Burgan Bank expects the sale to enable the bank to focus on its core market/iStockby Kudakwashe Muzoriwa
Kuwait’s Burgan Bank has signed an agreement to sell its majority stake in Bank of Baghdad to Bahrain-based United Gulf Holding Company as the bank considers reducing group-wide non-performing loans, exit riskier assets and consolidate position in the domestic market.
In a bourse filing, Kuwait’s second bank by assets stated that the sale will enable Burgan Bank to focus on its core market and develop stronger synergies with its subsidiaries in Turkey, Algeria and Tunisia.
Additionally, Burgan Bank said that the sale of its ownership in the Iraqi lender is in line with its strategy to improve its risk-adjusted returns for shareholders.
The transaction is projected to have a one-off negative impact of around KWD 9 million (AED 108.8 million) on Burgan Bank's 2020 net income and part of this impact of around KWD 4 million is expected to be reversed after completion of the transaction, added Burgan Bank
However, despite this negative impact, Burgan Group expects to maintain its healthy level of profitability for the year 2020. Similarly, the bank stated that the deal is also expected to have a positive impact on Burgan's asset quality with a reduction in non-performing loans by around KWD 34 million dinars, without giving specifying total group-wide bad loans.