Manama, Bahrain: Arab Banking Corporation today announced that its consolidated Group result for the first half-year of 2009 was US$54 million. Net profit for the second quarter was $22 million compared to $32 million in the first quarter, primarily due to impairment provisions taken for regional as well as global exposures.
Total operating income for the second quarter amounted to US$184 million, well above the total of US$139 million generated over the first quarter. Fee, commission and other income benefited partly from improved trade finance earnings and partly from gains arising from the buy back of our subordinated debt, whilst interest income also improved. At the same time, operating expenses increased to US$88 million, compared with the previous quarter’s total of US$79 million mainly due to reserves taken for cost restructuring initiatives. Operating profit before impairment provisions totalled US$96 million, US$36 million higher than in the previous quarter. Impairment provisions totalled US$50 million for the quarter, compared with the total of US$15 million last quarter in view of deterioration in certain regional and global exposures.
Shareholders’ equity at 30 June 2009 stood at US$2,043 million, compared to US$1,939 million at the end of the first quarter, the increase during the quarter coming from improvement in fair values of non-trading securities, exchange translation gains on foreign subsidiaries as well as the profit for the period. ABC’s capital base remains strong with a capital adequacy ratio, based on the Basel II capital adequacy regime, of 17%, predominantly Tier 1, which totalled 13.6%. ABC’s liquidity remains comfortable despite the adverse impacts of both the credit crunch and the continuing economic downturn, with the liquid assets to deposits ratio at 71%, compared with 69% at the end of the previous quarter.
In the light of the current adverse market conditions, ABC is maintaining its cautious approach especially in its wholesale banking businesses, replacing runoffs with very selective new assets. As a result, total assets declined over the quarter to $26.5 billion from $26.8 billion at end of the first quarter, predominantly in wholesale business.
Mr. Hassan Juma, President & Chief Executive of ABC, said, “ABC Group has again posted an improved operating profit, despite the continuing difficult economic and trading conditions, although net profit was affected by the necessity to take unexpectedly high impairments provisions. Our core businesses in both wholesale and retail banking continue to generate the steady earnings stream that we seek to develop over the next few years.”
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