Bank ABC (Arab Banking Corporation) today reported a net loss of $67 million attributable to the shareholders of the parent company for the first half of this year, due to an increase in loan loss provisions, largely related to a major fraud case and Covid-19 impact.

 

However, the bank weathered the unprecedented market conditions with strong balance sheet, robust underlying business revenues and pre-provision profit of $114 million, said the bank.

 

“Bank ABC has faced unprecedented and deeply challenging trading conditions in the first half of 2020.  The group started the year well with a strong balance sheet and good client transaction pipeline as we continued our digital and wholesale bank transformation. However, as H1 progressed, our plans were heavily impacted by the unique combination of Covid-19, collapse in oil prices and consequent economic and market pressures,” a bank statement said. 

Overall for the first half, business and client revenues held up well, while net interest margins were impacted by falling interest rates, and Brazilian Real depreciation created a significant translation impact on revenues from Banco ABC Brasil (BAB), it said.

Extensive measures were taken on operating expenses to offset the reduction in revenues to some degree so that on an underlying pre-provision basis, the group achieved a net result of $114 million compared to $133 million in 2019.  However, against this, a significant H1 ECL charge of $174 million (H1 2019 $21 million) largely as a result of a major client fraud, combined with the forward-looking nature of IFRS9, has pushed the group to a net loss of $67 million, it said.  

While there have been many challenges, Bank ABC has demonstrated strength and resilience in a number of key areas: 

• Client and transaction revenues have performed well, with many of its units posting total operating income levels of greater than 90% of previous year comparatives.

• Many key wholesale and retail banking clients have been provided with support measures such as payment deferrals extending across approximately $1 billion of its consolidated loan portfolio.

• Bank ABC’s reputation and standing has allowed it to continue to act as a lead arranger in areas of debt capital markets and syndications on major conventional and Islamic financing transactions with approximately $12 billion of debt origination facilitated in the first half.

• The bank’s payment and digital retail banking capabilities continue to expand, through AFS and our new digital, mobile-only ila Bank launched in Q4 2019, which showed exceptional growth of customer numbers and deposits under management. 

• Bank ABC’s balance sheet is strong with excellent capital and liquidity levels, which have been further bolstered by the retention of the 2019 dividend.  On Basel III basis, Group Tier 1 ratio is 16.3% (comprising predominately Core Equity (CET1) at 16.0%), LCR is 215% and NSFR is 121%, it said.

Over the rest of 2020, the group will continue to prioritise measures to restore profitability, while stabilising ECL charges, which will remain the largest single factor impacting Bank ABC results due to the continuing uncertainties being faced, the statement added.  

Bank ABC's Group Chairman Saddek Omar El Kaber commented: ‘While the group has reported a net loss, this is an aberration caused by high ECL charges, with a large element comprising a single major client fraud. The group’s strong balance sheet and effective operating processes are demonstrating our strong capabilities to weather these conditions. Our underlying business in many markets and business lines remain robust, our capital and liquidity levels are strong and our rating has been reaffirmed at investment grade. The Board of Directors would like to recognise the dedicated efforts of our employees during this period, and would emphasise Bank ABC’s continuing focus on ensuring their well-being.  We also express our thanks for the ongoing support of our regulators, shareholders and other stakeholders, which is critical to navigating the challenges ahead successfully. “ – TradeArabia News Service