Gulf International Bank net income shrinks in 1H 2016

08/15/2016
GULF International Bank B.S.C. (GIB) reported consolidated net income after tax of $41.7 million for the six months ended June 30, 2016, compared to $47.3 million in the prior year period. Net income after tax in the second quarter was $31.2 million compared to $20.9 million in the prior year period.
Total income at $151.4 million for the six months was $2.4 million up on the prior year with year-on-year increases recorded in all income categories with the exception of fee and commission income, and foreign exchange income. The year-on-year increase in the Bankís core income reflects the successful progress in the implementation of the new business strategy to transform GIB into a leading pan-GCC universal bank providing innovative customer-centric solutions.
Net interest income at $91.0 million for the six months was $5.4 million or 6 percent up on the prior year period. The year-on-year increase in net interest income reflected increases in both loan volumes and loan margins as the Bank continues to successfully reorientate its lending activities from transactional-based long-term project and structured finance to relationship-based large and mid-cap corporates. Fee and commission income at $32.6 million was $6.5 million lower than in the prior year, although comprised more than 20 percent of total income. The year-on-year decrease in fee and commission income was principally due to a difference in the timing of investment banking fees that are due to arise later in 2016 compared to 2015.
Foreign exchange income at $9.0 million was $2.8 million lower than in the prior year period. Foreign exchange income principally comprised revenue derived from customer-related activities, and in particular revenues derived from structured products designed to assist customers in hedging their foreign exchange exposures in the current volatile markets. Income in the first half of 2015 was at an exceptionally high level. This decrease was, however, partly compensation by higher revenue derived from customer-related interest rate derivative activities that is classified in trading income. Trading income at $4.6 million was $0.2 million up on the prior year period.
In addition to revenue derived from customer-related interest rate derivative activities, trading income comprised gains on an investment in a fund managed by the Bankís London-based subsidiary GIB (UK) Limited. Other income of $14.2 million for the six months compared to $8.1 million in the prior year period. Income for the period included an exceptional, one-off $8.5 million recovery relating to a previously written off loan. The remaining other income for the period principally comprised dividends on equity investments.
Total expenses at $102.3 million for the six months were $11.3 million or 12 percent up on the prior year period. The year-on-year increase in expenses was attributable to costs associated with new core banking and treasury IT systems infrastructure that went live in the third quarter of 2015, and the on-going investment in the implementation of GIBís new retail banking proposition. As a result of recent actions taken to minimize expenses, the year-on-year increase in total expenses will be more subdued in the second half of the year. The provision charge for the first half of the year was $3.9 million being $6.0 million less than the provision charge in the first half of 2016.
Consolidated total assets at the half year end were $23.3 billion, being $0.9 billion lower than the 2015 year end level.
Cash and other liquid assets, and short-term placements totalled $9.1 billion, representing an exceptionally high 39 percent of total assets. Investment securities, which principally comprised highly rated and liquid debt securities issued by major financial institutions and regional government-related entities, amounted to $4.1 billion. Loans and advances amounted to $9.5 billion, being $0.4 billion or 4 percent higher than in the 2015 yearend, reflecting new relationship-based large and mid-cap corporate loans. The Bankís funding profile continued to be resilient in the first half of 2016 with customer deposits of $13.1 billion comprising 82 percent of total deposits. Securities sold under agreements to repurchase (repos) decreased by $0.5 billion during the first six months of 2016 to $1.6 billion at 30th June 2015. The decrease in repos reflected a strategic initiative to increase the level of intra-group repos in order to minimize the related funding costs.
A $0.3 billion increase in senior term financing was due to a new $0.5 billion Saudi Riyal denominated bond issue, net of the maturity of a $0.2 billion term finance facility in the first quarter. GIBís robust funding position demonstrates the confidence of the Bankís customers and counterparties based on its strong ownership and financial strength. The Basel 3 total and tier 1 capital adequacy ratios at the half-year were an exceptionally strong 17.0 percent and 16.1 percent, respectively.

LINK: