BURGAN market ratios THE COMPANY: Burgan Bank, a subsidiary of Kuwait Projects (KIPCO), is a Kuwait-based commercial bank with a regional presence in seven countries, incorporated in 1975 and engaged in the provision of banking and investment services to individuals and corporations. Burgan was listed on the Kuwaiti Bourse in 1984 with a current market capitalisation of $3bn. Despite being considered the youngest commercial bank in Kuwait, Burgan ranks among the top Kuwaiti banks having the third-largest asset base of $21bn as of December 2012. Burgan’s presence in the domestic market as well as throughout the MENA region and in Turkey through its subsidiaries assures its commitment to a diversification and expansion strategy. In 2012 Burgan’s financial performance was reaffirmed by Standard & Poor’s Ratings Agency with BBB+ long-term and A-2 short-term counterparty credit ratings.
Burgan’s total assets posted a compound annual growth rate (CAGR) of 16% from 2007-12 to KD6bn ($21.43bn) in 2012, up from KD2.85bn ($10.18bn) in 2007, while its loan portfolio grew at a five-year CAGR of 19%, supported by expansion in the MENA region and Turkey. During 2012 total assets and loan portfolio rose by 31% and 50% to reach KD6bn ($21.34bn) and KD3.38bn ($12.07bn), respectively, powered by the acquisition of Burgan Bank Turkey (BBT). The bank’s asset quality showed a considerable improvement: the non-performing loans (NPL) ratio dropped to 7.1% as of December 2012, down from 11.5% in December 2011, while the NPL coverage ratio improved over the same period to 171%, up from 131%.
The bank’s total deposit base grew at a five-year CAGR (2007-12) of 16% to KD4.92bn ($17.57bn) from KD2.4bn ($8.57bn), while customer deposits grew at a 19% CAGR to KD3.9bn ($13.92bn). Over the last five years, the bank strengthened its shareholders’ equity base to KD491m ($1.75bn) as of December 2012, up from KD310m ($1.10bn) as of December 2008, reflecting strong support from the bank’s shareholders along with implementing its expansionary plan in the region.
The bank enjoys strong liquidity and a solid capital base with a liquidity ratio of 31.5% and a capital adequacy ratio of 18.5%, well above the Central Bank of Kuwait’s mandated 12%, indicating that the bank remains well capitalised and poised for growth.
In 2012 Burgan’s net profit rose 10% to KD55.6m ($198.5m) powered by higher operating profit before loan loss provisioning and impairments, which grew at 16.7% to a record KD119m ($425.02m). Burgan Group fiscal year (FY) 2012 revenues grew 16.4% to KD190m ($678.6m) from FY-11 levels led by Kuwait and Algeria that grew at corresponding rates of 12% and 40% to record KD94m ($335.7m) and KD35m ($125m), respectively. Revenue from Kuwait contributed 49% of FY-12 revenues while Jordan and Algeria contributed 24% and 18% of FY-12 revenues, respectively.
DEVELOPMENT STRATEGY: Burgan was able to transform from a local bank engaged in the Kuwaiti market to a banking group with operations spread across the GCC and MENA region. With the acquisitions of a controlling interest in several key banks in the region including Jordan Kuwait Bank, Algeria Gulf Bank, Bank of Baghdad, Tunis International Bank and BBT, Burgan more than doubled its balance sheet size to KD5.98bn ($21.35bn) from 2007 levels along with growing and diversifying its revenue stream and increasing its loan portfolio by 138% to KD3.4bn ($12.14bn).
The bank continues to implement its inorganic expansion strategy in the region after the acquisition of BBT, which provides the bank further diversification in revenue stream through operations in a non-oil economy.
The acquisition of BBT fits with Burgan’s regional strategy providing a full-fledged and scalable platform that offers upside growth potential in the right country at the right time. Also, it provides Burgan with access to markets with higher barriers to entry and opportunity to expand its trade funding business and focus on growth in corporate and small and medium-sized businesses. Looking forward, Burgan is expected to strengthen its top-line performance in the upcoming period.
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