Profits at the Bahrain-based Arab Financial Services (AFS) fell by 25 per cent in 1993 to $2 million as a result of the temporary US embargo. AFS will undergo a fundamental restructuring of its operations in 1994, and has confirmed that it will not be paying a dividend on its 1993 earnings.

Travellers cheque trading, a third of AFS' business, had already been hit by declining regional demand and fell by 34 per cent to $373 million by 21 December. Iraq, Sudan and Libya had been major markets. In March, AFS said it would not be resuming travellers cheques sales (MEED 11:3:94).

Cheque revenue will be replaced by expanding a range of cards and wholesale foreign currency dealing operations. AFS is owned by 56 Arab financial institutions - a ready base for AFS' products, bankers say.

The move by the US authorities to place AFS on its list of specially designated Libyan nationals on 20 December lent weight to AFS' decision to end travellers cheque sales (MEED 14:1:94). Travellers cheque payment card and foreign bank note dealing operations had to be suspended. The US reversed its decision in February (MEED 18:2:94)

Profits were $2.7 million up to 21 December. They were cut back to $2 million by costs related to the write-off of travellers cheque stock and other expenses related to the US decision, AFS says. However, AFS did not need to make any further provisions for 1993. It had set aside $3.5 million in 1992 and 1991 against the freeze of Iraqi assets. The volume of wholesale bank note dealing rose by 72 per cent in 1993 to $3,000 million. Payment card operations rose by 118 per cent.

Following the resignation of Arab Banking Corporation (ABC) head and AFS chairman Abdulla A Saudi, acting chairman and National Commercial Bank executive Adbulhad Shaif was elected chairman and ABC executive Adnan Yousif deputy chairman (MEED 11:3:94).

Arab Financial Services (AFS): results, 1992-93

($ million)

19931992

Assets264.2312.8

Shareholders' funds72.070.0

Provisions0.03.5

Dividend0.02.4

Net profit2.02.7

Source: Arab Financial Services (AFS), Bahrain