Gulf International Bank B.S.C. (GIB) reported consolidated net income after tax of $86.1 million for the nine months ended 30th September 2010 compared to a loss of $20.2 million in the comparable prior year period. Net income after tax in the third quarter was $29.8 million representing a significant improvement over the net income of $2.3 million recorded in the third quarter of 2009.
At the operating level, GIB reported consolidated operating income of $94.7 million. Net interest income, which at $121.6 million for the nine months represented the Bank's principal income source, was 25 per cent down on the prior year period. The year-on-year decrease was attributable to the deleveraging and derisking of the balance sheet and the prevailing historical low level of interest rates. Fee-related income at $26.5 million was $4.2 million lower than in the prior year period due to a lower level of investment banking fees. This reflected a subdued level of corporate finance-related activity in the region due to the prevailing market environment. Nevertheless, in September GIB acted as lead manager and co-underwriter for the IPO of Abdulla Abdul Mohsin Al-Khodari Sons Company in the Kingdom of Saudi Arabia and has also been appointed as the regional lead manager and co-underwriter for the recently announced ALBA IPO. Trading income at $10.1 million for the nine months largely comprised customer-related foreign exchange income while other income at $10.0 million principally comprised dividends received on equity investments and profits realised on investment securities. Total expenses at $73.5 million for the nine months were $19.3 million or 21 per cent down on the prior year period. The significant year-on-year decrease in expenses reflected proactive measures taken in 2009 to align the cost base with the Bank's business model following the deleveraging and derisking initiatives.
A net provision charge of only $4.0 million was recorded for the period. The limited provisioning requirement reflected the prudent and conservative provisioning actions taken by the Bank in 2009.
Consolidated total assets at the third quarter end were $14.9 billion. The asset profile at 30th September 2010 reflected a high level of liquidity that is being maintained as a precautionary measure in the prevailing challenging and stressed market environment. Cash and other liquid assets, and placements totalled $3.8 billion, representing a high 26 per cent of total assets. Investment securities at 30th September, which principally comprised highly rated and liquid debt securities issued by major financial institutions and regional government-related entities, amounted to $2.9 billion. Following the actions taken to derisk 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 recent turmoil in the European debt markets. Loans and advances amounted to $7.8 billion, being $1.5 billion down on the 2009 year end level. As a result, the loan to equity ratio was a conservative 4.1 times, while the ratio of loans to deposits and term finance was a prudent 67 per cent. The Bank is applying a prudent approach in its lending activities in the current uncertain environment. Customer deposits principally comprise deposits from governments, central banks and government-related institutions. Importantly, GIB does not have any net reliance on the interbank market. Term finance at the quarter end amounted to $3.2 billion, being $0.2 billion up on the year end. In April, the Bank successfully issued a Saudi Riyal 3.5 billion ($933 million) 5 year bond. GIB has no material term finance maturities until 2012. The Basel 2 total and tier 1 capital adequacy ratios at the end of the quarter were an exceptionally strong 23.7 per cent and 17.3 per cent respectively. The Bank has undertaken a quantitative impact study of the effect of the Basel Committee's recently announced Basel 3 guidelines. The impact study confirms that GIB is already fully compliant with the new capital and leverage ratios that are to be implemented on a progressive basis through to 2019.
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 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 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.