* Isam al-Sager to replace veteran Dabdoub
* Appointment promises stability, policy continuity
* But growth in Kuwait may be difficult
* Has been underperforming some big Gulf rivals
* Faces strategic choice on foreign expansion
By Sylvia Westall and Mirna Sleiman
KUWAIT/DUBAI, Feb 18 The new chief executive of
National Bank of Kuwait, the country's largest
commercial bank, will grapple with a sluggish home market as he
fends off competition from dynamic Gulf rivals.
NBK, the fifth-biggest bank in the Gulf, with $66 billion in
assets at the end of last year, said on Sunday that veteran
banker Isam al-Sager had been appointed its new group CEO, in an
internal transition that had been planned for years.
The 58-year-old will take over next month from Ibrahim
Dabdoub, who held the position for three decades. Sager, who has
served as Dabdoub's deputy since 2010, has worked at the bank
for more than 30 years.
NBK plays a major role in Kuwait's economy, and the
larger-than-life character of Dabdoub, 74, has helped shape the
business environment, speaking out against policy paralysis in
While Sager's appointment is seen as a sign of continuity at
the bank, in which the Kuwait government has a 5 percent stake,
it is not certain how he, a Kuwaiti, unlike Palestinian Dabdoub,
will address some strategic issues.
"Al-Sager's most valuable asset is his familiarity with the
bank's internal politics and Kuwait's complicated political
bottlenecks," said a person close to the bank's operations.
Sager may need to consider whether to concentrate more on
the bank's local market or expansion overseas, he added.
"That's the biggest challenge. Do you want to retain the
bank's global strategy or do you want to bring it closer to home
and get it sucked into the state's internal politics?"
Sager joined NBK in 1978, became CEO of its Kuwait business
in 2008 and was promoted to deputy group CEO two years later;
his family, one of Kuwait's most prominent business families,
helped to found the bank in 1952.
Sager, who holds a bachelor's degree in business
administration from California State Polytechnic University,
could not immediately be reached for comment on his appointment.
Described by people who know him as a quiet, low-key
operator, he looks unlikely to match Dabdoub's public profile.
Despite Kuwait's oil wealth, its growth has been held back
for years by political instability and red tape, making it a
less dynamic environment than other Gulf states such as the
United Arab Emirates and Saudi Arabia.
Persistent tensions between the cabinet and parliament have
held up reforms aimed at diversifying the oil-reliant economy
and a 30 billion dinar ($106 billion) development plan for big
infrastructure projects. There were some signs last year that
projects might be getting underway, but they remain just signs.
"There's been talk of government projects being initiated
for a number of years now and they haven't really got off the
ground," said Andrew Parkinson, analyst at credit rating agency
Fitch. "That is a real limitation for NBK and other Kuwaiti
Kuwait's economic headwinds mean Sager may find it difficult
to squeeze out faster growth in NBK's domestic market, which
contributed 78 percent of net operating income in 2013.
NBK missed analysts' forecasts last month when it reported a
48 percent year-on-year tumble in fourth-quarter net profit to
$142 million, though it said its full-year earnings reflected
improved confidence in the local economy.
"The most important issue facing the whole banking sector in
Kuwait, in which NBK has the lion's share, is how to create new
opportunities for growth and take the initiative in credit
expansion," said Abdulmajad al-Shatti, former chairman of
Commercial Bank of Kuwait.
This is because credit growth in recent years has been
driven by retail customers receiving rising public sector wages,
Shatti said. With state finances increasingly vulnerable to any
steep fall in oil prices, the government has started to consider
ways to rein in its spending growth, which could limit that
source of profits for local banks.
If development projects move ahead this year and the
government increases capital spending, that will offer
significant opportunities for NBK, said Alexios Philippides, an
analyst at Moody's Investors Service.
"A top priority for NBK should be to maintain its strong
asset quality, when faced with continuing elevated credit losses
within the Kuwaiti banking system, as the system continues to
absorb legacy problem loans and awaits the implementation of its
development plan," he said.
If growth inside Kuwait languishes, NBK could look to
opportunities in the Gulf and the larger Middle East. It already
has an Egyptian subsidiary, Al Watany Bank of Egypt, and a major
stake in Turkish Bank.
In 2012, Dabdoub told Reuters that NBK aimed to derive 50
percent of its net profit from overseas branches by 2020, up
from 29 percent then.
But NBK faces tough competition abroad from energetic
regional rivals such as National Bank of Abu Dhabi (NBAD)
, which has a fast-growing home base, and
government-backed Qatar National Bank (QNB).
NBAD has been expanding its network aggressively in the
Middle East and Asia, while QNB has made acquisitions in Egypt
and raised its stakes in foreign affiliates in Tunisia and Iraq.
The two banks have been performing better than NBK by some
NBK's return on equity, a measure of profitability, was 9.7
percent in 2013, down from 12.8 percent in 2012, according to
Thomson Reuters data. NBAD had an RoE of 14.4 percent last year,
down from 16.5 percent in 2012, while QNB's ratio has been
running near 20 percent.
The contrast can be seen in the banks' share prices. NBK has
performed well, rising 11 percent, since Reuters quoted sources
as saying in mid-January that Sager was set to succeed Dabdoub.
But it is up only 7 percent since the end of 2012, compared with
a 62 percent leap for NBAD and a 42 percent gain for QNB.
Sager "is one of the new generation, so there could be a new
way of seeing things, but I don't think there is going to be any
significant change" in policy, said an analyst at a Middle
East-based investment bank, who declined to be named.
"NBK is a very conservative bank, and I think that will
remain the strategy going forward. The main challenge is how
they are going to be able to maintain growth if the Kuwaiti
market doesn't pick up."
(Additional reporting by Ahmed Hagagy; Editing by Andrew
Torchia and Will Waterman)