The London-based ABC International Bank (ABCIB) has begun taking over the European and US branches of its parent bank, Arab Banking Corporation (ABC). The restructuring is part of a plan, first mooted in 1991 but never fully carried out, to make ABCIB the centre of ABC's operations in the West. The London bank is reporting a 23 per cent rise in net profits for last year to £11.3 million ($18.5 million).

General manager Abdulmagid Breish says that ABCIB is absorbing ABC's separate London branch, which has assets of about $1,200 million, and hopes to finish this by the end of March. The New York branch, with assets of roughly $1,500 million, will be integrated by the end of 1998. The Milan branch, with a balance sheet of about $300 million, will then be integrated after the approval of regulators. 'After that, we may have a look at what remains in Europe,' Breish says. ABC has two other subsidiaries in Europe, one small bank in Germany and another in Monaco.

To support its enlarged balance sheet, ABCIB plans to increase its capital by about £200 million ($327.2 million), using a combination of subordinated loans from the parent bank and retained earnings and capital from the branches.

The changes, which are part of a worldwide restructuring within ABC, are intended to cut the costs of its operations in the West by centralising them in London. They should also increase co-ordination within different parts of ABC's European businesses and make it easier to market the group, as well as creating tax savings, Breish says.

The consolidation will mean that a large chunk of the ABC group's balance sheet is to be held by a bank with an OECD risk weighting and Bank of England supervision. The reorganisation has cost some jobs: fifteen staff members were made redundant in London last year and a further eight lost their jobs in the Paris branch.

ABCIB was set up in London in 1991 to be the European flagship for the ABC group. This plan was never fully carried out - only the Paris branch was integrated - because ABC became distracted by the fallout from the 1991 Gulf War, and suffered bad debt problems left over from the 1980s and difficulties with the US government because of Libya's shareholding in the bank. ABC is now reorganising itself internally (MEED 16.1:98, Feature).

ABCIB specialises in short-term trade finance, though it has increasingly been getting involved in loan syndications. The bank's net interest income rose by 5.6 per cent to £17.7 million ($29.0 million) because of higher interest earnings from debt securities and certificates of deposit. Gross fee income rose by 15.2 per cent to £10.8 million ($17.7 million). Profits were also helped by a lower tax bill in 1998. The bank boosted its customer deposits, which rose by 45 per cent during 1997 to £117.6 million ($192.4 million). However, it remains heavily reliant on interbank funding, with a 33 per cent increase in deposits from other banks to £737.9 million ($1,207.2 million). More than 80 per cent of its loans mature within one year.