Gulf International Bank (GIB) has reported consolidated net income after tax of $31.8 million for the three months ending March 31, 2012, being $6.0 million or 23 per cent up on the comparable prior year period.
Year-on-year increases were recorded in all income categories. Net interest income at $31.9 million for the three months was $0.6 million up on the prior year period. A reduction in the loan volume during the first quarter of the year was offset by an increase in loan margins as the bank re-orientates its lending activity from transactional-based long-term project and structured finance to relationship-based large and mid-cap corporates.
As recognised by the international rating agencies, the managed reduction in the leverage of the loan portfolio to a more prudent multiple of equity has strengthened the bank’s risk positioning. In March, Fitch Ratings upgraded GIB’s Viability Rating to ‘BBB-’ from ‘BB+’ to reflect “the significant improvement to the bank’s risk profile from restructuring, de-risking and de-leveraging initiatives”.
Fee and commission income at $15.4 million was $0.8 million or 5 per cent higher than in the prior year period. As a result, fee-based income comprised almost one quarter of total income, reflecting the successful implementation of GIB’s new strategic focus on non-asset based, relationship-orientated services and on supporting customers’ commercial and trade finance requirements.
In particular, a significant year-on-year increase was recorded in commissions on letters of credit and guarantee. Trading income at $8.1 million for the quarter was $4.1 million up on, or more than double, the prior year period. This was attributable to a year-on-year increase in customer-related foreign exchange revenue as well as profits on investments in emerging market debt. Other income of $6.4 million was $2.9 million up on the prior year.
Other income principally comprised dividends on equity investments, profits realised on the sale of investment securities, and recoveries of impaired loans. Total expenses at $30.1 million for the three months were 11 per cent up on the prior year period. The year-on-year increase in expenses reflected ongoing investment in the implementation of GIB’s new GCC-focused universal banking strategy. A net provision release of $0.5 million was recorded in the first quarter. The absence of any provisioning requirement reflected prudent and conservative provisioning actions taken in prior years.
Jammaz Al-Suhaimi, GIB’s Chairman, Said: “We are pleased to report continued profitability growth in the first quarter of 2012 despite the initiatives we took in the past couple of years to derisk the wholesale lending portfolio and improve the funding profile of the Bank.”