Arab Banking Corporation announces US$ 1.11 billion enhancement to its capital

Enlarge Image

RELATED ARTICLES

• S&P reaffirms ratings for Arab Banking Corporation
• High levels of interest in BSB rights issue
• NBK plans 10% capital increase before end of year

The Board of Directors of Arab Banking Corporation (ABC), the Arab international banking group based in Bahrain, at its meeting held Wednesday, called for an Extraordinary General Meeting of its shareholders on 28 January 2010 to approve an increase in the paid-up capital of the bank from US$2.0 billion to US$3.11 billion by way of a priority rights offering to existing shareholders. This will substantially enhance ABC’s shareholders’ equity which stood at $2.1 billion at 30 September 2009.

ABC’s current capital base remains strong with a capital adequacy ratio, based on the Basel II capital adequacy regime, of 16.9% at 30 September 2009, predominantly Tier 1 which totalled 13.6% after a capital increase in 2008 of $1.0 billion. Building on the strength of this platform, the Board has proposed the new rights issue to cement ABC’s strategic transformation plan.

Last year, ABC engaged an internationally reputed consultancy firm to perform a critical review of the strategic objectives of the ABC Group with an objective to enhance shareholder value. The main recommendation has been to transform ABC from being a predominantly “Wholesale Bank” into a leading Universal Bank in the MENA region that delivers superior shareholder returns and provides distinctive service and products to its customers.
 
This strategic transformation entails a substantial increase in the capital resources of the ABC Group. ABC needs to grow through rapid expansion in its existing Universal Banking units and to set up units in new geographies such as Syria and Libya. Expansion by way of an acquisition is also not excluded, as and when the right opportunity presents itself for a suitable target with a significant retail footprint in the MENA.
 
Likewise, ABC is hoping that this fresh enhancement to its capital boosts its overall business, including by providing substantial additional liquidity to the ABC Group. ABC’s principal shareholders are Kuwait Investment Authority 29.7%; Central Bank of Libya 29.5%; and Abu Dhabi Investment Authority 27.6%.

Commenting on the proposed rights issue, ABC's Chairman, Mr. Mohammed Layas, stated: “ABC values the unwavering support that it has received from its shareholders over the past two turbulent years. The Board now welcomes the shareholders’ continuing faith in the strategic transformation plan initiated by the management, as the bank reasserts its commitment to delivering superior returns and further enhancing shareholder value.”

Mr. Hassan Juma, President & Chief Executive said, “The proposed rights issue comes at the right time to support ABC’s transformational growth strategy into a leading Universal Bank in the MENA, building on the nascent turnaround already achieved by the net profit of US$80 million in the first nine months of 2009, underpinned by revenue growth resulting from changes to our business focus, culture and organization.”