ANNUAL REPORT In the Name of Allah, Most Gracious, Most Merciful “Verily, Allah is the All-Provider, Possessor of Power, the Mighty” Allah the Almighty speaks the truth Boubyan Bank | Annual Report 2018 1 Contents Board of Directors 4 Fatwa & Shari’a Supervisory Board 6 Executive Management 7 Chairman’s Message 8 Management Discussion and Analysis Report 13 Governance Report 18 Social Responsibity 35 Risk Management 37 Report of Fatwa & Shari’a Supervisory Board 66 Consolidated Financial Statements and Independent Auditors’ Report 67 2 Boubyan Bank | Annual Report 2018 H.H. Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah Amir of the State of Kuwait H.H. Sheikh H.H. Sheikh Jaber Al-Mubarak Al-Hamad Al-Sabah Nawaf Al-Ahmad Al-Jaber Al-Sabah Prime Minister Crown Prince Boubyan Bank | Annual Report 2018 3 Board of Directors Mahmoud Yousef Al-Fulaij Chairman Adel Abdul Wahab Al-Majed Vice-Chairman & Chief Executive Officer 4 Boubyan Bank | Annual Report 2018 Abdulaziz Abdullah Al-Shaya Adnan Abdullah Al-Othman Ahmad Khalid Al-Humaizi Farid Soud Al-Fozan Board Member Board Member Board Member Board Member Hazim Ali Al-Mutairi Nasser Abdulaziz Al-Jallal Waleed Mishari Al-Hamad Board Member Board Member Board Member Boubyan Bank | Annual Report 2018 5 Fatwa & Shari’a Supervisory Board Sheikh Dr. Sheikh Dr. Sheikh Dr. Sheikh Dr. Abdulaziz Khalifa Al-Qasar Esame Khalaf Al-Enezi Mohammed Awad Al-Fuzaie Ali Ibrahim Al-Rashid Chairman Member/Reporter Member Member 6 Boubyan Bank | Annual Report 2018 Executive Management Adel Abdul Wahab Al-Majed Vice-Chairman & Chief Executive Officer Abdulla Al-Najran Al-Tuwaijri Abdul-Salam Mohammed Al-Saleh Waleed Khalid Al-Yaqout Deputy Chief Executive Officer Deputy Chief Executive Officer General Manager Administration Group Adel Abdullah Al Hammad Ashraf Abdallah Sewilam Neven Raic General Manager General Manager General Manager Human Resources Group Corporate Banking Group Consumer Banking Group Abdul Rahman Hamza Mansour Mohamed Ibrahim Ismail Rajeev Anant Kale General Manager General Manager General Manager Internal Audit Group Financial Control Group Banking Operations Group Maged George Fanous Adel Rashed Al-Mutairi Jabra Raja Ghandour Chief Risk Officer & General Manager Assistant General Manager Chief Executive Officer Risk Management Group Treasury Services Boubyan Capital Boubyan Bank | Annual Report 2018 7 Chairman’s Message By the Grace of Allah, the Almighty, Boubyan Bank successfully continued the steady growth and remarkable financial and operational achievements during 2018 in line with the business plan and strategic vision, along with maintaining the leadership in innovative digital banking products and services in the Kuwaiti market. 8 Boubyan Bank | Annual Report 2018 Hence, I am pleased to present the Annual Report of Boubyan Bank for year 2018 on behalf of the Board of Directors and the Executive Management of Boubyan Bank, which covers the financial statements and a highlight of the Bank’s activities during the year, including accomplishments at various aspects. Boubyan Bank | Annual Report 2018 9 Chairman’s Message Remarkable Financial Achievements More Innovative Services and Products Boubyan Bank has enhanced the growth momentum As creativity and innovation are primary pillars in in earnings, with a net profit growth at a rate of 18% Boubyan’s business model, we have kept up in 2018 in 2018, compared to 16% in the previous year. The the steadfast effort of strengthening innovation and net profit of the Bank amounted to KD 56.1 million customer services. For being constantly a step-ahead compared to KD 47.6 million in 2017, with earnings in the market, Boubyan Bank continued introducing per share of 21.37 Fils compared to 17.81 Fils for the new innovative banking products and services as well previous year. as enhancing existing ones. It is worth mentioning that the growth in profitability Boubyan Bank has also maintained its high standards of the Bank is mainly attributed to the success in providing customers with easily accessible and bestowed by Allah, the Almighty, upon us as well as innovative products designed to their comfort and the confidence of the shareholders and customers in convenience and available on digital and traditional the Bank, and the efforts exerted by the employees platforms. Our diligence, perseverance and dedication and their unwavering dedication and keenness on enabled the accomplishment of high customers’ delivering the highest service levels to customers. satisfaction possible. This success is driven as well by the innovation and creativity, which have been adopted by the Bank Boubyan Bank launched “Msa3ed” as a distinguished since launching the first 5-year strategy in 2010, and innovative product in 2018. “Msa3ed” is a new continuing the business model as a part of the second interactive Chatbot service available through Boubyan 5-year strategy of 2020. Application introduced for the first time in Kuwait and designed to assist customers in processing digital Most of the Bank’s indicators witnessed a growth transactions faster and easier. during 2018 where the total assets increased to approximately KD 4.34 billion at a growth rate of 9%, In addition to “Msa3ed”, Boubyan Bank succeeded and the operational revenues increased to reach KD in launching various banking products and services, 139.7 million with a growth rate of 11% in addition to including but not limited to: the increase in deposits of customers by 9% to reach • New digital services on Boubyan App and Boubyan KD 3.7 billion. Direct • New Business Banking Solutions Furthermore, the total equity of the Bank increased to • New finance products, such as health finance and KD 408 million from KD 375 million last year, along education finance with an increase in the financing portfolio to reach The meticulously planned and perfectly executed KD 3.26 billion at a growth rate of 13% in line with the efforts were rewarded with various awards that steady growth of the customer base of the Bank. marked another milestone in Boubyan’s journey of success. This includes winning the “Best Islamic Digital Based on the financial performance of the year ended Bank” Awards in Middle East and Kuwait, and the “Best December 31, 2018, the Board of Directors proposed Innovative Digital Bank” Award from Global Finance a distribution of cash dividends of 8% per nominal for the year 2018. share value (8 Fils per share) and 5% in bonus shares (5 shares for each 100 shares). Furthermore, the Board Best Customer Experience Retail Banking of Directors proposed a board remuneration of KD 360 In addition to leading innovative banking products thousands for 2018 similar to the previous year. and services, Boubyan Bank focused on the customer experience and customer centric by continuously With regard to the market share, our share in local upgrading the level of services offered to the customers finance increased to reach approximately 8.57% and unifying all the communication with the customers compared to 7.92% for the previous year, while the through all the channels. share of the retail finance increased to exceed 11.15%. 10 Boubyan Bank | Annual Report 2018 Hence, we managed to stay as the best bank in Kuwait The Corporate Banking Group managed to achieve Banking Industry in the field of customer services. This remarkable growth in its credit portfolio, with a growth is evidenced by the recent accomplishments, whereby rate of 17% during 2018. We have achieved this the Bank won the “Best Islamic Bank in Service Level” growth by attracting a number of prime companies, Award in Kuwait from the Service Hero for the eighth which are well-known for their financial and economic year in a row and “Best Bank in Customer Satisfaction creditworthiness, without compromising the highest and Loyalty” Award for the third year in a row. Such credit quality standards. It is worth mentioning that awards reiterate our Bank’s superb competitive abilities the growth achieved during 2018 was made through to provide customers with the highest level of services diversifying the financing to various economic sectors, and the best products in the Kuwaiti market. while giving a preference to the aviation, oil, education, and other services; and maintaining the quality of assets Boubyan Bank successfully achieved a milestone of as per the best banking risk management practices. its geographical expansion by having 42 branches, compared to 40 branches by the end of previous year. Young and Ambitious Human Resources In conjunction, the Bank expanded the network of Boubyan Bank gives a special attention to its human Boubyan Direct by having 31 machines spread all over resources as a part of the strategy for being a modern Kuwait. bank, which keeps up with international and regional developments through our young management team. Distinguished Corporate Banking Services The Bank is distinguished for entrusting the youths Boubyan Bank is aspiring to be “the First Choice and with more leading roles, especially that all training the Preferred Bank for Corporate Banking”. Hence, we and academic facilities and capabilities are available succeeded in launching remarkable and innovative to provide them with a unique opportunity to gain e-products and services, which we introduced for the professional and practical expertise, which would first time to the local corporate sector in response to boost their experiences at a young age. Boubyan Bank the Bank’s aspiration to meet all the banking needs and has succeeded over the past years in creating many requirements in line with the principles of the Noble job opportunities for ambitious Kuwaiti youths by Islamic Sharia. expanding its services and branches. In view of the current rapid technological development, This made our Bank an attractive choice to the Kuwaiti the Corporate Banking Group achieved a great deal of youths who are interested in working for the private success in launching numerous projects in 2018, such sector in general, and the banking industry in specific, as: due to the environment of creativity and innovation • Updating the Corporate Online Banking platform.