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Arab Banking profit declines 38pc on US subprime crisis

Net income fell to $125 million in 2007 from $202 million, the bank said today in a filing to the Bahrain Stock Exchange. Earnings per share weren't released. Arab Banking set aside $230 million as provisions, "resulting from securities writedowns that the group was obliged to take in the wake of the global credit squeeze that followed the US subprime housing loan crisis," the bank said in the statement.

The collapse of the US subprime mortgage market has led to about $146 billion of losses and markdowns at securities firms and banks worldwide since the beginning of 2007. Losses may exceed $265 billion as regional US banks, credit unions and overseas financial institutions write down the value of their holdings, Standard & Poor's said last week.

Arab Banking, which has overseas units in several countries, including the US, the UK and Singapore, is gaining more from focusing on trade, project finance and Islamic-based lending in the Middle East, its core market. Economic growth in the Middle East, boosted by robust oil income, benefited the bank and offset some of the subprime- related losses, Ghazi M. Abdul-Jawad, Chief Executive Officer said in the statement.

Net interest income rose 19 per cent to $289 million, while fees and commissions increased 67 per cent to $393 million. Loans portfolio increased 43 per cent at end of 2007 to $12.3 billion