National Bank of Fujairah PSC shareholders approve 2008 Annual Report and conversion of the Ministry of Finance funding into subordinated debt
National Bank of Fujairah PSC (NBF) held its Annual Ordinary and Extra Ordinary General Meetings today at Al Diar Siji Hotel in Fujairah. The shareholders considered and approved the Chairman’s report on the Bank’s activities and its consolidated financial statements for the year ended 31 December 2008.
The Bank achieved strong growth in its core businesses and maintained strong financial stability in the face of challenging market conditions. Core operating income growth of 33.4% was achieved following continued focus on core businesses. Financial stability was underpinned by strengthening of the capital adequacy (Basel 1) ratio at 17.8% and the advances to deposits ratio at 86.4%. Whilst the Bank saw consistent income growth in 2008 across all its core businesses, global market conditions had a significant impact on the value of the Bank’s investment portfolio. The investment portfolio fair value decreased by AED 250 million, of which AED 227 million was recognized in the profit and loss [2007: AED 70.3 million gain] and the remainder in equity. In response to continued uncertainty over macro economic conditions in the coming year, the Bank has significantly reduced its exposure to market volatility. Current market conditions also necessitate a prudent approach to potential loan loss provision. Provision policy for specific provisions was brought forward to 90 days past due, and a collective impairment provision of AED 45 million was secured in deteriorative credit conditions. The Bank recorded a loss of AED 50.3 million [2007: AED 323.8 million profit] as a result of investment fair value losses and prudent loan loss provisioning for the coming year, hence no distribution to shareholders.
The Bank recently announced a profit of AED 30 million for the first quarter of 2009 compared to the profit for the first quarter of 2008 of AED 55 million. The decline in profit reflects deteriorated credit and strained liquidity conditions and slow down in economic activity. The loan loss charge for the quarter is AED 24 million as opposed to net recovery of AED 0.6 million in the first quarter of 2008. The liquidity cost in the market has been unprecedently higher and has impacted net interest income and profit, despite the Bank’s prudent liquidity management.
HH Sheikh Saleh Bin Mohammed, Chairman commented:
“We are pleased to see the Bank’s profitable results for Q1 2009. The Board was confident that, despite the difficulties faced in 2008, continued focus on core operations, risk management and financial stability would ensure that the Bank is well positioned to grow in 2009. This a solid set of results in one of the most challenging economic environments we have ever seen. Following the full year of loss, Q1 results mark a welcomed return to profitable operations of the Bank.”
A continued emphasis on effective asset and liability management strengthened the Bank’s liquidity and capital position. The Bank secured an increase in available funding, with a new syndicated loan facility of US$ 210 million equivalent, being a US$ 80 million increase on the previous facility, and a subordinated debt issuance of AED 400 million. The conversion of the Ministry of Finance’s funding into subordinated debt will further strengthen the Bank’s capital and liquidity position. These prudent measures, together with a continued focus on core businesses and enhanced risk management, ensure that the Bank is financially strong and well placed to achieve continued and stable growth for the year.
HE Sir Easa Saleh Al Gurg, Deputy Chairman commented:
“The conversion of the Ministry of Finance funding into a subordinated debt will further supplement the Bank’s core business by improving the asset and liability matching profile and the capital adequacy ratio. The Bank will continue its prudent approach in the unprecedented market conditions and will pursue selective opportunities for achieving steady growth and adding value for its shareholders”.