Bahrain-based Gulf International Bank (GIB) announced that it has increased its paid up capital by US$ 500 million to US$ 1.5 billion, representing 50 per cent of the Bank’s authorised capital of US$ 3.0 billion. Following the increase in capital and the payment of a 50 per cent dividend in respect of 2006 profits, GIB’s total equity will increase to in excess of US$ 2.2 billion.
The increase in GIB’s paid up capital was approved by the Bank’s shareholders at an Extraordinary General Assembly meeting in February. The capital increase has been subscribed by the Bank’s shareholders in the same proportion as their current shareholdings. Accordingly, there is no change in the ownership structure of the Bank.
Commenting on this development, Shaikh Ebrahim K. Al-Khalifa, GIB’s Chairman and Undersecretary of the Ministry of Finance, Kingdom of Bahrain, stated: “The capital increase demonstrates the shareholder’s commitment to GIB and is a clear expression of confidence in the Bank’s GCC-focused merchant banking strategy. Since the new strategy was adopted in 2002, GIB has more than doubled its return on equity (ROE), which rose to 14.3 per cent in 2006. The capital increase will provide a platform for further growth in profitability and the generation of superior returns for the Bank’s shareholders.”
GIB’s Chief Executive Officer, Dr. Khaled M. Al-Fayez, said: “The capital increase will enable GIB to continue to expand its operations in its core market in the GCC and to strengthen its leading position in the region. The capital increase will also play a constructive role in helping to maintain and enhance the Bank’s credit ratings. In particular, it will enhance the Tier 1 capital ratio, a key capital ratio monitored by the international rating agencies. GIB will accordingly be able to continue to grow its business while maintaining strong capital ratios. This will be of particular importance during the transition to the new Basel 2 capital guidelines which are to be implemented in January 2008. The capital increase will ensure that GIB’s capital ratios will continue to be well above the regulatory minimum levels.”
Dr. Al-Fayez explained that: “The capital increase will support the Bank’s future asset growth and facilitate the Bank’s ability to underwrite major large-sized projects. We are witnessing a very significant increase in the size of projects in the region. The capital increase will enable GIB to continue to compete effectively with the large international and regional banks in underwriting, and participating in, major project-related financing transactions.”
In 2002, GIB implemented a GCC-focused merchant banking strategy, which has resulted in a significant improvement in the diversification and quality of revenues, and a substantial increase in net income and return on equity. Net income has increased threefold over the last four years from US$ 85.3 million in 2002 to US$ 255.5 million in 2006, reflecting increases in interest and non-interest earnings, the containment of expenses, and lower provisions.
GIB has strong investment grade ratings from all three major international credit rating agencies: Fitch, Moody’s and Standard & Poor’s. GIB was the first bank in the GCC to be awarded long-term investment grade credit ratings by all of the major international agencies. GIB’s current long-term foreign currency debt ratings are: Fitch: A, Moody’s: A3 and Standard & Poor’s: A-.
