Al Salam Bank-Bahrain AGM approves distributing 10% as cash dividends

The shareholders discussed and approved the board of directors' report and the financial statements for the year ended 31 December 2008 as well as received the Shari'a Supervisory Board report and the external auditor's report for the year ended 31 December 2008.

At the beginning of the meeting, the Bank's Chairman H.E. Mohamed Ali Rashid Alabbar read the Directors' Report in which he expressed satisfaction on the Bank's performance during the year ended 31 December 2008 which is the second full year of commercial operations since the Bank establishment in 2006.

Alabbar said "despite of the credit and liquidity crunch and extremely adverse market conditions in the last quarter of 2008, the Bank managed to post 40% growth in total assets in 2008 compared to 2007 and a 10% increase in net income for the same period".

The General Assembly endorsed the Board of Directors' recommendation to allocate BD12m of the 2008 net profit of BD25.5m ($67.6m) as cash dividends representing 10% of the paid-up capital. In addition, the General Assembly also endorsed the allocation of BD822,525 for Zakah and BD100,000 for charities and donations.

The Bank had been extremely cautious in expanding its financing portfolio and has been booking assets selectively, Alabbar said pointing to the Bank's asset portfolio being diversified.
"Hospitality & Tourism was our focus in the region with the Bank acquiring leasehold interests in two hotel towers overlooking the El-Haram in Mecca. One of the transactions was structured and majority of the equity interest placed with investors during the last quarter of 2008 despite extremely difficult market conditions," he added.

"During the year, the Bank also successfully placed the majority stake in the bio-diesel private equity transaction to its investors and raised over $250m from investors as equity participation for the light industrial project in Hidd, Bahrain which aims at developing a light industrial park."

Citing the opening of the Bank's second retail branch at the Bahrain City Centre, Al Abbar said that aimed came in furtherance of its retail banking activities in line with the Bank's plan to establish one or two new branches per annum in Bahrain.

He affirmed that the customer base of the Bank has expanded commensurate with the market size in Bahrain and the Bank is just a few years away from gaining the critical mass to compete in the market place.

In this regard, said that the Board is also considering non-organic growth, including acquisition of suitable retail operations or financing companies in line with its commitment to establish a large and viable commercial bank amongst Islamic banks in Bahrain.

As a demonstration of the Board's commitment to offer un-paralleled client service the Bank expanded its online delivery channel launched on a limited scale in 2007 and rolled out Al-Salam charge card with enhanced security features to protect customers against fraud. Alabbar emphasized that the management was after quality and is conscious of being at the cutting edge in its product and service deliveries rather than going after quantity.

On the treasury front, Alabbar asserted that the Bank was extremely successful in growing the financial institution relationship network and managed to draw over BD225m in interbank lines by end of 30 June 2008. To date, he said, the Bank was a net lender to the Banking system to the tune of BD165m due to sustained growth in customer deposits.

"When the symptoms of financial meltdown were evident, the Bank proactively managed to curtail interbank activity and build healthy liquidity reserves with the Central Bank of Bahrain (CBB). This is demonstrated by huge liquid funds and investments in CBB Sukuk to the tune of BD111m or 20% of the total assets at 31 December 2008. We are proud that to date Al Salam Bank-Bahrain continues to be a net lender to the banking system."

On the real estate sector front, anticipating strict regulations from CBB, the Bank tightened its investment in and financing to real estate sector, and limited its exposure to 30% of the total assets.

Alabbar hinted to the huge shortage of dwelling units in Bahrain for the middle class, and affirmed that the Bank is committed to undertaking a role with the support of the Government in developing affordable housing solutions in the coming years. "New businesses in the real estate sector are being undertaken on a selective basis to take advantage of market opportunities," he said.

Alabbar said that he believed that 2009 would be very challenging year for the banking sector as a whole and Al Salam Bank-Bahrain would be no exception to these challenges. Nevertheless, he said, to take advantage of the current attractive asset valuations, the Bank has established onshore investment advisory offices in London and Singapore to source opportunities for our investors.

"With a strong and growing deposit base and a robust risk management framework, we are confident that your Bank is poised to outperform peers in the medium to long term and establish itself as a model for a universal Islamic bank."

Finally, Alabbar extended the Board's appreciation to the leadership and ministries of the Kingdom of Bahrain, the Central Bank of Bahrain, correspondents, customers, shareholders and employees of the Bank for their support and collective contribution since the establishment.