Annual Report and Accounts 2004 - National Bank of Kuwait

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NBK’s performance demonstrates why ourfinancial strength ratings stand highest among allemerging market banks. During 2004, CapitalIntelligence raised our long-term credit rating to‘A+’, based on our strong financial profile,prudent risk management practices and healthyprofitability. Other leading international ratingagencies, including Moody’s, Standard & Poor’s andFitchRatings, confirmed their top ratings for NBK.Growth with disciplineOur outstanding performance in 2004 is not anexceptional occurrence, but rather a continuationof a consistent record of profit growth throughbooms, busts, expansions and recessions. While apositive business environment provided us withmany opportunities to exploit our fundamentalstrengths, our discipline in diversifying incomesources and managing risks prudently kept ourcourse steady, and our strategy of focusing on thecustomer made us well positioned to pursuegrowth locally and regionally.An improving economy on the back of recordhigh oil revenues and a favourable turn in theinterest rate cycle had a positive impact onbusiness volume and margins. At the same time,the change in the region’s geopolitical environmentcontinued to be a positive factor for Kuwait’seconomy, notwithstanding security issues inneighbouring Iraq. Demand for credit and otherbanking services was strong by retail and corporatecustomers. Investment activity continued toadvance at a fast pace. Money inflows werebuoyed by rising confidence and improvingbusiness opportunities, adding to the deposit base.While other banks were constrained by new Central Bank of Kuwait regulationsaimed at smoothing the credit cycle, NBK’s strong liquidity and financialprofile allowed us to avail ourselves of growth opportunities while maintainingour discipline of balancing risks against rewards. Alongside the growth inbusiness volume, our margins improved, helped by the rise in interest ratesin the second half of the year that allowed us to leverage our traditionallylow-cost deposit base.This past year, NBK completed a number of prominent deals includingarranging the US$ 600 million bridge loan for Equate Petrochemicals Companyand advising and lead-managing the US$ 325 million IPO for Al-QurainPetrochemical Industries Company, Kuwait’s largest ever public subscription.We were successful at broadening our service offering with innovativesolutions, deepening our relationship with valuable customers andpenetration of profitable segments, and raising our investments intechnology and channel development. These initiatives were guided by ourfocus on anticipating and meeting customer needs, and offeringcomprehensive financial solutions that match the world’s best practices.Regional expansionNBK made important strides towards implementing its regional expansionstrategy. As with our focused presence in the major international centres,our goal is to support our Kuwaiti customers and meet all their financialneeds inside and outside Kuwait, as well as to exploit growth opportunitiesin markets where we can leverage our competitive strengths.During 2004, NBK acquired a 20% stake in the International Bank of Qatar(formerly Grindlays Qatar Bank), together with full management control ofthe bank under the terms of a management contract. This deal provides uswith a strategic entry into the promising Qatari market with its hugepotential for growth and development.Earlier in the year, we opened a new NBK branch in Amman, Jordan thatalso enjoys strategic importance in the region, given the country’s success inenhancing its competitiveness, liberalising its economy and moving aheadwith bold reforms.NBK (Lebanon) opened its tenth branch there to cater to a growing numberof visitors, both Kuwaiti and Lebanese residing in Kuwait. We also movedahead with preparations for opening our first branch in Jeddah, Saudi Arabia,and for establishing operations in Iraq and China.Chairman’s Message6
Open and agileIn last year’s report we talked about taking acritical look inside the Bank – at our variousbusinesses, technologies, processes and people –to identify opportunities for improvement, furtherstrengthen our competitive advantage andmaintain NBK’s edge. As a result, we launched aseries of initiatives that will drive NBK’s growthover the long-term, with positive results alreadyevident in various key performance indicators.These results include higher revenue peremployee, higher cross-sell ratio, higher return onassets, lower cost-to-income ratio and, mostimportant, higher customer satisfaction.NBK’s evolution has been and will remain acontinuous process. To better reflect our brandpromise to customers, we examined how itsessence is projected through the NBK logo,branch network and other channels, media andstaff. In the process, we updated our logo toreflect more clearly our openness to understandingour customers and agility in meeting theirevolving needs, while maintaining our strongfoundation and connectedness to our local market.Social responsibilityNBK supports the welfare and development of the community it serves throughcommitting time, effort and money to various charitable, cultural, social andathletic activities and organisations. Education and health also receivespecial attention for their role in promoting prosperity in our communities.Among our regular activities is NBK’s annual charitable campaign heldduring the Holy Month of Ramadan, whose proceeds this year were donatedto cancer patients. We continued to support the specialised Children’sHospital built at the Bank’s own expense and donated to the Ministry ofHealth three years ago. We also held our tenth annual Walkathon thatattracted more than 6,000 participants.With appreciationIn conclusion, and on behalf of the Board of Directors, I would like toexpress our sincere gratitude and appreciation to His Highness the EmirSheikh Jaber Al-Ahmad Al-Jaber Al-Sabah, His Highness the Crown PrinceSheikh Saad Al-Abdullah Al-Salem Al-Sabah, His Excellency the PrimeMinister Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, and to members of theCouncil of Ministers and National Assembly, for their wise management ofthe nation’s economic policies.We also thank the Central Bank of Kuwait for its prudent management ofmonetary policy and oversight of the financial sector, and to the Ministry ofFinance, the Ministry of Commerce and Industry, the Chamber of Commerceand Industry, and all government departments and agencies, for theircooperation with the banking and financial sector of Kuwait.Our appreciation also goes to our shareholders for their confidence andcontinued support for NBK’s growth and development. We thank ourcustomers for entrusting more of their business to NBK, and we assure themof our unfailing commitment to uphold the NBK promise of high quality andconvenient services that meet, or exceed, their needs.In closing, we thank and acknowledge all our employees for their energy,caring, professionalism, passion for customer service and unwaveringcommitment to NBK and its mission. Their tireless efforts, integrity,innovation, teamwork and commitment to delivering value to customers andshareholders stand behind our successes and outstanding results. We havetremendous confidence in our management members’ and team’s ability tosustain our record and meet the growth challenges ahead.Mohammed Abdul Rahman Al-BaharChairman7
Page 1 and 2: Annual Report and Accounts 2004
Page 3 and 4: OUR VISIONTO BE THE PREMIER ARAB BA
Page 5 and 6: 11 Mohammed Abdul Rahman Al-BaharCh
Page 7: Our standing in the region is well
Page 11 and 12: services offered through a complete
Page 13 and 14: OFFERING THE WIDEST RANGE OF PRODUC
Page 15 and 16: NBK IS THE UNDISPUTED LEADER IN THE
Page 17 and 18: The Bank’s market edge is enhance
Page 19 and 20: THE EXPERTISE AND PLACEMENT POWER T
Page 21 and 22: NBK was also a pioneer when it intr
Page 23 and 24: NBK IS DISTINGUISHED AMONG KUWAITI
Page 25 and 26: Treasury‘Best Foreign Exchange Ba
Page 27 and 28: OUR CONTINUED SUPPORT FOR THE SPECI
Page 29 and 30: Oil sector and public financesKuwai
Page 31 and 32: Credit growth moderated somewhat du

Annual Report and Accounts 2004 - National Bank of Kuwait

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