Post on 01-May-2018
H. H. Sheikh Jaber Al-Ahmad Al-Jaber Al-Sabah
The Amir of the State of Kuwait
H. H. Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah
The Prime Minister
H. H. Sheikh Saad Al-Abdallah Al-Salem Al-Sabah
The Crown Prince
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TAB
LE O
F C
ON
TEN
TS
CONTENTS
Financial Highlights
Board of Directors
Chairman's Message
Financial Review
Financial Statements
Auditors’ Report
Balance Sheet
Income Statement
Cash Flow Statement
Statement of Changes in Equity
Notes to the Financial Statements
02
03
04
09
17
18
19
20
21
22
23
Financial Highlights
10
20
30
40
50
1999
29.4 35.4 42.1 45.5 48.5
2000 2001 2002 2003Profit for the year
KD Millions
0%
1%
2%
1999
1.62 2.07 2.39 2.35 2.16
2000 2001 2002 2003Return on Average Assets
Percent
10%
14%
18%
22%
1999
16.5 19.8 21.9 21.4 20.0
2000 2001 2002 2003Return on AverageShareholders' Funds
Percent
20
30
40
50
60
70
1999
36.6 45.4 51.9 56.9 60.8
2000 2001 2002 2003Earnings Per Share
Fils
10%
15%
20%
25%
30%
35%
1999
33.4 26.6 24.1 24.2 22.0
2000 2001 2002 2003Cost to Income Ratio
Percent
02
BO
AR
D O
F D
IREC
TOR
S
DIRECTORS
Bassam Yusuf Alghanim
Chairman & Managing Director
Salah Khaled Al-Fulaij
Deputy Chairman
Board Members
Adel Mohammed Rida Behbehani
Abdul Aziz Abdul Rahman Al-Shaya
Abdulkareem Abdulla Al-Saeed
Hussain Ahmed Qabazard
Khaled Saoud Al-Hasan
Naser Yousef Bourisli
Faisal Saoud Al-Fozan
03
Chairman’s MessageIn 2003 Gulf Bank surmounted
unprecedented regional and economic
challenges to its growth strategy and
delivered its fourth year of uninterrupted
profit and core business growth. There is
little doubt that Phase 1 of the Bank’s
“Transformation Strategy” has ensured that
the Bank has the collective skills,
commitment, vision, passion and customer
focus to transform this good Bank into a
truly great one. Following four years of
substantial investment in its staff, branches,
core banking systems and customer delivery
channels, 2003 was a benchmark year in
which the Bank embarked on the utilization
of this investment to produce superior
customer acquisition programs, customer
service, and customer retention initiatives.
Our strategy has been, and continues to be,
that exceptional shareholder value will be
generated through superior customer focus.
The Bank continued its market leading
profit growth, uninterrupted for four years,
and produced record net profits of KD 48.5
million in 2003 (US$ 164.4 million). Net
profits grew by 6.5% over 2002 and
Earnings Per Share increased by 7% to 60.8
fils. Return on Assets remained strong, at
2.16%, inspite of the severe business
disruption caused as a result of military
activity in Iraq, the very low interest rate
environment and intense local market price
competition. The Bank has upgraded and,
or replaced all of its major systems. The
resulting operational improvements,
enhanced customer service level and real
benefits produced by the Bank harnessing
the benefits of its substantial IT
investments, has been instrumental in
driving the Bank’s cost to income ratio
down to 22%, the best in Kuwait. This ratio
has continued to improve in spite of
continued investment in new branches and
the branch refurbishment program, further
enhancements to the Bank’s IT systems and
substantial investment in recruiting and
upskilling the brightest and best people for
our business. Enormous progress has been
made in strengthening Gulf Bank’s Brand
franchise, both in Retail and Corporate
Banking, and independent research
confirms that the Bank’s image and broad
appeal continues to grow amongst its
target market.
The replacement of all of the Bank’s major
IT systems and IT infrastructure over the
past three years has made it the most
technologically advanced Bank. In 2003, in
04
“ Gulf Bank... delivered its fourth year of
uninterrupted profit and core business growth ”“ ...the Bank has the collective skills, commitment,
vision, passion and customer focus to transform this
good Bank into a truly great one ”
excess of 83% of Gulf Bank’s transactions were handled
electronically. The substantial investment made in IT
infrastructure, systems and communications has given the
Bank a distinct competitive advantage. The Bank’s new
customer oriented IT systems coupled with simplification of
work practices has eliminated unnecessary or redundant
processes, resulting in efficient utilization of all resources, and
has made it a more efficient, flexible, innovative and
fundamentally profitable Bank. With our customer focused
strategy in place we are ideally positioned to utilize these
enabling technologies to further differentiate the Bank’s
service, product delivery, and further improve customer
satisfaction in the future.
Gulf Bank received Global Finance’s award for “Kuwait’s Best
Bank” in 2003. During the year further improvements were
made to the Retail Branch network. These major stand-alone
branches were constructed and opened, two of which replaced
smaller or older structures and two drive-thru ATMs were
installed at these locations. In addition, several refurbishment
projects were undertaken to align the existing branch network
with the Bank’s award winning Retail Banking branch format.
The Bank’s 24 / 7 self-service branch lobby program was further
expanded and enhanced, and included the introduction of
automated self-service check and cash lodgment facilities. The
Bank’s mobile phone messaging service (SMS) was further
expanded during the year to add Kuwait’s second major
mobile phone network. The Bank’s service now covers all
mobile phone users in Kuwait. Usage of the Bank’s internet
banking service (e-gulfbank.com) continued to grow and a
new Arabic version of the Bank’s web page was introduced at
the end of 2003. The Bank’s 24 / 7 telephone banking service
“805 805” remains the most frequented enquiry service at the
Bank. Service levels at our Telebanking service are among the
best in the region and considerably the best in Kuwait.
The Al Afdal customer salary program was augmented by the
Al Khaleej customer salary program in 2003. Both of these
complementary programs are designed to offer Kuwaiti
customers a total banking relationship. The features of both
product packages are aligned to the customers’ income level
and both programs have been supported with innovative
marketing and sales activities throughout the year. The Bank
remains the only Bank in Kuwait with a US$ 1 million prize
account “Al Danah”, which continues to be very popular. In
response to regulatory changes regarding the payment of low
income expatriate salaries, Gulf Bank in coordination with
other local banks, introduced the Al Amil program in late 2003.
Several innovative marketing programs were run throughout
2003, notably the Gulf Rewards Credit Card Discount Program
which was designed to promote credit card usage. This
program is the broadest and largest credit card discount
program in Kuwait and includes partners from major
international and local groups including airlines, hotels,
fashion retailers and health clinics. The Bank also introduced a
co-branded credit card with Kuwait National Petroleum
Company (KNPC). Gulf Bank remains the only Kuwaiti Bank to
operate and manage co-branded credit card programs.
05
“ The replacement of all of the Bank’s major IT systems and IT
infrastructure over the past three years has made it the most
technologically advanced Bank ” “ In 2003, in excess of 83% of Gulf Bank’s
transactions were handled electronically ”
Chairman’s Message continued...
The customer is at the center of all we do. During the military
conflict in the first half of 2003, Gulf Bank provided 7 day
branch services to key clients in order to expedite important
trade during this period, and Gulf Bank was the only Kuwaiti
Bank not to reduce its customer opening hours during the
conflict. The dedication and determination of Gulf Bank’s staff
embodied the passion and spirit of the Bank’s customer
commitment. Customer satisfaction with the Bank’s customer
care programs continues to remain high and the Bank remains
vigilant of the need to continuously monitor and enhance
service levels in order to be the ‘Best’.
Unparalleled speed of decision making, innovativeness and
flexibility in creating the best financial solution for the client
and unrivaled professionalism in service delivery are the prime
reasons why Gulf Bank’s Corporate Banking Group is known as
the ”Businessman’s Bank”. In a year which witnessed modest
industry growth during the first half of 2003, the Bank’s
Corporate Banking Group produced record results for
customer growth, business volumes and profitability. The
continued popularity of Gulf Bank amongst major business
clients in Kuwait has been driven by the Bank’s “total
relationship” approach to dealing with the customers’ needs,
and the timely response to customer needs. Benefits from the
substantial investments in new systems and upskilling of the
staff servicing our business clients has helped the Bank
broaden the scope and size of current relationships and
penetrate new client sectors with its innovative product and
service programs, as well as continuously improving the quality
of the assets. The Credit Control process is second to none. The
Bank continues to enjoy the reputation as the “Businessman’s
Bank” because of our customer focus and commitment.
The Bank’s Treasury Unit received a ”state-of-the-art” Dealing
Room in 2003 with greatly enhanced functionality, cost
structure and controls. The ergonomic design addresses the
extended service hours and specialization within the Unit. The
Bank introduced a range of new products including Derivatives
and Options, in addition to supporting its current portfolio of
FX and Hedges which it continues to market to clients. Gulf
Bank’s Dealing and Treasury Services are available to customers
over a six-day working week, and the Bank provides clients
with extended trading hours, in order to cover their trading
needs in Europe and the US. The Treasury Services continue to
proactively provide customers with advice and support, much
needed in spite of the Kuwaiti Dinar – US Dollar pegging
announced in January 2003. This pegging did not eliminate
exchange risk from Dinar / Dollar activity and Gulf Bank’s
Treasury Team were ideally positioned to provide clients with
the appropriate trading advice in order to cover their business
needs in 2003.
Kuwait’s two largest capital projects in 2003 were arranged by
Gulf Bank. The Siemens AG MEW – Al Zour Gas Turbine Power
Plant Project and the LG Engineering and Construction / KNPC
– Onstream Catalyst Replacement Revamp Project were both
arranged by the Bank’s International Division. This team of
business professionals is focused on the specific needs of
multinational corporate clients, oil sector clients, and financial
institutions. Despite disruption to international trade business
06 Chairman’s Message continued...
“ Gulf Bank was the only Kuwaiti Bank not to reduce
its customer opening hours during the conflict ”
“ Unparalleled speed of decision making,
innovativeness and flexibility... are prime reasons
why Gulf Bank’s Corporate Banking Group is known
as the “Businessman’s Bank” ”
during the first half of 2003, the International Division
experienced strong growth in its customer business and
dealings from international and regional banks.
The Bank issued its first Floating Rate Note (FRN) Eurobond in
October 2003. The Note, substantially over-subscribed, was the
first from a regional bank for a 5-year period and the Bank
closed subscriptions at US$ 200 million. The FRN was arranged
by JP Morgan and Morgan Stanley and given Gulf Bank’s
reputation, both regionally and internationally, the issue “sold
itself” according to JP Morgan.
At Gulf Bank, our people are at the heart of our strategy. We
believe that it is through our talented staff that we can truly
differentiate our unique brand of service and customer care.
Gulf Bank is notable for creating and sustaining a “high
performance” culture. This culture is one that attracts and
retains the brightest and most talented people, ensures that
managers have the skills and abilities to truly lead and where
everyone lives and practices the customer focus for which we
have become known for. In 2003, Gulf Bank recruited more
Kuwaiti graduates than any other Bank in Kuwait. The Bank is
committed to providing an environment in which ambitious
high performers can excel and establishing a succession
program which perpetuates the Bank’s drive for continued
success.
Gulf Bank continues to have the lowest level of Government
Debt Bonds in the Kuwaiti Banking sector. Although the
Bank’s level of Debt Bonds is minimal, this was further reduced
by 50% during 2003 and now stands at just 0.6% of total
assets. The benefit of having such a low level of Government
Debt Bonds is that it allows the Bank to utilize its assets in
more productive, long term and higher yielding customer
business.
For Gulf Bank, 2003 was a benchmark year in which it
concluded Phase 1 of its “Transformation Strategy” and
commenced Phase II - the “Actualization Strategy”. It is
uniquely positioned to benefit from its investment in
technology, branches and people and is now poised to
orchestrate its technologically advanced resources more fully
in order to provide faster, more innovative, customer friendly
and cost efficient solutions to customers. Through its customer
promise Gulf Bank will continue to grow and produce
exceptional shareholder value for the future.
I thank our Customers, Employees and Shareholders for their
business, loyalty and dedication.
Bassam Yusuf Alghanim
Chairman & Managing Director
07Chairman’s Message continued...
“ The Bank issued its first Floating Rate Note
(FRN) Eurobond in October 2003 ”“ Through its customer promise Gulf Bank will
continue to grow and produce exceptional
shareholder value for the future ”
FIN
AN
CIA
L R
EVIE
W
REVIEW
Summary of Financial Performance
Net Interest Income
Other Operating Income
Operating Expenses
Provisions
Balance Sheet Analysis
Bank Ratings
09
Summary of Financial Performance
Gulf Bank produced another record set of results in 2003,
maintaining its position as the only bank in Kuwait to have
delivered consistent core earnings growth over the last four
years. The strong performance was achieved despite the
adverse effects of lower interest rates, intense price
competition (particularly in corporate lending) and the Iraq
war, which slowed the rate of new customer acquisition and
depressed business volumes and activity in the first half of 2003.
The record net profit of KD48.5 million was KD3 million or 6.5%
higher than 2002. Operating profit before provisions grew by
KD7.9 million (15%) to KD60.4 million, reflecting strong core
earnings growth and good cost control. The Bank met all of its
key business plan targets and the financial results were in line
with the 2003 budget projections.
Net interest income increased by KD3.9 million or 7.5% to KD55
million. The benefit of strong retail and corporate loan growth
and reduced funding costs more than offset the significant
adverse impact of lower interest rates in 2003.
Other operating income grew by KD4.3 million (24%),
reflecting strong growth in fee income and foreign exchange
earnings and a small increase in investment disposal income.
Operating expenses increased by KD0.3 million or 2%. Staff
costs were KD0.2 million (2%) higher and non-staff costs were
KD0.1 million (2%) higher. The Bank’s industry-beating
cost:income ratio was further reduced, from 24.2% to 22.0%,
since the modest cost growth was more than offset by a
corresponding growth of 12% in operating income. The steady
downward trend in the cost:income ratio over the last four
years reflects the substantial productivity improvements in the
Bank and the measures taken to enhance sales performance
(particularly in terms of improved staff recruitment and
training).
Provisions were KD4.8 million higher than 2002, despite a 70%
reduction in the specific provisions charge. The total provisions
charge of KD10.2 million comprised specific provisions of KD0.7
million (KD1.6 million lower than 2002), and general provisions
10
(KD Millions)
Net interest income
Other operating income
Operating income
Operating expenses
Operating profit before provisions
Provisions
Operating profit
Directors’ emoluments
KFAS/National Labour Support Tax
Net profit
2003
55.0
22.4
77.4
(17.0 )
60.4
(10.2 )
50.2
( 0.1 )
( 1.6 )
48.5
2002
51.1
18.1
69.2
(16.7 )
52.5
( 5.4 )
47.1
( 0.1 )
( 1.5 )
45.5
Summary of Financial Performance continued...
Net Interest Income
Other Operating Income
Net interest income was up KD3.9 million (7.5%) in 2003.
Average interest-earning assets grew by KD297 million (16%) to
KD2.2 billion. The Bank’s overall net interest spread was broadly
maintained (only 5 basis points lower), despite the intense price
competition in the market, particularly in corporate lending.
The net interest margin was 19 basis points lower, at 2.50%, due
to the adverse impact of lower interest rates on the Bank’s net
free funds. (The average KD Discount Rate was 63 basis points,
or 16 per cent, lower in 2003, at 3.25%).
The growth in net interest income arose mainly in Retail
Banking and Corporate Banking. Retail lending grew by almost
50% as the Bank further enhanced its product range, opened
more new branches and continued to increase its retail market
share. Corporate lending grew by more than 20% as the Bank
successfully targeted specific customer segments while
maintaining lending margins and credit quality.
of KD9.5 million (KD6.4 million, or 208%, higher than 2002).
The substantial increase in general provisions was necessitated
by the Central Bank of Kuwait (CBK) conservative regulatory
requirement to provide a 2% general provision against the
year-on-year growth in loans and off-balance-sheet facilities.
This CBK requirement depresses the ‘year one’ profit from new
lending and significantly reduces the bottom line net profit
growth in a rapidly growing bank like Gulf Bank. However, the
Bank will reap substantial benefits from this loan growth over
the remaining term of the loans in question.
11
2003 2002
Net interest income (KD Millions) 55.0 51.1
Average interest-earning assets (KD Millions) 2,199 1,902
Net interest margin (Percent) 2.50 2.69
Average KD discount rate (Percent) 3.25 3.88
(KD Millions) 2003 2002
Net fees and commissions 15.2 13.1
Foreign exchange and derivatives income 3.3 2.8
Dividend income 1.8 1.7
Other income 2.1 0.5
Total other operating income 22.4 18.1
%
%
%
%
Other Operating Income continued...
Operating Expenses
Other operating income grew by KD4.3 million or 24% in 2003.
Net fees and commissions increased by KD2.1 million (16%),
mainly due to underwriting fees and business volume growth in
Corporate Banking. The growth in letters of credit and
guarantee volumes was particularly strong due to the Bank’s
successful strategy to focus on fee income growth.
Foreign exchange earnings were KD0.5 million (20%) higher,
reflecting increased customer business volumes and increased
proprietary trading income.
Dividend income was up KD0.1 million to KD1.8 million. Other
income was KD1.6 million higher at KD2.1 million, and mainly
comprised modest gains from the sale of investment securities
(KD1.3 million, compared with KD0.3 million in 2002), and
property disposal gains (KD0.5 million, compared with a loss of
KD0.1 million in 2002). The Bank applies rigorous investment
performance criteria when considering equity investments due
to concerns over potential equity market volatility, particularly
in the local market. The main focus is to generate sustainable
core earnings growth rather than seek windfall gains from
investment securities.
Operating expenses increased by KD0.3 million (2%) in 2003.
The costs of new branches and ‘e-delivery’ network and IT
system improvements were mostly offset by further operational
efficiency savings. Staff costs grew by KD0.2 million (2%) as a
result of higher performance related incentive payments (in
line with increased profitability). Year-end headcount was
slightly down due to the outsourcing of some administrative
and support activities in the fourth quarter.
Occupancy costs were KD0.2 million (16%) higher due to the
opening of new branches in 2002 and 2003. Depreciation costs
were KD0.3 million lower, since the depreciation costs of the
Bank’s recent investments in new branches and systems were
offset by the run-off of fully depreciated assets.
Other expenses were KD0.2 million (7%) higher in 2003, partly
due to additional marketing expenditure to support the retail
customer acquisition programme.
12
(KD Millions) 2003 2002
Staff costs 11.4 11.2
Occupancy costs 1.1 0.9
Depreciation 1.0 1.3
Other expenses 3.5 3.3
Total operating expenses 17.0 16.7
Cost:income ratio (Percent) 22.0% 24.2%
Period end headcount 732 756
Operating Expenses continued...
Provisions
Balance Sheet Analysis
The cost:income ratio improved by 2.2 percentage points to
22.0%. Gulf Bank has achieved the best operating efficiency
ratio in Kuwait, and one of the lowest ratios of any Arab bank,
over the past three years, despite significant investment in its
franchise during this period. This demonstrates the Bank’s
ongoing ability to grow its business and increase its market
share so that income growth exceeds the costs of investing in
branches, people, new products and systems.
Specific provisions of KD0.7 million were KD1.6 million (70%)
lower than 2002. The new specific provisions relating to the
growth in retail loans and credit card balances were partly
offset by net recoveries in Corporate Banking. General
provisions of KD9.5 million were required due to the CBK
conservative regulatory requirement to provide a 2% general
provision against the growth in loans and letters of credit and
guarantee facilities. The resulting total provisions charge of
KD10.2 million was KD4.8 million (89%) higher than 2002.
Asset quality remains very good, reflecting the Bank’s prudent
lending strategy and its strict and comprehensive credit
policies and procedures. Non-performing loans (NPLs) were
KD2.2 million (7%) lower at 31 December 2003, compared with
end 2002, and the proportion of NPLs to total loans improved
from 2.8% in 2002 to 2.0% at 31 December 2003. Specific
provisions cover improved from 71.1% of NPLs in 2002 to
80.0% of NPLs at 31 December 2003. Total provisions cover,
including general provisions, improved from 130.8% to
172.2% over the same period. Including the general provisions
on off-balance-sheet facilities, the total provisions cover
improved from 152.6% in 2002 to 200.3% in 2003.
13
Selected balance sheet data (KD Millions) 31 Dec 2003 31 Dec 2002
Loans and advances to banks 199 126
Loans and advances to customers 1,212 934
Government debt bonds 16 32
Total assets 2,483 1,997
Medium term loans from banks 204 155
Floating rate notes 59 -
Customer deposits 1,228 1,150
Shareholders’ funds 262 222
Key ratios (Percent)
Return on average assets 2.16 % 2.35 %
Return on average equity 20.0 % 21.4 %
Capital adequacy ratio 15.5 % 18.0 %
Balance Sheet Analysis continued...
Total assets increased by KD486 million or 24% to KD2.5 billion
at 31 December 2003. Almost 57% of the balance sheet was
deployed in loans and advances, compared with 53% at
31 December 2002.
Loans and advances to banks rose by KD73 million (57%) to
KD199 million. The increase reflected the granting of a
medium term loan to another Kuwaiti bank and the
resumption of new US dollar lending to international banks
following the end of the war in Iraq.
Loans and advances to customers increased by KD278 million
(30%), reflecting the strong, but prudent and strictly controlled
growth in retail and corporate lending.
Government debt bonds reduced by KD16 million (50%), falling
from 1.6% of total assets at end 2002 to 0.6% of total assets at
31 December 2003. Gulf Bank continues to benefit from having
achieved the lowest ratio of these low yielding assets of any
bank in Kuwait.
Medium term loans from banks (MTL) were increased to KD204
million to provide additional long term, stable funding for the
growth in retail lending. This MTL funding comprises 3 and 5
year KD and US dollar loans from other Kuwaiti banks.
Further long term funding was provided by the 5 year USD200
million floating rate note (FRN) Eurobond (due October 2008)
issued by the Bank in October 2003. The FRN marked Gulf
Bank’s inaugural bond transaction in the capital markets and
was priced at 65 basis points over USD 3 month Libor, in line
with the secondary market level of comparable regional credits.
The bond was 1.5 times oversubscribed, with strong demand
from a diversified investor base in Europe and Asia, as well as
the Middle East. It was the first ever 5 year USD bond issued by
a commercial bank in Kuwait and was the first international
financing from Kuwait following the end of the war in Iraq.
Customer deposits increased by KD78 million (7%) to KD1,228
million, and there was a substantial improvement in the deposit
mix. Current account balances grew by 22% and there was a
significant reduction in higher cost, ‘hot money’ time deposits
in Treasury and Corporate Banking. The total requirement for
customer deposits was substantially reduced by the increased
use of MTL and FRN funding, which is a more efficient means of
funding retail loan growth.
Shareholders’ funds increased by KD40 million (18%) to KD262
million. The growth mainly reflects the sale of treasury shares
during 2003 (net effect of KD14 million), the increases in
retained earnings (up KD8 million) and statutory reserves (up
KD5 million), and an increase in the fair valuation reserve of
KD12 million. The Bank had unrealised gains on its ‘available
for sale’ financial assets of KD22.4 million at 31 December 2003.
The return on average assets declined by 19 basis points from
2.35% in 2002 to 2.16% in 2003. The adverse impact of lower
interest rates on the income from net free funds was partly
offset by the benefits of more efficient balance sheet utilisation
(through the increased use of MTL/FRN funding), lower funding
costs (due to lower interest rates and the improved mix of
customer deposits), and the successful maintenance of lending
spreads in the face of intense price competition in the market.
The return on average equity declined by 140 basis points (6%),
14
Balance Sheet Analysis continued...
Bank Ratings
from 21.4% to 20.0% in 2003, reflecting the substantial
increase in year-end equity: up KD40 million (18%), from KD222
million to KD262 million.
The capital adequacy ratio declined from 18.0% at end 2002 to
15.5% at 31 December 2003. The reduction was in line with the
Bank’s strategy to leverage its balance sheet and increase
profitable lending for the benefit of shareholders and
customers. The capital adequacy ratio remains well above the
CBK minimum ratio of 12.0% and leaves the Bank strongly
capitalised to support the continued expansion of its business
activities in 2004.
The Bank’s ratings (upgraded during 2002) were reaffirmed in
2003. The rating ‘outlook’ from Capital Intelligence was also
increased from ‘stable’ to ‘positive’. Gulf Bank is the second
highest rated bank in Kuwait, and received similarly favourable
ratings for the 5 year FRN issued in October 2003, namely: ‘A-‘
(Fitch Ratings) and ‘BBB+’ (Standard & Poor’s).
The strong ratings reflect the financial strength, good asset
quality, strong profit growth and well focused and effective
business strategy of Gulf Bank. The Bank continues to increase
its market share and build on its position as Kuwait’s second
largest bank, despite the increasing competition in the market.
15
Long-term foreign currency ratings 2003 2002
Fitch Ratings A- A-
Moody’s Investors Service A2 A2
Capital Intelligence A- A-
Standard & Poor’s BBB+ BBB+
FIN
AN
CIA
L ST
ATE
MEN
TS
STATEMENTS
Auditors’ Report to the Shareholders
Balance Sheet
Income Statement
Cash Flow Statement
Statement of Changes in Equity
Notes to the Financial Statements
17
Auditors’ Report to the Shareholders
Waleed A. Al OsaimiLicence No 68 AErnst & YoungAl Aiban, Al Osaimi & Partners
07 January 2004Kuwait
Bader A. Al-WazzanLicence No 62 APricewaterhouseCoopers
Ernst & Young, Al Aiban, Al Osaimi & Partners, P. O. Box 74, 13001 SafatPricewaterhouseCoopers, Bader & Co. P. O. Box 20174, 13062 Safat
We have audited the accompanying balance sheet of Gulf Bank
K.S.C as of 31 December 2003 and the related statements of
income, cash flows and changes in equity for the year then
ended. These financial statements are the responsibility of the
Bank's management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with International
Standards on Auditing. Those Standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Bank as of 31
December 2003, the results of its operations, its cash flows and
changes in equity for the year then ended in accordance with
International Financial Reporting Standards.
Furthermore, in our opinion proper books of account have
been kept by the Bank and the financial statements, together
with the contents of the report of the Board of Directors
relating to these financial statements, are in accordance
therewith.
We further report that we obtained all the information and
explanations that we required for the purpose of our audit and
that the financial statements incorporate all information that is
required by the Commercial Companies Law of 1960, as
amended, and by the Bank's Articles of Association, that an
inventory was duly carried out and that, to the best of our
knowledge and belief, no violation of the Commercial
Companies Law of 1960, as amended, or of the Articles of
Association have occurred during the year ended 31 December
2003 that might have had a material effect on the business of
the Bank or on its financial position.
We further report that, during the course of our examination,
we have not become aware of any material violations of the
provisions of Law No. 32 of 1968, as amended, concerning
currency, the Central Bank of Kuwait and the organisation of
banking business, and its related regulations, during the year
ended 31 December 2003.
18
Balance Sheet As at 31 December 2003
Bassam Yusuf Alghanim(Chairman & Managing Director)
The attached notes 1 to 25 form part of these financial statements
Thomas T. Chen(Chief General Manager)
David Pace(Corporate Controller)
19
2003 2002
Note KD 000’s KD 000’sAssets
Cash and short term funds 3 196,272 333,485
Treasury bills and bonds 4 452,084 436,186
Deposits with banks and other financial institutions 5 300,000 10,000
Loans and advances to banks 6 198,690 126,168
Loans and advances to customers 6 1,211,842 934,317
Investment securities 7 84,642 103,931
Government debt bonds 8 15,780 31,621
Other assets 9 12,849 11,481
Premises and equipment 11,363 9,919
Total Assets 2,483,522 1,997,108
Liabilities & Equity
Liabilities Due to banks 10 558,623 245,618
Medium term loans from banks 10 204,205 154,915
Deposits from financial institutions 10 102,947 159,195
Customer deposits 11 1,228,169 1,150,332
Floating rate notes 12 58,940 -
Other liabilities 13 33,141 31,648
2,186,025 1,741,708
Shareholders’ Equity
Share capital 14 82,086 82,086
Statutory reserve 15 48,368 43,350
General reserve 15 2,356 2,356
Share premium 15 46,044 46,044
Property revaluation reserve 15 7,115 5,885
Treasury share reserve 15 8,749 4,775
Fair valuation reserve 15 22,428 10,600
Retained earnings 47,371 40,042264,517 235,138
Treasury shares ( 2,943 ) ( 13,322 )261,574 221,816
Proposed dividend 16 35,923 33,584
297,497 255,400Total Liabilities and Shareholders’ Equity 2,483,522 1,997,108
These financial statements have been approved for the issue by the Board of Directors on 6th January 2004 and signed on its behalf by
Income Statement Year ended 31 December 2003
20
2003 2002
Note KD 000’s KD 000’s
Interest income 17 87,109 94,076
Interest expense 18 32,162 42,948
Net Interest Income 54,947 51,128
Net fees and commissions 15,205 13,140
Net gains from dealing in foreign currencies and derivatives 3,312 2,764
Other income 19 3,919 2,215
Operating Income 77,383 69,247
Staff expenses 11,425 11,239
Occupancy costs 1,062 918
Depreciation 1,053 1,314
Other expenses 3,494 3,280
Operating Expenses 17,034 16,751
Provisions for impairment of financial assets 10,168 5,388
27,202 22,139
Operating Profit 50,181 47,108
Contribution to
Kuwait Foundation for the Advancement of Sciences 502 447
Directors’ emoluments 108 108
National labour support tax 1,114 1,046
Net Profit for the Year 48,457 45,507
Earnings Per Share (Fils) 20 60.834 56.910
The attached notes 1 to 25 form part of these financial statements
21
Cash Flow Statement Year ended 31 December 2003
2003 2002Operating Activities KD 000’s KD 000’s
Net profit for the year 48,457 45,507Adjustments:
Dividend income (1,805) ( 1,726 )Profit on sale of investment securities (1,286) ( 261 )Depreciation 1,053 1,314(Profit)/Loss on disposal of premises and equipment (213) 133Provisions for impairment of financial assets 10,168 5,388
Operating profit before changes in operating assets and liabilities 56,374 50,355(Increase) decrease in operating assets:
Treasury bills and bonds (15,898) ( 74,829 )Deposits with banks and other financial institutions (290,000) 15,072Loans and advances to banks (72,522) ( 39,964 )Loans and advances to customers (286,237) ( 29,893 )Government Debt bonds 15,841 23,689Other Assets (1,368) 1,454
Increase (decrease) in operating liabilities:
Due to banks 313,005 ( 48,589 )Medium term loans from banks 49,290 154,915Deposits from financial institutions (56,248) 32,092Customer deposits 77,837 ( 39,867 )Floating rate notes 58,940 -Other liabilities 37 ( 900 )
Net cash (used in) from Operating Activities (150,949) 43,535Investing Activities
Purchase of investment securities (5,894) (26,035 )Sale of investment securities 37,654 5,469Purchase of premises and equipment (1,743) ( 1,978 )Sale of premises and equipment 1,145 700Dividends Received 1,805 1,726
Net Cash from (used in) Investing Activities 32,967 ( 20,118 )Financing Activities
Dividends paid (33,584) ( 31,985 )Purchase of treasury shares (4,920) -Sale of treasury shares 19,273 -
Net Cash used in Financing Activities (19,231) ( 31,985 )
Net Decrease in Cash and Short Term Funds (137,213) ( 8,568 )
Cash and Short Term Funds at 1 January 333,485 342,053
Cash and Short Term Funds at 31 December 196,272 333,485
The attached notes 1 to 25 form part of these financial statements
Statement of Changes in EquityYear ended 31 December 2003
22
TREASURY FAIR
SHARE STATUTORY GENERAL SHARE REVALUATION SHARE VALUATION RETAINED SUBTOTAL TREASURY PROPOSED
CAPITAL RESERVE RESERVE PREMIUM RESERVE RESERVE RESERVE EARNINGS RESERVES SHARES DIVIDEND TOTAL
KD 000’S KD 000’S KD 000’S KD 000’S KD 000’S KD 000’S KD 000’S KD 000’S KD 000’S KD 000’S KD 000’S KD 000’S
At 1 January 2002 82,086 38,639 2,356 46,044 6,666 4,775 4,466 32,389 135,335 (13,322) 31,985 236,084
Dividend paid - - - - - - - - - - (31,985) (31,985)
Effect of changes in fair values of
“available for sale” financial assets - - - - - - 6,601 - 6,601 - - 6,601
Net realised (gains) during year - - - - - - (467) (340) (807) - - (807)
Surplus on revaluation of properties - - - - (781) - - 781 - - - -
Net profit for the year - - - - - - - 45,507 45,507 - - 45,507
Transfers from profit - 4,711 - - - - - (4,711) - - - -
Proposed dividend - - - - - - - (33,584) (33,584) - 33,584 -
At 31 December 2002 82,086 43,350 2,356 46,044 5,885 4,775 10,600 40,042 153,052 (13,322) 33,584 255,400
Dividend paid - - - - - - - - - - (33,584) (33,584)
Effect of changes in fair values of
“available for sale” financial assets - - - - - - 11,828 - 11,828 - - 11,828
Net realised (gains) during year - - - - - - - (643) (643) - - (643)
Release on disposal of properties - - - - (456) - - 456 - - - -
Surplus on revaluation of properties - - - - 1,686 - - - 1,686 - - 1,686
Purchase of treasury shares - - - - - - - - - (4,920) - (4,920)
Sale of treasury shares - - - - - - - - - 15,299 - 15,299
Profit on sale of treasury shares - - - - - 3,974 - - 3,974 - - 3,974
Net profit for the year - - - - - - - 48,457 48,457 - - 48,457
Transfers from profit - 5,018 - - - - - (5,018) - - - -
Proposed dividend - - - - - - - (35,923) (35,923) - 35,923 -
At 31 December 2003 82,086 48,368 2,356 46,044 7,115 8,749 22,428 47,371 182,431 (2,943) 35,923 297,497
R E S E R V E S
The attached notes 1 to 25 form part of these financial statements
23
Notes to the Financial Statements 31 December 2003
1. Incorporation and Registration
Gulf Bank K.S.C. is a public shareholding company incorporated in Kuwait on 29 October 1960 and is registered as a
bank with the Central Bank of Kuwait. Its registered office is at Mubarak Al Kabir Street, PO Box 3200, 13032 Safat,
Kuwait. The number of employees as of 31 December 2003 was 732 (2002:756).
2. Significant Accounting Policies
a) Basis of presentation
These financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS)
and interpretations issued by the International Accounting Standards Board (IASB). The financial statements are
prepared under the historical cost basis of measurement as modified by the revaluation of financial assets held as
available for sale, all derivative contracts and land and buildings.
The financial statements have been presented in Kuwaiti Dinars rounded off to the nearest thousand.
b) Financial instruments
Classification, recognition/de-recognition and measurement of financial instruments
Classification
In accordance with IAS 39 the Bank classifies its financial assets as “held for trading”, “originated financial assets” and
“available for sale” and its financial liabilities as “non-trading financial liabilities’’.
“Held for trading” are those financial assets which are acquired principally for the purpose of generating a profit from
short term fluctuations in price. This includes derivative financial instruments.
Financial assets that are created by the Bank by providing money directly to a borrower are classified as “originated
financial assets”.
Financial assets which are not classified as above are classified as “available for sale”, and are principally those
acquired to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes
in interest rates or equity prices.
Financial liabilities, which are not held for trading, are classified as “non-trading financial liabilities”.
Management determines the classification of these financial instruments.
Recognition/de-recognition
A financial asset or a financial liability is recognised when the Bank becomes a party to the contractual provisions of
the instrument. A financial asset is de-recognised when the Bank loses control of the contractual rights that comprise
the financial asset and a financial liability is de-recognised when the obligation specified in the contract is discharged,
cancelled or expired.
All regular way purchases and sales of financial assets are recognised using settlement date accounting. Changes in
fair value between the trade date and settlement date are recognised in income. Regular way purchases or sales are
purchases or sales of financial assets that require delivery of assets within the time frame generally established by
regulations or conventions in the market place.
Derivatives with positive market values (unrealised gains) are recognised as other assets and derivatives with negative
market values (unrealised losses) are recognised as other liabilities in the balance sheet.
24
2 Significant Accounting Policies continued...
Measurement
All financial instruments are initially recognised at cost (which includes transaction costs).
On subsequent re-measurement, financial assets classified as “held for trading” are carried at fair value with resultant
unrealised gains or losses arising from changes in fair value included in income. “Originated financial assets” are
carried at amortised cost using the effective yield method, less any provision for impairment. Those classified as
“available for sale” are subsequently measured and carried at fair values. Unrealised gains and losses arising from
changes in fair value of those classified as “available for sale” are taken to fair valuation reserve in equity. “Non-
trading financial liabilities” are carried at amortised cost using the effective interest method.
When the “available for sale” asset is disposed of, or impaired, the related accumulated fair value adjustments are
transferred to the income statement as gains or losses.
Fair values
Fair values of quoted instruments are based on quoted closing bid prices or using the current market rate of interest
for that instrument. Fair values for unquoted instruments are estimated using applicable price/earnings or price/cash
flow ratios refined to reflect the specific circumstances of the issuer.
The fair value of a derivative is the equivalent of the unrealised gain or loss from marking to market the derivative
using prevailing market rates or internal pricing models.
Impairment
A financial asset is impaired if its carrying amount is greater than its estimated recoverable amount. An assessment
is made at each balance sheet date to determine whether there is objective evidence that a specific financial asset,
or a group of similar assets, may be impaired. If such evidence exists, the impairment loss is recognised in the income
statement.
Loans originated by the Bank are subject to credit risk provisions for loan impairment if there is objective evidence
that the Bank will not be able to collect all amounts due. The amount of provision is the difference between the
carrying amount and the recoverable amount, being the present value of expected future cash flows, including
amounts recoverable from guarantees and collateral, discounted based on the original effective interest rate.
The provision for impairment of loans and advances also covers losses where there is objective evidence that probable
losses are present in components of the loans and advances portfolio at the balance sheet date. These have been
estimated based on the historical patterns of losses in each component, the credit ratings allocated to the borrowers
and reflecting the current economic environment in which the borrowers operate.
Loans and advances are written off when there is no realistic prospect of recovery.
c) Provisions
Provisions are recognised when, as a result of past events, it is probable that an outflow of economic resources will
be required to settle a present, legal or constructive obligation and the amount can be reliably estimated.
d) Treasury shares
The cost of the Bank’s own shares purchased, including directly attributable costs, is recognised as a change in equity.
Gains or losses arising on sale are separately disclosed under shareholders’ equity and in accordance with the
instructions of Central Bank of Kuwait, these amounts are not available for distribution. These shares are not entitled
to any dividends.
Notes to the Financial Statements 31 December 2003
25
2 Significant Accounting Policies continued...
e) Revenue recognition
Interest receivable and payable are recognised on a time proportion basis taking account of the principal outstanding
and the rate applicable. Once a financial instrument categorised as “originated financial assets” is written down to
its estimated recoverable amount, interest income is thereafter recognised based on the rate of interest that was used
to discount the future cash flows for the purpose of measuring the recoverable amount. Other fees receivable or
payable including loan commitment fees are recognised when due. Dividend income is recognised when the right to
receive payment is established.
f) Fiduciary assets
Assets held in trust or in a fiduciary capacity are not treated as assets of the Bank and accordingly are not included in
these financial statements.
g) Foreign currencies
Foreign currency transactions are recorded at rates of exchange ruling at the dates of the transactions. Monetary
assets and liabilities in foreign currencies at the year end are translated into Kuwaiti Dinars at rates of exchange ruling
at the balance sheet date. Foreign exchange contracts outstanding at the year end are revalued at the forward rates
ruling at the balance sheet date. Any resultant gains or losses are taken to the income statement.
3 Cash and Short Term Funds 2003 2002KD 000’s KD 000’s
Balances with the Central Bank of Kuwait 137,100 287,029
Cash on hand and in current accounts with other banks 20,473 16,418
Money at call and short notice 3,704 12,960
Deposits with banks and other financial institutions maturing within one month 995 7,078
Certificates of deposit maturing within one month 34,000 10,000
196,272 333,485
Cash and short term funds consist of cash in hand and on current account with other banks together with money at
call and deposits with banks and other financial institutions maturing within one month.
The Bank classifies cash and short term funds as “originated financial assets”.
4 Treasury Bills and Bonds
These financial instruments are issued by the Central Bank of Kuwait on behalf of the Ministry of Finance. They
mature within a period not exceeding one year.2003 2002
KD 000’s KD 000’s
Treasury bills 163,122 197,429
Treasury bonds 288,962 238,757
452,084 436,186
The Bank classifies treasury bills and bonds as “originated financial assets”
Notes to the Financial Statements 31 December 2003
26
5 Deposits with Banks and Other Financial Institutions 2003 2002KD 000’s KD 000’s
Time deposits 5,000 -
Certificates of deposit 295,000 10,000
300,000 10,000
The Bank classifies deposits with banks and other financial institutions as “originated financial assets”
6 Loans and Advances to Banks and Customers
Loans and advances represent monies paid to banks and customers and the Bank classifies them as “originated
financial assets”. The Bank’s assessment of the credit risk concentration, based on the primary purpose of the loans
and advances given, is provided below.
At 31 December 2003
Loans and advances to customers
Other
Middle Western Asia Rest of
Kuwait East Europe Pacific World Total
KD 000’s KD 000’s KD 000’s KD 000’s KD 000’s KD 000’s
Personal 336,944 - - - - 336,944
Financial 117,650 17,897 12,231 1,213 14,265 163,256
Trade and commerce 227,426 4,980 - - - 232,406
Crude oil and gas 11,113 421 - - - 11,534
Construction 141,063 2,514 7 - - 143,584
Government - 5,640 - - 1,537 7,177
Others 70,887 4,432 - 747 - 76,066
Manufacturing 21,376 8,916 - - - 30,292
Real Estate 260,146 - - - - 260,146
1,186,605 44,800 12,238 1,960 15,802 1,261,405
Less: Provision for impairment (49,563)
1,211,842
Loans and advances to banks 70,689 33,958 27,367 44,671 22,281 198,966
Less: Provision for impairment (276)
198,690
Notes to the Financial Statements 31 December 2003
27Notes to the Financial Statements 31 December 2003
6 Loans and Advances to Banks and Customers continued...
At 31 December 2002
Loans and advances to customers
Other
Middle Western Asia Rest of
Kuwait East Europe Pacific World Total
KD 000’s KD 000’s KD 000’s KD 000’s KD 000’s KD 000’s
Personal 215,106 225 - - - 215,331
Financial 95,516 6,552 10,213 - - 112,281
Trade and commerce 167,489 14,976 - - - 182,465
Crude oil and gas 9,776 428 - - - 10,204
Construction 90,399 1,970 975 - - 93,344
Government - 6,887 - - 1,419 8,306
Others 85,997 4,526 - - - 90,523
Manufacturing 43,653 1,230 - 250 - 45,133
Real Estate 217,008 - - - - 217,008
924,944 36,794 11,188 250 1,419 974,595
Less: Provision for impairment (40,278)
934,317
Loans and advances to banks 10,226 38,209 33,392 19,724 25,072 126,623
Less: Provision for impairment (455)
126,168
Movement in provisions for impairment
2003 2002KD 000’s KD 000’s
Specific General Total Specific General Total
At 1 January 22,157 18,576 40,733 21,171 17,358 38,529
Exchange adjustments (2) - (2) (230) - (230)
Recoveries 433 - 433 249 - 249
Amounts written off (9) - (9) (1,002) - (1,002)
Amount to be ceded to Central Bank of Kuwait (28) - (28) (27) - (27)
Income statement 611 8,198 8,809 1,996 1,527 3,523
Transfer to provision for “assets sold” - (97) (97) - (309) (309)
At 31 December 23,162 26,677 49,839 22,157 18,576 40,733
28
6 Loans and Advances to Banks and Customers continued...
The policy of the Bank for the calculation of the impairment provisions for loans and advances complies in all material
respects with the specific and general provision requirements of the Central Bank of Kuwait. The Central Bank of
Kuwait requires a general provision of 2% on all credit facilities not subject to specific provision. The analysis of specific
and general provisions set out above is based on the requirements of the Central Bank of Kuwait. The current year
provision for cash facilities is KD49,839,000 (2002: KD40,733,000). In addition to the provision for cash facilities, the
available provision for non-cash facilities of KD8,158,000 (2002: KD6,799,000) is included in other liabilities.
As at 31 December 2003, non-performing loans and advances amounted to KD28,948,000 (2002: KD31,138,000) split
between facilities granted pre-invasion and post-liberation as follows:
2003 2002
Loans & Loans &
Advances Provisions Advances Provisions
KD 000’s KD 000’s KD 000’s KD 000’s
Pre-invasion 13,237 13,237 13,265 13,265
Post-liberation 15,711 9,925 17,873 8,892
Total 28,948 23,162 31,138 22,157
In accordance with Decree 32/1992, when the pre-invasion provisions are no longer required they must be repaid to
the Central Bank of Kuwait.
Notes to the Financial Statements 31 December 2003
7 Investment Securities 2003 2002KD 000’s KD 000’s
Debt securities Quoted 39,707 37,198
Equity securities Quoted 24,492 12,114
Unquoted 20,443 54,619
44,935 66,733
84,642 103,931
The Bank classifies investment securities as “available for sale” financial assets.
During the year, the Bank recognised KD11,828,000 (2002: KD6,601,000) in equity as the net gain arising from changes
in fair value of investment securities and re-cycled a profit of KD643,000 (2002: KD807,000) to income arising from the
disposal of “available for sale” investment securities.
29Notes to the Financial Statements 31 December 2003
8 Government Debt Bonds
The Bank classifies government debt bonds as “originated financial assets”.
The Central Bank of Kuwait purchased resident Kuwaiti and GCC customers' debts existing at 1 August 1990, in addition
to related interest up to 31 December 1991, on behalf of the Government of Kuwait in accordance with Decree 32/1992
and Law 41/1993, as amended by Law 80/1995, in respect of the financial and banking sector. Pursuant to the
provisions of Law 41/1993, some amendments may be made to customers’ debt balances, which are being reviewed by
the Central Bank of Kuwait.
The purchase value of these debts was determined in accordance with the Decrees and was settled by the issue of
bonds, with a value date of 31 December 1991. The bonds mature over a maximum period of twenty years from the
value date. The Central Bank of Kuwait has redeemed KD15,841,000 during 2003 (2002: KD23,689,000). Interest on
the bonds is at a rate fixed semi-annually by the Central Bank of Kuwait and is payable semi-annually in arrears; the
average rate for 2003 was 1.89% (2002: 2.67%).
The Bank is required to manage the purchased debts without remuneration in conformity with the regulations as
promulgated by Decree 32/1992 in this respect.
9 Other Assets 2003 2002KD 000’s KD 000’s
Accrued interest receivable 9,661 7,067
Sundry debtors 3,188 4,414
12,849 11,481
The Bank classifies other assets as “originated financial assets”.
10 Due to Banks and Deposits from Financial Institutions 2003 2002KD 000’s KD 000’s
Due to banks
Current accounts and demand deposits 5,733 21,389
Certificates of deposit 393,500 30,000
Time deposits 159,390 194,229
558,623 245,618
Medium term loans 204,205 154,915
Deposits from financial institutions
Current accounts and demand deposits 17,333 32,407
Time deposits 85,614 126,788
102,947 159,195
30
Medium term loans from banks comprise four facilities entered into with three other Kuwaiti banks: US$150 million
(equivalent KD44,205,000) medium term loan due February 2005, KD60 million medium term loan due January 2007,
KD50 million medium term loan due September 2005 and KD50 million medium term loan due November 2006.
The Bank classifies due to banks, medium term loans from banks and deposits from financial institutions as “non-
trading financial liabilities”.
11 Customer Deposits 2003 2002KD 000’s KD 000’s
Current accounts 261,633 214,819
Savings accounts 207,834 201,326
Certificates of deposit 88 338
Time deposits 758,614 733,849
1,228,169 1,150,332
The Bank classifies customer deposits as “non-trading financial liabilities”.
12 Floating Rate Notes
On 22 October 2003, the Bank issued five year floating rate notes (due October 2008), with a principal amount of
US$200 million (equivalent KD58,940,000) at an issue price of 100%. The notes bear interest at the rate of 0.65% per
annum above the London interbank offered rate (LIBOR) for three month US dollar deposits, payable quarterly in
arrear. The notes are in bearer form in the denomination of US$100,000 each. They are listed on the Luxembourg
Stock Exchange and are redeemable at par on or before 22 October 2008.
The Bank classifies floating rate notes as “non-trading financial liabilities”.
13 Other Liabilities 2003 2002KD 000’s KD 000’s
Interest payable 10,764 10,384
Deferred income 3,750 5,176
Other 5,633 4,980
Provisions for non cash facilities 8,158 6,799
Provisions to be ceded to the Central Bank of Kuwait 28 27
Provisions for assets sold 632 535
Contribution to Kuwait Foundation for the Advancement of Sciences 502 447
Staff related provisions 2,560 2,254
National labour support tax 1,114 1,046
33,141 31,648
The Bank classifies other liabilities as “non-trading financial liabilities”.
Notes to the Financial Statements 31 December 2003
31Notes to the Financial Statements 31 December 2003
14 Share Capital 2003 2002KD 000’s KD 000’s
Authorised, issued and fully paid ordinary Shares 82,086 86,086
82,086 82,086
The number of authorised, issued and fully paid ordinary shares of KD0.100 each as at 31 December 2003 is
820,858,550 (2002: 820,858,550).
As at 31 December 2003 the Bank held 4,424,236 (2002: 21,229,236) of its treasury shares, equivalent to 0.54% (2002:
2.59%) of the total share capital at that date.
The market value of the treasury shares at 31 December 2003 is KD3,849,085 (2002: KD16,134,219).
15 Reserves
In accordance with the Law of Commercial Companies and the Bank’s Articles of Association, 10% of the Bank’s net
profit for the year is transferred to statutory reserve.
Distribution of the statutory reserve is limited to the amount required to enable the payment of a dividend of 5% of
share capital in years when accumulated profits are not sufficient for the payment of a dividend of that amount. Also
part of this reserve, equivalent to the cost of the treasury shares, has been earmarked as non-distributable.
The general reserve represents the surplus general provision on credit facilities arising on implementation of Central
Bank of Kuwait instructions issued on 18 December 1996 as well as additional instructions issued on 1 June 1999, and
dividends distributed on treasury shares up until the end of 1997.
The property revaluation reserve represents the surplus of market value over carrying value of freehold land and
buildings owned by the Bank. The balance in this reserve is taken directly to retained earnings when the underlying
assets are disposed of.
The balances in the share premium account and treasury share reserve cannot be distributed.
16 Proposed Dividend
At 31 December 2003, a cash dividend of KD0.044 per share has been proposed and will be submitted for formal
approval at the Annual General Meeting. This dividend (totalling KD35,923,000) has not been recognised as a liability
at 31 December 2003.
A cash dividend of KD0.042 per share proposed as of 31 December 2002, was approved at the 2002 Annual General
Meeting and was paid in 2003 following that approval. That dividend (totalling KD33,584,000) was not recognised
as a liability at 31 December 2002.
32
17 Interest Income 2003 2002KD 000’s KD 000’s
Government debt bonds, treasury bills and other investments 14,818 18,496
Placements with banks 9,092 12,305
Loans and advances to banks and customers 63,199 63,275
87,109 94,076
18 Interest Expense 2003 2002KD 000’s KD 000’s
Call accounts 1,329 1,916
Savings accounts 1,160 1,757
Time deposits 18,880 24,815
Bank borrowings 10,793 14,460
32,162 42,948
19 Other Income 2003 2002KD 000’s KD 000’s
Dividend income 1,805 1,726
Gains from disposal of investment securities 1,286 261
Gains/ (losses) on disposal of premises and equipment 213 (133)
Gain on sale of property acquired against debts 250 -
Customer portfolio management fee 107 98
Sundry income 258 263
3,919 2,215
20 Earnings per share
Earnings per share is based on the net profit of KD48,457,000 (2002: KD45,507,000) and the weighted average number
of ordinary shares of KD0.100, of 796,549,990 (2002: 799,629,314), after adjusting for treasury shares.
21 Related Party Transactions
Certain related parties (directors and officers of the Bank, their families and companies of which they are principal
owners) were customers of the Bank in the ordinary course of business. Such transactions were made on substantially
the same terms, including interest rates and collateral, as those prevailing at the same time for comparable
transactions with unrelated parties, and did not involve more than a normal amount of risk.
Notes to the Financial Statements 31 December 2003
33Notes to the Financial Statements 31 December 2003
The year end balances included in the balance sheet are as follows:
Description No of Board or
Executive Management No of Related Value
Members Parties KD 000’s
2003 Board Members
Loans 4 1 5,161
Commitments & Contingent Liabilities - 2 175
Deposits 4 1 49
Executive Management
Loans 7 - 314
Deposits 2 - 7
2002 Board Members
Loans 5 1 2,248
Commitments & Contingent Liabilities 1 1 123
Deposits 4 1 50
Executive Management
Loans 8 - 276
Deposits 1 - 7
22 Financial Instruments
i) Strategy in using financial instruments
As a commercial bank, the Bank’s activities are principally related to the use of financial instruments including
derivatives. It accepts deposits from customers at both fixed and floating rates and for various periods and seeks to
earn above average interest margins by investing these funds in high quality assets. It also seeks to increase these
margins by consolidating short term funds and lending for longer periods at higher rates while maintaining sufficient
liquidity to meet all claims that may fall due.
With the exception of specific hedging arrangements, foreign exchange and interest rate exposures associated with
these derivatives are normally offset by entering into counterbalancing positions, thereby controlling the variability
in the net cash amounts required to liquidate market positions.
ii) Risk management
The use of financial instruments also brings with it the associated inherent risks. The Bank recognises the relationship
between returns and risks associated with the use of financial instruments and the management of risk forms an
integral part of the Bank’s strategic objectives.
The strategy of the Bank is to maintain a strong risk management culture and manage the risk/reward relationship
within and across each of the Bank’s major risk-based lines of business. The Bank continuously reviews its risk
management policies and practices to ensure that the Bank is not subject to large asset valuation volatility and
earnings volatility.
The following sections describe the several risks inherent in the banking process, their nature and how they are managed.
34 Notes to the Financial Statements 31 December 2003
A) Credit Risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other
party to incur a financial loss. The Bank attempts to control credit risk by monitoring credit exposures, limiting
transactions with specific counterparties, and continually assessing the creditworthiness of counterparties. In addition
to monitoring credit limits, the Bank manages the credit exposure relating to its trading activities by entering into
master netting agreements and collateral arrangements with counterparties in appropriate circumstances, and
limiting the duration of exposure. In certain cases, the Bank may also close out transactions or assign them to other
counterparties to mitigate credit risk.
Concentrations of credit risk arise when a number of counterparties are engaged in similar business activities, or
activities in the same geographic region, or have similar economic features that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations
of credit risk indicate the relative sensitivity of the Bank’s performance to developments affecting a particular industry
or geographic location.
The Bank seeks to manage its credit risk exposure through diversification of lending activities to avoid undue
concentrations of risks with individuals or groups of customers in specific locations or business. It also obtains security
when appropriate.
Concentration of assets, liabilities and off-balance-sheet items
a. Credit risk concentration
The credit risk concentration within loans and advances, which form the significant portion of assets subject to credit
risk, is given in Note 6.
35Notes to the Financial Statements 31 December 2003
22 Financial Instruments continued...
b. Geographical concentration of assets, liabilities and off-balance-sheet items
At 31 December 2003: Other U.S.A Middle Western and Asia Rest of
Kuwait East Europe Canada Pacific World TotalAssets: KD 000's KD 000's KD 000's KD 000's KD 000's KD 000's KD 000's
Cash and short term funds 186,814 1,112 5,555 1,399 845 547 196,272Treasury bills and bonds 452,084 - - - - - 452,084Deposits with banks and other financial institutions 300,000 - - - - - 300,000Loans and advances to banks 70,689 33,958 27,367 - 44,671 22,005 198,690Loans and advances to customers 1,155,117 25,923 13,100 - 1,943 15,759 1,211,842Investment securities 6,922 56,210 3,918 3,188 12 14,392 84,642Government debt bonds 15,780 - - - - - 15,780Other assets 12,849 - - - - - 12,849Premises and equipment 11,363 - - - - - 11,363
2,211,618 117,203 49,940 4,587 47,471 52,703 2,483,522Liabilities:Due to banks 418,535 68,949 64,636 941 4,045 1,517 558,623Medium term loans from banks 204,205 - - - - - 204,205Deposits from financial institutions 98,450 4,497 - - - - 102,947Customer deposits 1,177,326 43,305 7,350 17 171 - 1,228,169Floating rate notes - - 58,940 - - - 58,940Other liabilities 33,141 - - - - - 33,141Shareholders' equity 297,497 - - - - - 297,497
2,229,154 116,751 130,926 958 4,216 1,517 2,483,522Commitments and contingent liabilities 421,958 59,698 15,150 829 45,090 77 542,802
At 31 December 2002: Other U.S.A Middle Western and Asia Rest of
Kuwait East Europe Canada Pacific World TotalAssets: KD 000's KD 000's KD 000's KD 000's KD 000's KD 000's KD 000's
Cash and short term funds 318,580 1,933 12,959 13 - - 333,485Treasury bills and bonds 436,186 - - - - - 436,186Deposits with banks and other financial institutions 10,000 - - - - - 10,000Loans and advances to banks 10,226 38,209 33,392 - 19,724 24,617 126,168Loans and advances to customers 897,712 23,808 11,188 - 233 1,376 934,317Investment securities 15,830 48,682 1,346 78 12 37,983 103,931Government debt bonds 31,621 - - - - - 31,621Other assets 11,481 - - - - - 11,481Premises and equipment 9,919 - - - - - 9,919
1,741,555 112,632 58,885 91 19,969 63,976 1,997,108Liabilities:Due to banks 71,778 88,024 74,348 8,204 3,240 24 245,618Medium term loans from banks 154,915 - - - - - 154,915Deposits from financial institutions 150,712 8,483 - - - - 159,195Customer deposits 1,112,593 33,024 4,659 - 50 6 1,150,332Other liabilities 31,648 - - - - - 31,648Shareholders' equity 255,400 - - - - - 255,400
1,777,046 129,531 79,007 8,204 3,290 30 1,997,108Commitments and contingent liabilities 343,503 41,525 20,489 437 39,983 60 445,997
36 Notes to the Financial Statements 31 December 2003
22 Financial Instruments continued...
Financial instruments with contractual amounts representing credit risk
The primary purpose of these instruments is to ensure that funds are available to a customer as required. The
contractual amounts represent the credit risk, assuming that the amounts are fully advanced and that any collateral
or other security is of no value. However, the total contractual amount of commitments to extend credit does not
necessarily represent future cash requirements, since many of these commitments will expire or terminate without
being funded.2003 2002
KD 000’s KD 000’s
Letters of credit:
Sight 80,979 77,799
Syndicated 14,843 23,548
Acceptance 74,678 54,396
Confirmed 5,287 6,864
175,787 162,607
Financial instruments with contractual or notional amounts that are subject to credit risk
These derivative financial instruments, comprising foreign exchange and interest rate contracts, allow the Bank and
its customers to transfer, modify or reduce their foreign exchange and interest rate risks.
The amount subject to credit risk is insignificant and is limited to the current replacement value of instruments that
are favourable to the Bank, which is only a fraction of the contractual or notional amounts used to express the
volumes outstanding. This credit risk exposure is managed as part of the overall borrowing limits granted to
customers. Collateral security is not usually obtained for credit risk exposures on these instruments.
Notional AmountsAt 31 December 2003 TERM TO MATURITY
Up to 1-3 3-12 Over1 Month Months Months 1 Year TotalKD 000's KD 000's KD 000's KD 000's KD 000's
Foreign exchange contracts Spot and forward 141,778 161,474 37,058 - 340,310
At 31 December 2002 TERM TO MATURITY
Up to 1-3 3-12 Over1 Month Months Months 1 Year TotalKD 000's KD 000's KD 000's KD 000's KD 000's
Foreign exchange contracts Spot and forward 91,090 161,714 57,555 - 310,359
37
22 Financial Instruments continued...
B) Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest rates will affect the fair value or cash flows of the
financial instruments. The Bank is exposed to interest rate risk as a result of mismatches or gaps in the amounts of
assets and liabilities and off-balance-sheet instruments that mature or reprice in a given period. The Bank manages
this risk by matching the repricing of assets and liabilities through risk management strategies.
A majority of the Bank’s assets and liabilities reprice within one year. Accordingly there is a limited exposure to
interest rate risk. The effective interest rate (effective yield) of a monetary financial instrument is the rate that, when
used in a present value calculation, results in the carrying amount of the instrument. The rate is an historical rate for
a fixed rate instrument carried at amortised cost and a current market rate for a floating rate instrument or an
instrument carried at fair value.
The Bank’s interest sensitivity position was as follows:
At 31 December 2003: Non
Up to 1-3 3-12 Over interest
1 Month Months Months 1 Year sensitive Total
Assets: KD 000's KD 000's KD 000's KD 000's KD 000's KD 000's
Cash and short term funds 137,699 - - - 58,573 196,272
Treasury bills and bonds 30,000 145,671 276,413 - - 452,084
Deposits with banks and other financial institutions - 250,000 50,000 - - 300,000
Loans and advances to banks 31,797 70,472 90,725 4,420 1,276 198,690
Loans and advances to customers 135,652 133,333 479,250 513,170 (49,563) 1,211,842
Investment securities - - - 40,436 44,206 84,642
Government debt bonds - - 15,780 - - 15,780
Other assets - - - - 12,849 12,849
Premises and equipment - - - - 11,363 11,363
335,148 599,476 912,168 558,026 78,704 2,483,522
Liabilities:
Due to banks 213,609 292,387 51,075 - 1,552 558,623
Medium term loans from banks 110,000 94,205 - - - 204,205
Deposits from financial institutions 53,110 38,386 11,451 - - 102,947
Customer deposits 842,359 207,891 160,416 8,254 9,249 1,228,169
Floating rate notes 58,940 - - - - 58,940
Other liabilities - - - - 33,141 33,141
Shareholders' equity - - - - 297,497 297,497
1,278,018 632,869 222,942 8,254 341,439 2,483,522
Notes to the Financial Statements 31 December 2003
38 Notes to the Financial Statements 31 December 2003
22 Financial Instruments continued...
At 31 December 2002: NonUp to 1-3 3-12 Over interest
1 Month Months Months 1 Year sensitive TotalAssets: KD 000's KD 000's KD 000's KD 000's KD 000's KD 000's
Cash and short term funds 309,956 - - - 23,529 333,485Treasury bills and bonds 56,941 134,540 244,705 - - 436,186Deposits with banks and other financial institutions - 10,000 - - - 10,000Loans and advances to banks 34,764 54,390 30,445 5,472 1,097 126,168Loans and advances to customers 103,200 97,294 397,425 376,676 (40,278) 934,317Investment securities - - - 37,939 65,992 103,931Government debt bonds - - 31,621 - - 31,621Other assets - - - - 11,481 11,481Premises and equipment - - - - 9,919 9,919
504,861 296,224 704,196 420,087 71,740 1,997,108Liabilities:Due to banks 146,068 76,927 18,936 2,135 1,552 245,618Medium term loans from banks 20,000 134,915 - - - 154,915Deposits from financial institutions 66,611 55,005 37,579 - - 159,195Customer deposits 792,758 186,019 163,148 2,642 5,765 1,150,332Other liabilities - - - - 31,648 31,648Shareholders' equity - - - - 255,400 255,400
1,025,437 452,866 219,663 4,777 294,365 1,997,108
Effective Interest RatesNon
At 31 December 2003: interest0%-3% 3%-6% 6%-9% 9%-12% sensitive Total
Assets: KD 000's KD 000's KD 000's KD 000's KD 000's KD 000's
Cash and short term funds 137,588 111 - - 58,573 196,272Treasury bills and bonds 452,084 - - - - 452,084Deposits with banks and other financial institutions 300,00 - - - - 300,000Loans and advances to banks 121,156 76,258 - - 1,276 198,690Loans and advances to customers 190,690 637,887 423,583 9,245 (49,563) 1,211,842Investment securities 729 - - 39,707 44,206 84,642Government debt bonds 15,780 - - - - 15,780Other assets - - - - 12,849 12,849Premises and equipment - - - - 11,363 11,363
1,218,027 714,256 423,583 48,952 78,704 2,483,522Liabilities:Due to banks 547,866 9,205 - - 1,552 558,623Medium term loans from banks 44,205 160,000 - - - 204,205Deposits from financial institutions 43,307 59,640 - - - 102,947Customer deposits 1,179,680 39,240 - - 9,249 1,228,169Floating rate notes 58,940 - - - - 58,940Other liabilities - - - - 33,141 33,141Shareholders' equity - - - - 297,497 297,497
1,873,998 268,085 - - 341,439 2,483,522
39
22 Financial Instruments continued...
Effective Interest Rates Non
At 31 December 2002: interest0%-3% 3%-6% 6%-9% 9%-12% sensitive Total
Assets: KD 000's KD 000's KD 000's KD 000's KD 000's KD 000's
Cash and short term funds 303,613 6,343 - - 23,529 333,485Treasury bills and bonds 25,193 410,993 - - - 436,186Deposits with banks and other financial institutions 10,000 - - - - 10,000Loans and advances to banks 81,242 43,829 - - 1,097 126,168Loans and advances to customers 124,207 449,412 381,510 19,466 (40,278) 934,317Investment securities 741 - - 37,198 65,992 103,931Government debt bonds 31,621 - - - - 31,621Other assets - - - - 11,481 11,481Premises and equipment - - - - 9,919 9,919
576,617 910,577 381,510 56,664 71,740 1,997,108Liabilities:Due to banks 241,766 2,300 - - 1,552 245,618Medium term loans from banks 114,915 40,000 - - - 154,915Deposits from financial institutions 87,113 72,082 - - - 159,195Customer deposits 908,134 235,893 540 - 5,765 1,150,332Other liabilities - - - - 31,648 31,648Shareholders' equity - - - - 255,400 255,400
1,351,928 350,275 540 - 294,365 1,997,108
C) Currency Risk
The Bank views itself as a Kuwaiti entity with Kuwaiti Dinars as its functional currency.
The Bank had the following significant net exposures denominated in foreign currencies as at 31 December.2003 2002
KD 000’s KD 000’sNet Assets (Liabilities):US Dollars 11,123 (2,153)Euros (19,522) 2,601Sterling Pounds (10,600) (10,493)Japanese Yen 19,511 19,781Australian Dollars 107 (530)Canadian Dollars (46) (468)Saudi Riyals (19,095) (1,399)Others 425 347
(18,097) 7,686
D) Liquidity Risk
Liquidity risk is the risk that the Bank will be unable to meet its net funding requirements. Liquidity risk can be caused
by market disruptions or credit downgrades which may cause certain sources of funding to dry up immediately. To
guard against this risk, management has diversified funding sources and assets are managed with liquidity in mind,
maintaining a healthy balance of cash, cash equivalents and readily marketable securities.
Notes to the Financial Statements 31 December 2003
40 Notes to the Financial Statements 31 December 2003
22 Financial Instruments continued...
The table below summarises the maturity profile of the Bank’s assets and liabilities. The contractual maturities of
assets and liabilities have been determined on the basis of the remaining period at the balance sheet date to the
contractual maturity date and do not take account of the effective maturities as indicated by the Bank’s deposit
retention history and the availability of liquid funds. The maturity profile is monitored by management to ensure
that adequate liquidity is maintained.
The maturity profile of the assets and liabilities at the year end based on contractual repayment arrangements is as follows:
At 31 December 2003:
Up to 1-3 3-6 6 Months 1 to 3 Over 3
1 Month Months Months to 1 Year Years Years Total
Assets: KD 000's KD 000's KD 000's KD 000's KD 000's KD 000's KD 000's
Cash and short term funds 196,272 - - - - - 196,272
Treasury bills and bonds 30,000 145,671 109,565 166,848 - - 452,084
Deposits with banks and other financial institutions - 250,000 45,000 5,000 - - 300,000
Loans and advances to banks 51 2,963 18,590 71,462 105,624 - 198,690
Loans and advances to customers 118,360 112,627 238,639 244,914 189,465 307,837 1,211,842
Investment securities - - - - - 84,642 84,642
Government debt bonds - - - - - 15,780 15,780
Other assets 12,849 - - - - - 12,849
Premises and equipment - - - - - 11,363 11,363
Total assets 357,532 511,261 411,794 488,224 295,089 419,622 2,483,522
Liabilities:
Due to banks 213,609 292,387 51,075 - - 1,552 558,623
Medium term loans from banks - - - - 144,205 60,000 204,205
Deposits from financial institutions 53,110 38,386 8,221 3,230 - - 102,947
Customer deposits 851,608 207,891 105,625 54,791 8,254 - 1,228,169
Floating rate notes - - - - - 58,940 58,940
Other liabilities 26,171 - 3,750 3,220 - - 33,141
Shareholders' equity - 35,923 - - - 261,574 297,497
Total assets 1,144,498 574,587 168,671 61,241 152,459 382,066 2,483,522
Net liquidity gap (786,966) (63,326) 243,123 426,983 142,630 37,556 -
41Notes to the Financial Statements 31 December 2003
22 Financial Instruments continued...
At 31 December 2002:
Up to 1-3 3-6 6 Months 1 to 3 Over 3
1 Month Months Months to 1 Year Years Years Total
Assets: KD 000's KD 000's KD 000's KD 000's KD 000's KD 000's KD 000's
Cash and short term funds 333,485 - - - - - 333,485
Treasury bills and bonds 56,941 134,540 94,400 150,305 - - 436,186
Deposits with banks and other financial institutions - 10,000 - - - - 10,000
Loans and advances to banks 107 719 20,312 30,312 67,694 7,024 126,168
Loans and advances to customers 100,194 73,362 149,495 142,421 201,533 267,312 934,317
Investment securities - - - - - 103,931 103,931
Government debt bonds - - - - - 31,621 31,621
Other assets 11,481 - - - - - 11,481
Premises and equipment - - - - - 9,919 9,919
Total assets 502,208 218,621 264,207 323,038 269,227 419,807 1,997,108
Liabilities:
Due to banks 146,068 76,927 18,936 - 2,135 1,552 245,618
Medium term loans from banks - - - - 94,915 60,000 154,915
Deposits from financial institutions 66,611 55,005 30,366 7,213 - - 159,195
Customer deposits 798,524 186,019 102,494 60,653 2,395 247 1,150,332
Other liabilities 23,651 - 5,176 2,821 - - 31,648
Shareholders' equity - 33,584 - - - 221,816 255,400
Total Liabilities 1,034,854 351,535 156,972 70,687 99,445 283,615 1,997,108
Net liquidity gap (532,646) (132,914) 107,235 252,351 169,782 136,192 -
E) Operational Risk
The Bank has a set of policies and procedures, which are approved by the Board of Directors and are applied to
identify, assess and supervise operational risk in addition to other types of risks relating to the banking and financial
activities of the Bank. Operational risk is managed through the Risk Management Department. This department
ensures compliance with policies and procedures to identify, assess, supervise and monitor operational risk as part of
overall risk management.
The operational risks are managed through the Risk Management Department in line with the CBK instructions dated
14 November 1996, concerning the general guidelines for internal controls and the instructions dated 13 October
2003, regarding the sound practices for managing and supervising operational risks in banks.
42
23 Fair Value of Financial Assets and Liabilities
Fair value is the amount at which an asset, liability or financial instrument could be exchanged or settled between
knowledgeable parties in an arm’s length transaction. Underlying the definition of fair value is the presumption that
the Bank is a going concern without any intention, or need, to liquidate, curtail materially the scale of its operations
or undertake a transaction on adverse terms.
Fair values of interest bearing financial assets and liabilities not represented on the Bank’s balance sheet at fair values
have been estimated using prevailing interest rates for debts with similar credit risk and residual maturity. The
carrying value of such financial instruments generally approximates their fair values.
Fair value of government debt bonds cannot be determined with sufficient reliability as future cash flows cannot be
determined reliably.
24 Contingent Liabilities and Commitments
These financial statements do not reflect the following commitments and contingent liabilities which arise in the
normal course of business.
2003 2002
KD 000’s KD 000’s
Guarantees:
Contract 218,759 162,046
Tender 33,635 45,234
Syndicated 10,853 10,824
Other 103,768 65,286
367,015 283,390
Irrevocable commitments to extend credit at the balance sheet date amounted to KD71,327,905 (2002: KD47,438,728).
Most of the commitments expire within 5 years.
Notes to the Financial Statements 31 December 2003
43
25 Segmental Analysis
i) By Business Units
Treasury & Domestic
International Banking Total
At 31 December 2003 KD 000’s KD 000’s KD 000’s
Income Statement
Interest income from external sources 30,247 56,862 87,109
Net Profit 16,324 32,133 48,457
Balance Sheets:
Assets
Net Assets 1,288,734 1,194,788 2,483,522
Liabilities
Deposits 897,101 1,255,783 2,152,884
Other Liabilities 4,928 28,213 33,141
Central Treasury 89,208 (89,208) -
Shareholders’ equity 297,497 - 297,497
1,288,734 1,194,788 2,483,522
Treasury & Domestic
International Banking Total
At 31 December 2002 KD 000’s KD 000’s KD 000’s
Income Statement
Interest income from external sources 36,365 57,711 94,076
Net Profit 16,462 29,045 45,507
Balance Sheets:
Assets
Net Assets 1,027,827 969,281 1,997,108
Liabilities
Deposits 697,027 1,013,033 1,710,060
Other Liabilities 3,359 28,289 31,648
Central Treasury 72,041 (72,041) -
Shareholders’ equity 255,400 - 255,400
1,027,827 969,281 1,997,108
ii) By Geographical Area
All significant segment revenue from external customers is derived from customers based in Kuwait. Geographic
segment information relating to location of assets is given in note 22 A.
Notes to the Financial Statements 31 December 2003