Arab Banking Corporation (ABC) announces its first half result

The earnings stream remains strong with total income increasing to US$408 million (2002: US$359 million). Net interest income for the first half was marginally lower than last year at US$222 million (2002: US$235 million) depressed by the declines in US dollar and European interest rates witnessed over the period. Non-interest income improved by 50% to US$186 million (2002: US$124 million) boosted by improved performance from capital markets, trade finance, consumer banking, and foreign exchange activities.

Loan loss provisions for the half-year amounted to US$65 million (2002: US$46 million), mainly because of the continued economic downturn in Europe, North America and Asia, and the debt default by Argentina.

Operating expenses totalled US$251 million (2002: US$224 million), impacted by the decline of the US dollar against other major currencies, including both the euro and sterling. However the overhead expense ratio remained steady at 62% (2002: 62%), reflecting the stronger earning capacity of the Group's product platforms, despite the increase in costs.

Net profit amounted to US$47 million, compared with the net profit of $51 million for the same period in 2002.

Despite the continued weakness of the US dollar, ABC Group's total consolidated assets declined by 2% to US$28.7 billion in June this year from US$29.3 billion at the year end 2002 (June 2002: US$28.9 billion). Liquidity remained strong with liquid assets to deposits ratio at 49% (2002: 51%) and loans to deposits ratio at 66% (2002: 66%). ABC Group's capital base remains strong, with a risk asset ratio of 14.2% at June 2003 (December 2002: 13.2%), calculated in accordance with Bahrain Monetary Agency requirements.

Mr. Ghazi M. Abdul-Jawad, President & Chief Executive said, "Compared to the final quarter of last year there has been a significant improvement. It is worth noting that our income generating capabilities have actually improved year-on-year. The recession in the U.S.A., Europe, Japan and the other major industrialised economies that started in the second half of 2002 has not abated, and is affecting banks worldwide, as well as depressing equity markets and business activities in general. Maintaining our earnings level in the face of adversity remains a high priority, and despite this setback we remain firmly on course towards achieving this goal."