The bank said that its asset profile at 31st March 2011 reflected an exceptionally high level of liquidity. “Cash and other liquid assets, and short term placements totalled $6.1 billion, representing a very high 36 per cent of total assets. Investment securities at 31st March, which principally comprised highly rated and liquid debt securities issued by major financial institutions and regional government-related entities, amounted to $3.1 billion,” it added.
The bank reported consolidated net income after tax of $25.8 million for the three months ended 31st March 2011.
This was 80 per cent up on the profit recorded in the fourth quarter of 2010, although marginally below the net income of $26.8 million recorded in the comparable prior year period.
Year-on-year increases were recorded in all income categories with the exception of net interest income. Net interest income at $31.3 million for the three months was 28 per cent down on the prior year period although only marginally below the interest earnings recorded in the 2010 fourth quarter.
The year-on-year decrease was attributable to a lower average loan volume and an increased cost of term finance as a result of initiatives to further minimise the mismatch in the maturity profile of the Bank’s assets and liabilities. These initiatives, while resulting in an additional cost, have reduced the Bank’s reliance on short term wholesale funding and will ensure compliance with the new Basel 3 regulatory rules on liquidity risk management well ahead of the planned implementation deadlines.
The impact of the managed reduction in the loan volume was partly offset by an increase in loan margins. Fee and commission income at $14.6 million was $5.8 million or 66 per cent higher than in the prior year period. As a result, fee-based income comprised almost one third 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.
Significant year-on-year increases were recorded in both investment banking fees, and commissions on letters of credit and guarantee. Trading income at $4 million for the quarter was 11 per cent up on the prior year and principally comprised customer-related foreign exchange revenues.
Total expenses at $27.2 million for the three months were 6 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.
Loans and advances amounted to $7.3 billion, being $0.2 billion lower than at the 2010 year end level. The loan to equity ratio at the quarter end was 3.7, while the ratio of loans to customer deposits and term finance was a prudent 65 per cent. Importantly, GIB does not have any net reliance on the interbank market. There was a further improvement in the bank’s funding profile in the first quarter of 2011 with a $1 billion increase in customer deposits and a $0.5 billion increase in term finance. These increases clearly demonstrate that GIB was not impacted by the events in Bahrain during the first quarter.
It also validates the conclusion by the international rating agency Fitch, that GIB’s ratings are not constrained by Bahrain’s sovereign ceiling rating, and the resultant reaffirmation of GIB’s long-term issuer default rating at ‘A’ with a stable outlook, being two notches above the Bahrain sovereign rating of ‘BBB+’. Despite the events in Bahrain, the Bank successfully raised a $500 million 5 year term facility at a cost equivalent to its highly successful Saudi Riyal 3.5 billion 5 year bond issue in April 2010.
GIB’s robust funding position reflects the confidence of the Bank’s customers and counterparties based on its strong ownership and financial strength. The Basel 2 total and tier 1 capital adequacy ratios at the end of the quarter were an exceptionally strong 24.0 per cent and 18.3 per cent respectively.