(MENAFN- Editorial) Bank ABC (Arab Banking Corporation B.S.C.) - Bahrain Bourse Trading Code “ABC” - today announces its results for the first half of 2019. The period was marked with persisting trade tensions between US and China, which together with the uncertain political situation in some of ABC’s key markets has dampened economic growth and demand for credit. Moreover, relative currency weakness in Brazil, as well as the changing USD interest rate outlook has affected ABC’s year on year performance. Notwithstanding these external conditions, when adjusting for one-off items and currency normalisation, ABC has ended the first half with positive underlying asset, revenue and profit growth.
Business Performance (six-month period):
Consolidated net profit attributable to the shareholders of the parent, for the first half of 2019 was US$112 million on a headline basis, a reduction of 1% compared to US$113 million reported for the same period last year. On an underlying basis, after adjusting for exceptional one-off items included in H1 2018, net profit grew by 9%, benefiting from improved provision experience, after absorbing the FX impact on the pre-provision net income.
Headline Profit before Taxation was US$159 million, 34% higher compared to US$119 million reported for the first half of 2018, although this normalises to a 7% decline, after adjusting for the effect of foreign currency hedging transactions in Banco ABC Brasil (“BAB”), which have an offsetting tax charge impact. This reduction is primarily due to the 8% devaluation of Brazilian Real (“BRL”) against USD compared to the same period last year. However, after adjusting for one-off items and FX impact, underlying profit before taxation grew by 1%
On a headline basis, total operating income was US$437 million, 12% higher against US$389 million reported for the same period last year, and normalises to 1% reduction year on year as explained above, impacted by BRL depreciation against USD. Adjusting for the FX impact and one-off items in prior year, the underlying total operating income grew by 4% demonstrating traction in the strategy despite volatile market conditions during the period.
Net interest income was US$279 million, 1% higher against US$277 million reported for the same period last year.
Operating expenses were at US$257 million, US$17 million or 7% higher than the same period of last year, due to inflation and flow through effect of continuing investments into strategic initiatives.
Impairment charges were at US$21 million compared with the US$30 million reported for the same period last year reflecting conservative underwriting, proactive credit management and relatively benign credit conditions.
Ratio of impaired loans to gross loans at 4.2% broadly similar to the 2018 year-end levels of 4.0%, but normalises to 3.3%, when long-standing legacy fully provided loans are adjusted for. Provisions coverage against the aggregate impaired exposures remained comfortable at 97%.
Tax charge is US$24 million, compared to tax credit (saving) of US$20 million for the previous year’s first half (the variance largely arising from the tax treatment of currency hedges in BAB noted above). On a normalised basis tax charge for the period was US$21 million compared to US$29 million for the same period last year.
The Earnings per share remained steady at US$0.04, similar to the first half of the previous year.
Total comprehensive income attributable to the shareholders of the parent was US$159 million compared to a loss of US$14 million reported for the same period of 2018, reflecting the healthy H1 net profit levels and favourable movements in foreign currency translation and fair value movement in debt instruments during the year.
Business Performance (three-month period):
Consolidated net profit attributable to the shareholders of the parent, for the second quarter of 2019 was US$57 million, 5% lower compared to US$60 million reported for the same period last year. Adjusting for exceptional one-off items, second quarter performance of 2019 was 9% higher compared to last year. The second quarter reflected similar trends as explained above for the 1H 2019.
Profit before Taxation on a headline basis was US$83 million, compared to US$39 million reported for the second quarter of 2018, and normalises to a 9% decline.
On a headline basis, total operating income was US$222 million, 25% higher against US$178 million reported for the same period last year, and normalises to 4% drop, after adjustments as mentioned above, impacted by the FX depreciation of the BRL against USD in particular.
Net interest income for the second quarter of 2019 was US$140 million, 1% higher against US$139 million reported for the same period last year.
Operating expenses were at US$129 million, US$8 million or 7% higher than the same period of last year due to reasons explained above.
Impairment charges were at US$10 million compared with the US$18 million reported for the same period last year reflecting proactive and conservative credit management.
Tax charge is US$14 million, compared to tax credit (saving) of US$34 million for the same period last year (the variance largely arising from the tax treatment of currency hedges in BAB noted above).
The Earnings per share remained steady at US$0.02, similar to the second quarter of the previous year.
Total comprehensive income attributable to the shareholders of the parent was US$70 million compared to a loss of US$64 million reported for the same period of 2018, reflecting the sum of net profit with favourable movements in foreign currency translation and fair value movement in debt instruments.
Balance Sheet:
Total assets stood at US$29.7 billion at the end of the first half of 2019, compared to US$29.5 billion at the 2018 year-end, whilst loans and advances also grew somewhat during the period to US$15.0 billion, reflecting our continuing emphasis on prudent use of balance sheet.
Deposits at the end of the period were at US$20.5 billion, similar to the levels of US$20.7 billion at 2018 year-end. Our efforts to diversify and improve the quality of our deposit base continue.
Equity attributable to the shareholders of the parent at the end of the period was at US$3,928 million, 2% higher compared to the US$3,862 million at the 2018 year-end.
Liquidity ratios strong with LCR and NSFR on a Basel III basis exceeding 100% with comfortable buffer and liquid assets to deposits ratio healthy at 56%.
Capital Ratios strong: Tier 1 at 17.2% and total capital adequacy ratio (CAR) 18.2%.
Bank ABC''s Group Chairman, Mr. Saddek Omar El Kaber, commented that “The half year results demonstrate the resilience of the Bank despite challenging market conditions during the period, both on economic and political fronts. Adjusting for the effects of foreign currency depreciation and one-off items last year, the Group is growing year-on-year at a satisfactory pace, without compromising its strong balance sheet and conservative credit risk approach.
Bank ABC is a leading player in the region’s banking industry and provides innovative wholesale financial products and services that include corporate banking, trade finance, project and structured finance, syndications, treasury products and Islamic banking. It also provides retail banking services through its network of retail banks in Jordan, Egypt, Tunisia and Algeria.
The full set of the financial statements and the press release are available on Bahrain Bourse’ website.
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