ABC posts net loss of US$51 million in 2002

As a result of heavy loan loss provisions,which totalled US$237 million in 2002, the Arab Banking Corporation recorded a net loss of US $51 million in 2002, compared to the net profit for 2001 of US$102 million.

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By  Massoud Derhally Published  March 13, 2003

Arab Banking Corporation, the parent company of the Bahrain based Arab-banking group, posted an operating profit before provisions, tax and minority interests for 2002 of US$253 million, down $35 million from 2001, as a result of higher loan loss provisions caused by a prevailing poor economic climate, the bank said in a statement.

As a result of these heavy loan loss provisions, the group recorded a net loss of US $51 million in 2002, compared to the net profit for 2001 of US$102 million.

Loan loss provision requirements, which totalled US$237 million in 2002 up from US$128 million in 2001 increased as a result of the bank’s increased risk exposure to areas it operates in and have been affected by an economic downturn, notably; Europe, North America, Argentina, Brazil, Hong Kong, and isolated loan loss provisions at Bahrain.

ABC Group’s net interest income reached US$452 million compared to US$469 million in 2001, largely due to the impact of low interest rates throughout the year. Non-interest income remained steady at US$292 million. Total ABC Group assets increased by 10% to US$29,313 million up from US$26,545 million in 2001.

The bank said in the statement that it “has defined its strategy by emphasising Arab World related flows in the project finance area and expanding on its existing trade finance capabilities…and non-core capital absorptive assets will be replaced with lower risk weighted assets.”

Ghazi M. Abdul-Jawad, president and chief executive said, “that circumstances in 2002 were clearly adverse, however, our operating result clearly shows that despite these adversities, the Group’s recurring earnings remain on track to creating a strong broad platform for future earnings’ growth.”

“We have continued to open new opportunities in Arab domestic markets, such as the retail presence in Algeria, Tunisia, Egypt, and Jordan, to enhance our wholesale product platforms in key European and North American markets, gearing our global reach to support these objectives,” added Abdul-Jawad.

The group said it started negotiations for the sale of its 55% investment in International Bank of Asia, in Hong Kong, with a view to utilizing the capital funds to support the Arab World business platform.

In view of potential regional conflict, ABC said it has put in place measures to counteract any possible effects on operations and liquidity. The bank said it has been building a strong liquidity profile and adjusting cash flows, to meet any possible credit crunch as a result of armed conflict in the region.

ABC was established in 1980 with an authorised capital of US$1,000 million. The three original shareholders were the Abu Dhabi Investment Authority, Kuwait's Ministry of Finance and the Libyan Secretariat of Treasury (later the Central Bank of Libya).

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