Faysal Islamic Bank of Bahrain (FIBB) has reported 1995 overall profits of $40.1 million, up 46 per cent from the previous year’s $27.5 million. The bank is to raise its capital to $100 million from $70 million, partly to pay for expansion in the Far East.
‘(FIBB) has succeeded in consolidating and diversifying its operations despite increased competition and difficult political and economic conditions in the market where the bank operates,’ chairman Mohammed alFaisal al-Saud said in a statement.
FIBB’s net profit in 1995 was $12.6 million, down from 1994’s $16.1 million figure which was boosted by a $13.7 million gain in the value of the bank’s newly-launched Pakistan subsidiary, Faysal Bank Limited. ‘If you exclude that gain, you see that there was a considerable improvement,’ Rizwan Sayed, FIBB’s financial controller, told MEED.
Total assets and liabilities fell to $368 million from $417 million. Sayed said this reflected FIBB’s decision to scale down its involvement in syndicated loans in Pakistan.
‘The returns were very low. We had $200 million worth of syndication deposits which were reduced to $100 million. We wanted to scale down our exposure to Pakistan. lt’s a case of too many eggs in one basket.’ The bank has decided to pay a $7.7 million dividend in the form of shares rather than cash, as part of its plans to raise its share capital by $30 million to $100 million, partly because it wants to use the profits to finance expansion in Asia. FIBB signed a memorandum of understanding in 1995 with Indonesia’s Bank Negara to set up a ‘multipurpose Islamic financial institution.’ Another reason for the capital increase is a request from the Bahrain Monetary Agency.
‘The BMA has concerns about capital adequacy ratios for Islamic banks because there are no standard tests for measuring them. It indicated that it would be happier if our capital was $100 million,’ Sayed said.
The rest of the capital increase will come from a bonus share issue of $7.3 million through capitalising reserves and a rights issue or $10 million at a premium or million in the next two years.
FIBB subsidiaries Advanced Technology Services and Faysal Investment Bank reported ‘handsome’ returns, the chairman’s statement said.