INTERIM CONDENSED CONSOLIDATED FINANCIAL … · Deposits with banks 17,065 (51,259) Kuwait...

I N T E R I M C O N D E N S E D C O N S O L I D AT E DF I N A N C I A L I N F O R M AT I O N ( U N A U D I T E D )

3 0 S E P T E M B E R 2 0 1 6

The attached notes 1 to 11 form part of the interim condensed consolidated financial information.

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Al Ahli Bank of Kuwait K.S.C.P. and its subsidiaries

INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED) For the period ended 30 September 2016

Three months ended 30 September

Nine months ended 30 September

2016 2015 2016 2015 Notes KD 000 KD 000 KD 000 KD 000 Interest income 46,300 30,950 133,919 90,932 Interest expense (19,193) (7,720) (52,455) (22,358) ───────── ───────── ───────── ───────── NET INTEREST INCOME 27,107 23,230 81,464 68,574 Net fees and commission income 6,864 6,389 22,408 18,966 Net foreign exchange gain 1,086 786 3,241 2,138 Net (loss) / gain on investment securities (165) 84 (2,557) (279) Dividend income 224 935 1,908 3,187 Share of results from an associate 721 835 2,002 1,906 Other operating income 307 332 1,557 742

───────── ───────── ───────── ───────── OPERATING INCOME 36,144 32,591 110,023 95,234

───────── ───────── ───────── ───────── Staff expenses (8,533) (6,126) (26,047) (18,596) Other operating expenses (5,062) (3,577) (14,947) (10,127) Depreciation and amortisation (1,176) (383) (3,426) (1,094)

───────── ───────── ───────── ───────── OPERATING EXPENSES (14,771) (10,086) (44,420) (29,817)

───────── ───────── ───────── ───────── OPERATING PROFIT FOR THE PERIOD 21,373 22,505 65,603 65,417 Provision / impairment losses 7 (15,265) (12,813) (42,320) (33,394)

───────── ───────── ───────── ───────── PROFIT FOR THE PERIOD BEFORE TAXATION 6,108 9,692 23,283 32,023 Taxation 8 (1,346) (904) (3,438) (2,798)

───────── ───────── ───────── ───────── NET PROFIT FOR THE PERIOD 4,762 8,788 19,845 29,225

═════════ ═════════ ═════════ ═════════

Attributable to: Shareholders of the Bank 4,750 8,788 19,803 29,225 Non‐controlling interests 12 ‐ 42 ‐

───────── ───────── ───────── ─────────

4,762 8,788 19,845 29,225 ═════════ ═════════ ═════════ ═════════

BASIC AND DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO THE SHAREHOLDERS OF THE BANK 9 3 fils 5 fils

12 fils 18 fils ═════════ ═════════ ═════════ ═════════


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INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) For the period ended 30 September 2016



2016 2015 2016 2015 KD 000 KD 000 KD 000 KD 000 Net profit for the period 4,762 8,788 19,845 29,225 ───────── ───────── ───────── ─────────

Other comprehensive income Items that are or may be reclassified subsequently to consolidated income statement:

Effect of changes in fair values of investments available for sale (934) (7,609) (3,731) (9,449) Net loss on sale / impairment losses on investments available for sale 408 152 3,026 1,298 Exchange difference on translation of foreign operations 565 (7) (2,003) 60 ───────── ───────── ───────── ─────────

Other comprehensive income / (loss) for the period 39 (7,464) (2,708) (8,091) ───────── ───────── ───────── ─────────

Total comprehensive income for the period 4,801 1,324 17,137 21,134 ═════════ ═════════ ═════════ ═════════

Attributable to:

Shareholders of the Bank 4,781 1,324 17,134 21,134

Non‐controlling interests 20 ‐ 3 ‐ ───────── ───────── ───────── ─────────

4,801 1,324 17,137 21,134 ═════════ ═════════ ═════════ ═════════


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INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) For the period ended 30 September 2016

Attributable to shareholders of the Bank

Reserves

Share capital

Share premium

Treasury shares (Note 6)

Statutory reserve

General reserve

Treasury shares reserve (Note 6)

Other reserves (Note 6)

Cumulative changes in

fair value

Retained earnings

Total reserves Total

Non‐

controlling interests

Total equity

KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 Balance as at 1 January 2016 161,917 108,897 (4,528) 67,815 67,368 8,065 8,775 12,938 124,353 289,314 555,600 859 556,459 Net profit for the period ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 19,803 19,803 19,803 42 19,845 Other comprehensive loss for the period ‐ ‐ ‐ ‐ ‐ ‐

(1,974) (695) ‐ (2,669) (2,669)

(39)

(2,708)

─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ───────Total comprehensive (loss) income for the period ‐ ‐ ‐ ‐ ‐ ‐

(1,974) (695) 19,803 17,134 17,134

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17,137

Dividends paid (Note 6) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ (16,077) (16,077) (16,077) ‐ (16,077) Treasury shares purchased ‐ ‐ (402) ‐ ‐ ‐ ‐ ‐ ‐ ‐ (402) ‐ (402) Acquisition of non‐controlling interest ‐ ‐ ‐ ‐ ‐ ‐ 11 ‐ ‐ 11 11 (62) (51)

─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ───────Balance as at 30 September 2016 161,917 108,897 (4,930) 67,815 67,368 8,065 6,812 12,243 128,079 290,382 556,266 800 557,066 ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ Balance as at 1 January 2015 161,917 108,897 (2,303) 64,588 64,141 8,065 8,299 23,314 121,430 289,837 558,348 ‐ 558,348 Net profit for the period ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 29,225 29,225 29,225 ‐ 29,225 Other comprehensive income (loss) for the period ‐ ‐ ‐ ‐ ‐ ‐ 60 (8,151) ‐ (8,091) (8,091) ‐ (8,091)

─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ───────Total comprehensive income (loss) for the period ‐ ‐ ‐ ‐ ‐ ‐ 60 (8,151) 29,225 21,134 21,134 ‐ 21,134

Dividends paid (Note 6) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ (20,983) (20,983) (20,983) ‐ (20,983) Treasury shares purchased ‐ ‐ (2,102) ‐ ‐ ‐ ‐ ‐ ‐ ‐ (2,102) ‐ (2,102) ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── ─────── Balance as at 30 September 2015 161,917 108,897 (4,405) 64,588 64,141 8,065 8,359 15,163 129,672 289,988 556,397 ‐ 556,397 ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════ ═══════


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Al Ahli Bank of Kuwait K.S.C.P. and its subsidiaries INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) For the period ended 30 September 2016

Note


2016 2015 KD 000 KD 000

OPERATING ACTIVITIES Net profit for the period before taxation 23,283 32,023 Adjustments for: Net loss (gain) on sale of investments available for sale 2,520 (27) Dividend income (1,908) (3,187) Depreciation and amortisation 3,426 1,094 Share of results from an associate (2,002) (1,906) Provision / impairment losses 7 42,320 33,394 ───────── ─────────

Operating profit before changes in operating assets and liabilities 67,639 61,391 Changes in operating assets and liabilities Deposits with banks 17,065 (51,259) Kuwait Government treasury bonds (15,152) 78,768 Central Bank of Kuwait bonds (61,396) 80,439 Investments at fair value through profit or loss 7,120 6,593 Loans and advances (197,255) (377,875) Other assets (5,929) 2,437 Due to banks and other financial institutions (406,485) 132,849 Customers' deposits 511,630 193,853 Other liabilities 3,788 (3,943) Taxes paid (2,369) (2,195) ───────── ─────────

Net cash flows (used in) / from operating activities (81,344) 121,058 ───────── ─────────

INVESTING ACTIVITIES Purchase of investments available for sale (121,127) (4,411) Proceeds from sale of investments available for sale 122,770 20,575 Dividend from investment in an associate 881 800 Net purchase of premises and equipment (5,282) (2,441) Acquisition of non‐controlling interest in subsidiary (51) ‐ Dividend income received 1,908 3,187 ───────── ─────────

Net cash flows (used in) / from investing activities (901) 17,710 ───────── ─────────

FINANCING ACTIVITIES Dividend paid (16,077) (20,983) Purchase of treasury shares (402) (2,102) ───────── ─────────

Net cash flows used in financing activities (16,479) (23,085) ───────── ─────────

Foreign currency translation difference (8,274) 25 ───────── ─────────

NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS (106,998) 115,708 Cash and cash equivalents as at 1 January 343,971 95,404 ───────── ─────────

CASH AND CASH EQUIVALENTS AS AT 30 September 236,973 211,112 ═══════ ═══════

Cash and cash equivalents comprise: Cash in hand and in current account with other banks 42,924 70,261 Balances with the Central Banks (original maturity not exceeding thirty days) 65,287 57,360 Deposits with banks (original maturity not exceeding thirty days) 128,762 83,491 ───────── ─────────

236,973 211,112 ═══════ ═══════

Interest received amounted to KD 133,571 thousand (30 September 2015: KD 94,398 thousand) and interest paid amounted to KD 46,412 thousand (30 September 2015: KD 23,547 thousand).


NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) At 30 September 2016

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1 INCORPORATION AND REGISTRATION Al Ahli Bank of Kuwait K.S.C.P. (“the Bank”) is a public shareholding company incorporated in Kuwait on 23 May 1967 and is registered as a Bank with the Central Bank of Kuwait (CBK). Its registered office is at Al Safat Square, Ahmed Al Jaber Street, Kuwait City. It is engaged in banking, primarily in Kuwait, United Arab Emirates and Egypt. The interim condensed consolidated financial information of the Bank and its subsidiaries (collectively “the Group”) were approved by the Bank’s Board of Directors on 13 October 2016. 2 BASIS OF PRESENTATION (a) The interim condensed consolidated financial information of the Group has been prepared in

accordance with International Accounting Standard 34 “Interim Financial Reporting” except as noted below.

The annual consolidated financial statements for the year ended 31 December 2015, were prepared in accordance with the regulations of the State of Kuwait for financial services institutions regulated by the Central Bank of Kuwait. These regulations require adoption of all International Financial Reporting Standards (IFRS) except for the IAS 39 requirement for collective impairment provision, which has been replaced by the Central Bank of Kuwait’s requirement for a minimum general provision.

(b) The accounting policies used in the preparation of the interim condensed consolidated financial

information are consistent with those used in the preparation of the annual consolidated financial statements for the year ended 31 December 2015, except for the adoption of the amendments and annual improvements to IFRSs, relevant to the Group which are effective for annual reporting period starting from 1 January 2016 and which did not result in any material impact on the accounting policies, financial position or performance of the Group.

(c) The interim condensed consolidated financial information does not contain all information and

disclosures required for full financial statements prepared in accordance with IFRS, and should be read in conjunction with the Group’s annual consolidated financial statements for the year ended 31 December 2015. Further, results for the nine months period ended 30 September 2016, are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2016.



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3 SEGMENTAL INFORMATION

The Group is organised into segments that engage in business activities which earn revenue and incur expenses. These segments are regularly reviewed by the chief operating decision maker for resource allocation and performance assessment. For the purposes of segment reporting the management has regrouped the operations into the following operating segments:

Commercial Banking ‐ Comprising a full range of credit, deposit and related banking services provided to its commercial customers.

International ‐ Operations related to overseas subsidiary and branches are classified as International.

Treasury and Investment ‐ Comprising money market, foreign exchange, treasury bonds, asset and surplus fund management, investment securities and investment in an associate and residual impact of transfer pricing and inter segment allocation.

Segmental information for the nine months period ended and as at 30 September is as follows:

Commercial banking International Treasury and Investments Total

2016 2015 2016 2015 2016 2015 2016 2015 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000

Operating income 83,754 74,591 25,785 10,145 484 10,498 110,023 95,234 ───────── ───────── ───────── ───────── ───────── ───────── ───────── ─────────

Segment results 33,585 32,515 4,859 4,487 (961) 8,251 37,483 45,253 Unallocated expense

(14,200)

(13,230)

───────── ─────────

Profit before tax 23,283 32,023 ══════ ══════

Segment assets 2,602,913 2,458,072 905,535 484,812 847,767 813,286 4,356,215 3,756,170 Unallocated assets 69,455 67,218 ───────── ─────────

Total assets 4,425,670 3,823,388 ══════ ══════

Segment liabilities 2,029,379 1,629,220 727,796 440,126 1,062,844 1,161,188 3,820,019 3,230,534 Unallocated liabilities

48,585

36,457

───────── ─────────

Total liabilities 3,868,604 3,266,991 ══════ ══════



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4 FAIR VALUE OF FINANCIAL INSTRUMENTS Financial Instruments Financial Instruments comprise of financial assets and financial liabilities. The fair value of financial assets are categorised as under: Investment securities (Audited) 30 September 31 December 30 September 2016 2015 2015 KD 000 KD 000 KD 000 Level 1: Equity 6,072 14,622 11,262 Debt securities

‐ Government 72,221 63,947 47,694 ‐ Non Government 77,249 101,304 124,833

Level 2: Equity 9,219 10,041 11,274 Debt securities

‐ Government 72,835 39,662 42,458 ‐ Non Government 37,432 42,485 ‐

Managed funds 20,633 39,312 39,695 Level 3: Equity 25,530 32,436 34,330 ───────── ───────── ───────── 321,191 343,809 311,546 ══════ ══════ ══════ The movements in level 3 category above is mainly due to purchase and sale during the period.

Fair values of financial instruments that are carried at amortised cost are not materially different from their carrying values. The impact on the interim condensed consolidated statement of financial position or the interim condensed consolidated statement of changes in equity would be immaterial if the relevant risk variables used to fair value the securities classified under level 2 and level 3 were altered by 5 per cent.



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5 RELATED PARTY TRANSACTIONS

These represent transactions with certain related parties (directors and senior management of the Group, close members of their families and entities of which they are principal owners or over which they are able to exercise significant influence and associate of the Group) who were customers of the Group during the period. The terms of these transactions are approved by the Group’s management. In the normal course of business, these related parties have deposits with the Group and credit facilities granted to them by the Group. The balances included in the interim condensed consolidated financial information are as follows: (Audited) 30 September 31 December 30 September 2016 2015 2015 KD 000 KD 000 KD 000 Loans and advances 47,568 70,872 70,599 Customers’ deposits 31,746 21,591 20,552 Investment securities 2,706 2,709 2,695 Portfolio managed by Group 73 76 79 Commitment and contingent liabilities 21,388 20,655 22,614 Interest income and interest expense includes KD 1,549 thousand (30 September 2015: KD 1,886 thousand) and KD 564 thousand (30 September 2015: KD 262 thousand) respectively on transactions with related parties. Key management compensation Compensation for key management is as follows:



2016 2015 2016 2015 KD 000 KD 000 KD 000 KD 000

Salaries and other benefits 854 572 2,668 1,696

Post employment benefits 59 38 160 135 ───────── ───────── ───────── ─────────

913 610 2,828 1,831 ══════ ══════ ══════ ══════

6 EQUITY (a) The shareholders at the Annual General Meeting held on 26 March 2016 approved the distribution of

cash dividend of 10% for the year ended 31 December 2015 (31 December 2014: cash dividend of 13%) which was subsequently paid. Treasury shares are not entitled to any cash dividends.



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6 EQUITY (continued) (b) Treasury shares and Treasury shares reserve:

30 September

2016

(Audited) 31 December

2015

30 September

2015

Number of shares held 12,553,680 11,325,473 10,985,776 ══════════ ══════════ ══════════

Percentage of shares held 0.78% 0.70% 0.68% ══════════ ══════════ ══════════

Market value (KD 000) 3,954 4,247 3,680 ══════════ ══════════ ══════════

Weighted average market value per share (fils) 325 365 359 ══════════ ══════════ ══════════

The balance in the treasury share reserve account is not available for distribution. Further, an amount equal to the cost of treasury shares is not available for distribution from general reserve throughout the holding period of these treasury shares.

(c) Movement in other reserves is as below:

Property

revaluation reserve

Foreign currency translation reserve

Employee benefit plan reserve &

other reserves

Total other reserves

KD 000 KD 000 KD 000 KD 000 At 1 January 2015 8,250 49 ‐ 8,299 Other comprehensive income for the period 35 25 ‐ 60

────── ────── ────── ────── As at 30 September 2015 8,285 74 ‐ 8,359 ════════ ════════ ════════ ════════

At 1 January 2016 8,956 (78) (103) 8,775 Other comprehensive (loss) income for the period

(72)

(1,915)

13

(1,974)

Arising from acquisition of non‐controlling interest in a subsidiary

‐

‐

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11

────── ────── ────── ────── As at 30 September 2016 8,884 (1,993) (79) 6,812 ════════ ════════ ════════ ════════



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7 PROVISION / IMPAIRMENT LOSSES



2016 2015 2016 2015 KD 000 KD 000 KD 000 KD 000 Provision charge for credit losses ‐ General 11,654 5,202 31,203 13,646 Provision charge for credit losses ‐ Specific 3,370 7,249 10,610 18,423 Investments available for sale 241 362 507 1,325 ────────── ────────── ────────── ──────────

15,265 12,813 42,320 33,394 ═══════ ═══════ ═══════ ═══════

8 TAXATION



2016 2015 2016 2015 KD 000 KD 000 KD 000 KD 000 Kuwait Foundation for the Advancement of Sciences 45 83 187 275 National Labour Support Tax 125 230 519 764 Zakat 50 92 208 306 Tax on overseas locations 1,126 499 2,524 1,453 ────────── ────────── ────────── ──────────

1,346 904 3,438 2,798 ═══════ ═══════ ═══════ ═══════

9 BASIC AND DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO SHAREHOLDERS OF THE BANK Basic and diluted earnings per share are computed by dividing the net profit for the period attributable to shareholders of the Bank by the weighted average number of shares outstanding during the period.:



2016 2015 2016 2015 Net profit for the period attributable to shareholders of the Bank (KD 000)

4,750

8,788

19,803

29,225

════════ ════════ ════════ ════════Weighted average number of the Bank’s issued and paid‐up shares 1,619,166,234 1,619,166,234

1,619,166,234 1,619,166,234

Less: weighted average number of treasury shares (11,991,526) (9,042,866)

(11,955,095) (6,976,135)

────────── ────────── ────────── ────────── Adjusted weighted average number of shares outstanding during the period 1,607,174,708 1,610,123,368 1,607,211,139 1,612,190,099

════════ ════════ ════════ ════════Basic and diluted earnings per share attributable to shareholders of the Bank

3 fils

5 fils

12 fils

18 fils

════════ ════════ ════════ ════════



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10 COMMITMENTS AND CONTINGENT LIABILITIES Financial instruments with contractual amounts representing credit risk. (Audited) 30 September 31 December 30 September 2016 2015 2015 KD 000 KD 000 KD 000 Acceptances 29,843 22,489 31,101 Letters of credit 122,784 153,087 146,188 Guarantees 797,602 755,051 680,506

───────── ───────── ─────────

950,229 930,627 857,795 ══════ ══════ ══════

Total commitments to extend credit at the statement of financial position date amounted to KD 425,131 thousand (31 December 2015: KD 491,291 thousand and 30 September 2015: KD 455,408 thousand). 11 DERIVATIVE INSTRUMENTS The notional or contractual amounts of outstanding derivative instruments together with the fair values are as follows:

30 September

2016

(Audited) 31 December

2015 30 September

2015

Assets Liabilities Contractual amounts

Assets Liabilities

Contractual amounts

Assets Liabilities

Contractual amounts

KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000

Held for hedging:

Fair value hedges Interest rate swaps 26 1,147 72,830 85 289 87,007 ‐ 1,405 92,736 Held for trading: Forward foreign exchange contracts 136 121 202,676

70 341 157,683

145 2,116 205,883

Interest rate swaps ‐ 6,187 88,883 ‐ 7,019 88,883 ‐ 6,306 88,883 ────── ────── ────── ────── ────── ────── ────── ────── ──────

162 7,455 364,389 155 7,649 333,573 145 9,827 387,502 ════ ════ ════ ════ ════ ════ ════ ════ ════

All derivative contracts are fair valued using observable market inputs and are classified as level 2.

INTERIM CONDENSED CONSOLIDATED FINANCIAL … · Deposits with banks 17,065 (51,259) Kuwait...

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