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MANAMA: Bank ABC is actively exploring merger and acquisition opportunities across the Mena region to diversify its revenue sources, build scale and expand presence, group chief executive Dr Khaled Kawan has said.
At a Press conference after the annual general meeting yesterday, Dr Kawan said the bank has in the past looked at buying businesses in Saudi Arabia, the biggest market in the GCC, and other countries in the region.
Being well-capitalised, the lender can finance acquisitions from its own balance sheet, he added.
The balance sheet remains strong, resilient and increasingly well-diversified.
The Basel III capital adequacy ratio and Tier 1 ratio at 2018-end stood at 18.2pc and 17.2pc respectively, which is higher than those of many of our peers, said Dr Kawan.
The underlying investment portfolio is stable and liquid, continuing to become more geographically diverse.
Customer deposits were $16.4 billion at the year-end, compared with $16.8bn in 2017, and loans and advances were $14.9bn, against $15.3bn in 2017.
“Operating performance continued its positive trend during the year 2018, and the first phase of our transformation strategy has met its goals. This was achieved despite slowing global economic growth and persisting geopolitical tensions. In our core markets, recovery in the GCC remains muted and the outlook in North Africa continues to be challenging. But conditions in Brazil, another key market for us, are improving.”
Bank ABC’s net profit for 2018 was $202 million, 5pc higher than in 2017, thus continuing the past few years’ improving operating performance.
Strategically, the bank is prioritising a more efficient use of capital and growing fee income, which caused return on equity to uptick, increasing to 5.2pc in the year.
Total operating income was $817m against $869m reported for last year but normalises to $866m vs $868m respectively, after adjusting for effects of foreign currency hedging transactions in Banco ABC Brasil (BAB) (which have an offsetting tax charge impact) and also being somewhat reduced by FX depreciation of the Brazilian real against the US dollar in particular.
Sael Al Waary, the deputy group chief executive, said after investments in building presence in Dubai and Singapore, as well as other strategic initiatives, operating costs were $474m, $12m higher than in 2017.
“Impairment charges for the year were $79m, down from $96m in 2017, reflecting prudent lending criteria and proactive management of remedial, which helped us contain our credit cost.”
The next phase of Bank ABC’s strategy, which was approved in late 2018, rests on four main pillars: to unlock the potential of the global wholesale bank, globalise and digitise the transaction banking business, enhance the group’s operating model to increase resilience and strengthen culture, and continue to seek inorganic opportunities to address model constraints and enhance the group’s returns.
“In regard to our wholesale bank strategy, the business at a global level shall be focusing on improving corporate and financial institutional client relationships by leveraging our network and capabilities to become a more effective partner, using multiple products across several countries on an ongoing basis.
“An important related initiative is reinforcing our global transaction banking business, leveraging our trade proposition alongside building a cash management business, which will meet a significant client need, as well as providing a source of diversification to the funding of the bank,” added Mr Al Waary.
On the digital strategy, a major strategic initiative is the development of a mobile-first retail bank, which is planned to go live in Bahrain before the end of 2019.
After launch in Bahrain, the intention is to expand into other Mena markets, such as Egypt and Jordan.
Since announcement of the intention for a market making arrangement in February 2018, the bank’s share price has risen from $0.28 to $0.44 (as of January 31, 2019), a rise of 50pc with over 30pc of that gain following announcement of the arrangement on June 20, 2018.
The volume of the bank’s shares traded in the 12 months period to December 31, 2018 has increased to 54.2m (+53pc) from 35.5m in similar period 2017.
The meeting saw shareholders approve a cash dividend distribution of 3pc ($0.03 per share, net of treasury shares), amounting to $92,934,000 and translating to approximately 46pc of the net profit for the year.
The AGM has also approved the appointment of new directors to replace retiring board members.
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