GIB posts $50m net income in H1

27/07/2014 13:24 AST

Gulf International Bank B.S.C. (GIB) reported consolidated net income after tax of $50.2 million for the six months ended June 30, 2014, compared to $60.6 million in the prior year period. Net income after tax in the second quarter was $21.1 million.

Total income at $134.4 million was $4.8 million or 4 percent up on the prior year, with year-on-year increases recorded in all income categories with the exception of foreign exchange income and trading income.

Net interest income at $76.6 million for the six months was $0.4 million up on the prior year period. The year-on-year increase in net interest income principally reflected further increases in both loan volumes and loan margins as the bank successfully reorientates its lending activities from transactional-based long term project and structured finance to relationship-based large and mid-cap corporates. The resultant increase in net interest income was partially offset by lower interest received from impaired loans, which were exceptionally high in 2013, and higher costs associated with balance sheet management initiatives. These initiatives are part of an on-going program to minimize the mismatch between the maturities of assets and liabilities. In this context, in May 2014 GIB issued a SR2 billion five-year floating rate note to investors in Saudi Arabia at a highly optimal spread of 72.5 basis points above SAIBOR.

Consolidated total assets at the half year end were $22.9 billion, being $1.8 billion or 8 percent higher than the 2013 year end level.

Cash and other liquid assets, and short-term placements totaled $10.6 billion, representing an exceptionally high 46 per cent of total assets. Investment securities amounted to $3.7 billion. Loans and advances amounted to $8.2 billion, being marginally lower than at the 2013 yearend, reflecting the maturity of legacy transactional-based long-term project and structured finance facilities.

There was a further improvement in the bank’s funding profile in the first half of 2014 with a $0.9 billion increase in customer deposits.

During the first half of 2014, the nurturing of relationships with large and mid-cap corporates since the adoption of the new business strategy resulted in a 10 percent increase in average loan volumes as well as increased non-asset based customer-related activities. Fee and commission income at $35.4 million was $7.2 million or 26 percent up on the prior year, and comprised more than one quarter of total income. This further growth in fee and commission income reflects the success that has been achieved in the implementation of GIB’s new strategic focus on non-asset based, relationship-orientated products and services, and on supporting customers’ commercial and trade finance requirements.

Foreign exchange income at $10.2 million was $1.5 million lower than in the prior year period. Foreign exchange income entirely comprised customer-related foreign exchange revenue, and in particular revenue derived from structured products designed to assist customers in hedging their foreign exchange exposures in the current volatile markets.

Foreign exchange income in the prior year was at an exceptionally high level due to an abnormally high level of customer transactions.

Trading income at $2.4 million compared to a $7.7 million profit in the prior year period. However, the prior year profit included an exceptional $5.9 million fair value gain on a fund investment arising on the fund’s recovery of a previously written off investment.

Saudi Gazette