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Annual Report 2017 - KFH’S Group Overview Kuwait Finance House K.S.C.P and Subsidiaries 2017 Annual Report Kuwait Finance House K.S.C.P and Subsidiaries 2017 Annual Report Kfh.com 180 3333 Kfh.com 180 3333 In the name of Allah the Most Gracious, the Most Merciful. Ye who Believe! Fear Allah and give up what remains of your demand for usury, if ye are indeed believers (278). If ye do it not, take notice of war from Allah and his Apostle, but if ye turn back, ye shall have your capital sums deal not unjustly and ye shall not be dealt unjustly (279). Al Baqara (278 - 279) Al-Quran His Highness Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah The Amir of the State of Kuwait His Highness Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah The Crown Prince His Highness Sheikh Jaber Al-Mubarak Al-Hamad Al-Sabah The Prime Minister Kuwait Finance House Abdullah Al-Mubarak Street - Murqab - Kuwait P.O. Box 24989 Safat 13110 Kuwait Tel: +965 1800700 Fax: +965 22455135 Cable: BAITMAL KT [email protected] www.kfh.com @KFHGroup @KFHGroup Kuwait Finance House (KFH) Contents Financial Indicators 06 KFH’s Group Overview 08 Chairman’s Message 12 Board of Directors 16 Fatwa & Shari’a Supervisory Board’s Report 24 Fatwa & Shari’a Supervisory Board 25 Economic Developments 27 Group Chief Executive Officer’s Statement & Management Discussion 29 Financial Performance 34 Executive Management 36 Corporate Governance Report 46 Risk Management and Governance Requirements 62 Capital Adequacy Disclosures - Basel III 64 Auditor’s Report and Consolidated Financial Statements 88 Financial Indicators NetNet Profit attributable to the shareholders of the bank 2015 Profit attributable to the shareholders of the bank 2015-2017- 2017 2017 184 + 26% 2016 165 2015 146 KD million 130 140 150 160 170 180 190 NetNet finance income 2015 finance income 2015-2017- 2017 2017 445 + 3% 2016 435 2015 432 KD million 425 430 435 440 445 450 TotalTotal Assets 2015 Assets 2015-2017- 2017 2017 17,358 + 5% 2016 16,499 2015 16,495 KD million 15,000 15,500 16,000 16,500 17,000 17,500 6 KFH DataKuwait Classification: Finance House Internal (K.S.C.P) Use and Only Subsidiaries اﻟﺪراﺳﺎت واﻟﺘﻘﺎرﯾﺮ اﻻﻗﺘﺼﺎدﯾﺔ – اﻻﺳﺘﺮاﺗﯿﺠﯿﺔ ﻟﻠﻤﺠﻤﻮﻋﺔ ﺑﯿﺖ اﻟﺘﻤﻮﯾﻞ اﻟﻜﻮﯾﺘﻲ Page 3 of 4 inancing eceiables Financing Recievables2015 2015-2017- 2017 2017 9,216 + 14% 2016 8,176 2015 8,095 KD million 7,000 7,500 8,000 8,500 9,000 9,500 Depositors’eositors Accounts 2015 Accounts 2015-2017- 2017 2017 11,597 + % 2016 10,717 2015 10,756 KD million 10,000 10,250 10,500 10,750 11,000 11,250 11,500 11,750 uit attributable to shareholders of the bank 2015 Equity attributable to the shareholders of the bank- 2017 2015-2017 2017 1,872 + 5% 2016 1,810 2015 1,779 KD million 1,700 1,750 1,800 1,850 1,900 KFH Data Classification: Internal Use Only Kuwait Finance House (K.S.C.P) and Subsidiaries 7 اﻟﺪراﺳﺎت واﻟﺘﻘﺎرﯾﺮ اﻻﻗﺘﺼﺎدﯾﺔ – اﻻﺳﺘﺮاﺗﯿﺠﯿﺔ ﻟﻠﻤﺠﻤﻮﻋﺔ ﺑﯿﺖ اﻟﺘﻤﻮﯾﻞ اﻟﻜﻮﯾﺘﻲ Page 4 of 4 KFH’s Group Overview Annual Report 2017 - KFH’s Group Overview KFH’s Group Overview Global Integrated Operations Leading the Islamic finance industry, KFH Group offers a wide range of Islamic products and services across several regions, with 484 branches, 1,479 ATMs and more than 15,000 employees. 6 3 1 2 5 4 • Kuwait Finance House (KFH) was the first Islamic bank established in Kuwait in 1977. Today, KFH is one of the leading Islamic banking institutions in the world, and one of the biggest financiers in both the local and regional markets. • KFH’s largest shareholders include: Kuwait Investment Authority (Direct), Kuwait Awqaf Public Foundation (Direct), Public Authority for Minors’ Affairs (Direct), The Public Institution for Social Securities (Indirect). • Kuwait Finance House is a publically listed company on Boursa Kuwait (Ticker “KFIN”). 1- Kuwait Finance House K.S.C.P. - Kuwait 5- Saudi Kuwaiti Finance House S.S.C. 2- Kuwait Finance House B.S.C. - Bahrain 6- KT Bank AG - Germany 3- Kuwait Turkish Participation Bank - Turkey 4- Kuwait Finance House - Malaysia (Berhad) 10 Kuwait Finance House (K.S.C.P) and Subsidiaries Annual Report 2017 - KFH’s Group Overview Vision To lead the international development of Islamic financial services and become the most trusted and sustainably most profitable Shari’a- compliant bank in the world. Mission To deliver superior innovation and customer service excellence while protecting and enhancing the interests of all our stakeholders. Values Leadership and Innovation Partnership and Accountability Compliance with Islamic Shari’a Kuwait Finance House (K.S.C.P) and Subsidiaries 11 Annual Report 2017 - Chairman’s Message Chairman’s Message Praise be to Allah Almighty, and Peace and Blessings be upon our Prophet Muhammad (PBUH), his Family and Companions. Esteemed Shareholders, Assalamu Alaikum Warahmatu Allah Wabarakatuh On behalf of myself, my fellow colleagues, members of the Board of Directors of Kuwait Finance House (“KFH”), I would like to present to you KFH Group Annual Report for 2017. We have managed this year to achieve positive results despite various difficult challenges, continued weak economic growth in several countries and geopolitical tensions. However, it can be said that 2017 was a unique year in KFH’s journey of success as it was crowned by celebrating its 40th Anniversary as the first and pioneer Islamic bank in Kuwait. KFH has completed four decades of significant achievements that contributed effectively to the national development and growth of Kuwait’s economy. Started as an ordinary small bank in late 1970s, KFH has succeeded in becoming one of the largest, most prominent, credible and secured Islamic banks in Kuwait where it also attained high credit ratings amongst the local and international peers with distinguished geographical diversity worldwide in Bahrain, Saudi Arabia, Turkey, Malaysia and Germany. With steadiness and absolute confidence, KFH has managed during the past 40 years to enhance the value of its depositors and shareholders’ equity, increase returns on their investments and maintain steady profitability despite crises and major challenges encountered at both local and international levels. Starting from a limited capital not exceeding two million Kuwaiti Dinars upon incorporation, its total shareholders equity grew to reach approximately two billion Kuwaiti Dinars as at the end of 2017. This long march has reflected several competitive advantages rendering KFH as a model, being a leading development bank with a prestigious Islamic trademark. KFH provides a large variable package of banking and investment products to motivate saving, meet finance and investment needs, attract more capital and acquire depositors and 12 Kuwait Finance House (K.S.C.P) and Subsidiaries Annual Report 2017 - Chairman’s Message shareholders trust in light of its high quality assets, growth in profits and prudent risk management policy. All such factors have ranked KFH as one of the pioneer leading Islamic banks both at local and international levels. We have started 2017 with a much stronger base where we reaped the harvest of our efforts during the past three years. These results are attributed, by the grace of Allah, to the loyalty of our customers, the outstanding efforts of our employees, our strict compliance with Islamic Shari’a principles and rules, the efficiency of our control systems and our good resources and risks management, where cost optimization outcomes have become obvious. We have executed prudent exits from certain investments to determine the ideal volume of investments after consolidating “KFH Investment Portfolio” through KFH Capital, overcoming certain duplicated activities, focusing on core banking business and expanding the strategic supervision circle so as to enable KFH to seize income generating investment opportunities and become the most sustainable in terms of profitability and the most trusted Islamic bank worldwide. On a strategic level, KFH managed to set its 3-year strategy ending in 2020. The strategy is focused on three main pillars including the development of current customers’ base, innovation based on the new digital financial technology (FINTECH) and achievement of operational excellence. We have set our ambitious strategy trend for the following years to counter challenges in the organizational, economic and operational environment and respond to regulatory requirements. Our aim is to make customers the main focus, exceed their expectations, maintain a constant leadership, and achieve distinct performance and sustainable growth. In regards to banking services and private banking, we have maintained our leading position among Kuwaiti banks, especially in the field of expanding the new innovative Shari’a compliant solutions circle, increasing the focus on services through digital media that enhance customers’ self-service, whereas we provided XTM machines in some of our branch locations. Corporate banking continued its growth benefiting from the strong and well established links and coordination with the Group’s subsidiaries and associates, which had the greatest effect on providing distinct financial solutions both at local and global levels. At the local level, KFH has arranged several major transactions to finance infrastructure projects including financing a company entering into contract with the Ministry of Electricity and Water with total value amounting 120 million Kuwaiti Dinars. Further, it has also financed a transaction for purchasing three aircrafts with value amounting 124 million Kuwaiti Dinars in favor of ALAFCO Aviation Lease and Finance Company. On the global level, KFH played the role of the main organizer and subscription manager of a transaction in US dollar syndication finance amounting 180 million Kuwaiti Dinars in favor of a wholly owned company of Omani Investment Fund. Further, KFH continued its focus on Small and Medium Enterprises. At another level, Group Treasury’s contribution to the financial results achieved by KFH this year was strong and outstanding.
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