BMB Investment Bank reveals restructuring progress and semi annual results

While the global financial markets meltdown continues to impact financial institutions across the world, the pace of the deterioration has slowed in the second quarter and the overall global economy is showing slow but encouraging signs of recovery.

During this period BMB embarked on an ambitious re-engineering and restructuring plan aimed at developing BMB into a niche investment bank with multiple business lines which will secure a more diversified and sustainable income stream going forward.

Part of this restructuring includes creating a leaner and more efficient institution and to this end the Bank has implemented measures that will achieve cost savings of almost 40%. These savings will be reflected in the Bank's financials starting in the third quarter.

Furthermore, in the second quarter of the year the Bank carried out an extensive and detailed analysis of its main line of business; its private equity portfolio. As a result of this exercise, and due to additional information becoming available in the second quarter of the year, there was a further reduction in the fair value of certain private equity investments which made such reductions significant at 30 June 2009.

The Bank has recognized the difference between the fair value at 30 June 2009 and the original cost of such investments in the income statement as required under International Financial Reporting Standards. The Bank is optimistic that given the improved economic outlook going forward, we will begin to see signs of recovery in the private equity markets as this sector traditionally lags behind the stock markets by six to nine months in terms of performance and recovery.

As a result of the above, the Bank has taken additional provisions on its private equity portfolio of US $12.7m in the second quarter of 2009 resulting in a net loss of US $19.7m for the first six months of the year as compared to a profit of $4.2m in the corresponding prior year.

The second quarter, however, has seen the Bank's trading investment portfolio recover as income from trading investments produced a profit of $2.0m in the second quarter as compared to a loss of $2.0m in the first quarter of the year. Income from operations therefore came in at $1.1m as compared to a loss of $1.6m in the first quarter and after expenses and impairment provisions, net loss for the quarter came in at $14.0m as compared to a loss of $5.7m in the first quarter of the year.

Total assets at 30 June 2009 declined to $84.1m primarily as a result of decreases in fair values on private equity fund investments. Shareholder's equity at 30 June 2009 stood at $29.0m as compared to $43.0m at 31 December 2008 due to the losses for the six months and the negative adjustment to fair value. Meanwhile, the Bank's Basel II capital adequacy ratio remains at a healthy 17.37% at the end of the quarter as compared to 22.8% at the end of 2008.

In commenting on the results the Bank's Chairman, Mr. Wilson Benjamin, said:

"The second quarter of the year has seen us make excellent strides towards our new strategic vision. The Bank's restructuring and re-engineering process has made very good progress resulting in a much more efficient and effective organization. We now begin the second phase of our strategy in building the platforms necessary for our various new business initiatives. Most importantly our capital raising campaign is progressing well and gaining strong momentum as several potential new investors have been identified who will provide a strategic and synergistic fit for the Bank."

Akbar Habib, Chief Executive Officer said, "The Bank's performance continues to suffer the effects of its legacy portfolio, and impairment provisions on the private equity funds continue unabated as a result of the cleaning up process of all aspects of the Bank's operations and the reclassification of the private equity portfolio. A more positive global economic outlook, as well as feedback from some of the world's leading private equity fund managers, lead us to believe that the worst is over as far as the private equity market is concerned and we expect to begin seeing a material improvement within six to nine months."

"We do not anticipate any further significant markdowns on our investment portfolio and in all likelihood an improved economic outlook should have a positive contribution on the Bank's overall performance. Our focus going forward is to kick start the required initiatives to begin generating revenue from other business lines and provide the Bank with a diversified revenue stream in a measured and sustainable manner in years to come," Habib added.