Bahrain-based United Gulf Bank (UGB) recorded net profits of $7.3 million in the first three months of 1998, an increase of 65 per cent on the same period of the previous year. The increase in earnings was mainly attributable to higher investment income following the sale of some of the bank's holdings on the Kuwaiti market.

The divestment of the Kuwaiti holdings forms part of the bank's strategy to diversify its investments around the world. UGB has invested in the US bond market as part of this process, and banking sources say the investments have performed fairly well to date.

The profit and loss statement shows a provision for doubtful loans of $1.3 million. This is understood to relate to a non-performing syndicated loan in the Gulf area in which the bank participated, for which it has now accepted a settlement.

Total assets contracted by 41 per cent to $411.3 million as loans and advances and customer deposits fell sharply and the investment portfolio declined by 27 per cent, reflecting the sale of the Kuwaiti holdings.

UGB is majority-owned by Kuwait Investment Projects Company (Kipco), which has reduced its stake to 84 per cent through the sale of a 10.5 per cent stake to the investment company Gulfinvest.