At their meeting on Thursday, 16th February 2012, the Board of Directors of Gulf International Bank B.S.C. (GIB or the Bank) approved the consolidated financial statements for the year ended 31st December 2011.
GIB recorded consolidated net income after tax of $104.5 million being $4.1 million or 4 per cent up on the prior year. Net income after tax in the fourth quarter was $19.9 million compared to $14.3 million in the fourth quarter of 2010.
Year-on-year increases were recorded in all income categories, with the exception of net interest income. Net interest income, which at $143.8 million represented the Bank’s principal income source, was 8 per cent down on 2010. The year-on-year decrease was attributable to a lower average loan volume associated with ongoing derisking initiatives, and an increase in the cost of term finance as a result of proactive actions taken to minimise the mismatch in the maturity profile of the Bank’s assets and liabilities. While the additional term finance resulted in an increased cost to the Bank, it significantly reduced the Bank’s previous reliance on less stable short-term wholesale funding, thereby protecting the Bank in the prevailing stressed market environment. In particular, the minimisation of reliance on short-term wholesale funding helped to isolate the Bank from the effects of the eurozone crisis. At the 2011 year end, only 9 per cent of the loan portfolio was funded by wholesale customer deposits. As recognised by the international credit rating agencies, the managed reduction in the leverage of the loan portfolio to a more prudent multiple of equity has strengthened the Bank’s risk positioning.
Fee-related income at $48.5 million was $6.3 million or 15 per cent higher than the previous year. As a result, fee-based income comprised 21 per cent of total income, reflecting positive progress in the implementation of GIB’s new strategic focus on non-asset based, relationship-orientated services. Trade finance-related commissions in particular recorded a 42 per cent year-on-year growth. Trading income at $17.6 million for the year was $4.9 million or 39 per cent up on the prior year, reflecting strong customer-related foreign exchange income. Other income of $17.0 million consisted principally of dividends received from listed equity investments and profits realised on the sale of investment securities. Total expenses of $119.8 million were $6.5 million or 6 per cent up on the prior year. The year-on-year increase in expenses reflected ongoing investment in the implementation of GIB’s new GCC-focused universal banking strategy. A net provision release of $1.9 million was recorded for 2011. The provision release arose on the repayment and settlement of provisioned exposures. The absence of a net provisioning requirement reflected the prudent and conservative provisioning actions taken by the Bank in previous years.
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GIB’s Chairman H.E. Jammaz bin Abdullah Al-Suhaimi, commented: “I am pleased with the progress made in the implementation of GIB’s new strategy, which aims at a total transformation of the way the Bank conducts its business and will take it into new frontiers of sophisticated banking. The strategy aims to transform GIB into a pan-GCC universal bank incorporating a unique retail bank offering. The development phase of this strategy was completed in 2010, and the first steps towards implementation were executed in 2011. The strategy implementation has involved the restructuring of the wholesale banking activity and preparations for the launch of a new retail banking business.”
H.E. Al-Suhaimi continued, “We believe that these measures will, within a few years, achieve the levels of profitability and return on equity in line with the expectations of our shareholders. The new institution will also benefit from more diversified and stable funding, thus reducing volatility and minimising the effects of external shocks. I am confident that the Bank is well placed to take advantage of new business opportunities, continue its key role in Saudi Arabia and the region as a leading financial institution, and ensure prosperity for all its stakeholders.”
Dr. Yahya bin Abdullah Alyahya, GIB’s Chief Executive Officer, stated: “We are delighted to report continued profitability growth in 2011 despite ongoing initiatives to derisk the wholesale lending portfolio and improve the funding profile of the Bank, while at the same time investing in the future of the Bank through new strategic initiatives. GIB’s robust funding position during 2011 reflected the confidence the Bank’s customers and counterparties have in its strong ownership and financial strength. GIB raised $900 million of new term finance during the year, thereby successfully reducing the Bank’s reliance on short-term wholesale funding. Of particular note, during 2011 GIB successfully issued its first ever Shariah-compliant term finance facility, a $300 million Sukuk-al-Murabaha private placement.”
He added, “GIB has been frequently recognised for its commitment to professionalism and excellence, and the very best in customer service. In 2011, the Bank was presented with a number of awards, including three awards from Global Banking and Finance Review: Best Investment Bank in the GCC, Best Investment Bank in Bahrain, and Best Investment Bank in KSA for our subsidiary, GIB Capital. New York-based Global Finance magazine also selected GIB as the Best Investment Bank in Bahrain for 2011, while UK-based emeafinance magazine named GIB as the Best Local Investment Bank in Bahrain.”
Dr. Alyahya continued: “Underscoring GIB’s financial performance was the re-affirmation of the Bank’s long-term issuer ratings by Fitch, Moody’s and Standard & Poor’s. The agencies noted GIB’s strong ownership and capitalisation, improved liquidity, and conservative provisioning. Such recognition constitutes a positive independent endorsement of the proactive and conclusive actions taken by GIB and its shareholders to address the challenges created by the global financial crisis.”
Dr. Alyahya also indicated that “the Bank’s Basel 2 Total and Tier 1 capital adequacy ratios at 31st December 2011 were 23.3 per cent and 19.2 per cent respectively. These are both exceptionally high by international comparison, underscoring the Bank’s intrinsic financial strength. With these strong capital ratios and as a result of the actions taken to strengthen the Bank’s liquidity position, GIB is already in full compliance with almost all of the Basel Committee’s Basel 3 guidelines that are planned to be implemented over the next few years.”
Consolidated total assets at 31st December 2011 were $16.8 billion. The asset profile at the 2011 year end reflected a high level of liquidity that is being maintained as a precautionary measure in the prevailing market environment. Placements and liquid assets amounted to $6.5 billion at the year end, representing a very high 39 per cent of total assets. In addition, investment securities, which principally comprise highly rated and liquid debt securities issued by major financial institutions and regional government-related entities, amounted to $3.2 billion. Following the actions taken in 2009 and 2010 to derisk the balance sheet and eliminate the Bank’s vulnerability to external shocks, GIB has no direct exposure to European government debt impacted by the eurozone crisis and has accordingly not been impacted by the turmoil in the European debt markets. Loans and advances amounted to $6.8 billion, being $0.8 billion down on the 2010 year end level. As a result, the loan to equity ratio was a conservative 3.4 times, while the ratio of loans to customer deposits and term finance was a prudent 53 per cent. The Bank is applying a prudent approach to its funding activities in the current environment, with a focus on enhancing non-asset based fee income. At the end of 2011, customer deposits represented 85 per cent of total deposits. Importantly, the Bank is a net placer of funds in the interbank market. Term finance at the year end amounted to $4.2 billion, being $0.5 billion up on the 2010 year end. In December, the Bank successfully issued a $300 million three-year Sukuk-al-Murabaha private placement as part of $900 million of new term finance raised during the year.
Gulf International Bank (GIB) is a leading bank in the Middle East with its principal focus on the Gulf Cooperation Council (GCC) states. The Bank is 97.2 per cent owned by the Government of Saudi Arabia. In addition to its main subsidiaries Gulf International Bank (UK) Ltd. and GIB Capital, the Bank has branches in the Kingdom of Saudi Arabia, the United Kingdom, the United States of America, in addition to representative offices in the United Arab Emirates and Lebanon.
For further information, please contact Mr. Abdulla Naneesh, Corporate Communications at GIB Bahrain: Tel (+973) 17 522 680, Fax (+973) 17 522 656.