Arab Banking Corporation (ABC) has announced that it will not distribute a dividend to its shareholders for 1995, as part of a strategy to strengthen its capital base.

ABC announced a consolidated net profit of $116 million for the year, up 10.5 per cent on 1994. Loan loss provisions were up to $84 million from $70 million in 1994. Net profits for 1995 are to be appropriated to retained earnings, meaning that shareholder funds to the end of 1995 were boosted by 8.3 per cent to $1,540 million, compared to $1,422 at the end of 1994.

A statement issued by the bank said that the lack of dividend was due to ‘the need to strengthen the group’s capital resources to meet impending challenges for the global banking industry.’ President and chief executive Ahmed Abdullatif referred to recent mergers and acquisitions in the banking industry, saying, in an interview, that in future years. ‘the market will only accept strongly-capitalised banks.’ He added: ‘We feel we should take the opportunity to strengthen our capital base.’ Abdullatif said that the measure would give the bank more freedom to take on new investments, saying that ABC should widen its activity in the Arab world, which currently accounts for just 10 per cent of total assets. ABC expects to open a representative office in Abu Dhabi this year.

Abdullatif attributed the fall in interest income during 1995 to lower income from Brady bonds acquired in 1994. ABC reported a 15 per cent drop in net profits to $29 million in the first quarter of 1996, compared with the same period during the previous year. Abdullatif attributed this to expansion costs at International Bank of Asia, in which ABC holds a controlling stake, investment in new technology and staff and foreign exchange re-evaluations connected with Banco Atlantico Group, which is controlled by ABC, and which operates mainly in the Spanish-speaking world.