Kuwaiti banks remain healthy despite increased competition, S&P says

With total banking assets of $129.7bn at December 31, 2007, the Kuwaiti banking system is the Gulf Cooperation Council's third largest. Consisting of 10 banks, it remains concentrated with National Bank of Kuwait (NBK; A+/Stable/A-1) and Kuwait Finance House (KFH; A-/Positive/A-2) accounting for about one-half of the system's total assets.

"Kuwaiti banks enjoy strong financial performance, solid capitalization, and good asset quality. Their liquidity is also strong and their loan leverage remains manageable,"

said Standard & Poor's credit analyst Paul-Henri Pruvost.

Offsetting these positives are the country's limited economic diversification, rapid and untested loan growth, high exposure to the real estate and stock markets, and increasing competition in Kuwait, Standard & Poor's noted in an updated report titled "Bank Industry Risk Analysis: Kuwaiti Banks' Financial Profiles Still Robust In The Face Of Tighter Regulation And Intense Competition".

Standard & Poor's ranks Kuwait's banking system in Group 4 of its Global Banking Industry Country Risk Assessment (BICRA), reflecting the system's strong financial profile, the protected business environment in which banks operate, and the supportive economic environment.

In addition, Standard & Poor's assessment of the banking system in Kuwait (AA-/Stable/A-1+) takes into account the government's interventionist approach toward the system and the high likelihood of support of systemically important private sector banks in case of need, therefore uplifting the ratings on Kuwaiti banks above their stand-alone creditworthiness.