Kuwait International Bank K S C P : Capital Disclosures – First quarter 2024

Pillar III Disclosures

Basel III disclosure

Period Ended 31 March 2024

Kuwait International Bank K.S.C.P. and Its Subsidiary
Basel III - Pillar III disclosures
For the period ended 31 March 2024
Contents
Objective:	1
First: Group Structure	3
Second: Capital Structure	3
Third: Additional Capital Disclosure requirements	5
Fourth: Capital Adequacy Ratio	14

Kuwait International Bank K.S.C.P. and Its Subsidiary

Basel III - Pillar III disclosures

For the period ended 31 March 2024

Introduction:

The Central Bank of Kuwait (CBK) vide its circular 2/RB, RBA/336/2014 dated 24 June 2014 and its amendments dated 18 June 2019 vide circular 2/RB, RBA/438/2019, on Basel III Capital Adequacy standards requires banks to make public disclosures. The CBK Basel framework consists of three Pillars. Pillar 1 provides a framework for measuring capital requirements for credit, operational and market risks. Pillar II pertains to the Supervisory Review Process and emphasises the importance of Internal Capital Adequacy Assessment Process (ICAAP) performed by banks. These risks include credit concentration risk, CRM, residual operational risk, market risk, profit rate risk, liquidity risk, strategic risk, reputation risk, legal risk, investment risk and any other substantial risk that is not appropriately captured in Pillar 1. Bank must conduct Stress Testing (ST) of their one year forward looking (business projections) under different scenarios and assumptions and assess the impact on their capital adequacy and profitability. Pillar III requires banks to provide a consistent and understandable disclosure framework which facilitates comparison, thus enhancing the safety and soundness of the banking sector in Kuwait.

Banks have to adopt sound governance framework, improve adopt appropriate internal control systems and install sufficient modern risk management to be able to control the risks embedded in the business environment and to practice good governance.

Objective:

The main objectives of this section are:

1. To allow market participants and investors (especially investment account holders) to assess
   KIB's exposure to risks as per Basel III general disclosure requirements.
2. To comply with CBK instructions and regulations for Islamic Bank's general disclosures related to Capital Adequacy Standard under Basel III.

Bank's Disclosure Approach:

Consolidated basis (Kuwait International Bank KSCP ("KIB" or "the Bank") and its subsidiaries (together the Group), on a semi-annual basis, reviewed by the external auditors of the Bank. The annual disclosures are audited by external auditors of the Bank.

The disclosures are made relying on calculating the minimum capital required by applying capital adequacy instructions of CBK to cover:

• Credit and Market risks using the Standardized Approach.
• Operational risk using the Basic Indicator Approach.

Under the Framework of Capital Adequacy, Banks must provide timely, accurate, relevant and adequate disclosures of qualitative and quantitative information that enables users to assess their activities and risk profile. The following public disclosures are made in line with the requirements of CBK.

Kuwait International Bank K.S.C.P. and Its Subsidiary

Basel III - Pillar III disclosures

For the period ended 31 March 2024

First: Group Structure

KIB is engaged in providing Islamic banking, finance and investment services that comply with Islamic Shariaà. The consolidated subsidiaries of KIB are Al Dawli Takaful Insurance Company KSCC ("KIB Takaful"), the Bank owns 73.6% of issued share capital of KIB Takaful, Kuwait. KIB Takaful is engaged in providing Sharia'a compliant insurance services. In addition, the Bank owns 99.9% of Al Dawli Invest Investment Company KSCC ("KIB Invest"), engaged in sharia compliant investment activities and also 100% of issued share capital of KIB Tier 1 Sukuk Limited and KIB Sukuk Limited, incorporated as special purpose vehicles with limited liability in the Cayman Islands

Second: Capital Structure

The Group's regulatory capital comprises of Common Equity Tier 1 (CET 1) capital which demonstrates the Group's strength and includes share capital, share premium, reserves, retained earnings less treasury shares and dividends declared. Additional Tier 1 (AT1) capital includes eligible portion of non-controlling interests and additional tier 1 sukuk. Tier 2 (T2) consists of eligible portion of non-controlling interests and general provision up to 1.25% of the total credit risk weighted assets according to rules and regulations.

The Group does not have exposure to derivatives, structured credit product and / or complex equity instruments, which are prohibited by the Islamic Shariaà principles.

		March		March
Particulars		2024		2023
		(KD' 000)		(KD' 000)
Common Equity (CET 1)
Share capital	170,338*	122,519*
Share premium		66,623		49,480
Revaluation reserve	12,412	12,952
Fair Value reserve		13,083		3,177
Statutory Reserve	43,374	41,339
Voluntary Reserve		37,291		35,256
Treasury share reserve	4,811	4,811
Retained earnings		23,206		29,312
Foreign currency translation reserve	1,185	930
Less:
Treasury shares	(45,161)	(45,161)
Proposed Dividends		-		-
Goodwill and other intangibles	-	-
Foreign currency translation reserve		-		-
Investments in FIs with ownership of less than 10% and above the threshold	-	(2,379)
Investments in FIs with ownership of more than 10% and above the threshold		-		-
Total Common Equity Tier (1)	327,161	252,235
AT (1)
Additional Tier 1 instruments	91,035	91,035
Eligible NCI in consolidated subsidiaries		2,195		336
Less:
Reciprocal cross-holdings in Additional Tier 1 instruments		(13,524)		(6,023)
Investments in FIs with ownership of less than 10% and above the threshold	-	(2,018)
Total Tier (1)		406,867		335,565
Tier (2)
General provision (up to 1.25% of the total credit risk weighted assets)		31,421		31,923
Eligible NCI in consolidated subsidiaries	517	71
Additional Tier II instruments		91,956		91,661
Total Tier (2)	123,894	123,655
Total eligible capital		530,761		459,220

*After proposed bonus share adjustment

Kuwait International Bank K.S.C.P. and Its Subsidiary

Basel III - Pillar III disclosures

For the period ended 31 March 2024

Third: Additional Capital Disclosure requirements

1. Common Disclosure Template:

The Group's regulatory capital which consists of the Common Equity Tier 1, AT1 and Tier 2 is as follows:

							March			March
				Common Equity Tier 1 capital: instruments and reserves			2024			2023
							(KD' 000)			(KD' 000)
	1			Directly issued qualifying common share capital plus related stock surplus			236,961*			171,999*
2		Retained earnings		23,206		29,312
	3			Accumulated other comprehensive income (and other reserves)			112,155			98,464
4		Directly issued capital subject to phase out from CET1 (only applicable		-		-
	to non-joint stock companies)
	5			Common share capital issued by subsidiaries and held by third parties			-			-
			(minority interest)
6		Common Equity Tier 1 capital before regulatory adjustments		372,322		299,775
				Common Equity Tier 1 capital: regulatory adjustments

1. Prudential valuation adjustments
2. Goodwill (net of related tax liability)
3. Other intangibles (net of related tax liability)
4. Deferred tax assets that rely on future profitability excluding those arisingfrom temporary differences (net of related tax liability)
5. Cash-flowhedge reserve
6. Shortfall of provisions to expected losses
7. Taskeek gain on sale (as set out in para 72 of the guidelines)
8. Gains and losses due to changes in own credit risk on fair valued liabilities
9. Defined-benefitpension fund net assets (para 68)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

1. Investments in own shares (if not already netted off paid-in capital onreported balance sheet)
2. Reciprocal cross-holdings in common equity
   Investments in the capital of banking, financial and insurance entities that
3. are outside the scope of regulatory consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued sharecapital (amount above 10% threshold of bank's CET1 capital)

(45,161)

-

-

(45,161)

-

(2,379)

Significant investments in the common stock of banking, financial and

1. insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold of bank's
   CET1 capital)
2. Mortgage servicing rights (amount above 10% threshold of bank's CET1capital)
3. Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability)
4. Amount exceeding the 15% threshold
5. of which: significant investments in the common stock of financials
6. of which: mortgage servicing rights
7. of which: deferred tax assets arising from temporary differences
8. National specific regulatory adjustments
9. Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover deductions

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Kuwait International Bank K.S.C.P. and Its Subsidiary

Basel III - Pillar III disclosures

For the period ended 31 March 2024

	28			Total regulatory adjustments to Common equity Tier 1				-
29		Common Equity Tier 1 capital (CET1)		327,161
				Additional Tier 1 capital: instruments
30		Directly issued qualifying Additional Tier 1 instruments plus related stock		91,035
	surplus
	31			of which: classified as equity under applicable accounting standards				91,035
32			of which: classified as liabilities under applicable accounting standards		-
	33			Directly issued capital instruments subject to phase out from Additional				-
			Tier 1
			Additional Tier 1 instruments (and CET1 instruments not included in row
34		5) issued by subsidiaries and held by third parties (amount allowed in		2,195
			group AT1)
	35			of which: instruments issued by subsidiaries subject to phase-out				-
36			Additional Tier 1 capital before regulatory adjustments		93,230
				Additional Tier 1 capital: regulatory adjustments
37		Investments in own Additional Tier 1 instruments		-
	38			Reciprocal cross-holdings in Additional Tier 1 instruments				(13,524)
			Investments in the capital of banking, financial and insurance entities that
39		are outside the scope of regulatory consolidation, net of eligible short		-
	positions, where the bank does not own more than 10%of the issued
			common share capital of the entity (amount above 10% threshold)
				Significant investments in the capital of banking, financial and insurance
	40			entities that are outside the scope of regulatory consolidation (net of				-
				eligible short positions)
41		National specific regulatory adjustments		-
	42			Regulatory adjustments applied to Additional Tier 1 due to insufficient				-
			Tier 2 to cover deductions
43		Total regulatory adjustments to Additional Tier 1 capital		-
	44			Additional Tier 1 capital (AT1)				79,706
45		Tier 1 capital (T1 = CET1 + AT1)		406,867
46		Directly issued qualifying Tier 2 instruments plus related stock surplus		91,956
	47			Directly issued capital instruments subject to phase-out from Tier 2				-
			Tier 2 instruments (and CET1 and AT1 instruments not included in rows
48		5 or 34) issued by subsidiaries and held by third parties (amount allowed		517
			in group Tier 2)
	49			of which: instruments issued by subsidiaries subject to phase-out				-
50		General provisions included in Tier 2 capital		31,421
	51			Tier 2 capital before regulatory adjustments				123,894
				Tier 2 capital: regulatory adjustments
	52			Investments in own Tier 2 instruments				-
53		Reciprocal cross-holdings in Tier 2 instruments		-
				Investments in the capital of banking, financial and insurance entities that are
				outside the scope of regulatory consolidation, net of eligible short positions, where
	54			-
			the bank does not own more than 10%of the issued common share capital of the

entity (above the 10% threshold)

-

252,235

91,035

91,035

-

-

336

-

91,371

-

(6,023)

(2,018)

-

-

-

-

83,331

335,565

91,661

-

71

31,923

123,655

-

-

-

55

Significant investments in the capital banking, financial and insurance entities that are outside the scope of regulatory consolidation (net of eligible short positions)

-

-

Kuwait International Bank K.S.C.P. and Its Subsidiary

Basel III - Pillar III disclosures

For the period ended 31 March 2024

56

57

58

59

60

National specific regulatory adjustments

Total regulatory adjustments to Tier 2 capital

Tier 2 capital (T2)

Total capital (TC = T1 + T2)

Total risk weighted assets (after applying 50% additional weighting)

Capital ratios and buffers

-

-

123,894

530,761

2,617,459

-

-

123,655

459,220

2,641,953

61

62

63

64

65

66

67

68

69

70

71

Common Equity Tier 1 (as a percentage of risk weighted assets)		12.50%
Tier 1 (as a percentage of risk weighted assets)	15.54%
Total capital (as a percentage of risk weighted assets)		20.28%
Institution specific buffer requirement (minimum CET1 requirement plus
capital conservation buffer plus countercyclical buffer requirements plus	9.50%
D-SIB buffer requirement, expressed as a percentage of risk weighted
assets)
of which: capital conservation buffer requirement		-
of which: bank specific countercyclical buffer requirement	-
of which: D-SIB buffer requirement		-
Common Equity Tier 1 available to meet buffers (as a percentage of risk	3.00%
weighted assets)
National minima
National Common Equity Tier 1 minimum ratio	9.50%
National Tier 1 minimum ratio		11.00%
National total capital minimum ratio excluding CCY and DSIB	13.00%

Amounts below the thresholds for deduction (before risk weighting)

9.55%

12.70%

17.38%

9.50%

-

-

-

0.05%

9.50%

11.00%

13.00%

1. Non-significantinvestments in the capital of other financials
2. Significant investments in the common stock of financials
3. Mortgage servicing rights (net of related tax liability)
4. Deferred tax assets arising from temporary differences (net of related taxliability)

Applicable caps on the inclusion of provisions in Tier 2

-

-

-

-

-

-

-

-

1. Provisions eligible for inclusion in Tier 2 in respect of exposures subjectto standardized approach (prior to application of cap)
2. Cap on inclusion of provisions in Tier 2 under standardized approach
3. Provisions eligible for inclusion in Tier 2 in respect of exposures subjectto internal ratings-basedapproach (prior to application of cap)
4. Cap for inclusion of provisions in Tier 2 under internal ratings-based approach

57,441

31,421

-

-

67,009

31,923

-

-

*After proposed bonus share adjustment

Kuwait International Bank K.S.C.P. and Its Subsidiary

Basel III - Pillar III disclosures

For the period ended 31 March 2024

2. Reconciliation Requirement:

The Group has applied the three-step approach for the reconciliation between the Consolidated Statement of Financial Position items and the regulatory capital elements as outlined in the regulations as follows:

Step (1) and (2):

							March 2024
							(KD'000)
				Balance sheet as in			Under
						regulatory
	Item			published financial
					scope of			Ref.
				statements
						consolidation
	Asset
Cash		16,110	16,110
	Cash and bank balances at central banks		303,879			303,879
Items in the course of collection from other banks and FIs	170,181	170,181
	Trading portfolio assets		-			-
Financial assets at fair value through statement of income	2,980	2,980
	Shariaà compliant hedging contracts		-			-
Financing and advances to banks	70,899	70,899
	Financing and advances to customers		2,368,262			2,368,262
	of which general provisions (netted above) capped for	31,421	31,421		(a)
	Tier 2 inclusion
	Financial assets at fair value through other comprehensive income		383,038			383,038
Current and deferred tax assets	-		-
	Prepayments, accrued income and other assets		35,698			35,698
Investment properties	63,235	63,235
	Investments in associates and joint ventures		1,845			1,845
Goodwill and other intangible assets (a) + (b)	-		-
	-	Goodwill		-			-
-	Intangible assets	-		-
	Property, plant and equipment		42,980			42,980
Total assets	3,459,108	3,459,107
Liabilities
	Deposits from banks and FIs		777,625			777,625
Items in the course of collection due to other banks	-		-
	Customer accounts		2,079,861			2,079,861
Trading portfolio liabilities	-		-
	Financial liabilities at fair value through statement of income		-			-
Shariaà compliant hedging contracts	-		-
	Financing securities (Sukuk)		91,956			91,956			(q)
Accruals, deferred income and other liabilities	77,939	77,939
	Current and deferred tax liabilities (c) + (d)		-			-
-	Deferred tax liabilities related to goodwill	-		-
	-	Deferred tax liabilities related to intangible assets		-			-
Provisions (non-cash)	3,836	3,836
	Retirement benefit liabilities		-			-
Total liabilities	3,031,217		3,031,217

Kuwait International Bank K.S.C.P. and Its Subsidiary

Basel III - Pillar III disclosures

For the period ended 31 March 2024

Step (1) and (2) (continued):

March 2024

(KD'000)

	Balance sheet		Under
Item	as in published		regulatory
	financial		scope of	Ref.
	statements		consolidation

Equity
Share capital	165,377	165,377		(b)
Share premium	66,623	66,623		(c)
Treasury shares	(45,161)	(45,161)		(d)
Revaluation Surplus	12,412	12,412		(e)
Fair Valuation reserve	13,083	13,083		(f)
Statutory Reserve	43,374	43,374		(g)
Voluntary Reserve	37,291	37,291		(h)
Treasury share reserve	4,811	4,811		(i)
Retained earnings	34,200	34,200
Of which Retained Earnings eligible as CET1 Capital	23,206	23,206		(j)
Of which Modification loss on deferral of financing instalments	-	-
Of which proposed bonus share	4,961	4,961		(k)
Of which profit for the period	6,033	6,033
Foreign currency translation reserve	1,185	1,185		(l)
Attributable to Bank's equity shareholders	333,194	333,194
Perpetual Tier 1 sukuk	91,035	91,035		(m)
Non-controlling interests	3,661	2,712
-	Common Equity Tier (1)	-	-
-	Additional Tier (1)	-	2,195		(n)
-	Tier (2)	-	517		(o)
Total equity	427,890	426,941
Total liabilities and equity	3,459,108	3,458,158
				March 2023
					(KD'000)
		Balance sheet as	Under
Item		in published	regulatory
		financial	scope of	Ref.
		statements	consolidation

Asset

Cash

Cash and bank balances at central banks

Items in the course of collection from other banks and FIs Trading portfolio assets

Financial assets at fair value through statement of income Shariaà compliant hedging contracts

Financing and advances to banks

Financing and advances to customers

of which general provisions (netted above) capped for Tier 2 inclusion

Financial assets at fair value through other comprehensive income Current and deferred tax assets

Prepayments, accrued income and other assets

Investment properties

Investments in associates and joint ventures

Goodwill and other intangible assets (a) + (b)

• Goodwill
• Intangible assets Property, plant and equipment
  Total assets

12,734	12,734
322,873	322,873
99,600	99,600
-	-
2,771	2,771
-	-
62,127	62,127
2,506,263	2,506,263
31,923	31,923	(a)
302,510	302,510
-	-
43,564	43,564
40,176	40,176
1,831	1,831
-	-
-	-
-	-
40,442	40,442
3,434,891	3,434,891

Kuwait International Bank K.S.C.P. and Its Subsidiary

Basel III - Pillar III disclosures

For the period ended 31 March 2024

Step (1) and (2) (continued):

							March 2023
								(KD'000)
						Under
Item			Balance sheet as in			regulatory
			published financial			scope of		Ref.
			statements			consolidati
						on
Liabilities
Deposits from banks and FIs	681,505	681,505
Items in the course of collection due to other banks		-			-
Customer accounts	2,227,724		2,227,724
Trading portfolio liabilities		-			-
Financial liabilities at fair value through statement of income	-		-
Shariaà compliant hedging contracts		-			-
Financing securities (Sukuk)	91,661	91,661		(q)
Accruals, deferred income and other liabilities		81,276			81,276
Current and deferred tax liabilities (c) + (d)	-		-
-	Deferred tax liabilities related to goodwill		-			-
-	Deferred tax liabilities related to intangible assets	-		-
Provisions (non-cash)		3,773			3,773
Retirement benefit liabilities	-		-
Total liabilities		3,085,939			3,085,939
Equity
Share capital		117,807			117,807		(b)
Share premium	49,480	49,480		(c)
Treasury shares		(45,161)			(45,161)		(d)
Revaluation reserve	12,952	12,952		(e)
Fair Value reserve		3,177			3,177		(f)
Statutory Reserve	41,339	41,339		(g)
Voluntary Reserve		35,256			35,256		(h)
Treasury share reserve	4,811	4,811		(i)
Retained earnings		33,897			33,897
Of which Retained Earnings eligible as CET1	29,312	29,312		(j)
Of which Modification loss on deferral of financing		(3,601)			(3,601)
Of which proposed bonus share	4,712	4,712		(k)
Of which profit for the period		3,474			3,474
Foreign currency translation reserve	930		930		(l)
Attributable to Bank's equity shareholders		254,488			254,488
Perpetual Tier 1 Sukuk	91,035	91,035		(m)
Non-controlling interests		3,429			407
-	Common Equity Tier (1)	-		-
-	Additional Tier (1)		-			336		(n)
-	Tier (2)	-		71		(o)
Total equity		348,952			345,930
Total liabilities and equity	3,434,891		3,431,869