Economic recovery 'on track'
Manama, March 11, 2010
Last year was yet another difficult one for the world economies although there were signs of green shoots of recovery in the financial markets during the second half of the year.
That was the positive message from First Investment Bank chairman Dr Mohammed Abdul Aziz Al Aloush to shareholders at the annual meeting in Manama yesterday.
'The bank weathered difficulties during 2008 and last year with a strategy to ensure preservation of capital and maintain adequate liquidity,' he said.
'The bank's asset allocation will remain biased towards a liquid assets portfolio and target a liquid assets to total assets ratio, of at least 60 per cent, until the geo-political risks and the risks of deeper recession abate.'
'The GCC economies contracted last year as a result of lower oil prices compared to the previous year's average,' he said.
'Oil prices plummeted from a high of $147 a barrel in July, 2008 to $34 a barrel in December 2008 and averaged around $60 a barrel last year. The GDP growth rate of GCC countries contracted by 0.6 per cent last year compared with a 4.6 per cent growth rate in 2008.
'In a highly surprising development, last year, the Dubai Government announced that Dubai World will ask creditors for a standstill agreement to extend the maturities of all debt repayments by Dubai World, and its property unit Nakheel, until May next year.
'The move rocked the credit markets, as many expected Abu Dhabi to stand behind the emirate.'
'The sovereign GCC credit markets, except for Dubai related entities, returned to stability in the middle of last year, after Abu Dhabi announced $10 billion of emergency financial aid to deal with the immediate obligations of Dubai,' he said.
'We expect the recent events in Dubai and its effect on the GCC to be a focal point for the Investors in the region as well as globally.'
'First Investment Bank continued to adopt a risk-averse approach in investing and launching products in an environment, which consisted of volatile oil prices, unpredictable public equity markets, liquidity constraints of the banks and a non-existent private placement market,' he said.
'The banks in the region, particularly the investment banks, reported poor results during the year as there were no exits in their investment portfolio and a lack of fee income due to the absence of the private placement market.
'During the year, the bank allocated capital to liquid investments by creating a regional sukuk portfolio and a portfolio of regional equities, in order to benefit from any rebounds in the markets.
'Although the transaction team built a strong deal pipeline in the private equity and real estate investment, the Bank did not conclude any transactions due to valuation concerns and also lack of bank funding for the projects.'
During the reporting period, the bank made a net loss of $3.5 million as compared to $3.6 million in the previous reporting period.-TradeArabia News Service