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GIB's net profit rises on lower provision charge

JEDDAH - Manama-headquartered Gulf International Bank B.S.C. ( GIB ) reported an increase of 11 percent or $6.1 million in consolidated net income after tax of $62.4 million for the six months ended June 30, compared to the same period a year ago, the bank said in a statement Sunday. Net income after tax in the second quarter was $36.6 million, representing a $7.1 million or 24 percent increase over the same period last year.

The bank is owned by the six GCC governments, with the Public Investment Fund of Saudi Arabia holding a 97.2 percent stake.

The year-on-year increase in net income was attributable to increases in all income categories, with the exception of net interest income, and a lower net provision charge, GIB chief executive Yahya Alyahya said.

Consolidated total assets in six months were $17.4 billion, 12 percent higher at $1.8 billion than 2010 end level. The asset profile in the first six months reflected an exceptionally high level of liquidity. Cash and other liquid assets, and short-term placements totaled $6.6 billion, representing a very high 38 per cent of total assets.

Investment securities in first half, which principally comprised highly rated and liquid debt securities issued by major financial institutions and regional government-related entities, amounted to $3.4 billion.

Net interest income at $74.1 million for the six months was 15 percent down on the prior year period. The year-on-year decrease was attributable to a lower average loan volume and an increase in the cost of term finance as a result of initiatives to further minimize the mismatch in the maturity profile of the bank's assets and liabilities.

While these initiatives have resulted in an additional cost, they have significantly reduced the bank's reliance on short term wholesale funding and will ensure compliance with the new Basel 3 regulatory rules on liquidity risk management well ahead of the planned implementation deadlines. Only 12 percent of the loan portfolio was funded by short-term wholesale deposits. As recognized by the international credit rating agencies, the managed reduction in the leverage of the loan portfolio to a lower, more prudent multiple of equity has strengthened the bank's risk positioning.

The impact on income of the reduction in the loan volume was partly offset by an increase in loan margins.

Fee and commission income at $26.5 million was $9.6 million or 57 percent higher than in the prior year period. As a result, fee-based income comprised almost one quarter of total income, reflecting continued success in the implementation of GIB 's new strategic focus on non-asset-based, relationship-orientated services.

© The Saudi Gazette 2011