Fitch: Kuwaiti banking sector to benefit from public debt and mortgage laws
Fitch Ratings-London: Key new laws in Kuwait are set to drive growth and diversification in the country's banking sector, Fitch Ratings says. These reforms, including public debt and residential mortgage laws, will create new lending opportunities and support economic expansion following a period of fairly subdued conditions.
Frequent political gridlock has delayed important economic reforms until recently, contributing to real GDP reducing by 3.6% in 2023 (non-oil: -2.9%) and by an expected further 2.8% in 2024 (non-oil: +1.5%). This constrained banks' lending opportunities and pushed them towards mergers and regional expansion as avenues for growth. However, government changes since the dissolution of parliament in May 2024 are helping decision-making and supporting the implementation of strategic public plans through Emiri decrees.
Credit growth in the banking sector, which was a low 2.1% in 2023, accelerated to 6.8% in 2024. Fitch expects high 8%–9% growth in 2025 if planned large government projects are awarded swiftly, following the recent approval of the public debt law. Approval of the residential mortgage law could bolster growth by unleashing substantial demand for housing loans.
The public debt law, which allows the sovereign to issue up to KWD30 billion over 50 years, will support government spending on large and diversified projects while preserving foreign assets, including foreign-currency reserves. This should also offset the negative impact from reduced global real GDP growth and lower oil prices. Progress on reforms, particularly the diversification of fiscal revenue (a 15% minimum top-up tax on multinational companies came into effect on 1 January 2025, with collections expected to begin in 2027), rationalisation of expenditure and diversification away from oil, would further support the government's budget and financial flexibility.
Fitch expects wholesale lending to increase by 7%–8% as the public debt reforms take hold and have a spillover effect across multiple sectors that require financing. Sovereign bonds issued under the new law will support banks' liquidity, offering high-quality liquid assets that can be traded or used in repurchase agreements with other banks and the Central Bank of Kuwait. These bonds, being 0% risk-weighted, will bolster banks' regulatory capital ratios while providing a stable interest income stream.
The residential mortgage law, if approved, could significantly transform Kuwait's housing finance landscape. For the first time, banks would be allowed to offer mortgage loans, potentially up to KWD200,000 and with a tenor of up to 25 years, with state-subsidised interest for tranches above KWD70,000. Given Kuwait's population of 1.5 million, even modest uptake could generate a substantial volume of new loans, expanding the banking sector and stimulating growth in the construction industry. Potential reforms to foreign property ownership laws could further increase demand for housing loans, mostly from high-earning expatriates.
Kuwaiti banks are adequately capitalised to support the likely growth in housing finance. We do not anticipate a significant build-up of asset-quality risk as over 80% of Kuwaiti citizens are civil servants with stable income sources. However, the new corporate income tax could put pressure on profitability, particularly at some of the largest multinational banks.
-Ends-
Matt Pearson
Associate Director, Corporate Communications
Fitch Group, 30 North Colonnade, London, E14 5GN
E: matthew.pearson@thefitchgroup.com
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Gulf Today
10 hours ago
- Gulf Today
Employee collects Dhs353,000 from client for a property sale, didn't deposit it in firm's account in Abu Dhabi
An employee at a real estate brokerage firm embezzled D353,000 from a client, prompting the Abu Dhabi Family, Civil, and Administrative Claims Court to order him to repay the amount to the company. The employee had received the amount as an initial payment for a residential unit but failed to deposit it into the company's account, leading the company to reimburse the client from its own funds. The company filed a lawsuit demanding the repayment of Dhs353,000, along with 5% interest and legal fees. It explained that the former employee, who had been deported after facing multiple court judgments, had received the cash amount of D353,000 from a client but never remitted it to the company. The court, relying on an expert report confirming the employee's debt, ordered him to repay the amount. Despite being legally summoned, the employee did not appear in court, leading to the court's ruling in favour of the company.
Al Etihad
15 hours ago
- Al Etihad
Fitch reaffirms TAQA's credit rating at ‘AA Stable'
7 June 2025 15:42 A. SREENIVASA REDDY (ABU DHABI)Fitch Ratings has reaffirmed Abu Dhabi National Energy Company's (TAQA) long-term credit rating at 'AA' with a Stable Outlook, underscoring the company's robust financial profile and strategic importance to the Abu Dhabi rating reflects TAQA's classification as a government-related entity, with Fitch assuming 'virtually certain' support from the Abu Dhabi government in all financial continues to enjoy the same sovereign rating as the government of Abu Dhabi, based on the expectation that its obligations would be fully supported if needed. Alongside this, Fitch Ratings has maintained TAQA's standalone credit profile (SCP) at 'bbb+', recognising the company's solid operational fundamentals.'The standalone profile reflects TAQA's strong business fundamentals, which are supported by its dominant presence in Abu Dhabi and a substantial portion of regulated and quasi-regulated earnings. We expect higher capex in 2025-2028 to increase its funds from operations,' Fitch Ratings observed in its latest agency highlighted that regulated and quasi-regulated businesses contributed 51% and 34%, respectively, to TAQA's 2024 EBITDA, underlining the company's stable revenue base. 'It has a leading position in Abu Dhabi as a fully integrated utility,' the agency cited several factors that justify the continued strong rating for TAQA, a key player in the region's energy infrastructure. 'We see no effective substitutes for TAQA given its role in the energy system of Abu Dhabi. TAQA has a large share in power generation and water desalination, monopoly in the electricity and water transmission and distribution (T&D), and wastewater treatment,' the report strategic investments have further reinforced TAQA's position. The 2024 acquisition of Sustainable Water Solutions Holding Company (SWS) and an equity stake in Abu Dhabi Future Energy Company (Masdar) have bolstered the company's capabilities as a leading integrated utility. 'A TAQA default could also affect the cost of funding for the sovereign, given its large size and activity on capital markets,' Fitch expects the regulatory framework governing electricity and water T&D in Abu Dhabi to remain stable and transparent, with effective cost-recovery mechanisms that compare favourably to other emerging markets. It also anticipates continued and timely subsidy payments from the state, supporting TAQA's financial ahead, Fitch forecasts that TAQA will receive increased earnings contributions from its associate companies over 2025–2028, amounting to Dh1 billion annually, with half of that expected from ADNOC Gas, in which TAQA holds a 5% stake. 'We do not forecast any dividends from Masdar, given its ambitious growth plans and targets,' the agency remains committed to Vision 2030, particularly in transmission, distribution, water, and power generation. Fitch estimates that Dh8 billion will be injected over 2025–2026, reinforcing TAQA's long-term investment trajectory. 'TAQA also plays an important role in achieving Abu Dhabi's energy targets of 2050, through its commitment to invest around Dh75 billion in 2021–2030, of which Dh26.7 billion were invested in 2021–2024,' Fitch summary, TAQA's reaffirmed rating is anchored in its strong business profile, stable cash flows, supportive regulatory environment, and strategic position in Abu Dhabi's utilities sector, backed by the near-certain support of the government. ADQ, the sovereign wealth fund, holds over 90% stake in TAQA, which is listed on the Abu Dhabi Securities Exchange with market cap of Dh370 billion. Source: Aletihad - Abu Dhabi
The National
a day ago
- The National
TV art guru jailed for 2.5 years for deals with suspected Hezbollah financier
An art expert who appeared on a BBC auction show was jailed for two-and-a-half years on Friday after a series of deals with a suspected Hezbollah financier. Oghenochuko Ojiri, 53, also known as Ochuko, sold artwork worth around £140,000 to Nazem Ahmad, a man designated by US authorities for alleged laundering for the Lebanese group. A regular on the Bargain Hunt programme, Ojiri was arrested two years ago by officers from the UK's National Terrorist Financial Investigation Unit. The investigation centred on alleged terrorist financing and money laundering by Mr Ahmad, an art collector and diamond dealer. Mr Ahmad, 60, a dual Belgian- Lebanese citizen, is under sanction s by Britain and the US. He has been accused of using the UK's fine art market to run an international financing operation for Hezbollah which is proscribed in the UK as a terrorist organisation. The art dealer's connection to the investigation into Mr Ahmad was first revealed by The National on Thursday, when he was charged. Ojiri is known for his appearances on the BBC's Bargain Hunt and has also appeared on the BBC's Antiques Road Trip. Ojiri had admitted to eight charges of failing to disclose his dealings with Mr Ahmad, which took place between October 2020 and December 2021, contrary to the Terrorism Act 2000. Prosecutor Lyndon Harris told the court hearing in May that Ojiri 'engaged in sales of artwork to Nazem Ahmad, a suspected terrorist financier'. Following the introduction of new money laundering regulations in January 2020 that brought the art market under the supervision of UK Customs, Ojiri is said to have discussed the changes with a colleague, indicating awareness of the rules, he told the court. 'At the time of the transactions, Ojiri knew Mr Ahmad had been sanctioned in the US,' Mr Harris said. 'He accessed news reports about Mr Ahmad and engaged in conversations with others about that, which indicates that he had information about Mr Ahmad.' Mr Ahmad was first accused by the US Treasury in 2019 of laundering substantial amounts of money and being involved in the smuggling of 'blood diamonds' for Hezbollah. He was sanctioned, then in April 2024 charged by the US along with eight associates with offences relating to breaching sanctions regulations. Police swooped on the high-security depot near London's Heathrow Airport in 2024, taking away nearly two dozen works of art belonging to Mr Ahmad, which they believe would probably have funded Hezbollah.
