Arab African streamlines balance sheet

08 July 1994

The Cairo-based Arab African International Bank (AAIB) is close to eliminating non-performing loans and investments from its balance sheet, the bank announced at its 29 June shareholders' meeting.

AAIB is owned by the Central Bank of Egypt, the Kuwaiti Finance & Planning Ministry and other Arab interests. It has branches in the UK, the UAE and Lebanon as well as in Egypt. The bank, set up in 1964, became weighed down in the 1980s with a large amount of non-performing sovereign loans, mainly to Arab countries.

The bank says that by the end of 1993 total non-performing sovereign loans were written down in value to just $51 million. These were sold off during the first quarter of 1994. The total non-sovereign loans of $285 million were almost entirely covered by provisions and other funds.

The main source of funds for the balance sheet streamlining has been the founders' subordinated deposits. These fell to $107 million at the end of 1993 from a peak of $510 million during 1991. The bank says that the remaining balance of $107 million will be used during 1994 to offset losses resulting from the disposal of sovereign debt and for further write- offs of non-performing corporate loans and investments.

'We are now fully confident that our balance sheets continue to reflect the true realisable value of our assets,' the bank said. Total assets at the end of 1993 were $974 million, slightly lower than the previous year.

The bank has commissioned an outside consultant to draw up a future growth strategy. This will include traditional banking services as well as an increasing involvement in private and investment banking.

The bank says that the consultant's study shows that AAIB's presence in the Egyptian, UAE, Lebanese and London markets will enable it to expand its status as an investment bank.

A total of $36 million in fresh equity has been deployed to boost the activities of the UAE, London and Beirut branches. AAIB says it sees particularly promising prospects in the Lebanese market.

In Egypt the bank's local branch has been granted a licence to deal in Egyptian pounds. It is planning to open two new branches in Cairo in 1994, and has an overall target of nine branches.

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