KUWAIT, (Reuters) – Kuwait’s Gulf Bank made a net loss of 5.9 million dinars ($20.54 million) in the second quarter after the bank raised first-half provisions for loans to defaulting Saudi Arabia borrowers.
The lender did not identify the borrowers in a statement announcing its results on Sunday, but said it had booked 58.6 million dinars in provisions in the first half of the year without giving a figure for the second quarter.
Regulators and bankers are grappling with the fallout from a multi-billion dollar debt restructuring at the two large Saudi family businesses, Saad Group and Ahmad Hamad Algosaibi and Brothers, seen as the biggest blow to hit the Middle East since the start of the global financial crisis.
“Values of general collaterals receded and the credit portfolio was affected by the default of certain customers in Saudi Arabia, necessitating enhancement of the provisions,” the bank said in a statement without being specific.
The net loss in the first half to June 30 came in at 7.5 million dinars, or 3 fils per share, Gulf Bank said in the statement on Sunday, without giving quarterly figures. There are 1,000 fils to the dinar.
Reuters calculated the second-quarter net loss based on previous financial data. The bank posted a 1.6 million dinar net profit in the first quarter.
Gulf Bank, in which sovereign wealth fund Kuwait Investment Authority (KIA) owns a 16 percent stake, made 23.8 million dinars net profit in the second quarter a year ago.
“The problem is that surprises never end… after the derivatives losses issue happened we said the bank is now clean and has no problems and then now we got the Saad and Algosaibi issue,” said Naser al-Nafisi, general manager at the al-Joman Center for Economic Consultancy.
“But according to the data available now, we expect the bank’s performance in the second half to be better than the first half,” he added.
Gulf Bank was rescued by the central bank in 2008 after derivatives losses. Its troubles had prompted the government to guarantee all deposits in local banks to restore confidence.
The bank’s shares were down 1.61 percent on Sunday. Earnings were released after trading hours.