Gulf International Bank reports 2018 financial results

Gulf International Bank B.S.C. (GIB) today announced its financial results for the full year ended 31st December 2018. Net income before provisions and tax for the year increased by 11% to $133.1 million compared to $120.3 million in the prior year, reflecting continued growth and higher contributions from the Bank’s diversified business lines.

After an exceptional provision charge of $353.3 million, the Bank reported a net loss of $227.0 million, compared with net income of $70.0 million in the prior year. The net loss for the last quarter of the year was $97.1 million, relating to higher provisions taken in the last quarter. The provisions related to challenging macro-economic conditions, which impacted the business environments of several GCC countries in which the Bank operates, contributing to a number of borrowers experiencing stressed financial circumstances and resulting in a higher level of non-performing loans during 2018. Consistent with the Bank’s prudent approach to provisioning, increased provisions were pro-actively made, and the higher level of provision coverage at 103 per cent will enable the Bank to focus on its strategic and business initiatives in 2019 without undue distractions, and enable the planned new subsidiary in Saudi Arabia, an important milestone in the Bank’s regional expansion initiatives, to commence operations on a firm footing.

Total income for the year increased by 11 percent to $398.5 million compared to $360.3 million in the prior year. Net interest income rose by 8 percent to $273.7 million from $253.1 million in 2017, reflecting positive progress in the implementation of the Bank’s strategy. Non-interest income increased by 16% to $124.8 million, attributable to higher client-related income derived from treasury products and higher returns on asset management portfolios. Non-interest income also included a recovery on a previously written-off loan, which conforms to the Bank’s persistence in seeking recoveries even where loans have been fully provisioned or written off.

 
Total expenses for the year were $265.4 million compared to $240.0 million in the prior year, attributable to costs associated with the ongoing implementation of the Bank’s business diversification and expansion strategy, including the new subsidiary in Saudi Arabia, as well as additional investments in the IT infrastructure to support the launch of innovative products and services.

The Bank continued to maintain a strong balance sheet in 2018, with consolidated total assets at the end of the year at $27.5 billion, an increase of 8 per cent from $25.5 billion at the end of 2017. The Bank’s asset profile continued to reflect high levels of liquidity with cash and other liquid assets, securities purchased under agreements to resell, and short-term placements increased by 21 per cent to $12.9 billion or 47 percent of total assets. The Bank’s funding profile also improved during 2018, with a 15 percent increase in customer deposits to $18.3 billion, including increased contributions from global transaction banking activities and meem digital retail banking. Retail deposits increased by 29 percent to $1.4 billion at year end. Total equity for the year amounted to $2.2 billion, representing 8 percent of total assets, a ratio that is relatively high by international comparison. A $214.7 million decrease in total equity comprised the net loss for the year, partly offset by positive fair value movements recorded in the statement of comprehensive income.

Commenting on the results, Dr. Abdullah bin Hassan Alabdulgader, Chairman of GIB, said, “We are pleased with the strong underlying performance and progress that GIB continued to make during 2018 in the implementation of our strategy focused on growth and diversification across business lines and core markets. The Bank reported an 11% increase in operating income, at the higher end of growth in operating income reported by regional banks for 2018. We are proud of this result and what it says about the strides we are making in existing areas of our business and the positive benefits being realised through the Bank’s strategic initiatives. We also ended the year with sound financial health as underscored by the Bank’s strong asset quality, high levels of liquidity and the affirmation of our ratings by Fitch and Moody’s during the year at levels well above the Bahrain sovereign rating, reflecting the strength of the Bank’s shareholders. Whilst the higher level of provisions, related to challenging macro-economic conditions and their impact on borrowers, affected our results for 2018, we believe we have taken the right steps to position the Bank to move forward on even firmer footing and in a better position than ever to become a leading pan-GCC universal bank. Central to our strategy for meeting this objective is the conversion of our branches in Saudi Arabia into a locally incorporated bank. We are now in the final stages of completing this process and embarking on further expansion in this key growth market. We have entered 2019 with strong momentum and look forward to enhanced performance and results in the year ahead. I would like to thank our Board, shareholders and management team for their guidance, support and continued hard work.”

Mr. Abdulaziz bin Abdulrahman Al-Helaissi, Group Chief Executive Officer of GIB, added, “We are pleased with the strategic progress GIB has made across our business in 2018 and of our continued ability to further diversify and deliver strong double digit growth in operating income. For the year, we were particularly pleased to report a 21% increase in client-related treasury product income, a doubling in our global transaction banking income and a four-fold increase in asset management fees generated in Saudi Arabia. We are also proud of the marked expansion of our retail banking operations. In 2018, we rolled out our meem digital bank in Bahrain and continued its successful growth in Saudi Arabia. As a result, we recorded a three-fold increase for the year in retail banking income and a 29% increase in deposits. This is an important growth area for the Bank and we will continue to focus on further building our digital capabilities, footprint and market leadership. Throughout the year ahead, we will also remain focused on executing on our strategy of diversification and geographic expansion with the ongoing strengthening of our presence in Saudi Arabia a key priority including the establishment of our local Saudi bank that is expected to take place before the end of the first quarter of 2019.”