RESEARCH  GCC

EQUITY REPORT

Burgan Bank (BURG.KW) NEUTRAL

Quarterly Result Update
CMP KWD 0.335
Target KWD 0.350 • Burgan Bank reported a total operating income of KWD 43.16 million during
Upside 4.5% 1Q10, up 36.6% YoY.
• Net profit plunged 82.9% to KWD 1.87 million during 1Q10, due to higher
provisions for impairment of loans and advances.
MSCI GCC Index 406.75
Kuwait Stock Exchange 6,430.90 • We have revised our FY2010E operating income downwards by 2.2%
because of lower than anticipated net interest income. However, our net
profit estimate now stands marginally lower by 0.9%, factoring in higher
Key Stock Data
operating expenses.
Sector Banking • We are reiterating our earlier NEUTRAL recommendation on Burgan Bank
Reuters Code BURG.KW with a revised target price of KWD 0.350, implying an upside of 4.5%.
Bloomberg Code BURG KK Equity
Net Out. Shares (bn) 1.012
Market Cap (KWD bn) 0.339 Overview
Market Cap (USD bn) 1.173
Avg. 12m Vol. (mn) 1.685 KWD Million 2008A 2009A 2010E 2011E 2012E
Volatility (30 day) 41.645 Total Operating Income 121.11 154.71 168.09 179.30 204.38
Volatility (180 day) 34.301 YoY Change 14.6% 27.7% 8.6% 6.7% 14.0%
Net Profit 37.07 6.21 17.44 30.89 49.31
YoY Change -50.5% -83.2% 180.8% 77.1% 59.6%
Stock Performance (%) Net Spread 2.9% 3.4% 3.5% 3.6% 3.7%
52 week high / low (KWD) 0.388 / 0.294 Net Interest Margin 2.5% 3.2% 3.4% 3.4% 3.6%
EPS (KWD) 0.027 0.005 0.013 0.022 0.036
1M 3M 12M
RoAE 11.2% 2.0% 4.5% 6.8% 10.3%
Absolute (%) 4.7 -3.2 2.4
Relative (%) 8.6 14.0 19.2
Operating Income
During 1Q10, Burgan Bank reported a 36.6% jump in total operating income to KWD
43.16 million from KWD 31.59 million in 1Q09, primarily due to higher net interest
Shareholding Pattern (%) income and reported share of results from associates. Even though the bank’s interest
income dropped 19.6% YoY to KWD 43.14 million, a sharp 41.7% reduction in interest
Kuwait Projects Company 56.00
expenses to KWD 18.62 million resulted in a 13.0% increase in net interest income to
Public Institution for Social Security 6.00 KWD 24.52 million from KWD 21.70 million. Furthermore, Burgan recorded net fees &
Public 38.00 commission income of KWD 7.69 million during 1Q10, up 20.1% YoY from KWD 6.40
million. Additionally, dividend income rose multiple times to KWD 1.27 million from
KWD 0.14 million, while other income was at KWD 0.89 million, down 54.3% from
KWD 1.94 million. Meanwhile, gains from foreign currency dealings were lower at
BURG and KSE Index KWD 1.02 million compared to KWD 1.79 million in 1Q09, while losses from available-
for-sale investments declined to KWD 0.12 million from KWD 0.18 million in the year-
ago period. Besides, the share of results from associates stood at KWD 7.91 million
during 1Q10, following the acquisition of a 6.48% equity interest in Bank of Baghdad
(BoB) to 51.79%. Accordingly, non-interest income rose 88.6% to KWD 18.64 million
from KWD 9.89 million.

Net Spread and NIM

The bank’s yield on average interest earning assets decreased 102 bps to 5.3% during
1Q10, while cost of funds declined 146 bps YoY to 2.1%. As a result, net spread
increased 44 bps to 3.3% from 2.8% in 1Q09. In addition, the bank’s net interest
margin rose 46 bps to 3.0%, due to an 88.6% increase in non-interest income during
1Q10.

Call us on +973 17549499 or email us at research@taib.com

 TAIB RESEARCH

Operating Expenses
During 1Q10, operating expenses rose 31.9% to KWD 13.81 million from KWD 10.47 million in 1Q09. Staff costs increased 19.5% YoY to
KWD 6.32 million from KWD 5.29 million, while other expenses stood at KWD 7.49 million, up 44.6% from KWD 5.18 million. Despite the
increase in operating costs, the cost-to-income ratio decreased 114 bps YoY to 32.0% during 1Q10, owing to a considerable growth in
operating income.

Provisions and Impairment

Net provisions for impairments totalled KWD 22.53 million during 1Q10 compared to KWD 4.90 million in 1Q09, led by higher provisions for
impairment of loans and advances. Provisions for impairment of loans and advances increased over five-fold to KWD 22.51 million from
KWD 4.30 million, whereas impairment of investment securities plunged 96.2% to KWD 0.02 million from KWD 0.60 million in 1Q09.

Net Profit
Net profit plunged 82.9% to KWD 1.87 million during 1Q10 from KWD 10.99 million in the year-ago period, due to higher provisions for
impairment of loans and advances. Subsequently, the adjusted EPS was down to KWD 0.005 from KWD 0.032.

Peer Comparison

In order to do a peer comparison for Burgan Bank, we have taken comparable banks operating in Kuwait region including Gulf Bank of
Kuwait (GBK) and Al Ahli Bank of Kuwait (ABK).

Financial Performance of Comparable Banks

GBK ABK Burgan Bank
(KWD Million) 2009 1Q10 2009 1Q10 2009 1Q10
Net Interest Income 89.64 24.92 81.77 18.83 101.83 24.52
YoY Growth -24.1% 4.2% 19.4% 0.4% 49.7% 13.0%
Total Operating Income 136.29 56.31 110.40 27.52 154.71 43.16
YoY Growth 63.9% 97.2% -2.3% 13.1% 27.7% 36.6%
Net Profit -28.07 0.52 39.17 15.28 6.21 1.87
YoY Growth -92.2% -67.1% -14.9% 1.1% -83.2% -82.9%
Loans & Advances (Net) 3,275.01 3,172.99 2,023.69 2,017.40 2,246.95 2,203.04
YoY Growth -5.9% -10.6% -5.0% -3.8% 5.3% -1.4%
Total Assets 4,743.91 4,515.78 2,965.99 3,029.05 4,093.98 4,139.62
YoY Growth -4.1% -12.0% -2.3% -2.8% 3.8% -3.8%
Customers' Deposits 3,149.44 3,105.82 1,837.67 1,885.83 2,424.98 2,444.61
YoY Growth -17.7% -17.2% -7.7% -8.0% 0.4% -8.7%
Shareholders' Equity 407.85 397.35 330.49 330.22 325.48 329.91
YoY Growth 973.6% -6.1% 5.8% 9.0% 4.9% 0.7%
Interest Yield 4.5% 4.1%* 4.8% 4.1%* 6.3% 5.3%*
Cost of Funds 3.0% 2.4%* -2.2% -1.8%* 2.9% 2.1%*
Net Spread 1.5% 1.7% 2.7% 2.3%* 3.4% 3.3%*
Net Interest Margin 1.9% 2.2%* 2.9% 2.5%* 3.2% 3.0%*
Cost to Income Ratio 34.9% 20.9% 27.6% 28.4% 28.1% 32.0%
Credit-Deposit (C/D) Ratio 120.5% 120.4% 118.1% 114.9% 97.5% 95.8%
Equity to Total Assets Ratio 8.6% 8.8% 11.1% 10.9% 8.0% 8.0%
RoAE -12.6% 0.5%* 12.2% 18.5%* 2.0% 2.3%*
RoAA -0.6% 0.0%* 1.3% 2.0%* 0.2% 0.2%*
* Annualised
Source: GBK, ABK, and Burgan’s Financial Statements
 TAIB RESEARCH

New Projects and Updates

As a part of its regional expansion strategy and to further extend its presence in North Africa, Burgan completed the acquisition of
Tunis International Bank (TIB) from United Gulf Bank (UGB) for KWD 194 million. The acquisition involves the purchase of Jordan
Kuwait Bank, Gulf Bank, Gulf Bank Algeria, Bank of Baghdad and Tunis International Bank for KWD 194 million. In addition, Burgan
opened a new branch at Financial Center Branch in Aswaq Al-Qurain and 4 ATMs at The Avenues Mall, bringing the total number of
branches and ATM's in Kuwait to 22 and 128, respectively.

During April 2010, Burgan entered into a contract to provide credit facilities to KGL Ports International (KGL PI), for its Shuwaikh Port
container handling equipment project worth KWD 44.50 million. In another deal, the bank signed an agreement with Kuwait National
Airways to extend a KWD 10 million credit facility for another year. Furthermore, the bank raised KWD 100.80 million through a rights
issue, the proceeds of which would help Burgan to further strengthen its presence domestically and capitalize on its expansion
strategy, mainly across high growth markets in the MENA region. Standard & Poor's Ratings Services reaffirmed the bank’s long- and
short-term counterparty credit ratings at BBB+/A-2, with a negative outlook.

In March 2010, Burgan partnered HP ProCurve to further enhance its IT infrastructure and support its business expansion plans in
2010. This will enable the bank to enhance its network infrastructure to support the growing number of users, as well as reduce its
downtime, network restrictions, and server connection capabilities.

Risks and Concerns to Valuation:

™ A substantial change in credit metrics may call for a revision of our estimates and recommendation.
™ Loan portfolio is expected to recover in tandem with economic growth in 2010. However, any further slowdown in the
economy may impact credit expansion.

Valuation Methodology:

We have used the Target P/BV approach based on the Gordon Growth Model (GGM) for arriving at Burgan Bank’s fair value, as
explained below:

Target P/BV Multiple Approach using the Gordon Growth Model (GGM)

The model uses sustainable return on average equity (RoAE), cost of equity (Ke) and expected growth in earnings (g) to arrive at the
target P/BV for the company using the formula:

Target P/BV = (RoAE - g) / (Ke - g)

Subsequently, we multiplied the target P/BV multiple for 2010E with the 2010E BVPS to arrive at the company’s fair value over a
medium-term investment horizon.

We have used the following assumptions to arrive at the target P/BV multiple for 2010:

i. Sustainable RoAE has been taken as the 5-year average of the RoAE over 2010E-2014E.
ii. The cost of equity (Ke) has been calculated as 9.99% using the Capital Asset Pricing Model (CAPM).
iii. The terminal growth rate (g) has been taken as 2.00%.
 TAIB RESEARCH

GGM Valuation Summary

Sustainable RoAE 10.61%
Cost of Equity (Ke) 9.99%
Perpetual Growth Rate 2.00%
Target P/BV Multiple for 2010E (x) 1.08
2010E BVPS (KWD) 0.325
Fair Value per Share using Target P/BV (KWD) 0.350
CMP (KWD) 0.335
Upside/(-)Downside 4.5%

Sensitivity Analysis

The following tables present a sensitivity analysis for the estimated fair value per share based on various terminal growth rate, cost of
equity and RoAE scenarios. The shaded area represents the most probable outcomes.

Sensitivity Analysis - GGM (Ke vs. g)

Terminal Growth Rate (g)
Cost of Equity 1.00% 1.50% 2.00% 2.50% 3.00%
7.54% 0.477 0.490 0.505 0.523 0.544
8.54% 0.414 0.420 0.427 0.436 0.446
9.99% 0.347 0.349 0.350 0.352 0.354
10.54% 0.327 0.327 0.327 0.328 0.328
11.54% 0.296 0.295 0.293 0.291 0.289

Sensitivity Analysis - GGM (Ke vs. RoAE)

Return on Average Equity (RoAE)
Cost of Equity 21.30% 22.30% 10.61% 24.30% 25.30%
7.54% 1.131 1.189 0.505 1.307 1.365
8.54% 0.958 1.008 0.427 1.107 1.157
9.99% 0.784 0.825 0.350 0.906 0.947
10.54% 0.734 0.772 0.327 0.848 0.886
11.54% 0.657 0.691 0.293 0.759 0.793

Sensitivity Analysis - GGM (RoAE vs. g)

Return on Terminal Growth Rate (g)
Average Equity 1.00% 1.50% 2.00% 2.50% 3.00%
21.30% 0.733 0.757 0.784 0.815 0.850
22.30% 0.769 0.796 0.825 0.858 0.897
10.61% 0.347 0.349 0.350 0.352 0.354
24.30% 0.842 0.872 0.906 0.945 0.990
25.30% 0.878 0.910 0.947 0.988 1.036
 TAIB RESEARCH

Investment Opinion

Kuwait’s economy grew at a CAGR of 4.3% over the past five years (2004-2009), whereas it contracted by 2.7% during 2009, according
to the International Monetary Fund (IMF). Kuwait experienced rapid economic growth during the past several years, spurred by booming
oil revenues. The country holds crude reserves of nearly 104 billion barrels, representing about 8% of the total global reserves. The
slowdown in economic activity began around mid-2008, when oil prices started tumbling after touching historical highs. Since then, the
central bank has taken several measures, such as reducing interest rates and guaranteeing deposits, in order to strengthen the overall
economy. During 2009, the retrenchment in the oil sector prompted the government to unveil an economic development plan outlining a
spending of up to USD 140 billion over the next five years to diversify the economy away from oil and to improve the investment
scenario, while boosting private participation. In addition, interest rates on credit facilities to residents and non-residents were
consistently reduced from 6.6% in Mar-09 to 5.5% in Mar-10. However, banking assets have remained almost flat since Sep-09. The
overall assets of local banks stood at KWD 40.58 billion as of Mar-10, compared to KWD 39.52 billion in Mar-09, an increase of a
marginal 2.7% in contrast to the robust compounded growth of 16.9% over 2005-2009. Meanwhile, total deposits stood at KWD 28.54
billion, up 4.6% over KWD 27.29 billion in Mar-09 compared to the robust CAGR of 20.1% during 2005-2009. Private sector deposits
(78.0% of total deposits) advanced 5.9% YoY to KWD 22.28 billion as of Mar-10, whereas government deposits were up 17.0% to KWD
3.71 billion.

After restructuring in 2002, Burgan launched a major management reshuffle in 2003-04, to emerge as one of the fastest growing banks
in the region. In terms of asset size, the bank currently ranks as the fourth largest bank in Kuwait and is also the third largest commercial
bank, with over 110 branches, 300+ ATM’s, and a customer base of over 0.30 million. Further, the bank embarked on a regional
expansion strategy in 2008, aimed at extending its presence in North Africa and widening the scope of operations in the MENA region
through the acquisition of majority stakes in four commercial banks in Algeria, Iraq, Jordan, and Tunisia. Accordingly, the bank
completed the transfer of Jordan Kuwait Bank, Gulf Bank Algeria, Bank of Baghdad, and Tunis International Bank from United Gulf Bank
during 2009 for KWD 194 million. However, weakness in the regional credit market affected bottom-line, which plunged 82.9% to KWD
1.87 million during 1Q10. In contrast to a robust CAGR of 33.8% during 2006-09, the loan portfolio increased marginally by 1.0% YoY
during 1Q10, reflecting the difficult macroeconomic conditions prevailing in Kuwait. Furthermore, total assets declined 3.8% YoY to
KWD 4.14 billion, while customer deposits dropped 8.7% YoY to KWD 2.44 billion. At the same time, credit quality concerns in the
country’s banking sector amid weak macroeconomic conditions resulted in over a five-fold jump in provisions for impairment of loans &
advanced to KWD 22.51 during 1Q10, which remain a key concern with respect to the quality of financing receivables and investments.
Owing to mounting credit quality concerns, we suggest a cautious approach for investing in Burgan Bank’s stock.

We had updated Burgan Bank on March 01, 2010 with a NEUTRAL recommendation (target price of KWD 0.391 with a 5.7% upside).
Currently, the company’s stock is trading at a P/E multiple of 26.41x and 14.91x on 2010E and 2011E earnings, and at a P/BV
multiple of 1.03x and 0.99x on 2010E and 2011E BVPS, respectively. Meanwhile, the stock has gained 5.4% since the beginning of
this year compared to a loss of 8.2% by the KSE (Kuwait Stock Exchange) Index. Considering the above factors, we have arrived at a
target price of KWD 0.350, representing an upside of 4.5% over its current price of KWD 0.335 (as on July 08, 2010). Accordingly,
we are reiterating our earlier NEUTRAL recommendation on Burgan Bank.
 TAIB RESEARCH
TAIB RESEARCH

Financial Statements

Consolidated Income Statement

(KWD Million) 2008A 2009A 1Q09A 1Q10A 2010E 2011E 2012E

Interest Income 208.74 202.00 53.63 43.14 198.97 219.99 248.83

Interest Expense -140.73 -100.17 -31.93 -18.62 -86.09 -94.02 -105.52
Net Interest Income 68.02 101.83 21.70 24.52 112.89 125.97 143.31

Fees & Commissions Income 24.60 31.84 6.69 8.17 36.62 42.11 48.01
Fees & Commissions Expense -2.18 -1.88 -0.29 -0.49 -2.16 -2.53 -2.93
Net Fees & Commissions Income 22.42 29.97 6.40 7.69 34.46 39.59 45.08

Net Gains from Foreign Currencies -0.24 4.50 1.79 1.02 1.02 0 0
Net Gains / (Loss) from Investments at Fair Value
through Income Statement 3.15 -0.44 -0.21 -0.02 -0.02 0 0
Net Gains from AFS Investments 21.03 4.43 -0.18 -0.12 3.50 4.47 5.81
Share of result from an associate 0 0.79 0.00 7.91 7.91 0 0
Dividend Income 2.26 1.08 0.14 1.27 2.18 2.82 3.39
Other Income 4.47 12.55 1.94 0.89 6.15 6.46 6.78
Total Operating Income 121.11 154.71 31.59 43.16 168.09 179.30 204.38
Staff Expenses -17.99 -20.99 -5.29 -6.32 -22.81 -24.33 -27.73
Other Expenses -15.50 -22.54 -5.18 -7.49 -31.21 -33.30 -37.95
Operating Profit before Provisions 87.62 111.17 21.12 29.35 114.06 121.67 138.69
Provision for Impairment of Loans & Advances -36.40 -79.39 -4.30 -22.51 -72.57 -60.40 -51.57
Provision for Impairment of Investment Securities -10.16 -3.45 -0.60 -0.02 -0.81 -0.39 0.00
Operating Profit 41.07 28.34 16.22 6.82 40.69 60.88 87.12
Contribution to the KFAS -0.36 -0.06 -0.11 -0.02 -0.41 -0.61 -0.87
Zakat -0.39 -0.06 -0.12 -0.01 -0.41 -0.61 -0.87
NLST -0.98 -0.16 -0.30 -0.05 -1.02 -1.52 -2.18
Taxation of Overseas Subsidiary -3.53 -7.38 -1.99 -2.34 -9.79 -14.03 -19.21
Total Taxation -5.26 -7.66 -2.51 -2.42 -11.62 -16.77 -23.13

Board of Directors' Remuneration -0.07 -0.07 0 0 -0.07 -0.07 -0.07

Net Profit 35.73 20.60 13.72 4.40 29.00 44.04 63.92

Attributable to:
Equity Holders of the Bank 37.07 6.21 10.99 1.87 17.44 30.89 49.31
Non-Controlling Interest -1.33 14.39 2.73 2.53 11.56 13.15 14.61
 TAIB RESEARCH

Consolidated Balance Sheet

(KWD Million) 2008A 2009A 1Q09A 1Q10A 2010E 2011E 2012E
ASSETS
Cash & Cash Equivalents 550.96 602.09 466.72 704.50 671.46 721.37 813.88
Treasury Bills and Bonds 387.38 417.05 369.94 412.01 442.46 478.88 526.52
Due from Banks & Other Financial Institutions 532.41 407.43 875.03 399.52 478.03 543.69 611.24
Loans & Advances to Customers' 2,132.99 2,246.95 2,235.43 2,203.04 2,336.43 2,542.04 2,801.01
Investment Securities 107.40 140.95 110.98 141.16 148.09 158.71 172.74
Investment in associates 0 15.43 0 0 0 0 0
Other Assets 75.95 79.52 82.32 78.90 85.66 94.12 105.05
Property & Equipment 30.61 36.66 30.97 40.15 42.36 48.45 55.11
Intangible Assets 125.31 147.90 131.96 160.34 160.34 160.34 160.34
Total Assets 3,943.00 4,093.98 4,303.35 4,139.62 4,364.83 4,747.60 5,245.90

LIABILITIES AND EQUITY

Due to Banks 192.26 276.44 200.80 284.83 294.73 301.58 312.25
Due to Other Financial Institutions 603.22 701.37 707.92 751.54 782.69 851.32 940.68
Deposits from Customers 2,416.10 2,424.98 2,676.79 2,444.61 2,502.70 2,773.53 3,095.91
Other Borrowed Funds 197.94 123.02 182.28 102.39 102.39 102.39 102.39
Other Liabilities 147.67 139.90 127.58 109.51 112.88 119.31 145.30
Total Liabilities 3,557.20 3,665.71 3,895.37 3,692.88 3,795.39 4,148.13 4,596.53

EQUITY
Share Capital 94.67 104.13 104.13 104.13 140.13 140.13 140.13
Share Premium 64.76 64.76 64.76 64.76 129.56 129.56 129.56
Treasury Shares -16.59 -18.29 -18.32 -16.92 -16.92 -16.92 -16.92
Statutory Reserve 39.22 39.87 39.22 39.87 43.94 50.03 58.74
Voluntary Reserve 39.59 40.25 39.59 40.25 44.32 50.41 59.12
Treasury Shares Reserve 37.29 37.30 37.29 36.77 36.77 36.77 36.77
Investment Revaluation Reserve 7.48 12.45 7.36 13.64 13.64 13.64 13.64
Share Based Compensation Reserve 0.48 0.54 0.53 0.54 0.54 0.54 0.54
Foreign Currency Translation Reserve 5.03 10.68 13.21 11.20 11.20 11.20 11.20
Retained Earnings 38.36 33.80 39.88 35.67 43.10 47.80 65.67
Shareholders' Equity attributable to Equity
Holders of the Bank 310.29 325.48 327.65 329.91 446.28 463.16 498.45
Non-Controlling Interest 75.52 102.80 80.33 116.83 123.17 136.31 150.92
Total Equity 385.80 428.27 407.98 446.75 569.45 599.47 649.38
Total Liabilities and Equity 3,943.00 4,093.98 4,303.35 4,139.62 4,364.83 4,747.60 5,245.90
 TAIB RESEARCH

Consolidated Cash Flow Statement

(KWD Million) 2008A 2009A 1Q09A 1Q10A 2010E 2011E 2012E
Operating activities
Profit for the year 41.07 28.34 16.22 6.82 40.69 60.88 87.12
Adjustments:
Net (gains)/loss from investment at fair value
through income statement -3.15 0.44 0.21 0.02 -0.02 0 0
Net gains from investment available for sale -21.03 -4.43 0.18 0.12 -3.50 -4.47 -5.81
Share of results from associates 0 -0.79 0 -7.91 -7.91 0 0
Provision for impairment of investment securities 10.16 3.45 0.60 0.02 0.81 0.39 0
Provision for impairment of loans and advances 36.40 79.39 4.30 22.51 72.57 60.40 51.57
Dividend income -2.26 -1.08 -0.14 -1.27 -2.18 -2.82 -3.39
Depreciation and Amortisation 3.86 5.97 1.58 1.73 6.94 7.98 9.13
Provision for share based compensation 0.31 0.05 0.05 0.01 0.01 0 0
Operating profit before changes in operating
assets and liabilities 65.35 111.33 22.98 22.03 107.39 122.37 138.62

Changes in operating assets and liabilities:

Treasury bills and bonds 86.15 -29.67 17.44 51.78 -25.41 -36.43 -47.64
Due from banks and other financials institutions -104.88 102.52 -342.62 32.38 -70.60 -65.66 -67.56
Loans and advances to customers -279.68 -79.46 -106.74 42.64 -193.93 -267.31 -311.77
Other asset -2.77 11.68 -6.37 9.94 -6.13 -8.46 -10.93
Due to banks -277.36 69.26 8.54 8.37 18.29 6.86 10.67
Due to other financial institutions 244.63 97.02 104.70 50.17 81.32 68.64 89.35
Deposit from customers 246.99 -65.61 260.69 -144.58 45.85 247.32 299.34
Other liabilities -23.15 -56.05 -22.60 -38.59 -27.02 6.43 25.99
Taxation Paid -2.66 -1.70 0 -0.22 -11.62 -16.77 -23.13
Net cash from/ (used in) operating activities -47.37 159.31 -63.98 33.93 -81.86 56.97 102.95

Investing activities
Proceeds/(Purchase) of investment securities 50.34 -29.40 -5.15 1.74 -5.41 -10.61 -14.03
Investment in an associate 0 -14.65 0 0 0 0 0
Acquisition of a subsidiary, net of cash 36.37 11.13 0 88.93 88.93 0.00 0.00
Additions to property and equipment -5.22 -5.16 -1.25 -0.91 -12.63 -14.07 -15.79
Dividends received 2.26 1.08 0.14 1.27 2.18 2.82 3.39
Net cash from/ (used in) investing activities 83.75 -36.99 -6.26 91.04 73.07 -21.86 -26.43

Financing activities
Other borrowed funds 149.28 -74.92 -15.66 -20.63 -20.63 0 0
Share Issue 0 0 0 0 100.80 0 0
Purchase of treasury shares -18.82 -1.76 -1.76 0 0 0 0
Sale of treasury shares 1.32 0.07 0.03 0.84 0.84 0 0
Cash dividend paid -51.58 0 0 0 0 14.01 14.01
Cash dividend paid to non controlling interests 0 -3.33 -1.90 -2.75 -2.75 0 0
Net cash used in financing activities 80.20 -79.95 -19.29 -22.54 78.26 14.01 14.01

Effect of foreign currency translation 3.21 3.60 5.30 -0.06 -0.06 0.00 0.00
Net movement in non controlling interests -0.04 5.16 0 0.05 0.05 0 0
Net increase/(decrease) in cash and cash
equivalents 119.77 51.13 -84.24 102.42 69.45 49.12 90.53
 TAIB RESEARCH

Financial Ratios

2008A 2009A 1Q09A 1Q10A 2010E 2011E 2012E

Profitability
Return on Average Assets 1.1% 0.2% 1.1%* 0.2%* 0.4% 0.7% 1.0%
Return on Average Equity 11.2% 2.0% 13.8%* 2.3%* 4.5% 6.8% 10.3%
Net Interest Income / Total Operating Income 56.2% 65.8% 68.7% 56.8% 67.2% 70.3% 70.1%
Non-Interest Income / Total Operating Income 43.8% 34.2% 31.3% 43.2% 32.8% 29.7% 29.9%

Margins
Interest Expense / Interest Income 67.4% 49.6% 59.5% 43.2% 43.3% 42.7% 42.4%
Interest Yield 7.7% 6.3% 6.4%* 5.3%* 5.9% 6.0% 6.2%
Cost of Funds 4.8% 2.9% 3.6%* 2.1%* 2.4% 2.4% 2.5%
Net Spread 2.9% 3.4% 2.8%* 3.3%* 3.5% 3.6% 3.7%
Net Interest Margin 2.5% 3.2% 2.6%* 3.0%* 3.4% 3.4% 3.6%
Cost to income ratio 27.7% 28.1% 33.1% 32.0% 32.1% 32.1% 32.1%

Liquidity & Assets Quality

Credit to Deposit (C/D) Ratio 90.8% 97.5% 86.0% 95.8% 100.0% 99.0% 98.0%
Customers' Deposits to Shareholders' Equity 778.7% 745.1% 817.0% 741.0% 560.8% 598.8% 621.1%
Deposits and balances due from banks / Due to
Banks 276.9% 147.4% 435.8% 140.3% 162.2% 180.3% 195.8%
Provisions / Gross Loans & Advances 2.8% 5.0% NA NA 6.6% 7.4% 7.7%

Capital Adequacy
Shareholders' Equity to Total Assets 7.9% 8.0% 7.6% 8.0% 10.2% 9.8% 9.5%
Shareholders' Equity to Gross Loans & Advances
and Financing Activities 14.1% 13.8% 14.2% 14.1% 17.8% 16.9% 16.4%

Operating Performance
YoY Change in Net-Interest Income 33.1% 49.7% 68.7% 13.0% 10.9% 11.6% 13.8%
YoY Change in Non-interest Income -2.7% -0.4% -57.9% 88.6% 4.4% -3.4% 14.5%
YoY Change in Total Operating Income 14.6% 27.7% -13.1% 36.6% 8.6% 6.7% 14.0%
YoY Change in Net Profit -50.5% -83.2% -55.3% -82.9% 180.8% 77.1% 59.6%

Valuation Ratios
Adj. EPS (KWD) 0.027 0.005 0.032* 0.005* 0.013 0.022 0.036
Adj. BVPS (KWD) 0.226 0.237 0.238 0.240 0.325 0.337 0.363
P/E (x) 12.43 74.15 10.48 61.44 26.41 14.91 9.34
P/BV (x) 1.48 1.42 1.41 1.40 1.03 0.99 0.92
CMP** (KWD) 0.335 0.335 0.335 0.335 0.335 0.335 0.335
* Annualised
NA ─ Not Applicable
** Price as on July 08, 2010
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