Dr. Yahya bin Abdullah Alyahya, GIB’s Chief Executive Officer
At their meeting on Saturday, 12th February 2011, the Board of Directors of Gulf International Bank B.S.C. (GIB) approved the consolidated financial statements for the year ended 31st December 2010.
GIB recorded consolidated net income after tax of US$100.4 million, compared with a loss of US$152.6 million in the prior year. Net income after tax in the fourth quarter was $14.3 million compared to a loss of $132.4 million in the fourth quarter of 2009.
Net interest income, which at $156.2 million represented the Bank’s principal income source, was 24 per cent down on 2009. The year-on-year decrease was attributable to the deleveraging and de-risking of the balance sheet, and the prevailing historical low level of interest rates. Fee-related income at US$42.2 million was US$1.5 million higher than the previous year reflecting the on-going focus by GIB on enhancing fee-based revenue. Trading profits at US$12.7 million largely comprised customer-related foreign exchange income, while other income of US$12.7 million consisted principally of dividends received from listed equity investments and profits realised on investment securities. Total expenses of US$113.3 million were US$9.5 million or 8 per cent lower than 2009, illustrating the successful implementation of proactive measures taken in the previous year to align the cost base with the Bank’s business model. A net provision charge of only US$4.0 million was recorded for 2010, reflecting the prudent and conservative provisioning actions taken by the Bank in 2009.
GIB’s Chairman, H.E. Jammaz bin Abdullah Al-Suhaimi, commented “As a result of the proactive measures to stabilise the Bank that were initiated during the previous year, GIB entered 2010 on a cautiously optimistic note, in view of the challenges posed by the ongoing impact of the global financial crisis and continued challenging market conditions in the region. With an improved balance sheet structure, GIB was in a stronger position at the beginning of the year to take advantage of new business opportunities arising from the global and regional economic and market recovery and to address the challenges of a return to profitability and the Bank’s future strategic direction.”
H.E. Al-Suhaimi continued “The ability of GIB to take advantage of a positive outlook for the region will undoubtedly be enhanced by the Board’s approval in 2010 of the Bank’s new strategy. This entails the transformation of GIB into a pan-GCC universal bank, based on four main pillars of corporate banking, investment banking, asset management and retail banking. The new institution will benefit from more diversified and stable funding, and additional revenue streams, thus reducing volatility and minimising the effects of external shocks. I am confident that the Bank is well placed to take advantage of new business opportunities, continue its key role in Saudi Arabia and the region as a leading financial institution, and ensure prosperity for all its stakeholders.”
Dr. Yahya bin Abdullah Alyahya, GIB’s Chief Executive Officer stated “During 2010, GIB’s funding profile was significantly strengthened by the successful closing of a Saudi Riyal 3.5 billion (US$933 million) five-year bond issue. In November 2009, GIB successfully completed a Saudi Riyal 2.0 billion three-year bond issue in Saudi Arabia. High demand for these bonds from a diverse group of highly respected institutional investors reflected the strong market confidence in GIB. Through these recent bond issues, GIB has successfully reduced its previous reliance on short-term wholesale deposits, thereby more closely aligning the maturity profile of the bank’s assets and liabilities.”
He added “GIB achievements in the regional debt capital markets were recognised by the ‘Best GCC Bonds Issue in 2010’ award by the UK-based World Finance Magazine. The judging panel evaluated originality and innovation, market leadership, transparency, good governance and continued progress. This independent recognition underlines GIB’s position as one of the most active financial institutions in the issuance of bonds in the region during 2010.”
Dr. Alyahya continued “Underscoring GIB’s financial performance was the re-affirmation of the Bank’s long-term issuer ratings by Fitch, Moody’s and Standard & Poor’s. The agencies noted GIB’s strong ownership and capitalisation, improved liquidity, and conservative provisioning. Such recognition constitutes a positive independent endorsement of the proactive and conclusive actions taken by GIB and its shareholders to address the challenges created by the global financial crisis.”
Dr. Alyahya also highlighted “The Bank’s Basel 2 Total and Tier 1 capital adequacy ratios at 31st December 2010 were 24.3 per cent and 18.7 per cent respectively. These are both exceptionally high by international comparison, underscoring the Bank’s intrinsic financial strength.”
Consolidated total assets at 31st December 2010 were $15.5 billion. The asset profile at the 2010 year end reflected a high level of liquidity that is being maintained as a precautionary measure in the prevailing market environment. Placements, and cash and other liquid assets amounted to $4.6 billion at the year end, representing a very high 30 per cent of total assets. In addition, investment securities, which principally comprise highly rated and liquid debt securities issued by major financial institutions and regional government-related entities, amounted to $3.1 billion.
Following the actions taken in 2009 and 2010 to de-risk the balance sheet and eliminate the Bank’s vulnerability to external shocks, GIB has no exposure to European government debt and has accordingly not been impacted by the turmoil in the European debt markets. Loans and advances amounted to $7.5 billion, being $1.8 billion down on the 2009 year end level. As a result, the loans-to-equity ratio was a conservative 3.9 times, while the ratio of loans to deposits and term finance was a prudent 61 per cent.
The Bank is applying a prudent approach to its funding activities in the current environment, with a focus on enhancing non-asset based fee income. At the end of 2010, customer deposits represented three quarters of total deposits. Customer deposits principally comprise deposits from governments, central banks and government-related institutions.
Importantly, the Bank is a net placer of funds in the interbank market. Term finance at the year end amounted to $3.7 billion, being $0.2 billion up on the 2009 year end. In April, the Bank successfully issued a Saudi Riyal 3.5 billion ($933 million) five-year bond. GIB has no material term finance maturities until 2012.
Gulf International Bank (GIB) is a leading merchant bank in the Middle East with its principal focus on the Gulf Cooperation Council (GCC) states. The Bank is 97.2 per cent owned by the Government of Saudi Arabia. In addition to its main subsidiary Gulf International Bank (UK) Ltd., the Bank has branches in London, New York, Riyadh and Jeddah, in addition to representative offices in Beirut and Abu Dhabi.