Ahlan Ahli 1 899 899www.eahli.com

ANNUAL REPORT 2016

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HIS HIGHNESS SHEIKH SABAHAL-AHMED AL-JABER AL-SABAHAmir of the State of Kuwait

HIS HIGHNESS SHEIKH NAWAFAL-AHMED AL-JABER AL-SABAHCrown Prince of the State of Kuwait

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OUR VISIONREIMAGINING A SIMPLER BANK

OUR MISSIONTO CONSISTENTLY PROVIDE EXPERIENCESTHAT SIMPLIFY AND ENRICH PEOPLE’S LIVES

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TRANSPARENCYWe will be clear and open in all our dealings with our customers and stakeholders; although excessive transparency may createa backlash, we accept the consequences

OUR CORE VALUES

INTEGRITYWe will be driven by whatis good for customers and the shareholders, not what is good for our short-term bottom line, because in the end, customer satisfactionwill lead to long-term shareholder value

SIMPLICITYWe will constantly strive to make banking simpler for our customers, with easy documentation and processes, friendly people, quick delivery, and therefore better products and services to the end user: “Doingthings simply” is not “Doing simple things”

EXCELLENCEIs just a consequence of the above and can be defined as: “Simpler, Faster, Better”

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SULAIMAN ABDALLAHSULAIMAN AL MURAIKHIBoard Member

Mr. Sulaiman Al Muraikhi was reappointed as a Board Member in March 2015 and is on the ABK-Egypt board. He was a former Board Member of Kuwait Finance & Investment Co., Wafra International Investment Co., Real Estate Trading Co. and Al Ahli Bank of Kuwait. He holds a Bachelor degree in Business Administration from Helwan University, Egypt (1977).

KHALED ABDULLAH MOHAMMED AL MISHARIBoard Member

Mr. Khaled Al Mishari has been a Board Member since 2013. He has served on the Boards of Gulf Bank, Kuwait Commercial Facilities Co., Kuwait Cement Co., Al-Mabani Co., Kuwait United Bank (London) and the Higher Council of Planning. He holds a Bachelor degree in Economics from Kuwait University (1971).

PRASANNA DATTATRAY HARDIKARBoard Member

Mr. Prasanna Hardikar has been a Board Member since 2013 and is on the ABK-Egypt board. He is an Associate of the Institute of Chartered Accountants of India and holds a Bachelor of Commerce degree from the University of Poona, India (1983).

BOARD OF DIRECTORS

TALAL MOHAMED REZABEHBEHANIChairman

Mr. Talal Behbehani has been a Board Member since March 2007. He was elected Deputy Chairman in March 2014 and then Chairman in December 2014. He currently serves on the Boards of Kuwait Insurance Co., and A’ayan Leasing Co., and was previously a Board Member of Industrial Bank of Kuwait. He holds a Bachelor of Arts degree in English from Kuwait University (1992).

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KHALID OTHMAN ABDULWAHHAB AL OTHMANBoard Member

Mr. Khaled Al Othman has been a Board Member since 2004 and is on the ABK-Egypt board. He has also served on the Boards of Gulf Bank, Kuwait National Cinema Co. as Deputy Chairman, Al Hamra Real Estate as Deputy Chairman and CEO and Ajial Real Estate & Entertainment Co. as Chairman and Managing Director. He holds a Bachelor degree in Statistics and Economics from Kuwait University (1978).

ALI MOHAMMED ABDULLAHAL-SHURAIDAHBoard Member

Mr. Ali Al-Shuraidah has been a Board Member since March 2016. He currently holds the position General Manager, Cyberspace Consulting and Information Technology. He previously held a number of positions including Assistant General Secretary, General Secretariat of the Council of Ministers, Under Secretary - Information Technology Center Council of Ministers. He holds a Bachelor degree in Engineering from Tulsa University and Master’s Degree from Ohio University (1978).

ADEL IBRAHIM YALI AHMED BEHBEHANIBoard Member

Mr. Adel Behbehani has been a Board Member since March 2016. He was previously a Credit Manager with Gulf Bank from 1987-1999 and a Senior Executive Manager with Commercial Bank of Kuwait from 1999-2013. He holds a Bachelor of Commerce degree from Kuwait University (1987).

SALAH AHMED AL SERHANDeputy Chairman

Mr. Salah Al Serhan has been a Board Member since 1987 and was elected Deputy Chairman in December 2014. He also served on the Board of Kuwait Clearing Co. (1988-2015). He holds a Diploma in Electronic Engineering from Heald College, USA (1965).

ALI IBRAHIM HEIJI HUSSAIN MARAFIBoard Member

Mr. Ali Marafi has been a Board Member since 2004 and is currently the Chairman of ABK-Egypt. He is also the Deputy Chairman of United Real Estate Co., Board Member of Commercial Facilities Co., and a Board Member of UBAF (Paris and Hong Kong). He has previously served as the Chairman of American Services Co.He holds a Bachelor degree in Economics and Political Science from Kuwait University (1973).

FAWZY T. AL THUNAYANGeneral Manager Board Affairs

Mr. Fawzy Al Thunayan was appointed General Manager, Board Affairs in January 2014, following thirty four years in investment and banking, ten of which were with investment companies, and sixteen years with the Central Bank of Kuwait, where he was the Head of the Foreign Operations Department. Thereafter, he joined Gulf Bank as General Manager of Board Affairs for eight years. He is currently also the Chairman of Ahli Capital Investment Co (ACIC). He holds a Bachelor degree in Business Management from the Catholic University of America, Washington DC, USA (1980).

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GRANT JACKSONGeneral ManagerTreasury and Investments

Grant Jackson joined ABK in 2015 with over 30 years’ work experience across the globe in various roles in Treasury management. Prior to joining ABK, he was the Treasurer for Gulf Bank, Kuwait. He holds a Bachelor degree in Applied Finance from Macquarie University (Australia) and has additional qualifications from Harvard University, the Australian Institute of Company Directors and Minhaj Shari’a Advisory.

KARL STUMKEGeneral ManagerInternational Banking

Karl Stumke joined ABK in 2010 and has more than 30 years’ banking experience in a number of retail and corporate entities including Barclays, where he held various executive and Board positions in London, Africa and the Middle East. He holds a Bachelor degree in Accountancy from the University of South Africa, and is a Certified Associate of the Institute of Bankers in South Africa. He also holds a Dip. Advanced Banking (RAU) and has done the Advanced Management Program (INSEAD), CAIB (SA).

STEWART LOCKIEGeneral ManagerRetail Banking

Stewart Lockie joined ABK in 2009, having previously worked in retail banking in Egypt and the United Kingdom, with Ahli United Bank and Barclays Bank for 18 years.A seasoned retail banker with more than 25 years’ experience, he achieved the Chartered Manager designation from the Chartered Management Institute in the UK, and holds an MSC in Management from the University of South Wales.

EMAD ROUSHDYExecutive General Manager Corporate Banking

Emad Roushdy joined ABK in 2000 and has more than 35 years’ experience in corporate lending with various well-known international and local financial institutions. He holds a Bachelor of Commerce degree from Cairo University and has various other financial qualifications from the American University of Cairo, as well as Harvard Business School.

MICHEL ACCADGroup Chief Executive Officer

Michel Accad joined ABK as Chief Executive Officer during 2014. From 2009 to 2014 he served as CEO for Gulf Bank of Kuwait and oversaw its turnaround following the 2008 crisis. Between 2006 and 2009, he was the Assistant CEO for Arab Bank PLC, responsible for all banking businesses globally. He is a 27-year veteran of Citigroup, which he joined in 1979. He held various CEO and Country Head positions and his last position was MD & CEO for Citibank Middle East & North Africa. He holds a Master’s degree in Business Administration from the University of Texas, Austin.

ABDULLA M. AL SUMAITDeputy Chief General Manager

Abdulla Al Sumait joined ABK in 2000 and is the Deputy Chief General Manager, as well as a member of several management committees. In a career in banking spanning nearly 39 years he held various senior positions including General Manager of Corporate Banking at Gulf Bank and ABK. He was the Chairman of Ahli Capital Investment Co. (ACIC) and a Board Member of Bank of Bahrain and Kuwait from 2001 to 2008. He holds a Bachelor degree in Economics from Kuwait University and a Diploma from the Institute of Banking Studies.

EXECUTIVE MANAGEMENT TEAM

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BALWANT BAINSGroup Chief Internal Auditor

Balwant Bains joined ABK in 2008 and has more than 25 years’ experience in the financial services industry, having worked in banks and consulting firms in the UK and Kuwait. Before joining ABK, he was Head of Market and Operational Risk at National Bank of Kuwait. He holds a Bachelor degree in Business Studies from London Guildhall University and is a Certified Internal Auditor and Certified Information System Auditor.

MOHAMMED SALLAMHead of Legal Division

Mohammed Sallam joined ABK in 2003 and has more than 35 years’ experience in litigation, contracting and consultancy.He previously worked at Commercial Bank of Kuwait andat a number of well-known law firms in Kuwait. He holdsa Bachelor degree in Law fromthe University of Ain Shams, Cairo.

JEAN PIERRE LE ROUX General Manager UAE

Jean Pierre Le Roux joined ABK in 2015 and has more than 20 years’ banking experience in Corporate, Commercial, and International Banking across the Gulf, Asia, and Africa, where he held various senior positions. Before joining ABK, he was the Head of Strategic Alliances and Banks at Abu Dhabi Commercial Bank. He holds an International Capital Markets Qualification from Securities Institute in London, and is a member of the South African Institute for Financial Markets.

KHALED EL SALAWY Chief Executive Officer & Managing Director, ABK-Egypt

Mr. Khaled El Salawy joinedABK-Egypt in 2016 as Chief Executive Officer and Managing Director. Before joining ABK he served at Union National Bank as DeputyChief Executive Officer between 2013 and 2016. Prior to that, he worked at the Bank of Alexandria/ Intesa Sanpaolo Group as Head of Corporate Banking and SME’s.He also held executive positions with the Egyptian American Bank, which was acquired later by the Credit Agricole Egypt from 1993 to 2006.Mr. El Salawy holds a Bachelor Degree in Economics from the American University of Cairo.

HAMZA ENKIGeneral ManagerHuman Resources

Hamza Enki joined ABK in 2002, with responsibility for Human Resources and has more than 35 years’ experience in the areas of manpower development, compensation, recruitment and training in the financial services industry. Before joining ABK he worked at National Bank of Kuwait in the HR Division for 22 years. He holds a Bachelor of Commerce degree (Kuwait University) and an MBA in Personal & Labour Law from the University of Scranton, USA (1987).

SOMNATH MENON Group Chief Operating Officer

Somnath Menon joined ABK in 2015 as Chief Operating Officer and has more than 35 years’ experience. He was previously with Citibank for 20 years. Thereafter, he joined Mashreq Bank, UAE as Group Head of Operations and Technology for 9 years where he undertook several transformational changes in best in-class technologies. He holds a Bachelor degree in Change Management from the UK and has successfully completed the AMP from Oxford University, UK.

SHIAMAK SOONAWALLAGroup Chief Finance Officer

Shiamak Soonawalla joined ABK in 2004 and has more than 25 years’ experience in the financial services industry, covering financial management, auditing and consulting practices in the Middle East. Before joining ABK, he held senior executive and executive positions with Ernst & Young in Saudi Arabia and Kuwait, and with National Commercial Bank in Saudi Arabia. He holds a Bachelor of Commerce degree from the University of Bombay and is a Chartered Accountant (India).

JAMAL AHMADGroup Chief Risk Officer

Jamal Ahmad joined ABK in 2000. Before joining ABK, he was with the risk management department of Burgan Bank in Kuwait. He has more than 30 years’ experiencein different banking sectors, including corporate finance, international syndications, investment, merchant banking and trade finance. He holdsa Bachelor degree in Monetary Economics from the Universityof Calcutta, India.

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KEY HIGHLIGHTS

Key Highlights of 2016

Operating income grew by 14.8%, operating profit grew by 2% and net profit by 7%

Stellar performance of ABK Egypt - 73% growth in customer loans; 42% growth in customer deposits

Diversified growth across Corporate, International and Retail Segments

Low NPL ratio of 2.6%

Substantial progress towards upgrading IT infrastructure and core banking system

Awards from well-established business media in recognition of the Bank’s transformation and achievements

Integration and alignment of ABK Egypt with Group practices and strengthening of its management team

Multiple corporate social responsibility activities in Kuwait and Egypt

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Moody’s Ratings

A2 Moody’s affirmed ABK’s A2/P-1 long and short term bank deposit ratings and stable outlook

Fitch Ratings

A+ Fitch affirmed ABK’s A+/F1 long and short term issuer default ratings and stable outlook

RATINGS

KD 32.5 Million Net Profit

ABK’S FINANCIAL RESULTSFOR THE YEAR ENDED31 DECEMBER 2016

Shareholders’s Equity

Net Profit Operating Profit Operating Income Total Assets

Earnings per Share Capital Adequacy Ratio

31Dec.2015

31Dec.2015

31Dec.2015

31Dec.2015

31Dec.2016

31Dec.2016

31Dec.2016

31Dec.2016

17.67%20Fils

KD 555Million

30.4KD Million

32.5KD Million

87.3KD Million

89.4KD Million

128.5KD Million

147.5KD Million

4.4KD Billion 4.3

KD Billion

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On behalf of the Board, I am delighted to present to you our Annual Report and Audited Financial Statements for 2016.

The year was one of financial consolidation for ABK Group, combined with strong and steady business progress across all our markets, particularly our acquisition in Egypt. This success was achieved through the concerted efforts and close working relationship between the Board and Executive Management teams and continued focus on our core fundamentals and delivery of our business strategy.

ABK Group delivered a solid performance across all its business segments while maintaining a prudent approach in a volatile global economic climate through aggressive precautionary provisioning on the Kuwait book. Total assets stood at KD 4.3 billion and customer deposits rose 16 per cent to KD 2.9 billion. Shareholder equity was KD 555 million. The Group’s return on assets during the year was 0.8 per cent and its return on equity over the same period was 5.8 per cent.

Dear Shareholders,

Net profit of the Group for 2016 stood at KD 32.5 million. This compared to KD 30.4 million in 2015, after making provisions of KD 52.4 million, including precautionary general provisions of KD 30 million which will help to ensure that ABK Group continues to be well insulated against instability in the market going forward. Earnings per share was 20 fils compared to 19 fils in 2015 and your Board proposed a cash dividend of 11 fils per share, subject to approval at the Group’s Annual General Meeting and Kuwait’s financial regulators.

Our business strategy is both pragmatic and flexible, qualities which allowed us to make progress despite the current unpredictable market. During the year, we completed the integration and rebranding of our acquisition in Egypt. All 39 branches of ‘Piraeus Bank of Egypt’ were rebranded as Al Ahli Bank of Kuwait - Egypt (ABK-Egypt) and the integration of the Bank’s systems and management structure is on schedule. ABK-Egypt has delivered healthy profit and growth in its first year of operation post-acquisition, and more importantly, the Group enjoys a foreign currency hedge position that substantially protects

CHAIRMAN’S MESSAGE

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its capital against any devaluation or fluctuations in the value of the Egyptian Pound. Looking to the future, with Egypt’s growing economic stability, we believe ABK Egypt is well positioned to take advantage of the new opportunities in this important and growing market.

We continued with our strategy of ‘Simpler Banking’, focusing on our transformation technology initiative to bring the best services to our customers. This included the launch of biometric fingerprint authentication on our mobile banking system which has replaced the need for passwords. The Bank’s Website and Internet Banking have been redesigned with a simpler user experience in mind, and customers can now pay their utility bills online directly from their bank account. Callers to the Contact Center are now identified by their phone numbers. The Call Center platform has been completely replaced, improving efficiencies and reducing call duration by an average of 30%, whilst assigning priority queuing to Elite, VIP and International callers. All ABK branches in Kuwait have now been equipped with Cash Deposit machines, further simplifying the customer experience.

But technology was not our only service focus and we also introduced a range of new services at several of our branches for customers with special needs, such as adapted ATMs, sign language services and website audio translation, to better serve the whole community.

ABK’s performance continued to be recognized by industry commentators and peers. Mr. Michel Accad was named ‘Bank CEO of the Year’ by CEO Magazine and by Arabian Business Magazine; a further testament to the Group’s outstanding leadership and approach.

ABK received numerous other awards during 2016 including the ‘Best Bank Transformation in the Middle East’ by Euromoney, ‘Deal of the Year’ by The Banker – an FT Affiliate, ‘Best Retail Bank’ by Asian Banker, ‘Retail Bank of the Year’ by The European, ‘Best Commercial Bank’ by Banker ME, ‘Employer of the Year’ by Naseba, ‘LPI certification’; the only Middle East financial institution to be accredited. ABK was also listed as one of the 50 safest banks in the Middle East by Global Finance.

ABK retains a healthy capital position and strong liquidity, in compliance with the Central Bank of Kuwait’s strong regulatory system, with its emphasis on building precautionary provisions. We continue to enjoy strong credit agency ratings of A2 from Moody’s and A+ from Fitch.

This year we have again produced a separate Corporate Social Responsibility report to record the many and varied projects the Group undertakes in supporting the community. We take our social responsibilities very seriously and have continued our support of local charitable and humanitarian organisations, with a primary focus on special needs.

Our success this year has been achieved by the dedication and commitment of many people and institutions. Our management team and staff have been particularly unstinting in their efforts and loyalty, and we owe them our deep gratitude.

I would like to extend our sincere appreciation to HH Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah, the Amir of Kuwait and HH Sheikh Nawaf Al-Ahmed Al-Jaber Al-Sabah, the Crown Prince. On behalf of my Board colleagues and myself, I offer thanks to the Governor, Deputy Governor and all officials of the Central Bank of Kuwait, Egypt and the UAE, the Capital Markets Authority, the Ministry of Commerce and Industry, and Kuwait Stock Exchange for their counsel. I would also like to extend our appreciation to our shareholders for their unwavering support.

Finally, I take this opportunity to thank our customers; their loyalty determines the Group’s success and their opinions and future requirements help us to innovate and develop more effective services and products for their needs.

Talal Mohamed Reza BehbehaniChairman

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MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis document gives an overview of ABK Group’s financial position, business and operations performance and outlook. The document is based on the published financial statements, management’s vision and best judgment, and is considered to be complete.

The document contains certain forward-looking statements that do not relate strictly to historical or current facts and represents current expectations, plans or forecasts about future business and economic conditions and results that management considers relevant to assessing future prospects of the Group. The forward-looking statements reflect the position as on the date they are made. Risks, uncertainties and changes to assumptions that are difficult to predict and beyond the Group’s control may eventually affect actual outcomes and results.

Business EnvironmentThe MENA region continued to experience the impact of low oil prices. The agreement reached by OPEC and some other major oil producers towards the end of the year led to firming up of oil prices and improved the economic outlook for the oil producing countries in 2017. Introduction of value added tax (VAT) regime in the near future also gathered momentum and the IMF estimates that this could raise GDP of the Gulf Cooperation Council countries by 1.5% to 2%.

In Kuwait, real GDP growth is estimated at 1.7% over 2016. The Kuwait Stock Exchange market index advanced by 2.4%; consumer price inflation is estimated at around 3.0% for the year. The Central Bank of Kuwait (CBK) raised its discount rate (CBDR) by 25 basis points to 2.50% in December 2016, following the rise in the lending rate of the United States Federal Reserve. On the regulatory front, CBK implemented the new Loan to Deposit Ratio of 90% from 1st October 2016, Liquidity Coverage Ratio requirement of 80% and required parallel run under net stable funding ratio requirement from January 2016. A significant factor that favorably impacted the economy and the banking sector was that the Kuwait government maintained infrastructure spending despite oil prices remaining low.

In Egypt, the government initiated structural changes to the economy and cuts to public finance from the summer of 2016. The Egyptian Pound was devalued towards the end of the year. The International Monetary Fund approved a USD 12 billion extended fund facility for Egypt after it tied up bilateral financing equivalent to 50% of the facility. These developments are expected to have a positive effect on the economy over the medium and longer horizon.

In the UAE, with its more diversified economy, the non-oil sector helped mitigate the impact of lower oil prices.

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Financial Performance

(KD Millions)

Income Statement 2016 2015

Net Interest Income 109.2 94.4

Non-Interest Income 38.3 34.1

Operating Income 147.5 128.5

Operating Expenses (58.1) (41.2)

Operating Profit before Provisions 89.4 87.3

Net Gain Arising from Business Combination - 8.0

Provisions/Impairment Losses (52.4) (61.4)

Taxes and Directors’ Fees (4.5) (3.5)

Net Profit 32.5 30.4

(KD Millions)

Financial Position 2016 2015

Total Assets 4,284.8 4,359.0

Net Loans & Advances 3,029.4 3,047.1

Deposits 3,634.7 3,695.5

Equity Attributable to Shareholders of the Bank 555.2 555.6

Key Performance Indicators 2016 2015

Earnings Per Share (in Fils) 20 19

Return on Assets 0.8% 0.8%

Return on Equity 5.84% 5.45%

Cost to Income Ratio 39.4% 32.0%

NPL Ratio 2.6% 2.3%

Capital Adequacy Ratio 17.67% 17.23%

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Operating expenses at KD 58.1 million were 41% higher compared to 2015. The increase reflects the impact of full year 2016 consolidation for Egypt operations compared to a month in 2015, the Group’s strategy to develop its IT infrastructure and strengthen its human resources capabilities. The cost to income ratio was 39.4% compared to 32% in 2015.

Provisions/impairment losses for the year amounted to KD 52.4 million. Continuing its conservative approach, the Group made a credit provision charge of KD 50.8 million which included substantial precautionary provisions. Market conditions impacted values of the Group’s investment portfolio and the Group recorded KD 1.6 million as impairment provisions on investment securities.

Financial Position The Group’s consolidated total assets and loans remained at KD 4.3 billion and KD 3.0 billion levels. Growth in assets & loans in Kuwait & UAE was offset by impact of devaluation on assets of ABK-Egypt.

The Group’s expansion of business to Egypt has contributed to improving its assets distribution profile and revenue streams geographically and overseas locations now contribute 17.4% of its assets and 22.3% of its revenue.

Overall, asset quality was stable with NPL level of 2.6%. As of 31st December 2016, the total accumulated provisions for loans and advances amounted to KD 231.2 million (7.1% of gross loans), reflecting an NPL coverage ratio of 277.6%, providing reasonable cushion for contingencies.

The Group maintained its conservative balance sheet structure, with lending funded by customer deposits. The funding mix was optimized with longer term customer deposits in the light of the new Loan to Deposit Ratio guidelines of CBK. Customer deposits grew 16.2% to reach KD 2.9 billion in 2016, up KD 403.6 million over 2015; replacing deposits from banks and other financial institutions that decreased by 38.7% from 2015.

Equity attributable to shareholders of the Bank was KD 555.2 million after dividend payout of KD 16 million for year 2015.

Shareholders’ equity was affected by net reduction in the cumulative fair value of investment securities and net foreign currency translation loss on consolidation of ABK-Egypt. To mitigate the impact of devaluation of the Egyptian Pound, the Group hedged part of its investment in ABK-Egypt using US Dollar monetary assets held by ABK-Egypt. Net gains or losses on retranslation of these monetary assets were transferred to the consolidated statement of comprehensive income to offset gains or losses on translation of its investment in ABK-Egypt.

DividendsContinuing its track record of consistent dividend payments from profits, the Group proposes to pay shareholders a cash dividend of 11 fils per share representing a dividend payout ratio of 54%.

Income Statement Total operating income of KD 147.5 million registered growth of 14.8% over 2015, reflecting improved revenues under both interest income and fees and commission in core business areas. Operating profit before provisions of KD 89.4 million was 2.4% higher than KD 87.3 million recorded in 2015. Net profit for the year grew by 7% to KD 32.5 million driven by improved operating revenues.

Earnings per share rose to 20 fils from 19 fils; return on average equity to 5.8% from 5.5%; while return on average assets remained at 0.8%.

The key components of the Group results were:

Net Interest Income grew strongly by 15.7% to KD 109.2 million from KD 94.4 million in 2015, reflecting diversified growth in assets and increased contribution from Egyptian operations at higher margins. Cost of funds also increased during the year as the Group sourced longer tenor customer deposits.

Non-interest income from core activities in the form of fees & commissions and foreign exchange gain at KD 34.3 million grew by 20.8% over 2015, driven by launch of new products, higher trade finance & forex business and increased revenues of Egypt operations. This offset investment losses on sale of legacy equity investments and lower dividend income. Overall, total non-interest income at KD 38.3 million grew by 12.3% compared to 2015.

MANAGEMENT DISCUSSION AND ANALYSIS (continued)

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During the year ABK-Egypt recorded substantial growth of 54% in total assets, 73% in loans and 42% in customer deposits.

ABK-Egypt is now well positioned to expand and grow in Egypt and to leverage the strong economic links between Kuwait and Egypt that relate to the major trade flows and the banking needs of the large Egyptian expatriate workforce in Kuwait and the banking needs of Kuwaitis with interests in Egypt.

Corporate Banking Division (CBD)Over the course of the year the CBD continued to diversify its product and service offerings. This helped maintain the positive trends it saw in 2015.

The HR investment in building teams of specialists continued to have a positive impact on overall performance and business efficiency. With the depth of expertise now at its disposal, the CBD’s strategy concentrated on transactions that offered long-term benefits of industrial diversity and sustainability, and which supported core local industries.

For example, CBD agreed to long-term financing of the green field development; Kuwait’s first rehabilitation hospital. This one-of-a-kind project has been long awaited in the community and will be a landmark in Kuwait’s medical services field. The hospital will provide all rehabilitation medical services for patients experiencing (or likely to experience) disability to help them adapt and enjoy the highest quality of living they can achieve. The scope of the rehabilitation hospital includes all services which improve health outcomes, reduces costs through shorter and fewer hospital stays and reduces disability.

A second area of focus during the year was the industrial and manufacturing sector. One of the highlights in this sector was the provision of extended long-term financing for the construction of a new industrial steel manufacturing facility in the Amghara Industrial Area, which was put into place as a backward integration for a client.

Corporate Banking was also very active in Kuwait’s oil and gas sector, where the CBD supported major local contractors in their operations with international partners.

This was primarily for the construction of Kuwait strategic clean fuel projects and the fourth refinery through extended working capital and long term financing arrangements for major sub-contractors.

Overall, 2016 was a year of sound progress for the CBD, as it built on the foundations laid down in skills and strategic investment of previous years. The Division has a deep understanding of the Kuwait market and is well placed to continue to develop in the future.

Retail Banking Division (RBD)The Retail Banking Division continued to focus on ‘Simpler Banking’ throughout the year to deliver superior banking service.

CapitalThe Group improved on its strong capital position under the Basel III regulatory capital framework. The Group remains well capitalized with Basel III Common Equity Tier 1 (CET1) ratio of 16.46% and a total capital adequacy ratio of 17.67%, a sound capital position that provides opportunity for growth.

ABK-Egypt 2016 was a year of transition and integration for ABK-Egypt, following completion of its acquisition of Piraeus Bank in November 2015. During the year, ABK-Egypt successfully completed the rebranding process from Piraeus Bank Egypt to ABK-Egypt, following appropriate approvals from regulatory authorities.

The management team was also strengthened, and ABK-Egypt’s strategy was aligned with ABK Group’s vision, mission and core values. Steps were taken to align and integrate policies and processes with those of the Group, and formal reporting structures and consolidation of financial records were put into place to meet regulatory and accounting standards.

The Corporate Banking Division, which services large, medium and small corporate organisations was strengthened by the creation of a new division to cover the Alexandria and Delta regions as well as a new Syndication & Project Finance Unit. The retail segment continued to develop its range of services including deposit products, payroll accounts, retirement and protection products, mortgages and consumer loans, automated payments, credit and debit cards and insurance products.

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Loans and DepositsOver 2016, loan processing times reduced from 109 minutes in December 2015 to just 70 minutes, while the proportion of non-performing loans dropped over the same period.

Retail deposits over the 12 months to December 2016 increased by 22% and the Group also increased its market presence in the UAE mortgage market with the introduction of the UAE mortgage loan.

Technology The Division continued its investment in technology during the year to further refine its eBanking offer. Online and mobile transactions increased by more than 80% through service refinements such as bill payment facilities and increased use of biometric technology and through constant marketing and promotion. The number of ATMs operated in Kuwait also increased substantially, from 54 in 2015 to 81.

A major service refinement during 2016 was the upgrade of the Call Center in Kuwait with a state-of-the-art system which provides enhanced services such as priority queuing, automatic caller identification and individual personalization.

Debit and Credit CardsThe year also recorded the launch of a number of important card enhancements. These included payWave for debit, credit and pre-paid cards, which incorporates revolutionary ‘tap and go’ technology. Verified-by-Visa (VbV) services for debit, credit and prepaid cards were also introduced to help increase security for customers choosing to use their cards to make purchases online. Further service refinements included the launch of an online prepaid application and an SMS notification service for card delivery. The Group is the first in the region to introduce a new Quick-Read card which is designed to make online purchases more straightforward. The improvement program also included new Elite and VIP card designs which incorporate both VbV and payWave technology.

The investment in card technology has helped ABK-Kuwait to be ranked no.1 by Neilson for the highest purchase spend per card across the entire Middle East. This achievement was boosted by a number of major card promotions in Kuwait during the year which included the ‘4 Million Miles’ summer card promotion, the opportunity in September to get up to 40% more miles for customers using their ABK cards, and the celebration in this year of the 1.5 billionth Skywards Mile being awarded.

Marketing Ten separate marketing campaigns were launched over the course of 2016, including a Salary Transfer campaign which resulted in a 20% increase in new customer accounts. Social media presence increased by 75% year-on-year, in-branch customer communication was also revised and online surveys were introduced to improve customer feedback and an online monthly e-newsletter to keep customers better informed of new developments and services.

Wealth Management The Wealth Management offering was further enhanced with the launch of its Elite Banking services. The launch of the new wealth investment proposition delivered KD 7.5 million new investment within the first five months of operations.

Service QualityAttention to service quality remains at the heart of the Group’s Retail offering and over the year customer waiting time for teller service in Kuwait’s branches reduced from 8 minutes to 2 minutes and from 11 minutes to 3 minutes for Relationship Officers.

In 2016, ABK became the first Kuwaiti bank to offer audio translation features on its website for the visually impaired. In addition, six of the Group’s branches have been modified with facilities to assist people with special needs or physical disabilities and 22 members of the customer service team have been trained in sign language to assist in communications with customers with impaired hearing.

MANAGEMENT DISCUSSION AND ANALYSIS (continued)

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International Banking Division (IBD)The International Banking Division consists of two business units in addition to the Dubai and Abu Dhabi branches, namely Financial Institutions and Sovereigns, and the Multinational Companies and Oil (MNC & Oil). The IBD offers a full range of products, which include loans, deposits, trade finance, treasury, risk participations, participation in secondary market trades and electronic banking.

In terms of Loans, Risk Participation and Secondary Market Deals, risk decisions are based on a Risk Adjusted Pricing Methodology and the risk appetite at that time. It is changeable as it takes into consideration global events, rating changes and our perception of risk. The total portfolio is approximately 87% investment grade.

With global events being what they are at the moment, the Group adopted a more cautious approach during 2016 and hence, expect more muted growth.

As fewer government and infrastructure projects were tendered or came in over the past few years, off balance sheet funding also reduced. IBD has traditionally offered Letters of Guarantee on behalf of overseas customers and banks to support their bids, which is picking up, but with far thinner margins.

In terms of MNC & Oil, IBD performed well as Operating Profit was 7% higher than 2015, at KD 8.9 million. This is a small part of the Group’s business that concentrates on International customers who operate in Kuwait; predominantly Chinese and South Korean. IBD offers a full range of products under a relationship management concept and will take on a more regional focus with the expansion of our UAE operations. With over 40 years in the UAE market, ABK evolved from merely supporting the financial needs of Kuwaiti business to a fully-fledged commercial operation over the past five years.

ABK Group’s UAE operations produced solid financial results with a net profit of KWD 3.7 million. The Group will continue to invest in the UAE and expand cautiously with focus being on market segments where it enjoys a competitive edge.

Treasury & Investments DivisionThe Treasury and Investment Division offers a broad range of foreign exchange (FX) and interest rate services and advice covering the Kuwait, Gulf and International markets.

The extension of the Group’s network, beyond Kuwait and UAE and into Egypt, has expanded our reach and ability to manage risk on a regional level.

2016 also saw a number of regulatory changes in the Kuwait market, including a move towards the adoption of the Basel III protocols for liquidity and risk management.

The Group’s current investment portfolio comprises mainly low risk and highly liquid regional bonds. These provide an enhanced return and additional liquidity buffer if and when required. As for proprietary activities, these are limited consistent with our risk appetite.

Human Resources Division (HRD)During 2016, HRD coordinated its efforts around improving the working culture within ABK Group.

The Learning and Development capabilities have been enhanced to include a digital proposition giving all employees access to a variety of technical and behavioral courses from any location. This was recognized with ABK Group being awarded the external accreditation from the Learning and Performance Institute (UK).

Process improvement has been made with simplicity in mind. During 2016, HRD introduced a paperless appraisal process and conducted a full talent review. By having a sustained approach to managing and measuring employees, it has enabled ABK to truly assess capabilities and core bench strength. This culminated in the launch of the Group’s first ever leadership development program that intakes candidates annually and is designed to develop leaders for the future.

ABK was awarded “Employee of the Year” by the Human Capital Forum in May 2016.

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Information TechnologyDivision (ITD)During 2016, ABK Group embarked on an IT Transformation journey which, amongst others, included creation of a new post of Chief Transformation Officer, in addition to the Chief Information Officer to focus on a number of technology initiatives. The primary and most significant change is the replacement of the Core Banking System for Kuwait and the UAE. After a thorough evaluation process, the Group partnered with Infosys to migrate to their world-class core banking system – Finacle.

The Group introduced a Middleware system for the first time together with a number of infrastructure and network related activities which include a complete upgrade of the Disaster Recovery facility, expansion and optimization of our network footprint, and a complete overhaul of the information security landscape.

The Group has invested in state of the art technology including a new system for Interactive Voice Response (IVR), and a new Anti Money Laundering system. The Group believes that the future of banking is predicated on our ability to be flexible and agile in the digital space and in 2016 we have taken a giant leap in this direction.

The Group is integrating the new acquisition in Egypt and has embarked on the consolidation and centralization strategy for Technology. Taking advantage of the superior technology environments available in Kuwait and Egypt, ABK aims to be recognised as the ‘best in class’. With this as the guiding principle, the Group has been able to implement a number of technology platforms at optimal cost and minimum timelines.

OperationsIn 2016, Operations embarked on a strategic initiative to enhance efficiency and productivity across the Group and centralization of operational processes in Kuwait. With the introduction of the high end imaging and workflow system, a large number of processing has now been centralized in Kuwait and in Egypt. This allows the branches to focus on customer service and enables the Group to have better controls and improved servicing capabilities.

The Operations in UAE have been focused on taking advantage of imaging and workflow system and network enhancements to be able to seamlessly process between Abu Dhabi and Dubai. Trade Finance Operations took on the challenge of working closely with Infosys to ensure the Trade module in Finacle has all the features required, to ensure continuing high quality services to our customers.

ABK have won two significant Quality Awards from JP Morgan Chase and Commerzbank for Straight Through Processing (STP) of foreign currency fund transfers. These quality awards are given based on very stringent standards and is a recognition of the consistent, high-quality performance of the Group’s funds transfer operations management and staff.

Anti-Money Laundering and Combating the Financing of Terrorism (AML & CFT)The Group is fully compliant with the AML & CFT regulations set by the Central Bank of Kuwait, Central Bank of the UAE, Central Bank of Egypt and all other applicable regulatory instructions in the jurisdiction in which the Group operates.

During 2016, the Group upgraded and replaced its AML system and also reviewed and updated all measures and policies relating to AML & CFT to ensure the Group continues to adhere to regulatory authority instructions and guidelines. This included a full review and update of ABK’s well-established “Know Your Customer” policy to provide an additional layer of security.

A dedicated independent unit monitors the implementation of policies and procedures that reports directly to the Chairman. The Board receives regular AML & CFT reports from the Independent unit and any suspicious activities are reported to the applicable regulator authority.

MANAGEMENT DISCUSSION AND ANALYSIS (continued)

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The Group’s Internal Audit Division, Risk Management Division, and External Auditors also routinely perform tests on the adequacy of AML & CFT policies and procedures to ensure they are current and robust. The Group regularly provides specialized internal training programs to staff to keep them up to date on measures and regulations regarding AML & CFT.

Risk Management Division (RMD)The RMD is responsible for developing an all-encompassing executable risk strategy, which is delivered on the basis of core Risk Management policies and procedures. During 2016, RMD implemented enhanced Internal Risk Rating systems, enhanced risk reviews, simplified risk procedures and conducted a series of workshops across different areas in relation to Risk Management. During 2016, RMD advised the management and the Board of Directors on risks based on market outlook and those emerging from economic uncertainties.

In 2017, RMD will continue to focus on identifying and reporting significant risks, changes in regulations and any other factors that may affect the Group’s business model and financials. Efforts will also be focused on increasing the risk appetite, together with minimizing the information security risk, model risk, people risk and enhancing the overall corporate brand value.

Internal Audit Division (IAD)The primary role of IAD is to evaluate and improve the effectiveness of ABK’s risk management, control, and governance processes. As part of the strategic initiatives during the year, the continuous auditing initiative was increased in an effort to raise control-related issues outside the routine audit cycle. IAD continues to coordinate with other assurance providers, to introduce synergies in the overall efforts of the second and third lines of defense, while maintaining their objectivity and independence.

Ahli Capital Investment Co. (ACIC)2016 was a year of restructure and growth for ACIC. During the year, a long-term strategic decision was taken to focus future growth on fee based income activities rather than returns from proprietary investments. Apart from a perceived increase in demand for this kind of activity, fee based income allows greater flexibility in future business planning.

To support the new approach, ACIC restructured and introduced a range of new Wealth Management solutions and products. It also created strategic partnerships with regional and International financial institutions to increase the firm’s product range and solutions. Additional management has been recruited across the organization to support this strategic initiative and additional efforts are being made to increase coordination across ABK Group.

ACIC also redesigned its website during the year to make it more informative and user-friendly. This initiative will continue into 2017, to further enhance the website, making it even more client-friendly.

Outlook & Strategy During 2017, the Group will continue to pursue its core value of simplicity, reflected in its vision of ‘reimagining a simpler bank’.

Looking ahead, the efforts currently underway to migrate the Bank from its legacy systems to new state-of-the-art IT systems will be a priority. Major upgrades through implementation of a new core banking system are underway, with further additional refinements such as data warehousing under consideration. On the HR front, the Group will continue to invest in its human capital with specific focus on performance management, talent management, and localization.

Key integration at operational level and investment in the management team at ABK-Egypt was completed over the course of the year. Going forward, the Group expects to use this base to grow in Egypt and to leverage the economic ties between Egypt and Kuwait, as well as the untapped banking potential of the large Egyptian expatriate population in Kuwait.

In the UAE, the Group will focus on growing its customer base, gaining deposits from new corporates and making progress in de-risking its credit portfolio. The Group is currently in the process of seeking regulatory approval for opening a branch in Dubai International Financial Centre and a further branch in Dubai.

CORPORATE GOVERNANCEREPORT

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IntroductionThe foundation of ABK Group’s Corporate framework is the commitment of its Board to set and adhere to best practices in Corporate Governance and assume accountability for ensuring ABK Group fulfils its regulatory and statutory obligations in the jurisdictions in which it operates.

The principal responsibility of the ABK Group Board is to set and oversee the implementation of the Bank’s strategy whilst ensuring that the Executive Management, who are responsible for the execution of the strategy, remain focused on long term profitable growth and sustainable shareholder value.

Composition of ABK’s Group Board ABK’s Group Board consists of 9 non-executive members including its Chairman who were elected by the Shareholders in the General Assembly for a term of 3 years. The summary biographies of the Board Members are included under pages 4 and 5.

Structure of the Group Board To perform its responsibilities the Board has set up the following Board committees whose authorities are defined in their respective charters: • Board Credit & Investment Committee (BC&IC)• Board Corporate Governance Committee (BCGC)• Board Audit Committee (BAC)• Board Nomination and Remuneration Committee (BNRC) • Board Risk Committee (BRC)

The Chairman of ABK Group’s Board of Directors follows up on the activities of the Committees on a continuous basis to ensure their assigned duties are performed, and also to obtain follow-up reports. The existence of the Board Committees does not exempt the Board from assuming direct responsibility for all matters relating to the Group.

ABK Group Board is further supported by Independent Boards in its two subsidiaries, Ahli Capital Investment Company (ACIC) and Al Ahli Bank of Kuwait - Egypt who in turn are supported by their own Board and Board Committees.

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The details of the meetings held by the ABK Group Board and its Committees during 2016 together with member’s attendance are outlined below:

AGM BOD BC&IC BCGC BAC BNRC BRC

Board Members Number of Meetings and Attendance

Talal Mohamed Reza Yousef Behbehani – Chairman BOD (1) 3/3 9/10 34/44 5/5 - - -

Salah Ahmed Al Serhan –Deputy Chairman BOD 3/3 10/10 - - 7/7 - 7/7

Ali Ibrahim Hejji Hussain Marafi (2) 2/3 7/10 - 5/5 - 6/7 -

Prasanna Dattatray Hardikar 2/3 9/10 - - 7/7 - 7/7

Khalid Othman Abdul-Wahhab Al Othman 2/3 6/10 29/44 - - 6/7 -

Khaled Abdullah Mohamed Al Meshari 2/3 6/10 37/44 4/5 - - -

Sulaiman Abdullah Sulaiman Al-Muraikhi 2/3 10/10 40/44 - - - -

Ali Mohammed Abdullah Al-Shuraidah (3) 2/3 7/10 - - 4/7 - 3/7

Adel Ibrahim Yali Behbehani (4) 2/3 7/10 32/44 - - 4/7 -

Board Credit & Investment Committee (BC&IC)During 2016, BC&IC met 44 times to review, approve and/or recommend (i) credit facilities for customer’s whose limits exceed the approval authority of the management credit committee (ii) credit and investment policy to the Board for approval and (iii) non-performing credits.

Board Corporate Governance Committee (BCGC)During 2016, BCGC met 5 times to review, approve and/or recommend (i) Committee Charters, Manuals, Procedures and Framework and (ii) Results of the inspection carried out by Central Bank of Kuwait.

Board Audit Committee (BAC)During 2016, BAC met 7 times to review, approve and/or recommend the (i) Interim and annual financial statements including adequacy of provisions and estimates (ii) External auditors’ scope, independence and performance (iii) Internal controls reviewers’ report (iv) Internal audit plan and activities and (v) Regulatory inspection reports.

Board Nomination & Remuneration Committee (BNRC)During 2016, BNRC met 7 times to review, approve and/or recommend the (i) HRD policies. (ii) Succession Plans, (iii) Health Insurance Contracts, and (iv) Senior Positions Recruitments.

Board Risk Committee (BRC)During 2016, BNRC met 7 times to review, approve and/or recommend (i)Risk Policies, charters, models and framework (ii)Risk appetite statement, framework and authority matrix (iii) limits for financial institutions and banks (iv) Quarterly ICAAP submissions (v) non-performing credits and (vi) Risk management activities.

Board Assessment of Corporate Governance Instructions and Internal Control SystemsABK Group Board confirms its compliance with the provisions of Central Bank of Kuwait’s Corporate Governance instructions and affirms the existing Internal Control Framework is operating as intended. Furthermore, an Annual Internal Control Review was conducted in 2016 by an external Audit firm in line with Central Bank of Kuwait’s instructions. This review did not highlight any matters of concerns on the existing Corporate Governance and Internal Control frameworks operating at ABK. The independent external auditor’s statement and acknowledgement of the adequacy of ABK Group’s Internal control systems is as follows:

(1) Elected as Chairman of BC&IC since March 2016(2) Elected as Chairman for ABK-Egypt since April 2016

(3) Elected as a member of the Board since March 2016(4) Elected as a member of the Board since March 2016

Chairman of the committee

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CORPORATE GOVERNANCE (continued)

Board Assessment of Internal Control SystemsExternal Auditor’s Statement and Acknowledgement of the Adequacy of Internal Control Systems

Board of Directors,Al Ahli Bank of Kuwait K.S.C.P,P.O Box: 1387, Safat 13014,Kuwait

23 June, 2016

Dear Sirs,

Report on Accounting and Other Records and Internal Control Systems

In accordance with our letter of engagement dated 15 February 2016, we have examined the accounting and other records and internal control systems of Al Ahli Bank of Kuwait K.S.C.P, (“the Bank”) its branches in United Arab Emirates (UAE) and its fully owned subsidiaries Ahli Capital Investment Company K.S.C (closed) (“Ahli Capital”) and Piraeus Bank Egypt S.A.E (hereafter collectively referred to as the “Group”) for the year ended 31 December 2015.

We covered the following processes of the Bank:

Treasury Internal Audit

Investments Legal Affairs

International Banking Facilities Management

Retail Banking Corporate Communications

Corporate Banking Anti-Money Laundering / Combatting the Financing of Terrorism

UAE Branches Compliance

Operations Board Affairs

Trade Finance Enterprise Program Management Office

Risk Management Complaints Unit

Finance Credit Control

Human Resources Fraud and Embezzlement

Information Technology

BDO Al Nisf & Partners is a member of BDO International Limited, a UK company Limited by guarantee, and forms part of the international BDO network of independent member firms.

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Our examination has been carried out as per the requirements of the Central Bank of Kuwait (CBK) circular dated 14 January 2016 considering the requirements contained in the Manual of General Directives issued by the CBK on 14 November 1996, Pillar IV of corporate governance instructions in respect of risk management and internal controls issued by the CBK on 20 June 2012, instructions dated 23 July 2013 concerning anti money laundering and combating financing of terrorism, instructions dated 9 February 2012 regarding confidentiality of customer’s information, financial securities activities and instructions regarding internal controls with respect to prevention and reporting of fraud and embezzlement cases.

As members of the Board of Directors of the Bank, you are responsible for establishing and maintaining adequate accounting and other records and internal control systems, taking into consideration the expected benefits and relative costs of establishing such systems and complying with the requirements contained in the CBK instructions mentioned in the above paragraph. The objective of this report is to provide reasonable, but not absolute, assurance on the extent to which the adopted procedures and systems are adequate to safeguard the assets against loss from unauthorized use or disposition; that key risks are properly monitored and evaluated; that transactions are executed in accordance with established authorization procedures and are recorded properly; and to enable you to conduct the business in a prudent manner.

Because of inherent limitations and internal control system, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the systems to future periods is subject to the risk that management information and control procedures may become inadequate because of changes in conditions or that the degree of compliance with those procedures may deteriorate.

Having regard to the nature and volumes of the Group’s operations, during the year ended 31 December 2015, and the materiality and risk rating of our findings, and the exception of matters set out in the report submitted to the Board of Directors of the Bank, in our opinion:

a) the accounting and other records and internal control systems of the Group were established and maintained in accordance with the requirements of the Manual of General Directives issued by the CBK on 11 November 1996 and letter issued by CBK on 14 January 2016,

b) the findings raised in the examination and assessment of the internal controls do not have a material impact on the fair presentation of the financial statements of the Group for the year ended 31 December 2015, and

c) the actions taken by the Group to address the findings referred in the report, including previous years’ findings, are satisfactory.

Yours faithfully,

____________________Qais M. Al NisfLicense No. 38 “A”BDO Al Nisf & Partners

BDO Al Nisf & Partners is a member of BDO International Limited, a UK company Limited by guarantee, and forms part of the international BDO network of independent member firms.

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Executive Management The qualifications of ABK Group Executive Management team are included on pages 6 and 7 of this Annual Report.

Major ShareholdersABK Group’s shareholders that own or have control of 5 per cent or more of the Group’s share capital as on 31st

December 2016 are outlined below.

Name of Shareholder Number of Shares % of Issued Capital

Wafra International Investment Co - Customers 163,743,115 10.11

Kuwait Investment Co - Customers' Account 160,669,238 9.92

Behbehani Investment Co (Direct & Indirect) 159,280,433 9.84

Behbehani Telecommunications Co 153,713,589 9.49

Heirs of Mohamed Saleh Yousuf Behbehani (Direct & Indirect) 110,179,587 6.80

Ali Morad Yousuf Behbehani 103,580,223 6.40

Behbehani Financial Co (Direct & Indirect) 81,437,831 5.03

ABK Group confirms that there is no arrangement known to the Group which may at a subsequent date result in a change in control of ABK Group.

Risk Management, Internal Controls & RemunerationABK Group has an independent Risk Management Division headed by a Group Chief Risk Officer who reports directly to the Chairman of the Board Risk Committee and has unrestricted access to the ABK’s Group Board.

ABK’s Group Board has also approved an organisational structure aligned with the business and activities of the Group to ensure controls necessary for executing the strategy are in place.

These controls include establishing objectives for each business unit, setting out tasks and responsibilities, identifying authorities and communication lines for administrative officers at all levels to achieve dual control and the segregation of responsibilities to avoid conflict and operational risks.

These controls are guided by the policy and procedure manuals for processing and monitoring operations, together with job descriptions for different job titles, including the necessary qualifications and work experience.

ABK’s Group Board ensures the objectivity and independence of the Group Internal Audit function headed by the Group Chief Internal Auditor remains unimpaired at all times.

Furthermore, the ABK Group Board recognises Internal and External Audit as crucial supervisory tools and views their reports as independent review of the information submitted by Executive Management together with the Internal Control and Corporate Governance framework of the Group.

Risk Management and Internal control arrangements at ABK Group are supplemented by a Group Board approved Remuneration Policy designed to:1) Incorporate all aspects and components of financial remuneration; 2) Align with the Group’s strategic objectives, risk appetite and long term risk strategy; 3) Align with financial performance and promote sustained profitability; 4) Maintain highly qualified, skilled and knowledgeable professionals across the Group5) Maintain sound remuneration governance, disclosure and transparency; and6) Comply with regulatory requirements in the justification in which it operates.

CORPORATE GOVERNANCE (continued)

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The Remuneration policy considers all aspects and components of financial remuneration which is underpinned by two key components that constitute the total reward payable as follows:

• Fixed remuneration: (salaries, allowances etc) which covers the following: • Salary such as basic, annual fixed bonus; and• Allowances for Kuwaiti staff, Indemnity Entitlement Policy, Travel Allowance or Employee Loan etc.

Salaries are contractually agreed amounts that compensate employees for the skills, competencies and experience used in performing their role. Salaries are reviewed annually and take account of the total reward package, market conditions and individual, divisional and Group-wide risk adjusted performance.

• Variable Remuneration: This represents performance-based bonuses and covers the following:• Variable cash bonus; and• Long Term Retention Plan, and application of the Malus/Claw back mechanism.

Variable remuneration is designed to motivate and reward high performers in the Group’s overall risk framework. Variable remuneration is allocated to individuals depending upon individual, divisional and Group performance, using a performance assessment system.

The Board Nomination & Remuneration Committee (BNRC) plays a key role in ensuring the overall remuneration payout and practices are both competitive and within the overall appetite of the Group Board.

BNRC discharges this responsibility by:

1) Review and recommend for approval the remuneration policy and related policies to the Group Board.2) Review and recommend to the Group Board the remuneration of the Chief General Manager, Deputy Chief

General Manager and Board Secretary.3) Review along with BRC, the ex-ante & ex-post performance measures and recommend the same to the

Group Board.4) At the completion of each performance period, review performance vis-à-vis the targets on ex-ante

performance measures, and determine the amount of the bonus pool.5) Review performance vis-à-vis the targets on ex-post performance measures and determine whether the

Malus/ Clawback clause needs to be applied to the long-term retention plan.

Remuneration Disclosure Directors’ fees for 2016 amounted to KD 435 thousand. The total remuneration paid to the top 5 executives, including the Group Chief Risk Officer, Group Chief Financial Officer, Group Chief Internal Auditor and Group Chief Operating Officer for the year ended 31st December 2016, amounted to KD 2,302 thousand.

Details of the remuneration paid to different executive categories for 2016 are set out below:

Amounts in KD ‘000

2016 No of staff Fixed salaries and other benefits

Performance based payouts Total

Senior Management * 26 2,039 902 2,941

Material Risk Takers ** 23 1,995 561 2,556

Financial and Risk Control Staff *** 17 1,176 245 1,471

Total 66 5,210 1,726 6,968

Senior Management includes all those executive positions whose appointment is subject to approval by the regulatory authorities and/or are part ABK management at Assistant General Manager grade and above excluding the material risk takers and financial & risk control staff. Material Risk Takers are those executives whose activities have a material impact on the risk profile of the Group. Financial and Risk Control Staff comprise of executives from the Risk, Audit and Finance functions at Assistant General Manager Grade and above.

*

*** **

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RISK MANAGEMENT

THE GROUP STRUCTUREABK Group structure consists of Al Ahli Bank of Kuwait K.S.C.P. (“the Bank”) and its wholly-owned subsidiary, Ahli Capital Investment Company K.S.C.C (“the Subsidiary”) and Al Ahli Bank of Kuwait - Egypt (together “ABK Group”) which are engaged in commercial banking activities of corporate banking, retail banking, international banking, treasury services and investment activities, and advisory services. The Bank is headquartered in Kuwait. The Group also has a significant investment in Credit One Kuwait Holding Company K.S.C., which is classified as an associate and is also located in Kuwait.

PILLAR III DISCLOSURESUnder the Central Bank of Kuwait (CBK) Basel III guidelines, banks are to follow a standardised approach for the Pillar I minimum capital requirement. The Central Bank of Kuwait also issued guidelines in June 2009 for the Internal Capital Adequacy Assessment Process under the Pillar II supervisory review process. Central Bank of Egypt issued its Pillar II guidelines in 2016.

The Group has adopted these guidelines in its capital adequacy assessment and management of all material risks covered under Pillar I and Pillar II.

The major highlights of these regulations are:• Banks must maintain a capital

adequacy ratio at a minimum of 13% excluding a D-SIB buffer determined by CBK.

• Banks have to adopt the Standardised Approach for implementing Basel III, using national discretion for

• Adopting Option II for bank exposures

• Adopting the top three rating agencies as External Credit Assessment Institutions, and

• Defining SME (Small & medium enterprises) as the maximum aggregate retail exposure limit to one SME or to any group of SMEs not exceeding KD 250,000 based on Circular (SBI/101/1995)

• The Bank’s external auditors must audit the annual capital adequacy returns.

• The Bank must conduct an Internal Capital assessment for all material risks (Pillar II risks) under the Internal Capital Adequacy Assessment Process (ICAAP). These risks include credit concentration risk, Credit Risk Mitigation CRM risks, remained operation risk, legal risk, interest rate risk, liquidity risk, strategic risk, reputation risk etc.

• The Bank must conduct stress testing of its one year forward business projections under different scenarios and assess the impact on capital adequacy and profitability.

Under the Capital Adequacy framework, the Bank must provide timely, accurate, relevant and adequate disclosures of qualitative and quantitative information that enable users to assess its activities and risk profile. The following public disclosures are made in line with the requirements of the Central Bank of Kuwait.

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Subsidiaries and Significant InvestmentsThe Group has a wholly-owned subsidiary company, Ahli Capital Investment Company K.S.C.C. The subsidiary is engaged in investment management and advisory activities and comes under the supervision of the Capital Market Authority. The Group also has a significant investment in Credit One Investment & Holding Co. and classifies the same as an associate. The amount invested in the associate is below the threshold deduction limit of 10 per cent and 15 per cent of the Group’s Common Equity Tier One and hence has not been deducted for the calculation of Common Equity Tier one and so has been risk weighted at 250 per cent.

Al Ahli Bank of Kuwait - Egypt is a full-fledged Retail and Corporate bank in Egypt which was acquired in November 2015 and is subject to regulatory jurisdiction of that country.

Risk exposures and capital management in the Group is performed at consolidated level, including the subsidiary’s activities. The Group also performs capital level assessments on a standalone basis for the Bank, its subsidiary and Al Ahli Bank of Egypt. However, the subsidiaries also perform their own separate capital adequacy exercise to determine its capital adequacy levels individually on a standalone basis.

CAPITAL STRUCTUREThe capital structure of the Group consists of Common Equity Tier I capital (paid-up equity capital and reserves, including fair value reserves) and Tier II capital, which includes general provision (subject to maximum of 1.25 per cent of total credit risk weighted assets). There is no Additional Tier 1 capital in the capital structure of the Group.

Capital Structure as at 31 December 2016 2016(KD ‘000)

2015(KD ‘000)

Paid-up share capital/common stock 161,917 161,917

Reserves 380,681 382,236

Less:

Treasury Shares (4,958) (4,528)

Other Intangibles (except Mortgage Servicing Rights) (13,500) (31,531)

Defined benefit pension fund liabilities (164) (103)

Threshold Deductions arising from Investments in FIs where ownership is <= 10% - -

Common Equity Tier I 523,976 507,991

General provisions (subject to maximum of 1.25% of total credit risk weighted assets) 38,473 38,230

Threshold Deductions arising from Investments in FIs where ownership is <= 10% - -

Tier II 38,473 38,230

Total eligible capital after deductions 562,449 546,221

The authorised, issued and fully paid up common equity shares of the Group amount to KD 161,917 thousand, comprised of 1,619,166,234 shares of 100 fils each. These shares are issued in compliance with Kuwaiti commercial law for public shareholding companies. Discretionary dividend payments on these shares are subject to regulatory approval. These shares are classified as share capital under the financial statements of the Group and have been recognised as part of its Common Equity Tier 1 Capital.CAPITAL STRUCTURE (continued)

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CAPITAL STRUCTURE (continued)Capital AdequacyThe Group’s capital management philosophy is aimed at maintaining an optimum level of capital to enable it to pursue strategies that build long-term shareholder value, whilst always maintaining minimum Pillar I capital requirements as well as meeting Pillar II capital requirements, which are the Group’s internal estimate of the capital required to cover all its material risks, including those which are not captured under Pillar I, and include credit concentration risk, interest rate risk in the banking book, liquidity risk, legal risk, residual operational risk, strategic risk, reputation risk, etc. The objective is to maximise its return on capital and, at the same time, maintain capital for unexpected losses. The Group manages its capital in an integrated manner with the aim of maintaining strong capital ratios and high ratings. This calls for a balanced approach of maintaining capital levels that are sufficient to provide a high return to shareholders, while meeting the requirements of regulators, rating agencies and other stakeholders (including deposit holders), and supporting future business growth. The cost of capital, and its composition, is also taken into consideration. The Group has established an ICAAP framework which entails:• Incorporation of the business plan with a three-year horizon for capital assessment• Assessment and measurement of the material risks in the Group’s exposures as per Pillar I & II guidelines• Monitoring of risks against the risk limits established• Monitoring capital at Group level within the Group’s risk appetite framework• Stress testing of the Group’s exposure, on a Group-wide basis, to assess its capital adequacy in case

of adverse scenarios; and• Periodic assessment and reporting of the ICAAP results to Executive management and Board so the

appropriate remedial actions can be taken.

ICAAP Framework of the Bank

Capital Adequacy Scoring Allocation MatrixThe Group also conducts a self-assessment exercise to assess inherent risk, as well as to assess the strength of the control framework over internal supervision, the risk management system, infrastructure, other support systems and governance.

The Group manages the adequacy of its capital under the following structures:

Capital Adequacy Planning FrameworkReview the adequacy of its group regulatory capital to support its current and future activities on an ongoing basis for internal capital management and regulatory reporting. Strategic business objectives and future capital needs

RISK MANAGEMENT (continued)

Identification of material risks specific to business models

Assumptions

Additional capital requiredfor stress test

Management actions Net stress test

Internal capital modelto quantify risk

Business Plans

Gross stress test

Projection of Pillar I & II CARon a three-year horizon

Strategy

Development of specificstress tests

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are assessed within this framework. The Group employs capital rationing techniques to allocate capital for each of the Group’s business units through budgetary planning process in order to optimise returns. An annual budget plan provides an overall direction to individual business units to estimate overall growth in assets and its impact on the required regulatory capital. The Group ensures that capital ratios are maintained above the regulatory minimum under Pillar I to meet Pillar II requirements and certain stress conditions. Under the terms of the framework, sources of future capital are identified and plans put in place to raise and retain capital.

The Group plans its capital projections for a three-year period to assess capital availability and adequacy, taking into account strategic business plans and other initiatives considering the strategic business environment and other factors in a three-year, forward looking capital assessment process.

The annual dividend pay-out is prudently determined and proposed by Group Board of Directors, and endeavours to meet shareholder expectations and regulatory capital requirements. The capital levels are monitored throughout the year factoring the business plans and economic environment to maintain capital adequacy at targeted levels.

Sensitivity Analysis and Stress TestingThe Group has set up a structural programme for stress testing, whereby Risk Management, in coordination with the business lines, identifies all the material risk factors affecting the Group’s operations. Based on these risk factors, plausible stress scenarios

(mild, medium and severe) are designed and exposures are stressed to assess the impact on the Group’s capital adequacy and profitability.

The Group carries out sensitivity analysis on the volatility of collateral, fair valuation reserves, possible rating downgrades of borrowers/ guarantors and the impact on profit. The Group’s capital solvency is then assessed and reported to the Group Board of Directors.

The Group also runs a stress testing programme for one-year business projections as part of its risk management process for capital management. This process is performed every quarter to assess capital adequacy and reported to the Group Board of Directors. Stress testing is run at a consolidated group level to assess loss impact on capital adequacy levels.

The stress testing programme covers the following risk categories:• Credit risk – default on loans

provided to counterparties, including financial institutions, corporate and retail borrowers.

• Concentration risk – concentration in the form of exposure towards individuals, or particular industries/sectors, collateral or concentration in countries or regions.

• Interest rate risk – adverse changes in interest/yield curve.

• Market risk – adverse changes in prices of assets and the effect of these changes on the portfolio of the Bank and markets.

• Liquidity risk – reduction in credit lines, non-availability of financing facilities, Bank-specific and systemic liquidity shocks etc.

• Operational risk – risk categories as defined by Basel III.

• Remained Operational risk - risks arising from documentation and implementation of contractual rights.

• Credit Risk Mitigation (CRM) risk – collateral values considered as CRM are stressed, taking into consideration the decline in market values of shares and real estate.

• Legal risks – are stressed as part of the operational risk scenario analysis.

• Strategic risk & reputation risk – capital for strategic risk and reputation risk is further stressed under the mild, medium & severe scenarios.

For the purposes of stress testing, the Group considers all portfolios and includes its:• All on-balance sheet positions in

the banking and trading books• Off-balance sheet positions

(commitments, contingencies, derivative contracts etc.)

• Risk mitigants such as collateral values, values of hedging instruments etc; and

• Exposures across geographies, sectors etc.

• Stress scenarios on operational risks

• Liquidity profiles and gaps.

The Group has designed three stress scenarios – ‘mild’, ‘medium’ and ‘severe’ – based on its risk policies for stress testing purposes. The different risk categories are individually considered, including the Group’s subsidiaries and grossed to assess the impact on a consolidated basis. Different levels of stress are applied to various risk categories as quantified under the three scenarios to determine stress losses.

The Group has also instituted governance controls over its capital adequacy and assessment process, with independent reviews by Internal Audit for compliance with policy and governance.

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CAPITAL STRUCTURE (continued)Composition AnalysisThe consolidated composition of capital (Tier I and II) is analysed to ensure capital stability and reduce volatility in the capital structure.

Capital adequacy (Required Capital) 2016(KD ‘000)

2015(KD ‘000)

Claims on sovereigns 1,591 395

Claims on public sector entities (PSEs) 4,817 5,609

Claims on banks 36,885 38,744

Claims on corporate 227,007 197,975

Regulatory retail exposures 67,763 64,136

Past due exposures 5,042 3,923

Other exposures 57,009 86,810

Total 400,114 397,592

Less: General provision in excess of 1.25% risk weighted assets (21,233) (19,553)

Net credit risk weighted exposure 378,882 378,039

Market risk exposure 400 2,555

Operational risk exposure 34,600 31,440

Grand Total 413,883 412,034

Capital Adequacy Ratios:

Tier I 16.46% 16.03%

CET 1 16.46% 16.03%

Total 17.67% 17.23%

The Capital Adequacy Ratios of banking subsidiary Al Ahli Bank of Kuwait - Egypt as at 31st December 2016 are as follows:Tier I: 21.02%, CET 1: 21.02 %, Total: 22.34%

RISK MANAGEMENT (continued)

31

Additional capital disclosures required by Basel III regulations together with items impacting the regulatory capital are outlined below:

Common Disclosure (Component of Regulatory Capital Reported by Group)

2016(KD ‘000)

2015(KD ‘000)

Reference ofthe Balance Sheet

under the Regulatory Scope

of Consolidation

Common Equity Tier 1 Capital: Instruments and Reserves

Directly issued common share capital plus relatedstock surplus 270,814 270,814 c + d

Retained earnings 133,882 124,353 f

Accumulated other comprehensive income(and other reserves) 155,582 165,064 g

Common Equity Tier 1 capital before Regulatory Adjustments 560,278 560,231

Common Equity Tier 1 Capital: Regulatory Adjustments

Dividends (17,680) (16,078)

Other intangibles other than mortgage - servicing rights(net of related tax liability) (13,500) (31,531)

Defined-benefit pension fund net assets (164) (103)

Investments in own shares (if not netted off paid-in capital on reported balance sheet) (4,958) (4,528) e

Total Regulatory Adjustments to Common Equity Tier 1 (36,302) (52,240)

Common Equity Tier 1 capital (CET 1) after Regulatory Adjustments 523,976 507,991

Tier 1 Capital 523,976 507,991

General Provisions included in Tier 2 Capital 38,473 38,230

Tier 2 Capital before Regulatory Adjustments 38,473 38,230

Tier 2 Capital: Regulatory Adjustments - -

Tier 2 Capital (T2) 38,473 38,230

Total Capital (TC = T1 + T2) 562,449 546,221

Total Risk Weighted Assets 3,183,705 3,169,487

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CAPITAL STRUCTURE (continued)Composition Analysis (continued)Additional capital disclosures required by Basel III regulations together with items impacting the regulatory capital are outlined below:

Common Disclosure (Component of Regulatory capital reported by Group)

2016(KD ‘000)

2015(KD ‘000)

Reference of the Balance Sheet under the Regulatory Scope

of Consolidation

Capital Ratios and Buffers

Common Equity Tier 1 (as a percentage of risk weighted assets) 16.46% 16.03%

Tier 1 (as a percentage of risk weighted assets) 16.46% 16.03%

Total capital (as a percentage of risk weighted assets) 17.67% 17.23%

Institution specific buffer requirement (minimum CET1 requirement plus capital conservation buffer plus countercyclical buffer requirements plus D-SIB buffer requirement, expressed as a percentage of risk weighted assets)

13.50% 12.50%

of which: capital conservation buffer requirement 2.50% 2.50%

of which: bank specific countercyclical buffer requirement 2.50% 2.50%

of which: D-SIB buffer requirement 0.5-2.0% 0.5%-2.0%

Common Equity Tier 1 available to meet buffers(as a percentage of risk weighted assets). 7.00% 7.00%

National Minima

National Common Equity Tier 1 minimum ratio (i.e. 9.5%) 302,452 301,101

National Tier 1 minimum ratio (i.e. 11%) 350,208 348,644

National total capital minimum ratio (i.e. 13% excludingCCY and D-SIB buffers) 413,883 412,034

Amounts below the Threshold for Deductions(before Risk Weighting) - -

Applicable Caps on the Inclusion of Provisions in Tier 2 - -

Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardized approach (prior to application of cap)

201,800 188,637 a + b

Cap on inclusion of provisions in Tier 2 under standardized approach 163,327 150,406

Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap)

- -

Cap for inclusion of provisions in Tier 2 under internalratings-based approach - -

A reconciliation of the balance sheet as per published financial statements to the regulatory scope of consolidation at 31st December 2016 & 31st December 2015 is shown on page 33. The Group follows IFRS standards for consolidation purposes which are also applied for Basel III reporting.

RISK MANAGEMENT (continued)

33

Reconciliation of ABK Group’s balance sheet computed in line with IFRS and the balance sheet computed under regulatory scope of consolidation

ItemBalance Sheet

as in Published Financial Statements

Under Regulatory Scope of

Consolidation

Reference to Common

Disclosure

2016(KD ‘000)

2015(KD ‘000)

2016(KD ‘000)

2015(KD ‘000)

Assets

Cash and balances with banks 494,678 432,173 494,678 432,173

Kuwait Government treasury bonds 223,142 204,246 223,142 204,246

Central Bank of Kuwait bonds 173,715 179,713 173,715 179,713

Loans and advances (net of specific provisions) 3,218,253 3,223,658 3,218,253 3,223,658

General provisions on Loans and advances (188,869) (176,515) (188,869) (176,515) a

Investment securities 237,905 343,809 237,905 343,809

Investment in an associate 18,263 16,572 18,263 16,572

Other assets 43,333 53,125 43,333 53,125

Intangible Assets 17,698 41,217 17,698 41,217

Premises and equipment 46,695 41,066 46,695 41,066

Total assets 4,284,813 4,359,064 4,284,813 4,359,064

Liabilities Due to banks and other financial institutions 734,771 1,199,192 734,771 1,199,192

Customers’ deposits 2,899,908 2,496,278 2,899,908 2,496,278

Other liabilities 76,861 90,038 76,861 90,038

Specific provision on contingent liabilities 4,539 4,976 4,539 4,976

General provision on contingent liabilities 12,931 12,121 12,931 12,121 b

Total liabilities 3,729,010 3,802,605 3,729,010 3,802,605

Shareholders’ Equity

Share capital 161,917 161,917 161,917 161,917 c

Share premium 108,897 108,897 108,897 108,897 d

Treasury shares (4,958) (4,528) (4,958) (4,528) e

Retained Earnings 133,872 124,353 133,872 124,353 f

Reserves 137,749 148,883 137,749 148,883 g

Non-controlling interests 646 859 646 859

Proposed dividend 17,680 16,078 17,680 16,078 h

Total shareholders' equity 555,803 556,459 555,803 556,459

The main features table includes information on the amount recognised in regulatory capital as at 31st December 2016 which is available on the bank’s website under disclosures.

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RISK MANAGEMENT STRUCTURE AND PROCESS The Group has established comprehensive risk frameworks for managing all material risks. The frameworks address the identification, measurement and monitoring processes of all material risks including credit risks, market risk and operational risk under Pillar I and other risks such as credit concentration risk, credit risk Mitigation CRM Risk, interest rate risk in banking book, liquidity risk, remained operation risk, legal risk, strategic risk, reputation risk and others in Pillar II.

The Group has in place risk frameworks for managing various risks as identified under the Basel III and ICAAP guidelines. Risk management is governed by the Risk Management Frameworks that include Risk Policy, Risk Appetite and Assessment, Risk Measurement & Stress Testing models and methodology, and Capital Adequacy Assessment Matrices, which are approved by the Group Board. Risk is embedded in the decision-making process on all risk types to enable the Group to manage the risks assumed within acceptable levels.

The Group has also articulated a risk appetite statement which sets out the boundaries within which the risks have to be assumed and managed in terms of availability and use of capital, after setting aside buffer for stress conditions. Descriptions of the risk appetite statement along with the risks identified and the methodology used to manage those risks are as follows:

Risk Appetite StatementThe Group has established a risk appetite framework and risk culture in managing its exposure diligently in order to ensure risks are taken and managed within the risk appetite through capital budgeting, risk limits etc. In this respect, a risk appetite statement has been defined and provides a basis for setting the Group’s risk-taking capacity, maintaining a risk buffer, risk limits within business strategy, risk parameters for overall business objectives, appetite indicators for monitoring, and reporting. Objectives of this appetite framework includes:

• Support strategic initiatives• Embedding risk appetite into

the Bank’s business culture • Risk appetite and availability of

capital • Setting boundaries of limits

and thresholds for risk taking• Measurement of both

qualitative and quantitative risk parameters

• Evaluation of risks in a consistent manner

• Monitoring risk levels against limits and thresholds which percolates down to business level and risk type

• Support stakeholder value maximization by monitoring and improvising expectations

At a Group-wide level, the risk appetite statement is based on maintaining capital adequacy ratio, Risk Adjusted Return On Capital (RAROC) quality of assets (non-performing loans) and geographic diversification, external credit rating of the Group, earnings volatility, and other metrics, such as the liquidity risk, loans to deposit levels, operational risk, and regulatory compliance. These parameters are then cascaded down to business units by setting a series of risk limits applicable for each business line.

Risk Limits/ThresholdsThe Group sets risk limits as part of the various policies governing different business areas. These limits are monitored, within the risk appetite framework, by the business lines based on business plans. The risk appetite statements have been embedded within each risk management framework for managing credit, market, operational, liquidity and strategic and reputation risk.

These appetite statements have been translated into specific risk limits and thresholds for managing risk levels within appetite levels through risk and business policies thereby embedding into business processes.

Monitoring, Control & Reporting of Risk Appetite and LimitsThe Group monitors the risk appetite, risk limits and thresholds periodically through its monitoring, control and reporting mechanism. This is monitored with the aim of assessing the level of the risk exposures, and so that the appropriate corrective measures needed to maintain the appetite levels within acceptable ranges can be taken.

RISK MANAGEMENT (continued)

35

Risk Control & GovernanceThe primary goal of risk management is to ensure that the Bank’s asset and liability profile, its trading positions, and its credit and operational activities, do not expose it to losses that could threaten its viability. Risk Management assists in ensuring that risk exposures do not become excessive, relative to the Bank’s capital and financial positions. The Bank maintains a limit monitoring system to mitigate all over the counter deals and hedges FX risk by forwards and spot deals, and interest rate risk using IRS, and cross currency swaps for balance sheet management.

Risk Management includes the following four elements: • Risk Identification • Risk Measurement • Risk Monitoring • Risk Control

The Group’s Risk Management Division’s organisational structure is set out below:

Group CEO &Deputy Chief General Manager

Group Chief Risk OfficerRisk Management DivisionABK-Egypt Risk UAE Risk

Board Risk Committee

Credit RiskUnit

ExecutiveCommittee

OperationalRisk Unit

Asset LiabilityCommittee

Management Risk

Committee

IT Risk Unit/ITSecurity Unit

Strategic & ReputationRisk Unit

ManagementCredit

Committee

InvestmentCommittee

ProvisionCommittee

ICAAP/BaselIII

PortfolioProvision Unit

Financial Risk(Market Risk)

Unit

InformationTechnology

Steering Committee

Management Committees

The Risk Management Division reports directly to the Board Risk Committee with a dotted reporting line to the Group CEO.

The business lines, along with the support divisions, Risk Management Division and the Internal Audit Division, comprise the three components that ensure effective compliance with the control processes laid down for risk management across the group. A separate Compliance Unit also independently ensures the regulatory guidelines are followed and complied with. The Risk Management Division, with the active support of the Board and top management, is committed to instilling a risk conscious culture throughout the Group.

Credit RiskCredit risk arises from the potential financial loss resulting from customers failing to honour the terms of their contracts. It also includes the risk of loss in portfolio value as a result of credit quality migration from lower risk to higher risk categories.

Credit risk is the most significant risk to which the Group is exposed, therefore its proactive management is key to ensuring the Group’s long-term success.

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RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Credit Risk (continued)The Group has a comprehensive due diligence system to assess and approve credit facilities and well-defined policies for controlling and managing credit risk at the counter-party, group, economic sector and country levels.

The Group also has a robust system of borrowers’ risk ratings that incorporates international best practices to assess the default risk of corporate borrowers. Credit borrowers are graded from 1 to 10, with one being excellent and 10 being bad. The borrower risk rating model takes into consideration key factors, such as business trends, management, financials, industry, collaterals, etc., which are duly weighted to arrive at the rating. Borrowers’ ratings changes/migration are monitored annually. The Bank has a retail risk rating scorecard to assess retail credit risk, which also provides an end-to-end automated system for processing loans and credit cards.

With International borrowers and Foreign financial institutions, the Group relies on credit rating agencies for credit grading assessments, including political risk assessment, and deals mainly with investment grade borrowers and countries. The Group uses Standard & Poor’s, Moody’s and Fitch Ratings for sovereign and bank exposures, choosing the higher of the lowest two ratings for assigning risk weight to an exposure. The Group also adopts the following mapping notations to link public issue ratings with comparable ratings in the Group’s book. It uses the long-term rating for this mapping.

S&P Rating ABK Risk Grade

AAA 1

AA 2

A 3

BBB 4

BB 5

B 6

CCC/CC/C 7,8,9

D 10

All corporate and sovereign credit requires an independent credit risk review as per risk management practice. Borrower exposures are managed through exposure limits to them, and wherever group exposure exceeds a stipulated limit, the Board Credit & Investment Committee’s approval is sought. Credits extended to the Board of Directors are approved strictly in accordance with Central Bank of Kuwait requirements and executed on an arms-length basis, which are governed through the Group’s corporate governance process.

With regard to credit culture, Risk Management ensures that appropriate policies, guidelines, processes and procedures exist to cover all business areas where credit risk arises. It also ensures the consistent application of the Bank’s credit extending standards and the periodic review and updating of credit policies, guidelines and procedures.

The policy sets limit criteria for individual exposures, group exposures, economic sector and countries. Credit facilities to any counter-party are not extended until a credit line has been approved. A strict credit approval process exists with authority levels delegated to ensure the efficient conduct of business.

Risk Management ensures that credits are granted according to the approved standards and that all risks are highlighted in the credit risk review, including policy exceptions.

RISK MANAGEMENT (continued)

37

Credit facility risk covers the analysis of the nature of on and off-balance sheet counter-party exposure (size, tenor, complexity and liquidity), including secured and unsecured credit facilities, and reporting thereof.

Portfolio risk arises because of a high positive correlation between individual credit facilities, meaning that default by one borrower can lead to several related borrowers defaulting who bear that correlation. This may include:• Concentration of exposure in

geographical areas, sectors, groups, counter-parties or rating categories

• Trend analysis in volume, sectors and concentration

• Trends in portfolio quality (borrowers’ risk migration, non-performing loan)

The Group monitors and reports to its regulators credit concentrations in accordance with regulatory guidelines. The Group also complies with regulatory guidelines with regard to credit disbursal/ regulation to various sectors of the economy.

Under Pillar II, the concentration risk is also assessed to provide capital and manage the concentration risk prudently. CRM risk is also assessed based on the quality of collateral, the liquidity, the volatility and the effectiveness of documentation etc.

In addition to the above, the Group has prudent internal portfolio exposure limits to manage concentration in various sectors. Portfolio exposure analysis is performed at regular intervals, and whenever required, the Group will

revise/limit its exposures to manage/contain risks. To mitigate risks arising from the financial crisis that affected the world economy, the Group proactively reviewed portfolio exposures to various transaction types, counter parties, sectors, banks and countries and revised exposure limits for managing risk.

As far as retail credit is concerned, the Group also has the necessary policies, controls and processes in place. These are in line with regulations on consumer and instalment loans and credit cards. Retail loans are originated through the branch network. The retail loans that comply with policy criteria are processed when approved by the necessary approving authorities. Exceptions are reviewed independently by Risk Management and approved by the credit committee. A separate Retail Lending Unit reviews and ensures all necessary procedures and documentations are completed. The Group also reviews the retail portfolio for deterioration and has mechanisms for loan and instalment collections when past due.

Market RiskMarket risk is the risk of adverse impact on the value of assets, liabilities or revenues from market conditions or movements in market rates and prices. Market-sensitive assets and liabilities are generated through loans, investments, and customer and proprietary trading operations. For measuring market risk in the trading book, all positions are marked to market daily and limits are approved and independently monitored. All exposures are independently monitored by Risk

Management and appropriate limits are approved by the Asset Liability Management Committee (ALCO).

Market risk capital is also assessed under Pillar II for any concentration in trading positions, illiquidity in the markets, positions marked to model etc. The Group adopted a standardised approach to measuring its market risk.

Foreign Exchange RiskForeign exchange risk represents the exposure to fluctuations in the values of current holdings and future cash flows denominated in other currencies. The types of instruments exposed to this risk include: foreign currency-denominated loans and liabilities, future cash flows in foreign currencies arising from foreign exchange transactions, proprietary positions and customers’ foreign exchange transactions.

Instruments used to mitigate this risk are foreign exchange spot, forwards, options, etc. These instruments help to insulate against losses that may arise due to significant movements in foreign exchange rates. All foreign exchange exposures are centrally managed by Treasury and are daily marked to market. Limits have been assigned with respect to overnight open exposures, stop loss and authorised currencies to monitor and control foreign exchange exposures. The Group also uses VaR, whose limits are monitored independently by Risk Management on a daily basis, and stress scenarios to quantify the foreign exchange risk.

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RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Interest Rate RiskInterest rate risk arises on account of a mismatch in re-pricing of loans and deposits. The majority of loans are re-priced in line with changes in the applicable Discount Rate. However, the pricing of deposits is not linked to the Discount Rate and so the interest rates on deposits do not get re-priced, along with the re-pricing of loans. The mismatch that arises as a result gives rise to interest rate risk (basis risk). The other elements in the consolidated statement of financial positions carrying interest rate risk are Treasury Bills and Bonds, Central Bank Bonds and debt securities in the Group’s fixed income investment portfolio.

The Group’s overall goal is to manage interest rate sensitivity so that movements in interest rates do not adversely affect its net interest income. Interest rate risk is measured as the potential volatility in net interest income caused by changes in market interest rates.

Exposures are quantified using interest rate re-pricing gaps. Earnings at risk limits are monitored and simulations used to estimate the impact of various interest rate scenarios on the net interest income. These simulations incorporate assumptions of asset and liability re-pricing and maturity characteristics. Exposures against limits and simulation analysis are regularly monitored by the ALCO.

Under Pillar II, the Group carries out an internal assessment of capital for interest rate risk in the banking book and allocates specific capital for this risk.

Liquidity RiskLiquidity is the ongoing ability to accommodate liability maturities and deposit withdrawals, fund asset growth and business operations and meet contractual obligations through unconstrained access to funding at reasonable market rates.

The Group’s projected liquidity needs are analysed and optimum alternatives to manage the liquidity risk are recommended. Risk Management identifies liquidity at risk, which is monitored and reported daily. Liquidity management policies and a contingency liquidity plan have been established. A liquidity stress test is conducted to assess the impact of the withdrawal of deposits, crystallisation of contingent liabilities etc. in the mild, medium and severe scenario, both under Group-specific, and systemic scenarios. The concentration in deposits is monitored on a regular basis and reviewed by ALCO.

Liquidity risk appetite has been put in place with the following parameters – liquid assets, total assets, loans to deposits, cumulative negative maturity mismatch, funding source diversification, stress testing under severe scenario, and capital consumption. These appetite parameters are used for managing liquidity risk and the exposure the Group would be willing to take and manage risk levels within appetite levels.

Under Pillar II, liquidity risk is assessed for Group-specific and general market scenarios, and capital provided to manage the risk.

The Group has also adopted internally the new Liquidity Coverage Ratio requirements under Basel III recommendations and monitors the liquidity coverage periodically.

Asset Liability Ratio Risk ManagementRisk Management plays a critical role in assessing the risk embedded in the Group’s assets and liabilities. It recommends measures to manage risks efficiently within the agreed risk appetite. Risk Management’s role includes assessing the volatility and concentration of revenues; effectiveness in pricing to cover costs and risk; and facilitating and setting RAROC hurdle rates etc.

The variability of net interest income in different scenarios is monitored, aiming to maximise net interest income within acceptable risk levels. Optimising balance sheet management by conducting Balance Sheet reviews for managing yields through optimal deployment of surplus liquidity, managing cost by focusing on low cost deposits and making recommendations to prudently manage cost of funds. Also, recommendations are made of appropriate funding mix between local currency and foreign currency thereby optimising the balance sheet returns within acceptable risk limits.

RISK MANAGEMENT (continued)

39

Operational Risk ManagementOperational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. Managing this risk relies on identifying risks that exist within the Group, educating employees on the operational risks they encounter in the course of their duties, and ensuring that the control framework works effectively.The Group identifies and assesses operational risk in products, activities, processes and systems. It also ensures the associated operational risks are properly assessed and mitigated, before any new products or services, activities, processes or systems are introduced.

Risk identification is vital to the development of viable operational risk monitoring and control systems. Risk identification considers internal factors such as the Group’s structure, the nature of its activities, the quality of its human resources, organisational changes and employee turnover. It also examines external factors such as changes in the industry, major political and economic changes, and technological advances.

Operational Risk ModelsThe Group has developed Operational Risk Models (ORMs) that cover key risks identified in the Group’s business and support areas through a self-assessment exercise and/or other risk assessment methods. The risks highlighted in the ORMs are discussed with the respective business units and are reviewed by the Risk Committee.

The Group has an operational risk VaR model to quantify its exposure by systematically tracking and recording the frequency and severity of individual error and loss events, and other relevant information, and measures the losses through operational risk VaR.

Under Pillar II, remaining operational risk is assessed, using the VaR model, to assess all material operational risks.

Legal risks are assessed as part of the operational risk VaR model, and capital is assessed based on the impact and likelihood of material legal risk issues.The Group’s internal error/loss database captures loss events from material activities and exposures. It also tracks individual internal error/loss data (actual loss, potential loss, near misses and attempted frauds), mapping these into the relevant business lines. The Group also collects information about the date of events and recoveries, as well as descriptive information about the causes and drivers of the loss events. The loss data events collected are analysed and any deficiencies in the Group’s processes are remedied.

Control and Mitigation of Operational RiskThe Bank has established policies, processes and procedures to control and mitigate material operational risks. It periodically reviews risk exposures and control strategies and adjusts the operational risk profile accordingly, using appropriate strategies in light of its overall risk appetite and profile:

• The Group ensures that there is appropriate segregation of duties, and that personnel are not assigned responsibilities that may create a conflict of interest, or enable them to conceal losses, errors or inappropriate actions.

• Policies for managing risks associated with outsourcing activities have been established. Outsourcing arrangements are based on robust contracts and service level agreements that ensure a clear allocation of responsibilities between external service providers and within the Group.

• The Group has an independent compliance risk unit to monitor compliance with various regulatory and internal guidelines.

• The Group has an IT Risk Unit to ensure adequate IT processes and controls for IT systems and information security controls.

• The Group has insurance cover to mitigate operational risk.

• The Group has a Disaster Recovery Plan and a Business Continuity Plan in place. The disaster recovery plans are regularly tested for processing transactions from the disaster recovery site.

Strategic Risk & Reputation Risk ManagementThe Group has put in place risk frameworks covering policy, guidelines, procedures and tools.

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RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Strategic RiskThe Group defines strategic risk as the current or prospective impact on the Group’s earnings, capital, and risks arising from changes in its operating environment from adverse strategic decisions, improper implementation of decisions or a lack of responsiveness to industry strength, economic direction or technological changes. In this regard, the Group has put in place a strategic risk framework to identify, measure, monitor and report strategic risk exposures. For the purposes of strategic risk, the sources of risks are from:• An inadequate strategic governance framework;• An inadequate identification of factors that impact the strategy and/or business plans;• Insufficient planning and resource allocation process;• Failure in the execution of plans, projects and initiatives; and• Issues related to environment dynamics – internal and external including products, services and practices.

Strategic risk is primarily assessed in terms of the controls available to mitigate such risks and the ability to successfully implement a long term strategic plan. Matrices have been developed to monitor and measure risk, using a score card process, to assess strategic risks to the strategic plan, and to consider capacity to withstand those risks against the stated / approved risk appetite. Capital is assessed based on a metric score, taking into account all strategic initiatives that impact the business and earnings through a self-assessment exercise.

Reputational Risk Reputational risk is defined as the risk of current or prospective negative impact on earnings, or capital arising from damage to the Group’s reputation in the perception of major stakeholders. Reputational risk is managed through a reputational risk management framework that focuses on:• Identifying key reputational risk indicators under each driver;• Establishing the roles and responsibilities of different entities in the reputational risk assessment and

management process; and• Developing a formalised and structured approach for managing risks to the Group’s reputation.

The Group has identified various reputational risk indicators and has classified these under 12 drivers. These Key risk Indicators (KRI’s) are managed under customer satisfaction; financial soundness; corporate governance; management integrity; business practice; risk management and control environment; regulatory compliance; transparency; media and rumours; corporate culture; staff competence; and crisis management. These parameters are used for assessing and managing reputation risk.

Under Pillar II, reputational risk is assessed based on reputational risk scorecards to assess risk through key drivers that influence the Group’s reputation in the perception of its significant stakeholders.

Past Due Credit ExposuresThe Group defines past due exposure in line with regulatory guidelines. Accordingly, a cash facility will be considered past due in the following circumstances:• the overdraft account exceeds 10 per cent over the limit continuously;• the current account is in debit balance without any authorised limit;• the credit facility is not renewed/extended on expiry;• the instalment due on the loan has not been repaid on its due date and/or• the interest accrued on the loan has not been settled on its maturity date.

Impaired facilities have been defined in significant accounting policies in the financial statements.

The Group provides specific and general provisions, based on Central Bank of Kuwait guidelines, as set out below. However, for UAE branches and ABK-Egypt the respective regulations apply.

RISK MANAGEMENT (continued)

41

Specific Provision The required minimum specific provision will be computed on the delinquent amount outstanding, based on the number of days of irregularity as shown below:

Irregular days Minimum required provisions

Between 91 days and 180 days 20%

Between 181 days and 365 days 50%

Over 365 days 100%

Specific provisions based on Central Bank of Kuwait guidelines are benchmarked against IAS 39 requirements.

Specific provisions are also made for monitoring category accounts, using management judgment and discretion. General ProvisionAs mandated by the Central Bank of Kuwait, ABK provides general provision on all credit facilities to customers, net of certain restricted categories of collateral to which Central Bank of Kuwait instructions are applicable. However, for branches and subsidiaries operating in overseas jurisdictions the respective local regulation also applies.

The Group also makes additional general provisions to cover the general credit and market risk inherent in the portfolio. To ensure that the credit risk is effectively managed, the Bank has a well-established and comprehensive credit risk management policy framework covering the entire credit spectrum, to ensure that non-performing loans are minimised.

Bank’s Credit Risk Management Policy Framework

Portfolio Approach

Policies, Procedures and Guidelines

Credit Analysis Tools

Monitoring and Follow-up

Lending Discipline

Risk Responsibility and Accountability

Credit Culture and Skills

Credit Control

Approval Authority

Pricing Model

Credit Risk Measurement Techniques

Credit Risk Management Framework

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RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Gross Credit Risk Exposure

Gross outstanding before any risk mitigation Funded Unfunded Total

Gross Credit Risk Exposure as at 31st December 2016 (KD ‘000)

Cash items 28,220 - 28,220

Claims on sovereigns 715,455 109,310 824,765

Claims on public sector entities (PSEs) 145,716 1 145,717

Claims on banks 561,550 646,845 1,208,395

Claims on corporate 2,047,343 715,774 2,763,117

Regulatory retail exposures 536,806 21,990 558,796

Past due exposures 42,679 1,547 44,226

Other exposures 384,277 104,368 488,645

Total 4,462,047 1,599,836 6,061,883

Gross Credit Risk Exposure as at 31st December 2015 (KD ‘000)

Cash items 16,481 - 16,481

Claims on sovereigns 671,052 23,597 694,649

Claims on public sector entities (PSEs) 117,106 1 117,107

Claims on banks 576,446 607,682 1,184,128

Claims on corporate 1,756,659 602,544 2,359,203

Regulatory retail exposures 513,031 19,938 532,969

Past due exposures 39,303 3,486 42,789

Other exposures 804,432 725 805,157

Total 4,494,510 1,257,973 5,752,483

RISK MANAGEMENT (continued)

43

Gross Credit Risk Exposure – Average Balance

Gross outstanding before any risk mitigation Funded Unfunded Total

Gross Credit Risk Exposure – Average Balance as at 31st December 2016 (KD ‘000)

Cash items 22,829 - 22,829

Claims on sovereigns 803,947 48,538 852,485

Claims on public sector entities (PSEs) 141,550 1 141,552

Claims on banks 535,875 626,933 1,162,808

Claims on corporate 1,866,999 664,676 2,531,675

Regulatory retail exposures 536,221 19,120 555,340

Past due exposures 38,300 1,629 39,929

Other exposures 675,249 26,954 702,203

Total 4,620,970 1,387,851 6,008,822

Gross Credit Risk Exposure – Average Balance as at 31st December 2015 (KD ‘000)

Cash items 17,721 - 17,721

Claims on sovereigns 544,246 13,272 557,518

Claims on public sector entities (PSEs) 130,506 1 130,508

Claims on banks 500,485 648,742 1,149,227

Claims on corporate 1,616,650 564,758 2,181,407

Regulatory retail exposures 438,976 17,534 456,510

Past due exposures 31,396 1,462 32,857

Other exposures 744,827 2,448 746,704

Total 4,024,807 1,248,217 5,273,024

A N N U A L R E P O R T | 2 0 1 6

44

RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Geographic Distribution – All Exposures

Domestic (Kuwait)

Other MiddleEast & Africa

Europe USA Asia Pacific

Rest of the

WorldTotal

Geographic Distribution – All Exposures as at 31st December 2016 (KD ‘000)

Cash items 21,342 6,878 - - - - 28,220

Claims on sovereigns 476,300 336,222 - - 9,182 3,061 824,765

Claims on public sector entities (PSEs) 48,383 82,921 - - 12,830 1,583 145,717

Claims on banks 157,558 361,483 380,787 7,589 228,896 72,082 1,208,395

Claims on corporate 2,086,349 569,698 40,826 13,827 39,869 12,548 2,763,117

Regulatory retail exposures 508,524 50,074 160 - 38 - 558,796

Past due exposures 27,890 16,337 - - - - 44,227

Other exposures 451,430 24,336 12,225 - 654 - 488,645

Total 3,777,776 1,447,950 433,998 21,416 291,469 89,274 6,061,883

Geographic Distribution – All Exposures as at 31st December 2015 (KD ‘000)

Cash items 11,903 4,578 - - - - 16,481

Claims on sovereigns 421,049 270,565 - - - 3,035 694,649

Claims on public sector entities (PSEs) 8,161 90,321 785 - 13,131 4,709 117,107

Claims on banks 66,087 317,240 432,669 3,396 303,473 61,263 1,184,128

Claims on corporate 1,748,896 514,165 20,410 13,827 48,096 13,809 2,359,203

Regulatory retail exposures 471,631 61,334 4 - - - 532,969

Past due exposures 31,357 11,432 - - - - 42,789

Other exposures 737,396 42,606 24,073 - 1,082 - 805,157

Total 3,496,480 1,312,241 477,941 17,223 365,782 82,816 5,752,483

RISK MANAGEMENT (continued)

45

Geographic Distribution – Funded Exposures

Domestic (Kuwait)

Other MiddleEast & Africa

Europe USA Asia Pacific

Rest of the

WorldTotal

Geographic Distribution – Funded Exposures as at 31st December 2016 (KD ‘000)

Cash items 21,342 6,878 - - - - 28,220

Claims on sovereigns 467,119 236,093 - - 9,182 3,061 715,455

Claims on public sector entities (PSEs) 48,382 82,921 - - 12,830 1,583 145,716

Claims on banks 126,898 214,129 103,192 7,158 39,264 70,909 561,550

Claims on corporate 1,556,257 443,151 28,958 - 18,977 - 2,047,343

Regulatory retail exposures 497,746 39,060 - - - - 536,806

Past due exposures 27,876 14,803 - - - - 42,679

Other exposures 347,062 24,336 12,225 - 654 - 384,277

Total 3,092,682 1,061,372 144,375 7,158 80,907 75,553 4,462,047

Geographic Distribution – Funded Exposures as at 31st December 2015 (KD ‘000)

Cash items 11,903 4,578 - - - - 16,481

Claims on sovereigns 416,269 251,748 - - - 3,035 671,052

Claims on public sector entities (PSEs) 8,160 90,321 785 - 13,131 4,709 117,106

Claims on banks 63,087 234,922 96,717 2,966 118,587 60,167 576,446

Claims on corporate 1,334,045 384,139 11,678 - 26,797 - 1,756,659

Regulatory retail exposures 459,024 54,007 - - - - 513,031

Past due exposures 31,332 7,971 - - - - 39,303

Other exposures 736,769 42,508 24,073 - 1,082 - 804,432

Total 3,060,589 1,070,194 133,253 2,966 159,597 67,911 4,494,510

A N N U A L R E P O R T | 2 0 1 6

46

RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Geographic Distribution – Unfunded Exposures

Domestic (Kuwait)

Other MiddleEast & Africa

Europe USA Asia Pacific

Rest of the

WorldTotal

Geographic Distribution – Unfunded Exposures as at 31st December 2016 (KD ‘000)

Cash items 9,182 100,128 - - - - 109,310

Claims on sovereigns 1 - - - - 1

Claims on publicsector entities (PSEs) 30,660 147,354 277,595 431 189,632 1,173 646,845

Claims on banks 530,092 126,547 11,868 13,827 20,892 12,548 715,744

Claims on corporate 10,779 11,014 160 - 38 - 21,990

Regulatory retail exposures 13 1,534 - - - - 1,547

Past due exposures 104,368 - - - - - 104,368

Total 685,095 386,576 289,623 14,258 210,562 13,721 1,599,835

Geographic Distribution – Unfunded Exposures as at 31st December 2015 (KD ‘000)

Cash items 4,780 18,817 - - - - 23,597

Claims on sovereigns 1 - - - - 1

Claims on public sector entities (PSEs) 2,999 82,318 335,952 431 184,886 1,096 607,682

Claims on banks 414,852 130,026 8,731 13,827 21,299 13,809 602,544

Claims on corporate 12,608 7,326 4 - - - 19,938

Regulatory retail exposures 25 3,461 - - - - 3,486

Past due exposures 627 98 - - - - 725

Total 435,892 242,046 344,687 14,258 206,185 14,905 1,257,973

RISK MANAGEMENT (continued)

47

Gross Credit Exposure – Residual Contractual Maturity

Less than 1 Month

1 Month to 1 Year

1 Year to 5 Years

Over 5 Years Total

Gross Credit Exposure – Residual Contractual Maturity as at 31st December 2016 (KD ‘000)

Cash items 28,220 - - - 28,220

Claims on sovereigns 401,994 283,217 126,393 13,162 824,765

Claims on public sector entities (PSEs) 1,514 25,880 76,714 41,610 145,717

Claims on banks 323,456 616,002 229,972 38,965 1,208,395

Claims on corporate 387,512 1,398,320 854,752 122,534 2,763,117

Regulatory retail exposures 40,742 70,940 105,145 341,969 558,796

Past due exposures - - 44,227 - 44,227

Other exposures 102,497 162,140 180,250 43,758 488,645

Total 1,285,936 2,556,499 1,617,451 601,997 6,061,883

Gross Credit Exposure – Residual Contractual Maturity as at 31st December 2015 (KD ‘000)

Cash items 16,481 - - - 16,481

Claims on sovereigns 231,867 377,672 75,169 9,941 694,649

Claims on public sector entities (PSEs) 2,578 57,109 29,171 28,248 117,107

Claims on banks 288,755 563,648 292,987 38,738 1,184,128

Claims on corporate 455,623 1,189,046 601,219 113,315 2,359,203

Regulatory retail exposures 40,380 76,309 100,322 315,958 532,969

Past due exposures - - 42,789 - 42,789

Other exposures 103,882 403,326 247,792 50,157 805,157

Total 1,139,566 2,667,110 1,389,449 556,358 5,752,483

A N N U A L R E P O R T | 2 0 1 6

48

RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Impaired Credit Facilities And Provision – By Category

NPL Specific provision

General provision

Specific provision

charge

Impaired Credit Facilities and Provision – By Category as at 31st December 2016 (KD ‘000)

Claims on banks - - 1,785 -

Claims on corporate 78,631 42,002 194,719 20,130

Regulatory retail exposures 9,850 4,858 5,296 7,924

Total 88,481 46,860 201,800 28,054

Impaired Credit Facilities and Provision – By Category as at 31st December 2015 (KD ‘000)

Claims on banks - - 2,562 -

Claims on corporate 74,099 37,442 181,102 9,778

Regulatory retail exposures 10,011 4,539 4,971 4,163

Total 84,110 41,981 188,635 13,941

RISK MANAGEMENT (continued)

49

Impaired Credit Facilities And Provision – By Geographic Area

NPL Specificprovision

Generalprovision

Impaired Credit Facilities and Provision – By Geographic Area as at 31st December 2016 (KD ‘000)

Domestic (Kuwait) 64,959 37,755 189,323

Other Middle East & Africa 23,522 9,105 10,172

Europe - - 986

USA - - 70

Asia Pacific - - 597

Rest of World - - 652

Total 88,481 46,860 201,800

Impaired Credit Facilities and Provision – by Geographic Area as at 31st December 2015 (KD ‘000)

Domestic (Kuwait) 69,214 38,204 174,081

Other Middle East & Africa 2,729 301 6,764

Europe - - 958

USA - - 26

Asia Pacific - - 1,061

Rest of World 12,167 3,476 5,771

Total 84,110 41,981 188,635

A N N U A L R E P O R T | 2 0 1 6

50

RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Movement In Provisions for Credit Facilities Impairment

Funded Unfunded Total

Movement in Provisions for Credit Facilities Impairment as at 31st December 2016 (KD ‘000)

Provisions as on 1st January 2016 212,232 18,384 230,616

Exchange difference (2,847) (1,472) (4,319)

Amounts written off during the year(net of recoveries)

(28,450) - (28,450)

Charge for the year 50,255 558 50,813

Provisions as at 31st December 2016 231,190 17,470 248,660

Movement in Provisions for Credit Facilities Impairment as at 31st December 2015 (KD ‘000)

Provisions as on 1st January 2015 153,101 16,622 169,723

Acquired from subsidiary 6,369 1,271 7,640

Exchange difference 375 49 424

Amounts written off during the year(net of recoveries)

(5,850) - (5,850)

Charge for the year 58,237 442 58,679

Provisions as at 31st December 2015 212,232 18,384 230,616

RISK MANAGEMENT (continued)

51

Risk Weighted Exposure Post Credit Conversion and Risk Mitigation

Rated Unrated Total

Risk Weighted Exposure Post Credit Conversion and Risk Mitigation as at 31st December 2016 (KD ‘000)

Claims on sovereigns 12,242 - 12,242

Claims on public sector entities (PSEs) 27,955 9,099 37,054

Claims on banks 276,534 7,195 283,729

Claims on corporate 11,015 1,735,195 1,746,210

Regulatory retail exposures - 521,255 521,255

Past due exposures - 38,784 38,784

Other exposures - 438,527 438,527

Total 327,746 2,750,055 3,077,801

Risk Weighted Exposure Post Credit Conversion and Risk Mitigation as at 31st December 2015 (KD ‘000)

Claims on sovereigns 3,035 - 3,035

Claims on public sector entities (PSEs) 43,143 - 43,143

Claims on banks 289,410 8,622 298,032

Claims on corporate 17,488 1,505,398 1,522,886

Regulatory retail exposures - 493,355 493,355

Past due exposures - 30,179 30,179

Other exposures - 667,769 667,769

Total 353,076 2,705,323 3,058,399

A N N U A L R E P O R T | 2 0 1 6

52

RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Counter Party Credit RiskThe Group has put in place risk policies and processes to identify, measure, monitor and report on counter party credit risk. These policies are integrated into credit risk management and have been applied in determining the internal house limits for maximum exposure, based on the counterparty’s credit rating. High grade counter parties will attract higher limit exposure, while low credit grade customers will be restricted to lower level exposure. These limits have been determined based on the probability of default associated with each risk grade of borrowers. The Group seeks to minimise unexpected losses based on the probability of default.

For derivatives, the limits structure that has been set up is based on the tenor of the contract and the risks which are the function of the volatility of the underlying. Counterparty limits structures are in place by product limits including for daily maximum delivery risk.

The Group has implemented policies for accepting and securing collaterals as risk mitigation, as well as processes for monitoring valuation fluctuations and legally securing collateral. Processes and methods are in place for the continuous monitoring of fluctuations in the values of collateral support on counter party credit. Triggers have been established to ensure the top-up of collateral based on marked to market on the daily value fall below the trigger. The Bank uses a standardised approach to calculate credit value adjustment (CVA) as per the regulations. The impact of

a downgrade in the long-term credit rating would not be material in respect of providing any additional collateral.

Credit Risk MitigationThe policies and processes for on- and off-balance sheet netting (and the extent to which the Group makes use of them); the policies and processes for collateral valuation and management; and a description of the main types of collateral taken, are described below.

Credit Risk Mitigation (CRM) encompasses collateral management, credit guarantee and netting arrangements. Netting techniques are currently not employed as a CRM technique.

However, the Group has in place a system of collateral valuation and management. All listed equity collateral is valued daily, for collateral coverage determination. To manage the concentration risk of equity collateral, the Group has a stipulated percentage of paid-up capital of the company as the maximum that can be accepted as collateral.

To manage the quality of quoted equity collateral, equity shares have been graded in three groups based on the liquidity and financial strength of the equity, with Grade I representing the highest quality. The required collateral coverage increases from Grade I to Grade III.

In respect of real estate collateral, two valuations are obtained of which one will be the valuator approved by the regulator. The average of the two valuations will be considered. Real estate collateral is valued each year.

The Bank normally accepts the following types of collateral: • Equity shares and funds• Cash margins and fixed deposits• Real estate comprising of

income-producing and non-income producing assets.

Among other Risk mitigants, the Group also insists on the assignment of Insurance on inventories, plants and machinery and will also accept unlisted equity, guarantees of individuals, corporates and banks, based on their creditworthiness and rating grades.

In this respect, the Group has put in place specific policies over the types of collateral that are acceptable to it. In addition, it has set up processes to properly value the collateral support provided and to ensure that this support is secured legally, including documentation. Adequate legal processes are in place to ensure that documentation is adequate. In addition, the valuations are continuously monitored to ensure adequate coverage over the credit exposures together with the concentration of collateral support on an aggregate basis against limits to ensure risk is maintained within collateral risk limits.

Guarantors who provide collateral support are assessed for their credit worthiness based on their financial strength and external ratings, if available. In the case of individuals, their personal net worth is taken into account, while for corporate guarantors, their financial strength is assessed and rated. External agency ratings are used in the case of financial institutions.

RISK MANAGEMENT (continued)

53

Collateralised Credit Exposure with Eligible Collateral

GrossCredit

Exposure

Collateral-ized

Exposure

Financial Collaterals

Bank Guarantees Real Estate

Collateralised Credit Exposure with Eligible Collateral as at 31st December 2016 (KD ‘000)

Cash items 28,220 - - - -

Claims on sovereigns 824,766 - - - -

Claims on public sector entities (PSEs) 145,718 198 198 - -

Claims on banks 1,208,393 - - - -

Claims on corporate 2,762,366 1,188,236 468,516 18,459 165,204

Regulatory retail exposures 559,550 39,508 21,513 - 515

Past due exposures 44,226 13,846 1,643 - 1,575

Other exposures 488,645 462,135 26,396 - 78,711

Total 6,061,883 1,703,923 518,267 18,459 246,005

Collateralised Credit Exposure with Eligible Collateral as at 31st December 2015 (KD ‘000)

Cash items 16,480 - - - -

Claims on sovereigns 694,649 - - - -

Claims on public sector entities (PSEs) 117,107 659 659 - -

Claims on banks 1,184,128 3 3 - -

Claims on corporate 2,359,202 974,717 307,641 15,108 202,232

Regulatory retail exposures 532,970 41,364 25,573 58 860

Past due exposures 42,789 14,508 8,290 - 875

Other exposures 805,157 724,942 183,946 - 125,007

Total 5,752,482 1,756,193 526,112 15,166 328,974

A N N U A L R E P O R T | 2 0 1 6

54

RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Credit Risk Mitigation (continued)Credit Risk Exposure After Credit Conversion Factor and CRM

Before CRM CRM Net exposure

Credit Risk Exposure After Credit Conversion Factor and CRM as at 31st December 2016 (KD ‘000)

Cash items 28,220 - 28,220

Claims on sovereigns 716,573 - 716,573

Claims on public sector entities (PSEs) 145,717 (198) 145,519

Claims on banks - rated 685,229 - 685,229

Claims on banks - unrated 17,475 - 17,475

Claims on corporate 2,398,389 (652,179) 1,746,210

Regulatory retail exposures 547,377 (22,029) 525,348

Past due exposures 43,453 (3,218) 40,235

Other exposures 436,462 (105,107) 331,355

Total 5,018,895 (782,730) 4,236,164

Credit Risk Exposure After Credit Conversion Factor and CRM as at 31st December 2015 (KD ‘000)

Cash items 16,481 - 16,481

Claims on sovereigns 671,290 - 671,290

Claims on public sector entities (PSEs) 117,106 (659) 116,447

Claims on banks - rated 697,218 - 697,218

Claims on banks - unrated 24,912 (3) 24,909

Claims on corporate 2,047,872 (524,981) 1,522,891

Regulatory retail exposures 522,554 (26,491) 496,063

Past due exposures 41,079 (9,165) 31,914

Other exposures 804,819 (308,953) 495,866

Total 4,943,331 (870,252) 4,073,079

RISK MANAGEMENT (continued)

55

Market Risk for Trading Portfolio, Foreign Exchange and Commodities ExposuresThe Group uses a standardised approach for measuring the market risk of its portfolio consisting of FX, equity and derivative instruments.

Capital Requirements for Market Risk Exposures

Capital Requirements for Market Risk Exposures 2016 (KD ‘000)

2015 (KD ‘000)

Equities position risk - 1,853

Foreign exchange risk 400 702

Minimum capital required for market risk 400 2,555

Operational RiskThe Group uses a standardised approach to measure operational risk. The profit for each business line is determined using the transfer pricing methodology and the mapping policy provides detailed guidelines on the mapping of business income into eight standard business lines.

The Group’s mapping policy has been approved by the Board of Directors.

Capital Requirements for Operational Risk

Capital Requirements for Operational Risk Exposures 2016 (KD ‘000)

2015 (KD ‘000)

Trading and sales 6,515 4,947

Commercial banking 21,989 21,505

Retail banking 6,061 4,946

Asset management 35 42

Minimum capital required for operational risk 34,600 31,440

A N N U A L R E P O R T | 2 0 1 6

56

RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Equity Position in the Banking BookAll equity positions that are not marked as trading exposures are classified as exposures in the banking book.The Group’s holdings of listed equities are valued based on the closing bid price. For unquoted shares, the valuation conforms to IAS 39 requirements. All investments require the approval of the Investment Committee or the Board Credit & Investment Committee, depending on the amount of exposure. The accounting techniques and valuation methodologies used, including key assumptions used in the valuation, are disclosed in the significant accounting policies note to the financials. The types and nature of investments classified as publicly traded and privately held are disclosed in note 22 of the consolidated financial statements.

Equity risk is monitored by specifying the maximum asset allocation as a percentage of total assets of the Bank. The Bank has also put in place sector, market and stop loss limits.

A maximum portfolio limit is also established for unlisted equity exposure as a percentage of Maximum Investment Limit. Each month a comprehensive portfolio report is presented to the Board Credit & Investment Committee on the performance of the equity investment portfolio and its compliance with the various limits laid down in the Bank’s investment policy.

Total Value of AFS Investments Disclosed in the Consolidated Statement of Financial Position

Total Quoted Unquoted

Total Value of Investments Disclosed in the Consolidated Statement of Financial Positionas at 31st December 2016 (KD ‘000)

Investment securities – available for sale 214,821 162,855 51,966

Total Value of Investments Disclosed in the Consolidated Statement of Financial Positionas at 31st December 2015 (KD ‘000)

Investment securities – available for sale 336,689 260,807 75,882

Capital Requirements for Market Risk Exposures

Total Investment Gains 2016 (KD ‘000)

2015 (KD ‘000)

Realised gains recorded in the consolidated statementof income (2,517) (448)

Unrealised gains recorded in the consolidated statementof changes in shareholders’ equity 9,996 12,943

100% of the above included in Tier 1 Capital 9,996 12,943

Capital Requirement for Investments

Total Investment Gains 2016 (KD ‘000)

2015 (KD ‘000)

Investment securities – available for sale 16,028 24,168

RISK MANAGEMENT (continued)

57

Interest Rate Risk in the Banking Book (IRRBB)The nature of IRRBB, key assumptions and the frequency of IRRBB measurement, are set out below:

Interest rate risk is limited as a majority of loans are re-priced with any change in the applicable Discount Rate except retail instalment loans committed for a fixed rate. However, the pricing of deposits is not linked to the Discount Rate and hence the interest rates on deposits are not re-priced together with the loans. The resulting mismatch gives rise to interest rate risk (basis risk). The other elements in the consolidated statement of financial position carrying interest rate risk are Treasury Bonds, Sovereign Bonds and other debt debt securities in the investment portfolio.

Deposits are re-priced based on their final maturity or, if linked to a floating rate index, on the re-pricing date. Deposits that are insensitive to interest rate movements are categorised separately. Assets and liabilities that do not have definite maturities/re-pricing intervals, and off-balance sheet items, will be assigned to the respective time-bands according to judgment, empirical studies and the Bank’s past experiences. The earnings at risk are calculated based on interest rate re-pricing gaps. Simulation analysis is also conducted under different interest rate scenarios and the impact is quantified at regular intervals. Exposure against limits and simulation analysis are monitored regularly by ALCO. The Group hedges the interest rate risk in the banking book, where appropriate, by using derivative instruments like interest rate swaps, etc. Hedging is done in the same currency and covers the period of the underlying transaction.

Interest Rate Risk in Banking Book (IRRBB) 2016 (KD ‘000)

2015 (KD ‘000)

1bp sensitivity in KD book 118 129

1bp sensitivity in USD book 7 9

The Group recognises the need to be transparent and has implemented a comprehensive corporate governance and disclosure policy. It has made maximum public disclosure to enable stakeholders to assess the risk profile of the Group; to assess the risk measurement and management techniques used; and to make informed decisions when dealing with the Group. The Group has detailed a comprehensive risk framework in compliance with the regulatory guidelines and identified key risks – detailing the measurement and monitoring techniques under each risk area.

Remuneration PracticesThe Group has established policies over remuneration practices and guides its remuneration based on performance and risk. For this purpose, the Group has set up the Board Nomination and Remuneration Committee (BNRC) to independently assess and monitor remuneration systems for Kuwait, ACIC and branches in UAE whereas for ABK-Egypt, in line with Central Bank of Egypt guidelines’ Renumeration Committee has been set up. This committee’s mandate is to ensure appropriate policies, performance measurement, remuneration and risk tolerance, and award and disclosure systems are in place.

The remuneration policy provides the basis of determining remuneration to the staff, Managers and Senior Executives based on their responsibilities and authority levels. Remuneration is determined based on this policy, including performance rewards. These policy guidelines apply to the group as a whole, including its overseas branches while taking into consideration the respective country’s labour laws.

The material risk takers are those executives whose activities have a material impact on the risk profile of the Group.

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58

RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Remuneration Practices (continued)The guiding principle of the remuneration policy is pay for performance. The remuneration has fixed and variable components, which comprises both a cash and deferred component. Specific employee role and responsibility-related performance metrics are designed in the form of Key Performance Indicator Metrics (KPIs) to continuously evaluate executive and staff performance, which is evaluated based on a combination of:a) targets and their achievement measured on a transparent basis and b) behavioural dimension or expected behaviours which represent robust and prudent leadership, and applied

for determining rewards.

The objective of the policy is to link reward to performance, while considering the risk over a long-term horizon through a claw back on the deferred remuneration.

The BNRC regularly reviews the remuneration policy and updates as needed. The policy was reviewed in 2016 and updated.

The remuneration of risk and audit employees is not linked to the Group’s financial performance. The Board Risk Committee and Board Audit Committee oversee the remuneration of risk and audit staff respectively, based on performance measures determined by the respective committees.

The KPIs are in the form of a balanced scorecard and are based on financial, risk and control parameters, as well as strategic achievements. Both Ex-Ante and Ex-Post measures are used to determine compensation. In determining remuneration that takes into account the risks taken by business executives, where future risks and crystallisation of such risks are considered through appropriate deferred remuneration schemes and claw back. Performance-related rewards are part-retained and subject to long term performance review.

The Group has put in place ex-ante operating profits, net profit, NPLs and ex-post matrices like trends in NPLs, Peer comparison in key matrix etc. that are used to determine rewards taking long term view including deferred payment of such rewards and claw back where the criteria are not met. The performance of the business divisions is linked to the Group’s overall performance, the divisional performance and the personal contribution; however, the performance of the control functions is only linked to the divisional performance and personal contribution. There is a matrix by which the overall performance bonus pot is directly impacted by the financial achievement. If the achievement is below target, the performance bonus pool is suitable reduced based on the matrix.

The Group typically defers a portion of its variable reward pay out for Executive Management over future periods. Future performance assessment incorporates factors directly related to claw-back considerations prior to vesting.

As part of its variable remuneration, the Group uses a cash performance bonus, as well as deferred reward schemes. The Group does not have any stock/stock option scheme.

RISK MANAGEMENT (continued)

59

Details of the Renumeration Paid to Senior Management and Other Material Risk Takers

Total Value of Remuneration Awards for the 2016 Fiscal Year

No ofEmployees

Unrestricted (KD ‘000)

Deferred (KD ‘000)

Fixed Remuneration

Cash-based 66 4,409 Nil

Other 66 801 Nil

Variable Remuneration

Cash-based 66 1,521 237

SeniorManagement

Material RiskTakers

Financial & Control Function

No % KD‘000 No % KD

‘000 No % KD‘000

Variable 26 39% 884 23 35% 561 17 26% 312

Guaranteed bonus 26 39% 148 23 35% 159 17 26% 84

End of service payments 3 43% 31 3 43% 175 1 14% 69

Total Value of Remuneration Awards for the 2015 Fiscal Year

No ofEmployees

Unrestricted (KD ‘000)

Deferred (KD ‘000)

Fixed Remuneration

Cash-based 62 3,933 Nil

Other 62 906 Nil

Variable Remuneration

Cash-based 62 1,396 252

SeniorManagement

Material RiskTakers

Financial & Control Function

No % KD‘000 No % KD

‘000 No % KD‘000

Variable 21 35% 832 22 37% 490 17 28% 326

Guaranteed bonus 22 35% 146 23 37% 129 17 27% 72

End of service payments 2 40% 33 2 40% 312 1 20% 25

A N N U A L R E P O R T | 2 0 1 6

60

RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Leverage RatioWithin the framework of implementing Basel III reforms, Central Bank of Kuwait has issued regulations (circular no. 2/RB/342/2014 dated 21/10/2014) on the application of a leverage ratio. The regulation prescribes a minimum ratio requirement of 3 per cent and is calculated as Tier 1 capital divided by the leveraged exposures. The leverage ratio computed as of 31st December 2016 & 31st December 2015 is disclosed in the table below.

Summary Comparison of Accounting Assets vs. Total Leverage Ratio Exposure

Summary Comparison of Accounting Assets vs. Total Leverage Ratio Exposure 2016(KD ‘000)

2015(KD ‘000)

S.N. Item

1 Total consolidated assets as per published financial statements 4,284,813 4,359,064

2Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting purposes but outside the scope of regulatory consolidation

- -

3Adjustment for fiduciary assets recognized on the balance sheet pursuant to the accounting policy but excluded from the leverage ratio exposure measure

- -

4 Adjustments for derivatives 6,251 6,831

5 Adjustment for securities financing transactions. - -

6 Off-balance sheet exposures (i.e. credit equivalent amounts) 591,681 489,133

7 Other exposures - -

8 Total exposures in the Leverage ratio measure (i.e. total of above-mentioned items) 4,882,745 4,855,028

RISK MANAGEMENT (continued)

61

Leverage Ratio Common Disclosure

Leverage Ratio Common Disclosure 2016(KD ‘000)

2015(KD ‘000)

S.N. Item

1On-balance sheet items (excluding derivatives and SFTs, but including collateral)

4,473,682 4,535,579

2 (Asset amounts deducted in determining Basel III Tier 1 capital) - -

3 Total on-balance sheet exposures (excluding derivatives and SFTs) 4,473,682 4,535,579

Derivative Exposures

4Replacement cost associated with all derivatives transactions(i.e. net of eligible cash variation margin)

1,172 155

5 Add-on amounts for PFE associated with all derivatives transactions 5,079 6,676

6Gross-up for derivatives collateral provided where deductedfrom the balance sheet assets pursuant to the operativeaccounting framework

- -

7 (Deductions of receivables assets for cash variation marginprovided in derivatives transactions) - -

8 (Exempted CCP leg of client-cleared trade exposures) - -

9 Adjusted effective notional amount of written credit derivatives - -

10(Adjusted effective notional offsets and add-on deductionsfor written credit derivatives)

- -

11 Total derivative exposures (sum of lines 4 to 10) 6,251 6,831

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62

RISK MANAGEMENT STRUCTURE AND PROCESS (continued)Leverage Ratio (continued)

Leverage Ratio Common Disclosure 2016(KD ‘000)

2015(KD ‘000)

S.N. Item

Securities Financing Transaction Exposures

12Gross SFT assets (with no recognition of netting), after adjustingfor sale accounting transactions

- -

13(Netted amounts of cash payables and cash receivables of gross SFT assets)

- -

14 CCR exposure for SFT assets - -

15 Agent transaction exposures - -

16Total securities financing transaction exposures(sum of lines 12 to 15)

- -

Other Off-Balance Sheet Exposures

17 Off-balance sheet exposure at gross notional amount 1,559,422 1,416,321

18 (Adjustments for conversion to credit equivalent amounts) (967,741) (927,188)

19 Off-balance sheet items (sum of lines 17 and 18) 591,681 489,133

Capital & Total Exposures

20 Tier 1 capital 523,976 507,991

21 Total exposures (sum of lines 3, 11, 16 and 19) 5,071,614 5,031,543

Leverage Ratio

22 BASEL III Leverage Ratio 10.33% 10.10%

RISK MANAGEMENT (continued)

63

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A N N U A L R E P O R T | 2 0 1 6

64

BRANCH NETWORK

65

Main Branch Ahmad Al Jaber Street, Safat SquareP.O. Box 1387 Safat, 13014 Kuwait Tel 22411100 /22400900Fax: 22417284Email: headoffice@abkuwait.com

Salmiya Branch Almulla Complex,Salem Al Mubarak StreetP.O. Box 1387, Safat, 13014 Kuwait Tel: /25710088 /25716562 25731411Fax: 25721964Email: salmiyabr@abkuwait.com

Hawally Branch Al Ahli Bank Building, Tunis Street P.O. Box 1387, Safat, 13014 Kuwait Tel: 22612700 /22643877Fax: 22659203Email: hawallybr@abkuwait.com

Fahaheel BranchAl Manshar Complex,Near Al Kout Mall P.O. Box 1387, Safat, 13014 Kuwait Tel: 23912201 /23912200Fax: 23927685 Email: fahahelbr@abkuwait.com

University Branch Kuwait University, Khaldiya (Library/ Administration Complex)P.O. Box 1387 Safat, 13014 Kuwait Tel: 24819177 /24819176 Fax: 24837508 Email: universitybr@abkuwait.com

Shuwaikh Branch Banks Street P.O.Box 1387 Safat, 13014 Kuwait Tel: 24815172 /24815171 Fax: 24838524 Email: shuwaikhbr@abkuwait.com

Sabah Hospital Branch Sabah Hospital P.O. Box 1387, Safat, 13014 Kuwait Tel: 24819478/22437546Fax: 24838525Email: sabahbr@abkuwait.com

Sharq BranchBehbehani Complex P.O. Box 1387, Safat, 13014 KuwaitTel: 22437546 /22437545 Email: sharqbr@abkuwait.com

Farwaniya BranchAl Ettehad Complex, Habib Munawer Street P.O. Box 1387, Safat, 13014 Kuwait Tel: 24740977 /24731950 Fax: 24737429Email: farwaniyabr@abkuwait.com

Sabhan BranchIndustrial Area, Block 7, Building 3P.O. Box 1387, Safat, 13014 Kuwait Tel: 24714655Fax: 24747136Email: sabhanbr@abkuwait.com

Jabriya Branch Block 7, Street 102Near the police stationP.O. Box 1387, Safat, 13014 Kuwait Tel: 25333691 /25333690Fax: 25320017Email: jabriyabr@abkuwait.com

Jahra Branch Al Waha Area, Block 3 Near Al Waha PolyclinicP.O. Box 1387, Safat, 13014 Kuwait Tel: 24559552 /24559495Fax: 24557046Email: jahrabr@abkuwait.com

Jahra Branch (2) Mubarak Complex 2, Jahra Commercial Center P.O. Box 1387, Safat, 13014 Kuwait Tel: 24564208/24564207 Fax: 24564301 Email: jahra2br@abkuwait.com

Qurain BranchAl Qurain Cooperative Building Near the police stationP.O. Box 1387, Safat, 13014 KuwaitTel: 25422854/25422853Fax: 25422851Email: qurainbr@abkuwait.com

Ministries Complex Branch Ministries Complex, Block 17 P.O. Box 1387, Safat, 13014 KuwaitTel: 22439093/22439092Fax: 22439096Email: mincomplexbr@abkuwait.com

Domestic Branches

A N N U A L R E P O R T | 2 0 1 6

66

BRANCH NETWORK (continued)

Galleria 2000 Branch Galleria 2000, Salem Al Mubarak Street, Salmiya P.O. Box 1387, Safat, 13014 KuwaitTel: 25713500 /25713400Fax: 25718400Email: galleriabr@abkuwait.com

Al-Zahra Branch Zahra Area, Block 4, Association of Cooperative Al Zahra P.O. Box 1387, Safat, 13014 KuwaitTel: 25245077 /25245088Fax: 25246183 Email: alzahrabr@abkuwait.com

Liberation Tower Branch Liberation Tower, Safat P.O. Box 1387, Safat, 13014 KuwaitTel: 22542908 /22493507Fax: 22492506Email: libtowerbr@abkuwait.com

Mansouriya BranchBlock 2, Al Arabi StreetP.O. Box 1387, Safat, 13014 KuwaitTel: 22542908 /22542907Fax: 22542914Email: mansouriya@abkuwait.com

Hadiya Branch Block 1, Hadiya Cooperative P.O. Box 1387, Safat, 13014 KuwaitTel: 23941373 /23941536Fax: 23941548Email: hadiyabr2@abkuwait.com

Ahmadi BranchEast Ahmadi, Mustafa Karam Co., Building 15, Ground Floor No.1P.O. Box 1387, Safat, 13014 KuwaitTel: 23989592 /23989589 Fax: 23989615Email: ahmadibranch@abkuwait.com

Jleeb Al-Shuyoukh Branch Al Jawhara Mall, Block 9/8/7, Building A 34, Street 1, Ground FloorP.O. Box 1387, Safat, 13014 KuwaitTel: 24341877Fax: 24341442Email: jleebbr@abkuwait.com

Al Sulaibiyah – Al Forda Branch Government Property, Al-WaferMarketing Services,Shop No: B1/G/12/BA/03P.O. Box 1387, Safat, 13014 KuwaitTel: /24643933 /24643932 24643930Fax: 24643931Email: sulaibiyah_forda@abkuwait.com

Khaitan Branch Khaitan, Abraj Rona Real-EstateComplex P.O. Box 1387, Safat, 13014 KuwaitTel: 24753325 /24752696Fax: 24752696Email: khaitanbr@abkuwait.com

Al Bahar Center Branch Al Bahar Center, Tunis Street, Block 61, Building 81P.O. Box 1387, Safat, 13014 KuwaitTel: 22613580Fax: 22613426Email: albaharcent.632@abkuwait.com

Andalous BranchCommercial Area, Block 14, Street 602P.O. Box 1387, Safat, 13014 KuwaitTel: 24891802 /24891754Fax: 24891094Email: andalusbr@abkuwait.com

Salwa Branch Salwa Area, Block 2, Street 1, Avenue 315, Ground Floor P.O. Box 1387, Safat, 13014 KuwaitTel: 25644293Fax: 25644273Email: salwabr2@abkuwait.com

Al Shaab Branch Block 7, Abdullah Rawdhan StreetP.O. Box 1387, Safat, 13014 KuwaitTel: 22641838 /2234837Fax: 22641831Email: alshaab@abkuwait.com

Al Firdous Branch Block 7, First Street(opposite Al Firdous Cooperative)P.O. Box 1387, Safat, 13014 KuwaitTel: 24897663 /24897636Fax: 24897420Email: alferdous@abkuwait.com

South Sabahiya Branch Block 1, South Sabahiya(next to Al Ahmadi Municipality) P.O. Box 1387, Safat, 13014 KuwaitTel: 23624207 /23624206Fax: 23624209Email: southsabahiya@abkuwait.com

Domestic Branches (continued)

67

ABK Egypt - Head OfficeSmart Village, Desert Road, Cairo Building No. B227 - B228, 12577EgyptTel: +202 35352790/ 91Fax: +202 35370522

Greater CairoZamalek26 104th July St., Zamalek, Cairo

Talaat Harb10 Talaat Harb St., Evergreen Building 4th Floor, Down Town

El Sayeda Zeinab227 Port Said St., Sayeda Zeinab

Shobra49A Shobra St., Shobra

Manial3 Mathaf El Manial, Manial

New Maadi1/4 Laselki St., Maadi

Helwan100A Mansour St., Helwan

Heliopolis52 Nazeeh Khalifa St., Heliopolis

El Hegaz299 El Hegaz St. Ground floor, Heliopolis

Dubai BranchAl Ahli Bank of Kuwait (KSCP) Opp. Hamarain CentreP.O Box 1719 Abu Baker Al Siddique Road Deira, Dubai UAE

Contact Details: Telephone: (+9714) 2681118/ 2687171Fax: (+9714) 2684445 Website: www.eahli.comEmail: info@ahlibank.ae

Abu Dhabi BranchMuroor RoadEibfs BuildingGround floor, P.O. Box 7941 Abu Dhabi UAE

Contact Details: Telephone: (+9712) 4015150Fax: (+9712) 4439070 Website: www.eahli.comEmail: info@ahlibank.ae

El-Tahra12 Saraya El Koba Sq., in frontof Tahra Palace

Roxy80 El Khalifa El Maamoun St., Heliopolis

Nasr City13 Abou Dawood El-Zahery St.,Nasr City

10th of Ramadan CityNo. 25 City Center,10th of Ramadan City

Giza:32B Mourad St., Giza

Faisal:7-6, El Mansoureya Housing,end of Faisal St.

Mohandessin4 Syria St., Mohandessin

Sudan128 Sudan St., Mohandessin

6th of October (Hosary) Block 18/1/A - Beside El Hossary Mosque - Central road - 6th Of October - Al Madina Center Tower

Karma101, Admin Area, Karma 1 Compound, Sheikh Zayed

UAE Branches Egypt Branches

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68

BRANCH NETWORK (continued)

AlexandriaPatrice Le Momba2 Patrice Le Momba St., Bab Sharq

Semouha38 Tout Ankh Amoun St., Semouha

El Montaza746 El Gueish St., El Mandara

Loran477 El Gueish Road, Cornish, Loran

Nabi Daniel15 Mahmoud Azmy St., Attareen

DeltaMansoura28 Ali Mubarak St. from Saad Zaghloul St., Toreel

Tanta48 El Gueish St.

Zagazig30 El Galaa St.

DamanhourBuilding No.2, Intersection of Omar Ibn El Khattab St. & Abd El Salam El Shazly St.

CanalPort SaidIntersection of Gomhoreya St., Damietta St. & Hafez Ibrahim St., El Sharq

SuezBuilding No.1, Intersection of El Borg Road & 23rd of July St.

DamiettaZaher District, Corniche El Nile, Damietta, Ras El Bar Road

IsmailiaEl Gawhara Tower,Shebin El Koum St.

Red SeaHurghadaEl Hadaba El Shamalia - Hurghada - Red Sea

Sharm El Sheikh - HadabaShores Amphorus Hotel, Hadabet Om El Seed

Upper EgyptAswan82 Abtaal El Tahrir St., Bandar Aswan

AssiutIntersection of Thawra St. & Salah Salem St.

SohagIntersection of No. 15 St. & El Gomhereya St., El Hag Ahmed Dief Allah Towers, Sohag

Menia191 Cornich El Nile St.

Egypt Branches (continued)

Ahlan Ahli 1 899 899www.eahli.com

ANNUAL REPORT 2016