The National Bank of Kuwait (NBK), Kuwait’s largest and most prominent financial institution, has reported a significant dip in its earnings for the first quarter of 2025. The bank’s net profit for Q1 2025 dropped by 9% year-on-year, from KD 147 million ($485 million) in the first quarter of 2024 to KD 134 million ($435 million) in Q1 2025. This decline has been largely attributed to the newly introduced 15% corporate tax that came into effect in January 2025, significantly impacting NBK’s profitability.
The tax, which is part of Kuwait’s broader economic strategy to align with global taxation standards, is designed to ensure that multinational companies and local entities pay a minimum level of tax on their earnings. The new policy is in line with the OECD’s Pillar Two framework, a global tax standard aimed at reducing the possibility of tax avoidance through offshore havens. This move is a major shift for Kuwait, a country that has long been seen as having a relatively tax-free environment for businesses.
Corporate Tax Impact on NBK’s Earnings
The new corporate tax structure has had an immediate effect on businesses operating in Kuwait, with NBK being one of the first major financial institutions to report its financial performance after the tax’s implementation. The 15% corporate tax has increased the overall tax burden for companies operating in the country. Isam Al-Sager, the Vice Chairman and CEO of NBK, spoke on the matter, acknowledging the temporary negative impact of the new tax on the bank’s earnings. He emphasized, however, that the bank remains committed to ensuring its long-term growth and stability, noting that the tax policy aligns with global standards and is ultimately beneficial for Kuwait’s economy.
Al-Sager reassured stakeholders that while the first-quarter results reflect the initial impact of the corporate tax, NBK remains confident in its ability to weather the financial challenges posed by the new tax structure. He also emphasized the role of this tax reform in helping to diversify Kuwait’s revenue streams away from oil, a key objective of the government’s Vision 2035 development plan.
Operational Growth Amidst Tax Challenges
Despite the hit to its bottom line, NBK’s operational growth remains robust. The bank reported a 9% year-on-year increase in total assets, which reached KD 42 billion ($137 billion) by the end of March 2025. This growth is largely driven by increased customer loans and advances, which grew by 10% to KD 25 billion, while customer deposits also increased by 6%, reaching KD 24 billion. This shows that the bank’s overall financial position remains solid, despite the impact of the new tax policy.
In addition to strong growth in traditional banking operations, NBK has seen positive contributions from its international banking segment and Boubyan Bank, its Islamic banking arm. Boubyan Bank, in particular, has been a key contributor to the bank’s growth, with both the retail and corporate segments performing well despite the macroeconomic challenges.
Furthermore, NBK reported a modest increase in net operating income, which rose by nearly 1% compared to the previous year. The steady performance in these areas indicates that the bank is not only able to adapt to new tax policies but is also strengthening its position in the market. The overall outlook for the bank remains cautiously optimistic, with a focus on sustainable growth moving forward.
Looking Ahead: Optimism for Kuwait’s Economic Landscape
While the first-quarter results reveal the challenges faced by the National Bank of Kuwait, Al-Sager expressed optimism about the future of both the bank and Kuwait’s broader economic landscape. He noted that the Kuwaiti government’s Vision 2035, which focuses on diversifying the economy and reducing dependence on oil revenues, will open up new opportunities for growth. He pointed to ongoing infrastructure projects and the development of key sectors, such as technology, renewable energy, and tourism, as drivers of long-term economic growth.
Al-Sager also highlighted the resilience of the Kuwaiti financial sector, noting that Kuwait has been taking steps to strengthen its banking regulations and improve the business environment in the country. While there are still global challenges—such as trade tensions, geopolitical instability, and fluctuations in oil prices—Al-Sager believes that Kuwait is well-positioned to continue growing despite these external pressures. He also stressed that the government’s efforts to attract foreign investment, along with its commitment to implementing progressive tax policies, will make the country a more competitive and stable place for businesses to operate in.
Conclusion
The National Bank of Kuwait’s performance in Q1 2025 reflects the immediate impact of the newly implemented corporate tax, with the bank seeing a 9% decline in profit compared to the previous year. Despite this, the bank’s overall financial health remains strong, with significant growth in total assets, customer loans, and deposits. The bank’s resilience in the face of new challenges underscores its commitment to growth and stability, even as it adapts to changes in Kuwait’s tax policies.
The broader outlook for Kuwait’s economy is positive, with ongoing development projects and initiatives under Vision 2035 set to drive further growth. While the corporate tax is likely to continue affecting businesses in the short term, the long-term benefits of these reforms could help the country achieve greater economic diversification and financial stability.
NBK’s management remains confident in the bank’s ability to navigate these changes, and stakeholders can expect continued operational growth and strategic expansion in the coming quarters. The National Bank of Kuwait’s ability to adapt to evolving tax and economic conditions demonstrates its resilience and reinforces its position as a key player in Kuwait’s financial sector.
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