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Ahli United Bank (AUB), one of the region's leading banking institutions, announced a consolidated net profit, attributable to the bank's equity shareholders, of $296.3 million for the year ended December 31, 2007, an increase of 42.8 per cent over the previous year ($207.5 million).
Though the market conditions were most challenging since the second half of 2007 given the continued general uncertainty regarding the full implications from the US sub-prime crisis and its potentially expanding contagion effect, the bank was able to deliver yet another record net profit mainly due to application of a prudent diversified risk management strategy, judicious cost management approach with a view to securing sustainable core earnings on a continuous basis.
At the year-end, the bank's consolidated total assets stood at $23 billion, an increase of 10.6 per cent over the previous year. This was funded mainly by a 20 per cent increase in customers' deposits to $10.8 billion, successful conclusion of a pre-emptive ordinary share rights issue in December 2007 which raised $ 373.8 million in capital proceeds, together with 2007's record profit and 2006 retained earnings resulted in the equity attributable to the bank's equity shareholders rising to $2.3 billion.
Due to continuing growth in earnings across its business segments the bank's total operating income increased by 35.3 per cent to $666.8 million from $492.9 million in 2006. Despite the cost inflationary pressures prevailing in the region, the bank was able to improve the cost to income ratio down to 35.8 per cent (2006: 39.8 per cent) using judicious cost management approach and continuing streamlining in the processes.
The bank remains focused on enhancing the equity shareholders' returns in a sustainable and prudent manner as evidenced by the return on average equity rising from 15.1 per cent (2006) to 18 per cent (2007).
In keeping with the bank's strategy, AUB continued to expand both through organic means and mergers and acquisitions. During 2007, the bank acquired a 35 per cent stake in Alliance Housing Bank (AHB) Oman, marking AUB's entry into the Sultanate of Oman, an economy that has tremendous, untapped potential.
International Finance Corporation (IFC) also participated in this acquisition by taking an equity stake of 9.9 per cent through participation in a capital increase. Subsequent to the acquisition, as part of migration to a full commercial banking business model and integration with the AUB group, AHB was rebranded under a new name - Ahlibank (ABO) effective January 5. The bank also signed a five year renewable technical services and management agreement to provide technical and management services to ABO.
Based on the results, the board recommends, subject to Central Bank of Bahrain's approval, a cash dividend of 3.5 cents per share together with a bonus share issue of one share for every 10 shares held by eligible ordinary shareholders at the record date with appropriate conversion ratio adjustments made for outstanding convertible tranches of class B preference shares and IFC's convertible subordinated debt.
"In a year that was marked by turmoil in financial markets across the world, it is especially commendable that AUB has been able to deliver excellent results. Our ability to deliver consistent, healthy returns to our shareholders is indicative of the strength and diversity of AUB's core business activities," said Fahad Al Rajaan, chairman of AUB.
