Mahfouz: The Bank continues to make measured progress on its Sharia-compliant conversion process in line with the regulatory framework.

• Kuwait continues to benefit from funding flexibility supported by domestic market depth and access to international capital markets
• Kuwait policy response has supported the stability of economic activity during an exceptionally challenging environment.
• We continued to advance our digital capabilities, enhancing the accessibility, security, and efficiency of our services.

Challinor: Gulf Bank’s net loans and advances grew by nearly 6% in a single quarter, the strongest growth in several years.

• Total operating expenses grew only 1% year on year, which reflected our ongoing cost discipline.
• Corporate portfolio asset quality continues to demonstrate sustained strength and resilience.
• The retail growth in the system remains very slow and subdued, increasing by only 0.1% year to date as per CBK data.

Kuwait City, May 5, 2026 : Gulf Bank held its first quarter 2026 earnings webcast on Monday 4th May 2026, to present and discuss the Bank's financial performance. The webcast was organized by EFG Hermes and presented by Sami Mahfouz, Acting Chief Executive Officer of Gulf Bank, and Mr. David Challinor, Chief Financial Officer of Gulf Bank. The discussion was moderated by Ms. Dalal AlDousari, Deputy General Manager of Investor Relations at Gulf Bank.

Operating Environment

Mr. Sami Mahfouz, Acting Chief Executive Officer of Gulf Bank, commenced the webcast with key updates regarding the operating environment and Gulf Bank’s overall position during the first quarter of 2026. Mr. Mahfouz stated: “As we all know, we have been operating in an exceptionally challenging environment, as Kuwait and the whole region have been facing hostile security developments and heightened regional tensions since late February 2026. While these conditions have weighed on market sentiment and affected parts of the local and regional economic landscape, the State’s institutional strength, and the timely and adequate policy response, have supported the stability of economic activity.”

Mr. Mahfouz added “During the first quarter of this year, key sovereign indicators remained robust as Kuwait’s credit ratings were reaffirmed by leading credit rating agencies, reflecting the country’s strong financial position and external resilience. Kuwait continues to benefit from funding flexibility supported by domestic market depth and access to international capital markets.”

He added: “Operationally, Gulf Bank swiftly activated its business continuity and risk management protocols in line with established frameworks and directives from the Central Bank of Kuwait. This ensured the uninterrupted operation of our systems and the continued delivery of services across all channels. We also continued to advance our digital capabilities, enhancing the accessibility, security, and efficiency of our services. At the beginning of the year, Gulf Bank announced the launch of its new mobile application dedicated to SME and Corporate banking clients, designed to meet the evolving needs of businesses across various sectors. ”

Margins

Commenting on net interest margin, Mr. David Challinor, Chief Financial Officer of Gulf Bank stated: “The margin contracted 9 basis points in Q1 and now it’s sitting at 1.82%. The contraction which was expected was primarily driven by the full quarter impact of the benchmark rate cuts that happened in December. Now, we did see cost of funds fall during the quarter, but it wasn’t enough to offset the income yield drop. We’ve seen deposit pricing in the local market continue to be relatively sticky in response to recent rate cuts, and the geopolitical events exacerbated this dynamic. In terms of outlook, at the beginning of the year we didn’t provide any margin guidance for the full year 2026 due to many moving parts and uncertainty around benchmark rate movements. Although we did indicate that in the short term we would expect a contraction, and that’s what we saw. Now the key driver of the margin is movements in benchmark rates.”

Loan Growth

In regard to loan growth, Mr. Challinor noted: “We had an exceptionally strong start to the year in terms of loan growth. Net loans and advances grew by 326 million, which was almost 6% growth in just one quarter, and the highest growth for a number of years. And when we look at total customer loan growth year to date, which excludes lending to banks, our growth was 5.3% for the quarter, versus the market, which was 1.9% to the end of March. And for the corporate segment we grew 9% versus the market, which was 2.8%. This is testament to our very strong corporate franchise. However, the retail growth in the system remains very slow and subdued, increasing by only 0.1% year to date as per CBK data, and this reflects a very challenging and competitive environment in retail. In terms of outlook, on the Q4 call we guided high single digit loan growth for the full year 2026. And we would expect this to be achieved with the possibility of potential upside.”

Cost of Risk

On Cost of Risk, Mr. Challinor, remarked: “Credit costs totaled 9.4 million in Q1 2026, reflecting a decline of 0.7 million, or 7%, compared to the same period last year. This was primarily attributable to the sustained strength and resilience of the corporate portfolio’s asset quality. And a similar theme has continued, which is that almost all the credit costs relate to retail. And we’ve mentioned before that the retail credit costs have remained elevated for a prolonged period, but we could expect some normalization to occur as our underwriting amendments coupled with enhancements to the collections process, both work to deliver positive results. Now in terms of outlook, at the beginning of the year we gave guidance for the full year cost of risk to be in the 50 to 60 basis point range. At Q1, we were 61 basis points so we would expect, at this stage, for the guidance to still hold. ”

Operating Expense

On operating expense Mr. Challinor mentioned: “Operating expenses grew only 1% year on year, and we achieved a positive JAWs ratio of 1.2% in Q1 2026 which reflected our ongoing cost discipline in relation to our business-as-usual cost base. And our cost-to-income ratio was 51.9% in Q1 26 versus last year Q1 25 which was 52.6% so there has been a reduction there. Now clearly, we are advancing several strategic projects such as the Islamic conversion and potential merger. And we’ve indicated before that the year 2026 will bear the majority of these costs. In terms of guidance, we previously said the absolute cost growth for the full year could be around the mid-to-high single-digit range and that estimate still holds.”

Conversion to Sharia compliance and potential Merger

About the updates on the Islamic banking conversion and the merger, Mr. Sami Mahfouz, Acting Chief Executive Officer of Gulf Bank noted: “On the Sharia-compliant conversion, the Bank continues to make measured progress in line with the regulatory framework following the Central Bank of Kuwait’s preliminary approval. As for the potential merger with Warba Bank, the evaluation process is ongoing, with due diligence activities nearing final stages, under the guidance of independent advisors and the oversight of both Boards and relevant regulatory authorities. The process is progressing in an orderly manner, and any material updates will be communicated in line with disclosure requirements.”

CBK regulatory guidelines

Regarding the expectations on the timeframe for easing CBK regulatory guidelines, Mr. Mahfouz mentioned: “We thank the proactivity of the Central Bank of Kuwait in terms of enacting that easing which is similar to the playbook of Covid. At that time, the Central Bank of Kuwait was very patient and disciplined when things stabilized and reverting to old ratios and naturally, we would expect the same approach this time. That said, the situation remains fluid as we speak while we hope we reach an end to the hostilities around the region. We expect the Central Bank of Kuwait to apply the same approach and achieve the return to the original ratios in ordinary fashion.”