By Ulf Laessing
KUWAIT, July 13 (Reuters) – Kuwait Finance House (KFH), the country’s biggest bank by market value, posted a near 29 percent rise in second-quarter profit, the second lender in Kuwait to post double-digit profit growth as it expands abroad.
The Islamic lender earned 83.9 million dinars ($315.2 million), or 41 fils per share, in the three months to June 30, compared with 65.2 million dinars, or 33 fils per share, a year earlier, according to a KFH statement on the bourse website.
There are 1,000 fils to the dinar.
The quarterly earnings came just below a 87.60 million dinars profit forecast by investment bank Global Investment House in a Reuters survey last month..
The bank, which is expanding in the Gulf, Middle East and Asia to offset rising competition at home, did not give a reason for the profit jump but said deposits rose by 31 percent to 6.31 billion dinars in the second quarter.
KFH, the second-largest Islamic bank in the Gulf, had received “numerous” requests from governments to operate in their respective countries by setting up banks or through partnerships, Chairman Badr al-Mukhaizeem said in a statement, but did not give details.
Assets advanced by 28 percent to 10.27 billion dinars at the end of June, KFH said.
Last week, National Bank of Kuwait said quarterly income grew 16 percent, beating a Global forecast, as its lending business grew despite stricter lending rules at home.
Faisal Hasan, head of research at Global, said there was growth potential for KFH both locally and abroad, particularly in the Gulf and Asia.
“KFH core banking activities such as financing are going well. In Kuwait, competition is heating up but KFH is benefiting from brand loyalty.”
Total profit rose 30 percent to 325.29 million dinars in the first six months. Return on assets was 3.3 percent, while return on shareholders’ equity was 27 percent.
KFH which says it operates in accordance with Islamic sharia, shares profits from its activities with depositors.
Moody’s Investor Service said in February that global assets that comply with Islamic law have grown 15 percent each year for the last three years. Assets could grow by another third to more than $1 trillion by 2010, McKinsey & Co said in December.
KFH plans to set up an investment firm in Saudi Arabia and expand in Gulf Arab states, Chief Executive Mohammad al-Omar said in June.
KFH also wants to expand into Turkey and is considering expansion in Hong Kong and Australia to tap booming demand for Islamic finance, Omar said then.
Islamic banking is growing as Muslims seek investments that comply with their religious beliefs.
“Right now the stories are coming from Malaysia where they get a lot of projects. We have to analyse now how much revenues they are generating,” Hasan said.
Al-Watan newspaper quoted on Sunday Mukhaizeem as saying the bank, with partners, plans to set up a health centre in Bahrain.
Al-Qabas daily said in an unsourced report the bank had won a licence to open a unit in Australia. Officials at KFH were not immediately available to comment on the reports.
Shares of KFH have risen 15.8 percent this year compared with 19.2 percent for the main stock index. The stock traded at 2.78 dinars on Sunday before the profit announcement. (For Reuters content on Islamic finance, click on) (Additional reporting by Rania El Gamal; Editing by Quentin Bryar