Arab Banking Corporation announces $54m half-year profit

Net profit for the second quarter was $22m compared to $32m in the first quarter, primarily due to impairment provisions taken for regional as well as global exposures.

Total operating income for the second quarter amounted to $184m, well above the total of $139m generated over the first quarter.

Fee, commission and other income benefited partly from improved trade finance earnings and partly from gains arising from the buy back of our subordinated debt, whilst interest income also improved.

At the same time, operating expenses increased to $88m, compared with the previous quarter's total of $79m mainly due to reserves taken for cost restructuring initiatives. Operating profit before impairment provisions totalled $96m, $36m higher than in the previous quarter.

Impairment provisions totalled $50m for the quarter, compared with the total of $15m last quarter in view of deterioration in certain regional and global exposures.

Shareholders' equity at 30 June 2009 stood at $2,043m, compared to $1,939m at the end of the first quarter, the increase during the quarter coming from improvement in fair values of non-trading securities, exchange translation gains on foreign subsidiaries as well as the profit for the period.

ABC's capital base remains strong with a capital adequacy ratio, based on the Basel II capital adequacy regime, of 17%, predominantly Tier 1, which totalled 13.6%. ABC's liquidity remains comfortable despite the adverse impacts of both the credit crunch and the continuing economic downturn, with the liquid assets to deposits ratio at 71%, compared with 69% at the end of the previous quarter.

In the light of the current adverse market conditions, ABC is maintaining its cautious approach especially in its wholesale banking businesses, replacing runoffs with very selective new assets. As a result, total assets declined over the quarter to $26.5bn from $26.8bn at end of the first quarter, predominantly in wholesale business.

Mr. Hassan Juma, President & Chief Executive of ABC, said:

"ABC Group has again posted an improved operating profit, despite the continuing difficult economic and trading conditions, although net profit was affected by the necessity to take unexpectedly high impairments provisions. Our core businesses in both wholesale and retail banking continue to generate the steady earnings stream that we seek to develop over the next few years."