International markets knock GIC profits back by 50 per cent

03 February 1995

Profits at the Gulf Investment Corporation (GIC) dropped by more than 50 per cent in 1994 compared with a year earlier, when the Kuwait- based corporation reported record earnings.

The corporation's profits were hit by losses in its international trading operations, which were only partly offset by the performance of its investment and lending activity in the GCC states.

Net profits fell to $62.2 million in 1994 from $128.5 million a year earlier. In 1993, profits were pushed up by exceptional performances in GIC's securities trading. Last year, the corporation reported heavy losses in these activities, reflecting the downturn in the world's bond and equity markets.

The bank's wholly owned subsidiary, Gulf International Bank (GIB), also reported a sharp drop in earnings from this sector (see across).

GIC's securities trading concentrates on US and other OECD government bonds, as well as equities in developed markets, mainly New York, London and Tokyo. GIC's exposure to emerging markets makes up less than 5 per cent of equity investment, banking sources say.

Despite the fall in profits, GIC's assets rose to $9,224 million last year, up by almost 8 per cent on 1993. This was largely due to increased lending by the corporation in the GCC during 1994. Between 1992-1993, loans and advances fell by 4 per cent to $3,192 million.

Lending to Gulf investors proved one of the most profitable sectors for the corporation in 1994, alongside investment banking operations.

Several investment projects in GCC states matured during the year, allowing the corporation to sell its holdings. The corporation's investments in international equity funds also contributed to the profits that it made last year.

GIC's results were approved by the executive committee on 25 January, under the chairmanship of Ahmad Humaid al-Tayer, the UAE's minister of state for finance and industry. GIC is wholly owned by the six states of the GCC.

The full balance sheet is expected to be issued after the corporation's general assembly later in the year.

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