Bahrain-based Bank ABC recovers well; reports $55mln net profit for H1

 

The bank reported a net profit attributable to the shareholders of the parent of $55 million with cost of risk returning to pre-pandemic levels, reflecting an improved economic outlook, after the bank absorbed the impact of regional fraud events experienced in 2020, a statement said.

 

"We are carefully navigating ongoing constrained post-pandemic operating conditions across our markets, supporting our clients, staff and communities while progressing our growth and digital transformation plans. Notably, the group’s acquisition of BLOM Bank Egypt, signed in January, reached final completion stage in August, and going forward will be a fully consolidated subsidiary within the Bank ABC Group," it said.

 

Key performance highlights:

 

* Total Operating Income significantly increased on a headline basis, and on an underlying basis* grew by 12% compared to the previous year, despite lower interest rates and challenged economic conditions.

* Operating expenses on an underlying basis* were higher by 4% as the group returns to normal level of activity, although continuing to employ greater discipline and cost control while continuing investment into our strategic priorities for transforming the bank.

* Balance sheet remains strong with capital and liquidity ratios well above the regulatory requirements: Group CET 1 Ratio is 16.1%, LCR 241% and NSFR 122%.

* Overall asset portfolio quality remains solid with sound credit underwriting standards evidenced by client-level stress-testing reviews.

* Our strategic transformation on various fronts continues with relentless focus. Payment and digital retail banking capabilities gain steady traction. ila Bank’s customer base and deposits have been growing from strength-to-strength as it continues to launch innovative products and features to enhance customers’ banking experience. Arab Financial Services (AFS) is building momentum into its next phase of its transformation steered by a new management team.

 

Bank ABC's Group Chairman Saddek Omar El Kaber commented: “We are pleased with the robust results of the group. Several of our businesses have performed exceedingly well under the current conditions, reaffirming the strong underlying fundamentals of the Group’s diversified franchise. Although the transition from the pandemic continues to be challenging, Bank ABC continues to operate strongly, with undistracted focus on transforming the Bank through strategic initiatives, including the completion of the Blom Bank Egypt acquisition.”

 

Q2 2021 Business Performance

 

* Consolidated net profit attributable to the shareholders of the parent, for the second quarter of 2021 was $25 million, compared to a net loss of US$5 million reported for the same period last year.

* Earnings per share for the period was US$0.01, compared to nil for the same period last year.

* Total comprehensive income attributable to the shareholders of the parent was $137 million, broadly at the same level compared to $138 million reported for the same period last year.

* On a headline basis, Total Operating Income was $225 million, 63% higher compared to $138 million reported for the same period last year (last year’s comparatives being significantly affected by currency fluctuations and hedging in Banco ABC Brasil*). On an underlying basis*,

 

Total Operating Income was at $208 million for the period, a 23% increase on the US$169 million reported for the same period last year.

 

* Net interest income was $138 million, 20% higher against $115 million reported for the same period last year, after absorbing the impact of declining interest rates compared to the same period last year supported by growing volumes in certain markets.

* Operating expenses were at $128 million, 12% higher than $114 million for the same period last year, as the group returns to a more normal level of activity (underlying basis* 13%). Whilst last year benefited from aggressive cost containment measures, the Group continues to enforce appropriate cost discipline without compromising on investment into the group’s digital transformation and strategic initiatives.

* On an underlying basis*, the group achieved a Net Operating Profit of $79 million for the quarter, 44% higher compared to $55 million in Q2 2020. Headline Net Operating Profit was $97 million, compared to $24 million reported for the same period last year (last year impacted by currency fluctuations explained above).

* Impairment charges (ECL) or credit loss expenses for the quarter were $29 million compared to $54 million reported for the same period last year, with stabilising economic outlook from the lows last year, and without the major impact of regional fraud events such as NMC, that created abnormally elevated ECL charges during 2020.

* Tax charge for the quarter was $35 million, compared to the recovery of $26 million for the same period last year. The variance largely arising from the tax treatment of currency hedges in Banco ABC Brasil, which have an offsetting impact on Total Operating Income. On an underlying basis*, tax charge for the period was at $13 million compared to $5 million for the same period last year.

 

H1 2021 Financial results

 

* Consolidated net profit attributable to the shareholders of the parent, for the half-year ended 30 June 2021 was $55 million, compared to a net loss of $67 million reported for the same period last year.

* Earnings per share for the period was at $0.02, compared to $-0.02 in the previous year.

* Total comprehensive income attributable to the shareholders of the parent was $121 million compared to total comprehensive loss of $396 million reported last year, reflecting the net profit and relatively stable markets during 1H 2021 compared to last year.

* On a headline basis, total operating income was US$407 million, 70% higher compared to $240 million reported for the same period in 2020 (last year’s comparatives being significantly affected by currency fluctuations and hedging in Banco ABC Brasil*). On an underlying basis*, total operating income was at US$413 million for the period, a growth of 12% over US$369 million for the same period last year, reflecting strong recovery across most of our markets and business lines.

* Net interest income was $260 million, 3% higher against $252 million reported for the same period last year, after absorbing the impact of declining interest rates and FX depreciation. On an underlying basis*, net interest income was 6% higher year on year.

* Operating expenses were at $253 million, 2% higher than $247 million for the same period last year. Cost trajectory returning to normal levels with unrelenting focus on cost discipline and continuing investments into the Group’s digital transformation and strategic initiatives.

* On an underlying basis* the group achieved a net operating profit of US$155 million, 27% higher than the $122 million reported last year. Headline Net Operating Profit was $154 million, compared to a loss of $7 million reported for the same period in 2020 (last year impacted by currency fluctuations explained above)

* Impairment charges (ECL) or credit loss expenses for the period were $49 million, 72% lower than the $174 million reported for the same period last year. Impairment charge for the year returning to pre-pandemic levels with stabilising economic outlook leading to normalised IFRS 9 ECL charges, and without the impact of a major client fraud which affected many banks in the region and comprised ~$90m of the 2020 H1 ECL charge.

 

Balance Sheet

 

* Equity attributable to the shareholders of the parent at the end of the period was $3,890 million, 3% higher than the US$3,767 million reported at the 2020 year-end.

* Total assets stood at $30.9 billion at the end of the period, 1.7% higher compared to $30.4 billion at the 2020 year-end. * Loans and Advances stood at $15.9 billion, 1.8% higher than the $15.7 billion reported at 2020 year-end, reflecting credit conditions and continuing prudent use of the Group’s balance sheet capacity.

* Deposits were at $22.2 billion, compared to the levels of $21.3 billion at 2020 year-end. Despite the prevailing conditions, our deposit experience remained steady underscoring the confidence of our clients. Our efforts to diversify and improve the quality of our deposit base continue. - TradeArabia News Service