Bahrain-based Securities & Investment Company (SICO) announced today a net profit of BD 252 thousand for the second quarter of 2010 compared to a profit of BD 1.28 million for the first quarter of 2010, a drop of 80% Net profit for the corresponding period for 2009 was BD 1.102 million SICO also announced that its net profit for the first six months of the year were BD1.532 million, compared to BD 935 thousand for the first half of 2009, a 64% increase. The firm was affected by a drop in its trading revenues, in addition to a lack of client activities particularly in investment banking during a particularly volatile second quarter.
As a background the positive market momentum seen in 1Q10, and which reflected on SICO's first quarter results, carried through into April and early May. However, the middle of May marked the beginning of a major reversal sparked by concerns over the scope of EU sovereign debt, a seeming slowdown in the Chinese economy, the growing likelihood of sweeping financial sector reforms being enacted by the US Congress, and Brent oil dropping to a trough of US$ 65 from a peak of US$87 reached in late April. These, and other factors, led to international and regional markets posting their worst monthly performance for over a year. The second quarter ended with fears of a Global double-dip recession, concerns that austerity measures by the UK and Germany would impact economic output, and international and regional markets continuing their negative performance.
SICO currently has 50 per cent (or BD 37.932 million) of its balance sheet in cash and deposits, compared to 58 per cent at the end of the fourth quarter of 2009 (BD47.848 million); reflecting the cautious position the bank continues taking in regards to domestic and international capital markets. Available-for-sale securities amounted to BD 17.261 million as of the end of 1H10 (BD 19,867 million as of the end 2009), while Held-to-Maturity investments amounted to BD 6.203 million(BD 4.740 million as of the end of 2009) , and Investments at fair value through the profit & loss grew by 63 per cent to BD 10.201 million (BD 6.260 million at the end of 2009). A significant amount of our market exposure is in short duration investment rated bank and GCC government fixed income instruments.
Total income for the first six months of 2010 was BD 3.513 million (1H09: BD 2.603 million) while earnings per share reached 3.61 Bahraini fils (1H09: 2.21 Bahraini fils). Despite the challenging market conditions, total assets under management increased to BD 161 million at the end of June 2010, compared with BD 150.5 million at the end of December 2009.
Total expenses, which include staff overheads, general administration and other expenses, increased by 19 percent for the first half of 2010 to BD1.981 million compared to BD 1.668 million for the same period the previous year.
SICO maintained a strong capital base ending the first half of the year with BD 53.170 million in shareholder equity. It should be noted that the firm paid a dividend for FY09 of BD 2.121 million during the second quarter of this year.
Anthony Mallis, CEO of Securities & Investment Company, said: "The second quarter was particularly volatile in all equity markets that the firm has exposure to – including the GCC- while concurrently we continued experiencing a fall in client activity in a number of our business lines. While not as harsh as the events of 2008 nonetheless the quarter under review was challenging, with outstanding global and regional financial issues largely unresolved, while volumes on regional GCC markets falling substantially, coupled to little activity in equity issuance. On the plus side regional governments generally continue remaining economically robust, and on a more micro-level we have seen overall and relative growth for our firm in comparison with our regional peers in a number of businesses. It has to be highlighted that SICO has consistently operated for the past eighteen months on a 'fortress balance sheet' basis, protecting clients' and shareholders' assets. With our Firm remaining strongly capitalised, highly liquid and largely unleveraged, we continue being well positioned to take advantage of new business opportunities when the markets improve. SICO is undertaking a number of exciting initiatives that will unfold within the next six months, and should bear fruit on the medium term."
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