Gulf International Bank B.S.C. (GIB) reported consolidated net income after tax of $56.3 million for the six months ended 30th June 2010 compared to a loss of $22.5 million in the comparable prior year period. Net income after tax in the second quarter was $29.5 million representing a 10 per cent increase over the first quarter profit.
At the operating level, GIB reported consolidated operating income of $63.5 million. Operating income in the second quarter of $32.9 million was 8 per cent up on the first quarter. Net interest income, which at $87.3 million for the six months represents the Bank’s principal income source, was 23 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 historically low level of interest rates. Net interest income in the second quarter, amounting to $44.1 million, was nevertheless slightly up on the first quarter. Fee-related income at $16.9 million was 14 per cent 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 volatile market environment. GIB has nonetheless recently been appointed as financial advisor, lead manager, and co-underwriter for the upcoming IPO of Abdulla Abdul Mohsin Al-Khodari Sons Company in the Kingdom of Saudi Arabia. Total expenses at $50.7 million for the six months were $9.6 million or 16 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.
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 half year end were $15.8 billion. The asset profile at 30thJune 2010 reflected a high level of liquidity that is being maintained as a precautionary measure in the prevailing stressed and volatile market environment. Cash and other liquid assets, and placements with banks totalled $5.0 billion, representing 32 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 $2.3 billion. Following the actions taken in 2009 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 markets. Loans and advances amounted to $8.2 billion, being $1.1 billion down on the 2009 year end level. As a result, the loan to equity ratio was slightly below the Bank’s target ratio of 5, while the ratio of loans to customer deposits and term finance was a prudent 81 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 half year 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. This more than offset an $800 million term loan maturing in April. 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 23.0 per cent and 16.6 per cent respectively.
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.