Arab Banking Corp returns to profit

MANAMA - Arab Banking Corporation (BSC), the parent company of the Arab Banking Group headquartered in Bahrain, yesterday announced a net profit of $120 million for the year 2003 compared with a net loss of $41 million for 2002.

By From Our Correspondent

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Published: Wed 25 Feb 2004, 11:59 AM

Last updated: Wed 1 Apr 2015, 11:55 PM

The group's operating profit before provisions, tax and minority interests for 2003 totalled $354 million, up 54 per cent on $230 million for 2002.

The board of directors have decided to recommend a dividend of seven per cent to the annual general meeting, a communique issued by ABC said.

ABC's earnings stream was strong, despite the weak economic environment. Total revenues increased by 25 per cent to $898 million (2002: $721 million). Net interest income was lower at $437 million (2002: $464 million) mainly because of the negative impact of continued low US dollar interest rates on earnings from equity funds.

Commission, fees and other income surged 79 per cent to $461 million (2002: $257 million) boosted by improved performance from the Brady bond portfolio, capital markets, retail banking, and treasury activities, and also benefiting from the strengthening of the euro against the dollar. The distribution of funded and non-funded income in 2003 was 49:51 (2002: 64:36).

Loan loss provisions amounted to $133 million (2002: $204 million), mainly because of the continued economic weakness in some of the regional economies and the US, although the bank's investment group subsidiaries in Spain and Hong Kong accounted for $59 million or 48 per cent of the net total, it said.

Operating expenses rose 11 per cent to $544 million (2002: $491 million), mainly due to the translation effect from the surge in the euro/dollar exchange rate on Banco Atlantico's expenses incurred in euro. However, the overhead expense ratio improved slightly to 61 per cent (2002: 68 per cent).

Total ABC Group assets increased by four per cent to $30,068 million (2002: $28,915 million), mainly due to the foreign exchange translation impact of the strong euro on the assets of ABC's subsidiaries based in Europe. Loan assets grew by six per cent to $15,921 million (2002: $14,981 million), holdings of marketable securities were increased by six per cent to $5,290 million (2002: $5,005 million) whilst placements with other banks declined by 2 per cent to $6,651 million (2002: $6,802 million).

Consolidated equity as of December 31, 2003 stood at $1,585 million, and the Group's capital base remained strong, with a risk asset ratio of 14.7 per cent at December 31, 2003 (2002: 13.1 per cent). Liquidity also remained strong with liquid assets to deposits ratio at 51 per cent (2002: 54 per cent) and loans to deposits ratio at 64 per cent(2002: 65 per cent).

Ghazi M Abdul-Jawad, president and chief executive, said that despite the weak economic environment, the low interest rate environment, and the reduction in business flow that followed the March 2003 Gulf War, ABC's operating result proves the soundness and resilience of the policies that the bank's board and management have consistently followed.

"The disposal of our investments in International Bank of Asia and Banco Atlantico has enhanced our resources, which we plan to deploy in developing our regional presence in 2004 and the future. Building on the operational base that we have developed over the past few years with our retail presences in Algeria, Tunisia, Egypt, and Jordan, we will be seeking opportunities to expand within the region, particularly in Islamic, retail and consumer banking, to further enhance our existing pan-Arab presence.

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