Global Investment House, one of Kuwait’s top investment banks, is recommending investors to sell their shares in Kuwait Finance House (KFH), Kuwait’s leading Islamic bank.

Global said that it expects KFH's bottom-line to exhibit a profitability decline of 20 per cent year-on-year this year owing to higher provisions, lower non-commission income and stagnancy in the top-line.

High growth in the earnings is then expected to ensue, driven by improving net commission income, higher investment income pushing growth in the non-commission income, and a decline in the provision requirements as asset quality improves and the need to provide coverage declines.

It said that KFH is trading at price earnings and price to book value multiples of 25 and 2.7 respectively.

"Our estimated value for this banking scrip is worked out to be KD1.04 ($3.61) based on adaptation of the Gordon Growth Model," Global said.

"According to our fair value the banking scrip offers a downside of 23.7 per cent over the closing price. We therefore downgrade our recommendation on the scrip from hold to sell." – TradeArabia News Service