Bahrain-based Gulf International Bank (GIB) has registered a net profit of $117.9 million for 2012, up 13 per cent over the previous year with year-on-year increases recorded in all income categories.

A leading bank in the Middle East with its principal focus on the GCC states, GIB said its net income after tax in the fourth quarter was $20.9 million compared to $19.9 million the year before.

Net interest income, which at $149.4 million represented the Bank’s principal income source, was $5.6 million or 4 per cent up on 2011, said  statement from the bank which is majority owned by the Saudi Arabian government.

During 2012, loans and advances, the principal source of GIB’s net interest earnings, increased by $358.5 million or 5 per cent. The growth in the loan portfolio reflected the leveraging of the bank's expertise to serve its large and mid-cap customers.

The growth in loans in 2012 followed year-on-year decreases in the loan volume since 2007 as the bank implemented deleveraging and derisking initiatives.

The renewed growth in 2012 reflected the success of the transformation of GIB’s wholesale banking activity and effective engagement with the bank’s customers to meet their financing requirements.

Fee-related income at $56.7 million was $8.2 million or 17 per cent higher than the previous year. As a result, fee-based income comprised almost one quarter of total income, reflecting further positive progress in the implementation of GIB’s strategic focus on non-asset based, relationship-orientated services.

Trade finance-related commissions in particular recorded a 27 per cent year-on-year growth following a 42 per cent year-on-year increase in the prior year. In addition, foreign exchange income at $21.3 million for the year was $11 million or more than double the prior year level.

Foreign exchange income principally comprised profits generated on customer-initiated foreign exchange contracts. The substantial year-on-year increase reflected a focus on the cross selling of treasury products to clients and the introduction of new products and services to meet client needs.

Trading income at $14.3 million for the year was $7 million up on, or almost twice the prior year level. This was principally attributable to profits on investments in emerging market debt.

There was particularly strong growth in the emerging markets during 2012 and the bank was well positioned to benefit from the positive sentiment in this market sector, said the GIB statement.
 
Chairman Jammaz bin Abdullah Al-Suhaimi lauded the progress made in the implementation of GIB’s new strategy, which aims at a total transformation of the way the bank conducts its business and will take it into new frontiers of sophisticated banking.

According to him, the new strategy aims to transform GIB into a pan-GCC universal bank incorporating a unique retail bank offering.

"The strategy implementation has involved the restructuring of the wholesale banking activity and preparations for the launch of a new retail banking business which are now in an advanced stage," he stated.

Al-Suhaimi said, "We believe that these measures will, within a few years, achieve the levels of profitability and return on equity in line with the expectations of our shareholders. The new institution will also benefit from more diversified and stable funding, thus reducing volatility and minimising the effects of external shocks."

He said the bank is well placed to take advantage of new business opportunities, continue its key role in Saudi and the region as a leading financial institution, and ensure prosperity for all its stakeholders.

CEO Dr Yahya bin Abdullah Alyahya expressed delight at the continued profitability growth in 2012 despite increased costs associated with the investment in the future of the bank through new strategic initiatives.

He said the GIB’s robust funding position during 2012 reflected the confidence that the customers and counterparties have in its strong ownership and financial strength.

"This was clearly demonstrated when GIB issued a $500 million five-year senior unsecured bond in December at one of the lowest coupons for a US 5-year senior unsecured debt issue by a bank in the Mena region. The bond issue was 3.5 times oversubscribed, even at a highly competitive pricing level, providing a conclusive endorsement of the international investor’s confidence in GIB’s strong financial position," he added.

The bank's consolidated total assets as at December 31, 2012 were $17.7 billion. The asset profile at the 2012 year end reflected a high level of liquidity that is being maintained as a precautionary measure in the prevailing market environment.

The Bahrain-based said that following actions taken in prior years to derisk the balance sheet and eliminate its vulnerability to external shocks, GIB has no direct exposure to European government debt impacted by the eurozone crisis and has accordingly not been impacted by the turmoil in the European debt markets.

The bank is applying a prudent approach to its funding activities in the current environment, with a focus on enhancing non-asset based fee income, said the GIB statement.

At the end of 2012, the customer deposits, which increased by $1 billion over the prior year end, represented 81 per cent of total deposits, it added.-TradeArabia News Service