BACB profits rise on provision write-backs

10 May 1996

London-based British Arab Commercial Bank (BACB), known until last March as UBAF Bank, reported net profits of £23 million ($34.7 million) in 1995, a rise of 10 per cent from 1994. Operating income actually fell, but net profits were boosted by the write-back of £21 million ($31.7 million) in provisions.

Operating income fell 7.6 per cent to £33.3 million ($50.3 million), because of overdue interest payments and lower fees and interest earnings on trade and project finance, a bank statement said. BACB is paving a £15 million ($22.7 million) dividend, up from 1994's £10 million ($15.1 million). The provision writeback was largely due to resolution of a late payment dispute in the US and recovery of a provision made for a long-term credit to a customer country which had since repaid some of the facility, the bank's assistant general manager for finance, Christian Denby. says.

Following recent changes in BACB's shareholding structure, subsidiaries of banking giant HSBC Holdings now own 46.51 per cent of the bank. HSBC's Midland Bank increased its stake to 41.51 per cent in February 1995, while the British Bank of the Middle East, another HSBC unit, bought a 5 per cent stake. Libyan Arab Foreign Bank cut its holding by 11.5 per cent to 25 per cent. Morocco's Bank al-Maghrib, Banque Exterieure D'Algerie and Central Bank of Egypt each hold 7.86 per cent. Rafidain Bank has 4.91 per cent.

BACB's assets rose 8.9 per cent to £972.8 million ($1,469 million). But pre-tax returns on average assets, excluding provisions released, fell to 2.4 per cent from 3.6 per cent. Loans and advances to banks fell 8.6 per cent to £375.9 million ($567.6 million) while loans to customers grew 28 per cent to £347.0 million ($523.9 million). Shareholders' equity rose to £116.1 million ($175.3 million) from £108.4 million ($163.7 million). Lower fee income in 1995 reflected a fall in demand for letter of credit refinancing and medium-term trade finance.

BACB said the slowdown was due to 'adjustments to new circumstances' and saw 'definite signs that more normal patterns are being restored in 1996.' In 1996, BACB will focus on trade finance in the Middle East. 'The bank is taking a particular interest in developing long-term relationships in Egypt,' Denby said. Regeb Misellati is standing down after three years as the bank's chairman and will be replaced by BACB's current vice-chairman, John Hill.

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