GIB reports a profit of $72.7 million for nine months
Gulf International Bank B.S.C. (GIB) reported consolidated net income after tax of $72.7 million for the nine months ended 30th September 2014, compared to $101.5 million in the prior year period. Prior year income included two exceptional, one off income items amounting to $20.9 million. Excluding these exceptional income items, net income was $7.9 million lower than the prior year period due to a $16.1 million year-on-year increase in operating expenses. The increase in expenses was attributable to the investment in the implementation of the new GCC-focused universal banking strategy and, in particular, the new retail bank which is currently undergoing a trial phase for customers in the Kingdom of Saudi Arabia under the brand name ‘meem'. Net income after tax in the third quarter was $22.5 million being 7 per cent up on the second quarter.
Total income at $200.7 million was $10.5 million or 5 per cent lower than the prior year. Excluding the exceptional income referred to above, total income was $10.4 million up on the prior year with a notable 10% year-on-year increase in the strategically important fee and commission income, reflecting success in the cross-sell of non-asset based products and services to the Bank's customers.
Net interest income at $117.0 million for the nine months was $2.7 million down on the prior year period. The year-on-year decrease was principally attributable to higher costs associated with balance sheet management initiatives that form part of an on-going programme to minimise the mismatch between the maturities of assets and liabilities. In this context, in May 2014 GIB issued a Saudi Riyal 2.0 billion five year floating rate note to investors in the Kingdom of Saudi Arabia at a highly optimal spread of 72.5 basis points above SAIBOR. Net interest income derived from the wholesale corporate lending activity increased by 7 per cent over the prior year period. The year-on-year increase reflected further increases in both loan volumes and loan margins as the Bank successfully reorientates its lending activities from transactional-based long-term project and structured finance to relationship-based large and mid-cap corporates. This resulted in an 8 per cent increase in the average loan volume as well as increased non-asset based customer-related activities. Fee and commission income at $50.4 million was $4.7 million or 10 per cent up on the prior year, and comprised one quarter of total income. This further growth in fee and commission income reflects the success that has been achieved in the implementation of GIB's new strategic focus on non-asset based, relationship-orientated products and services, and on supporting customers' commercial and trade finance requirements. Foreign exchange income at $15.1 million entirely comprised customer-related foreign exchange revenue, and in particular revenue derived from structured products designed to assist customers in hedging their foreign exchange exposures in the current volatile markets. Trading income at $3.5 million compared to a $6.6 million profit in the prior year period. However, the prior year trading income included an exceptional $5.9 million fair value gain on a fund investment arising on the fund's recovery of a previously written off investment. Trading income principally comprised gains on investments in funds managed by the Bank's London-based subsidiary, GIB (UK) Limited. Other income of $14.7 million for the nine months compared to $24.0 million in the prior year period. However, the prior year other income included an exceptional $15.0 million recovery arising on the liquidation of a structured investment vehicle that had been written off in 2007. Other income principally comprised dividends on equity investments.
Total expenses at $122.5 million for the nine months were $16.1 million or 15 per cent up on the prior year period. The year-on-year increase in expenses was attributable to the on-going investment in the implementation of GIB's new GCC-focused universal banking strategy.
Consolidated total assets at the quarter end were $22.2 billion, being $1.0 billion or 5 per cent higher than the 2013 year end level. The asset profile at 30th September 2014 reflected an exceptionally high level of liquidity. Cash and other liquid assets, and short-term placements totalled $9.4 billion, representing an exceptionally high 42 per cent of total assets. Investment securities at 30th September, which principally comprised highly rated and liquid debt securities issued by major financial institutions and regional government-related entities, amounted to $3.8 billion. Loans and advances amounted to $8.5 billion, being $0.2 billion higher than the 2013 year end level, reflecting ongoing growth in the Bank's lending activities. There was a further improvement in the Bank's funding profile with a $0.3 billion increase in customer deposits. Senior term finance was $3.4 billion at 30th September representing a $1.1 billion increase over the 2013 year end. The increase represented additional term borrowings raised to lengthen the maturity of the bank's liabilities. GIB's robust funding position demonstrates 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 18.9 per cent and 16.6 per cent respectively.