Ahli United Bank No Comments



Ahli United Bank today announced its financial results for the year 2009. The Bank has achieved a 5% growth in total operating income which increased to US$ 696.4 million, supported by a 15.7% increase in net interest income to US$ 466.6 million (2008: US$ 403.1 million). Despite the tight liquidity and credit conditions that prevailed in the first half of 2009, the Bank successfully managed to contain its cost of funding through tight asset liability management and asset re-pricing resulting in improving Net Interest Margin from 2.1% (2008) to 2.4% (2009).

The Bank’s reported net profit of US$ 200.7 million for the year, a drop of 21.5% over the US$ 255.7 million net profit of 2008, was impacted by increased levels of provisioning on its loans portfolio to ensure prudent mitigation of identified risks given the continuing uncertain operating environment further affected by regional credit events. Consequently, the charge for provisions for loan losses and contingencies rose to US$ 228.1 million (2008: US$ 98.6 million). This included provisions of $171.5 million exceeding 90% coverage for its entire portfolio exposures to specified impaired Saudi corporate assets so as to fully absorb any potential losses related to these accounts. Non-performing loans portfolio represented 2.8% of its total loan portfolio in 2009.

Despite the adverse operating environment and the prudent approach in terms of loan loss provisions, the Bank’s strong underlying operating income generated a Q/4-2009 net profit of US$ 17.0 million which represented a major improvement in earnings by US$ 41.4 million vis-à-vis a loss of US$ 24.4 million during Q/4-2008.

In view of the uncertainty in timing and prospects of economic recovery, the Bank adopted a very prudent and controlled risk stance in 2009, thus containing the loans and advances portfolio at US$ 13.3 billion (2008: US$ 13.6 billion). A phased de-risking of the balance–sheet profile was also undertaken by deploying liquidity from corporate credits to sovereign and quasi sovereign bond and FRN exposures resulting in non-trading investments rising to US$ 3.9 billion (2008: US$ 3.4 billion) providing an improvement in spread income with a reduction in assessed credit risk. Total assets of US$23.6 billion remained essentially flat in 2009 (2008 – US$ 23.6 billion) as the Bank focused on liability management and improving capital and liquidity ratios. Customer deposits were held at US$13.2 billion while wholesale bank & financial institutional deposits rose by 7.7% to US$ 5.5 billion (2008: US$ 5.2 billion) reflecting continuing and growing confidence in the Bank’s credentials corroborated by a re-affirmation of AUB credit ratings by S & P, Fitch and Capital Intelligence at A-, A- & A respectively with a Stable outlook.

The Bank also continued its focus on achieving sustainable process efficiencies and cost controls, which resulted in the cost to income ratio reducing to 34.2% (2009) from 39.1% (2008). The Bank’s diluted earnings per share for the period was US cents 4.2 (2008: US cents 5.3).

In view of the continuing challenging operating environment, the Board of Directors has recommended a cash dividend of 8% (2008: 10%) subject to approval by the shareholders. The regulatory capital adequacy ratio of the Bank improved during the year standing at a solid 15.1% (2008: 13.8%) comfortably above the regulatory minimum requirement of 12.0%, with a tier 1 component of 10.9% (2008: 9.0 %).

“2009 continued to pose operating challenges given the economic slowdown and the related larger provisioning requirements. We are however encouraged by the Bank’s resilience and strong fundamentals which have enabled it to navigate the regional ripple effects of the global and regional economic slowdowns and to effectively address all identified impairment challenges in a full and unambiguous manner”, said Mr. Fahad Al-Rajaan, Chairman of AUB.

“While 2010 remains a challenging year, we nevertheless see solid opportunities for growth on a number of fronts. One of these is the potential to further enhance AUB’s business leverage and contribution in Egypt after raising our stake in Ahli United Bank, Egypt (AUBE) to c.79.6% through a path breaking tender offer successfully closed in January 2010. Moreover, we are seeking to enhance our presence in the MENA region by acquiring a strategic shareholding in United Bank for Commerce and Investment in Libya, which complements our expanded presence in Egypt. Furthermore, we are confident of AUB Group tapping the large potential arising from the forthcoming conversion of its c.75% subsidiary – Bank of Kuwait and the Middle East (BKME) into a fully Sharia compliant Islamic institution in Q/2-2010. This will add a very important product dimension to the AUB Group range of products and services and will also involve the re-branding of BKME as Ahli United Bank K.S.C which will reinforce our cross border brand identification. It is also gratifying to note that AUB, in partnership with the U.K. based, Legal & General Group Plc, one of the world’s largest life insurance companies, has commenced offering life insurance products and services beginning with Bahrain through our equally owned conventional and Takaful joint venture companies in furtherance of AUB’s objective of gradually becoming a broadened provider of financial services”.

During 2009, AUB’s strong underlying fundamentals enabled it to continue to earn a number of prestigious awards, including the ‘Best Bank in Middle East 2009’; ‘Best Foreign Exchange Bank – Middle East’ from Global Finance; ‘Best Bank – Bahrain’ from Global Finance and The Banker and ‘Best Trade Finance Bank in Bahrain’ from Global Finance.