Bahrain-based Gulf International Bank (GIB) has reported net income after tax of $62.4 million for the six months ended June 30, marking an 11 per cent increase on the comparable period of last year.

Net income after tax in the second quarter was $36.6 million representing a $7.1 million or 24 per cent increase over the second quarter profit in 2010.

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.

Net interest income at $74.1 million for the six months was 15 per cent 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 minimise 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.

As a result of these initiatives, at the end of June only 12 per cent of the loan portfolio was funded by short term wholesale deposits. As recognised 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 per cent 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.

Significant year-on-year increases were recorded in both trade finance and investment banking fees. Trading income at $9.8 million was $3.9 million or 66 per cent up on the prior year, reflecting strong customer-related foreign exchange revenues. Total expenses at $55.3 million for the six months were 9 per cent up on the prior year period.

The year-on-year increase in expenses reflected ongoing investment in the implementation of GIB’s new GCC-focused universal banking strategy.

A net provision charge of only $0.5 million was recorded for the period. The limited provisioning requirement reflected the prudent and conservative provisioning actions taken by the Bank in previous years.

Consolidated total assets at the half year end were $17.4 billion, being $1.8 billion or 12 per cent higher than the 2010 year end level. The asset profile at 30th June 2011 reflected an exceptionally high level of liquidity.

Cash and other liquid assets, and short term placements totalled $6.6 billion, representing a very high 38 per cent of total assets. Investment securities at 30th June, which principally comprised highly rated and liquid debt securities issued by major financial institutions and regional government-related entities, amounted to $3.4 billion.

The bank has no exposure to troubled European government debt and has accordingly not been impacted by the recent turmoil in the European debt market. Loans and advances amounted to $7.1 billion, being $0.4 billion lower than at the 2010 year end, it said in a statement.

The loan to equity ratio at the half year end was 3.6, while the ratio of loans to customer deposits and term finance was a prudent 57 per cent. Customer deposits principally comprise deposits from governments, central banks and government-related institutions, it added. – TradeArabia News Service