Mahfouz:

• Kuwait continues to demonstrate resilience, supported by strong economic and financial sector fundamentals.
• Favorable banking sector conditions contributed to a stable and supportive operating environment.
• Gulf Bank delivered strong financial performance while maintaining robust asset quality and prudent risk management.
• The Bank continued to advance its transition to Islamic banking through progress across multiple strategic workstreams.

Challinor:

• First-half loan growth reached 7.6%, driven by strong corporate banking activity.
• Operating expenses reflected continued investment in strategic initiatives and the long-term growth of the business.
• Lower funding costs contributed to stronger margins during the second quarter and supported earnings growth.
• Cost of risk declined to 16 basis points for the quarter, marking one of the lowest levels reported in several years.

Gulf Bank held its first half 2026 earnings webcast on Monday 3rd August 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 half of 2026. Mr. Mahfouz stated: “The first half of 2026 was marked by elevated geopolitical tensions and heightened regional uncertainty. While these developments have weighed on sentiment across parts of the region, Kuwait has continued to demonstrate resilience, supported by strong sovereign fundamentals, and the stability of its financial sector. The country's credit profile remains robust, while continued access to both domestic and international funding markets reinforces confidence in Kuwait's financial position and funding flexibility.”

Mr. Mahfouz added “From a banking sector perspective, conditions remained broadly favorable during the first half of the year. The unchanged benchmark interest rates provided greater stability for businesses and better visibility for borrowers. Moreover, the sector continued to benefit from strong capitalization, healthy liquidity levels, and sound regulatory oversight.”

He added: “Against this backdrop, Gulf Bank delivered a strong performance during the first half of the year. We achieved growth in profitability, expanded our lending portfolio, and maintained robust asset quality. These results underscore the resilience of our business model, the strength of our risk management framework, and the disciplined execution of our strategic priorities. We continued advancing our planned transition to Islamic banking and made progress across multiple workstreams, including governance, products, systems, policies and processes, further strengthening our operational readiness for the transition as we move through the necessary regulatory and shareholder approval process.”

Loan Growth

Commenting on loan growth, Mr. David Challinor, Chief Financial Officer of Gulf Bank stated: “We had another strong quarter of net loan growth in Q2 of 118 million or 1.9%, which has brought growth in the first half to 7.6%. And once again the corporate banking business was the growth engine with a mix of high quality local and international transactions. However, the market growth in the retail segment was only 1.6%, which reflects the continuation of a subdued environment leading to highly competitive pricing. But our strategy remains, which is to continue a disciplined approach in our credit appetite and to prioritise credit quality over volume, which has resulted in a better performing loan book. Looking forward, we anticipate that loan growth in the second half will develop at a more moderate pace.”

Operating Expense

On operating expense Mr. Challinor mentioned: “Operating expense growth for the first half was 8%, which represented an absolute increase of 3.8 million. Now, three quarters of that increase related to the “other expense” category. And the growth was mainly due to the advancement of our strategic projects, the Islamic conversion and the merger, coupled with an operational risk provision. Now, in terms of guidance, I’d previously mentioned that the cost growth for FY26 would be around the mid-to-high single digit range, but I think the latter is now more likely.”

Margins

In regard to net interest margin, Mr. Challinor noted: “We saw the margin expand in Q2 by 8 basis points from the Q1 level. And this expansion was driven by a decrease in the cost of funds combined with an increase in income yields. The cost of funds fell by 6 basis points in Q2 after falling 5 basis points in Q1. And this primarily reflected the repricing following the December rate cuts. Looking ahead, obviously the key driver of margin movements are changes in benchmark rates. And the general consensus is that rate cuts are significantly less likely now than they were at the start of the year, which is positive for the margin outlook. We’d also expect CASA levels to start increasing, which will work to put downward pressure on the cost of funds.”

Cost of Risk

On Cost of Risk, Mr. Challinor, remarked: “The net credit cost charge for Q2 was 2.5 million, which translates into a cost of risk of only 16 basis points for the quarter. Now clearly, we haven’t seen such a low level of quarterly cost of risk and credit cost for many years, which is an outstanding result, and this was indeed the biggest driver of the bottom-line earnings growth. And we saw in Q2, both a lower specific provision and a higher level of recoveries than we’d usually seen in previous quarters, which is a very encouraging development. Now on the corporate side, we had several provision releases coupled with recoveries which together helped to lower the Bank’s credit costs even further. If we look at the percentage of loans classified as stage 2, it’s now only at 2.3% which is likely the lowest in the Kuwaiti banking system. So, our balance sheet is in a relatively strong position versus competitors to handle any future shocks arising due to the current geopolitical situation. In terms of guidance. At the start of the year, we expected the cost of risk to land in the 50-to-60-point range for FY26, but we’re now lowering this to under 50 basis points.”

Conversion to Sharia compliance

About the updates on the Islamic banking conversion and the potential merger with Warba Bank, Mr. Sami Mahfouz, Acting Chief Executive Officer of Gulf Bank noted: “As mentioned earlier 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. Implementation efforts are advancing across core workstreams, with dedicated teams overseeing the transition across business, operation, and technical areas. Focus remains on ensuring readiness in a structured manner, while maintaining consistency in service delivery. As for the potential merger with Warba Bank, process is progressing in an orderly manner, and any material updates will be communicated in line with disclosure requirements.”