National Bank of Kuwait (NBK) reported Q3 19 net profit of 93.1mn (+8% yoy), which was below Bloomberg consensus KWD99.3mn and our expectation of KWD100.4. Core revenues were weaker than expected. The stock trades at 13.2x 2020f PE, 2.1x tangible 2019f PB and 2019f 4.3% DY. Our mid-cycle ROTE forecast is 16.7%. There is a results conference call on 17 October.
We have an unchanged target price of KWD0.95 and a Hold recommendation on NBK.
- Loan impairment charge was lower than expected (-31% yoy). The cost of risk was 82bps; it was running well above 100bps in both 2017 and 2018. Coming on the back of a similar experience in H1 19 this suggests that central bank pressure to book extra precautionary provisions has eased.
- Better than expected debt investment fair value gains through other comprehensive income.
- Net interest income (-3% yoy) was weaker than expected – the lowest quarterly margin for over two years.
- Fee income was flat yoy; we had expected 6% growth.
- Operating costs advanced 13% yoy, faster than our 11% growth expectation.