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00:00Monster move in the stock on the inclusion first of all. What will that inclusion mean and more importantly for our viewers. Have you seen any major pillar investors come in in this MSCI inclusion any big taking of stake in you. I know there are limits but anybody chunk up on your stock. Well good morning gentlemen and thank you for having me on. We're obviously very pleased to be back and then DAX. Actually it turns out that when we're no stranger to the index a couple of years ago in November 2020 when Kuwait came into the index we were part of it. Last year in May of 2021 we drop off the standard index into the small cap index but now we're back into the standard index. So we're no strangers to the index along the way. We did develop a good relationship with foreign investors. We're currently well covered by both our com capital and he FTSE. Currently the bank has foreign ownership of about 13 percent. Our market cap is about four billion dollars so 30 percent is about 500 million dollars. So we are already engaged with foreign investors and we do expect some more inflow into the stock with the upgrade. However it is fairly well. We can see we can we can see a lot of the statistics on the terminal as well. Just again for for us to get a bit more perspective on how this sets you up for the remainder of the year how this fits into your outlook for profitability in a very uncertain global monetary policy backdrop. Well actually in Kuwait we do have two forces coming together at the same time. On the one hand we have rising interest rates and we are fairly early in the cycle. At the same time we do have high oil prices which are good for the Kuwaiti economy and the banking sector. Here in Kuwait in general. So we understand the difficulty in the global markets. However we do hold a somewhat positive outlook here in Kuwait. Here in Kuwait for the balance of the year. So Tony we heard from the Federal Reserve chair yesterday clear and convincing. They need to see a clear and convincing turn in inflation but they are in a different mode now. Well early in the cycle in rates where do you think this cycle peaks out by the end of this year. What does it mean for interest income at Gulf Bank. How many hikes will we get. I'm having to translate to your income statement. Well we as I said we are fairly early in the cycle. We do expect another four to six interest rate hikes here in the next year or so. This will affect us positively. Obviously every interest rate hike comes with a bit of expansion and names here and. And overall we do expect names to expand and we do expect interest. We would expect our earnings to be rising going forward. I mean with all the oil money gushing into Kuwait right now and the government clearly having a lot more flexibility to spend on projects it sounds to me that that is where the biggest pocket of growth is going to come from for Gulf Bank. Can you shed a bit more light on that in terms of what's going to be the driving momentum. Yes actually we agree at current oil prices of 100 or 110 dollars. That is well below the break even price here in Kuwait of seventy or seventy five dollars. So we do have surpluses in the government budget going forward and over time we do expect that surplus to go into project spending. We are the second largest conventional bank in Kuwait and we obviously expect to participate in that project spending as it as it comes online. So yes the outlook is fairly positive for project spending here in Kuwait going forward. Don't tell me this the debate is the dependency of institutions like Gulf Bank on real estate and oil. What are you telling those to national investors that you've been roadshow ing with or talking to. A by diversification. How will you deliver growth. Well as you know we're a local band. So we're quite exposed to the local economy. We have very little exposure to the regional economy. When you look at our balance sheet less than 10 percent is exposed to the GCSE saw. We're mainly a Kuwait bank. And I think for foreign investors who invest in our in our stock they are investing in a pure local play. Now. Diversification in terms of geography is very limited. However diversification in terms of a product is fairly well here in Kuwait for us. We do participate obviously in all aspects of the economy whether it's on the retail side or on the corporate side. And currently the outlook is fairly positive across the board. Going to. I was looking at the biggest banks in Kuwait and I think you rank about fifth in terms of market capitalization. And then I looked at some of the other banks in play and I kind of began to get the idea that maybe you're in talks with some of your other local names to try and consolidate. Maybe that is a way to create synergies and more profitability. This is a time where banks are consolidating across the region anyway. Well that's a subject that always comes up here in the market. Kuwait has 10 banks currently five Islamic and five congenital conventional. So yes we are the fifth largest in terms of market cap. However however the market is fairly well balanced and it's not really over banks. So I don't expect a consolidation cycle here in the near future because simply because the market is fairly well balanced and it's fairly well profitable.

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Gulf Bank Set for MSCI Inclusion

Tony Daher, CEO of Gulf Bank discusses the Kuwait-based bank's 1Q earnings, its inclusion on MSCI's global standard indexes and outlook for 2022. In this exclusive interview, he speaks with Yousef Gamal El-Din and Manus Cranny on "Bloomberg Daybreak: Middle East." (Source: Bloomberg)

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