The bank's recent financial performance has provided strong foundations for its overseas push. Net income for 2005 hit $286 million, up 33 per cent on the previous 12 months. Loans and advances and customer deposits rose by 19.2 per cent and 33.6 per cent respectively, while total assets climbed by 28.4 per cent to $8,078 million. 'We are not going to shy away from the fact that we had a good year,' says chairman and managing director Abdulmajeed al-Shatti.

Like most other local financial institutions, Commercial Bank has benefited from the benign economic climate at home; Kuwait's nominal gross domestic product (GDP) is estimated to have grown by 35 per cent in 2005. But, with four new international banks - Citigroup, HSBC, BNP Paribas and National Bank of Abu Dhabi - winning licences to start operations in the state, and Islamic newcomers Kuwait Real Estate Bank (KREB) and Boubyan Bank entering the scene, the competition for financial services is hotting up.

Al-Shatti is confident most of the local conventional banks should be able to cope. 'International banks have been active in Kuwait for years: the only difference is that now you see their logos and their physical presence,' says Al-Shatti. 'As for Islamic banks, I believe there will always be a certain segment of the population who would like to bank with them. But not everyone will. Many customers have been banking with us for years and there is a great deal of loyalty in the market.'

Al-Shatti sees the focus on customer service and innovative products as key to retaining and winning new clients on the retail banking side. And while international banks have the reach and resources to offer more competitive margins, there is still more than enough business to go round. Even the recent spate of stock market corrections is unlikely to have much of an impact locally, thanks largely to strict lending regulations enforced by the Central Bank of Kuwait. 'I'm not worried, as we were not really affected by the correction,' says Al-Shatti. 'We've always been very selective when it comes to lending, and we also have many sophisticated clients who liquidated before the crash. Many of them invested in well-run, fundamentally sound companies and we also had good collateral. There has been no rise in the default rate. In fact, I don't even think we've seen one default.'

Nevertheless, local banks are not expected to witness the same high rate of earnings from equity investments this year and this will have a dampening effect on profit growth, expected to be in the region of 10-20 per cent. 'I think we've seen off most of the correction already, although growth won't be like last year, for sure,' Al-Shatti says.

Tight regulation may have shielded local banks from the worst effects of the share meltdown, but it is also one of their biggest bugbears, with the 80:20 rule receiving the most criticism. Earlier in the year, in an attempt to work around the rule, Commercial Bank with National Bank of Kuwait launched a euro commercial note programme, but this was promptly cancelled by the central bank before it got off the ground.

'We've been living with the 80:20 rule for a year now and it has not affected us as much as we first thought,' says Al-Shatti. 'As business people, we hope it can be relaxed, but I wouldn't say we are disappointed. I think the central bank has done a great job to regulate the banking sector.'

As its fiscal performance strengthens and opportunities diminish at home, the bank is looking to expand outside. It recently acquired three other Kuwaiti institutions' stakes in Bank of Bahrain & Kuwait (BBK), taking its tot