Kuwait Times

Published Date: February 11, 2009

KUWAIT: Commercial Bank of Kuwait (CBK) said yesterday it was not exposed to troubled firms Investment Dar Co and Global Investment House, its chairman said yesterday. Global Investment House, the country's biggest investment bank, said last month it had defaulted on most of its debt, while Islamic rival Investment Dar said in December it needed up to $1 billion in loans.

Commercial Bank has no exposure to the two firms Investment Dar and Global ... Dar and Global have settled loans owed to CBK," CBK Chairman Abdul-Majeed Al-Shatti told Al Arabiya television. Global has appointed HSBC and CBK Capital, a unit of the country's third-largest lender by market value, to hold talks with creditors. Shatti said Dar had settled its debt after selling its 19.2 percent stake in Islamic lender Boubyan Bank to CBK.

In December, CBK said it had cancelled the deal it reached with Dar in November to buy the Boubyan Bank stake. But Shatti yesterday the deal had not been cancelled. "The deal was not cancelled, we have agreed with Dar to proceed with the deal cancellation," Shatti said, without giving further details. In Kuwait, stakes larger than 5 percent have to be offered to the public in an auction on the bourse. CBK owns the 19.2 percent stake in Boubyan Bank, according to bourse data posted on its website.

Separately, a government rescue plan will help Kuwait's financial sector but its total value of $5 billion may not be enough to mitigate the impact of the global crisis on the OPEC member as a whole, Standard Chartered said yesterday. On Thursday, the Cabinet approved a stimulus package worth KD 1.5 billion ($5.1 billion) including state guarantees of up to 50 percent for fresh loans banks provide to local firms. "Markets were anticipating a larger rescue plan and there are concerns that $5 billion would n
ot be enough," Standard Chartered said in a note to clients.

Central Bank Governor Sheikh Salem Abdul-Aziz said on Sunday he expected local banks to provide loans to companies worth up to KD 4 billion this year and next, of which Kuwait would guarantee 50 percent. Kuwait will also guarantee half of all loans local banks provide to investment firms to reschedule debt and 25 percent of those from foreign creditors, according to the plan.

Standard said the government needed to increase spending to help the economy. Kuwait is expected to cut spending by about KD 7 billion in the 2009/10 fiscal year starting in April mainly due to much lower contributions to social welfare funds, the head of parliament's budget committee said last week. - Reuters