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 2020 1 Contents Board of Directors 4 Shari’a Supervisory Board 5 Executive Management 6 Chairman’s Message 7 Management Discussion and Analysis Report 14 Governance Report 20 Social Responsibility 37 Risk Management 39 Report of Shari’a Supervisory Board and External Sharia Auditor’s 68 ReportIndependent Auditors’ Report 71 2 Boubyan Bank | Annual Report 2020 H.H. Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah Amir of the State of Kuwait H.H. Sheikh Mishal Al-Ahmad Al-Jaber Al-Sabah Crown Prince H.H. Sheikh Sabah Khaled Al-Hamad Al-Sabah Prime Minister Boubyan Bank | Annual Report 2020 3 Board of Directors Abdulaziz Abdullah Dakheel Al-Shaya Adel Abdul Wahab Al-Majed Chairman Vice-Chairman & Group Chief Executive Officer Adnan Abdullah Al-Othman Fahad Ahmad Al-Fouzan Hazim Ali Al-Mutairi Mohamed Yousef Al-Saqer Director Director Director Director Waleed Mishari Al-Hamad Waleed Ibrahim Al-Asfour Waleed Abdullah Al-Houti Director Director Director 4 Boubyan Bank | Annual Report 2020 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 Boubyan Bank | Annual Report 2020 5 Executive Management Adel Abdul Wahab Al-Majed Abdullah Abdulkareem Al-Tuwaijri Abdul-Salam Mohammed Al-Saleh Vice-Chairman & Group Chief Chief Executive Officer Chief Executive Officer Executive Officer Private, Consumer, and Digital Banking Corporate Banking, Financial Control, Treasury and Legal Affairs Waleed Khalid Al-Yaqout Adel Abdullah Al-Hammad Abdullah Ahmed Al-Mehri Group General Manager Group General Manager Chief Operating Officer Administration Group Human Resources Group Ashraf Abdallah Sewilam Abdul Rahman Hamza Mansour Mohamed Ibrahim Ismail Group General Manager Chief Internal Auditor Group General Manager Corporate Banking Group Internal Audit Group Financial Control Group Maged George Fanous Adel Rashed Al-Mutairi Chief Risk Officer Treasurer Risk Management Group Treasury Group 6 Boubyan Bank | Annual Report 2020 Chairman’s Message Boubyan Bank | Annual Report 2020 7 Chairman’s Message Dear Valued Shareholders and Investors, First, on behalf of my fellow Board Directors, the Executive Management and myself, I am pleased to present the Annual Report of Boubyan Bank Group for year 2020, which encompasses the financial statements and a highlight of the bank’s activities and numerous accomplishments during the year. Despite the challenges during last year, we have successfully achieved remarkable accomplishments, by the Grace of Allah, the Almighty, in the growth of our operational activities, the solid leadership in digital banking in the local market, and the progress in the execution of the business plan and strategic vision. Kuwait faced sadness with the death of the Amir Furthermore, Boubyan Bank Group lost its Chairman – of Humanity, Sheikh Sabah Al-Ahmad Al-Jaber Mr. Mahmoud Yousef Al-Fulaij (may Allah have mercy Al-Sabah (may Allah have mercy on him), who was on him), who was among the leading supporters for the inspirer of the Kuwait economic vision for 2035. the remarkable turnaround of Boubyan since the With his absence, Kuwait, Arab and Islamic nations preparation of the first five year plan in year 2010. have lost a leader in humanitarian values. However, our condolences remains with the successors His Highness, the Amir of Kuwait, Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah and His Highness, the Crown Prince, Sheikh Meshal Al-Ahmad Al-Jaber Al-Sabah. 8 Boubyan Bank | Annual Report 2020 COVID 19 Pandemic a growth rate of 15%, along with an increase in The COVID 19 Pandemic shed its consequences on the financing portfolio to reach KD 4.82 billion at a economy in general, and the financial and banking growth rate of 26% in line with the steady growth of sector in particular as the growth of global and local the bank’s customer base. economies slowed-down due to the pandemic. This had driven the banks worldwide to take precautions, Furthermore, the total equity attributable to including booking contingent provisions to avoid shareholders reached KD 518 million compared to financial and economic consequences related to the KD 575 million last year, along with an increase in pandemic. customer deposits to reach KD 5.11 billion at a growth rate of 17%. However, with the Grace of Allah, Almighty, we succeeded during 2020 in accomplishing the business It is worth mentioning that despite the solid financial and activities of Boubyan Bank Group in line with the position, capital adequacy, and growth of business business plan and strategies. Thus, we present to you a activities and operating profit of the bank, no cash highlight on these achievements within the upcoming dividends have been proposed for this year with an sections. objective to solidify the financial position taking into consideration the exceptional circumstances of the Distinguished Financial Achievements global and local economies due to the COVID 19 Despite the consequences of COVID 19 Pandemic Pandemic, which has not been yet fully overcome. on the banking sector, Boubyan Bank has achieved remarkable results, where net operating profit Accordingly, the Board of Directors proposed a reached KD 93.1 million compared to KD 84.7 million distribution of 5% in bonus shares (5 shares for each with a growth rate of 10%. However, the net profit 100 shares). Furthermore, the Board of Directors declined from KD 62.6 million in 2019 to KD 34.4 proposed a board remuneration of KD 450 thousand million because of booking contingent provisions due for 2020 similar to the previous year. to the Pandemic. Thus, the earnings per share reached 9.66 Fils compared to 19.41 Fils for the previous year. With regard to the market share, our share in local finance increased to reach 10.13% compared to It is worth mentioning that the growth in profitability 9.31% by the end of previous year, while the share of of the bank is mainly attributed to the success the retail finance increased to exceed 14%. bestowed by Allah, the Almighty, upon us as well as the confidence of the shareholders and customers in The Third Five-Year Strategy the bank, and the efforts exerted by the employees Despite the challenges during this stage, we have and their unwavering dedication and keenness on remained steadfast in our mission to continue on with delivering the highest service levels to customers. the third phase of our five year strategy – Boubyan This success is further driven by the innovation and 2023, moving into a “steady-state” growth built on creativity, which are well rooted in our business our core business platform. Our domestic foundation strategies, along with the acquisition of Bank London has provided us with the opportunity to strengthen our and Middle East in line with the strategic plan of the international presence with our subsidiary BLME, and bank. to develop exciting new digital banking platforms, thus keeping with our pledge to be leaders in innovation – The total assets increased to approximately KD 6.4 and providing our customers with effective banking billion at a growth rate of 21%, and operational and wealth management solutions. revenues increased to reach KD 167.5 million at Boubyan Bank | Annual Report 2020 9 Chairman’s Message Acquisition of BLME By understanding our customers’ needs, for banking In line with our strategic objectives to enhance global services in these digital times, we have expanded our presence and focus on digital banking services, Boubyan Direct to 38 locations, with face-to-face Boubyan Bank was able in 2020 to acquire Bank video service available 24/7 to address any of our London and Middle East (BLME) in the UK. Hence, customers banking needs. Most importantly, ITM’s Boubyan Bank has now a foreign banking arm as provide the convenience of an actual teller, which a platform to enhance its customer base through ensures that the customer gets the full in-branch focusing on wealth management and digital banking experience. That includes discussing loan and credit services. options, account opening applications and accessing other critical services that may be difficult to navigate Supreme Retail Banking Services on a touchscreen. Our network of 249 ATMs is well While we celebrated our 16th year of success, we have distributed for all day to day services in addition achieved during this year significant milestones in our to issuing new debit and credit cards to ensure strive for perfection. We have worked vigorously to convenience and accessibility to our customers. change the perceived image of Islamic banking as being too traditional and have aimed to project ourselves Pioneer in Customer Satisfaction as a modern Islamic bank, which has been the main In our relentless focus on customer service, to excel reason for our growth. Guided by Boubyan Bank’s in every product digital or traditional, every service strategy; the bank’s natural DNA, creativity, digital and every customer interaction, the customers have innovation and resilience have pushed the market rewarded our efforts by voting us the best bank in and ourselves to develop new products, improve our customer service. The actions, engagement, and tone services, and systems to create the most reliable and you take with customers must reflect the nature of the advanced banking experience for our customers. relationship you aspire to have with them. We focus our efforts to train our employees to be empathetic Our initiatives to become the main digital player in when dealing with customers to ensure we gain the the banking arena in the past couple of years, has customers’ trust.