The Earnings Webcast was held and presented by the Chief Financial Officer, David Challinor.

Challinor:

• We maintained a balanced approach between credit expansion and asset quality, ensuring the resilience and integrity of our loan book.
• We saw an improvement in the cost-to-income ratio in the second quarter versus the first as margins recovered.
• The most recent local government debt issuances will accelerate economic activity and enable faster participation by banks in financing national initiatives.

Kuwait, 30 August 2025: Gulf Bank held its first half 2025 earnings webcast on Tuesday 29th July 2025, to present and discuss the Bank's financial performance. The webcast was organized by EFG Hermes and presented by Mr. David Challinor, Chief Financial Officer of Gulf Bank. The discussion was moderated by Mr. Youssef Dib, from Investor Relations at Gulf Bank.

Operating Environment

Mr. David Challinor, Chief Financial Officer of Gulf Bank, commenced the webcast with key updates regarding Gulf Bank’s operating environment during first half 2025. Challinor stated: “The first half of 2025 was marked by a dynamic operating environment and rising geopolitical tensions and oil price fluctuations have added volatility to regional markets and shifted governments priorities. These factors have also influenced market sentiment, creating a more cautious investment landscape. Locally, fiscal policy developments have also played a role in shaping market conditions. The most recent local government debt issuances will accelerate economic activity and enable faster participation by banks in financing national initiatives.”

Mr. Challinor added “Against this backdrop, and despite continued pressure on margins across the sector, our financial performance reflects strong execution and a prudent approach to managing our operations. We continued to maintain a balanced approach between credit expansion and asset quality, ensuring the resilience of our loan book. Our low non-performing loan ratio and high coverage levels underscore the effectiveness of our risk management framework and our ongoing commitment to financial stability.”

He added: “We are also advancing our internal readiness for a potential Islamic Sharia-compliant conversion, subject to being granted with the necessary regulatory and shareholders’ approvals. The essential systems, governance frameworks, and talent are currently being explored. We are carefully assessing all operational and market implications to ensure we would be well-prepared subject to obtaining the necessary approvals. In addition, we have recently signed a Memorandum of Understanding with Warba Bank stating the basis of cooperation in assessing a proposed merger between both banks independently, ensuring the best interests of all the Bank’s shareholders in line with all regulations. Following that, we announced on 28th July 2025 that we had obtained approval from the Central Bank of Kuwait to engage and appoint a group of specialized consultancy firms with the necessary qualifications and expertise to carry out the feasibility study and due diligence for the potential merger.”

Margins

In response to questions raised regarding the net interest margins and the trend during Q2 on a sequential basis, Mr. David Challinor, Chief Financial Officer of Gulf Bank remarked: “The margin expanded very strongly by a total of 14 basis points from Q1. Now, even though we saw a fall in the cost of funds during Q2 the market has recently become very competitive which is causing the cost of new deposits to rise and if this dynamic continues to persist, then we could be faced with some margin pressure even in the absence of cuts to benchmark rates.”

Operating Expenses

In terms of operating expenses Mr. Challinor mentioned: “We’ve seen a 6% growth in total operating expenses in H1 25 versus H1 24. I think given the potential Islamic banking conversion coupled with the potential merger, we are likely to have a higher absolute level of operating expenses in the second half than the first. Now, the increase in the cost to income ratio at H1 25 has been primarily by asset repricing on the income side, coupled with an uptick in the other expenses category. However, we did see an improvement in the cost-to-income ratio in the second quarter versus the first as the margin recovered, but I think the full year outlook is that the ratio is set to increase from FY24 levels”.

Credit Cost

When asked about the credit cost and the Bank’s asset quality, Mr. Challinor said: “As I’ve mentioned on previous investor calls, for at least a year now, the vast majority of the Bank’s credit costs are coming from the retail book and this trend continued into Q2. However, the Q2 credit costs for retail were the lowest since Q3 2023 which is an encouraging sign. On the corporate side, the book continues to perform exceptionally well with insignificant new NPLs. In terms of the guidance we gave at the beginning of the year we said FY25 credit costs are likely to fall in the 60 to 70 basis point range, which was down significantly from 75 basis points for FY24. For H1 25 we are sitting at 61 basis points, so I think the full year guidance of 60 to 70 continues to be appropriate at this stage.”

Loan Growth

In regard to loan growth, Mr. Challinor noted: “In Q2 we continued to grow the loan book, and the year-to-date growth was 3.8% for the first half of 2025. Now, when we compare it to the second half of last year, where we saw a contraction of 1.8%, H1 25 has witnessed a strong rebound from H2 24. And this rebound has been driven by our corporate business, which has grown 7.2% year to date versus the market growth, to the end of May 25, of 5.1%. So, we’ve gained market share in corporate this year and we also gained market share last year. Now when we look at retail, this continues to be a challenge in the current environment, and according to the CBK data the growth to the end of May 2025 was only 1.2% which is perhaps indicative of the current higher rates and future rate expectations. In terms of the outlook for total loan growth for the full year 2025, we did guide for around mid-single digit loan growth, and we are currently on track to achieve this.”