Bahrain-based Gulf Finance House (GFH), which generated $300 million through successful exists, reported a net loss of $349 million for 2010, almost half of the $728 million losses reported a year ago.
The bank said that it had made significant progress in executing upon its restructuring and recapitalization plan. The operating costs have drastically been reduced by 20% in 2010.
The bank said that it had successfully exited some of its assets including its stake in the Bahrain Financial Harbour, Qinvest and Saudi Real Estate Company with cash and assets proceeds reaching approximately to $300 million.
“GFH’s balance sheet continued to be realigned throughout the year as part of its restructuring plan with total assets reaching $1 billion in 2010. Liabilities were reduced from $1.2 billion to $900 million and financing liabilities were reduced by 33% to $440 million compared to $653 million as at 31 December 2009,” it added.
The bank restructured its debt profile by repaying $200 million of an outstanding $300 million murabaha financing facility in February 2010 to syndicates arranged by West LB and refinanced the $100 million balance to be paid in August 2010. Following the period-end, the bank successfully renegotiated the repayment terms of the remaining $100 million for a period of two years with a further one year until 2013 at the option of GFH. The bank has significantly cut costs by 20% with total expenses falling to $101 million, and staff costs down by 37% to $18 million.
Later in 2010 GFH presented its plans to improve the bank’s capital structure, strengthen its balance sheet and raise funds to pursue its growth strategy at the AGM / EGM held in November 2010 where resolutions were approved by GFH shareholders. The resolutions covered a 4:1 share consolidation and other capital reduction measures including raising up to $500 million through a convertible murabaha to strengthen the bank’s capital base and fund its growth strategy, and acquiring an additional 10% stake in Khaleeji Commercial Bank.
GFH has received participations of over $100 million towards its recapitalization plan from some gulf sovereign funds and gulf investors post obtaining the relevant approvals. GFH is anticipating receiving additional participation during the course of this year to further support its business growth and strengthen its position in the market.
“While 2010 continued to be challenging for financial institutions in both the global and GCC markets, we have continued a prudent and far-reaching review of all of our assets, made provisions where appropriate and successfully exiting some of our investments,” said Esam Yousif Janahi, Executive Chairman of GFH.
“In tandem, we have conducted a thorough review of our cost base and successfully reduced expenses by 20% or $25 million across the bank. Our priorities at GFH are now very clear; namely to grow revenues, maximize efficiencies and continue to monitor and minimize costs. In order to achieve these objectives, I and my fellow board members we have proposed a new plan which includes a change in the executive management of the bank as well as adopting new business model. Accordingly, we undertook several initiatives in 2010 to strengthen our balance sheet and GFH position by building a sustainable recurring income for the bank though creation of regional financial institutions, beside its periodical offered investments. I remain confident that GFH will deliver long-term value to both shareholders and clients alike, and I am personally focused on achieving these goals,” he added.