BMB restructures capital to support new focus

01 December 1995

Bahrain Middle East Bank (BMB) will hold an extraordinary shareholders meeting on 9 December to approve a capital restructuring that will reduce the bank's share capital by 40 per cent. The restructuring, already approved by the board of directors, will eliminate the losses BMB incurred during the Kuwait crisis and assist the bank's efforts to focus activity on investment banking services.

'We have wanted to do this for a while, because we wanted to get rid of the impact of the Kuwait crisis,' says Albert Kittaneh, BMB chief executive. 'This will allow us, next year, to go for an increase in capital to finance the bank's longer term strategic direction.'

Under the restructuring, the capital will be reduced to $83.9 million, comprising 335.9 million shares, from $139.9 million, comprising 559.8 million shares. Kuwait's Burgan Bank will remain BMB's largest single shareholder with 28.6 per cent, and the other 16,000 shareholders will also have their stake reduced on a pro rata basis. Kittaneh says the reduced capital will reflect more accurately the net asset value of BMB and will also help boost the bank's share price on the Bahrain Stock Exchange.

When the new management team was installed in the bank in mid-1993, BMB shares rose to about BD 0.055 ($0.14) from BD 0.030 ($0.08). Since then the share price has dropped back to BD 0.030, because the bank has not been allowed to pay any dividends while the retained losses were still on the balance sheet. Most of the losses were incurred from unpaid letters of credit for Iraq, Kittaneh says.

Since 1993, the bank has been transforming itself into a niche investment bank, and has steadily reduced its loans portfolio and balance sheet. At the end of October 1995, total assets were 4 per cent lower at $393 million, compared with 12 months earlier. Profits have improved with the bank's new strategy, and for the first 10 months of 1995 were $4.5 million, compared with $1.6 million for the same period last year.

The bank has been developing its fee income base, including launching its Proinvest fund at the end of 1994 and managing an Asia Pacific fund, launched in conjunction with two international banks this year. Kittaneh says BMB is planning several new initiatives for 1996 that will be listed on the Bahraini market.

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