The banking industry continues to go through a time of unparalleled global challenge. ABK, like many in the industry, has had to respond with determination and vigour. While it is too early to call the end of this period of volatility and uncertainty, there are encouraging signs that the worst could be behind us.

The macro-economic climate in the region improved gradually in 2010. This was partly due to the continued strength of the oil price, still the most significant economic determinant in the Gulf. But there was also a lessening of regional fears on the part of international investors as the UAE tackled some of the serious problems it was facing this time last year.

In our home market, the firm and responsible guidance of the Kuwait banking authorities was a constant factor throughout the year, and as a result we are seeing some improvement in the overall investment climate. This, along with the resilient oil price, will help ensure a steady stream of public sector projects in the coming years, from which the Kuwaiti banking sector will benefit as investment providers.

Nonetheless, 2010 was still a challenging year. The profit recovery was extremely gratifying, especially against the background of a low interest rate environment. Once again, we took credit provisions, though lower than last year, and a top priority continues to be the cautious and conservative management of our resources, with a constant focus on risk and cost control.

Our balance sheet, enhanced by the proceeds of the KD 101 million rights issue in May, gives further cause for confidence.

The measures we have taken to preserve capital and reinforce our financial resources have put us in a strong position, to the benefit of customers and investors. The international ratings agencies have also recognised our efforts in this respect by upgrading ABK's standing in the credit markets. We are confident that ABK will continue to compete strongly with its Kuwaiti peer group in this respect.

ABK is now well positioned to capitalise on the anticipated growth in public sector activity. The corporate banking business remains the mainstay of our profitability. The division took determined action in 2010 to consolidate and improve the quality of its assets, and the effects of this effort are bearing fruit.

In retail banking, the challenge was to enhance profitability in a low interest rate environment, and the division achieved this by focusing more closely than ever before on customer interface. The policy of opening new branches and offering customers better service and dedicated products was extended. The award-winning customer website was significantly enhanced and improved. We remain committed to providing first-class services to customers, depositors and business partners in Kuwait and elsewhere in the region.

The actions by Dubai to confront its financial challenges have been effective in helping improve investor sentiment and regional financial confidence. ABK's business in the UAE largely focuses on meeting the needs of the Kuwaiti business community there, and we are confident we can continue to do so as conditions improve.

International banking generated more fee income as the world economic situation improved, and the prospects for Al Ahli Capital improved.

The outlook in these parts of our business is now more positive. 2011 is still clouded by macro-economic concerns, especially emanating from Europe and the USA. But overall levels of business and sentiment have improved.

More recently, the political upheavals in the region demonstrate once again the capacity for external events to affect regional economic conditions. It is too early to say what the long-term repercussions of these events will be.

The prudent and cautious regulatory policy of the Kuwait authorities has helped sustain ABK and Kuwait through this period of uncertainty. We remain confident that by international standards we meet and surpass the highest standards of capital resources and management.

Above all, we remain committed to our core strategy of providing first-class banking services to our clients in Kuwait and the region, within a culture of risk and prudential management. Employees at all levels have contributed to our achievement of bringing this core strategy safely through the recent turbulence, and we remain grateful for their ongoing efforts.

There will be challenges still to come in the years ahead, but we have emerged through the worst of the financial storm. Let us hope now for calmer waters, and a return to steady growth.

Colin Plowman
Chief General Manager &
Chief Executive Officer