wait...
