Gulf Bank completes recapitalization and is now ready to sail into the future

Gulf Bank is pleased to announce that:

•Gulf Bank has raised a total of KD376m of capital, by way of a Rights Issue of 1,253,851,183 New Shares including the auction of 36,263,737 Rights to Treasury Shares at 20 fils per Right.
•Prior to the Rights Issue, credit/investment provisions and losses in derivatives had been quantified by External Auditors at KD375m.
•Existing shareholders took up 68% of the new shares at a price of 300 Fils per share.
•Holders of Treasury Shares Rights acquired 36,263,737 shares at a price of 300 Fils per share (2.9% of the new shares).

In line with the resolution adopted by shareholders at the EGM on 2 December 2008, the balance of unsold shares will be purchased by the Kuwait Investment Authority (KIA) at a price of 300 Fils per share, giving it approximately 403 million shares, representing 32% of the new rights issue and a final ownership stake in Gulf Bank of 16%. Gulf Bank is extremely pleased to have the KIA as a partner as it embarks on a new beginning.

This capital raising has resulted in the Bank having a pro-forma core Tier I capital of 12.5%, on a proportionally consolidated basis, significantly enhancing the Bank's financial strength and flexibility in the face of continuing turbulence and uncertainty in global financial markets.

The new capital will allow Gulf Bank to build on the existing franchise as a profitable bank and to continue as a competitive provider of world-class banking services to customers.

Kutayba Alghanim, Chairman of Gulf Bank stated: "We are moving forward. While the Bank has completed this recapitalization, it is only the first step in a broad and sustained effort to further leverage our existing strengths to build a stronger banking franchise in Kuwait. Our retail and corporate customer base, solid organization, and strong brand are only the starting point.

We will move the Bank toward world-class standards in customer satisfaction, product innovation, and competitive value. Our plan consists of three major elements: First, we will identify and implement best practices throughout the organization - from the front-line teller serving a retail customer to sophisticated cash management for corporate customers. These best practices will include the way we do things throughout the Bank, the tools we use, and the "always customer-driven" priorities we set.

Second, we will invest in the Bank. While part of this investment will be in better technologies and branches, a lot of this will be in our core asset, the staff of Gulf Bank - training, incentives, and advancement of our human capital. We will ensure that we have the best leadership in the region to drive the organization forward.

Finally, we will ensure that the Bank is secure. In other words, we need to manage risk effectively so that shareholders are well served. This means a bank-wide upgrade of the risk management systems and processes so that credit risk, market risk, and operating risk are always controlled.

It is critical that current and prospective shareholders realize that these initiatives are already underway. We have engaged a number of world-class advisors to help us design and implement these changes - and we are well underway: reorganization of the Bank is currently progressing; we have commissioned searches for additional talent to be added to the Bank's organization; and we are launching a number of go-to-market programs that will introduce new products to our customers and increase our market share more than ever to realize this future.

I thank all of our investors and the KIA for their support in this recapitalization. I would like to express the appreciation of the Board, to our staff and customers for the support and encouragement we have received . I also extend a very special thanks to the Governor of the Central Bank, H.E. Sheikh Salem AbdulAziz Al-Sabah, the Executive Director, Dr. Mohammed Al Hashel and the Central Bank team for their unwavering support of Gulf Bank."

Board elections

In line with the Bank's articles of association, nominations for new Directors are currently being sought and after confirmation by the Central Bank of Kuwait,a new Board will be elected in March 2009 at the Ordinary General Meeting. The Board will then elect a Chairman and Vice-Chairman.