NBK criticises lack of government spending
Kuwait City, October 11, 2012
Kuwait needs to step up spending on infrastructure to boost economic growth, the head of its largest bank said on Thursday, in unusually critical comments for a Gulf business leader.
"Government spending continues to be insufficient and the tendering of new projects has significantly lagged leading to a stagnant stock market performance and dormancy in economic activity," group CEO, Ibrahim Dabdoub said in a statement announcing National Bank of Kuwait's (NBK) third-quarter results.
Kuwait has suffered from years of political upheaval stemming from a long-running power battle between the elected parliament and a government dominated by the ruling family. The row has held up investment and major economic reforms.
Dabdoub, is one of the most senior banking figures in the region, having led the bank since 1983. His comments follow similar criticisms he made in July and reflect the frustration business leaders are facing in the oil-rich Gulf state which has seen political instability hampering growth.
NBK, the largest lender in the Gulf state, reported a 37 per cent rise in third-quarter net profit, beating analysts' forecasts, as it consolidated results of its unit Boubyan Bank in its quarterly results.
The lender said it raised its stake in Boubyan to 58.3 per cent in the quarter, effectively rendering it a subsidiary.
NBK, said quarterly profit rose to KD108.1 million ($384.5 million) in the three months to September 30, compared with KD78.9 million a year ago. Six analysts in a Reuters poll had predicted KD65.09 million net profit on average.
NBK got regulatory approval for its $431 million purchase of a 11.05 per cent stake in Boubyan Bank in July, taking its ownership to 58.34 per cent.
The group's assets were 16.34 billion dinars by the end of September, up 24.5 per cent from the same time a year ago, the bank said. Its shares have fallen 2.8 per cent year-to-date on the Kuwait bourse, while Boubyan shares have risen 3.4 per cent.
Dabdoub said that any improvement in Kuwait's operating environment "now depends on developing a more dynamic fiscal policy, most importantly accelerating spending on mega projects".
"We hope this will materialise in the near future considering recent directions from the highest authority and the proposed measures to boost economic activity and spur growth."
Kuwait's ruler, Sheikh Sabah al-Ahmad al-Sabah, last month called for "serious and effective steps" to strengthen the economy, according to a report of his comments from the finance minister.
Political upheaval has held up a 30 billion dinar ($108 billion) economic development plan and this year's phase of the project was rejected by opposition deputies in April.
The plan is supposed to provide a series of infrastructure projects including a new airport terminal, new oil refinery and hospitals, and is aimed at diversifying the economy and attracting foreign investment.
Sheikh Sabah dissolved parliament earlier this week, opening the way to a parliamentary election in the Opec member state which is likely to take place before the end of the year.
It was the sixth dissolution of parliament since Sheikh Sabah came to power in early 2006. – Reuters