Finance & Capital Market

Bank ABC H1 net profit jumps 27pc to $70m; revenue at record

Bahrain-headquartered Bank ABC has seen first-half (H1) net profit attributable to the shareholders of the parent jump 27% YoY to $70 million, while its total operating income crossed the $500 million mark for the first time in history. 
 
The group is weathering the unexpected headwinds from geopolitical developments and persistent high inflation across some markets, being counterbalanced by sustained high oil prices and improving economic activity in other markets, as well as rising interest rates. 
 
Total operating income grew both on a headline (28%) and underlying (31%) basis reflecting higher interest rates and volumes, consistent margins and also benefiting from consolidation of BBE. 
 
Operating expenses
Operating expenses on a headline basis were higher than 2021, with integration of BBE and with the business returning to normal level of activity compared to previous year. The group remains focused on disciplined cost control while continuing to invest into digital transformation to build its ‘bank of the future’.
 
The balance sheet remains strong with capital and liquidity ratios well above the regulatory requirements: the Group’s T1 Ratio is 16.6%, comprising predominantly 14.7% CET1, LCR 244% and NSFR 126%. 
 
Bank ABC's Group Chairman, Saddek Omar El Kaber, remarked: “We are extremely pleased with the group’s performance with historic achievement in revenues and solid growth in profits during the first half of 2022 despite unexpected headwinds. Bank ABC continues to focus on building the “bank of the future” by leveraging its strong balance sheet, the strength of its global franchise and expediting the digital transformation plans. At this juncture, we are delighted with the widespread industry recognition including our recent win of the ‘Innovation in Digital Banking Award 2022 for Middle East’.  We are looking forward to further progress on our strategy and gaining momentum in our revenues to achieve record levels for the full year.” 
 
Q2 2022 Business Performance 
Consolidated net profit attributable to the shareholders of the parent, for the second quarter of 2022 was $39 million, 56% higher compared to $25 million reported for the same period last year.
 
Earnings per share for the period was $0.01, unchanged from the corresponding period last year. Total comprehensive income attributable to the shareholders of the parent was a loss of $111 million, compared to $137 million profit reported for the same period last year, mainly from a net impact of foreign exchange translation in foreign subsidiaries and change in fair value of debt instruments. 
 
On a headline basis, total operating income was $273 million, 21% higher compared to $225 million reported for the same period last year benefitting from higher interest rates, volumes and inclusion of revenue from BBE during this year. On an underlying basis, total operating income was at $270 million for the period, a 33% increase on the $203 million reported for the same period last year. 
 
Net interest income
Net interest income was $193 million, 40% higher against $138 million reported for the same period last year, benefitting from higher interest rates compared to the same period last year and supported by growing volumes in some of the bank’s key markets. 
 
Operating expenses were at $172 million, 34% higher than $128 million for the same period last year, from a combination of consolidation of BBE as well as the group returning to a more normal level of activity. 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 $96 million for the quarter, 28% higher compared to $75 million in Q2 2021.  Headline net operating profit was $101 million, compared to $97 million reported for the same period last year.
 
Impairment charges (ECL) or credit loss expenses for the quarter were $26 million compared to $29 million reported for the same period last year, reflecting the quality of the  Group’s asset portfolio and broadly in line with our historic credit loss experience.
 
Tax charge for the quarter was $22 million, compared to $35 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 mainly in previous year. On an underlying basis, tax charge for the period was at $23 million compared to $13 million for the same period last year, higher primarily due to due to higher profit before tax in overseas subsidiaries.
 
H1 2022 Business Performance 
Consolidated net profit attributable to the shareholders of the parent, for the first half of 2022 was $70 million, 27% higher compared to $55 million reported for the same period last year.  
 
Earnings per share for the period was $0.02, unchanged from the corresponding period last year. Total comprehensive income attributable to the shareholders of the parent was a loss of $103 million, compared to a profit of $121 million reported for the same period last year. This arose from a net impact of foreign exchange translation in foreign subsidiaries and change in fair value of debt instruments. 
 
On a headline basis, total operating income was $520 million, 28% higher compared to $407 million reported for the same period last year. On an underlying basis, Total Operating Income was at $523 million for the period, compared to $400 million for the same period last year, benefitting from increase in interest rates and consolidation of BBE. 
 
Net interest income was $370 million, 42% higher against $260 million reported for the same period last year, supported by higher interest rates, higher loan volumes, consistent margins and the addition from BBE.
 
Operating expenses were at $331 million, 31% higher than $253 million for the same period last year, from a combination of consolidation of BBE as well as the group returning to a more normal level of activity. The group continues to enforce appropriate cost discipline without compromising on investments into the group’s digital transformation and strategic initiatives. 
 
Headline net operating profit
Headline net operating profit before credit loss expense and taxation was $189 million, 23% higher compared to $154 million reported for the same period last year.  On an underlying basis, the group achieved a net operating profit before credit loss expense and taxation of $190 million for the quarter, 29% higher compared to $147 million in H1 2021, benefitting from the addition of BBE and higher interest rates.
 
Impairment charges (ECL) for the period were $51 million compared to $49 million reported for the same period last year, broadly in line with our historic credit loss experience.  
 
Tax charge $42 million, compared to $36 million for the first half of 2021, the variance largely arising from higher profit before tax at Brasil, the tax treatment of currency hedges in Banco ABC Brasil (BAB) which have an offsetting impact in Total Operating Income. On an underlying basis, tax charge for the period was at $40 million compared to $29 million for the same period last year.
 
Balance Sheet
Equity attributable to the shareholders of the parent and perpetual instrument holders at the end of the period was $4.11 billion, compared to the $3.87 billion at the 2021 year-end, 6% higher, benefiting from the Additional Tier 1 capital issued during the Q1 2022 and after absorbing dividends paid. 
 
Total assets stood at $34.3 billion at the end of the period, comparable to the $34.9 billion at the 2021 year-end.
 
Loans and Advances were 2% higher for the quarter at $17.0 billion compared with levels of $16.8 billion at 2021 year-end reflecting the Group’s selective underwriting and a strengthening in BRL FX rate.
 
Deposits were at $24.7 billion, compared to the levels of $25.8 billion at 2021 year-end. 
 
Liquidity ratios are strong with LCR and NSFR at 244% and 126% respectively with comfortable buffer and liquid assets to deposits ratio at 50%.
 
Capital Ratios are strong, CET1 at 14.7%, Tier 1 at 16.6% and total CAR at 17.7%.
 
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 and through ila Bank in Bahrain. The bank is a renowned leader in digital innovation in banking and is a rising transformational force in the region’s financial services sector. -- TradeArabia News Service