Gulf Bank predicts recovery next year

Kuwait: Gulf Bank expects to boost its profits in the third quarter and sees 2011 as a year of recovery, as the lender leaves its aggressive provisioning policy behind it, Chief Executive Michel Accad said.

Gulf Bank, which was rescued by the Kuwaiti central bank in 2008, after about 260 million dinars (Dh3.3 billion) of derivatives losses, is completely provisioned against bad loans and on track for a comeback, Accad said.

The bank's troubles prompted the government to guarantee all deposits in local banks to restore confidence.

Accad said in an interview yesterday that the fourth largest Kuwaiti bank by market value had made it out of "intensive care" in 2009 from the derivatives trauma.

"I think I'm going out of [the] hospital from the end of the second quarter, because now we have shown our first profit," Accad said.

The bank, booked 85 million dinars in provisions against bad loans in the first half, clearing the way for lower provisions, he said.

Kuwait's central bank has imposed a strict provisioning policy on local lenders since the outbreak of the financial crisis to protect the banking sector, in addition to specific provisions that each bank might need to book against bad loans or investments.