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Operating income was $292.1m, being $73.7m or 34% up on the prior year, before taking account of the adverse impact of the global credit crisis. This reflected a record performance by the Bank's core GCC-focused merchant banking business. However, after taking account of revaluation losses and provisions in relation to exposures impacted by the global credit crisis witnessed during the second half of 2007, the Bank reported a net loss of $757.3m for the year. The provisions primarily related to structured investment vehicles (SIVs), and collateralised debt obligations (CDOs) incorporating exposures to the US subprime sector.
GIB's Chairman, H.E. Shaikh Ebrahim K. Al-Khalifa, stated: "GIB stands strong and sound, with the shareholders having confirmed their ongoing support to the Bank with the investment of an additional $1.0bn of capital. The capital increase exceeds the loss incurred in 2007. This is a clear expression of confidence in the Bank. GIB remains committed to its leadership role in the region and its vision of being the merchant bank of choice in the GCC".
Total income at $342.4m reflected strong increases in both interest and fee-based income. Net interest income at $305.6m in 2007 was $47.9m up on the previous year. The increase in interest earnings was principally due to significantly higher loan volumes, related in particular to GCC project financings. Non-interest income benefited in particular from strong fee-based income derived from asset and fund management, corporate advisory and underwriting activities. Fee and commission income rose by $22.3m to $88.1m for the year. Total operating expenses were contained below the prior year level.
Consolidated total assets rose to $30.0bn at the end of 2007, representing an increase of $5.2bn over the prior year end. The year-on-year increase was principally attributable to ongoing growth in the GCC loan portfolio. Total equity amounted to $2,215m at the 2007 year end being $359m higher than at the end of 2006. The Bank's capital adequacy ratios remained strong with Basel 1 Total and Tier 1 capital adequacy ratios of 14.7% and 11.7% respectively at 31st December 2007. These ratios are high in comparison to both regulatory minimum and international standards. The Basel 2 capital adequacy ratio at 31st December 2007 of 13.8% was above the Central Bank of Bahrain's minimum ratio requirement of 12.0%.
GIB's Chief Executive Officer, Dr. Khaled Al-Fayez, commented:
"While the Bank has been impacted by the events and turmoil in the global credit markets, it has acted quickly and decisively to take the necessary measures to address the consequences of these adverse market developments. The Bank has taken prudent and conservative provisioning actions in relation to investments in SIVs that were adversely impacted by the liquidity crisis resulting from the credit market turmoil, and CDOs incorporating exposure to the US subprime sector. Provisions included $150m in respect of possible impairments that had not been specifically identified at the year end. At the end of 2007, 98% of available-for-sale debt securities were investment-grade rated. We are nevertheless taking active and comprehensive measures to further enhance the Bank's risk management processes."
Gulf International Bank (GIB) is a leading merchant bank in the Middle East with its principal focus on the Gulf Cooperation Council (GCC) states. The Bank is owned by the six GCC governments, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, and the Saudi Arabian Monetary Agency (SAMA). In addition to its main subsidiary Gulf International Bank (UK) Ltd., the Bank has branches in London, New York, Riyadh and Jeddah, in addition to representative offices in Beirut and Abu Dhabi.
Posted by Anne-Birte Stensgaard, Senior News Editor
