Gulf International Bank (GIB), a leading merchant bank in the Middle East, said its consolidated net income for three months ended March 31, 2009, soared to $42.9 million when compared to $22.7 million last year.

The year-on-year increase in net income was principally due to the elimination of trading losses incurred in the prior year period following the termination of proprietary trading activities in 2008, said a statement from the bank.

The net interest income, and fee and commission income, which represent the bank’s two principal income sources, were $8.5 million or 12 per cent and $9.7 million or 49 per cent down respectively on prior year levels, the statement added.

The year-on-year decrease in net interest income was attributable to the deleveraging of the balance sheet in the current challenging market and economic environment. The difficult market conditions also contributed to the lower fee-related income, the bank pointed out.

Net income for the first quarter of the year benefitted from a number of exceptional, non-recurring income items. Accordingly, it was not representative of the Bank’s core underlying earnings, the statement added.

The net income for the period included the net interest earnings of circa. $9.5 million on the investment securities sold on March 27, 2009.

Trading income included profits of $3.3 million on externally managed funds that are in the process of liquidation.

In addition, the net income included a $9.8 million investment security non-specific provision release resulting from the sale of investment securities. These exceptional income items will not reoccur in future periods, the bank said.

The GIB's consolidated total assets at the end of the quarter were $24.2 billion. The asset profile at March 31, 2009 reflected an exceptionally high level of liquidity following the receipt of funds from the sale of investment securities on March 27.

Cash and other liquid assets, and placements with banks totalled $9.3 billion, representing 38 per cent of total assets, it added.

The investment securities as on March 31, which principally comprised investment grade-rated debt securities issued by major financial institutions and government-related entities, amounted to $2.1 billion.

Loans and advances amounted to $12.3 billion, being $0.7 billion down on the 2008 year end level. The reduction in the loan portfolio resulted from actions taken to reduce the balance sheet leverage in the current uncertain environment.

The Basel 2 total and tier 1 capital adequacy ratios at the end of the quarter were a strong 17.4 per cent and 12.4 per cent respectively.-TradeArabia News Service