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.
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.
How banks can take on Google in the race for AI talent
By Nicola Sullivan, solutions director at candidate engagement tech firm Meet & Engage
The events of 2020 have made the battle for AI talent more ferocious than ever. In a volatile landscape where innovation is key, multinational firms are rolling up their sleeves for the inevitable scrum ahead.
For incumbent banks, the stakes are intimidatingly high. In one corner stand the fintech startups: the likes of Revolut and Monzo, who are snapping up AI-literate graduates while laying down pressure for capacity in exactly that area.
In the other corner, we find the Silicon Valley contenders of Amazon, Facebook and Google, who have phenomenal pay packages – not to mention glamour and visibility – on their side. And technologists with a finance background loom firmly in their crosshairs (Facebook employs hundreds of ex-banking recruits).
This unsettling picture is intensified by a chronic tech shortage: in a recent study by AI firm Peltarion, 83 percent of AI decision-makers agreed that a deficit of deep learning skills was seriously hampering their competitiveness. But, with the global impact of AI on financial services companies set to hit $140 billion in productivity gains and cost savings by 2025, banks need to find a way to break ahead and secure the AI talent they need. Here’s how:
Fish from a wider talent pool
We tend to think of AI in relation to a very niche set of qualifications. Yet in reality, it’s a fast-moving sphere that also requires a host of soft transferable skills such as problem-solving, agility, great communication and a sound analytical mind. In short, it’s less about what a candidate knows/does, and more to do with what they could know or do.
It’s worth thinking about whether you are being open-minded enough in your interpretation of tech talent. Do the AI roles you’re looking to fill need specific skills and criteria, or are they better suited to people who are inherently curious, intelligent and quick to learn?
Depending on the answer, you may want to expand your search from the bright young things of MIT or Berkeley to other related careers or older candidates with transferable skills. You may even want to look internally for the next generation of tech talent.
For example, if a bank’s customer-facing roles are declining but AI supply is not keeping up with demand, maybe this is a problem that could fix itself. The bank in question could run a two-week internal virtual AI internship to test interest, with the aim of rechanneling internal talent and avoiding redundancies. If AI is as critical as all forecasts suggest to the future of finance, investing in a more comprehensive approach like this may make a lot of sense.
Then there’s also the question of underrepresented groups. The proportion of black or latino people at major tech companies remains depressingly low, while women make up only a quarter of computing roles.
As well as driving equality, this issue of diversity is also a market gap that could be used for competitive advantage by banks. But doing so requires a deep-seated strategy that addresses the root reasons why candidates from these groups are turning away from tech. Issues such as lack of career development and accessible education need to be solved at ground level from the inside-out; an effort that begins before, or in tandem with, recruitment.
Make your recruitment process personal and transparent
When you’re fighting for top AI candidates who have the world at their fingertips, it’s not enough to bundle them through a generic Applicant Tracking System. You have to actively woo them, and get them on-side with your vision and community. This is especially important for millennials and Gen Z recruits, who are more purpose-driven than their predecessors.
Live online chat sessions hosted by high-profile speakers across the business is one tactic our banking clients have seen great success with here. For example, a shortlisted group of technologists get to meet with a bank’s CTO or Chief Human Resources Officer via a group chat (which they can join anonymously if they want to), to ask questions and find out more about a company’s technology roadmap and cultural ethos.
This is a rare opportunity to give candidates real takeaway value; even if they’re not thinking about leaving their current job, few will turn down the chance of time with the person who runs cybersecurity at a major bank. And this person will invariably be able to communicate a much better sense of culture than a third-party recruiter can.
Visibility is also important here: if you want to attract more BAME or female candidates, you need to have lead BAME or female technicians as a vocal part of the recruitment process, showing what success in your company looks like. If you don’t have people to fulfil these roles, you need to go back and address that rather than making empty statements.
Opening the doors to your company in this way is a winning strategy for tech candidates: it’s a “wrapper” to put around them and make them feel wanted, welcome and motivated – even when a recruitment process lasts a little longer than you’d like.
Talk like yourself but walk like a tech expert
Part of the openness needed to recruit key tech talent is about being authentic, too. There’s a tendency among some finance incumbents to “get down with the kids” and appear more like their disruptive competitors than they truly are. If you are a long-established brand in the banking world, with a good track record of developing careers, that alone is enough to attract AI technologists – you have a lot to offer, and you don’t need to put on a guise.
Equally, if you do have work to do in being more accessible to potential candidates, focus on real progression rather than image. This may mean putting through measures to build awareness and role modelling around recruitment diversity, or enhancing employee wellbeing.
With mental health issues on the rise in the workplace, a co-managed wellness programme of fitness and community events can make the difference between which way a candidate sways in a roomful of enticing options. This is especially true since banks – for all their boardrooms traditions – have a reputation amid technologists for a better, less brutal work-life balance than Silicon Valley.
Lastly, banks need to walk the walk when it comes to tech-enabled recruitment. However hard you try to make it personal, most candidate enrollments will involve a degree of automation at some stage – and it’s important to make that process as quick and slick as possible. For a candidate with consumer-grade tech experience, first impressions count: they want to know that this is a place that will recognise and nurture their skill set. So instead of a long, clunky application process, maybe consider a virtual assessment centre or a sophisticated chat bot, which can capture essential information in a fast, engaging way.
Recruiting the world’s top tech talent isn’t a question of magic or even necessarily a huge pay cheque. Instead you need to weave together these “micro-moments” that signal your bank’s character, integrity and technical ambition. Do this, and you stand a good chance of persuading leading AI candidates to skip the queue and come directly to you.
1.4 million customers to stop using bank branches due to COVID
8.4 million customers had already stopped visiting branches in person before lockdown
However, three quarters (74%) of customers will return to banking in branch after the pandemic
Of those who plan to return to branches, over two thirds (69%) will only return when they absolutely need to
A further 1.6 million (3%) said they don’t have an account with a high-street bank, meaning a total of 3 million Brits don’t have a need for physical branches.
This number may rise, as 8.4 (16%) million Brits had stopped using their bank’s branches before lockdown and are not sure if they will ever return.
However, not everyone has gone completely digital as 3 in 10 British banking customers (29%) have already returned to using their bank’s branches, with an additional 44% of customers planning to return soon.
Of these people who plan to return in the near future, over two thirds (69%) will only return when they absolutely need to and their problem cannot be solved online or over the phone.
While a third of those consumers (31%) are waiting for a COVID vaccine or treatment before they go back to their local branch.
This means that eventually, three-quarters of Brits (74%) will return to banking in-branch the way they did before lockdown.
However, they may face a longer journey than they previously did to find a branch. Data from ONS shows 25% of branches have closed in the UK since 2012 and this decline in branches is likely to continue if people follow through with their plans to avoid branches.
Customers in Northern Ireland will go back to banking in branches more so than those in any other region, with 85% of customers here saying they have already returned or plan to do so soon.
Interestingly, a quarter of customers (25%) in the East Midlands had already stopped banking in branches, making this the area with the most customers who no longer use branches.
Those in the North East are set to follow the same path as residents in the East Midlands, with 5% of customers in the North East saying they will stop using branches in the future.
To see the research in full visit: https://www.finder.com/uk/banking-branch-usage
Commenting on the findings, Jon Ostler, CEO at finder.com said:
“Lockdown has quickly changed many aspects of our lives and our banking behaviour was no different. Not being able to visit bank branches in person meant many consumers had no option but to start using online banking and bank’s mobile apps. These are generally easy to use and intuitive so you would expect some of these new converts to stay away from branches going forward.
“While the digital-only banks excel at their app offering, previous research we carried out found that sentiment towards these banks fell almost three times as much during lockdown than towards high street banks. This could be a sign that the quality of apps and online banking from high street banks is catching up.”
Finder commissioned Onepoll on 26 to 28 August 2020 to carry out a nationally representative survey of adults aged 18+. A total of 2,000 people were questioned throughout Great Britain, with representative quotas for gender, age and region.
Liquid Assets of a Bank
Liquid assets are tangible and movable assets which are easily convertible into cash in a crisis situation. Liquid assets are used by lenders to fund their loans. Examples of liquid assets include government bonds and central bank reserves.
To stay alive, financial institutions must have enough liquid funds to pay withdrawals and other immediate financial obligations by depositing holders of checks. But the amount of money they have in liquid form is not enough to cover these short-term obligations and their financial problems will become worse. Liquid assets of the financial institutions should be regularly replenished to make the banking system financially stable. In order to maintain a sufficient amount of money in the economy, the Federal Reserve System will always be in need of additional assets.
There are several ways in which the financial institutions can replenish their liquid assets. One of the ways is by borrowing funds from banks and credit unions. The other way is by issuing debt securities to provide liquidity for the monetary system.
Borrowing from banks and credit unions: Banks can borrow funds from other financial institutions in order to meet their liquidity requirements. However, the rate at which banks borrow funds from other financial institutions is usually very high. This high rate can only be beneficial for the financial institutions because the borrowed funds are used to purchase commercial mortgage-backed securities (CMBS). In return for providing CMBS, the banks can receive interest payments on the principal balance of the loans they have made to other financial institutions.
Issuing debt securities: The assets that a commercial bank or credit union secures as collateral for the loan from other financial institutions can also be used to liquidate its existing liquid assets. Usually, the assets used as collateral to secure loaned funds are Treasury securities, corporate bonds and treasury bills. However, as the value of these securities decreases, the banks’ ability to recover them through the redemption of their treasury bills and the federal income tax on the principal balance of these securities can increase the amount of funds they will have to pay out on short-term debts.
Securing debt securities: As mentioned above, the assets which commercial banks and credit unions can use to liquidate their liquid and non-liquid assets can also be used to secure loans made by them to other financial institutions. But it is important for the banks and credit unions to ensure that the funds they use to secure these loans are not used to purchase more securities. In order to obtain maximum gains from the sale of their assets, they should use a method to redeem the securities before the maturity date of the loan.
In addition to using these methods to secure other financial institutions’ loans, banks and credit unions can also sell their assets in order to raise the funds they need for making short-term payments. For example, if a commercial bank has a large inventory of commercial mortgage-backed securities, it may want to sell some of its assets in order to raise the capital required to make a single payment. If the purchase price of these assets is less than the total loan balance, the bank can sell its securities and cash in order to raise the necessary capital.
Although liquid and non-liquid assets can help the banking system to make its operations more stable, the loss of one type of asset can severely affect the financial condition of a bank or credit union. Therefore, even if there are many types of assets, it is important for the banks and credit unions to maintain a balanced level of liquidity in order to make sure that the economic system is not adversely affected by any one type of loss.
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