Provisions take their toll on GIB profits

12 March 1999
FINANCE

Bahrain-based Gulf International Bank (GIB) has reported a 5 per cent drop in net income for 1998 to $82.1 million, its lowest profit for four years. Total assets rose by $685 million to $10,209 million after increases in investment security and loan volumes. Shareholders' equity stood at $731 million, 7.2 per cent of total assets.

Operating profits of $112.1 million were hit by a $30 million loan loss provision taken as a result of its significant exposure to troubled South- East Asian markets, though the bank says its conservative approach to provisioning has been welcomed by ratings agencies. 'We have always made provisions higher than the matrices of the regulating agencies, such as BMA [Bahrain Monetary Agency]. This includes the $30 million which we made in 1998 against our exposure in Indonesia, Pakistan and Russia,' says GIB general manager Abdullah

el-Kuwaiz. The bank says its performance was helped by earnings in its core commercial banking business. A higher volume of margin-generating assets contributed to a 5.2 per cent year-on-year increase in net interest revenue, which it says more than offset a $4.8 million decrease in other income.

'GIB's income for 1997 included an $8.6 million profit from the sale of an asset. Excluding this exceptional item, net income in 1998 increased by $4.3 million, or 5 per cent,' says El-Kuwaiz. He says this reflects an increase in the bank's interest earnings without sacrificing liquidity levels or the high asset quality.

The bank is in the process of completing its merger with London-based investment bank Saudi International Bank (SIB). The deal is expected to boost GIB's financial strength ratings, which international ratings agency Moody's Investors Service downgraded from C to D+ in December. GIB, which is wholly-owned by the Kuwait-based Gulf Investment Corporation, will publish full results after its annual general assembly on 13 March.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.