Kuwaiti Banks Set for Better 2022 Performance on Rising Oil Prices, Interest Rates

Kuwait’s economic recovery, higher oil prices, and rising interest rates are paving the way for improved earnings by Kuwaiti banks, according to a report by S&P Global Ratings. The banking sector is expected to see financial earnings fully recover this year, buoyed by a supportive environment, in addition to higher margins and higher interest rates.

“The operating environment for banks in Kuwait will improve in 2022 thanks to higher oil prices and continued recovery from the pandemic,” the report stated, adding that some constraints still persist. Kuwait’s fiscal funding strategy remains uncertain and the general reserve fund, which is the government’s main liquidity buffer, has decreased substantially, it added. Another constraint is the banks’ high exposure to the real estate and construction sectors, which, according to S&P, is a “key risk.”