Global Arab Network | Kuwait- Gulf Bank to restore the pre-crisis position in 2010

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Kuwait- Gulf Bank to restore the pre-crisis position in 2010

Global Arab Network - - John Short

Monday, 28 September 2009 16:36

Gulf Bank's CEO Michel Accad stressed Monday that next year will represent a starting point for the Bank to restore its pre-crisis position as one of the largest local banks.

Interviewed by Kuwait News Agency (KUNA), Accad stated, "As everyone knows, last October the Bank went through a serious crisis that cost the bank substantial losses. The crisis drove the Bank's management to adopt a set of significant measures, supported by the Central Bank of Kuwait (CBK), who played the most prominent role in treating the crisis and its implications.

"Of the major actions adopted by the Bank was a capital increase, in addition to setting aside a large portion of the Bank's operating profit, during the first half of the current year, as future precautionary provisions." "Therefore, we are now in a much stronger position following those events," the figure continued.

"The chaos sustained by Gulf Bank could have hit any other bank. Indeed, numerous banks in the region, and the world, actually experienced hardships as prominent names were involved in credit and financial transactions that bear a large amount of risk," he explained.

About the Bank's exposure to Saad and Qusaibi Groups, he said that "Like other local and regional banks, Gulf Bank was affected by the repercussions at Saad and Qusaibi Groups. We are leading a constant dialogue with other creditors and regulators to discuss the way forward.

"However, we must recognize that we are in a position where we are better able to absorb losses, especially following the capital increase," Accad noted.

In response to a question about the size of exposure to both groups, Accad said, "The problem is not unique to Gulf Bank, as many banks are facing the same problem. Realistically, we should take stricter actions against those borrowers to preserve our rights. Such exposures will not affect our capital adequacy. Although constituting a problem of this magnitude, it will eventually be absorbed." In response to another question about his view of the financial crisis and its impact on Gulf Bank, Accad stated, "We all hope that this will be a temporary stage. The economy always moves in cycles. The main question being currently raised is how long will the cycle last?" "There is no doubt that the world is passing a time of hardship. For Gulf Bank, 2009 will be a difficult year, compared to 2010, which I view as a year of recovery. In the next year, we will be able to address all problems, as we will carry out reforms on the credit policy, and, more importantly, the Bank will address its problems from an institutional perspective," he elaborated.

"The entire world has changed in the aftermath of the crisis. Gulf Bank changed its board of directors and executive management, with new names joining the Bank. Hence, everyone hopes that 2010 will represent a starting point by focusing on retail and corporate banking. Despite the suffering, we will re-emerge with new energy in the market, wider franchise, and stronger network," he stressed.

About his expectations in relation to the global financial crisis, Accad said, "There is a general sentiment that the developed world is emerging from the worst stage. I believe that they have reached the bottom point, and embarked on recovery. I also believe that GCC countries, including Kuwait, need one to two more years to start recovering from the impacts of the crisis." As for Gulf Bank, Accad said, "The main direction will be to focus on retail and wholesale banking in our evolving market, which can absorb a lot of inter-bank competition." "It is established that corporate banking products are more sophisticated, and are more risky due to their complex nature, especially that it is not only the loans or project finance, but also the advisory and risk reduction services that count in this area," he said.

To a question about the Bank's regional expansion plans, Accad stressed that "Gulf Bank will have to move step by step, which means that we have to proactively seize the opportunity.

"Owing to the Bank's conditions, regional thinking is premature. The Bank needs to re-arrange its internal conditions and focus on the local market before considering regional expansion," he said.

"If we manage to fully recover during 2010-2011, this will reflect a healthy step. Then, we will naturally proceed abroad in the right direction. However, we have to take it step by step, as we should solve our problems before we consider expanding," he commented.

About the Bank's results for the third quarter of this year, Accad said, "The operating conditions will not be much different from the first and second quarters. The bottom line will depend on the level of precautionary credit provisions we decide to take. The bank's capital, however, remains adequate," he concluded.

Accad has over 30 years of experience in banking in the Middle East and North Africa region and his past post included many management positions in Citigroup since 1979. He later worked in Jordan. He has a masters degree with honors from Texas University, which he received in 1978. (KUNA)

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