ABC Islamic Bank expects to expand its customer base and develop new products this year as customers' appetite for borrowing returns.

The subsidiary of Bahrain-based Arab Banking Corporation on Thursday posted a net profit of $2.1 million this year compared to $10.1 million in 2009.

Total operating income was $15.9 million compared to $20.4 million last time due to lower rates and de-risking of balance sheet asset size. Staff and operating costs of $4.9 million were also lower than the previous year at $5 million.

Impairment provisions of $8.6 million were taken for regional exposures during the year, $3.6 million higher than the previous year.

Net profit for the fourth quarter was $500,000, compared to $200,00 in the third quarter. Total operating income was $3.8 million compared to $4.1 million for the previous quarter.

Staff and operating costs for the fourth quarter were at $500,000 compared to $1.5 million in the third quarter. Additional impairment provision of $2.7 million was taken during the quarter.

Shareholders' equity at the year-end stood at $187.3 million compared to $176.5 million for the previous year, an increase of $10.8 million coming from improvement in fair values of available-for-sale investments and net profit for the year.

The capital adequacy ratio at 2010 year-end was very strong at 24.5 per cent, predominantly Tier 1, which totalled 24.2 per cent, both up year on year.

ABC Islamic Bank's total assets declined to $1.21 billion at the end of last year, from $1.32 billion a year before, mainly due to decline in available-for-sale investments, murabaha receivables and ijarah assets as a result of further de-risking of the balance sheet.

'During 2010, ABC Islamic Bank has built new relationships with target customers across the Mena region, as well as raising its quality of service to differentiate it from other Islamic banks,' said managing director Naveed Khan.

'Having one of the broadest product ranges of any Islamic institution, the bank is providing selected target market customers with high-quality relationship banking incorporating more than one product.

'The bank has also led several new financings for customers.

'Notably, it was the sole arranger of a Japanese bank's international syndicated facility, which demonstrated how Islamic finance can give conventional borrowers access to a diversified source of finance.

'During the coming year, ABC Islamic Bank expects to grow its lending activity selectively, as a result of both its recent drive to win new clients, and a gradual recovery in the borrowing appetite of customers,' he said.

'The bank will also work closely with ABC Group's expanding regional retail business, designing and producing Islamic products for the retail market,' Khan added-TradeArabia News Service