RAKBANK announces financial results

This increase in net profit is consistent with the Bank's recent history of solid growth by focus on the retail banking segment.

Funded income grows by 34 per cent
Net interest income of AED178.81 rose by 34% over the previous period in 2003 consistent with growth in the funded assets of the Bank. Gross loans and advances at AED3.38 billion reflected an increase of 35% over outstandings as at 31st December 2003, an increase of almost 42% when compared with the accounts as at 30th September 2003. The Personal Banking portfolio continued to grow throughout the first nine months in line with targeted expansion. A number of new products and services have been successfully launched during the period under report. Of the portfolio mix of loans and advances 83% relates to personal banking with the balance reflecting corporate outstandings.

Commission and fee income grows by 65 per cent
Fee and commission income at AED85.71 million increased by 65% when compared with the first nine months of 2003. This is in line with the Bank's strategy of developing its fee income through a new range of quality products and services including investment services.

During 2004 the Bank's trade finance operations were centralised. The improved customer service resulted in increased business and an enhanced fee income flow.

Expenses
For the first nine months of 2004 expenses amounted to AED129.16 million, an increase of 32% compared to the same period in 2003. The Bank continues to expand its business with the introduction of new products and services, new branches and continuing improvements to systems. The Bank also remains committed to Emiratisation as its ratios demonstrate.

Assets and liabilities
Total assets as at 30th September 2004 increased by 21.64% to AED4.56 billion compared with AED3.75 billion as at December 2003. The bulk of this growth is seen in increased lending in the retail segment. The Bank's investment portfolio (including originated debt securities) is also being diversified and ended the quarter at AED154.82 million (AED59.59 million - December 2003).

The growth in the assets book has been funded by a combination of liabilities including customer deposits which increased by AED564 million in the first nine months, medium term bank borrowing and an increase in shareholders' funds.

The successful closure of the rights issue in March 2004 was followed by the distribution of the 2003 dividend composed of cash and stock. A total of 3.75 million shares with par value of AED10 were issued at a premium of AED5 per share on a rights issue which figure included the employee share save scheme. Total shareholders' funds totalled AED765.12 million as at the end of September 2004.

The net charge for loan impairment amounted to AED40.03 million in the first nine months compared to AED20.08 million in the same period in 2003. This includes specific provisions relating to both retail and corporate banking divisions.

The Bank adopts a very conservative lending policy and despite the growth in the loan portfolio the provisions especially those relating to the retail segment are well below industry average standards and indicates the quality of the Bank's lending book. On the corporate side the Bank's policy is to make full provision at the time a potential loss is recognised.

The 30th September 2004 interim condensed financial information as reviewed by our auditors can be found on the Bank's website: www.rakbank.ae.

Capital adequacy
The Bank's liquidity position continues to be strong. The capital adequacy ratio at the end of first nine months stood at 17%, against a minimum of 10% as prescribed by the Central Bank. Tier 1 capital has increased through a combination of rights issue and stock dividends, which has positively impacted the capital adequacy ratio reflecting the Bank's continued efforts to grow the balance sheet within a sound policy of Balance Sheet risk management.

Ratings
Both Moody's Investor Services and Capital Intelligence currently rate the Bank. Capital Intelligence has very recently upgraded the foreign currency long-term rating and the financial strength rating of RAKBANK to BBB from BBB- reflecting the Bank's strong growth in recent years.

The current ratings stand as follows:

Moody's:

Deposits: Baa1 / P-2
Financial Strength D+

Capital Intelligence

Foreign currency L/T: BBB S/T: A3
Financial Strength BBB
Outlook Stable
Support 3