Investments help to raise GIB profits

04 April 1997

Gulf International Bank's (GIB's) income from its lending activities fell during 1996, but higher earnings from securities helped the bank to report an increase in net profit, according to GIB's annual results. The Bahrain-based offshore commercial bank released headline figures earlier this year showing a 5.2 per cent rise in net profit to $94.5 million (MEED 31:1:97).

In 1997, GIB is likely to emphasise project finance in the Gulf, where it has a strong position as an arranger and underwriter. It has also been granted permission to open a branch in India. The fall in income from lending, the bank's largest income stream, was due to lower interest rates worldwide in 1996 rather than any shifts within the loan portfolio, a bank source says. The value of loans increased slightly during the year to $3,437 million, reflecting higher lending in North America and Asia rather than within the GCC - a region which accounts for about one-half of all loans. Total assets rose by 6.5 per cent to $8,983 million.

GIB is owned by Gulf Investment Corporation (GIC), which is itself owned by the six Gulf Arab states. Project finance and syndicated lending will continue to be a growth area for GIB as regional governments encourage more private-sector finance for industrial and infrastructure projects. 'Overall, we see large opportunities for financings of a more structured type,' the source says.

The bank's liabilities are mostly in the form of short-term deposits, though in practice a large portion of these deposits belong to GCC customers who tend to leave their money with the bank for long periods. If GIB intends to underwrite more project financings, this implies that it may go to back to the syndicated loan market this year. The bank currently has $550 million in term funding, raised over the past two years.

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