The sale of shares in the Hong Kong-based International Bank of Asia (IBA) realised a $51 million profit for the Bahrain-based Arab Banking Corporation (ABC), ABC said in a statement to shareholders on 20 February. This confirms the extent to which the sale of 45 per cent of IBA contributed to ABC’s 1993 net profits of $135 million (MEED 18:2:94).
The deal has enabled ABC to propose a 20 per cent increase in dividends to $60 million, or $0.60 a share.
The statement to shareholders announced ABC’s full figures for 1993. A 9 per cent cut in total expenses, taking them back to 1989 levels, also contributed to the 70 per cent increase in profits, ABC says. The annual general meeting is scheduled for 3 April in Bahrain.
Total assets fell by 5 per cent to $18,433 million due to the fall in the value of the dollar against European currencies, ABC says. Loans and advances fell by 7 per cent to $9,779 million. This was due to an increased emphasis on short-term trade financing loans with their faster turnover; 51 per cent of the total loans had maturities of less than a year, ABC says.
The demand for loans in Europe was slow in 1993, but Bahrain, New York and Singapore increased direct and syndicated lending activity. ABC is predicting a rise in its syndicated and project financing business in 1994. Several large project-related financings in the Gulf were being finalised at the end of 1993 by ABC’s Bahrain and Milan branches, such as the 10-year loan to Saudi Consolidated Electric Company for the Western Region (Sceco-West – MEED 29:10:93, Saudi Arabia).
The 17 per cent fall in customer deposits and certificates of deposit to $8,288 million was also attributed to exchange rate factors.
Net interest income fell to $401 million, equivalent to 57 per cent of total operating income of $703 million, compared with 64 per cent of operating income in 1992. The fall was due to the effect on the group’s Spanish subsidiary, Banco Atlantico, of a high level of non-performing loans and the depreciation of the peseta. In addition, the bank says certain sovereign debt rescheduling arrangements were less favourable in 1993.
Non-interest income for 1993 was high, again much of it thanks to the IBA sale. Fees from trade financing and commercial banking provided $141 million. Gains on securities dealings rose to $41 million from $15 million the year before.
Loan loss provisions rose by 13 per cent to $145 million, representing 8 per cent of all loans and advances. ABC says the figure would have been lower but for stricter provisioning required by the Spanish government which affected Banco Atlantico. Non-performing loans fell by 15 per cent to $1,479 million in 1993, due to the restructuring of Argentinian debts. Non-performing sovereign loans amounted to $893 million, about $436 million of it to Brazil, which has begun preparations for a restructuring programme, ABC says.