BAHRAIN'S other large offshore bank is Gulf International Bank (GIB). While ABC's operations are spread across three continents, GIB has spent the last few years concentrating on the Gulf. Within the area, it is fast becoming the dominant local player in syndications and project finance. With assets of $8,433 million at the end of 1995, the bank is much smaller than ABC. However, it derives strength from being owned by Gulf Investment Corporation (GIC), an investment bank owned by the six GCC states.

'Over the last five years, our stated policy was to be active in lending to the Gulf market. But we're trying to strike a geographic balance,' says GIB's general manager Ghazi Abdul-Jawad, who joined the Manama-based bank in 1985. Over half of GIB's assets are in Europe or North America with another 30 per cent in the Gulf itself, where it lends to governments and large corporates.

In February, Abdul-Jawad will clear his desk and move a few hundred metres down the road in Manama to ABC, where he is to become the chief executive. He will be leaving an institution which has made a profit every year since 1991, when it was rescued from bad debt problems through a buyout by GIC. Abdul-Jawad said the 1996 results are likely to carry on the profitable trend. 'In terms of year-to-date profitability we've done extremely well. We're running above budget, but the final result will be impacted by how much we take into provisions.'

Keen to avoid a repetition of past problems, GIB provisions with care. Abdul-Jawad says asset quality is also better than it was. 'Our non-performing loans have been declining and loan-loss provisions exceed non-performing loans. We have a very vigorous credit process and a strong investment securities portfolio.' Within the Gulf, GIB lends to government entities and to large corporates. 'Naturally, some of our corporate client base is affected by delays in government disbursements, but the breadth of that client base has assured us that there will be no surprises.'

Nonetheless, the bank is embarking next year on a comprehensive risk- rating of its entire corporate portfolio. In the Gulf, most of GIB's corporate loans are short-term. 'By 2000, 90 per cent of that portfolio will have matured. Sometimes you have to run just to replace the runoffs, which makes it more difficult with pressures from competition. You get a serious erosion of lending margins,' says Abdul-Jawad.

This is one reason why GIB has put effort into building up its project finance business in the last few years. As a bank owned indirectly by regional states, GIB seems well-placed to capitalise on the slow but growing trend for big projects, mostly in the field of energy, to be financed on a limited or non-recourse basis. The bank's name appears among the arrangers for almost every big project financing done in the area, and usually at the top end of the tombstone. 'I don't want to brag, but any deal that GIB takes into the syndication markets is assured of completion,' says Abdul-Jawad. 'We are the preferred counterparty for both borrowers and lenders.'

Project loans, which usually have a maturity of seven years or more, give stability to GIB's balance sheet. But the general manager warns that the pickings are getting leaner. 'With the sheer number of banks competing for this business, there is an appreciable reduction in margins. We've already seen shrewd corporates take advantage of such a window. Sadaf was a case in point, and there will be other Sadafs,' he says, referring to a $700 million expansion for a Saudi petrochemicals company which reached financial close in late 1995.

Although GIB has given up its global ambitions and settled for being a bank for the Gulf, it is still looking for new lines of business. It filed in October for a licence to open a representative office in India, and an Islamic banking subsidiary is under consideration. It is also upgrading its computer systems. 'Our strategy would be to maintain our leadership in syndications and in project finance regionally while looking at other geographic markets,' says Abdul-Jawad. After more than a decade at the helm, he will be watching it happen from down the road at the Bahrain headquarters of ABC.