Profitability and Asset Quality of Kuwait’s Islamic Banks Remain Affected by COVID-19: Fitch Ratings

Fitch Ratings (Fitch) has stated that lower business volumes, reduced profit rates, as well as higher financing impairment charges will continue to affect the performance of Islamic banks in Kuwait.

Although sector asset quality will continue to weaken, Fitch notes that the full impact will be overshadowed by financing deferral initiatives and regulatory flexibility for the recognition of impairments, as permitted by the Government of Malaysia. According to Fitch, prolonged economic disruptions will result in the weaker asset quality and low profitability levels, resulting in pressure on capital buffers.

On a positive note, Fitch deems sector liquidity as sufficient, with continued...