Interim Condensed Consolidated Financial Information · 30 June 2015 2014 2015 2014 KD 000 KD 000...

30 June 2015

Al Ahli Bank of Kuwait K.S.C.P.Ahlan Ahli 1 899 899

Interim CondensedConsolidated FinancialInformation (Unaudited)

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION TO THE BOARD OF DIRECTORS OF AL AHLI BANK OF KUWAIT K.S.C.P.

IntroductionWe have reviewed the accompanying interim condensed consolidated statement of financial position of Al Ahli Bank of Kuwait K.S.C.P. (the “Bank”) and its subsidiary (collectively “the Group”) as at 30 June 2015 and the related interim condensed consolidated income statement and interim condensed consolidated statement of comprehensive income for the three months and six months periods then ended, and interim condensed consolidated statement of changes in shareholders’ equity and interim condensed consolidated statement of cash flows for the six months period then ended. The management of the Bank is responsible for the preparation and presentation of this interim condensed consolidated financial information in accordance with the basis of presentation set out in Note 2. Our responsibility is to express a conclusion on this interim condensed consolidated financial information based on our review.

Scope of ReviewWe conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

ConclusionBased on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial information is not prepared, in all material respects, in accordance with the basis of presentation set out in Note 2.

1

Ernst & Young Al Aiban, Al Osaimi & Partners P.O. Box ۷٤ ۱۸–۲۱st Floor, Baitak Tower Ahmed Al Jaber Street Safat Square ۱۳۰۰۱, Kuwait

Tel: ۲۲۹٥ ۹٥ +٦٥۰۰۰ Fax: ٦٤۱۹ ۲۲٤٥ ۹٦٥+ [email protected] ey.com/mena

۲ ٤ ۲۳۰٤۹

۱۳۰۹۱

۲٤۳۸۰٦۰ ۹٦٥ ۲٤٦۸۹۳٤ ۹٦٥ ۲٤٥۲۰۸۰ ۹٦٥

www.deloitte.com

Ahmed Al-Jaber Street, Sharq Dar Al-Awadi Complex, Floors ۹ & ۷ P.O. Box ۲۰۱۷٤Safat ۱۳۰٦۲ or P.O. Box ۲۳۰٤۹ Safat ۱۳۰۹۱ Kuwait Tel : + ۲۲٤۰۸۸٤٤ ۹٦٥ , ۲۲٤۳۸۰٦۰ Fax: + ۲۲٤۰۸۸٥٥ ۹٦٥ , ۲۲٤٥۲۰۸۰ www.deloitte.com

Deloitte & Touche Al-Wazzan & Co.

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION TO THE BOARD OF DIRECTORS OF AL AHLI BANK OF KUWAIT K.S.C.P. Introduction We have reviewed the accompanying interim condensed consolidated statement of financial position of Al Ahli Bank of Kuwait K.S.C.P. (the “Bank”) and its subsidiary (collectively “the Group”) as at 30 September 2014 and the related interim condensed consolidated income statement and interim condensed consolidated statement of comprehensive income for the three months and nine months periods then ended, and interim condensed consolidated statement of changes in shareholders’ equity and interim condensed consolidated statement of cash flows for the nine months period then ended. The management of the Bank is responsible for the preparation and presentation of this interim condensed consolidated financial information in accordance with the basis of presentation set out in Note 2. Our responsibility is to express a conclusion on this interim condensed consolidated financial information based on our review. Scope of Review We conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial information is not prepared, in all material respects, in accordance with the basis of presentation set out in Note 2. Report on other Legal and Regulatory Requirements Furthermore, based on our review, the interim condensed consolidated financial information is in agreement with the books of account of the Bank. We further report that, to the best of our knowledge and belief, we have not become aware of any violations of the Companies Law No. 25 of 2012, as amended, or of the Bank’s Articles of Association and Memorandum of Incorporation during the nine months period ended 30 September 2014 that might have had a material effect on the business of the Bank or on its financial position.

2

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION TO THE BOARD OF DIRECTORS OF AL AHLI BANK OF KUWAIT K.S.C.P. (continued) Report on other Legal and Regulatory Requirements (continued) We further report that, during the course of our review, to the best of our knowledge and belief, we have not become aware of any violations of the provisions of Law No. 32 of 1968, as amended, concerning currency, the Central Bank of Kuwait and the organisation of banking business, and its related regulations, during the nine months period ended 30 September 2014 that might have had a material effect on the business of the Bank or on its financial position. WALEED A. AL OSAIMI LICENCE NO. 68 A EY (AL AIBAN, AL OSAIMI & PARTNERS)

BADER A. AL-WAZZAN LICENCE NO. 62 A DELOITTE & TOUCHE (AL WAZZAN & CO.)

14 October 2014 Kuwait

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION TO THE BOARD OF DIRECTORS OF AL AHLI BANK OF KUWAIT K.S.C.P. (CONTINUED)

Report on other Legal and Regulatory RequirementsFurthermore, based on our review, the interim condensed consolidated financial information is in agreement with the books of account of the Bank. We further report that, to the best of our knowledge and belief, we have not become aware of any violations of the Companies Law No. 25 of 2012, as amended and its executive regulation, or of the Bank’s Articles of Association and Memorandum of Incorporation during the six months period ended 30 June 2015 that might have had a material effect on the business of the Bank or on its financial position.

We further report that, during the course of our review, to the best of our knowledge and belief, we have not become aware of any violations of the provisions of Law No. 32 of 1968, as amended, concerning currency, the Central Bank of Kuwait and the organisation of banking business, and its related regulations, during the six months period ended 30 June 2015 that might have had a material effect on the business of the Bank or on its financial position.

14 July 2015Kuwait

WALEED A. AL OSAIMILICENCE NO. 68 AEY(AL AIBAN, AL OSAIMI & PARTNERS)

TALAL Y. AL-MUZAINILICENCE NO. 209ADELOITTE & TOUCHEAL-WAZZAN & CO.

2

Interim Condensed Consolidated Statement of Financial Position (Unaudited) As at 30 June 2015

30 June 2015

(Audited)31 December

201430 June

2014Notes KD 000 KD 000 KD 000

ASSETS

Cash and balances with banks 281,110 144,825 448,449

Kuwait Government treasury bonds 241,952 279,831 269,958

Central Bank of Kuwait bonds 150,231 221,228 254,158

Loans and advances 2,625,853 2,422,297 2,456,376

Investment securities 11 321,991 345,011 306,940

Investment in an associate 15,136 14,865 14,118

Other assets 36,772 37,156 31,441

Premises and equipment 34,731 33,826 30,750

TOTAL ASSETS 3,707,776 3,499,039 3,812,190

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES

Due to banks and other financial institutions 990,600 923,752 895,636

Customers’ deposits 2,082,079 1,938,297 2,310,008

Other liabilities 79,263 78,642 65,274

TOTAL LIABILITIES 3,151,942 2,940,691 3,270,918

SHAREHOLDERS’ EQUITY

Share capital 161,917 161,917 161,917

Share premium 108,897 108,897 108,897

Treasury shares 3 (3,644) (2,303) (2,295)

Reserves 288,664 268,851 272,753

Proposed dividend 3 - 20,986 -

TOTAL SHAREHOLDERS’ EQUITY 555,834 558,348 541,272

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 3,707,776 3,499,039 3,812,190

Talal Mohamed Reza BehbehaniChairman

Abdulla M. Al SumaitDeputy Chief General Manager

The attached notes 1 to 12 form part of the interim condensed consolidated financial information.

3


Three months ended 30 June

Six months ended 30 June

2015 2014 2015 2014Notes KD 000 KD 000 KD 000 KD 000

Interest income 30,599 28,053 59,982 54,642

Interest expense (7,236) (6,664) (14,638) (12,188)

NET INTEREST INCOME 23,363 21,389 45,344 42,454

Net fees and commission income 6,108 5,756 12,577 11,567

Net foreign exchange gain 882 616 1,352 1,235

Net (loss) gain on investment securities (232) 374 (363) 982

Dividend income 785 976 2,252 1,950

Share of results from an associate 480 789 1,071 1,228

Other income 252 164 410 476

OPERATING INCOME 31,638 30,064 62,643 59,892

Staff expenses (6,842) (5,726) (12,470) (11,166)

Other operating expenses and depreciation (3,717) (3,267) (7,261) (6,525)

OPERATING EXPENSES (10,559) (8,993) (19,731) (17,691)

OPERATING PROFIT FOR THE PERIOD BEFORE PROVISION /IMPAIRMENT LOSSES 21,079 21,071 42,912 42,201

Provision / impairment losses 4 (8,689) (9,525) (20,581) (22,084)

PROFIT FOR THE PERIOD BEFORE TAXATION 12,390 11,546 22,331 20,117

Taxation 5 (1,010) (598) (1,894) (1,043)

NET PROFIT FOR THE PERIOD 11,380 10,948 20,437 19,074

BASIC AND DILUTED EARNINGS PER SHARE 6 7 fils 7 fils 13 fils 12 fils


4




2015 2014 2015 2014KD 000 KD 000 KD 000 KD 000

NET PROFIT FOR THE PERIOD 11,380 10,948 20,437 19,074

Other comprehensive (expense) income

Items that may be reclassified subsequently to income statement:

Effect of changes in fair values of investments available for sale (1,075) (1,713) (1,840) 2,448

Net gain on sale / impairment losses on investments available for sale 374 523 1,146 8

Exchange difference on translation of foreign operations 27 - 67 3

Other comprehensive (expense) income for the period (674) (1,190) (627) 2,459

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 10,706 9,758 19,810 21,533

5


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Six months ended 30 June 2015 2014

Note KD 000 KD 000OPERATING ACTIVITIESNet profit for the period 20,437 19,074Adjustments for:

Net loss (gain) on sale of investments available for sale 183 (797)Dividend income (2,252) (1,950)Depreciation 711 696Share of results from an associate (1,071) (1,228)Provision / impairment losses 4 20,581 22,084

Operating profit before changes in operating assets and liabilities 38,589 37,879Changes in operating assets and liabilitiesDeposits with banks (60,165) (40,130)Kuwait Government treasury bonds 37,879 (42,285)Central Bank of Kuwait bonds 70,997 (6,742)Investments at fair value through profit or loss 6,489 (8,349)Loans and advances (220,219) (288,098)Other assets 1,275 3,864Due to banks and other financial institutions 66,848 256,466Customers' deposits 143,782 362,692Other liabilities (2,334) (694)Net cash flows from operating activities 83,141 274,603INVESTING ACTIVITIESPurchase of investments available for sale (11,491) (64,921)Proceeds from sale of investments available for sale 25,291 19,957Net movement in investment in an associate 800 720Net purchase of premises and equipment (1,582) (822)Dividend income received 2,252 1,950Net cash flows from (used in) investing activities 15,270 (43,116)FINANCING ACTIVITIESDividend paid (20,983) (20,986)Purchase of treasury shares (1,341) (107)Net cash flows used in financing activities (22,324) (21,093)Foreign currency translation difference 33 4NET INCREASE IN CASH AND CASH EQUIVALENTS 76,120 210,398Cash and cash equivalents as at 1 January 95,404 154,086CASH AND CASH EQUIVALENTS AS AT 30 JUNE 171,524 364,484Cash and cash equivalents comprise:Balances with the Central Bank of Kuwait 73,000 172,705Cash in hand and in current account with other banks 53,099 91,944Deposits with banks with original maturity up to thirty days 45,425 99,835

171,524 364,484

7

Interim Condensed Consolidated Statement of Cash Flows (Unaudited)For the period ended 30 June 2015


Notes to the Interim Condensed Consolidated Financial Information (Unaudited)30 June 2015

8

1 ACTIVITIESAl Ahli Bank of Kuwait K.S.C.P. (“the Bank”) is a public shareholding company incorporated in Kuwait on 23 May 1967, and is registered as a Bank with the Central Bank of Kuwait. Its registered office is at Al Safat Square, Ahmed Al Jaber Street, Kuwait City. It is engaged in banking, primarily in Kuwait and in the United Arab Emirates.

The Bank has a subsidiary, Ahli Capital Investment Company K.S.C. (Closed) (“the Subsidiary”) which is engaged in investment management and advisory activities, regulated by the Capital Markets Authority, Kuwait.

The interim condensed consolidated financial information of the Bank and its Subsidiary (collectively “the Group”) were approved by the Bank’s Board of Directors on 14 July 2015.

2 BASIS OF PRESENTATION

(a) The interim condensed consolidated financial information of the Group has been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” except as noted below.

The annual consolidated financial statements for the year ended 31 December 2014, were prepared in accordance with the regulations of the State of Kuwait for financial services institutions regulated by the Central Bank of Kuwait. These regulations require adoption of all International Financial Reporting Standards (IFRS) except for the IAS 39 requirement for collective impairment provision, which has been replaced by the Central Bank of Kuwait’s requirement for a minimum general provision.

(b) The accounting policies used in the preparation of the interim condensed consolidated financial information are consistent with those used in the preparation of the annual consolidated financial statements for the year ended 31 December 2014, except for the adoption of the amendments and annual improvements to IFRSs, relevant to the Group which are effective for annual reporting period starting from 1 July 2014 and did not result in any material impact on the accounting policies, financial position or performance of the Group.

(c) The interim condensed consolidated financial information does not contain all information and disclosures required for full financial statements prepared in accordance with IFRS, and should be read in conjunction with the Group’s annual consolidated financial statements for the year ended 31 December 2014. Further, results for the six months period ended 30 June 2015, are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2015.

3 SHARE CAPITAL AND RESRVES

a) The shareholders at the Annual General Meeting held on 21 March 2015 approved the distribution of cash dividend of 13 per cent amounting to KD 20,986 thousand for the year ended 31 December 2014 which was paid subsequently (31 December 2013: cash dividend of 13 per cent amounting to KD 20,989). Treasury shares are not entitled to any cash dividends.

b) As at 30 June 2015, the Bank held 8,570,676 (31 December 2014: 4,862,229 and 30 June 2014: 4,842,229) of its own shares equivalent to 0.53% (December 2014: 0.30 % and 30 June 2014: 0.30 %) of the total issued share capital at the reporting date. The market value of these shares as at 30 June 2015 amounted to KD 3,171 thousand (31 December 2014: KD 1,994 thousand and 30 June 2014: KD 2,058 thousand ) and the weighted average market value per share is 370 fils ( 31 December 2014: 426 fils and 30 June 2014: 425 fils).

9


4 PROVISION / IMPAIRMENT LOSSES



2015 2014 2015 2014KD 000 KD 000 KD 000 KD 000

Credit facilities 8,436 8,744 19,618 21,029

Investments available for sale 253 781 963 805

Others - - - 250

8,689 9,525 20,581 22,084

5 TAXATION



2015 2014 2015 2014

KD 000 KD 000 KD 000 KD 000

Kuwait Foundation for the Advancement of Sciences 107 103 192 180

National Labour Support Tax 297 286 534 499

Zakat 119 115 214 200

Tax on overseas branches 487 94 954 164

1,010 598 1,894 1,043

10

6 BASIC AND DILUTED EARNINGS PER SHARE

Basic and diluted earnings per share are computed by dividing the net profit for the period by the weighted average number of shares outstanding during the period, calculated as follows:



2015 2014 2015 2014

Net profit for the period (KD 000) 11,380 10,948 20,437 19,074

Weighted average number of the Bank’s issued and paid-up shares 1,619,166,234 1,619,166,234 1,619,166,234 1,619,166,234

Less: weighted average number of treasury shares (6,856,565) (4,842,229) (5,925,642) (4,765,860)

Adjusted weighted average number of shares outstanding during the period

1,612,309,669 1,614,324,005 1,613,240,592 1,614,400,374

Basic and diluted earnings per share 7 fils 7 fils 13 fils 12 fils


7 SEGMENTAL INFORMATION

The Group is organised into segments that engage in business activities which earn revenue and incur expenses. These segments are regularly reviewed by the chief operating decision maker for resource allocation and performance assessment. For the purposes of segment reporting the management has grouped the products and services into the following operating segments:

Commercial Banking - Comprising a full range of credit, deposit and related banking services provided to its commercial customers. Treasury and Investment - Comprising money market, foreign exchange, treasury bonds, asset and surplus fund management, investment securities and investment in an associate.

Operating income includes operating revenue directly attributable to a segment. Segment results include revenue and expenses directly attributable to a segment. Segment assets comprise those operating assets that are directly attributable to the segment.

Segmental information for the six months period ended 30 June is as follows:

Commercial Banking Treasury and Investment Total

2015 2014 2015 2014 2015 2014KD 000 KD 000 KD 000 KD 000 KD 000 KD 000

Operating income 56,148 50,203 6,495 9,689 62,643 59,892

Segment result 25,640 20,689 5,548 8,216 31,188 28,905

Unallocated expenses (8,857) (8,788)

Profit before tax 22,331 20,117

Segmental assets 2,662,631 2,643,828 973,642 1,106,171 3,636,273 3,749,999

Unallocated assets 71,503 62,191

Total assets 3,707,776 3,812,190

11



2015 2014 2015 2014KD 000 KD 000 KD 000 KD 000

Salaries and other benefits 579 522 1,124 1,054

Post employment benefits 70 63 98 96

649 585 1,222 1,150

8 RELATED PARTY TRANSACTIONS

These represent transactions with certain related parties (directors and senior management of the Group, close members of their families and entities of which they are principal owners or over which they are able to exercise significant influence and associate of the Group) who were customers of the Group during the period. The terms of these transactions are approved by the Group’s management.

In the normal course of business, these related parties have deposits with the Bank and credit facilities granted to them by the Bank. The balances included in the interim condensed consolidated financial information are as follows:

Interest income and interest expense includes KD 165 thousand (30 June 2014: KD 749 thousand) and KD 34 thousand (30 June 2014: KD 71 thousand) respectively on transactions with related parties.

Key management compensationCompensation for key management is as follows:


(Audited)

30 June 31 December 30 June

2015 2014 2014

KD 000 KD 000 KD 000

Loans and advances 9,290 9,651 35,854

Deposits 8,615 8,456 17,716

Managed funds 89 85 88

Commitment and contingent liabilities 2,038 2,038 11,787

12


9 COMMITMENTS AND CONTINGENT LIABILITIES

Financial instruments with contractual amounts representing credit risk.

(Audited)30 June 31 December 30 June

2015 2014 2014KD 000 KD 000 KD 000

Acceptances 51,194 21,459 23,936

Letters of credit 193,388 231,567 195,708

Guarantees 669,298 628,149 627,346

913,880 881,175 846,990

Total commitments to extend credit at the statement of financial position date amounted to KD 430,791 thousand (31 December 2014: KD 352,453 thousand and 30 June 2014: KD 249,100 thousand).

10 DERIVATIVE INSTRUMENTS

The notional or contractual amounts of outstanding derivative instruments together with the fair values are as follows:

(Audited)

30 June 2015 31 December 2014 30 June 2014

KD 000 KD 000 KD 000

Assets LiabilitiesContractual

amounts Assets LiabilitiesContractual

amounts Assets LiabilitiesContractual

amountsKD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000 KD 000

Held for hedging:

Fair value hedges

Interest rate swaps 152 606 92,705 257 492 83,293 137 650 65,744

Held for trading:

Forward foreign exchange contracts 137 3,202 168,346 334 2,142 175,910 550 96 192,142

Interest rate swaps - 6,331 88,883 - 3,264 88,883 201 330 88,883

289 10,139 349,934 591 5,898 348,086 888 1,076 346,769

All derivative contracts are fair valued using observable market inputs and are classified as level 2.

13

12 ACQUISITION OF A SUBSIDIARY

During the current period the Bank has entered into an agreement with Piraeus Bank S.A to acquire 98.5% of the Piraeus Bank Egypt (S.A.E.) for an estimated purchase consideration of USD 150 million subject to obtaining all the required approvals from certain regulatory authorities. The closing of the transaction is expected before the end of 2015.

The movements in Level 3 category above is mainly due to purchase and sale during the period.

Fair values of all financial instruments are not materially different from their carrying values.

The impact on the interim condensed consolidated statement of financial position and the interim condensed consolidated statement of shareholders’ equity would be immaterial if the relevant risk variables used to fair value the unquoted securities were altered by 5 per cent.

11 FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial InstrumentsFinancial Instruments comprise of financial assets and financial liabilities. The fair value of financial assets are categorised as under:

Investment securities

(Audited)

30 June 31 December 30 June

2015 2014 2014

KD 000 KD 000 KD 000

Level 1: Equity 12,230 10,267 11,149Debt securities 176,954 192,017 173,435

Level 2: Equity 23,107 22,887 25,131Debt securities 42,462 46,939 43,011Managed funds 43,459 49,519 32,813

Level 3: Equity 23,779 23,382 17,901Debt securities - - 3,500

321,991 345,011 306,940


30 June 2015

Al Ahli Bank of Kuwait K.S.C.P.Ahlan Ahli 1 899 899

Interim CondensedConsolidated FinancialInformation (Unaudited)

Interim Condensed Consolidated Financial Information · 30 June 2015 2014 2015 2014 KD 000 KD 000...

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