'Profit figures were better than we had expected,' says AUB group chief executive Adel el-Labban. 'The operating environment for 2001 was difficult, with the tragic events of 11 September exacerbating the already weak market. Nevertheless, AUB succeeded in raising net interest income and core non-interest income.'

Interest income fell by $25 million over the year to $247 million. However the impact was offset by an 18 per cent decline in interest expenses to $160 million, resulting in an overall 13.6 per cent improvement in net interest income. AUB's core non-interest earnings, comprising fee income, trading, associated and other operating income, rose 12.8 per cent over the year to $68.7 million.

Profit levels would have been higher still had the bank not increased provisions for losses on loans and advances by almost 50 per cent to $17.7 million. El-Labban says the move was sensible in light of the challenging market conditions. 'Prudence, conservatism and tight cost controls are the key to supporting earnings levels, and these basic principles are more important then ever in a difficult business climate.'

In the past year, AUB has pressed ahead with an aggressive acquisition schedule, taking over the old Grindlay's operation, Commercial Bank of Bahrain, and buying a 15 per cent stake in Bank of Kuwait & the Middle East (BKME). El-Labban says the bank will continue with its strategy of building a presence in the GCC and is studying further options for expansion, but he declined to give details of prospective investments (Banking, MEED Special Report, 21:12:01, pages 27-28).