AUB announces net profits of $255.7m for 2008

The Bank's reported net profit of $255.7m for the year (2007: $296.3m) was impacted by increased levels of specific and precautionary provisions taken in light of the prevailing adverse operating environment.

The results include a higher level of net loan loss provisions of $96.8m (including $41.6m of additional collective impairment general provisions charge) to ensure adequate coverage of problematic exposures and maintenance of asset quality in a prudent manner (2007 - net loan loss provision: $24.4m).

This resulted in incurring a loss of $24.4m in the last quarter of the year ($70.4m profit in Q4 2007). The Bank maintains a prudent 90% specific provision coverage of its non-performing loan portfolio at 31 December 2008, in addition to its significant general provision balances. Non performing loans to total loans stood at 1.9% (as compared to 1.2% in 31 December 2007). In addition, the bank has fully written off its impaired international investments resulting in a loss of $ 12.4m as compared to a profit of $24.9m in 2007.

Total assets of $23.6bn grew by 2.6% in 2008 (2007 - $23.0bn) as the bank focused on liability management particularly increasing its client deposits. Client deposits rose by 22.2% to $13.2bn (2007: $10.8bn) with strong deposit growth achieved from retail and non retail depositors reflecting our clients' strong underlying confidence in the Bank.

AUB was also able to secure extended refinancing for two years of $800m out of its existing medium term syndicated loan facility from 30 October 2009 to 30 October 2011 at competitive terms, despite very adverse market conditions. This represents a watershed transaction, given the prevailing turmoil, demonstrating AUB's credentials in the global banking community.

"In a year marked by an unprecedented global credit crisis and an increasingly challenging business environment, AUB has been able to report a profit of $255.7m after pro-actively identifying and absorbing the cost of fully providing/writing off problematic risk exposures,"

said Mr. Fahad Al-Rajaan, Chairman of AUB.

"While 2009 remains a very challenging year ahead, we nevertheless see opportunities on a number of fronts. One of these will be our entry into offering life insurance products and services across the region. Following the recent approval by the Central Bank of Bahrain, we look forward to launching during the year the commercial operations of our conventional and Takaful joint venture companies, in partnership with the U.K. based, Legal & General Group. We also look forward to completing the conversion of our 75% subsidiary bank, Bank of Kuwait & the Middle East K.S.C., into a full fledged Sharia compliant bank which will add an important product dimension to the AUB Group services."

"We are also pleased with the confidence reposed by the international financial community, as evidenced in maintaining our high rating by international rating agencies. In 2008, both Fitch and S&P reaffirmed AUB's Credit Rating of "A-"(stable) while Capital Intelligence reaffirmed AUB's rating as A (Stable). The key reasons cited were AUB's leading commercial position in the Kingdom of Bahrain, better geographic diversification than for regional peers, improving financial performance and strong asset quality," Mr Al-Rajaan concluded.

During 2008, AUB's robust performance earned it a string of prestigious awards, winning the 'Best Bank in Middle East 2008' award by Global Finance; 'Best Bank - Bahrain' from Euromoney and The Banker; 'Best Commercial Bank - Bahrain' from Asiamoney and 'Best Foreign Exchange Bank in the Middle East' and 'Best Trade Finance Bank in Bahrain" from Global Finance.