Arab Banking Corporation (ABC) announces its third quarter result

ABC Group's net profit increased to US$69 million, compared with a net profit of $55 million for the same period last year.

ABC's earnings stream remains strong. Total operating income increased by 12% to US$605 million (2002: US$542 million). Net interest income was marginally lower at US$328 million (2002: US$337 million) because of the continued low US dollar interest rates affecting mainly the earnings from equity funds. Non-interest income surged 35% to US$277 million (2002: US$205 million) boosted by improved performance from capital markets, retail banking and treasury activities, also benefiting from the strengthening of the Euro against the Dollar.

Loan loss provisions amounted to US$91 million (2002: US$90 million), mainly because of the continued economic downturn in the areas in which ABC has operations - Europe, North America and Asia, exacerbated by Argentina's debt default.

Operating expenses increased to US$380 million (2002: US$346 million), largely due to the translation impact arising from the sharp rise in Euro/Dollar exchange rate which has inflated Banco Atlantico's expenses in Dollar terms. However, the overhead expense ratio improved slightly to 63% (2002: 64%), reflecting the strong earning capacity of the Group's product platforms.

ABC Group's total consolidated assets declined by 2% to US$28.6 billion in September this year from US$29.3 billion at the year end 2002 (September 2002: US$28.8 billion). Liquidity remained healthy with liquid assets to deposits ratio at 48% (2002: 52%) and loans to deposits ratio at 67% (2002: 67%). ABC Group's capital base remains strong, with a risk asset ratio of 14.5% at September 2003 (December 2002: 13.2%), calculated in accordance with Bahrain Monetary Agency requirements.

Mr. Ghazi M. Abdul-Jawad, President and Chief Executive said, "ABC continues to demonstrate its financial and commercial strength, witnessed by the continued improvement in our income generating capabilities, despite the recession in the US, Europe, Japan and the other major industrialised economies that started in the second half of 2002 and which has only recently shown signs of abating. Growth in the Arab world economies was generally weak in the earlier part of the year due to the Iraq crisis which continues to impact, to some extent, the business opportunities in the region.

"ABC recently announced that it has reached an agreement with Fubon Financial Holding & Co., Limited, a leading financial group in Taiwan, regarding the disposal of its 55% investment in International Bank of Asia Limited, Hong Kong. We expect that this sale will be completed before the year end, reducing ABC Group's total assets by $4.4 billion and, whilst improving ABC's capital adequacy ratios, will provide for the redeployment of resources in its home markets within the Arab world."