MANAMA: Bank ABC has reported consolidated net profit for the first half of 2019 was $112 million on a headline basis, a reduction of one per cent compared with $113m reported for the same period last year.
On an underlying basis, after adjusting for exceptional one-off items included in H1-2018, net profit grew by 9pc, benefiting from improved provision experience, after absorbing the forex impact on pre-provision net income.
The first half of 2019 was marked with persisting trade tensions between US and China, which together with the uncertain political situation in some of ABC’s key markets has dampened economic growth and demand for credit.
Moreover, relative currency weakness in Brazil, as well as the changing US dollar interest rate outlook has affected ABC’s year-on-year performance.
Notwithstanding these external conditions, when adjusting for one-off items and currency normalisation, ABC has ended the first half with positive underlying asset, revenue and profit growth.
Headline profit before taxation was $159m, 34pc higher compared with $119m reported for the first half of 2018, although this normalises to a 7pc decline, after adjusting for the effect of foreign currency hedging transactions in Banco ABC Brasil, which have an offsetting tax charge impact.
This reduction is primarily due to the 8pc devaluation of Brazilian real against US dollar compared with the same period last year.
However, after adjusting for one-off items and FX impact, underlying profit before taxation grew by 1pc.
On a headline basis, total operating income was $437m, 12pc higher against $389m reported for the same period last year, and normalises to 1pc reduction year-on-year, impacted by BRL depreciation against US dollar.
Adjusting for the forex impact and one-off items in prior year, the underlying total operating income grew by 4pc demonstrating traction in the strategy despite volatile market conditions during the period.
Net interest income was $279m, 1pc higher against $277m reported for the same period last year.
Operating expenses were at $257m, $17m or 7pc higher than the same period of last year, due to inflation and flow through effect of continuing investments into strategic initiatives.
Impairment charges were at $21m compared with the $30m reported for the same period last year reflecting conservative underwriting, proactive credit management and relatively benign credit conditions.
Ratio of impaired loans to gross loans at 4.2pc broadly similar to the 2018 year-end levels of 4pc, but normalises to 3.3pc, when long-standing legacy fully provided loans are adjusted for.
Provisions coverage against the aggregate impaired exposures remained comfortable at 97pc.
Tax charge is $24m, compared to tax credit (saving) of $20m for the previous year’s first half (the variance largely arising from the tax treatment of currency hedges in BAB).
On a normalised basis tax charge for the period was $21m compared with $29m for the same period last year.
The earnings per share remained steady at $0.04, similar to the first half of the previous year.
Total comprehensive income was $159m compared with a loss of $14m reported for the same period of 2018, reflecting the healthy H1 net profit levels and favourable movements in foreign currency translation and fair value movement in debt instruments during the year.
For the three-month period ended June, consolidated net profit was $57m, 5pc lower compared with $60m reported for the same period last year.
Adjusting for exceptional one-off items, second quarter performance of 2019 was 9pc higher compared with last year.
The second quarter reflected similar trends as for H1 2019.
Profit before taxation on a headline basis was $83m, compared with $39m reported for the second quarter of 2018, and normalises to a 9pc decline.
On a headline basis, total operating income was $222m, 25pc higher against $178m reported for the same period last year, and normalises to a 4pc drop, after adjustments, impacted by forex depreciation of the BRL against USD in particular.
Net interest income for the second quarter was $140m, 1pc higher against $139m reported for the same period last year.
Operating expenses were $129m, $8m or 7pc higher than the same period of last year.
Impairment charges were $10m compared with $18m reported for the same period last year reflecting proactive and conservative credit management.
Tax charge is $14m, compared to tax credit (saving) of $34m for the same period last year (the variance largely arising from the tax treatment of currency hedges in BAB).
The Earnings per share remained steady at $0.02, similar to the second quarter of the previous year.
Total comprehensive income was $70m compared with a loss of $64m reported for the same period of 2018, reflecting the sum of net profit with favourable movements in foreign currency translation and fair value movement in debt instruments.
Total assets stood at $29.7bn at the end of the first half of 2019, compared with $29.5bn at the 2018 year-end, whilst loans and advances also grew somewhat during the period to $15bn, reflecting continuing emphasis on prudent use of balance sheet.
Deposits at the end of the period were at $20.5bn, similar to the level of $20.7bn at 2018 year-end.
Efforts to diversify and improve the quality of deposit base continue.
Equity at the end of the period was at $3,928m, 2pc higher compared with $3,862m at 2018 year-end.
Liquidity ratios strong with LCR and NSFR on a Basel III basis exceeding 100pc with comfortable buffer and liquid assets to deposits ratio healthy at 56pc.
Capital ratios strong: Tier 1 at 17.2pc and total capital adequacy ratio (CAR) 18.2pc.
Bank ABC Group chairman Saddek El Kaber said, “The half-year results demonstrate the resilience of the bank despite challenging market conditions during the period, both on economic and political fronts. Adjusting for the effects of foreign currency depreciation and one-off items last year, the group is growing year-on-year at a satisfactory pace, without compromising its strong balance sheet and conservative credit risk approach.”
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