RAKBANK announces financial results

The current quarter's increase continues the Bank's recent history of solid growth performance.

Funded income grows by 45%

Gross interest income of AED 96 million for the current quarter registered an increase of 45% over 31 March 2004 due to the significant increase in the Auto Loans, Mortgage Finance and Credit Card portfolio of the bank.

Gross loans and advances closed at AED 4.3 billion, an increase of 11% over 31 December 2004 and an increase of 47% compared to 31 March 2004. The Personal Banking portfolio continued to grow throughout the quarter in line with targeted expansion. The Mortgage Loan portfolio saw a significant increase of 90% over December 2004, while the bank also launched its first co-branded credit card in January 2005. The portfolio mix of loans and advances represents 88% personal banking and 12% corporate.

Commission and fee income grows by 58%

Fee and commission income at AED 36 million registered a 58% increase over 31 March 2004. Fee income from Credit Cards jumped by almost 100% compared to the same period in 2004. This demonstrates the bank's strategic shift in enhancing its fee income from providing quality services to its customers.

Similarly the bank also realised significant income from disposal of some of its investments while the forex income grew by almost 60% due to increased forex and trade finance transactions.

Expenses

Expenses in the current quarter at AED 55.62 million were up by 49% compared to the same period in 2004. This was due to growth in staff numbers and the launch of various new products and promotions. The bank has also introduced state of the art Electronic Deposit Machines at all its major branches and offsite locations. Premises also increased to support growth in card operations, telesales and phone banking divisions, NRI service unit, Investment and bancassurance units.

The Bank continues to invest in marketing, technology and other delivery channels and remains at the forefront of Emiritisation in the banking industry.

Assets & liabilities

Total assets as at 31 March 2005 were AED 5.58 billion, a 7% increase from 31 December 2004 (AED 5.2 billion) resulting mainly from the growth in loans and advances by AED 416 million. The bank's investment portfolio is also being diversified and closed at AED 195 million compared to AED 151 million in December 2004.

The growth in the asset book has been supported by a combination of increases in medium term inter bank borrowings and an increase in shareholders funds. Customer deposits increased by AED 64 million during the current quarter.

The net charge for loan impairment amounted to AED 10.4 million in the current quarter compared to AED 6.3 million in first quarter of 2004. This relates to specific provisions mainly in retail banking of AED 17.8 million as offset by specific recoveries of AED 8.2 million.

The Bank has adopted a very conservative lending policy and given the growth in the loan portfolio these provisions are well below industry standards and indicate the quality of the Bank's lending book.

The 31 March 2005 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 current quarter stood at 17.6%, against a minimum of 10% as prescribed by the Central Bank.