Arab Banking Corporation (ABC) announces USD202 million net profit for 2006

This represents a 57% increase in the net profit of US$129 million for 2005.

Total income grew 38% to US$484 million (2005: US$352 million). Net interest income rose 29% to US$249 million (2005: US$193 million) due to growth in business activities (loans and securities) and the rise in international interest rates. Non-interest income increased 48% to US$235 million (2005: US$159 million). Loan loss recoveries net of impairment provisions amounted to US$ nil (2005: US$14 million), demonstrating the continuing improvement in credit quality.

The cost/income ratio improved to 54% (2005: 60%). The increase in operating expenses to US$262 million from US$211 million in 2005 was more than offset by increase in revenues. The increased staff costs are attributable mainly to hiring of a number of product and specialist staff, and the additional staff incentive plan costs resulting from increased revenues, together with the costs of rationalisations carried out to improve operational efficiencies. Premises, equipment and other operating expenses were kept well under control.

ABC Group's total assets at year end amounted to US$22.4 billion (2005: US$17.6 billion). Investment in securities increased to US$8.6 billion from US$6.6 billion mainly in highly liquid AAA-rated securities. Loans and advances increased to US$8.6 billion from US$6.8 billion. Liquidity remained extremely strong, with the liquid assets to deposits ratio at 74% (2005: 75%). Loans to deposits ratio also remained at a low level of 49% (2005: 51%). The Group continues to maintain a strong capital base, as evidenced by the risk asset ratio of 17.0% (2005: 21.0%), calculated in accordance with the requirements of the Central Bank of Bahrain.

During 2006 the Group continued to develop its network, opening a representative office in Beirut, Lebanon early in the year. The retail banking network was also extended, with new branches opened by the Group's subsidiaries in Egypt, Jordan, and Algeria.

In July 2006, ABC successfully completed the issue of a 5-year floating rate note issue, raising $300 million, priced at the equivalent of a rating of A, under the US$2.5 billion EMTDN Programme launched in November 2005. The year also saw the successful closure of ABC International Bank plc's 5-year term loan facility, which was oversubscribed in the London market and increased from an initial $150 million to $200 million. The success of these issues reflects the favourable perception ABC enjoys in the international financial markets, reinforced later in the year when the major rating agencies upgraded ABC's ratings: Standard & Poors and Capital Intelligence assigned a rating of BBB+ (from BBB the year before), whilst Fitch Ratings and Moody's raised their outlook to "positive" (from "stable" the previous year).

In line with the Group's strategy, ABC commenced building an investment banking platform focused on MENA during 2006, completing the recruitment of the initial staffing of seasoned and highly professional investment bankers. Beginning in 2007, the new investment banking division will provide advisory and capital raising capabilities that will enable ABC's clients to access broader regional and international capital markets. ABC intends to play a key role in the development of investment banking in the MENA region and to expand its position as an advisor to the governments, institutions and corporates in the area. The investment banking division will also act as an intermediary for investors in the region and, through its funds management arm, intends to offer a broad range of investment products.

Mr. Ghazi M. Abdul-Jawad, President & Chief Executive said, "We have again demonstrated the fundamental success of our renewed focus on the Arab world and our core competencies, whilst continuing to grow and diversify our income sources. ABC's much improved operating result should be a source of satisfaction to the bank's shareholders, whom we thank for their continued support.

"We will continue to build our regional platforms, in our core wholesale banking areas of trade and project finance, Islamic banking, and in our growing retail and investment banking markets. ABC's market-oriented focus, broad and increasingly diversified product range, and expanding reach through a pan-Arab and international network should significantly enhance ABC's earnings potential in the future."