Kuwait Finance House: Strong EPS growth more than captured in valuation & consensus

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Kuwait Finance House: Strong EPS growth more than captured in valuation & consensus

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Kuwait Finance House

Strong EPS growth more than captured in

valuation & consensus

Initiating Coverage: UNDERPERFORM | PO: 0.650 KWD | Price: 0.778 KWD

Initiate at Underperform, PO of KD0.650, c.16% downside 18 May 2026

We initiate coverage of Kuwait Finance House (KFH) with an Underperform rating and a Equity

PO of KD0.650. KFH is the second-largest bank by market share and the largest Islamic

bank in Kuwait, with c.14% of equity attributable to operations in Türkiye. While our RahulResearchRajan,AnalystCFA >>

forecast 16% 3Y EPS CAGR is one of the strongest among MENA banks, we find the Merrill Lynch (DIFC)

valuation premium unwarranted. In our view, it fails to reflect: 1) the rising asset quality +97rahul.rajan@bofa.com1 4425-8254

risks, which are not captured in consensus estimates; 2) the rising share of Türkiye in Olga Veselova >>

EPS, from 16% in 2025 to >25% in 2029E, requiring a higher Cost of Equity; and 3) the Research Analyst

Merrill Lynch (DIFC)

capital allocation risks – the company has said it is open to inorganic growth too. olga.veselova@bofa.com

AQ likely to erode, coverage lower than NBK/peers

We believe KFH might possibly face provisioning headwinds in Kuwaiti operations given

Stock Datanegative GDP growth revisions in 2026E (IMF: to -0.6%, -4.5ppt). KFH has lower

provision coverage vs. NBK (stage 3 coverage on CBK provisions) and MENA banks Price 0.778 KWD

(stage 2/3 coverage on IFRS). Further, we assume CoR to stay elevated in Türkiye in Price Objective 0.650 KWD

2026E (200bps), yet lower than that in 2025 (222bps). We believe VA consensus Date Established 18-May-2026

underestimates CoR next 3Y: 54bps vs. 71bps by BofAe for KFH (incl. Türkiye).