First-quarter figures released by United Gulf Bank (UGB) show that the diversification of its operations is having a positive impact on profitability. The Bahrain-based bank recorded net profits for the period of $3.8 million, compared to $9.1 million for full-year 1998. Profits of $7.3 million were earned in the first quarter of 1998, but the bottom line was boosted by extraordinary income from the divestment of some of the bank's Kuwaiti holdings.

'We are moving into the mainstream,' says a UGB source. 'We've been working on improving the performance of our subsidiaries and the private equity funds are profitable.'

UGB's share in the profits of its major associated companies - United Realty Bank, Burgan Bank, Jordan Kuwait Bank, Baltic Transit Bank, Gulf Insurance Company and United Industries Company - was $1.6 million in the first quarter of 1999, after yielding nothing in the same period of 1998. Interest income also supported the bottom line, rising 84 per cent to $6 million, from $3.3 million in the same period of 1998. Some of the increase is the result of the consolidation of Tunis International Bank into UGB's income statement for the first time.

UGB is the investment banking arm of Kuwait Investment Projects Company.