Impressive 50% increase over 2007 results
The Board of Directors of First Gulf Bank (FGB), announced today its full 2008 results with net profit of AED3,005 million, representing an impressive increase of 50% over its 2007 results.
“At a time where the world is heavily impacted by the financial turmoil resulting in credit and financial crisis, FGB has once again recorded strong performance and exceeded expectations. This reconfirms the bank’s position as one of the best performing, most efficient and most profitable institutions. FGB has strong foundations to continue delivering its vision and commitment to shareholders,” said Abdulhamid Saeed, Managing Director of FGB.
“Despite the unprecedented difficult times the world has seen in the fourth quarter, our business model has proved to be impressively successful. In Q4 of 2008, the bank has recorded a net profit of AED671 million, that is 8% higher than the AED621 million generated in Q4 of 2007,” he added.
“The forward looking vision of our Board of Directors, combined with the strength and expertise of the bank’s management and staff, has positioned FGB to successfully navigate through this difficult economic cycle. FGB’s priority is to maintain a strong balance sheet, optimize profit for our shareholders, at the same time deliver exceptional service to our customers,” said André Sayegh, FGB’s CEO.
Throughout the year, FGB has maintained a healthy and strong balance sheet where Bank’s Assets grew by 47% to reach AED107.9 billion by year end 2008 and Equity increased by 64% to reach AED16.6 billion.
In a timely step, the bank announced in July 2008 the issuance of mandatory convertible bonds worth AED3.6 billion to UAE institutional strategic partners.
“It is all about doing the right thing at the right time. The issuance of the convertible bonds came at a time just before the liquidity crunch in the region. The bank now enjoys adequate capitalization with Capital Adequacy Ratio at 14% which has put us at comfortable position when compared to the international standards,” said Sayegh.
In line with its consistent and well thought strategy of income diversification, 70% of FGB Group’s Net Profit was generated by the core banking businesses: Corporate, Retail and Treasury, while the remaining 30% was generated by the two subsidiaries Mismak and First Merchant International and the three associate companies Green Emirates Properties, Aseel Islamic Finance and First Gulf Financial Services. The bank has maintained the same ratio for the third year in a row.
The total revenue of the overall core banking activities increased by 71% during the year from AED2,210 million to AED3,786 million, driven mainly by a 94% increase in the Net Interest and Islamic Financing income, from AED1,331 million in 2007 to AED2,580 million in 2008.
“Our core banking operations continue to perform strongly, which further underlines the bank’s status as a very dynamic institution with a solid revenue generating power.” Added Sayegh.
Income from fee, commission, foreign exchange, derivatives and investment banking has increased by 37%, from AED879 million to AED1,205 million. Revenue from subsidiaries and associate companies has also seen an increase by 48%, from AED616 million to AED912 million. These strong income growth indicators were the result of an increase of the funded business, where Loans and Advances increased by 79% to reach AED79.4 billion. This is in addition to an increase in the Non Funded business where the Letters of Credit, Acceptances and Guarantees increased by 85% to reach AED48.6 billion.
In 2008, the growth in the loan book is coupled with an excellent quality portfolio ratio reflected in a Non Performing Loans (NPL) ratio of only 0.6% of the total gross loans. This is strengthened by a higher than the banking industry coverage ratio, where Provision Coverage Ratio is at 233% in 2008 compared to 144% by year end 2007.
Customers’ Deposits at AED74.0 billion increased during the year by AED21.7 billion representing an increase of 42%. The Loan to Deposit Ratio was at 107% by end of December 2008, down from 114% by end of September 2008.
As part of its revenue diversification strategy, the bank continued in 2008 to embark on its prudent geographical expansion program. The bank has officially inaugurated its operations in Libya, with First Gulf Libyan Bank starting its operation during the last quarter of 2008. Moreover, it has undergone significant progress towards converting its Singapore Representative Office into a wholesale bank.
“We will continue to spread our international reach and gain presence in some of the world’s leading financial centres,” Sayegh said.
FGB enjoys one of the best profitability ratios in the UAE banking sector, with Return on Average Equity for the year 2008 at 22.5%, Return on Average Assets at 3.3% and Net Interest Margin at 3.1%. During the year, the bank efficiently managed its costs versus its revenues resulting in a Cost to Income Ratio at 24%. This has also helped the bank to be in a better position to further improve this ratio in the coming years.
With a Net Profit exceeding AED3 billion, the Diluted Earning Per Share is at AED2.10 compared to AED1.46 in 2007, representing a 44% increase.
In a proactive measure to protect both its long term local and foreign investors, FGB’s Board of Directors approved and initiated during the fourth quarter of 2008 a one-year share buyback program and capped the foreign ownership to15%, down from 30%.
“Once again, this was a timely step to protect the interests of our long term shareholders. We will continue to monitor the financial markets and are open to offer opportunities to new long term strategic partners once the market circumstances change and head to more stable and favorable conditions,” Sayegh said.
During its meeting, and taking into consideration 2008 performance and the future growth potential, FGB’s Board recommended the distribution of 35% of its capital as cash dividend subject to approvals from Central Bank and Shareholders’ Annual General Meeting.
“FGB has a prominent profile in the marketplace due to its assigned ratings. FGB is rated “A+” by Fitch and “A2” by Moody’s and “A+” by Capital Intelligence. This recognizes and reaffirms the bank’s excellent financial performance and its well-established franchise. We will continue to maintain our competitiveness and commitment to our stakeholders.” concluded Sayegh.
“I confirm that the Board is fully confident that FGB is well positioned to continue with its planned growth and consistent performance. We will continue to focus on strengthening our balance sheet, optimizing profit for our shareholders and delivering world-class financial services and products,” concluded Abdulhamid Saeed, Managing Director.