GIB’s GENERAL ASSEMBLY RATIFIES : 2005 CONSOLIDATED ACCOUNTS AND REPORTS RECORD PROFIT OF $203.0 MILLION

Gulf International Bank’s (GIB) 2005 consolidated accounts were ratified at the 29^th meeting of the General Assembly convened today in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Manama, Kingdom of Bahrain.

GIB recorded consolidated net income after tax of $203.0 million for the year being $52.8 million or 35 per cent up on the previous year.  This represented the highest ever result in the bank’s history.  The General Assembly also approved the payment of a $101.5 million dividend from the 2005 profits.

Commenting after the meeting, H.E. Shaikh Ebrahim K. Al-Khalifa, GIB’s Chairman and Undersecretary at the Ministry of Finance, Kingdom of Bahrain, said: “2005 proved to be another excellent year for GIB.  I am delighted to report that with significant improvements continuing across all major business activities, GIB recorded the highest ever profit in its history.  This is the second consecutive year in which the bank has reported a record profit.  As a result of initiatives introduced over the past four years, each of the bank’s key lines of business was positioned to take advantage of well-established strategies during 2005.  All major business activities generated excellent results, demonstrating the success of the bank’s ongoing strategic initiatives coupled with an effective and proactive management of risk.  The record result clearly illustrates the soundness of the bank’s GCC focused merchant banking strategy.  In 2005, GIB continued to provide its shareholders with superior returns, while maintaining favourable recognition from clients, counterparties, international credit rating agencies and market monitors.  During the year, GIB received important upgrades in the long-term foreign currency ratings assigned by the international credit rating agencies.  Standard & Poor’s upgraded their rating of the bank to ‘A-’ from ‘BBB+’ while Moody’s upgraded their rating to ‘A3’ from ‘Baa1’.  This followed an upgrade by Fitch in December 2003 to ‘A-’ from ‘BBB+’.  As a result, GIB is one of the highest rated financial institutions in the Middle East.  GIB remains committed to its leadership role in the region and to its vision of becoming the merchant bank of choice in the GCC”.

Dr. Khaled Al-Fayez, GIB’s Chief Executive Officer, explained that: “The Group recorded a strong return on average shareholder’s equity of 12.3 per cent in 2005.  The significant year-on-year increase in the Group’s profit reflected increases in all income categories and a reduction in provisions for credit losses.  An increase in interest earnings was principally attributable to higher GCC loan volumes and margins, related in particular to project and structured financings, and also to a more favourable interest rate environment.  GIB continues to be the leading financier and arranger of specialised lending within the GCC.  An increase in non-interest income reflected strong fee-based earnings derived from the Group’s strategically important merchant banking activities, including asset and fund management and corporate advisory.  Investment banking and management fees at $29.8 million for the year were 26 per cent up on the prior year.  Funds under management increased by 32 per cent during the year rising to $17.9 billion at the year end.  As a result, GIB is the largest commercial Arab-owned fund manager in the GCC region.  Our objective is to continue to build the flow of non-interest income through a further increase in funds under management and important investment banking mandates.  A year-on-year increase in operating expenses reflected higher performance-related remuneration associated with the significantly stronger financial performance”.

Consolidated total assets rose by $3.6 billion to $22.9 billion at the end of 2005.  This reflected a significant growth in loans and advances which increased by $1.8 billion or 33 per cent during the year.  The increase was principally due to further growth in the GCC loan portfolio.  The year-on-year increase in the balance sheet also reflected the high level of liquidity prevailing in the GCC region.  This contributed to a significant increase in customer deposits, rising by $3.2 billion or 52 per cent to $9.4 billion at the end of 2005.  A $0.7 billion increase in term financing, including subordinated term financing, contributed to a lower requirement for shorter tenor bank deposits.  The Bank’s regional leading role in capital raising was reaffirmed during the year with the issue of an $800 million syndicated five-year term deposit facility.  This was the largest syndicated term finance facility raised to date by a regional financial institution.  This was followed by a groundbreaking $400 million ten-year subordinated floating rate note.  GIB was the first financial institution in the Middle East to issue a Tier 2 subordinated note.  The BIS risk asset ratio at 31^st December 2005 was 12.7 per cent being very comfortably above the regulatory minimum of 8 per cent and also at a level that will accommodate desired future balance sheet growth.

Gulf International Bank (GIB) is a leading merchant bank in the Middle East with its principal focus on the Gulf Cooperation Council (GCC) states.  The six GCC governments, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, own 72.5 per cent of the bank, while the Saudi Arabian Monetary Agency (SAMA) owns 27.5 per cent.  In addition to its main subsidiary Gulf International Bank (UK) Ltd., the Bank has branches in London, New York, Riyadh and Jeddah, as well as representative offices in Beirut and Abu Dhabi.

FINANCIAL HIGHLIGHTS

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