Commercial Bank of Kuwait – Ratings Affirmed

(MENAFN- Capital Intelligence Ltd) Capital Intelligence Ratings (CI Ratings or CI) today announced that it has affirmed the Long-Term Foreign Currency Rating (LT FCR) and Short-Term Foreign Currency Rating (ST FCR) of Commercial Bank of Kuwait (ComBk or the Bank) at ‘A+’ and ‘A1’, respectively. At the same time, CI Ratings has affirmed ComBk’s Bank Standalone Rating (BSR) of ‘bbb+’, Core Financial Strength (CFS) rating of ‘bbb+’ and Extraordinary Support Level (ESL) of High. The Outlook on the LT FCR and BSR remains Stable.

In a separate rating action also published today, CI has affirmed the issue ratings assigned to the Bank’s Basel III-compliant Tier 2 subordinated bond (Tranche 1 and 2) at ‘BBB’ with a Stable Outlook.

The three-notch uplift of the LT FCR above the BSR is based on an ESL of High. The ESL takes into account the Bank’s market position in the Kuwaiti banking sector, the Kuwaiti government’s strong track record of providing assistance to banks in the event of need, the existence of a state guarantee on all deposits placed inside Kuwait, as well as the very strong financial capacity of the government to provide support.

The affirmation of the LT FCR, which is at the same level as Kuwait’s sovereign LT FCR of ‘A+’, reflects ComBk’s financial credit strengths of excellent asset quality together with a substantial buffer including a very high level of provisions (in particular general provisions), good capitalisation including CET 1 ratio, very good profitability, as well as a high level of liquid assets.

ComBk’s BSR is based on a CFS rating of ‘bbb+’ and an Operating Environment Risk Anchor (OPERA) of ‘bbb’. The CFS reflects the Bank’s credit strengths of very good asset quality, strong coverage ratios, solid capitalisation, and very good net profitability. The Bank is extremely conservative in balance sheet management, primarily focusing on managing risk rather than growth. ComBk has a relatively good position in the Kuwaiti banking sector, particularly within corporate banking. That said, its market share is small, and the franchise is modest in a competitive environment. Other credit challenges include concentrations in both the loan book and deposits, in common with the sector.

The OPERA for Kuwait is ‘bbb’ (indicating modest risk). The OPERA reflects the substantial financial buffer of the sovereign and its capacity to support the banking system in case of imbalances. It also reflects the economy’s limited diversification, including high reliance on hydrocarbon exports, and slow – albeit improving – reform progress. In March 2025, Kuwait saw the approval of a long-awaited borrowing law aimed at addressing fiscal pressures and financing domestic infrastructure projects. The law, which will see Kuwait return to the international debt markets after an eight-year absence, allows the government to issue up to KWD30bn in local or foreign currency debt instruments with long-term maturities. This will strengthen Kuwait’s fiscal flexibility and support long-term growth.

ComBk is very prudent in its provisioning policy (and aggressive in write-offs), with an extremely high level of general provisions in place. For the seventh year in a row, ComBk had nil NPLs at end-2024, preferring to write off the small level of arising bad debt during the year. Despite nil NPLs, ComBk’s general provisions represented a high 6.9% of gross loans at end-2024. Taking into account the Bank’s regulatory Tier 1 capital, together with its general provisions, NPLs could rise considerably, but ComBk’s coverage would still be very good.

Q1 25 loan details show that the Bank had an NPL ratio of 0.3%. In 2025, ComBk revoked its long-held policy of maintaining zero NPLs. Its internal policy now is to maintain the NPL ratio below 1%. Loan-loss reserve coverage against NPLs was over 2,200% at Q1 25. Stage 2 loans were a lower 10.5% of gross loans (2024: 12.6%).

The Bank’s investment securities portfolio is small, and a large majority of the portfolio comprises debt securities, nearly all of which are quoted. Apart from government bonds (Kuwait, Qatar and the UAE), nearly all other bonds are generally in high-rated bank paper, particularly banks in the UAE and Qatar.
Returns improved again in 2024 on the back of higher net interest income and provision release from the settlement of Boubyan Bank shares (ComBk had conservatively booked large provisions against this case but received further proceeds in 2024). ComBk’s ROAA was again the highest in the Kuwait peer group, as is its operating profit on average assets. Earnings strength is considered sound. Operating income has strengthened over the past few years, as it is at a good level relative to the Bank’s asset base. Margins remain healthy. Looking ahead, the low level of NPL accretion, together with the high level of general provisions, should allow the Bank to keep the cost of risk low – if it so chooses. Net profit was steady in Q1 25.

ComBk’s funding base and liquidity are viewed as satisfactory. The customer deposit base, including deposits from OFIs, is sizeable and forms a comfortable proportion of liabilities and capital. There is high concentration within the deposit base, which is standard for most Kuwaiti banks. The Bank’s liquid assets position is good. Customer deposits rose by a good amount in 2024, as ComBk targeted lower-cost time deposits. The net loans to customer deposits ratio is slightly on the high side, but the net loans to stable funds ratio is sound, reflecting the very good capital base. Regulatory liquidity ratios were strong at end-2024 and remained so in Q1 25.

The Bank is well-capitalised with a high CAR (19%) and CET 1 ratio (15.4%), and strong buffers are in place. Capital ratios are considerably above the Kuwait regulatory minima (which are set at a high level) and are the highest in the peer group. The Bank has a modest record of headline internal capital generation. However, the historical practice of taking large general reserves means that internal buffers are higher than is apparent at first glance. ComBk issued the first KWD50mn tranche of a KWD100mn Tier 2 subordinated bond in 2023, with the second tranche issued in 2024.

ComBk is focused on the Kuwaiti market, with few activities outside its home market. The local market is competitive, and the long-term opportunity for asset growth is somewhat limited. Other challenges include a high concentration in its customer deposit base, particularly connected to government or quasi-government agencies. There is also high exposure to the real estate sector in Kuwait. Both issues are prevalent for the entire Kuwait banking sector.

Rating Outlook

The Stable Outlook indicates that the ratings are unlikely to be altered in the next 12 months, and reflects our expectation that ComBk will maintain its current good financial profile.

Rating Dynamics: Upside Scenario

As the LT FCR is already at the same level as the sovereign, it would require an uplift in the sovereign rating/outlook for the LT FCR or its outlook to be raised, or the outlook improved. The likelihood for such an upward revision in the sovereign rating over the next 12 months is seen as being low. Even if the sovereign rating or its outlook were to be raised, it would not necessarily prompt an immediate corresponding shift in the ratings of ComBk given the Bank’s size and business model. Substantial improvement in operating profitability and liquidity, whilst maintaining other metrics at the current strong levels, could create some upward pressure, but this is currently seen as being unlikely. An upgrade in the BSR would require a significant improvement in financial metrics, together with an improvement in Kuwait’s OPERA.

Rating Dynamics: Downside Scenario

Downward pressure on ComBk’s ratings or outlook would possibly occur if there were a marked deterioration in either loan asset quality or liquidity. Neither seems likely given the current strength of metrics in both areas. If the operating environment were to deteriorate, the OPERA might come under pressure; should it be reduced, the ratings could fall. A downward revision to the sovereign’s ratings or outlook would necessitate similar action on ComBk, as its ratings are currently at the same level as those of the sovereign.

Contact

Primary Analyst: Darren Stubing, Senior Credit Analyst; E-mail: ...
Secondary Analyst: Rory Keelan, Senior Credit Analyst
Committee Chairperson: Morris Helal, Senior Credit Analyst

About the Ratings

The credit ratings have been issued by Capital Intelligence Ratings Ltd, P.O. Box 53585, Limassol 3303, Cyprus.

The following information sources were used to prepare the credit ratings: public information and information provided by the rated entity. Financial data and metrics have been derived by CI from the rated entity’s financial statements for FY2020-24. CI may also have relied upon non-public financial information provided by the rated entity and may also have used financial information from credible, independent third-party data providers. CI considers the quality of information available on the rated entity to be satisfactory for the purposes of assigning and maintaining credit ratings. CI does not audit or independently verify information received during the rating process.

The principal methodology used to determine the ratings is the Bank Rating Methodology, dated 3 April 2019 (see Information on rating scales and definitions, the time horizon of rating outlooks, and the definition of default can be found at Historical performance data, including default rates, are available from a central repository established by ESMA (CEREP) at

This rating action follows a scheduled periodic (annual) review of the rated entity. Ratings on the entity were first released in December 1985. The ratings were last updated in June 2024. The ratings and rating outlook were disclosed to the rated entity prior to publication and were not amended following that disclosure. The ratings have been assigned or maintained at the request of the rated entity or a related third party.

The ratings have been initiated by CI. The following scheme is therefore applicable in accordance with EU regulatory guidelines.

Unsolicited Credit Rating

With Rated Entity or Related Third Party Participation: Yes
With Access to Internal Documents: No
With Access to Management: Yes

Conditions of Use and General Limitations

The information contained in this publication including opinions, views, data, material and ratings may not be copied, distributed, altered or otherwise reproduced, in whole or in part, in any form or manner by any person except with the prior written consent of Capital Intelligence Ratings Ltd (hereinafter “CI”). All information contained herein has been obtained from sources believed to be accurate and reliable. However, because of the possibility of human or mechanical error or other factors by third parties, CI or others, the information is provided “as is” and CI and any third-party providers make no representations, guarantees or warranties whether express or implied regarding the accuracy or completeness of this information.

Without prejudice to the generality of the foregoing, CI and any third-party providers accept no responsibility or liability for any losses, errors or omissions, however caused, or for the results obtained from the use of this information. CI and any third-party providers do not accept any responsibility or liability for any damages, costs, expenses, legal fees or losses or any indirect or consequential loss or damage including, without limitation, loss of business and loss of profits, as a direct or indirect consequence of or in connection with or resulting from any use of this information.
Credit ratings and credit-related analysis issued by CI are current opinions as of the date of publication and not statements of fact. CI’s credit ratings provide a relative ranking of credit risk. They do not indicate a specific probability of default over any given time period. The ratings do not address the risk of loss due to risks other than credit risk, including, but not limited to, market risk and liquidity risk. CI’s ratings are not a recommendation to purchase, sell, or hold any security and do not comment as to market price or suitability of any security for a particular investor.

The information contained in this publication does not constitute investment or financial advice. As the ratings and analysis are opinions of CI they should be relied upon to a limited degree and users of this information should conduct their own risk assessment and due diligence before making any investment or other business decisions.

Copyright © Capital Intelligence Ratings Ltd 2025

MENAFN12062025002960000411ID1109666020