Gulf International Bank B.S.C. (GIB) reported consolidated net income after tax of US$50.2 million for the six months ended 30th June 2014, compared to US $60.6 million in the prior year period. Net income after tax in the second quarter was US$21.1 million.
Total income at US$134.4 million was US$4.8 million or 4 per cent up on the prior year with year-on-year increases recorded in all income categories with the exception of foreign exchange income and trading income.
Net interest income at US$76.6 million for the six months was US$0.4 million up on the prior year period. The year-on-year increase in net interest income principally reflected further increases in both loan volumes and loan margins as the Bank successfully reorientates its lending activities from transactional-based long term project and structured finance to relationship-based large and mid-cap corporates. The resultant increase in net interest income was partially offset by lower interest received from impaired loans, which were exceptionally high in 2013, and higher costs associated with balance sheet management initiatives. These initiatives are part of an on-going programme to minimise the mismatch between the maturities of assets and liabilities. In this context, in May 2014 GIB issued a Saudi Riyal 2.0 billion five year floating rate note to investors in the Kingdom of Saudi Arabia at a highly optimal spread of 72.5 basis points above SAIBOR. During the first half of 2014, the nurturing of relationships with large and mid-cap corporates since the adoption of the new business strategy resulted in a 10 per cent increase in average loan volumes as well as increased non-asset based customer-related activities. Fee and commission income at US$35.4 million was US$7.2 million or 26 per cent up on the prior year, and comprised more than one quarter of total income. This further growth in fee and commission income reflects the success that has been achieved in the implementation of GIB’s new strategic focus on non-asset based, relationship-orientated products and services, and on supporting customers’ commercial and trade finance requirements. Foreign exchange income at US$10.2 million was $1.5 million lower than in the prior year period. Foreign exchange income entirely comprised customer-related foreign exchange revenue, and in particular revenue derived from structured products designed to assist customers in hedging their foreign exchange exposures in the current volatile markets. Foreign exchange income in the prior year was at an exceptionally high level due to an abnormally high level of customer transactions. Trading income at US$2.4 million compared to a US$7.7 million profit in the prior year period. However, the prior year profit included an exceptional $5.9 million fair value gain on a fund investment arising on the fund’s recovery of a previously written off investment. Trading income principally comprised gains on investments in funds managed by the Bank’s London-based subsidiary, GIB (UK) Limited. Other income of US$9.8 million for the six months compared to US$5.8 million in the prior year period. However, other income included an exceptional, one-off recovery relating to a previously impaired loan. The remaining other income principally comprised dividends on equity investments.
Total expenses at US$81.2 million for the six months were US$12.3 million or 18 per cent up on the prior year period. The year-on-year increase in expenses was attributable to the on-going investment in the implementation of GIB’s new GCC-focused universal banking strategy, and in particular the new retail bank which is currently undergoing a trial phase for retail banking services to customers in the Kingdom of Saudi Arabia under the brand name ‘meem’.
Consolidated total assets at the half year end were US$22.9 billion, being US$1.8 billion or 8 per cent higher than the 2013 year end level. The asset profile at 30th June 2014 reflected an exceptionally high level of liquidity. Cash and other liquid assets, and short-term placements totalled US$10.6 billion, representing an exceptionally high 46 per cent of total assets. Investment securities at 30th June, which principally comprised highly rated and liquid debt securities issued by major financial institutions and regional government-related entities, amounted to US$3.7 billion. Loans and advances amounted to US$8.2 billion, being marginally lower than at the 2013 year end, reflecting the maturity of legacy transactional-based long-term project and structured finance facilities. There was a further improvement in the Bank’s funding profile in the first half of 2014 with a US$0.9 billion increase in customer deposits. Senior term finance was US$3.0 billion at 30th June representing a US$0.7 billion increase over the 2013 year end. The increase represented additional term borrowings raised to lengthen the maturity of the bank’s liabilities. GIB’s robust funding position demonstrates the confidence of the Bank’s customers and counterparties based on its strong ownership and financial strength. The Basel 2 total and tier 1 capital adequacy ratios at the end of the quarter were an exceptionally strong 19.3 per cent and 16.8 per cent respectively.
Gulf International Bank (GIB) is a leading bank in the Middle East with its principal focus on the Gulf Cooperation Council (GCC) states. The Bank is owned by the six GCC governments, with the Public Investment Fund of Saudi Arabia holding a majority stake (97.2 per cent). In addition to its main subsidiaries Gulf International Bank (UK) Ltd. and GIB Capital, the Bank has branches in London, New York, Riyadh, Dhahran and Jeddah, in addition to representative offices in Beirut and Abu Dhabi.