2000 - Bank ABC

Transcription

2000 - Bank ABC

Arab Banking Corporation Group
Annual Report 2000
developing our
business focus
ABC’s Vision
Our vision is to be the premier and most innovative
international Arab financial group.
Our mission is to:
CONSISTENTLY GENERATE INCREASING VALUE FOR
OUR SHAREHOLDERS.
SPECIALISE IN ARAB-RELATED ACTIVITIES ACROSS
THE WORLD.
INVEST IN INTERNATIONAL FINANCIAL INSTITUTIONS
THAT DIVERSIFY AND ENHANCE SHAREHOLDER
VALUE.
ATTRACT AND RETAIN HIGH QUALITY EMPLOYEES
BY PROVIDING REWARDING CAREERS.
Our key objectives are to:
MAINTAIN A STRONG PRESENCE IN THE ARAB WORLD
AND ACHIEVE OPTIMAL DIVERSIFICATION OF OUR
EARNING STREAM.
MAINTAIN A STRONG RISK MANAGEMENT PROCESS.
MAINTAIN AN EFFECTIVELY MANAGED EXPENSE BASE
FOCUSED ON GENERATING INCREASING SHAREHOLDER
VALUE.
BUILD A STRONG AND LIQUID FINANCIAL
INSTITUTION WITH EMPHASIS ON ASSET QUALITY.
Arab Banking Corporation Annual Report 2000
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Global Network
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CONTINUED
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Global Network
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The business and geographic mix of the Group and the knowledge and experience that the Group’s
management has of emerging markets around the world make ABC the leading Arab bank.
Arab World Division
International Division
Arab Banking Corporation
– Algeria
ABC Banque Internationale
de Monaco S.A.M.
2000 Highlights
2000 Highlights
Total Assets
Total Loans and
Advances
Total Deposits
Shareholders’
Funds
Number of
Branches
US$ millions
156
37
86
35
4
US$ millions
Total Assets
Total Loans and
Advances
Total Deposits
Shareholders’
Funds
Number of
Branches
317
76
294
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Investment Group
Banco ABC Brasil S.A .
2000 Highlights
US$ millions
Total Assets
Total Loans and
Advances
Total Deposits
Shareholders’
Funds
Number of
Branches
1,306
763
1,019
164
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ABC Islamic Bank (E.C.)
ABC International Bank plc
Banco Atlantico S.A.
2000 Highlights
2000 Highlights
2000 Highlights
Total Assets
Total Loans and
Advances
Total Deposits
Shareholders’
Funds
Number of
Branches
US$ millions
195
139
135
57
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(Jordan)
2000 Highlights
Total Assets
Total Loans and
Advances
Total Deposits
Shareholders’
Funds
Number of
Branches
US$ millions
366
145
309
35
20
US$ millions
Total Assets
Total Loans and
Advances
Total Deposits
Shareholders’
Funds
Number of
Branches
2,278
1,114
1,265
332
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Total Assets
Total Loans and
Advances
Total Deposits
Shareholders’
Funds
Number of
Branches
US$ millions
Total Assets
Total Loans and
Advances
Total Deposits
Shareholders’
Funds
Number of
Branches
8,001
4,472
6,875
2000 Highlights
2000 Highlights
2000 Highlights
Total Assets
Total Loans and
Advances
Total Deposits
Shareholders’
Funds
Number of
Branches
565
65
500
60
-
3,749
2,234
3,000
2000 Highlights
439
27
US$ millions
Total Assets
Total Loans and
Advances
Total Deposits
Shareholders’
Funds
Number of
Branches
423
175
314
55
6
Total Deposits
4,659
8,818
Shareholders’
Funds
1,904
ABC Group
ABC Securities (Egypt) S.A.E
US$ millions
12,009
Total Loans and
Advances
US$ millions
Total Assets
Total Loans and
Advances
Total Deposits
Shareholders’
Funds
Number of
Branches
US$ millions
Total Assets
274
International Bank of
Asia Limited
US$ millions
ABC Parent (ABC BSC)
436
Arab Banking Corporation –
Daus & Co GmbH
– Egypt (S.A.E.)
2000 Highlights
The ABC Group
31
2000 Highlights
US$ millions
Total Assets
Total Loans and
Advances
Total Deposits
Shareholders’
Funds
26,676
14,039
21,509
1,904
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28
-
– Tunisie, S.A.
2000 Highlights
Total Assets
Total Loans and
Advances
Total Deposits
Shareholders’
Funds
Number of
Branches
US$ millions
59
32
42
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Group Organisation
The ABC Group is organised into three business divisions and a central Group Head Office divided into
several functional divisions, reflecting its key objectives as outlined on page one.
Board Secretary: Dr. Khaled S. Kawan
Board of Directors
Audit Committee
Ghazi M. Abdul-Jawad
Internal Audit: Prasad Abraham
President & Chief Executive
Treasury Group
Essam El Wakil, SVP
Banking Group
Group Treasurer
Taher D. Makkiyah, EVP
Chief Banking Officer
Group Treasury Unit
}
Arab World Division
George Karam, SVP
FX, Precious Metals, Commodities & Sales
Money Market, Options, Derivatives & New Products
Bahrain Business Unit
}
Marketable Securities
Tunis Branch (OBU)
}
Investment Group
Arab Banking Corporation - Algeria
}
Other Treasury Units in the Group
Omar el-Abd, SVP
Arab Banking Corporation - Egypt (S.A.E.)
Investment Coordinator
Arab Banking Corporation (Jordan)
ABC Securities (Egypt) S.A.E.
}
Omar el-Abd, Chief Executive Officer
}
Arab Banking Corporation - Tunisie, S.A.
Representative Offices:
Abu Dhabi, Casablanca, Tehran & Tripoli (Libya)
Banco ABC Brasil, S.A.
Tito Enrique da Silva Neto, President
Banco Atlántico, S.A.
Manuel Montecelos, Chief Executive Officer
} Banco Atlántico Panama, S.A.
George K. Morton, SVP
}
Grand Cayman Branch
}
International Bank of Asia Ltd
Mike M. Murad, Vice Chairman & Chief Executive Officer
Administration Group
Milan Branch
New York Branch
Corporate Communications
Singapore Branch
Global Information Technology
}
ABC Finanziaria S.p.A.
}
}
Arab Banking Corporation Daus & Co. GmbH
}
Human Resources & Administration
Legal & Compliance
Operations
Planning & Financial Controls
London Branch
Paris Branch
Premises & Engineering
Representative Offices:
Credit & Risk Group
Houston & Los Angeles
Richard Cumberland, SVP
Chief Credit & Risk Officer
Credit Department
Credit Risk Control & Policy
}
Economics
Remedial Loans
Risk Managment
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Board of Directors
There are currently 12 Directors on the Board who have varied backgrounds and experience and
who individually and collectively exercise independent and objective judgement. All Directors are
non-executive.
The Board of Directors meets regularly and has a formal schedule of matters reserved to it,
considering key aspects of the Group’s affairs referred to it for decision. The Board and its
Committees are supplied with full and timely information to enable them to discharge their
responsibilities. All Directors have access to the advice and services of the Secretary who is responsible for ensuring that the Board procedures and applicable rules and regulations are observed;
in addition, the Directors are able, if necessary, to take independent professional advice at the
Group’s expense.
The roles of Chairman and Chief Executive Officer are separate, with distinct responsibilities. Directors are appointed by the shareholders for a specific term and re-appointments are
reviewed as each Director approaches the end of his term. None of the Directors had at any time
during the year a direct or indirect material interest in any contract of significance with ABC or
any of its subsidiaries.
Members of the Board of Directors and Secretary to the Board
Mr. Abdulmohsen Y. Al-Hunaif Chairman Kuwaiti.
B.A. in Commerce, Ain Shams University, Egypt. Undersecretary of the Ministry of Finance in Kuwait.
Chairman of ABC since 1994, Chairman of Banco Atlántico, S.A., Spain. Mr. Al-Hunaif has more than 30
years’ experience as a banker and senior government official. He sits on the boards of various Middle East
and European banks as well as serving with a number of government organisations.
Mr. Ageli Abdulssalam Breni Deputy Chairman Libyan.
B.Sc. in Economics, Benghazi University, Libya; M.S. in Economics, Oklahoma State University, U.S.A.
Deputy Governor of Central Bank of Libya. Director of African Development Bank, Ivory Coast. Also
Director of ABC International Bank plc, U.K., and Chairman of Arab Banking Corporation - Tunisie, S.A.
He was appointed Director of ABC in 1996. Mr. Breni has more than 20 years’ experience as a banker.
(Resigned 6 December 2000).
Mr. Khalifa M. Al-Kindi Deputy Chairman U.A.E. citizen.
B.Sc. in Economics, East Michigan University, U.S.A. Deputy Managing Director of Abu Dhabi Investment
Authority and Director of Abu Dhabi Investment Company. Also Director of ABC International Bank plc,
U.K., and a past Director of International Bank of Asia Ltd., Hong Kong, and Banco Atlántico, S.A., Spain.
He has been a Director of ABC since 1992 and has 15 years’ experience as an investment banker as well
as holding a number of directorships in various public corporations.
Dr. Anwar Ali Al-Mudhaf Director Kuwaiti.
B.A., Kuwait University; M.B.A. and Ph.D. in Finance, Peter Drucker Management Center, Claremont
Graduate School, California, U.S.A. Dr. Al-Mudhaf is currently the General Manager of Kuwait Health
Insurance Company and a lecturer in corporate finance, investment analysis and financial institutions at
Kuwait University. He is also a Director and a Member of the Board’s Investment Committee of the Kuwait
Public Institute for Social Security, Vice-Chairman of Al-Mal Kuwaiti Company (K.S.C.) and a past Director
of Al-Ahli Bank of Kuwait. Dr. Al-Mudhaf joined ABC’s Board in December 1999.
Mr. Hassan A. Juma Director Bahraini.
Fellow of the Chartered Institute of Management Accountants (FCIMA), U.K. Managing Director of
National Bank of Bahrain as well as serving on the boards of a number of public and corporate bodies in
Bahrain. Also Director of Banco Atlántico, S.A., Spain. Mr. Juma has been a Director of ABC Group since
1994. He has more than 25 years’ experience as a senior commercial banker.
Sheikh Khalid A. Al-Turki Director Saudi Arabian.
B.A. in Political Science, M.A. in International Relations, American University, Washington D.C., U.S.A.;
M.B.A. in Business Administration, Stanford University, U.S.A. Chairman, Advisory Council, Centre
for Middle Eastern Studies, Harvard University. Chairman of Trading & Development Co. (TRADCO),
Saudi Arabia. Also Chairman of ABC International Bank plc, U.K. Mr. Al-Turki has been a Director of
ABC since 1992 and has spent over 30 years in both academic fields and banking and international trade.
Dr. Saleh Lamin El-Arbah Director Libyan.
B.A. in Economics, University of Benghazi, Libya; M.B.A. University of Hartford, U.S.A.; Ph.D. in
Economics, Academy of Science, Hungary. Director Accounting and Investments of the Central Bank of
Libya; Director of Salima Holding Mabrouk, Casablanca, Morocco, and former Undersecretary of
the Ministry of Planning, Economy and Commerce, Libya. Also a Director of Banco Atlántico, S.A., Spain.
Dr. El-Arbah has been a Director of ABC since 1996 and has 30 years’ experience in central government.
Dr. El-Arbah is currently on leave from the University of Gharian (Libya) where he holds a chair in
MacroEconomics.
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Board of Directors
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Mr. Abdulwahab A. Al-Tammar Director Kuwaiti.
B.A. in Social Sciences, Economics and Business Administration, American University of Cairo, Egypt.
President of Altammar Economic Consultation and, among the many offices he has held in the past,
Mr. Al-Tammar has been Governor of the Central Bank of Kuwait and Chairman and Chief Executive
Officer of Arab Insurance Group, Bahrain. He has over 30 years’ banking experience and is a Member of
both Kuwait Economic Society and of Kuwait Society for Special Studies. He has served as a Director of
ABC since 1991 and is also a Director of ABC International Bank plc, U.K. Mr. Al-Tammar served as
Chairman of ABC over the period 1980-1983 and Chairman of ABC and Arab Banking Corporation
(Jordan) over the period 1992-1999.
Mr. Issa M. Al Sowaidi Director U.A.E. citizen.
B.Sc. in Economics, Northeastern University of Boston, U.S.A. Executive Director of Abu Dhabi
Investment Authority and Director of Abu Dhabi National Oil Company For Distribution (ADNOCFOD). Also Director of International Bank of Asia Limited, Hong Kong, and Chairman of Arab Banking
Corporation - Egypt (S.A.E.). He has been a Director of ABC since 1995, with over 15 years in investment
banking.
Mr. Mubarak R. Al-Mansouri Director U.A.E. citizen.
B.Sc. in Finance, M.B.A., University of West Florida, U.S.A. General Manager, Retirement Pensions and
Benefits Fund, Abu Dhabi. Director of Arab International Bank, Egypt, also Director of Banco Atlántico,
S.A., Spain. Director of ABC since 1997. Mr. Al-Mansouri has nine years’ experience in investment and
commercial banking.
Sheikh Ali Jarrah Al Sabah Director Kuwaiti.
B.A. in Economics and Political Science, University of Kuwait. Member of the Higher Planning Council
for the State of Kuwait, Director of Bahrain Middle East Bank and Chairman of Burgan International
Trading Co., W.L.L., Kuwait. Also Chairman of International Bank of Asia Ltd., Hong Kong. Sheikh Ali
has been a Director of ABC since 1998 and his experience covers over 25 years in international and
commercial banking, as well as international trading and public service.
Mr. Mohammed A. Al Mannai Director Bahraini.
Chairman of Al-Mannai Group, Bahrain. Served as a Member of the Consultative Council for the State of
Bahrain over a period of eight consecutive years. Member of the G.C.C. Commercial Arbitration Centre
and Deputy Chairman of Al Ahli Commercial Bank, Bahrain. Mr. Al Mannai also serves as Chairman
or member of the board of several other Bahraini and Egyptian companies. His more than 35 years’
experience in commerce and banking has been available to ABC since 1998.
Dr. Khaled S. Kawan Secretary to the Board Libyan.
Ph.D. (Doctorat d’Etat) in Banking Laws, University of Paris (Sorbonne), France. Dr. Kawan has served
as in-house counsel to, and Secretary to the Board of Directors of, ABC since 1991.
Board Committees
Specific responsibilities have been delegated to the Board Committees. The two principal Board
Committees, and their Board members, are:
Audit Committee
Mr. Issa M. Al Sowaidi (Chairman)
Mr. Saleh Lamin El-Arbah
Dr. Anwar Ali Al-Mudhaf
Mr. Abdulwahab A. Al-Tammar
The Board of Directors has delegated to the Group Audit Committee the responsibility for
ensuring the existence of an effective system of accounting and financial controls. Audit
Committee meetings are held at least four times a year. The Committee also meets regularly with
the Internal and External Auditors. Selected members of management are invited to meetings to
discuss relevant issues.
During its meetings, the Committee reviews, inter alia, the Group’s annual and interim
financial statements, summaries of all internal audit reports, all reports issued by the Group’s
various regulatory authorities, and all management letters from the External Auditors. The
Committee also reviews the appointment and retirement of External Auditors.
It is the responsibility of the Group Internal Audit Department to confirm the condition
of ABC Group’s assets and to monitor its activities to ensure that its operations are properly
controlled. Internal Audit reports directly to the Group Audit Committee. Internal Audit
performs independent examinations of all ABC Group’s operations and lending activities. The
frequency and scope of reviews for any given business unit are determined by the level of risk
associated with that unit, and how that unit’s performance was rated at the previous audit.
Separate internal audit departments have been created in major Group subsidiaries. These
departments report to their boards through their respective audit committees.
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Board of Directors
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Executive Committe
Mr. Abdulmohsen Y. Al-Hunaif (Chairman)
Mr. Khalifa M. Al-Kindi (Deputy Chairman)
Mr. Ageli Abdulssalam Breni (Deputy Chairman) (Resigned 6 December 2000)
Mr. Hassan A. Juma
Mr. Abdulwahab A. Al-Tammar
The Executive Committee exercises all of the responsibilities of the Board between its meetings.
Senior Management
The direct responsibilities of the members of the Group’s Senior Management, as briefly outlined in the chart on page four, are shown below together with details of their background and
experience. The exercise of Head Office control over subsidiaries is supported by the appointment
of senior management to the boards of the subsidiaries.
Head Office
Mr. Ghazi M. Abdul-Jawad President & Chief Executive Saudi Arabian.
B.A. in Political Science, Lewis & Clark College, Oregon; M.A. in International Relations, Fletcher School
of Law & Diplomacy, Tufts University, Mass., U.S.A.; Fellow of the Chartered Institute of Bankers, U.K.
Member of Steering Committee of Institute of International Finance, Washington, and Steering
Committee for the Gulf Executive Management Strategic Leadership Programme and several other
consultative or advisory committees. Director of Al Lujain Corporation. Also Vice Chairman of
Banco Atlántico, S.A., Spain, Chairman of Arab Banking Corporation – Daus & Co. GmbH and Chairman
of Arab Financial Services (E.C.), Bahrain. Previously General Manager of Gulf International Bank
(B.S.C.), Bahrain. Mr. Abdul-Jawad has over 25 years’ experience as a senior general and commercial
banker and in government service and has held his present position with ABC Group since 1997.
Mr. Taher D. Makkiyah Executive Vice President & Chief Banking Officer U.S. citizen.
B.B.A. (Accounting major), American University of Beirut; M.B.A. (Finance major), Tulane University,
U.S.A.; Harvard Executive Program graduate. Previously Managing Director based in the U.K., in charge
of Europe, Middle East and Africa, of Chase Manhattan Private Bank, a division of Chase Manhattan Bank
N.A.. Earlier, Senior Managing Director in the Emerging Markets Group of Chemical Bank N.A. and a
similar position at Manufacturers Hanover Corporation prior to its merger with Chemical Banking
Corporation. During his career, Mr. Makkiyah has served as a member of the boards of The Far East Trust
Bank, Philippines, and The Anglo Romanian Bank Ltd., U.K., and as a member of the Business Council
for International Understanding, the Financial Services Volunteer Corps for Eastern Europe, Builders
for Peace Group, the Philippine American Chamber of Commerce and the American University of
Beirut Alumni Association of North America, and as President of the Arab Bankers Association of
North America. He has had over 25 years’ experience in commercial, correspondent and private banking
and has been ABC Group’s Chief Banking Officer since 1998.
Mr. Omar el-Abd Senior Vice President & Investment Coordinator U.S. citizen.
Bachelor of Commerce, Alexandria University, Egypt. Previously General Manager of Crédit des Bergues,
Geneva, for nine years, earlier with The First Boston Corporation and Saloman Brothers. Joined ABC
in 1998 and has over 30 years of experience in international and investment banking.
Mr. Richard Cumberland Senior Vice President & Chief Credit & Risk Officer British.
Associate of the Chartered Institute of Bankers, U.K. Mr. Cumberland joined ABC in 1999 after 23 years
with Chase Manhattan Bank N.A. and has over 35 years’ experience in commercial banking and credit
and risk management.
Mr. Essam El Wakil Senior Vice President & Group Treasurer Egyptian.
B.A. in Business Administration, Cairo University, Egypt. Mr El Wakil has been with ABC since 1980
and served in both Bahrain’s and London’s Treasury Departments. He took over as Group Treasurer
in 1999. Mr El Wakil has over 25 years’ experience in Treasury Management.
Mr. George Karam Senior Vice President & Division Head, Arab World U.S. citizen.
B.A. in Economics and Public Administration, American University of Beirut; M.A. in Economics, New
School for Social Research, New York; M.B.A. Finance, Fordham University, New York, U.S.A. Mr. Karam
joined ABC in 1998 after 16 years with Manufacturers Hanover and Chemical Bank N.A. in international
commercial and treasury banking.
Mr. George K. Morton Senior Vice President & Division Head, International Canadian and British.
B.A. (Hons) in Modern History and M.A. in History (East Asia), University of Toronto, Canada. Formerly
Vice President, Trade Finance & Correspondent Banking at Bank of Nova Scotia, Toronto, earlier with
National Bank of Bahrain and Gulf International Bank. Mr. Morton brings over 25 years’ experience in
international commercial banking to the Group. He joined ABC in 1998.
Mr. Asaf Mohyuddin Senior Vice President & Head of Planning & Financial Controls Pakistani.
B.Com. (Hons) in Commerce, Punjab University, Pakistan; Fellow of the Institute of Chartered
Accountants in England and Wales, U.K. Mr. Mohyuddin joined ABC in 1983 having formerly
been General Manager (Finance) at Pak-Arab Fertilisers, Pakistan, and with Citibank, N.A. in the Middle
East. He assumed his present position in 1998, and has over 25 years’ experience in finance and banking.
Mr. Mohyuddin was promoted to the rank of SVP in 2000.
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Board of Directors
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Mr. Edward Watson Senior Vice President & Head of Human Resources & Administration British.
Associate of the Chartered Institute of Bankers, U.K. Mr. Watson joined ABC in 1997 having previously
spent 30 years with the Midland Bank PLC in the U.K. predominantly in the Human Resources arena.
His extensive Human Resources experience was subsequently supplemented by spells with the National
Bank of Abu Dhabi and Standard Chartered Bank in the Gulf and also by a consultancy assignment
during 1995 with the National Bank of Malawi. Mr. Watson was promoted to the rank of SVP in 2000.
Mr. Sael Al Waary Senior Vice President & Head of Global Information Technology British.
B.Sc. (Hons) Computer Science, University of Reading, U.K. Mr. Al Waary joined ABC Group in 1981,
and from 1986 was General Manager & Director of ABC (IT) Services Ltd., the wholly-owned technology
arm of ABC, located in London, U.K. In 1997 he relocated to the Head Office at Bahrain to head ABC’s
Global Information Technology function. A board member of Arab Financial Services Company
(Bahrain) and ABC (IT) Services Ltd. (U.K.), Mr. Al Waary has over 20 years’ experience in banking IT.
Mr. Al Waary was promoted to the rank of SVP in 2000.
Mr. Mounir Ben Slimane Senior Vice President & Legal Counsel Tunisian.
Diplômes d’Etudes Approfondies (post graduate degrees) in Law, Sorbonne University, Paris, France.
Advocat since 1978, Mr. Ben Slimane is a member of the Tunis Bar, and of the Paris Bar. He is also a
member of the International Bar Association. Immediately prior to joining ABC Mr. Ben Slimane was
Head of the Legal department for the Central Province of Saudi French Bank, the affiliate of Banque
Indosuez. He joined ABC as counsel in 1985, and was promoted to Legal Counsel and Head of Legal
Affairs in 1996. Mr. Ben Slimane was promoted to the rank of SVP in 2000.
Mr. Alexander B. Richardson Senior Vice President & Head of Operations British.
B.A. (Hons) and M.A. in Chemistry & Statistics, Cambridge University, U.K., Fellow of the Institute of
Chartered Accountants in England and Wales, U.K. Mr. Richardson joined ABC in 1997 having previously
held executive positions in offshore and investment banking in Europe, the Middle East and Far East with
E. D. & F. Man Investment Products, Alubaf Arab International Bank and Ernst & Young Management
Consultants. Mr. Richardson was promoted to the rank of SVP in 2000.
Mr. Prasad Abraham Senior Vice President & Chief Internal Auditor, Compliance Officer Indian.
B.Sc. in Chemistry, University of Calicut; Diploma in Business Studies, Cochin, India. Formerly of Citibank
N.A., Mr. Abraham joined ABC in 1983 and has over 25 years’ experience in internal audit. Mr. Abraham
was promoted to the rank of SVP in 2000.
Main Operating Subsidiaries
Mr. Abdulmagid Breish Chief Executive Officer, ABC International Bank plc, U.K. Libyan.
B.A. Political Sciences, American University of Beirut; Financial & Policy Diploma, IMF Washington D.C.
Mr. Breish joined ABC in 1980, and served as Head of Business Development until 1985 before transferring to Tokyo as Chief Representative. In 1988 he took over as Managing Director of ABC Investment
& Services Co (EC) in Bahrain, and in 1991 he became General Manager of ABC International Bank plc
in London. In 1993 he was made Chief Executive Officer of ABC International Bank plc. Mr. Breish has
over 25 years’ experience in commercial, investment and Islamic banking.
Mr. Manuel Montecelos Chief Executive Officer, Banco Atlántico, S.A., Spain Spanish.
Degree in Industrial Engineering, High Technical School of Industrial Engineers, Madrid; Degree in
Economics, I.C.A.D.E., Madrid. Formerly with ISOLUX, S.A., joined Banco Atlántico, S.A. in 1975,
appointed Deputy General Manager, heading inter alia Strategic Planning and General Accounting,
and Member of the Management Committee, in 1986. Appointed General Manager, Commercial
Area, 1996 and to his current position of Chief Executive Officer in July 1999. Mr. Montecelos brings
to ABC Group over 25 years’ experience in Spanish commercial banking.
Mr. Mike M. Murad Vice Chairman, Managing Director & Chief Executive Officer
International Bank of Asia Ltd., Hong Kong U.S. citizen.
B.A. in Business Administration, Cleary College, Michigan; M.A. in Business Administration, University
of Miami; banking and management degrees from Stonier Graduate School of Banking at Rutgers
University, the University of Michigan Graduate School of Banking, the University of Wisconsin and
the Harvard Executive Management Program. Honorary Doctor of Humane Letters, DePaul University.
Mr. Murad joined ABC in 1987 after 20 years in commercial and retail banking including several years
in senior management positions with Sun Bank of Florida, Inc., U.S.A. and the Bahrain subsidiary of
Arab African International Bank, Egypt. He has been the Vice Chairman, Managing Director and CEO
of the Group’s subsidiary in Hong Kong since 1988 and was additionally the Asia Division Head from
1991 until the reorganisation of ABC Group in 1998. He also served as Chief Operating Officer in Head
Office between 1991 and 1995.
Mr. Tito Enrique da Silva Neto President, Banco ABC Brasil S.A., Brazil Brazilian.
Degree in Operational Engineering, University of Industrial Engineering, São Paulo. Mr. da Silva Neto’s
experience spans over 30 years in Brazilian commercial and investment banking, including 15 years with
Banco Finasa de Investimento S.A. and four years each with Banco do Estado de São Paulo S.A. and Banco
Itamarati S.A., before joining Banco ABC Brasil S.A. in his present position of Director President in 1991.
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The New Synergies of ABC Group – The Way Forward
ABC’s Vision – to be the premier and most innovative international Arab financial group – reflects several
separate, albeit closely interwoven, themes. Put simply, the Group aims to be the first amongst its peers – but who
are its peers? Today, ABC sees itself as both a major regional player and an important international bank, so it
must measure itself by these twin yardsticks. As an Arab bank it has an important role to play in servicing an
increasingly sophisticated and demanding corporate, governmental and institutional client base in the Arabian
Gulf, Levant and the Magreb countries.
Meeting the needs of its regional customers therefore requires it to produce innovative and progressive
products geared to the region, with its varied economic and social developmental requirements,
whilst maintaining and constantly refreshing its capability to deliver competitive international services
and products. As an international bank, it must provide its multinational clients investing or trading
in the Arab world with sound risk management systems and strategies that address the individual
conditions inherent in a region containing many diverse political and economic structures, not to
mention currencies and currency systems. It must also meet the highest international standards of asset,
risk and liquidity management, internal control and the delivery of reliable, consistent and increasing
shareholder value.
The Group’s Mission and key medium-term objectives therefore seek to address these imperatives
through: the continuous development and maintenance of its Arab-related business expertise; its diversification of income and risk through judicious investments; its strong – and expanding – Arab world
franchise; its determination to preserve and maintain its financial strength and its detailed attention to
best practice risk and asset management.
ABC’s strong presence in the Arab world has always given it a unique advantage among international
banks. To capitalise on this and, furthermore, to benefit as much as possible from greater diversification
of income sources and risk, ABC decided, as it approached the end of its second decade, to build up
the regional side of its bridge between the international world and the Arab world. It therefore resolved to
expand more aggressively into its natural geographical territory, through a combination of new subsidiaries
and branches, organic growth and – only as and when necessary, and subject to ABC majority control –
acquisitions of existing banks.
These new domestic banking units have become platforms from which to launch an expanded range
of products that can be offered within, and throughout, the Group – broadly concentrated on domestic
and commercial banking, with strong emphasis on commercial banking. New products – in particular in
the areas of Islamic, project and structured finance – specifically geared to the needs of the Group’s major
multinational and regional clients have also been developed in Head Office and London for dissemination
Group-wide. Meanwhile, a new Egyptian securities company, formed in 2000, marks the beginning of a
cautious regional expansion into the capital markets field.
Having laid the foundations for growth, the next stage of ABC’s development plan is to tap into the
synergies available throughout the Group and thus to maximise the contribution of the most profitable
units. The Arab world domestic banking platforms are expected to be among the most profitable in the
Group, delivering high returns on equity. These domestic platforms also have the capability to contribute
synergistic benefits globally.
The new philosophy prevailing throughout the Group is to focus on building close relationships
with multi-nationals in Europe and the USA have existing or potential interest in doing business in the
Arab world. In the area of trade finance, the operating units there can source business directly, without
the over-dependence on correspondent banking relationships experienced by ABC’s smaller regional
competitors. In the case of major projects – the financing of which is fast becoming an ABC speciality –
through its global network ABC effectively has two opportunities to play a part: working with, and
providing facilities to multinationals (including export credit agency - linked and limited recourse
facilities) out of its international units; and the provision of direct services and financing to Arab buyers
and sponsors from the Head Office and the domestic platforms.
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The New Synergies of ABC Group – The Way Forward
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The synergies arising out of the widespread application of this philosophy are increasingly evident and
producing real benefits for the Group:
✺ The international units seek out – and feed back to Arab world units – regional business
opportunities from multinationals in their areas, whether they be the provision of local domestic or
corporate banking services and finance to their regional subsidiaries, or trade and other finance facilities
to the multinationals' customers.
✺ The regional domestic banking platforms, meanwhile, introduce the international units to
the many supplier (and buyer) credit opportunities with exporters and contractors in their own region,
of which they become aware through their own customer base and marketing.
✺ The capital markets and investment banking arms of the Group provide fee- earning advisory
services such as project finance structuring and local securities issuance to both domestic and international clients, introducing them to other parts of the Group for consideration of financing facilities
as appropriate.
✺ Islamic, project and structured finance opportunities are fed into the specialised centres in
Bahrain and London by both the international and domestic banking units.
✺ Bahrain Treasury products and other risk management facilities, specifically geared to those
exposed to Arab world countries and currencies, are marketed throughout the Arab world both directly
and via the domestic platforms, and through the international units.
✺ Islamic Banking in Bahrain meanwhile packages Arab - focused investment funds and introduces
these to the retail domestic units, for distribution to their local clients.
✺ The loan underwriting, syndication, placement and distribution facilities of Bahrain and London
are available to all parts of the Group.
Conclusion
There is a growing realisation of the emergence of a Group -wide symbiosis in ABC. This process began
with the creation of a wider regional network in the Arab world to complement that of the International
Division. These developments were rapidly followed by the development and launching of sophisticated,
targeted, products geared to both the Arab and international markets: Islamic facilities and services,
Treasury products like the new Arab currency options and swaps; fund management services provided for
institutional customers; risk and cash management services for the multinationals and major domestic
corporates; tech-nological services developed in-house and provided to the domestic units for their own
use, such as mobile telephony and Internet banking, credit card issuance, etc. and Project and Structured
Finance.
Today, the closer and ever-growing interaction between all operating entities in the ABC Group,
whether they be units of the Arab World or the International Divisions, or playing their part as members
of the Investment Group, is leveraging operating costs and maximising the contributions of every part
of the Group, for the benefit of the whole. ABC looks forward to moving closer to achieving its ultimate
aim: the welding together of a synchronous, inter- dependent and mutually symbiotic financial group
dedicated to its global Vision – to be the premier international Arab financial group.
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Corporate Governance
Control Environment
ABC Group is committed to the maintenance and development of a culture of policy and procedural adherence appropriate to a major international banking group. This is achieved through a formal organisational structure with clearly
demarcated lines of responsibility together with the issue and review of formal policies and procedures from the Board
through the Chief Executive to the senior management of the Group.
The Group has two main areas of business activity. The first is the ‘core bank’, comprising ABC’s branches and
wholesale banking subsidiaries worldwide, and the Arab region’s retail banks. These business units are directed, supervised, and supported within a matrix structure under which commercial banking activities are controlled by the Banking
Group, through the Arab World and International Divisions; foreign exchange dealing, securities trading and related
activities are controlled by the Treasury Group; credit and risk management matters are controlled by the Credit & Risk
Group; and administrative matters are coordinated by the Administration Group.
The activities of ABC’s other subsidiaries – Banco ABC Brasil, S.A., Banco Atlántico, S.A., International Bank of Asia
Ltd. and ABC Securities (Egypt) S.A.E. – are coordinated by the Investment Group. These subsidiaries are considerably
more autonomous than the ‘core bank’ units, because of the substantial difference in the nature of their business. Banco
Atlántico, S.A. and International Bank of Asia Ltd. are largely domestic retail banks, whilst Banco ABC Brasil, S.A. is a
domestic commercial bank with mainly corporate clients and ABC Securities (Egypt) S.A.E. provides asset management,
corporate finance, sales and trading and advisory services. These subsidiaries each have their own Head Office structures
covering their day-to-day activities, within ABC Group’s overall policy, planning and risk management framework. The
assistance and advice of the Group Head Office in Bahrain is sought whenever necessary.
The Administration Group provides operational, legal, accounting, communications, information technology,
premises management and Human Resources support to the business units in pursuit of ABC Group’s main goal –
shareholder value. The emphasis is on service and support, and all of the Administration Group’s activities are directed to providing these in a timely, efficient and cost-effective manner.
The Administration Group issues and administrates a number of policy and procedural manuals, aimed at
providing the business units with a common platform for operational controls.
Corporate Communications is responsible for public relations, media and employee relations, and shareholders’ relations, its main role being to encourage effective internal and external communication in all matters related to
ABC Group’s business objectives. The department uses its extensive contacts with local and international publications
to disseminate information worldwide about the Group’s activities and achievements. Its effective advertising campaigns,
on-going management of the Group’s Internet website, participation in regional and international conferences
and exhibitions and sponsorship of charitable causes all contribute to informing shareholders and clients of the Group’s
strategy and values. Internally, its employee newsletter ‘Al Masrafiyah’ keeps members of the Group informed on important
developments and encourages interaction and exchange of views amongst employees.
Global Information Technology is responsible for global IT strategy and planning and related technical services throughout the Group, assessing its future operational needs and developing and implementing IT systems to meet them. It is
the focal point in ABC Group for the review and assessment of business requirements and the project proposals
arising from them, matching these business needs with the Group’s technology strategy and primary concern of delivering
efficient, cost-effective, systems.
Human Resources & Administration establishes ABC Group’s overall Human Resources strategy and where appropriate
provides direction and guidance to business units in best practice policies and procedures to meet business needs. ABC is
cognisant of the contribution of its management and staff, throughout its worldwide network, to its development since its
inception. It is conscious that its success will ultimately be determined by the quality of the people engaged in fulfilling its
medium and long-term strategic aims. ABC Group is therefore committed to attracting and retaining the most qualified
and effective executives and realising the full potential of all of its staff through career development and training, the
provision of a stimulating and challenging working environment and a performance-based reward system.
Legal & Compliance monitors the provision of legal services to the ABC Group as a whole, through a combination
of in-house resources and outsourcing.
The department is directly responsible for the provision of legal services to ABC’s Head Office, branches and certain
of its subsidiaries in connection with all aspects of their business (including regulatory and reporting requirements) and
is also responsible for the Group’s compliance with international regulatory and reporting requirements, although the
Chief Internal Auditor performs the liaison role of Group Compliance Officer in relation to the Bahrain Monetary Agency
(BMA). Legal & Compliance also collaborates with the in-house legal departments of those ABC Group subsidiaries
large enough to maintain their own.
Planning & Financial Controls provides corporate financial information, including quarterly and annual financial
statements, management information for senior management and the business units, supervises the planning and budgeting process, and ensures that ABC Group fulfils the financial reporting requirements of the Bahrain Monetary Agency.
The department ensures that the Group’s accounting policies and reporting functions fully comply with international
accounting standards and best practice in the international banking industry. The department also co-ordinates
ABC Group’s tax matters.
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Monitoring and corrective action
The Board of Directors is responsible for setting acceptable levels of risks to which the Group may be exposed,
maintaining effective internal control within the Group and ensuring that the necessary steps are taken by senior
management to identify, measure, monitor and control these risks. The various internal and financial controls
are subject to independent review by Group Internal Audit and external Auditors and regulators as appropriate. The
reports of all of these review bodies are received on behalf of the Board by the Group Audit Committee, which ensures
that appropriate corrective action is taken where required. The Group Audit Committee is informed directly by Group
Internal Audit’s reports to the Committee, and by discussions with external Auditors as required, of the work they have
undertaken and the conclusions they have reached, respectively.
Compliance
In accordance with the instructions of the Bahrain Monetary Agency, ABC has appointed a Compliance Officer to act
as central coordinator for the Group in respect to all matters relating to BMA regulatory, reporting and other requirements. This responsibility lies with the Chief Internal Auditor. The Chief Internal Auditor also performs the role
of Group Compliance Officer. The compliance function covers the broad areas of corporate governance, adherence to
best practices, anti-money laundering procedures, code of conduct, conflict of interest etc. The Legal & Compliance
Department in Head Office is responsible for developing, implementing and monitoring programmes for ensuring
that all business units in the Group adhere to laws and governmental regulations in their respective countries.
Risk Management
The Board is responsible for establishing the Group’s long-term business strategy, including determining the degree of
risk acceptable to it. The Board has delegated its authority for risk strategy to the Head Office Credit Committee (HOCC)
and the Asset and Liability Committee (ALCO), each of which is supported by dedicated Group support divisions.
Overview
Risk management involves the identification, assessment and ongoing control of material risks that could detrimentally
impact on the organisation’s performance and achievement of its long-term objectives. In banking, the primary goal
of risk management is not to avoid those risks that are inherent in the business, but to manage them consciously and
with a view to ensuring the generation of income sufficient to reflect the degree of risk assumed.
The major risks to which the Group is exposed are credit, market, liquidity, operational and legal risks.
The Board of Directors delegates its responsibilities for overall risk management, through the President & Chief
Executive, to several Head Office departments and committees, which determine appropriate strategies and policies
and ensure their adherence.
Credit Risk
Credit risk is the risk of financial loss arising from the inability or unwillingness of a customer or counterparty to meet an
obligation entered into with the Group. It arises from the loan, contingent obligations, treasury and other activities undertaken by a bank. Direct loans, commitments to extend credit, treasury settlement exposures, derivatives and securities
transactions and obligations are all subject to credit risk. In the normal course of business the Group, through the parent
bank and its diverse subsidiaries, deals with all types of customers and counter-parties, from sovereign states and central
banks to other governmental and financial institutions, correspondent banks, multinational and other major corporates,
medium-sized and small corporates to family-run businesses and individuals.
The primary means of avoidance of loss on credit risk is the initial decision as to whether or not to extend
credit. Authority to approve credits is delegated by ABC’s Board of Directors under and subject to the conditions laid
down in the Group Credit Policy. At the highest level, the Group Head Office Credit Committee (HOCC) must approve
Group country, industry and customer credit and counterparty limits exceeding prudential Group pre-set guidelines laid
down in the Group Credit Policy. Their purpose is both to guard against undue concentrations of exposure in any area,
geographical or sectoral, as well as to ensure that exposure to individual customers or customer groupings is kept at
prudential levels in relation to their capital and financial resources and commensurate with their ability to meet their
obligations when due. The HOCC is chaired by the President & Chief Executive and includes the Chief Banking Officer,
the Division Heads and the Chief Credit & Risk Officer.
The parent bank and its banking subsidiaries are governed by specific credit policies that, whilst following closely
Group policies, reflect local practices and regulatory requirements. Notwithstanding this, approval at Head Office is
mandatory where exposure individually or in aggregate exceeds the guidelines set out in Group Policies and exposure is
required to be contained within the country risk limits established Group-wide by the HOCC and ABC’s Board of Directors.
ABC Group maintains a strong credit culture that places the responsibility for the credit firstly and primarily on the
account officer and business unit head exercising delegated authority or recommending the credit to the next level
of decision-making. Responsibility for day-to-day management of existing credit exposure is similarly delegated to the
business unit officers who, in turn, must adhere to the detailed requirements for regular review of the customers
and analysis of their financial and economic condition. The standardised credit risk rating system in use in the ‘core’
wholesale banking units assists in the assessment and gradation of risk on corporate and financial institution customers
both at the obligor and facility levels. The system has been extensively modified to create a robust ten-grade risk rating
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system intended ultimately to be eligible for the Internal Ratings based (IRB) approach to meeting future regulatory
capital requirements. It ranks customers under a series of six gradated ‘satisfactory’ ratings (which correspond to the
rating bands used by the recognised rating agencies). These ratings are followed by ‘watchlist’ and ‘special mention’
rankings, to assist in the early identification and management of weak credits, in turn followed by ‘substandard’ and
‘doubtful’ and ‘loss’, against which minimum mandatory provisions are required in accordance with the Group Credit
Policy. When an asset is considered uncollectable and therefore categorised as Loss, it implies mandatory write-off of
that asset, in all cases. The credit risk rating system will be extended throughout the Group, with suitable adjustments
to account for the strongly retail banking nature of some subsidiaries, where stronger emphasis will be on product and
portfolio segmentation rather than the borrower.
The above risk ratings approach represents a cornerstone in the Group’s credit risk management process and
provides the framework for (i) monitoring of portfolio quality and determination of credit risk portfolio management
strategies (ii) linkage of credit quality assessment with associated pricing, and thereby the basis for estimation of credit
loss provisioning and capital allocation (iii) determination of approval authorisation.
The Group requires collateral to mitigate credit risk where unsecured, or ‘clean’, facilities being sought are considered to be beyond prudential limits. This collateral may be in the form of cash, securities, charges over the customer’s
assets or third-party guarantees. At the end of 2000 assets secured by collateral amounted to US$5,292 million, or 20 per
cent of total assets.
Internal Audit is responsible for carrying out Risk Asset Reviews of business units to assess the quality of credit
exposures booked in those units and the efficacy of, and adherence to, approval and analytical standards laid down in
Group and individual subsidiaries’ credit policies and procedures.
The parent bank and its banking subsidiaries also maintain their own head office credit departments, responsible for
assessing credits prior to approval at a level higher than the business unit, when this is required, or post-fact following the
business unit’s exercise of its delegated authority – as well as on a regular review basis. In addition, the Head Office Credit
Department in Bahrain assesses the quality of Group common customers (both bank counterparties and corporate
customers) and recommends appropriate Group limits to the HOCC for its consideration and approval.
Portfolios are reviewed in detail at least annually and the weaker credits quarterly. The business units of the Banking
Group carry out a quarterly overall assessment of their loan portfolio in conjunction with Division Heads. Additionally,
all criticised credits are reviewed regularly by the respective business unit’s account officers and unit heads, with progress
on the credits’ management being reported to ABC’s Remedial Loans Unit at the Head Office in Bahrain no less
frequently than quarterly, and often monthly. Reports are in an ‘Action Plan’ format demanding firm undertakings from
the responsible account officers as to actions being taken to reduce exposure and maximise recoveries. These reports are
forwarded to both Division Heads and the Remedial Loans Unit at Head Office and in certain cases are also subjected
to detailed in situ case-by-case reviews between the business units and the Head Office.
Group country limits are reviewed regularly by the HOCC, taking into consideration in-house and external
economic reviews and various quantitative and qualitative data, with particular emphasis on countries where credit risk may
be concentrated or greater exposure is being targeted, or whose economies are evidencing deteriorating economic
conditions, and within the context of overall business strategy, taking into account past utilisation and earnings, future
business potential and anticipated yields. The modified ten-band in-house rating system is used in conjunction with
external agency ratings to determine the Group country limit in each case, the maximum such limit being strictly
constrained under a formula relating each country’s ratings and size of GDP to ABC’s consolidated assets and equity.
The Head Office Credit Risk Control & Policy Unit provides senior management with consolidated information
on Group exposures to counterparties, customers, countries and industries. The Unit is responsible for coordinating
credit risk management technology development within the Group. It is also responsible for recommending Group
credit policy and procedural amendments and innovations, and coordinating their introduction into the various policy
manuals in place throughout the business units.
The Group is following with interest the latest developments in credit risk management and disclosure, in
particular the current dialogue taking place between the Basle Committee on Banking Supervision and the banking
community. ABC supports the establishment of principles aimed at securing an appropriate environment to ensure the
existence of sound processes for granting of credits, their administration, measurement, monitoring and control, and the
development of guidance on uniform credit risk disclosures to ensure transparency in bank reporting.
Market Risk
Market risk is the risk of financial loss to the Group resulting from adverse movements in the value of financial
instruments, in turn arising from changes in the level or volatility of interest rates, foreign exchange rates or equity and
other security or commodity prices, including derivatives.
Market risk arises as a normal part of the Group’s activities and occurs as a result of both its asset and liability
management (under ‘the banking book’) and its trading activities (‘the trading book’), although each has different
accounting consequences. ABC Group is exposed to market risk in its treasury trading activities because the present value
of its trading positions fluctuates with changes in market rates and prices. Additionally, the Group is exposed to market
risk in its commercial banking activities and investment portfolios because the revenues from these activities are sensitive
to changes in interest rates.
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Managing Market Risk
The Group has established risk management policies and limits within which exposure to market risk is monitored and
controlled. Strategic oversight is exercised by the Head Office Asset & Liability Committee (ALCO), which is chaired by
the President & Chief Executive. Membership includes the Chief Banking Officer, Group Treasurer, Investment
Coordinator, Chief Credit & Risk Officer and heads of the Risk Management, Marketable Securities and Planning &
Financial Controls Departments. Each major subsidiary has its own ALCO that assesses and manages the market risks
which arise in its business units under limits approved by its local Board.
ABC Group manages its market risk on a diversified basis, with consolidation at Head Office for management
and regulatory capital adequacy reporting. Market risk positions are managed within established limits by each
subsidiary, business unit head and trading desk. The criteria for establishing market risk limits include the Group’s risk
appetite, market volatility and liquidity, business strategy and Human Resources.
At Head Office in Bahrain there is an independent Risk Management Department, reporting directly to the Chief
Credit & Risk Officer and indirectly to the Group Treasurer. The Risk Management Department is responsible for:
i.
development of all policies related to market risk;
ii. establishment of methodologies to measure and monitor established limits;
iii. monitoring, in conjunction with Internal Control, of market risk limits;
iv. review and recommendation to ALCO of new or additional trading limits;
v. review of all new trading products;
vi. independent testing of all trading models;
vii. stress testing the portfolios to determine the effect of large unusual market movements.
The Group currently employs a mix of purchased applications and proprietary models developed in-house to quantify,
monitor and control market risk. In addition, ABC is nearing completion of the implementation of an externally sourced
comprehensive market risk management application. For the computation of market risk capital, the Group presently
utilises the standardised methodology, consistent with the Basle Accord and BMA regulations. However, Value at Risk (VaR)
methodologies, integrated with the risk management process, will support a future change to an internal management
model for market risk capital calculation, subject to approval by the BMA.
Interest Rate Risk
Interest rate risk is the risk of an adverse impact on the earnings of the Group or the economic value of its assets,
liabilities and off-balance sheet positions arising, either in the banking or the trading book of the Group, from one of the
following:
Firstly, it arises from the timing differences in the maturity (or repricing) of assets and liabilities (‘mismatch risk’). Put
another way, mismatch risk arises when there are mismatches or gaps in the amount of assets, liabilities and off-balance
sheet instruments that mature or reprice in a given period. These risks can be due to customers’ differing term preferences
or to conscious decisions by management to maintain gaps, under limits authorised to them.
It also arises from changes in the slope and shape of the yield curve, differences in repricing references of two
instruments or an imperfect correlation in the adjustment of rates earned and paid.
Finally, it arises from the effect of interest rate movements and changes in volatilities on the market value of options
held within the Group’s portfolio.
In managing the interest rate risk resulting from its trading and banking activities, Head Office does not
differentiate between the ways in which the exposure has arisen. For the core banking units both banking and trading
gap positions are consolidated, by currency, in the reports by the business units.
For purposes of illustration, we have calculated the impact on the Group’s operating profits before taxation and
minority interest of an immediate, adverse, 100 basis point, parallel, all curve, interest rate shock as at 31 December 2000.
Such a low probability event could reduce the next 12 months’ Net Interest Income by US$2.5 million (1999: US$17.7
million) if no remedial action were to be taken.
There are established limits on individual business units’ aggregate maximum exposures and on an overall
basis for the core banking units consistent with ABC Group strategy and financial plan targets. Limits are reviewed
regularly by the Head Office ALCO, whose recommendations are submitted to the Board for its approval prior to
implementation. Trading activities generating interest rate risk are concentrated largely in the Bahrain Treasury
Department, from where it can be managed directly under the overall supervision of the Group Treasurer.
Foreign Exchange Rate Risk
Foreign exchange rate risk is the risk of an adverse impact on the Group’s earnings or shareholders’ equity due to
currency rate movements. The Group is exposed to foreign exchange rate risk through both its trading portfolios and
its structural positions. Exposure management is divided accordingly.
The Group’s trading portfolios are exposed to foreign exchange rate risk in both the spot and forward foreign
exchange markets and in the options markets. Spot foreign exchange risk arises when the total present value of assets
in any currency does not equal the total present value of liabilities in that currency. Forward foreign exchange risk
arises when, for a given currency, the maturity profile of forward purchases differs from the maturity profile of forward
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sales. Options risk arises from the effect of interest rate and exchange rate movements and changes in volatilities on the
market value of the options within the Group’s portfolios.
Under the Trading Book Policy statements, foreign exchange rate risk is managed by appropriate limits and stop
loss parameters determined by each subsidiary’s local ALCO and approved by the Board, in the same way as for interest
rate risk-related limits.
The Group’s structural positions relate to its net investment in its foreign subsidiaries and are included in the
significant net foreign currency exposures detailed in note 12 to the Financial Statements. The structural positions are
reviewed weekly by Head Office ALCO in accordance with the Group’s strategic plans and actively managed by Group
Treasury based on the expected and projected changes in the underlying currencies, in order to provide protection
against significant movements. The Group Treasury can employ foreign exchange forward contracts, options and other
derivatives when executing ALCO’s strategic decisions in the management of the Group’s structural positions.
Equity, Debt Securities and Commodity Risk
As a normal part of its treasury trading activities, ABC is exposed to the risk of an adverse impact on the Group’s earnings due to movements in the prices of individual equities or other securities or commodities, or generally in the value
of their respective markets, or in either case their related derivatives. The Marketable Securities Department in Head
Office buys and sells securities as part of its management of the Group’s capital as well as in the course of its fund management activities. Group banking subsidiaries, particularly those engaged in retail banking, also manage their capital or
provide client fund management services, in addition to buying and selling securities as part of their brokerage activities.
Management of these risks is similar to that explained above in relation to foreign exchange risk, with Marketable
Securities Department working within set limits and stop loss parameters.
Liquidity Risk
ABC Group defines liquidity as the ability to meet its obligations as they fall due. A part of the ability to meet obligations
is maintaining the capability to execute specific transactions at or near current market prices without unduly affecting
those market prices. The Group deals with the latter by closely monitoring the depth and spreads in markets in which it
transacts, as well as limiting activities in less liquid markets or products.
ABC maintains liquid assets at prudential levels to ensure that cash can quickly be made available to honour its
obligations. It has specific policies regarding liquid assets coverage of short-term wholesale deposits and the potential risk
impact of large single depositors, ensuring that there is no reliance on one customer or small group of customers.
Liquidity management also recognises the impact of potential cash outflows arising from irrevocable commitments to
fund new assets.
Liquidity management reporting by ABC’s subsidiaries conforms to all local regulations and is reviewed daily by
the responsible Treasurer. A report is prepared for the wholesale units on a weekly basis by Risk Management Department for presentation to the Head Office ALCO, and on a monthly basis for the President & Chief Executive and Group
Treasurer. ALCO reviews the consolidated liquidity profiles of relevant units and the top depositor and borrower
concentrations by currency, region and entity.
Derivatives
Derivatives are off-balance sheet financial instruments that derive their characteristics from those of underlying assets,
interest rates, exchange rates or indices. These include futures, forwards, swap and options transactions in the foreign
exchange, interest rate and equity markets. Transactions may take place via exchanges or directly with counterparties.
As a normal part of business, ABC Group enters into many kinds of derivative activities in both its trading
and banking books. In the trading book, the Group assists customers and counterparties (typically financial or governmental institutions or major corporations) to alter their risk profile in a particular area of risk by structuring deals
to suit individual client needs. The positions accumulated from such activity are either passed on to others in the market
or retained as open positions and managed for a profit. The Group’s trading activities are largely managed in Bahrain
Treasury under overall supervision of Group Treasury, with appropriate limits and stop loss parameters in place as
dictated by the Trading Book Policy.
In addition to its role as a dealer, the Group also uses derivatives to manage its own asset and liability portfolios
and structural positions. Such strategic transactions are always executed by Group Treasury under specific approval of
Head Office ALCO.
Operational Risk
Operational risk is the risk of financial loss or damage to the reputation of the Group arising from inadequate internal
controls and procedures, breakdowns in processes, systems and technology, fraud or deliberate and malicious damage.
Group policy dictates that the operational functions of booking, recording and monitoring of transactions should
be carried out by staff who are independent of the individuals initiating the transactions. Each operating unit is guided
by comprehensive manuals, which specify the policies, procedures, and controls that are relevant for each function.
Internal control policies and procedures dictate the segregation of duties, delegation of authorities, exceptions reporting, exposures management and reporting, reconciliations and disaster recovery and business continuity planning.
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Separate Internal Control units carry out ongoing monitoring of day-to-day procedures and ensure adherence
to key control functions. With the improvement in the Group’s technology base, controls are frequently integrated into
processing systems.
The identification and assessment of all types of risk to which the Group may be subject, and the review of the
efficacy of the procedures in place to control them are, of course, essential elements of the role of the Head Office
Internal Audit Department. Internal Audit therefore functions as a second line of defence in regard to operational risk
in ABC Group, via the Department’s periodic reviews of both business and support units. In Head Office, as well as in
the head offices of Group subsidiaries, Internal Audit departments report to their respective Audit Committees, advising
them of irregularities and procedural failures discovered or identified and recommending appropriate action. In certain
specific cases, immediate responsibility for assessing and neutralising operational risk may be delegated to other,
specialised, areas within the Group.
Legal Risk
The legal consequence of actions, investments or situations which lead to material unexpected negative results is known
as legal risk. Inadequate documentation, legal and regulatory incapacity or insufficient authority of a counterparty,
contract invalidity or unenforceability, are all examples of legal risk. Management of this risk is through effective
consultation with internal and external legal counsel.
The provision of the highest level of integrated, cost-effective, legal advice, guidance and services to management
and the business units is the responsibility of the Head Office Legal & Compliance Department. This requires detailed
and up - to - date knowledge of international finance and corporate law and an understanding of its implications. All major
Group subsidiaries have their own in-house legal departments, acting under the guidance of the Head Office department. The Legal & Compliance Department is also the focus for ABC’s ‘compliance’ activities within the Group, although
the Chief Internal Auditor performs the role of Group Compliance Officer in matters in liaison with the BMA.
Capital Management
The Bahrain Monetary Agency is the home supervisor for ABC and sets and monitors its capital requirements
on both a consolidated basis and an unconsolidated basis. Individual banking subsidiaries are directly regulated by their
local banking supervisors, who set and monitor their capital adequacy requirements. In 1988 the Group of Ten central
banks that form the membership of the Basle Committee on Banking Supervision agreed guidelines for banks’ capital
measurement and standards.
Since then, the capital adequacy requirements of the different banking supervisors of the Group and its ‘core’ banking subsidiaries have tended to converge, albeit with differences in the extent of capital adequacy required in the case
of each. The BMA requires each Bahrain-based bank or banking group to maintain a minimum ratio of total capital to
risk-weighted assets of 12 per cent, taking into account both balance sheet assets and off-balance sheet transactions. This
is greater than the Basle Committee’s recommendation of a minimum 8 per cent ratio.
ABC Group’s capital is divided into two tiers: tier 1, comprising shareholders’ funds and minority interests; and tier
2, comprising general loan loss provisions, property revaluation reserves, and the current year’s earnings. The amount
of qualifying tier 2 capital cannot exceed that of tier 1 capital, and term subordinated loan capital cannot exceed 50 per
cent of tier 1 capital. There are also limitations on the amount of general provisions which may be included in the tier 2
capital. Deductions are made from tier 1 capital in respect of goodwill and intangible assets. Total capital is also reduced
by deducting investments in associates and treasury stock maintained in ABC’s own shares.
As mentioned in the section on Risk Management, banking operations are divided between ‘trading book’
and ‘banking book’. Risk-weighted assets are computed according to the appropriate categorisation. ‘Banking book’
risk-weighted assets are measured by reference to a scale of risk weights, classified according to the nature of each asset
and counterparty, taking into account any eligible collateral or guarantees. ‘Banking book’ off-balance sheet items giving
rise to credit, foreign exchange or interest rate risk are assigned weights appropriate to the product and category of
the counterparty, taking into account any eligible collateral or guarantees. ‘Trading book’ risk-weighted assets are
determined by taking into account market-related risks, such as foreign exchange, interest rate and equity position risks,
in addition to counterparty risk.
The Group is reviewing the second and final draft document on the New Capital Adequacy Framework released
by the Basle Committee on Banking Supervision, relating to future regulatory capital requirements on credit risk on the
banking book and to operational risk. In this regard the Group is keen to prepare itself adequately and play
a proactive role both within the region and vis-à-vis the regulatory authorities, for eligibility under the Internal Ratings
based (IRB) approach to regulatory capital estimation. It also looks forward to an agreed approach for capital treatment
of credit risk mitigation techniques such as credit derivatives, collateral, guarantees and on-balance sheet netting.
16
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Financial Highlights
Earnings
Profit before provisions, tax and minority interests
Profit before tax and minority interests
Net profit for the year
Net interest revenue
Other operating income
Earnings per share (expressed in US dollars)
(US$ million)
Financial Position
(US$ million)
Total assets
Loans and advances
Placements with banks and other financial institutions
Trading securities
Investment securities
Shareholders’ funds
Ratios
Profitability
(%)
Cost: Income ratio
Net profit as % of average equity
Net profit as % of average assets
Dividend cover (times)
2000
1999
262
196
127
433
280
$1.35
261
164
112
434
256
$1.19
26,676
14,039
7,060
713
2,961
1,904
24,358
12,903
5,891
363
3,128
1,857
63
6.8
0.50
1.93
62
6.2
0.46
1.98
17,526
11.8
13.5
7.4
7.4
12.8
15,767
12.9
14.7
7.4
6.9
11.9
52.6
13.8
$20.23
53.0
14.3
$19.73
41.8
1.5
40.9
1.5
Capital
Risk weighted assets (US$ million)
Risk asset ratio - Tier 1
Risk asset ratio – Total
Average shareholders' funds as % of average total assets
Loans and advances as a multiple of shareholders’ funds (times)
Total debt as a multiple of equity (times)
Asset Quality
Loans and advances as % of total assets
Securities as % of total assets
Net asset value per share
Liquidity
Liquid assets ratio
Deposits to loans cover (times)
Capitalisation
and principal
shareholders
Authorised
1,500
(US$ million)
Issued, Subscribed and fully paid-up
1,000
Principal shareholders
Registered address
Kuwait Investment Authority (Kuwait)
Central Bank of Libya (Libya)
Abu Dhabi Investment Authority (Abu Dhabi)
Individual and Institutional Investors
Arab Banking Corporation B.S.C.
ABC Tower, Diplomatic Area
P.O. Box 5698, Manama, Bahrain
Publicly quoted company listed on Bahrain
and Paris Stock Exchanges.
(Commercial Registration Number 10299)
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17
Directors’ Report
“
The Group’s business strategy is now well established: to redress the balance between its
International and Arab elements, achieving diversification of income whilst optimising available
synergies to leverage its global network and increase overall revenues without commensurate
expansion of costs. The past year has been not without difficulties and disappointments
but has also seen many achievements, not the least of which was the successful completion of
this, another step on the road to ABC’s Vision – to be the premier and most innovative
international Arab financial group.
”
18
1,721
1,740
1,857
1,904
96
97
98
99
00
Shareholders’ Funds
145
25
112
127
US$ millions
129
The United States economy began to show signs of slower growth from the early summer of 2000.
Nevertheless, inflation remained under control due to the continued robust trend in labour
productivity as well as a flood of imported goods and services. The US dollar started to weaken
towards the end of 2000 as the current account deficit exceeded 4.3 per cent of GDP.
Euro-Zone economies were affected by the sharp increase in global energy prices. However,
inflation was below that of the United States. Moreover, the Euro-Zone’s external current
accounts were generally in balance. The Euro continued its downward trend and, with the
European Central Bank’s apparent earlier lack of concern over its level, together with the continuing lure of a strong dollar, fell below 85 US cents by late September. This finally prompted
significant intervention by the ECB and other major central banks, leading to the Euro’s partial
recovery through the year end.
The pound sterling, long considered to be overvalued, underwent a major correction
during 2000, losing about 15 per cent of its value in terms of the dollar by late November
before recovering some ground in the last month. Nevertheless, the United Kingdom economy
experienced robust expansion during the year, well above the normal trend, accompanied by
low inflation and an improvement in the rate of unemployment. The price of the expansion,
however, was a widening current account deficit.
Following very anaemic growth in 1999, the Japanese economy recovered some momentum
in 2000. Nonetheless, weak domestic demand with a robust export expansion served to increase
the country’s external surplus to nearly US$121 billion. The yen proved to be highly volatile
during the year, but this did not disguise its weakening trend against the US dollar. The Asian
economic recovery that began in 1999 was sustained during 2000, but progress was uneven
within the region.
In Latin America, Brazil fully recovered from 1999’s weak growth, but suffered nearly twice
the level of inflation as a consequence. Argentina emerged from a deep recession with only a
weak economic recovery. There were market concerns about the economy and the deflationary
impact of the peso stabilisation system. Faced with Argentina’s hefty debt servicing obligations,
later in the year the IMF provided several billion dollars of emergency funding. Mexico and
Venezuela benefited from higher energy prices.
In the Arab world and Iran, the greatly improved revenues produced by the world energy
price rise enabled the major oil-exporting countries to re-start their economic diversification and
infrastructure improvement schemes and to recommence hydrocarbon resource development.
Algeria was able to reduce its overall external debt level while Libya’s economic growth ranged
between 5 and 6 per cent, reflecting a higher volume of crude oil output. Saudi Arabia’s
economic expansion exceeded 3 per cent in 2000 and a surplus was realised on current account,
the first since 1998. Other GCC states, too, experienced strong growth, with a significant turnaround in budgetary prospects in the wake of higher oil prices. Several other Arab countries such
as Egypt, Morocco and Tunisia benefited from stronger growth in their main European markets.
The Egyptian pound was under some pressure as the current account deficit widened, while
economic growth approached 5 per cent. The Tunisian economy grew at about 5 per cent, but
its external deficit widened despite stronger exports as imports rose. Morocco’s real GDP growth
was virtually flat, its external gap also widening because of a surge in imports.
The violence and turmoil in the Middle East impacted on the regional economies, notably
in Lebanon, Syria, Jordan and Palestine, with the failure to achieve a just peace in the region
during 2000 badly affecting the social and economic progress of these countries. Jordan’s
economic activity rose by a modest 3.5 per cent with a relatively low inflation of about 1.5 per cent,
but may have registered an increase in its current account deficit. Following a recession in 1999
Lebanon saw little growth in economic activity during 2000, but inflation was below 1 per cent.
1,657
Economic Context
96
97
98
99
00
Net Income after Tax
US$ millions
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Directors’ Report
The trend toward a more manageable current account deficit may have continued last year as
imports fell in 1999 and will not have grown significantly during 2000. Palestinian business
was badly disrupted by blockages imposed by Israel on movements of goods, services, and tax
revenues following the surge in hostilities during the last few months of 2000.
Performance
Loans
Placements
Investmemt Securities
Trading Securities
Liquid Assets
Premises & equipment
Others
Developments in ABC Group in 2000 reflected both a natural response to these economic twists
and turns as well as a determination to proceed to the next stage in its long-term strategy.
It reduced its exposure to the troubled Far Eastern economies, held steady in Latin America,
boosted investment in North Africa and expanded business operations in the Arab world – with
the exception of the Levant – achieving number one position as loan arranger in the Middle East
in the process.
The Group’s financial result was fair, with net profit increasing by 13.4 per cent over 1999
as it continued to build resources and capabilities in the Arab world to meet its objective of
regional leadership. Despite a significant proportionate shift of assets from Asia to the Arab
world, Group assets were permitted to expand only gradually. They increased by 9.2 per cent
over 1999 levels, reflecting the Group’s continuing resolve to focus on asset quality and deliver
a steadily increasing return to shareholders. New robust credit and country risk rating
systems introduced in 2000 permitted tighter definition in identification of underlying credit
risk, assisting in enhanced risk management and improving return vs. risk calculations.
This shift of assets was reflected in the performance of the new units in Tunisia, Algeria
and Egypt. Following the award of its new onshore banking licence in Tunisia, ABC Tunisie was
launched in June 2000, complementing ABC’s offshore branch by providing domestic services
to major corporates and groups involved in the export/import business. The new bank achieved
full profitability by the end of the year, while the offshore branch continued its excellent record
of increased profits every year. The Tunisian units expect a similar performance next year.
ABC Algeria’s substantial first year’s profit in 1999 was repeated in 2000, as it expanded both
balance sheet and turnover, and opened three branches during the year: at Hassi Messaoud, Oran
and central Algiers, which will be fully operational early in 2001.
ABC Egypt’s rationalisation of the offices and staff resources, inherited by ABC upon its acquisition in 1999, continued as it opened two branches and finalised the move of its head office into a
prestigious new building in the modern Zamalek area of Cairo. To meet the demands of its new discriminating target customer base of multinationals, large corporates and medium/high net worth
individuals it has introduced modern cash management services and an ATM network (a relatively
new phenomenon in Egypt); a new telephone banking Call Centre will be installed in early 2001.
The Group’s strategy of expansion in the Arab world via a series of domestic banking
platforms reaped early rewards: net income from these new business units – non-existent prior
to 1999 – amounted to over US$11 million in 2000 - more than double the 1999 return. A further
40 per cent increase is targeted for 2001. The new Egyptian capital markets subsidiary –
ABC Securities (Egypt) – was launched during 2000.
The synergistic benefits of the Group’s strategy became increasingly apparent as Head
Office support teams focused on cross-selling between the Group’s business units worldwide, with
increasing success. The International Division intensified its emphasis on Arab world-related
activities, providing increasing levels of direct trade and project finance facilities to multinationals
doing business in the Arab world, as well as marketing to them the sophisticated Arab-related
treasury products of Group Treasury and the international and domestic services available out of
the domestic platforms in North Africa. These domestic units in turn fed at a growing rate the
business opportunities identified by them to ABC branches overseas and the wholesale banking
units in Bahrain and London, as appropriate. ABC Islamic Bank and ABC’s Project and
Structured Finance Department in Bahrain worked closely with the Islamic Asset Management,
Project and Structured Finance teams in ABC International Bank in London, structuring transactions on behalf of clients in the Arab world as well as in Europe and North America, jointly
or separately underwriting transactions and packaging, securitising and distributing them to
clients worldwide, notably in telecommunications, power, oil and gas.
Active remedial exposure management again successfully reduced total Group exposure
to the troubled Asian economies and Russia. Following a reduction of over US$200 million in
1999 to the worst-hit countries – Thailand, Indonesia, China, Pakistan and Russia – in 2000 the
combined effect of asset sales, workouts and write-offs achieved a further reduction of US$334
million with a virtual full exit from Russian debt. Total exposure to these countries now stands at
US$365 million, or 0.7 per cent of total credit exposure.
52.6%
26.5%
11.1%
2.7%
1.5%
1.6%
4.0%
Assets Breakdown
per cent
.
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Milan.
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19
Directors’ Report
8,868
10,483
11,208
10,649
9,643
10,245
10,058
11,451
Group Treasury proceeded with the implementation of its ‘hub and spoke’ strategy within
the ABC Group, decentralising funding responsibilities to business units whilst retaining to itself
overall exposure and liquidity management. It is planned that the two hubs – located in Bahrain
and London – will in 2001 be linked on-line to each ABC Group business unit. Centralisation will
be retained for specialist products such as options, but generic products such as foreign exchange
and money markets will be driven by local markets, and controlled by consolidation. The Global
Marketing department, reporting to the Arab World Division, now coordinates treasury marketing
throughout the Division, obviating unnecessary duplication whilst delivering to customers globally
all the various treasury products now available through its streamlined units. Group Treasury’s
new departmental structure including, under individual senior managers, specialist units offering
New Products, Precious Metals & Commodities, Foreign Exchange, Options, Derivatives and
Marketable Securities services, are all coordinated to the benefit of the global client.
The Group’s commitment to managing its expense base continued. The 5.1 per cent
increase in Group expenses reflected the inclusion of ABC Egypt for its first full year, and of the
start -up of ABC Tunisie and ABC Securities (Egypt). In addition, International Bank of Asia was
obliged to recruit additional staff during the year to cope with increased business volumes, and
ABC International Bank was also recruiting during the year to enhance its product range, which
now includes Islamic banking services. Expenses at Banco ABC Brasil were affected by rising staff
costs, and those of Banco Atlántico by their ongoing restructuring.
Rationalisation of the Group structure, with cost savings as well as cross-selling synergies
in mind, continued. The Rome and Cairo representative offices were closed and their global
marketing functions assumed by the Milan branch and Egyptian domestic banking subsidiary
respectively. ABC Finanziaria, the Rome-based finance subsidiary, was also relocated to Milan
for the same reasons. The International Division continues to examine further consolidation
in European operations with appropriate changes in corporate structure, both to control costs
and to develop a pan-European strategic approach to chosen business lines.
Last year we referred to the introduction of advanced Information Technology as not merely
a contributory, but rather an essential and integral part, of our commitment of service to our
customers and creation of value for our shareholders. In 2000 we made great strides towards
extracting optimum value from our multi-faceted, complex banking group, with advances in both
operating unit support and risk exposure management.
The customised upgrade of our core system – the common technology platform in use by
all the core units of the Group – continued apace, with the first phase now complete. Extensive
enhancement of our Credit Risk Management System has expanded its functionalities immensely.
Together with the introduction of new market risk management systems, these advances will
enable precise measurement of ABC Group aggregated exposures across multi-product lines and
allocation of Value-at-Risk (VaR) limits to treasury departments and traders as a first phase in 2001.
A central data warehouse now allows on-line monitoring of treasury exposure across all
core business units and, coupled with end-of-day exposure reports received from the noncore subsidiaries in Spain, Hong Kong, Brazil and Egypt, Group-wide credit exposure extraction.
New advanced front office treasury and marketable securities systems have been implemented
in Bahrain, London, New York and Paris, with Singapore, Frankfurt and Milan to follow in 2001.
8,426
10,395
CONTINUED
96
97
98
99
00
Banks
Customers
Trends in Deposits
US$ millions
Building for the Future
Introduction of the new technology brings with it the benefits of advanced Enterprise-wide Risk
Management and Management Information Systems.
ABC Group is building an international standard risk management system which, when
combined with its new robust risk rating systems, will be designed to meet all regulatory and
international banking standards for capital allocation purposes.
Head Office Global Information Technology department has created a separate team
dedicated to the Arab world domestic business units, to ensure standardisation of technological
infrastructure as well as to coordinate and support their ongoing development. A feasibility
study has also been launched into the possible creation of an Internet bank designed to meet
the needs of the mass affluent Arab in the Middle East and North Africa region.
Global Information Technology continues its major task of utilising Internet technology
to consolidate and deliver the immense informational resources and applications of the Group
to each individual’s desktop with minimal cost, time and effort. Management will be able to
access, at speed, all internal and external data necessary to research, analyse and make appropriate decisions on every aspect of their activities.
20
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Directors’ Report
5,643
5,680
5,956
6,101
6,512
6,661
5,917
6,986
6,167
7,872
CONTINUED
96
97
98
99
00
Short Term
The banking industry will undoubtedly be facing many challenges in the years to come,
from utilising to best advantage the technological developments of the twenty first century
to managing risk to greatest effectiveness, meeting best international banking practices and
adhering to regulatory imperatives and evolving accounting standards. The Group is cognisant
of, and following closely, all these developments, particularly those relating to credit and market
risk evaluation and disclosure and to international accounting standards. The Bahrain regulatory authorities have been among the first in the world to recommend adherence to IAS39,
the latest accounting standard that takes effect on January 1, 2001, and which closely mirrors the
US accounting standards on the recognition and measurement of financial assets and financial
liabilities. Most European and other countries with their own accounting standards have not
yet adopted the principles of IAS39, but it is anticipated that convergence of standards will
have been achieved by 2005 at the latest. ABC confirms that, with effect from January 1, 2001,
it applies IAS39 to its own and its consolidated financial statements and in the conduct of its
business. The changes involved are wide-ranging and the effects are potentially significant, but
in ABC Group’s case are not deemed at this time to be material.
The Group’s business strategy is now well established: to redress the balance between its
International and Arab elements, achieving diversification of income whilst optimising available
synergies to leverage its global network and increase overall revenues without commensurate
expansion of costs. The International network provides support and financial services – particularly in trade finance – to multinationals doing business in the Arab world and Arab corporates and institutions importing goods and services from the developed countries. The Arab
domestic platforms, in turn, provide trade finance facilities as well as local and cash management
services to international corporate clients, whilst developing their own corporate, institutional
and governmental client base and retail opportunities to the benefit of their revenue stream.
In the middle stand the wholesale and specialist banking units in Bahrain and London which
meet the needs of clients in both regions in project and structured financing, Islamic banking
and asset management, syndicated loans and Arab -related treasury products.
The strategy is ambitious, demanding commitment to change and to cooperation by senior
management and staff alike. ABC Group is fortunate in the quality and dedication of its people and
we are confident that they will meet the challenges ahead with enthusiasm and professionalism.
ABC, in turn, commits itself to the development of its human resources and to the maintenance
of an environment that is both stimulating and rewarding. We thank all our management and
staff, worldwide, for their efforts in the past year, one not without difficulties and disappointments
but also one that has seen many achievements, not the least of which was the successful completion
of another step on the road to ABC’s Vision – to be the premier and most innovative international
Arab financial group.
As always, we acknowledge with gratitude the constructive advice and guidance of the
Group’s diverse regulatory authorities in the jurisdictions in which we operate and, in particular,
of the Bahrain Monetary Agency to which we are also indebted for its unswerving support.
Long Term
Trends in Loans Portfolio
US$ millions
Abdulmohsen Yousef Al-Hunaif
Chairman
Note: In compliance with the Bahrain Monetary Agency Circular No. BMA/751/93 and
EDBC/782/93, dated 8 July 1993 and 17 July 1993 respectively, set out below are the interests of
Directors and Senior Managers in the shares of Arab Banking Corporation (B.S.C.) for the year ended
31 December 2000.
1/1/2000
31/12/2000
Directors’ Shares
Senior Managers’ Shares
60,000
19,829
60,000
17,829
Total
79,829
77,829
Note: Directors’ remuneration for 2000 amounted to US$ 655,000 (1999:US$ 655,000).
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Group Financial Review
CONTINUED
“
The net profit for the year was US$127 million, an increase of 13 per cent and a further sign
of the steady progress being made towards achieving consistent, reliable and diversified
revenues under the Group’s long-term strategic plan.
”
23,582
26,064
24,358
26,676
ABC Group’s net interest income remained steady in 2000 at US$433 million (1999: US$434
million). Non-interest income however rose by 9 per cent to US$280 million (1999: US$256
million), mainly as a result of a three-fold improvement in net gains on trading and investment
securities together with a 6 per cent increase in net fee and commission income, the latter in itself
reflecting a 16 per cent increase in the overall volume of documentary credits, acceptances
and guarantees processed during the year. Total operating income rose by 3 per cent to US$713
million (1999: US$690 million).
Provisions against loans, advances and other impaired credits during 2000 amounted to
US$134 million (1999: US$138 million). The net charge, after recoveries of US$68 million (1999:
US$41 million), amounted to US$66 million (1999: US$97 million). No significant new country
provisions were required during the year. However, a net charge of US$20 million was taken
during the year to augment general provisions (1999: US$7 million). The significant improvement in the Group’s provisioning needs is a reflection of a much improved credit quality
resulting from a relative improvement in market conditions and a much more rigorous internal
risk management system. Most of the provisioning requirement was at the Hong Kong and
Spanish retail banking subsidiaries in view of local business expansion. Some provisions also arose
at certain other Group units on exposures in the United States and the Middle East.
After accounting for these provisions, net operating income increased by 9 per cent to
US$647 million (1999: US$593 million).
Operating expenses rose by 5 per cent to US$451 million (1999: US$429 million), partly
due to the inclusion in the consolidated accounts of Arab Banking Corporation - Egypt (S.A.E.)
of its first full year of operations, and of Arab Banking Corporation - Tunisie and ABC Securities
(Egypt) S.A.E., both formed during the year. In addition International Bank of Asia Limited and
ABC International Bank plc both recruited additional staff during the year, the former to cope
with increased business volumes in consequence of economic expansion and the latter to expand
its product range, notably its Islamic banking services. Expenses at Banco ABC Brasil S.A. were
also affected by the general rise in staff costs, whilst Banco Atlántico incurred exceptional costs
due to its ongoing restructuring. As a result of these factors, the overhead expense (cost:income)
ratio increased to 63 per cent (1999: 62 per cent).
Minority interests in subsidiaries amounted to US$36 million (1999: US$21 million), mainly
reflecting increased profits reported by subsidiaries in which there are sizeable minority stakes.
Taxes on operations outside Bahrain amounted to US$33 million (1999: US$31 million).
Following these deductions the net profit for the year was US$127 million (1999: US$112
million), an increase of 13 per cent and a further sign of the steady progress being made towards
achieving consistent, reliable and diversified revenues under the Group’s long-term strategic plan.
22,988
Income Statement
96
97
98
99
00
Total Assets
US$ millions
Factors Affecting Historical or Future Performance
ABC Group continues to focus its current expansion on the Arab world. The North African
subsidiaries, most of which are no more than two years old, have been performing well and
producing an increasing contribution to Group revenues. Arab Banking Corporation - Algeria, Arab
Banking Corporation - Egypt (S.A.E.), Arab Banking Corporation - Tunisie and ABC Securities
(Egypt) S.A.E., a new capital markets-oriented subsidiary launched in 2000, all have plans to expand
operations and make valuable contribution to Group revenues.
The fortunes of the ABC Group in the future will, therefore, be more closely tied to those
of the Arab world countries – and the corporations and institutions therein – in which the
Group does business. In turn, these countries will depend to a greater or lesser degree on the
performance of the major economies of the United States and Europe with which they trade, as
economic growth boosts demand for the oil and other commodities produced by the Arab world.
The Group is convinced that the unique symbiosis of its international units sourcing customers
for its Arab world units, whilst simultaneously providing their own services and expertise to
Arab world customers dealing internationally, is the right course for the future.
The advanced risk management techniques and new systems that are being implemented
are expected to contribute to significantly improved asset and revenue quality, with a positive
impact on the Group’s profitability.
22
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CONTINUED
Total liquid assets, including trading and investment securities, placements and liquid funds,
increased by 12 per cent to US$11,143 million (1999: US$9,969 million) as money market placements expanded by 20 per cent. This expansion in liquidity was, in turn, driven by an increase in
deposits of US$1,621 million, or 8 per cent, the majority of which was attributable to the 12 per
cent, or US$1,206 million, increase in deposits from customers. Total placements, together with
liquid funds of US$409 million (1999: US$587 million), represented 28 per cent (1999: 27 per
cent) of total assets. Total liquid assets represented 42 per cent (1999: 41 per cent) of total assets.
The Group’s total assets increased by 10 per cent to US$26,676 million (1999: US$24,358
million), mainly due to this increase in liquid assets and the increase in the loan portfolio referred
to below. The average assets of the Group in 2000 amounted to US$25,409, whilst its average
liabilities, excluding shareholders’ equity and minority interest, totalled US$23,123 million.
ABC Group’s overall loan exposure grew by 9 per cent to US$14,039 million (1999:
US$12,903 million); however, its total loans to deposits ratio remained at 65 per cent in the light
of the increase in deposits. Short-term lending – loans with a maturity of less than one year – as
a proportion of the total portfolio fell to 44 per cent (1999: 46 per cent). Deposits from customers
and central banks grew to US$11,451 million (1999: US$10,245 million). Deposits from banks
and financial institutions, as mentioned above, increased to US$10,058 million (1999: US$9,643
million). Deposits include US$2,865 million (1999: US$3,092 million) relating to sale and
repurchase agreements.
Term funding totalled US$1,692 million (1999: US$1,289 million). ABC Group raised a total
of US$1,225 million (1999: US$297 million) on international capital markets during the year.
262
261
322
242
338
Sources and Uses of Funds
Commitments, Contingent Liabilities and Other Off-Balance Sheet Items
96
97
98
99
At the end of 2000, the Group’s consolidated off-balance sheet items stood at US$23,004 million
(1999: US$29,677 million). The total risk-weighted asset equivalent of commitments and contingent liabilities and other off-balance sheet items was US$2,591 million (1999: US$2,524 million).
The total volume of documentary credits, acceptances and guarantees undertaken during the year
was US$7,561 million (1999: US$6,511 million), 48 per cent (1999: 38 per cent) of which related
to the Arab world.
The Group uses a range of derivative products for the purposes of hedging and servicing
customer-related requirements, as well as for managing its own balance sheet.
00
Operating Profits
US$ millions
Geographical and Maturity Distribution of the Balance Sheet
In 2000, ABC’s operations in the Arab world increased, as did its activities – through the subsidiaries in the Investment Group – in Asia and Latin America. Those in North America and
Western Europe fell in relative terms, but nevertheless rose in absolute values.
Assets
(per cent)
Liabilities
2000
1999
2000
1999
18
39
17
15
9
2
17
41
15
16
8
3
39
33
14
4
8
2
37
35
12
5
8
3
100
100
100
100
Arab world
Western Europe
Asia
North America
Latin America
Others
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23
CONTINUED
Total credit exposure (including off-balance sheet items) was geographically spread as
follows: Arab world amounted to 18 per cent (1999: 20 per cent). Western Europe
accounted for 47 per cent (1999: 45 per cent); Asia increased to 13 per cent (1999: 9 per cent);
North America fell to 14 per cent (1999: 19 per cent) and Latin America remained at 7 per cent
(1999: 6 per cent). The balance of 1 per cent (1999: 1 per cent) emanated from Africa, Eastern
Europe and multi-country credits.
Loans and advances were distributed as follows: the Arab world was stable at 18 per cent
(1999: 18 per cent). Western Europe declined to 36 per cent (1999: 40 per cent), Asia was
substantially higher at 21 per cent (1999: 18 per cent), and North America amounted to 12
per cent (1999: 13 per cent), while Latin America rose to 12 per cent (1999: 9 per cent). The
balance of 1 per cent (1999: 2 per cent) emanated from Africa, Eastern Europe and multicountry credits.
An analysis of the maturity profiles of assets and liabilities shows that, at the end of 2000,
54 per cent (1999: 55 per cent) of assets and 80 per cent (1999: 82 per cent) of liabilities did
not exceed one year’s maturity. Loans and advances maturing in less than one year amounted
to 44 per cent (1999: 46 per cent) of all loans and advances.
Classified Loans and Provisions
Non-performing loans and off-balance sheet credits are defined as those in default on contractual
repayments of principal or payment of interest in excess of 90 days. Such credits are immediately
placed on non-accrual status, with all past due interest being reversed, accumulated interest thereafter being excluded from income unless received in cash. In practice the Group adopts a highly
conservative stance and places all such credits on non-accrual status as soon as there arises a
reasonable doubt as to timely collection.
Concentrated action at the level of the business units most affected by the problems in
Thailand, Indonesia, China, Russia, and Pakistan, under the coordination and guidance of
the Remedial Loans Unit at Head Office, helped to reduce ABC Group’s exposure to nonperforming credits in these countries. Through a combination of debt rescheduling and restructuring, secondary market asset sales or swaps – and bankruptcy proceedings where these
were unavoidable – the total such exposure, which fell by a total of US$203 million in 1999,
was reduced by a further US$334 million in 2000. Significant write-offs from existing provisions
were a natural but unavoidable by-product of this process.
Exposure to the troubled countries mentioned above now stands at US$365 million, as
follows:
(US$ millions)
Thailand
Indonesia
China
Russia
Pakistan
24
2000
1999
30
98
191
1
45
76
202
293
68
60
365
699
Arab World
Asia
Latin America
North America
Europe
Others
16.9%
18.2%
9.2%
16.2%
38.0%
1.5%
Breakdown of Earnings Assets
by Region
per cent
Algiers .
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CONTINUED
Loans placed on non-accrual status at the end of 2000 decreased by 28 per cent to US$694 million
(1999: US$960 million). After write-offs of US$298 million (1999: US$84 million) mainly relating
to exposures in SE Asia and Europe, aggregate provisions at the end of 2000 amounted to US$620
million (1999: US$869 million). They constituted 89 per cent (1999: 91 per cent) of all nonperforming loans and 4 per cent (1999: 7 per cent) of all loans and advances.
An ageing analysis is given below in respect of all loans and advances placed on non-accrual:
(US$ millions)
Principal
Provisions
Book Value
186
39
201
268
69
8
103
259
117
31
98
9
694
439
255
1,904
249
1,692
1,857
270
1,289
1,740
241
1,420
1,721
202
1,451
1,657
188
1,299
Less than 3 months
3 months to 1 year
1 to 3 years
Over 3 years
Group Capital Structure and Capital Adequacy Ratios
96
97
Shareholders’
Equity
98
Certificate
of Deposits
99
ABC Group’s tier 1 capital rose slightly by US$25 million to US$2,065 million; however, in light
of the increase in total risk - weighted assets over the year, the tier 1 capital ratio declined to 12.2
per cent (1999: 13.4 per cent). Meanwhile, tier 2 capital increased from US$270 million to
US$302 million.
The total capital base increased by US$57 million to US$2,367 million (1999: US$2,310
million), producing a consolidated capital ratio of 13.5 per cent, compared with 14.7 per cent
in 1999.
Risk-weighted assets increased by US$1,717 million to US$17,526 million (1999: US$15,767
million), mainly on account of the expansion in the loan portfolio in the Arab world and Hong
Kong, but also reflecting increases in placements to OECD banks and in market risk - weighted
items.
All ABC Group subsidiaries meet the capital adequacy requirements of their respective
regulatory authorities.
00
Notes &
Bonds
Shareholders’ Funds
Non-Deposit Sources of Funds
& Shareholders’ Funds
ABC shareholders’ funds as at 31 December 2000 stood at US$1,904 million (1999: US$1,857
million). Average shareholders’ funds amounted to US$1,879 million (1999: US$1,819 million).
US$ millions
Other Ratios
At 31 December 2000, the ratio of the Group’s term financing to Shareholders’ Funds was 0.89:1
(1999: 0.69:1).
Average Shareholders’ Funds expressed as a percentage of Average Total Assets was 7 per
cent (1999: 7 per cent).
Total Loans and Advances expressed as a multiple of Shareholders’ Funds was 7 times
(1999: 7 times).
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ABC’S SENIOR MANAGEMENT TEAM GATHERED FROM AROUND THE WORLD IN
BAHRAIN IN JANUARY TO REVIEW THE YEAR’S PERFORMANCE AND DETERMINE
OBJECTIVES FOR 2001.
26
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Review of Operations and Support Functions
Banking Group
Arab World Division
“
In 2000 the Arab World Division drew closer to the fulfilment of its mission - to establish ABC
as the leader in the region and the banking group of choice for Arab and international
corporates and institutions alike.
”
The philosophy of the Division is to combine the Group’s existing strengths in wholesale banking
and sophisticated treasury products with those of the new domestic banking and capital market
platforms, to offer its target market the widest possible range of services, achieving in doing so
both diversification and enhancement of revenue for the Group as a whole. It aims to satisfy the
needs of top tier corporates and multinationals, and governmental and financial institutions.
The Bahrain-based Commercial Banking Department represents the largest unit in the Arab
World Division, both in terms of assets and revenues. Commercial Banking has been organised
along the lines of four complementary groups: Corporate Banking, Governments and Financial
Institutions, Project & Structured Finance, and Syndication. The first three are profit centres,
whereas the latter, as a support unit, is a cost centre. The department, working together with the
Global Marketing Department (spun off last year from the Treasury Group to coordinate
Key banking products and
treasury marketing worldwide), is responsible for relationship management throughout the
services are being developed
Division, with the regional representative offices and domestic banking platforms, dedicated to
to meet expanding customer
their specific geographical areas, feeding key market information and referring client needs to
requirements. New branches
are planned in 2000 and beyond, account officers for individual attention. Similarly, client requirements relating specifically to the
Arab world are identified by the ABC Group’s international offices and fed into the Bahrain
to provide the network to
centre. Commercial Banking then structures optimum solutions to address the clients’ needs,
enhance its delivery capabilities
calling on the specialist support units’ expertise in Project & Structured finance and/or loan
and establish its presence.
syndications, as and when required.
Both ABC Islamic Bank and Project & Structured Finance work closely with their counterGhazi M. Abdul -Jawad
parts in ABC International Bank in London, structuring transactions on behalf of Arab world and
international clients, jointly or separately underwriting transactions, then packaging, securitising
and distributing them to clients.
During 2000, the Project and Structured Finance group was substantially strengthened
with the appointment of a new team of professionals. The expanded unit will pursue major
regional project, structured and asset-based finance transactions, supported by Syndication. Their
combined efforts have already brought significant success as ABC had achieved the loan arranger
leadership position in the Middle East by the end of the year.
Developments continued apace in the domestic banking platforms of North Africa and the
Middle East. ABC Egypt continued its re-engineering exercise to reposition itself toward its new
target market, refurbishing and relocating its offices and introducing the modern technology
required both to deliver its services to clients and to support Head Office and local management information needs. It built on its existing product range by successfully entering the
major syndication and club loan market, participating in several significant transactions, as
well as extending its trade finance and treasury product offerings. It also assumed, directly, the
marketing role of the Cairo representative office, which was closed during the year.
ABC Jordan, a more mature subsidiary working in a difficult economic environment,
increased its profit through a combination of increased volumes of trade finance facilities offered
and reduced provisions, and finalised plans to introduce mobile telephone and Internet banking
to its clients in 2001.
ABC Islamic Bank focused its marketing more closely on the Arab world and consolidated
existing relationships in the GCC countries, whilst concentrating on specialist product development aimed at the Arab markets. It aims to capitalise on its expanded product range and packaging and distribution expertise, in conjunction with the London Islamic office, in the year to
come. In the meantime, it returned a slightly reduced profit for 2000.
The Group’s investment in ABC Algeria in late 1998, as the first - ever foreign-owned bank
to set up operations there, was an immediate success and it continued to perform well in
2000. Expansion plans are underway, with several branches planned to be opened, backed by an
increase of 125% in its share capital to be completed by the end of 2001.
ABC Tunisie and ABC’s Tunis offshore branch also had a most successful year. The onshore
bank broke even after its first six months of operation whilst the branch continued its sixyear record of consecutive increased profits. Between the two units, which will be merged in two
to three years’ time, the Group can provide a full range of retail commercial and import/export
“
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27
CONTINUED
related banking services and products to top -tier corporate and consumer clients. The two
business units have continued to introduce new products to their corporate and institutional
clients to assist in their foreign exchange, interest rate risk and cash flow management, and these
have been received with enthusiasm in the market.
In summary, last year the Arab World Division drew closer to the fulfilment of its mission –
to establish ABC as the leader in the region and the banking group of choice for Arab and
international corporates and institutions alike. Pursuing the course of the greatest possible
integration and cross-selling of services between business units, the Division recently set up a
new coordination unit in Bahrain, consisting of dedicated senior officers from the New Products,
Credit and Control areas of Head Office. The aim of the new unit is to act as a conduit for
business in both directions and ensure that new products are offered to clients of the domestic
platforms, whilst communicating the policies and credit and control culture of the Head Office
to these units. Meanwhile, the Division continues to seek an appropriate medium for entry into
the Levant and, given the right opportunities, other GCC countries.
Arab Banking Corporation - Egypt (S.A.E.)
In pursuance of its strategy to build a diverse banking group delivering a steadily increasing
return for its shareholders, the Group purchased a 95.8 per cent interest in Egypt Arab African
Bank (S.A.E.) in November 1999, renaming it Arab Banking Corporation - Egypt (S.A.E.). ABC
Egypt is a traditional commercial bank in transition, under guidance and direction from Head
Office, towards a specialist retail and corporate bank providing a first-class and internationally
oriented service to the top and medium tiers of domestic and multinational corporates and to
medium and high net worth individuals. Its ability to call on the financial and product strengths
of the ABC Group worldwide to provide its clients with innovative solutions is key to this strategy.
In 2000, ABC Egypt expanded into the corporate syndicated and club loan market, acting
as lead and co-lead manager in several large transactions. It also benefited from Group synergies,
extending an increased number of trade finance and export credit facilities (achieving 70 per
cent increase in non-funded and 15 per cent in funded facilities in doing so) and introducing
ABC treasury products to its clients and overseas correspondent banks. In the retail market it
was actively engaged in designing value products appealing to its target market segment and
upgrading existing delivery channels to support new service capabilities.
The restructuring of the bank proceeded during the year, with an initial 20 per cent reduction of staff followed by the recruitment of 30 new professional managerial staff, supplemented
by extensive training programmes for existing staff. It identified a new 3,300sqm building in
the prestigious area of Zamalek in Cairo, more in keeping with the bank’s change in focus and
targeted client base, and will move the head office there in 2001. State-of-the-art technology is
being introduced in support of its retail strategy, to be manifested through a new ATM network
in service from February 2001 and the launching during the year of a telephone banking Call
Centre, e-Banking services and new corporate and personal credit cards, with sophisticated cash
management services to be offered to its multinational and major domestic corporate and
individual clients. New products are also being introduced to support its corporate lending. Its
branches are being refurbished to emphasise its commitment to quality and dedication to service.
Local and Group head office management information requirements will be met by the implementation of the new global Core Banking System, scheduled to go live towards the end of 2001.
Despite the recent downturn in the Egyptian economy, the bank did well in 2000, increasing its net profit by 9 per cent to US$6.3 million equivalent in the first full year under ABC
management.
For 2001, four new branches are planned (three in Cairo including the new head office
branch, the fourth in 6th of October City) and several new products are set to be introduced
aimed at the retail market. The bank also anticipates further expansion in the range of services
for the corporate and public sectors.
US$
400,000,000
Gulf International
Bank B.S.C.
ABC Group Co-Arranger
July 2000
Since the launch of Arab Banking Corporation (Jordan) in 1991, out of the former National
Securities Portfolio (PLC) acquired by ABC, its consistent performance and steady growth have
served it well in supporting its gradual expansion. Its 20-branch network is spread throughout
Jordan and it operates a profitable brokerage subsidiary. The bank’s joint venture, with seven
other Jordanian banks and Visa International, in a nationwide Visa card company has also proved
successful, with potential for considerable expansion. Its move to a new head office building,
necessitated by expanding business operations, aptly demonstrated its success over its relatively
short life.
28
Algiers .
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Despite the backdrop of
Jordan’s sluggish economic growth
over the past four years, the year
2000 evidenced some cause for cautious optimism. The rate of GDP
growth increased to 3.4 per cent
from 1.9 per cent in 1999, exports
grew by 20 per cent and the trade
deficit fell from 10.7 per cent of
GDP to 7.7 per cent. Unemployment
declined by 1.2 per cent to 13.2 per
cent and the external public debt
was reduced by 3.5 per cent. In
accordance with the Paris Club
agreement signed in May 1999,
Jordan rescheduled its debt with its
creditors, providing much-needed
relief.
ABC Jordan benefited from
the albeit slight economic expansion, but particularly the growth in
trade, its income from that source
increasing by nearly 30 per cent as
a result of greater volumes of letters
of credit and guarantees issued. The
bank also benefited from the
Central Bank of Jordan’s reduction
of obligatory reserve requirements
for commercial banks, reducing its
cost of funding. ABC Jordan
increased its net interest margin
by 9 per cent, but its increased
holding of marketable securities
produced a loss for the year
compared with a profit in 1999. As a
consequence, the total operating
income declined by 2 per cent
from the year before. Nevertheless,
significantly reduced provisions
served to produce a net profit of a
healthy US$2.1 million, generating a
return on shareholders’ equity of
6 per cent, compared with 2 per cent
in 1999.
The new cabinet, formed in
June 2000 with a mandate to stimulate the economy, is expected to focus
on expanding trade with other Arab
countries and establishing the Aqaba
region as a Special Economic Zone.
Free trade agreements were signed
with the USA and the European
Union which, together with Jordan’s
acceptance into the World Trade
Organisation in 1999, should help to
encourage foreign trade expansion.
Nevertheless, the continuation of the
troubles in the region cannot but
affect negatively Jordan’s economy.
Project finance concentrated on several high profile oil and gas
projects in the Middle East and North Africa (MENA) region.
410
m
US$
G A S P I P E L I N E P R O J E C T • O M A N G A S C O M PA N Y S A O C
A B C G R O U P M A N D AT E D A R R A N G E R • N O V E M B E R 2 0 0 0
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29
CONTINUED
ABC Jordan intends to work
actively to increase its share of the
retail banking market, through the
introduction of more and better
retail products and high quality feebased customer services in the local
and international capital markets, at
the same time remaining positioned
to take full advantage of any
upturn in the economy and external
trade finance opportunities. Moreover, as the bank provides against
non-performing loans irrespective
of collateral held against those loans,
it is estimated that over 76 per cent of
the provisions held against such loans
will ultimately be recovered once
collateral has been liquidated. The
bank is well poised for profitable
growth on the back of a solid and
efficient infrastructure supporting a
focused and extensive product range.
Financing private power and water developments in MENA is a major
drive of the project finance business in the region.
1015
m
US$
T AW E E L A H A 1 / G U L F T O T A L T R A C T E B E L
P O W E R C O M PA N Y ( 1 3 5 0 M W P O W E R / 8 4 M I G D W A T E R )
ABC GROUP ARRANGER • DECEMBER 2000
30
ABC Islamic Bank (E.C.), a specialist
offshoot of ABC through the incorporation of its Islamic Banking
Division in 1998, provides Shariacompliant products and services for
both its own and ABC Group clients
alike. Its products include trade
and capital goods financings such
as modaraba, murabaha, musharaka,
ijara, ijara wa iktana, bai salam
and istissna transactions, and it also
advises clients on, and structures on
their behalf, equity-related investments in accordance with Sharia.
It co-launched with another Islamic
institution the first Islamic Bond
(sukook) in 1999. ABC Islamic Bank
also manages two successful Islamic
managed investment funds and
offers overnight interbank money
market investment capability to
Islamic banks through an innovative
mechanism linked to these managed
funds. The bank is shortly to introduce a variety of other innovative
Islamic products: the world’s first
Islamic credit card; a leasing fund to
assist clients to diversify their investments, focusing on equipment and
real estate leasing in North America;
and an Islamic bond linked to
strategic commodities to assist oilproducing Arab states to raise
Sharia-compliant funds.
Through its membership of
the ABC Group the bank has the
capability, depending on the needs
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of its client and the size of the transaction, to arrange a financing wholly in-house or, alternatively,
to syndicate it widely among the Group’s correspondents. Moreover, it provides corporate clients
worldwide with access to new sources of finance, often in highly tax-efficient ways.
ABC Islamic Bank concentrates its marketing on the Arab world. In 2000 it established new
relationships with several financial institutions in North Africa and the Levant, to add to those
forged in 1999, and strengthened further the existing excellent relationships with clients and
institutions in the GCC countries, particularly Saudi Arabia. The bank also worked closely with
other ABC Group units – particularly with ABC International Bank’s London-based Islamic Asset
Management unit, but also with the business units in the Magreb countries of North Africa as
well as Germany, France and Brazil – in structuring Islamic transactions and providing trade
finance and leasing facilities to their clients.
In 2000, the bank returned a total operating income of US$6.9 million, 15 per cent down
on 1999, still a good result in the context of the negative impact on the investment climate in the
Middle East of the prevailing regional tensions and the continuing difficult business environment
in some Asian and African markets. After allowing for a proportionately greater profit allocation
to investment holders, however, the bank’s net profit for the year was US$3.6 million compared
with 1999’s US$4.7 million.
US$
50,000,000
Lundin Oil
ABC Bahrain – Mandated
Arranger
October 2000
Arab Banking Corporation - Algeria opened for business in December 1998 under the first
commercial banking licence to be issued to a foreign bank in Algeria. ABC holds 70 per cent of
its share capital, the balance being spread between International Finance Corporation, the
subsidiary of the US - based World Bank, The Arab Investment Company (TAIC) of Saudi Arabia
and a group of Algerian investors. The investment has been an immediate success, providing a
26 per cent return on shareholders’ equity in its first full year of operations.
ABC Algeria has primarily targeted the commercial market and was active in 2000 in the
provision of trade - related facilities, such as letters of credit, surety bonds and guarantees, as well
as direct credits to its corporate, industrial and governmental clients and participation in the local
inter-bank money market. The bank is pleased to have thus contributed its part to the country’s
continuing economic expansion, vindicating the government’s commitment to increasing
liberalisation and privatisation and fostering a healthy market economy.
ABC Algeria’s three new branches, inaugurated in October 2000 and located in Hassi
Messaoud, Oran and central Algiers, will be fully operational from January 2001 and will enable
the bank to expand its area of operations and increase market share. Like the main branch
at head office, these branches will be connected on-line to the Head Office in Bahrain. In
partnership with The Arab Investment Company, the IFC, Tunisie-Leasing and some local
shareholders, ABC Algeria plans to launch a leasing company – a relatively new source of finance
for Algeria – in the first quarter of the new year.
The bank has made good progress since its formation, increasing its operating income during
2000. After accounting for increased staff costs due to the branch expansion, it equalled its first
year’s satisfactory net result of US$4.6 million. In view of its early success, the shareholders decided
to increase the bank’s paid in capital by the equivalent of US$20 million – approximately 50 per cent
of which has already been effected, with the remainder due in 2001.
Arab Banking Corporation - Tunisie
The Group’s newest offspring, ABC Tunisie, commenced operations on 22 June, 2000 as a
Tunisian onshore bank with operations complementary to ABC’s offshore branch, ABC Tunis.
By the end of the year it had exceeded breakeven point, returning a small profit, having taken
full advantage of the important business opportunities available to it – which could not have
been availed by ABC’s offshore branch – in the provision of finance and services to the corporate,
institutional and retail banking fields.
With Tunisia’s retention in 2000 of its international investment grade rating and the quickening pace of its economic liberalisation programme, the bank expects to benefit from the
greater business opportunities emanating from increased foreign investment. The upsurge in
overall trade volumes between Europe and Tunisia resulting from implementation of the 1995
Partnership Agreement with the European Union, together with the business opportunities
available through Group synergies, also leaves the bank well placed with its existing expertise in
trade finance and treasury products. ABC Tunisie is targeting Tunisian import/export groups
and large companies in need of their range of sophisticated products in the area of foreign
exchange and interest rate risk management and foreign currency financing as well as insurance
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CONTINUED
and leasing services; it is also currently developing a range of retail banking products designed
to appeal to higher net worth individuals as well as to middle income clients, including Internet
and telephone banking and credit card services.
As part of its drive towards expansion in the retail and commercial areas, two branches of
the bank are scheduled to be opened in early 2001, at Sfax and Sousse, the second and third
largest cities in Tunisia. It plans to be the first Tunisian bank with branches on-line, another step
in meeting its ambitious objective of becoming one of Tunisia’s most respected banking
institutions.
Banking Group
International Division again became a major contributor to the Group’s net profit, with
“a 9Inper2000,
cent Return on Equity. We are confident that this will be enhanced further in 2001 as the
Division contributes to the achievement of the Group’s Mission of maximising shareholder value
in our chosen international businesses, in which ABC will be the preferred counterparty of choice
for governments and their agencies, financial institutions and multinational corporations active in
the exchange of trade and investment with the Arab world.
”
This year, building on the basic strategies adopted since 1998 under the Group’s Mission and key
objectives, International Division focused on four main themes: effective risk management to
enhance portfolio quality; support for the Group’s core business in the Arab World; new product
innovation leading to incremental revenue streams; and continuing expense control and
rationalisation of under-productive businesses and offices.
Portfolio quality: The significant remedial effort at Singapore Branch bore fruit in 2000 with
a reduction of US$139 million in non-performing loans. We anticipate significant provision
recoveries now that the negative aspects of the 1998 Asian crisis have been fully absorbed. The
slowdown in the US economy, however, has led to a degree of loan asset deterioration in New York
Branch. This was to be expected given the diversity of its portfolio, but New York nevertheless
continued to operate profitably in 2000. Greater selectivity in, along with closer monitoring
of, our assets continues to lower the number and absolute volume of non-performing credits and
the extent of provisioning required against them. The continued application of strict country,
regional and tenor caps, as well as continuing emphasis on short-term, trade-driven exposure to
first-class financial institutions in Latin America and East Asia, ensures a reliable and attractive
revenue stream within prudent exposure limits.
Core business: All International Division units are firmly focused on providing global reach
for the Group’s core Arab world business activities – the provision of trade, export and project
finance and Islamic or other structured finance by the Arab world operating units – and facilitating multinational banking and investment into – or by – the Arab region. In addition, Divisional
units are developing expertise in selected industries with direct and strategic relevance to the
Group’s domestic markets: oil and gas, petrochemicals, power and water, telecommunications
and transport. All units have augmented their skill base and marketing resources to deliver to
their targeted client base efficient, cost effective transaction execution; they plan to build further
on these successes during 2001.
New Products: The Division’s business operations are now wholly strategically and financially
driven, operating under a system of clear financial hurdles balanced by stringent credit quality
criteria. Emphasis is on fee generation to optimise returns on balance sheet utilisation. The Islamic
and Structured Trade Finance groups in ABC International Bank plc, London are creating
enhanced Group synergies in the origination and distribution of assets, not for holding on the
Group’s own books but for warehousing and on-selling to enhance yields. Singapore Branch is
making progress entering the Arab world-related trade finance arena and in financing the Asianbased offices of major international commodity houses. The European wholesale banking offices
have intensified their marketing of major multinational vendors of capital goods and services
to the Arab world, aiming to capture an increasing share of the end-buyer financing, ancillary
bonding and documentary credit business as well as the lucrative project advisory roles. These
efforts will be intensified in the coming year in coordination with the expanded project finance
capabilities in Bahrain.
Rationalisation: Our strong business focus has led to reduction of personnel costs in noncore areas as well as to elimination of non-productive offices. In Rome our Representative Office
was closed in 2000. ABC Banque Internationale de Monaco was sold early in 2001 to our Spanish
32
US$
300,000,000
ABSA Bank
ABC Group Arranger
August 2000
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subsidiary, Banco Atlántico S.A., where greater direct synergies are apparent. We continue to
review actively further rationalisation opportunities in our European wholesale banking
operations, particularly in operational and systems centralisation, common management and
business platforms and a more integrated corporate structure.
In 2000, International Division again became a major contributor to the Group’s net
profit, with a 9 per cent return on equity. We are confident that this will be enhanced further
in 2001 as the Division contributes to the achievement of the Group’s Mission of maximising
shareholder value in our chosen international businesses, in which ABC will be the preferred
counterparty of choice for governments and their agencies, financial institutions and multinational corporations active in the exchange of trade and investment with the Arab world.
In its tenth anniversary year, ABC International Bank plc (ABCIB) posted pre-tax profits of £16.2
million, a 27 per cent increase over 1999. Provisioning for specific exposures and a general
provision were made in line with the bank’s conservative policy towards its credit risk profile.
Net profit after tax rose by 19 per cent to £15.2 million.
ABCIB’s prime objective is to promote trade and business links between Europe and the
Arab world. Its strategy is to source, repackage and distribute transactions into the market,
particularly in the areas of trade and commodity finance. Over the year it has steadily diversified
its product base and enhanced the quality of its earnings, increasing its fee income primarily from
structured financings in the energy and telecommunications sectors. As a result ABCIB improved
its annual return on capital by 19 per cent over the previous year, to 7 per cent in 2000.
ABCIB operates out of its branches in London and Paris, through several specialist departments, cooperating closely with ABC’s Head Office in Bahrain to source and book business.
In January 2000 the General Manager of the London Branch was also appointed Deputy Chief
Executive of the bank and in the second half of 2000 a new Treasurer was appointed in London
and a new General Manager to Paris Branch. Expansion possibilities in Europe are currently
being considered.
In London Structured Trade Finance and Correspondent Banking successes included a three year financing for the supply of GSM equipment from Motorola to Jordan Mobile Telephone
Services. Paris generated US$1.3 billion of documentary letter of credit business and arranged
several COFACE - guaranteed buyer credits for Algeria. London’s Commodity Finance group,
working with three other banks, arranged a US$250 million medium-term prepayment facility
in favour of Qatar Petroleum on behalf of a major oil-trading client. Paris focused mainly on soft
commodities, especially agricultural products.
Project Finance concentrated on the energy sector, arranging and lead-managing, with the
support of the Syndications group, several high profile projects in the Middle East and North
Africa (MENA) region, including the US$410 million gas pipeline project for Oman Gas
Company and an independent power project in Tunisia for which it won the mandate at yearend. Paris supported major projects in the MENA region including a desalination plant in the
UAE, and participated in the financing of an offshore rig and the acquisition of an oil refinery in
Morocco. It is also acting on a number of transactions on a build-own-operate-transfer (BOOT)
basis for wastewater treatment in Tunisia and Jordan and the energy sector in Egypt.
Specialised Finance focused on the financing of cellular telecommunication networks in
the MENA region and Turkey; fibre-optic networks for competitive local exchange carriers; and
mergers and acquisitions in the European cable television industry. It also demonstrated its
expertise in asset-backed finance transactions.
The Islamic Asset Management (IAM) team, since its establishment at the end of 1999, has
structured equipment leasing and real estate assets, sourced primarily from North America, for
distribution to investors in the Arab world. In November 2000, ABCIB Islamic Asset Management
Limited was established to segregate ABCIB’s Islamic and conventional banking products and
provide advisory services. IAM works closely with ABC Islamic Bank in Bahrain.
At the end of 2000, ABCIB’s short-term facilities (those repayable within two years) stood at
72 per cent of the total loan portfolio. Long-term borrowings stood at 32 per cent of total
deposits. The ratio of fees and trading income to total income increased to 33 per cent in 2000
from 27 per cent in 1999, while the ratio of non-interest income to total expenses increased to 68
per cent from 59 per cent.
The bank’s aggregate volume of letters of credit, acceptances and guarantees during 2000
amounted to US$2.3 billion, slightly higher than 1999. ABCIB’s portfolio of loans and advances
to customers maturing between one and five years amounted to £198 million at the end of 2000,
an increase in volume of 185 per cent over 1999. Its total loan portfolio, net of provisions, ended
the year at £748 million or 5 per cent higher than 1999.
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33
CONTINUED
ABCIB’s Risk Asset Ratio was 19.7 per cent at year- end, comfortably above the minimum
standards set by the U.K. Financial Services Authority. Based on tier I Capital alone (less deductions) the Ratio stood at 12.7 per cent.
The bank’s principal thrust for 2001 is to take full advantage of the favourable economic
climate created by the increased price of oil to finance a higher volume of trade and infrastructure projects in the Arab world.
The introduction of ABC Group’s new core computer system will significantly improve
management information and risk control as well as providing the tools for a more active
Treasury operation. ABCIB will continue to play a leading role within the ABC Group to achieve
its objectives.
Arab Banking Corporation - Daus & Co. GmbH
In seeking to harness the benefits of ABC Group synergy, Arab Banking Corporation - Daus
GmbH has focused its core business clearly on commercial banking and the long-term financing
of exports from Germany to the MENA region, including Iran. The bank has steadily built up its
commercial export and project finance activities, including structured finance, enabling it now
to offer exporter clients up to 100 per cent financing of export credit guaranteed projects. Its
decision to present itself as a niche bank in a largely over-banked country has enabled it, through
innovative structures and new products, both to strengthen its profile towards its client base and
to expand its credit portfolio. As ABC Daus’ reputation for efficient and innovative service has
spread, it has benefited from increasing volumes of business brought to it from German
exporters. For example, ABC Daus is now the major bank address for the financing of German
exports to Libya and, with the cooperation of ABC’s Algerian subsidiary in routing business
originating in that country, is steadily increasing volumes from that source also. The bank has
also expanded its relationships in Eastern Europe, adding clients in Slovenia and Hungary to its
existing portfolio in the Czech Republic and Poland.
In 2000, ABC Daus’ net interest income was reduced by approximately a third, despite an
increase in money market activities, as loan volumes were reduced in favour of off-balance sheet
business opportunities. Commission and fee income held steady, notwithstanding reduced yields
arising from increasingly competitive pressures, as the bank was able to increase overall turnover
of contingent liabilities, whilst the costs of restructuring its managed bond portfolio to alter
the maturity profile and interest sensitivity were more than balanced by its income from this
area. In addition, ABC Daus’ externally managed securities portfolio produced an excellent
contribution to its earnings. The bank’s total operating income for the year was consequently
higher at Euro 19.2 million compared with Euro 11.2 million for 1999.
ABC Daus decided to apply its total profit for the year to achieve full provisioning of its
non-performing loan book, releasing the parent bank from its historical guarantee issued in lieu.
Due to prudent management of its loan portfolio, the bank has not suffered a single loan
loss since 1992. The resultant saving of the old non-performing portfolio’s refinancing costs,
together with anticipated savings in premises cost arising from the sale of its Frankfurt office
building (which it only partially occupies), should further improve the bank’s performance.
Investment Group
“
The objective of the Investment Group remains that of enabling the ABC Group as a whole
to diversify risk and enhance shareholder value through its non-core investments. In the year
2000, the combined operations of the Investment Group banking units contributed a total
of US$67.9 million in net profit for the ABC Group. The re-engineering of Banco Atlántico is
proceeding smoothly and the bank is well positioned to meet the challenges of the current
competitive banking environment in Spain. International Bank of Asia has benefited from
the economic recovery in Hong Kong, whilst Banco ABC Brasil has maintained its contribution
to Group net profits commensurate with its size.
”
The Investment Group is responsible for maintaining and enhancing shareholder value for
ABC Group from its non-core banking operation investments, particularly Banco Atlántico, S.A.,
International Bank of Asia Limited and Banco ABC Brasil, S.A. It works closely with these banks,
helping them to introduce and market new investment products and increase fee-generating
business. It is also responsible for the introduction of new capital market-related initiatives
throughout the Group.
34
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Having been granted an investment banking licence in Egypt in June 2000, the Investment
Group completed the establishment of its wholly-owned investment company, ABC Securities
(Egypt) S.A.E., with an authorised capital of LE500 million of which LE100 million was paid in
initially. The company provides asset management services to high net worth individuals and
institutional investors, advising public corporations on privatisation and arranging private and
public bond and equity issues.
Banco Atlántico, S.A.
The Spanish economy again expanded in 2000. GDP grew by 4 per cent, stronger in the first half
but with some slackening in the second half as a consequence of lower private consumption
following a rise in interest rates and a slowdown in employment creation. External demand played
an important part in overall GDP growth, reflecting the increase in global trade generally, and
more particularly the expansion of the European economies, in addition to the competitive
advantages brought to Spanish exporters on account of the Euro’s depreciation against other
major currencies. With inflation reaching 4 per cent, however, short-term official interest rates had
to rise, which naturally impacted on banking rates, in turn, curtailing private sector expenditure –
and thus short-term borrowing – whilst simultaneously encouraging a trend towards term deposits
as long term rates were unaffected. This left the Spanish banking sector struggling to contain
operating expenses as the only effective way to combat the resultant low interest margins.
In 1999, Banco Atlántico S.A. commenced a process of change, spanning both tangible
and intangible aspects of the organisation, by the simultaneous introduction of a global re-engineering project and a number of human resources initiatives, including management and
performance evaluation by competencies and greatly increased man-hours devoted to training
personnel in the new processes. To reduce costs, the bank opened new administrative centres in
Andalusia, Madrid and Barcelona to concentrate transaction processing, as well as introducing
simplified and automated credit granting and monitoring processes and more focused recovery
procedures on doubtful loans. This has succeeded in generating personnel cost savings – freeing
up human resources for more profitable activities – whilst simultaneously raising the quality of
decision-making.
The bank is in the final stages of phasing in a new and fully integrated Management
Information System, allowing cost allocation on a product, customer or business unit basis. A new
auditing process has also been implemented, emphasising remote auditing, with corresponding
personnel savings and improvement in internal control.
The application of new sales techniques allied with the introduction of new technology,
bringing with it new competencies in data warehousing, data mining and information-based
marketing, began in earnest in early 2000 and should be complete by March, 2001. The nature
of marketing itself is evolving in Banco Atlántico, from the mass marketing concepts of the past
to an environment that focuses the intensive and intelligent use of data to develop individually
targeted sales media and design, enabling the bank to market customised products and services
to individual customers.
As part of the marketing drive, the bank is developing an agent network and by the end of
2000 had appointed 450 agents who had introduced some 1,200 clients with a business volume of
over 8,000 million pesetas. The bank’s Capital Market Unit was expanded and reinforced to
provide its private and personal banking customers with access to its specialised products through
all its branches. In addition, early in 2001 it acquired Banque Internationale de Monaco from its
parent, ABC, to spearhead the expansion of its Private Banking Services into France and Italy.
A series of new products were launched during the year, specifically designed to attract the
bank’s target clients. Amongst these were six structured deposit schemes, eight new investment
funds, three unit-linked funds, US dollar deposit accounts designed for non-residents and a series
of new flexible deposit accounts for domestic clients. In addition two new types of mortgage were
announced, as well as a new consumer credit with repayment terms of up to eight years, a
pensioners’ Gold Account, a salary account for non-residents and a special investment fund for
the Basque Country designed to take advantage of the different tax regulations affecting that
region. A number of successful commercial paper and subordinated debt issues also took place
during the year.
Several new credit cards were offered, including affinity cards, as well as a number of
insurance products relating to mortgage and consumer loans. Further new products are in the
pipeline: an account for young people; a new structured deposit and a 26 month deposit for Internet
users; a fixed income guaranteed fund; and two new credit cards for private banking clients.
US$
77,500,000
Al Shira Marine
Investments Co.
ABC Group Arranger
July 2000
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35
CONTINUED
With regard to the application of Internet banking, Banco Atlántico has significantly
expanded its capacity to service clients, both in terms of the number of users who can simultaneously access its portal as well as the types of transactions on offer – including the new products
specially designed for the Internet. Share dealing on-line has resulted in the opening of over
20,000 new accounts in a single year. An English language version of the bank’s website has
been introduced to service non-resident and multinational clients. A Call Centre will shortly be
available to clients for Telephone Banking services. ATM services have been expanded and
income therefrom increased by 42 per cent during 2000.
A life insurance company was launched at the beginning of the year, offering a wide range
of own-design products distributed through the branch network. The company had reached
breakeven by November 2000.
For the reasons given above, 2000 witnessed an overall increase in Banco Atlántico’s total
customer resources, which fed into an 18 per cent increase in its loans and advances to customers.
Total operating income also rose, by 11 per cent, but net profit fell by 2 per cent to Pts. 7.0
billion as a result of general loan loss provisions imposed under conservative Bank of Spain
regulations, resulting in a slight deterioration in the efficiency ratio to 75 per cent and a return
on shareholders’ equity of 8 per cent.
International Bank of Asia Limited
The Hong Kong economy moved upward in 2000, driven by external demand as exports
increased by almost 17 per cent over 1999; GDP expanded by more than 10 per cent during
the first three quarters. However, the impact of this trade growth did not filter down to the
domestic economy and, although declining somewhat, unemployment remained high by Hong
Kong standards at 4.6 per cent. Domestic demand was therefore very cautious, as reflected in
the continuing decline in consumer prices and the low volume of property sales. In such an
environment interest rates would normally be low but – because of the link between the Hong
Kong dollar and the US dollar – the US Federal Reserve Bank’s efforts to slow the US economy
likewise demanded higher interest rates in Hong Kong. Hence, loan demand was weak,
with domestic loans growing by an anaemic 1.4 per cent. While economic trends were more
encouraging than anytime since 1997, the recovery was still fragile.
Against this mixed backdrop, International Bank of Asia achieved an enviable rate of
growth. Loans rose by more than 28 per cent to HK$17.4 billion. Deposits rose in tandem with
loan growth, maintaining IBA’s conservative loan-to-deposit benchmark of 75 per cent. Customer
deposits increased to HK$23.4 billion, 24 per cent above the December 1999 level. IBA maintained its high liquidity policy, increasing cash and interbank placings by 5 per cent.
IBA also tested the newly revived FRCD market, inviting participation in a HK$500 million
facility. The response was overwhelming, with 14 banks joining to provide HK$ 800 million in
IBA’s second largest issue and its largest pure Hong Kong dollar FRCD. Standard & Poor’s
reconfirmation of IBA’s A-3, BBB ratings, unchanged since their initial award in 1996, was a
positive factor in the striking success of the FRCD issue.
Net interest income rose by 6 per cent despite intense competition among banks which
restrained loan pricing. The net interest margin of 2.93 per cent was up by seven basis points over
the mid-year figure through a judicious mix of higher yielding loans and control of funding costs.
Non-interest income jumped by 73 per cent, driven by credit card commissions, share brokerage,
loans fees, letter of credit fees and insurance revenues. Operating expenses rose by 14 per cent
as IBA expanded its range of services, installed new systems and resumed advertising. However,
an improved cost:income ratio and strong increases in productivity, as measured by asset per
employee and net income per employee ratios, demonstrated that IBA invested well to expand
business. Total operating income was up by 19 per cent. Provisions for bad and doubtful debts
fell 52 per cent in comparison with 1999, reflecting the general improved credit quality, and
taxes incurred during the year, following a tax credit in 1999 when the Hong Kong government
granted a tax rebate to stimulate the economy, were minimal. IBA’s net profit for the year was a
very creditable HK$244 million, producing an improved return on assets of 0.93 per cent and
return on equity of 7.3 per cent.
IBA, anticipating economic recovery, chose to focus on growth during 2000, introducing a
series of new products, attracting new customers, opening additional channels and exploiting
technology to upgrade service. Beginning with the redesign of Mycard, IBA’s signature credit
card product for women, and continuing with the introduction of Magicard, a new product which
leverages on the forthcoming Disney theme park and is linked to a special Internet site, IBA
demonstrated its ongoing leadership in the high yielding credit card business. As the need for
personal finance revived, the bank launched a whole range of loans for individuals, providing
36
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US$
600,000,000
Petrokemya
ABC Group Lead Manager
May 2000
The NGL-4 project is designed to increase the recovery of natural gas
liquids from Dukhan Arab ‘D’ reservoir and the North Field.
400
m
US$
Q ATA R N G L - 4
A B C G R O U P M A N D AT E D A R R A N G E R • A P R I L 2 0 0 0
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37
CONTINUED
The Group’s structured finance team arranged and participated in several
aviation finance facilities for some borrowers including Gulf Air, Egypt Air, Oasis and
other regional and international operators.
90
m
US$
O A S I S I N T E R N A T I O N A L L E A S I N G C O M PA N Y
ABC GROUP LEAD ARRANGER/UNDERWRITER • 2000-2001
38
flexibility and convenience while
generating
attractive
interest
income. Ambassador Privileged
Banking was expanded, taking
advantage of the experience gained
since it was first introduced in 1997.
Featuring a sophisticated new logo,
the Ambassador services aim at
higher net worth clients, providing
them with personalised attention
for savings, investments and loans.
Capitalising on the success of
its two new investment centres
opened in 1999, which quickly
accounted for 40 per cent of its
brokerage turnover, IBA opened
two more centres, gaining new
customers and increased market
share, contributing to a 100 per
cent increase in its total brokerage
commission. IBA’s partnership with
Winterthur Insurance, part of
the Credit Suisse group, expanded
the range of products available to
customers, more than doubling
commission revenue. As part of the
Bank Consortium Group, an alliance
of ten local banks, IBA was active in
promoting Mandatory Provident
Fund products. The alliance joined
also in underwriting several very
large loans to Hong Kong blue chip
corporates.
Based on consumer research,
the bank began to strengthen its
presence in selected neighbourhoods. The research identified a
customer preference for larger
branches with more spacious service
areas and conveying both solidity
and friendliness. By merging two
branches which had already reached
full capacity into a single Causeway
Bay Superbranch, a substantial
increase in business was achieved,
with deposits growing by more than
one-third since its opening in July.
This policy will be repeated in Tsuen
Wan in the New Territories, where
a new superbranch will be opened
in 2001.
Following the successful transition to the new millennium, IBA’s
focus turned to new technology and
commenced the building of its new
e -Commerce structure. It launched
a Virtual ATM in May, providing
customers with the first stage of
Internet banking. In July it signed a
contract with Computer Science
Corporation, one of the world’s
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largest data facilities management and computer consulting firms, to assume responsibility
for overall management of information technology. IBA joined with three other banks to form a
company to provide the basic platform for expanded Internet banking.
In the aftermath of Hong Kong’s most severe recession since 1945, IBA’s objective in 2000
was to resume growth and increase the return to shareholders. In outpacing the industry as a
whole, it has demonstrated that it can switch from meeting the challenges of economic crisis to
exploiting the opportunities of economic recovery. Emphasis was placed on its strengths, with
its strong positions in retail banking, credit card operations and hire purchase finance supplemented by new inroads into personal investment through new insurance and investment products,
an expanded network of investment centres and the upgraded Ambassador Privileged Banking.
Diversity remains an overriding principle of IBA’s business as it expands its customer
base and revenue sources. The bank places major emphasis on diversified risk, both in terms
of industry and individual customer. The S&P rating recognises IBA’s ability to manage its risk.
Substantial challenges face IBA in 2001. Further deregulation of interest rates and the
increasing challenge of foreign banks, as well as technological changes, present both opportunity
and threat. Economic growth has been driven by external trade which may slow as the US
economy cools. The global trend of consolidation is approaching Hong Kong. IBA welcomes
deregulation because it has won its position in Hong Kong by relying on innovation, listening to
its customers and responding to market needs. It has expanded its capabilities through alliances
with Winterthur and the Bank Consortium. By bringing in CSC as its strategic partner in
technology it has armed itself with the tools to meet the challenges. IBA is positioned for strong
growth in 2001.
Banco ABC Brasil S.A.
US$
400,000,000
Turkiye Garanti
Bankasi AS
ABC Group Co-Arranger
July 2000
In 2000 the Brazilian economy’s welcome stability, as evidenced particularly in long-term domestic
interest rates, led to an expansion of credit as consumers exhibited greater confidence in the
future and utilised more of the credit lines available to them. The growing market resulted in the
banks increasing their leverage but, like the situation in Spain, relative stability produced
decreased perceived risk and pushed down lenders’ spreads. Banco ABC Brasil was no exception
and, convinced that these conditions were not temporary but rather of a structural nature on
account of the improved economic framework, cautiously expanded its asset portfolio.
The continuing internationalisation of the Brazilian economy, with the consequential
liberalisation of capital flows and easier entry of foreign banks into the market, also contributed to
the lowering of spreads and widening of tenors generally, especially in the area of international
trade financing. The spreading liberalisation also enabled foreign banks to collateralise their
trade-related credits, allowing them to deal direct with end-clients and again imposing competitive
pressures on local banks.
The low volatility of domestic interest and exchange rates also diminished demand for hedge
instruments, one of ABC Brasil’s areas of expertise and traditionally an important source of
revenue. On the other hand, the bank’s proprietary positions showed a much better performance
due to gap management and mismatched treasury positions. In addition, fees from structured
operations, driving the issuance of credit instruments for distribution to capital market investors,
presented profitable opportunities whilst some clients, in their search for better spreads and more
volatile assets, increased their interest in equities and instruments with slightly higher credit risk
or lower liquidity, also creating opportunities for fee revenue for the bank.
Asset management also presented a challenging environment, as fees fell sharply in response
to competitive pressures. Distribution was the key to the bank’s success in this area in 2000.
As the financing of investments deriving from privatisations of public utilities picked up,
ABC Brasil, well positioned in this segment of the market, benefited accordingly. This remains a
promising avenue for the bank for the future.
In a year where the prospect of major devaluation of the Brazilian currency was not a
concern, ABC Brasil produced a strong result, increasing net profits by 47 per cent to US$32.7
million. This excellent performance amply demonstrated the soundness of its strategy to assure
a continuous flow of operations and sustained profitability through imaginative and innovative
solutions that add value for its clients.
Following similar trends in other major economies, the Brazilian financial system is currently
in a process of consolidation through which the national retail banks are expected eventually
to dominate the collection and payment businesses, giving them a natural competitive edge.
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39
CONTINUED
The obvious place for ABC Brasil under this scenario will be through its tight focus on
specialised products and superior client services. The bank has positioned itself as an important
provider of specialised and highly sophisticated credit operations to large Brazilian corporations,
complemented by a range of financial services such as asset management, underwriting and
treasury activities. To this end, its new Grand Cayman branch to be opened in 2001 is expected
to contribute in business expansion to its multinational clientele. ABC Brasil is also studying
ways of participating in both the middle corporate market and the consumer sector, whilst
maintaining its traditional conservative stance on credit risk.
ABC Securities (Egypt) S.A.E.
ABC Securities (Egypt) commenced operations during the second half of June 2000 under
licence from the Capital Market Authority, with an authorised capital of LE500 million and initial
paid up capital of LE100 million, to provide asset management services to high net worth
individuals and institutional investors, advise public corporations on privatisation and arrange
private and public bond and equity issues.
The second half of the year, however, did not provide the ideal opportunities for the firm’s
operations that had been hoped for. The country experienced a severe liquidity squeeze, government arrears to the private sector exceeding LE25 billion. Foreign reserves fell below US$15
billion, the lowest since 1994, causing a fall in the exchange rate against the US dollar from LE3.4
to LE3.9 in November. A parliamentary election took place in November that is likely to lead
to a change in government in early 2001. An array of economic legislation that could impact
significantly on government revenues, investment and the overall business climate is likely to
follow, with the introduction of intellectual property rights legislation, a value - added tax system
and a more flexible exchange rate regime being particularly on the cards.
The performance of the government in tackling outstanding issues on several fronts
over the first six months of 2001 will determine the extent of business confidence, investment
levels and overall economic growth. The proposed legislation could be viewed as a positive
development leading to a recovery in performance, which would no doubt assist in creating
better business opportunities for the firm. ABC Securities (Egypt) is adopting a realistic approach
in terms of projecting balance sheet and income growth, but anticipates that productivity and
profitability ratios will continue to exceed Group - established targets in the near future.
Group Treasury
Group Treasury acts as a central coordinator and manager of the Group’s funding and liquidity
profile. In 2000, it continued to work towards the Group-wide ‘hub and spoke’ concept introduced
in 1999. Under this strategy, funding responsibilities are mainly to be devolved to the business
units – the parent bank’s branches as well as the banking subsidiaries – in line with their
on-balance sheet activities, whilst market and liquidity risk management remains centralised
for the benefit and security of the ABC Group as a whole. Individual business units will continue
to market their treasury products within their own geographic regions but duplication of
relationship marketing and servicing of clients’ requirements by different ABC Group units
will be eliminated. Product development, particularly in relation to Arab world currencies
and options, will be concentrated in the Bahrain hub, represented by Group Treasury itself, and
disseminated worldwide.
Group Treasury is divided into three separate departments, with the following responsibilities:
Foreign Exchange, which includes the Middle East Currencies, Precious Metals &
Commodities and Treasury Sales units, provides institutional clients and central banks in the
region with a comprehensive service, in addition to handling proprietary trading on behalf of the
parent bank. It covers all major Middle East currencies, to which it will be adding several North
African and Mediterranean currencies in 2001. In response to identified client demand, the unit
is also expanding into gold and other precious metal and commodity trading.
Money Market, Options, Derivatives & New Products, which includes Islamic Murabaha
Investments, plays a vital role in the management of ABC’s liquidity, assessing movements in
interest rates and determining appropriate action through the use of derivative tools such as
interest rate swaps, forward rate agreements, collars and swaptions to smooth out market
volatility and reduce interest rate risk. The options team has become one of the largest and most
professional in the region, with activities including pricing of both ‘plain vanilla’ and exotic
40
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currency and interest rate options
for institutional clients. Employing
its acknowledged expertise the team
has successfully arranged a stream
of attractive hedging and risk
management solutions for clients
and ABC Group. The New Products
unit’s mandate is to structure
alternative investment products,
including structured notes and
capital guaranteed funds, to be
marketed throughout the Group’s
retail units worldwide from 2001.
Marketable Securities, including Fixed Income, Equities and
Investment Management, manages
portfolios of fixed income securities
on behalf of institutional clients
and ABC itself, in addition to its
normal trading activities in bonds
and equities. Total funds under
management now exceed US$2.4
billion. The department played a
major role during the year when
ABC joined with a major US investment bank as Co-Lead Manager and
Placement Agent in a successful
US$300 million Collateralised Bond
Obligation transaction. It also
began trading in stocks listed on the
major international exchanges and,
through ABC Securities W.L.L.,
ABC’s broking subsidiary active in
Bahrain Stock Exchange securities,
is expanding its portfolio management services to cover a wider
range of Arab securities. Marketable
Securities also plans to increase
selective investment in international
managed funds both on behalf of its
clients and for ABC’s own portfolios.
A separate Global Marketing
Department was set up in 1999,
reporting directly to the Arab World
Division but indirectly to Group
Treasury, and is responsible for marketing of treasury services to new
clients and coordination of existing
relationship marketing throughout
the Arab world. In time this responsibility will be extended to the whole
ABC Group.
During the year, Group
Treasury raised US$400 million
(increased from an original offering
of US$300 million to meet investor
demand) for the ABC Group, via
a medium-term loan syndicated
among a group of prime international banks.
The Group financed several telecommunications transactions
including wireless and satellite communications.
420
m
US$
T H U R AY A S A T E L L I T E T E L E C O M S
A B C G R O U P U N D E R W R I T E R / A R R A N G E R • M AY 2 0 0 0
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41
CONTINUED
Credit & Risk Group
The Credit & Risk Group (CRG) has overall responsibility within the ABC Group for centralised
credit policy and procedure formulation, credit exposure reporting, control and risk - related
regulatory compliance, remedial loans management and the provision of analytical resources to
senior management. It is also responsible for identifying market risks arising from ABC Group
activities, recommending to the relevant central committees appropriate policies and procedures
for managing exposure to such risks and establishing the systems necessary to implement effective controls.
In 2000, CRG’s activities and progress covered the following areas:
Regulatory
ABC has always paid close attention to, and carefully tracked developments in, evolving regulatory standards and industry best practice, especially in the field of credit risk management.
In recent times this interest has involved the CRG, both regionally in discussions with regional
banks, and internationally through representations on steering committees and in working
groups of the International Institute of Finance, in active deliberations on the Draft Capital
Adequacy Accord and its implications for future credit risk management. As a consequence,
there has been an early recognition of the potential challenges presented by changes to the BIS
guidelines on capital adequacy and proactive efforts are under way within the ABC Group
to enhance the existing credit risk management framework, with a view to augmenting and
standardising the credit risk culture throughout the Group and creating the infrastructure for
optimising the application of capital resources to credit risk.
Policy and Process
ABC intends moving towards an environment where business strategies and decisions are based
on capital usage optimisation. In the area of credit, the first stage is standardisation of risk measurement, which has two dimensions: amount and quality. To address the former, in the trading
book an ‘add-on factor’, reflecting further potential downside risk, is to be introduced and added
to the (marked-to-market) value of counterparty risk, whilst counterparty risk in the banking
book will be weighted at par. Risk quality will be reflected through the risk rating process outlined
below. With the progressive implementation of the Credit Risk Management (CRM) system
during the end of 2000, and the introduction of the revised risk rating system through the
coming year, this first stage will be reached by the wholesale banking units in 2001, with the retail
banking subsidiaries to follow. Simultaneously, CRG is entering the next phase of development
(policy, systems, internal data archiving and external data sources) for the estimation of
capital required in support of specific credit exposures, entailing estimation of expected and
unexpected loss relating to specific credit exposures. Whilst a specific time frame for the
completion of the latter is not attributable presently, the Group is moving forward expeditiously
to create this framework which would meet both emerging regulatory requirements as well as
internal capital assessment needs. Focus has this year been mainly on the following areas:
Risk Standardisation
A robust ten-grade risk rating system (related to both obligor and facility types) has been introduced to replace the less stratified system in operation earlier. The rating process is cumulative
and rigorous, drawing on best practices for such systems as identified by both the Bank for
International Settlements in its rating practices surveys as well as the CRG’s own independent
findings. The new system will lay the foundation for the possible ultimate adoption of the Internal
Ratings Based (IRB) approach to meeting future regulatory capital demands as we move towards
2004. ABC’s in-house country rating system has also been similarly overhauled to produce an
equivalent ten- grade structure.
US$
200,000,000
Arab Petroleum
Investments
Corporation
ABC Group Mandated
Arranger
July 2000
Risk Measurement Methodology
In line with international best practice, and in order to streamline and optimise the usage of
credit lines to ABC’s counterparties, as stated above, credit risk in the Group’s trading book will
henceforth carry, in addition to marked -to - market values, an ‘add-on factor’ to cover potential
future exposure. This differs from the current methodology of applying set risk weights to the
nominal amount of each exposure to approximate the amount of credit risk. Moreover, settlement risk in the trading book is now realistically measured on a multi-day basis. Credit risk in
the banking book will continue to be carried at par. ABC also continues to seek bilateral and
42
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multilateral netting arrangements to reduce risk and enhance business potential - in support of
this, limit structures have been reconfigured so that distinctive risk categories are measured as
appropriate relative to their tenors.
As presaged in last year’s annual report, a new market risk management system has been
selected to meet the requirements of the regulators and best practice industry standards in the
measurement of all types of market risk and the efficient allocation of capital to those risks. The
system was due to complete user acceptance testing and go live in the first quarter of 2001. It will
provide Historic, Monte Carlo and Variance/Covariance Value-at-Risk (VaR) calculations as well
as marginal VaR and a suite of sensitivity calculations aggregated by, among others, location, risk
and trading desk. This will aid in the setting of capital-optimised limits through providing
management with more accurate quantification of exposure risk. Data capture capability, through
upgraded systems’ introduction in ABC’s branches and certain wholesale banking units, when
added to existing VaR reporting from non-core units engaging in trading activities, should enable
Group VaR calculation by the end of 2001. The year is therefore seen as one of introduction and
integration of VaR methodologies in both risk management and limit monitoring.
Credit Portfolio Risk
Although overall portfolio statistics and parameters have always been a part of individual credit
consideration and review, in future the Group intends to more proactively manage credit portfolios in terms of concentrations and desired diversification through new technology and
products available to it. The frequency of portfolio reviews by Head Office in terms of geographical/industrial/maturity analysis has increased. Policy prescriptions relating to portfolio
exposure thresholds are being introduced. Products facilitating credit risk transferral away from
the Group, such as credit derivatives, will enable a more dynamic management of the portfolio
in the future.
Credit Process
Following the implementation of the new Group Credit Policy the involvement and supervision
by Head Office of the Group credit portfolio has significantly increased. This has been primarily
through referral thresholds and through the rationalisation of Group credit lines to counterparties. The result has been noticeable in efficiencies in the process itself together with enhanced
information feedback to Head Office whilst maintaining the autonomy and decentralised credit
processes at the business units in compliance with local statutory and regulatory requirements.
With the introduction of risk ratings and an enhanced credit risk management technology
platform, greater but safer devolution of credit authorities, with accompanying accountabilities
and control, will be achieved, thereby rendering the credit approval process more efficient.
Credit Risk Management Technology
Following an intensive search for the optimum credit risk management solution, ABC decided to
address its requirements in stages. The first phase entailed an expansion of the functionalities of
its existing treasury monitoring system to include all products, thereby facilitating the provision
of Group aggregated exposures across all products, plus the creation of a central warehouse of
present and historical credit risk information. This phase, entailing minimal implementation
risks, meets ABC’s immediate requirements in the area of effective exposure management and
control. The next phase will see the introduction of systems directed at optimising the credit
approval process itself, via the Group’s Intranet-based delivery and decision-making technology;
and of default probability estimation software calibrated to ABC’s own internal risk rating system,
its country, industry and other exposure limits.
Data Standards and Quality
A key integral in the area of modern effective risk management, and one which troubles most
banks, is the availability and accuracy of relevant data. In ABC’s case, and in spite of the
complexity introduced by a diversity of business units, uniform data description standards are of
paramount importance and resources are therefore being deployed to ensure consistency of
description and categorisation.
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43
Sao Paulo
CONTINUED
Remedial Loans and Recovery
The Remedial Loans Unit of CRG continues to pursue its primary objective of an ongoing
reduction in the impaired or classified asset portfolio of ABC Group, through proactive asset
management and disposals, practical workouts and debt restructuring exit strategies. It plans
to maximise the net present value of recoveries whilst minimising the impact of credit losses,
where appropriate, by employing credit derivatives and swaps to mitigate against identified but
unrealised credit risks.
ABC business units submit quarterly reports on non-performing credits, with provision
forecasts, that are evaluated by Head Office senior management to determine the adequacy of
existing provisions. Under the auspices of Remedial Loans, all units now submit their impaired
asset credit reviews on a standardised ‘Action Plan’ format that analyses recovery potential
under at least two alternative identifiable exit scenarios. This helps to focus account officers’
minds on the need to reduce non-performing credits within agreed deadlines. Remedial Loans is
pleased with progress in 2000. Exposure to the troubled countries of Thailand, Indonesia, China,
Russia and Pakistan was reduced in 1999 by US$203 million, and by a further US$334 million in
2000 to reach a total of US$365 million. This was achieved through a combination of debt
rescheduling and restructuring, asset sales or swaps and bankruptcy proceedings where these
were unavoidable. Significant write-offs from existing provisions were a natural but unavoidable
by-product of this process.
The Global Information Technology Department is responsible for global IT strategy and
planning as well as the provision of related technical services throughout the Group. The
Department fulfils a significant role through its responsibility for assessment of future operational
needs and development and implementation of new IT systems to meet them. It acts as the
focal point in ABC Group for the review and assessment of business requirements and the
project proposals arising from them, matching these business needs with the Group’s technology
strategy and primary concern of delivering efficient, cost-effective, systems.
In line with ABC’s global technology upgrade programme and IT standardisation strategy
for the wholesale banking units, the Department continued to make significant progress during
the year in the deployment of best-of-breed business applications and technical services. Having
completed the implementation of real-time front office systems in Bahrain, London, New York
and Paris, roll out is set to continue in 2001 in the remaining European units, as is deployment
of the new back office system in Bahrain and London.
All ABC’s branches and subsidiaries are now inter-connected through the Group’s new
private global telecommunications network, providing enhanced services with seamless backup
capabilities.
Similarly, significant progress has been made with the ‘Enterprise Risk Management
Systems’ project. For Credit Risk Management, the system capability upgrade now permits instant
Group-wide credit exposure information retrieval for Treasury and non-Treasury activities alike.
For Market Risk Management, ABC has implemented a state-of-the-art system that can support
advanced risk analytics such as Value-at-Risk and simulation techniques.
With the enhanced transaction processing foundation in place, an Executive Information
System (EIS) development programme was launched to provide users with consolidated on-line
Group - wide risk and exposure reports by customer or by country portfolio. Other reports assist
in the accumulation and analysis of market data, enable cash flow or profit and loss analysis,
or provide on-line updated Group policies. The EIS forms an integral part of the Group’s
initiative to web - enable business applications via a true internally generated e -business portal ABC Corporate Intranet.
ABC Group has developed a comprehensive retail banking IT architecture for its retail
banking units in the Arab world. Global Information Technology, in close collaboration with
ABC’s subsidiary in Jordan, has introduced a project to provide mobile and Internet banking
services which are expected to be launched early in 2001. In parallel, the Group is implementing
best-of-breed IT solutions for its subsidiaries in Egypt.
During the year, as part of its overall e-Business strategy, ABC launched an initiative to explore
the possibility of establishing a separate entity to concentrate on the provision of a suite of online/Internet-based financial products and services, targeting a niche market in the global arena.
44
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Auditors’ Report to the Shareholders
AUDITORS REPORT TO THE SHAREHOLDERS OF ARAB BANKING CORPORATION (B.S.C.)
We have audited the accompanying consolidated balance sheet of Arab Banking Corporation
(B.S.C.) [the bank] and its subsidiaries [the group] as of 31 December 2000, and the related
consolidated statements of income, cash flows and the changes in equity for the year then ended.
These consolidated financial statements are the responsibility of the bank’s Board of Directors.
Our responsibility is to express an opinion on these consolidated financial statements based on
our audit.
We conducted our audit in accordance with International Standards on Auditing. Those
Standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the group as of 31 December 2000 and of the results of its operations and
its cash flows for the year then ended in accordance with International Accounting Standards.
We confirm that, in our opinion, proper accounting records have been kept by the bank and
the consolidated financial statements, and the contents of the directors’ statement relating to
these consolidated financial statements, are in agreement therewith. We further report, to the
best of our knowledge and belief, that no violations of the Bahrain Commercial Companies Law,
nor of the Bahrain Monetary Agency Law, nor of the memorandum and articles of association of
the bank have occurred during the year ended 31 December 2000 that might have had
a material adverse effect on the business of the bank or on its consolidated financial position and
that the bank has complied with the terms of its banking licence. We obtained all the
information and explanations which we required for the purposes of our audit.
27 February 2001
Manama, State of Bahrain
45
Consolidated Balance Sheet
CONTINUED
Consolidated Statement of Income
CONTINUED
31 December 2000
Year ended 31 December 2000
Note
2000
(US$ million)
1999
(US$ million)
Note
2000
(US$ million)
1999
(US$ million)
OPERATING INCOME
ASSETS
Liquid funds
Trading securities
Loans and advances
Interest receivable
Investments in associates
Other investments
Other assets
Premises and equipment
3
4
5
TOTAL ASSETS
409
713
2,961
7,060
14,039
247
41
69
697
440
587
363
3,128
5,891
12,903
208
52
85
694
447
26,676
24,358
11,451
10,058
249
220
48
637
10,245
9,643
270
187
43
423
1,692
1,289
24,355
22,100
417
401
1,000
(74)
396
582
1,000
(74)
408
523
1,904
1,857
26,676
24,358
LIABILITIES
Deposits from customers
Deposits from banks and other financial institutions
Certificates of deposit
Interest payable
Taxation
Other liabilities
TERM NOTES, BONDS AND OTHER TERM FINANCING
6
7
Interest income
Interest expense
Net interest income
1,673
(1,240)
433
280
434
256
713
690
(66)
(97)
647
593
281
54
116
265
54
110
Total operating expenses
451
429
PROFIT BEFORE TAXATION AND MINORITY INTERESTS
196
164
(33)
(36)
(31)
(21)
127
112
1.35
1.19
9
Total operating income
Provision for losses on loans and advances, net of recoveries
4
NET OPERATING INCOME AFTER PROVISIONS
OPERATING EXPENSES
Staff
Other
Taxation on foreign operations
Minority interests in subsidiaries
10
6
NET PROFIT FOR THE YEAR
EARNINGS PER SHARE (expressed in US dollars)
MINORITY INTERESTS
1,472
(1,038)
24
EQUITY
Share capital
Treasury stock
Reserves
Retained earnings
TOTAL LIABILITIES, MINORITY INTERESTS AND EQUITY
Abdulmohsen Yousef Al-Hunaif
Chairman
Ghazi Abdul-Jawad
The attached notes 1 to 27 form part of these consolidated financial statements
46
47
Consolidated Statement of Cash Flows
CONTINUED
Consolidated Statement of Changes in Equity
CONTINUED
2000
(US$ million)
1999
(US$ million)
Share
capital
OPERATING ACTIVITES
Net profit for the year
Items not involving cash flow:
Provisions for losses on loans and advances
Depreciation
Item considered separately:
Gains less losses on investment securities
Changes in operating assets and liabilities:
Trading securities
Loans and advances
Other assets
Other liabilities
Other non-cash movements
Net cash (outflow) inflow from operating activities
127
112
66
26
97
25
(21)
(7)
(366)
(1,095)
(924)
(46)
853
343
248
141
266
1,481
(386)
(1)
327
(1,141)
288
100
Balance at the end of the year 1998
Net profit for the year –1999
Transfer from retained earnings
901
1,000
-
(74)
-
Revaluation
Share
reserve 2 premium 2
Foreign
exchange
translation
adjustments
Statutory
reserve
General
reserve
Retained
earnings 3
159
11
140
-
10
-
11
-
42
-
71
-
(41)
-
-
-
-
-
-
-
5
-
5
170
140
10
11
42
71
(36)
523
1,857
-
(56)
127
(12)
Total
422 1,740
112
112
(11)
-
Foreign exchange
translation adjustments
(648)
Treasury
stock
Extraordinary
financial
Capital
reserve
reserve 2
(US$ million)
Dividend
Net profit for the year –2000
Transfer from retained earnings
1,000
(74)
-
-
13
-
-
-
(1)
-
-
-
-
-
-
-
-
-
(24)
-
183
140
10
11
41
71
(60)
582
(56)
127
-
Foreign exchange
translation adjustments
1,000
(74)
(24)
1,904
INVESTING ACTIVITIES
Purchase of investment securities
Sale and redemption of investment securities
Purchase of investments
Sale of investments
Acquisition of subsidiary
Purchase of premises and equipment
Sale of premises and equipment
Net cash inflow (outflow) from investing activities
(1,612)
1,697
(4)
26
(53)
38
92
(1,574)
1,163
(33)
34
(47)
(33)
32
(458)
Net cash inflow (outflow) from financing activities
(Decrease) increase in liquid funds
Foreign exchange translation differences
Liquid funds at beginning of the year*
Liquid funds at end of the year*
General Meeting. As such, no liability has been recognised in these consolidated financial statements.
2. These reserves are not distributable.
3. Retained earnings include non-distributable reserves amounting to US$ 77 million relating to subsidiaries
(1999: US$ 49 million).
4. Note 8 contains further details of equity.
FINANCING ACTIVITIES
(Repayment) issue of certificates of deposit - net
Issue of term notes, bonds and other term financing
Repayment of term notes, bonds and other term financing
Dividend paid
1. A dividend of US$ 0.70 per share (1999: US$ 0.60 per share) has been proposed for approval at the Annual Ordinary
(15)
1,225
(795)
(56)
35
297
(460)
-
359
(128)
(197)
19
587
315
(23)
295
409
587
*Liquid funds comprise cash, nostro balances and balances with central banks.
48
49
Notes to the Consolidated Financial Statements
CONTINUED
CONTINUED
31 December 2000
1. Incorporation and Activities
The parent company, Arab Banking Corporation (B.S.C.), [the Bank] incorporated in the State of Bahrain by an Amiri decree,
operates under an offshore banking licence issued by the Bahrain Monetary Agency.
2. Significant Accounting Policies
The consolidated financial statements of Arab Banking Corporation (B.S.C.) and its subsidiaries [the Group] are prepared in
accordance with the Bahrain Commercial Companies Law and the Bahrain Monetary Agency Law and in conformity
with International Accounting Standards and prevailing practices of the banking industry. The following is a summary of the
significant accounting policies:
a) Accounting convention
These consolidated financial statements are prepared under the historical cost convention, as modified by the revaluation of
premises in respect of certain subsidiaries and measurement at market value of derivatives and securities held for trading.
b) Consolidation
These consolidated financial statements include the financial statements of the parent company and its subsidiaries after
adjustment for minority interests and elimination of inter-company transactions and balances. Goodwill arising on consolidation is amortised over the expected period of benefit (5 to 20 years) on a straight-line basis.
31 December 2000
2. Significant Accounting Policies
j) Taxation on foreign operations
continued
There is no tax on corporate income in the State of Bahrain. Taxation on foreign operations is provided for in accordance
with the fiscal regulations applicable in each location. No provision is made for any liability that may arise in the event of
distribution of the reserves of subsidiaries. A substantial portion of such reserves is required to be retained to meet local
regulatory requirements.
k) Employee pension and other end of service benefits
Costs relating to employee pension and other end of service benefits are accrued in accordance with actuarial and other
valuations as required by regulations applicable in each location.
l) Fiduciary assets
Assets held in trust or in a fiduciary capacity are not treated as assets of the Group and accordingly, are not included in these
consolidated financial statements.
m) Off balance sheet financial instruments
Investments in associates owned between 20% and 50% are accounted for by the equity method. Other investments, which are
less than 20% owned, are stated at cost with provision for any decline, other than temporary, in value.
Off balance sheet financial instruments arise from forwards, futures, forward rate agreements, swaps and options transactions
in the foreign exchange, interest rate and capital markets. Off balance sheet instruments used in trading activities and to hedge
other trading positions are marked to market and the resultant gains and losses are taken to the statement of income. Gains
and losses on instruments used to hedge exposures to fluctuations in interest and exchange rates in conjunction with asset and
liability management activity are recognised in a manner that matches the accounting treatment of the assets and liabilities
hedged.
d) Securities
n) Repurchase and resale agreements
c) Investments
Trading securities are stated at market value. Gains and losses on trading and market value adjustments are taken to the statement of income.
Investment securities are acquired for the long term and are stated in the balance sheet at amortised cost with provision for
any decline, other than temporary, in value. Premiums and discounts on acquisition are amortised on a straight-line basis from
date of purchase to maturity.
e) Premises and equipment
Premises and equipment are stated at cost or as revalued to approximate market values in the case of freehold land and
buildings based on valuations by independent firms of professional surveyors. The surplus, net of tax if any, on revaluation is
directly credited to revaluation reserves in equity. Any decrease in revaluation is charged first against any previous surplus,
in respect of that asset held in revaluation reserve, and where such surpluses are insufficient, the shortfall is charged to the
statement of income.
Freehold land is not depreciated. Depreciation on other premises and equipment is provided on a straight-line basis over their
estimated useful lives.
Assets sold with a simultaneous commitment to repurchase at a specified future date (‘repos’) continue to be recognised in the
balance sheet and are measured in accordance with accounting policies for trading securities or investment securities. The
counterparty liability for amounts received under these agreements is included in deposits from banks and other financial
institutions or deposits from customers, as appropriate. The difference between sale and repurchase price is treated as interest
expense and accrued over the life of the repo agreement. Assets purchased with a corresponding commitment to resell at a
specified future date (‘reverse repos’) are not recognised in the balance sheet, as the bank does not obtain control over the
assets. Amounts paid under these agreements are included in placements with banks and other financial institutions or loans
and advances, as appropriate. The difference between purchase and resale price is treated as interest income and accrued over
the life of the reverse repo agreement.
3. Investment Securities
The market value of investment securities at the year-end amounted to US$ 2,951 million (1999: US$ 3,054 million).
4. Loans and Advances
2000
(US$ million)
1999
(US$ million)
2,548
2,079
1,030
1,125
5,802
1,696
379
2,299
2,398
1,058
1,166
4,629
1,941
281
Loan loss provisions
14,659
(620)
13,772
(869)
Balance at 31 December
14,039
12,903
f) Revenue recognition
Interest income and expense are recognised on a time proportion basis taking account of the principal outstanding and
the rate applicable. Fee income and expense are recognised when earned or incurred.
Premiums, discounts and initial issue expenses on dated securities are amortised on a straight-line basis to the date of
maturity.
g) Offsetting
Financial assets and financial liabilities are only offset and the net amount reported in the balance sheet when there is a
legally enforceable right to offset the recognised amounts and the bank intends to either settle on a net basis, or to realise the
asset and settle the liability simultaneously.
Financial
Manufacturing
Construction
Trade
Consumer and other services
Government
Other
h) Loans and advances
Loans and advances are stated net of loan loss provisions. Loan loss provisions comprise both specific and general provisions.
Specific provisions are created where losses are expected to arise on problem loans and advances. Additionally, management
considers it prudent to maintain a general provision which recognises the inherent risks associated with any lending portfolio.
Loans and advances are written off when they are considered to be uncollectible.
Loans and advances are placed on a non-accrual basis when payment of interest or principal is contractually past due by 90
days or earlier when there is reasonable doubt as to ultimate collection. Interest accrued on these loans and advances is not
recognised as income unless received in cash.
i) Foreign currencies
Assets and liabilities in foreign currencies are translated into US dollars at the market rates of exchange prevailing at the
balance sheet date. Foreign exchange translation gains and losses arising from translating the financial statements of
subsidiaries into US dollars are recorded directly in equity.
Forward exchange contracts are valued at market rates applicable to their respective maturities at the balance sheet date and
the resulting gains and losses are taken to the statement of income. Gains and losses arising from the difference between spot
and forward rates on forward exchange contracts, which are entered into in connection with loans and deposits, are
amortised over the periods of the related contracts.
All other translation gains and losses are taken to the statement of income.
50
51
CONTINUED
CONTINUED
31 December 2000
4. Loans and Advances
31 December 2000
7. Term Notes, Bonds and Other Term Financing
In the ordinary course of business, the parent company and certain subsidiaries raise term financing through various
capital markets at commercial rates.
continued
The movements in loan loss provisions during the year were as follows:
1999
Provisions
2000
Provisions
General
Specific
(US$ million)
Total
Interest in
suspense
General
Specific
(US$ million)
Total
Interest in
suspense
117
25
(5)
-
752
109
(63)
(298)
869
134
(68)
(298)
270
(15)
90
(98)
118
16
(9)
-
772
122
(32)
(84)
890
138
(41)
(84)
237
(26)
70
(8)
(3)
(14)
(17)
(5)
(8)
(26)
(34)
(3)
At 31 December
134
486
620
752
869
117
270
The gross carrying value of loans placed on a non-accrual basis amounted to US$ 694 million at the year-end (1999:
US$ 960 million). Specific provisions of US$ 486 million (1999: US$ 752 million) were held against impaired loans,
including those on a non-accrual basis.
Equipment
and other assets
(US$ million)
Total
(US$ million)
Cost or valuation:
At 1 January 2000
Additions
Disposals
Foreign exchange translation and other adjustments
401
19
(14)
(12)
242
34
(17)
(11)
643
53
(31)
(23)
At 31 December 2000
394
248
642
48
5
(2)
(1)
148
21
(9)
(8)
196
26
(11)
(9)
50
152
202
Depreciation:
At 1 January 2000
Provided during the year
Disposals
Foreign exchange translation and other adjustments
At 31 December 2000
Subsidiaries
(US$ million)
Total
(US$ million)
8
330
300
400
-
360
103
100
7
84
368
433
400
400
7
84
1,038
654
1,692
1,038
143
511
143
1,549
1,038
654
1,692
-
2
2
849
440
1,289
2000
(US$ million)
1999
(US$ million)
Authorised – 150 million shares of US$ 10 each
1,500
1,500
Issued, subscribed and fully paid – 100 million shares of US$ 10 each
1,000
1,000
2001
2002
2003
2005
2007
2008
Interest basis:
Fixed
Floating
Obligations subject to investor put options prior to
stated maturities (included above)
5. Premises and Equipment
Land and
buildings
(US$ million)
Parent company
(US$ million)
Aggregate maturities:
At 1 January
Charge for the year
Recoveries
Suspended for the year
Write-offs
Foreign exchange translation
and other adjustments
242
Total obligations outstanding at 31 December 2000
Total obligations outstanding at 31 December 1999
8. Equity
a) Share capital
b) Treasury stock
Treasury stock represents the purchase by the Bank of its own shares. At the end of the year the Bank held 5,867,736 shares
(1999: 5,867,736 shares). The shares are carried at cost adjusted for any gain or loss on subsequent sale.
c) Statutory reserve
Net book value:
At 31 December 2000
344
96
440
At 31 December 1999
353
94
447
As required by the Articles of Association of the Bank and the Bahrain Commercial Companies Law, 10% of the net profit
for the year is transferred to the statutory reserve. Such annual transfers will cease when the reserve totals 50% of the paid
up share capital. The reserve is not available for distribution except in circumstances as stipulated in the Bahrain
Commercial Companies Law and following the approval of the Bahrain Monetary Agency.
d) General reserve
6. Taxation on Foreign Operations
The general reserve underlines the shareholders’ commitment to enhance the strong equity base of the Bank.
2000
(US$ million)
1999
(US$ million)
27
21
22
21
48
43
36
(3)
33
(2)
33
31
Balance sheet:
Current tax liability
Deferred tax liability
Income statement:
Current tax on foreign operations
Deferred tax on foreign operations
In view of the operations of the Group being subject to various tax jurisdictions and regulations, it is not practical to
provide a reconciliation between the accounting and taxable profits together with the details of effective tax rates.
52
e) Extraordinary financial reserve
The extraordinary financial reserve has been established to cover any possible future diminution in the carrying value of
assets and is used at the discretion of the Board of Directors.
f) Capital reserve
The capital reserve arises on the consolidation of subsidiaries acquired at a discount and is not distributable.
g) Revaluation reserve
The revaluation reserve has been created by revaluation of properties in certain subsidiaries and is not distributable.
h) Foreign exchange translation adjustments
The movements in foreign exchange translation adjustments represent the foreign exchange translation gains and losses
arising from translating financial statements of foreign subsidiaries into US dollars.
53
CONTINUED
CONTINUED
31 December 2000
31 December 2000
9. Other Operating Income
13. Commitments, Contingent Liabilities and Other Off Balance Sheet Items
1999
(US$ million)
2000
(US$ million)
Fee and commission income
Fee and commission expense
Gains less losses on trading securities
Gains less losses on investment securities
Gains less losses on dealing in foreign currencies
Credit card income - net
Other - net
191
(19)
7
21
27
20
33
178
(16)
2
7
23
19
43
280
256
2000
(US$ million)
1999
(US$ million)
1,398
178
2,103
4,846
1,639
178
1,454
4,916
8,525
8,187
2,560
2,457
Direct credit substitutes, guarantees and acceptances
Forward asset purchase commitments
Short-term self-liquidating trade and transaction-related contingent items
Other commitments (including undrawn loans)
Risk - weighted equivalents
b) Other off balance sheet items
10. Staff
The number of staff employed by the Group as of 31 December 2000 was 5,270 (1999: 5,209).
11. Investments in Subsidiaries and Associates
The principal subsidiaries, all of which have 31 December as
their year end, are as follows:
Banco Atlantico S.A. Group companies
Banco de Iberoamerica
International Bank of Asia Ltd.
Arab Banking Corporation – Daus & Co.GmbH
ABC Banque Internationale de Monaco S.A.M.
Arab Banking Corporation (ABC) – Jordan
ABC Algeria
Arab Banking Corporation – Egypt [S.A.E.]
ABC Tunisie
ABC Securities [Egypt] S.A.E.
continued
Country of
incorporation
Interest of
Arab Banking
Corporation
(B.S.C.)
(%)
Spain
Panama
Hong Kong
United Kingdom
Germany
Monaco
Bahrain
Jordan
Brazil
Algeria
Egypt
Tunis
Egypt
67
67
55
100
99
99
100
87
79
70
96
100
100
In the ordinary course of business, various types of transactions are entered into involving foreign exchange contracts and
derivative financial instruments. These financial instruments arise from forwards, futures, forward rate agreements, swaps
and options transactions in the foreign exchange, interest rate and capital markets. The notional amounts indicate the
volume of these transactions outstanding at year- end. Significantly smaller amounts are subject to risk as a result of offsetting positions. The credit risk for these instruments is normally the positive market value of the instruments, net of
any legally enforceable right of set-off, which is usually significantly less than the notional amounts. The credit and market
risk pertaining to off balance sheet financial instruments are monitored and controlled in the same way as balance sheet
instruments.
At the balance sheet date, the outstanding notional amounts and the risk weighted equivalents calculated in accordance
with the capital adequacy guidelines established for the global banking industry were as follows:
2000
(US$ million)
1999
(US$ million)
3,576
6,653
1,219
2,848
183
8,117
5,914
1,621
3,739
2,028
71
14,479
21,490
31
67
Foreign exchange contracts
Interest rate and currency swaps
Interest rate futures
Options
Forward rate agreements
Equity contracts
Risk - weighted equivalents
The principal associate is Arab Financial Services (E.C.), incorporated in Bahrain, with 36% ownership.
14. Maturities of Assets and Liabilities
The maturity analysis of assets and liabilities based on remaining period to the contractual maturity date is as follows:
12. Significant Net Foreign Currency Exposures
At 31 December 2000
Significant net foreign currency exposures, arising mainly from investments in subsidiaries, are as follows:
1999
(US$ million)
2000
(US$ million)
Long
Brazilian real
Egyptian pound
Euro
Hong Kong dollar *
Jordanian dinar
Pound sterling
Saudi riyal
47
131
76
239
40
48
-
Short
(111)
Long
Short
22
103
220
50
27
-
(12)
(131)
*This foreign currency exposure is covered by currency options to minimise the risk of loss from adverse movements in the
foreign currency rates.
13. Commitments, Contingent Liabilities and Other Off Balance Sheet Items
a) Commitments and contingent liabilities
Commitments and contingent liabilities include commitments to extend credit, standby letters of credit, acceptances and
guarantees, which are structured to meet the various requirements of customers. At the balance sheet date, the principal
outstanding and the risk - weighted equivalents calculated in accordance with the capital adequacy guidelines established
for the global banking industry were as follows:
1–3
months
3–6
6 – 12
months
months
(US$ million)
1–5
years
Over
5 years
Undated
Total
Assets
Liquid funds
Trading securities
Placements with banks and
other financial institutions
Loans and advances
Other
409
340
217
23
73
55
101
45
54
152
976
1,481
98
59
409
713
2,961
5,457
1,216
-
1,052
1,787
-
359
1,569
-
138
1,595
-
50
3,946
-
4
3,918
-
8
1,494
7,060
14,039
1,494
Total assets
7,639
2,935
2,084
1,832
5,124
5,403
1,659
26,676
7,733
2,043
585
441
571
78
-
11,451
6,311
40
2,618
107
593
54
402
39
57
9
77
-
-
10,058
249
80
-
21
-
77
-
106
-
1,323
-
85
-
1,322
1,904
1,692
1,322
1,904
14,164
4,789
1,309
988
1,960
240
3,226
26,676
Liabilities, minority interests and equity
Deposits from banks and
Term notes, bonds and other
term financing
Minority interests and other
Equity
Total liabilities, minority
interests and equity
54
Within
one
month
55
CONTINUED
CONTINUED
31 December 2000
31 December 2000
14. Maturities of Assets and Liabilities
15. Interest Rate Exposure
continued
continued
Within
one
month
The maturity analysis of assets and liabilities based on remaining period to the contractual maturity date is as follows:
At 31 December 1999
Within
one
month
1–3
months
3–6
months
6 – 12
months
(US$ million)
1–5
years
Over
5 years
Undated
Total
Assets
Liquid funds
Trading securities
Loans and advances
Other
587
96
510
5
61
9
135
28
156
106
1,021
35
1,205
84
40
587
363
3,128
3,914
1,600
-
1,129
1,386
-
658
1,562
-
156
1,369
-
30
3,515
-
4
3,471
-
1,486
5,891
12,903
1,486
Total assets
6,707
2,581
2,364
1,709
4,672
4,715
1,610
24,358
Total liabilities, minority interests
and equity
7,201
1,593
665
294
482
10
-
10,245
6,071
91
2,153
128
1,047
31
304
20
46
-
22
-
-
9,643
270
-
-
313
-
61
-
908
-
7
-
1,054
1,857
1,289
1,054
1,857
13,363
3,874
2,056
679
1,436
39
2,911
24,358
Assets
Liabilities and minority interests
Off balance sheet items
Assets
Liabilities, minority interests
and equity
At 31 December 1999
Assets
6,712
(6,486)
1,138
2,073
(2,656)
(619)
1,842
(945)
(62)
216
(636)
(432)
487
(71)
7
674
(31)
14
470
(647)
(1,904)
-
12,474
(11,472)
(1,904)
46
1,364
(1,202)
835
(852)
423
657
(2,081)
(856)
3,716
(4,167)
459
1,772
(778)
(96)
841
(320)
(57)
972
(228)
145
159
(522)
(61)
138
(86)
18
378
(1,622)
-
7,976
(7,723)
408
898
464
889
(424)
70
(1,244)
6 – 12
months
(US$ million)
1–5
years
Over
5 years
Noninterest
bearing
Total
Assets
Assets
8
661
Assets
1,956
(1,787)
169
56
183
(451)
-
39
(63)
-
67
(35)
-
347
(6)
-
102
-
234
(40)
-
(268)
(24)
32
341
102
194
Total
529
(201)
19
173
(158)
6
265
(31)
(46)
22
(80)
10
277
(352)
(74)
3,298
(3,195)
(454)
123
347
21
188
(48)
(149)
(351)
13,641
4,803
3,251
1,428
1,258
(14,189)
1,256
(4,509)
(743)
(1,529)
(100)
(1,057)
(281)
708
(449)
Within
one
month
1–3
months
6,756
(6,742)
(621)
1,946
(2,405)
408
(607)
(51)
1,442
(3,452)
174
1,622
3–6
months
90
6 – 12
months
(US$ million)
936
1,359
26,676
(630)
(100)
(197)
42
(4,565)
(74)
(26,676)
-
528
781
(3,280)
1–5
years
Over
5 years
Noninterest
bearing
1,976
(696)
105
470
(246)
(102)
391
(11)
33
971
(18)
14
292
(239)
(1,857)
-
1,385
122
413
967
(1,804)
1,710
(616)
(50)
1,121
(895)
4
975
(51)
3
219
(331)
148
241
19
419
(1,054)
-
(1,836)
1,044
230
927
36
260
(635)
1,676
(1,390)
-
115
(408)
-
130
(115)
-
70
(28)
-
141
(1)
-
-
383
(302)
-
(293)
15
42
140
-
-
Total
314
(608)
(85)
755
(541)
(38)
12,802
(10,357)
(1,857)
(163)
425
6,127
(6,399)
298
26
81
2,515
(2,244)
271
Other currencies
Assets
(189)
(379)
176
958
(1,590)
443
(172)
4
60
(222)
141
(260)
(53)
217
(151)
(62)
67
(14)
7
462
(337)
(347)
2,914
(3,501)
(135)
(722)
Gross
Assets
Liabilities, minority interests
and equity
10,832
4,085
3,982
(13,174)
(4)
(4,037)
273
(2,247)
71
(585)
(152)
(494)
119
1,806
919
593
(2,346)
Hong Kong dollars
Noninterest
bearing
775
(624)
(28)
286
Euro
Over
5 years
Hong Kong dollars
US dollars
Assets
Equity
1–5
years
US dollars
Assets
Equity
At 31 December 2000
3–6
months
6 – 12
months
(US$ million)
Gross
Euros
1–3
months
1,257
(1,749)
(341)
(833)
Interest rate exposure is the sensitivity of earnings to changes in interest rates. Such exposures arise in the ordinary course
of business and are managed on a decentralised basis employing the use of off balance sheet interest rate products where
appropriate. The respective Asset and Liability Committees of the Bank and its subsidiaries establish the maximum levels
of interest rate mismatch that are permitted, and regularly monitor the exposures.
The repricing profile of assets, liabilities and off balance sheet financial instruments used to hedge exposures to interest
rate risk based on the earlier of contractual maturity and the next interest repricing date is as follows:
Within
one
month
3–6
months
Other currencies
Liabilities, minority interests and equity
Deposits from banks and
Term notes, bonds and other
term financing
Minority interests and other
Equity
1–3
months
321
1,656
968
1,279
(32)
40
1,287
1,556
24,358
(3,789)
(347)
(24,358)
-
(2,580)
-
2,928
(2,382)
546
57
CONTINUED
CONTINUED
31 December 2000
31 December 2000
18. Segmental Information
continued
The effective interest rates of assets, liabilities and off balance sheet instruments in major currencies are as follows:
At 31 December 2000
Within
one month
%
1– 3
months
%
3– 6
months
%
6 –12
months
%
1– 5
years
%
Over
5 years
%
7.4
6.8
6.3
7.7
7.1
6.7
7.8
7.7
12.0
7.2
6.7
6.9
6.2
3.9
5.3
6.3
6.3
5.9
5.5
4.0
4.3
5.9
5.0
4.2
4.1
4.7
3.7
6.4
4.7
5.1
5.4
2.4
2.4
4.4
5.2
7.1
9.7
5.9
-
7.6
6.1
-
11.1
6.2
-
10.5
6.4
-
7.7
6.9
-
6.4
-
Within
one month
%
1– 3
months
%
3–6
months
%
6 – 12
months
%
1– 5
years
%
Over
5 years
%
6.8
5.7
6.0
6.9
6.1
7.3
7.1
6.5
8.9
8.5
9.6
4.2
8.1
5.4
7.4
6.7
8.4
5.9
4.6
2.7
2.7
4.2
3.2
2.9
3.3
1.4
3.6
4.9
2.6
4.0
5.6
2.4
5.7
5.2
7.0
9.5
5.9
-
8.2
6.3
-
7.6
6.6
-
9.0
6.8
-
9.3
6.9
-
-
US dollars
Assets
Liabilities
Euros
Assets
Liabilities
Hong Kong dollars
Assets
Liabilities
At 31 December 1999
For management purposes, the group is organised into two major business segments, namely, wholesale and retail. These
segments are the basis on which the group reports its primary segment information. Secondary segment information
is based upon the location of the units responsible for recording the transaction. Transactions between segments are
conducted at estimated market rates on an arm’s length basis.
Primary segment information (US$ million)
Wholesale
Net interest income
Operating expenses
Loan loss provisions
Profit before taxation and
minority interests
Total assets employed
2000
Retail
Wholesale
Total
1999
Retail
Total
120
86
(126)
(16)
313
194
(325)
(50)
433
280
(451)
(66)
139
72
(120)
(18)
295
184
(309)
(79)
434
256
(429)
(97)
64
132
196
73
91
164
13,313
13,572
26,885
12,075
12,406
24,481
Intra-group items
(123)
(209)
24,358
26,676
US dollars
Assets
Liabilities
Segment liabilities, minority interests
and equity
12,756
Intra-group items
Euros
Assets
Liabilities
Assets
Liabilities
16. Credit Exposure
Credit risk is the risk that a customer or counterparty will fail to meet a commitment, resulting in financial loss to the
Group. Such risk arises from lending, trade finance, treasury and other activities undertaken by the Group. Credit risk is
actively monitored in accordance with the credit policies which clearly define delegated lending authorities, policies and
procedures. The management of credit risk also involves the monitoring of risk concentrations by industrial sector as well
as by geographic location.
17. Geographical Distribution of Assets, Liabilities and Off Balance Sheet Items
1999
2000
Liabilities
Assets and equity
(US$ million)
Off
balance
sheet
items
Liabilities
Assets and equity
(US$ million)
Off
balance
sheet
items
10,304
4,671
4,855
4,060
2,293
493
8,897
10,392
3,617
1,045
2,152
573
13,089
4,243
1,632
2,909
983
148
10,093
4,059
3,590
3,916
2,031
669
8,529
9,077
2,916
1,214
1,968
654
14,391
6,903
1,127
6,151
969
136
26,676
26,676
23,004
24,358
24,358
29,677
12,801
26,763
11,661
24,462
(104)
(87)
24,358
26,676
Secondary segment information (US$ million)
Hong Kong dollars
Western Europe
Arab World
Asia
North America
Latin America
Other
14,007
Asia
Total
Arab
world
43
42
111
196
62
-
102
164
8,799
3,985
13,892
26,676
7,467
3,408
13,483
24,358
Segment profit before taxation
and minority interests
Segment assets
1999
Europe &
Asia Americas
2000
Europe &
Americas
Arab
world
Total
19. Repurchase and Resale Agreements
Proceeds from assets sold under repurchase agreements at the year-end amounted to US$ 2,865 million (1999: US$ 3,092
million) of which US$ 1,154 million (1999: US$ 1,463 million) relates to customer product and treasury activities in a major
retail banking subsidiary.
Amounts paid for assets purchased under resale agreements at the year-end amounted to US$ 1,008 million (1999:
US$ 911 million) and relate to customer product and treasury activities in retail banking subsidiaries.
20. Transactions with Related Parties
In the ordinary course of business there are transactions with shareholders, associates and other related parties. Transactions with related parties are made on the same commercial terms as those applicable to comparable transactions with
unrelated parties and do not involve more than a normal amount of risk. All the loans and advances to related parties are
performing advances and are free of any provision for possible loan losses. The year-end balances in respect of related
parties included in the consolidated financial statements are as follows:
2000
(US$ million)
Loans and advances
Term notes, bonds and other term financing
Irrevocable commitments and contingencies
1999
(US$ million)
685
230
19
462
230
17
The income and expenses in respect of related parties included in the consolidated financial statements are as follows:
Interest income
Interest expense
58
34
7
59
CONTINUED
CONTINUED
31 December 2000
31 December 2000
21. Fiduciary Assets
Funds under management at the year- end amounted to US$ 2,434 million (1999: US$ 2,936 million). These assets are held
in a fiduciary capacity and are not included in these consolidated financial statements.
25. Capital Adequacy
22. Fair Value of Financial Instruments
Capital Base
‘Fair value’ is the amount at which an asset could be exchanged or a liability settled in a transaction between knowledgeable, willing parties in an arm’s length transaction.Underlying the definition of fair value is the presumption that
the Group is a going concern without any intention or requirement to curtail materially the scale of its operation or to
undertake a transaction on adverse terms. The values at which the financial instruments are stated in these consolidated
financial statements (‘book values’) are based principally on historical cost and could therefore differ from fair values.
Fair values are estimated based on generally accepted methods which include quoted market prices or, where appropriate,
quoted market prices of similar financial instruments with appropriate adjustments and the use of discounted cash flow
analysis. Market prices have been used wherever possible. However, in certain cases, including loans and advances, no ready
markets exist wherein exchanges between willing parties can take place. In these cases, estimates which involve subjective
assessments, and which are regarded as reasonable, have been made.
1999
2000
Book
Fair
value
value
(US$ million)
Excess
(shortfall)
of fair
value over
book value
Book
Fair
value
value
(US$ million)
Excess
(shortfall)
of fair
value over
book value
FINANCIAL ASSETS
Liquid funds
Trading securities
Loans and advances
Investments
Other
409
713
2,961
409
713
2,951
(10)
587
363
3,128
587
363
3,054
(74)
7,060
14,039
110
1,384
7,058
13,918
110
1,384
(2)
(121)
-
5,891
12,903
137
902
5,891
12,731
137
902
(172)
-
21,509
249
1,692
905
21,500
249
1,692
905
19,888
270
1,289
1,054
19,871
270
1,289
1,054
FINANCIAL LIABILITIES
Deposits
Term notes, bonds and other term financing
Other
9
-
17
(229)
(124)
It is expected that the book value of loans and advances and investment securities, both of which are held for the long term
or to maturity, will be recovered as adequate provisions have been made for any anticipated shortfalls in recovery.
23. Assets Pledged as Security
At the balance sheet date, assets amounting to US$ 125 million (1999: US$ 68 million) have been pledged as security for
borrowings and other banking operations.
24. Earnings per Share
‘Basic’ earnings per share are calculated by dividing the net profit for the year by the number of shares outstanding at the
end of the year. No figures for diluted earnings per share have been presented, as the bank has not issued any capital based
instruments which would have any impact on earnings per share, when exercised.
Net profit for the year (US$ million)
Number of shares outstanding as of 31 December
Basic earnings per share (US$)
60
2000
1999
127
94,132,264
1.35
112
94,132,264
1.19
The risk asset ratio calculations, in accordance with the capital adequacy guidelines established for the global banking
industry, are as follows:
2000
(US$ million)
Tier 1 Capital
Tier 2 Capital
Total capital base
(A)
Risk -Weighted Exposures
Balance
2000
(US$ million)
1999
(US$ million)
1999
(US$ million)
2,065
302
2,040
270
2,367
2,310
Risk-weighted equivalents
2000
1999
(US$ million)
(US$ million)
Assets
Cash and claims on, guaranteed by or
collateralised by securities of central
governments and central banks of
OECD countries
4,870
5,034
-
-
Claims on banks and public sector
companies incorporated in OECD
countries and short - term claims on
banks incorporated in non -OECD
countries
8,394
6,871
1,679
1,374
Claims secured by mortgage of
residential property
2,099
2,164
1,050
1,082
11,145
9,978
11,145
9,978
8,525
8,187
2,560
2,457
14,479
21,490
31
67
16,465
1,061
14,958
809
(B)
17,526
15,767
(A/B)
13.5%
14.7%
Claims on public sector entities, central
governments, central banks and longerterm claims on banks incorporated in
non -OECD countries and all other assets,
including claims on private sector entities
Commitments and contingent liabilities
Foreign exchange and interest rate
related contracts
Credit risk - weighted assets and off balance sheet items
Market risk - weighted assets and off balance sheet items *
Total risk - weighted assets
Risk asset ratio
* Market risk capital requirements are based on the standardised measurement methodology.
61
ABC Directory
CONTINUED
31 December 2000
26. Parent Company
The balance sheet of the parent company, Arab Banking Corporation (B.S.C.), is presented below:
2000
(US$ million)
1999
(US$ million)
30
305
2,135
3,154
4,659
158
1,397
26
13
93
39
29
143
1,858
2,471
4,294
98
1,340
33
17
115
38
12,009
10,436
ASSETS
Liquid funds
Trading securities
Loans and advances
Interest receivable
Investments in subsidiaries
Investments in associates
Other investments
Other assets
TOTAL ASSETS
Interest payable
Other liabilities
1,726
7,092
137
112
990
6,523
30
106
81
TERM, NOTES, BONDS AND OTHER TERM FINANCING
1,038
849
10,105
8,579
EQUITY
TOTAL LIABILITIES AND EQUITY
1,000
(74)
978
1,000
(74)
931
1,904
1,857
12,009
10,436
Included in the above assets and liabilities are balances due from and due to subsidiaries and associates as follows:
Loans and advances
Treasury Group
Representative Offices
ABC Tower, Diplomatic Area,
PO Box 5698, Manama, Bahrain
Tel: (973) 543000 (General),
(973) 533144/533155
(Foreign Exchange),
Fax: (973) 533163/533062
Tlx: 9432 ABCBAH BN (General),
9384 ABC DEP
(Foreign Exchange & Deposits),
Direct Dealing Reuters Code:
ABCB, ABDB
Reuters Monitor: ABCU- ABCZ
Internet:
http://www.arabbanking.com
Group Treasurer
Essam El Wakil, Senior Vice President
Tel: (973) 543375 / 532933
Abu Dhabi
The Falcon Tower,
Al Nasr Street, Office No. 602
PO Box 6689, Abu Dhabi, UAE
Tel: (971)(2) 6344944
Fax: (971)(2) 6328002
E-mail: abcrep@emirates.net.ae
Ahmed Ebrahim Al Moataz,
Chief Representative
Ghazi Abdul-Jawad
Internal Audit
Prasad Abraham, Senior Vice President
Tel: (973) 543387
Administration Group
LIABILITIES
Share capital
Treasury stock
Reserves and retained earnings
Head Office
495
291
355
634
30
233
27. Authorisation of the Consolidated Financial Statements
These consolidated financial statements were authorised for issue by the Board of Directors on 27 February 2001 and signed
on their behalf by the Chairman and President & Chief Executive.
Corporate Communications
Dr. Sami Dannish, First Vice President
Tel: (973) 543204
Sael Al Waary, Senior Vice President
Tel: (973) 543707
Human Resources & Administration
Edward Watson, Senior Vice President
Tel: (973) 543347
Legal & Compliance
Mounir Ben Slimane, Legal Counsel
Tel: (973) 543371
Operations
Alex Richardson, Senior Vice President
Tel: (973) 543714
Planning & Financial Control
Asaf Mohyuddin, Senior Vice President
Tel: (973) 543274
Premises & Engineering
Nawaf Beyhum, First Vice President
Tel: (973) 543307
Credit Group
Chief Credit & Risk Officer
Richard Cumberland, Senior Vice
President
Tel: (973) 543280
Risk Management
Peter G James, First Vice President
Tel: (973) 543328
Credit Risk Control & Policy
Abhijit Choudhury, First Vice President
Tel: (973) 543288
Remedial Loans
Stephen Jenkins, Vice President
Tel: (973) 543713
62
FX, Precious Metals, Commodities
& Sales
Karim Dashti, First Vice President
& Assistant Treasurer
Tel: (973) 533144 / 533155
Options, New Products &
Treasury Support
Amr Gadallah, First Vice President
Tel: (973) 533155
Fixed Income, Equities
& Investment Management
Mohammed Tariq, First Vice President
Tel: (973) 543441 / 535760
Banking Group
Taher D Makkiyah, Executive Vice
President & Chief Banking Officer
Tel: (973) 543232
ARAB WORLD DIVISION
Division Head
George Karam, Senior Vice President
Tel: (973) 533056
Fax: (973) 533832
Global Marketing Unit
Yousif Al Dhaen,
First Vice President & Head
Tel: (973) 543203
Corporate Banking
Govt & Financial Institutions
Sheikh Rashid Al Khalifa,
First Vice President
Tel: (973) 543314
Gulf & Levant
Mohamed El Calamawy,
First Vice President
Tel: (973) 543260
Saudi Arabia
Faisal Hammadi,Vice President
Tel: (973) 543268
Syndications
Jonathan Ward, First Vice President
Tel: (973) 543331
Project Finance
Mark Yassin, First Vice President
Tel: (973) 543292
Branches
Tunis (OBU)
ABC Building,Les Berges du Lac,
2045 Tunis, Tunisia
Tel: (216)(1) 861861;
(216)(1) 861110 (Treasury)
Fax: (216)(1) 860921
Tlx: 12505 ABCTU TN
E-mail: abc.tunis@arabbanking.com
Direct Dealing Reuters Code: ABCT
Swift: ABCOTNTT
Ezzedine Saidane, General Manager
Casablanca
201 Boulevard Mohamed Zerktouni,
Casablanca 20100, Morocco
Tel: (212)(22) 393260/393270
Fax: (212)(22) 393274
E-mail: abc@connectcom.net.ma
Milad Larady, First Vice President
& Chief Representative
Tehran
No. 114, 1st Floor (opposite 35th St.)
Khaled Eslamboli Avenue
Tehran 15167,
Islamic Republic of Iran
Tel: (98)(21) 8798452/3
Fax: (98)(21) 8774561
Tlx: 216860 ABC IR
E-mail: arabbanking.teh@vessal.net
Mohammad Nasser Yousefi,
Chief Representative
Tripoli
That Emad Administrative Centre
Tower 5, 16th Floor
PO Box 3578, Tripoli, Libya
Tel: (218)(21) 3350226/
3350227/3350228
Fax: (218)(21) 3350229
E-mail: abc_rep_ly@lttnet.net
Mansour Abouen, Chief Representative
Subsidiaries
ABC Tower, Diplomatic Area
Tel: (973) 543000
Fax: (973) 536379/533163
Tlx: 9432/9433 ABC BAH BN
Saleh M. Al-Yousef, Chairman
Mohamed A BuQais, First Vice
President & Deputy General Manager
ABC Securities W.L.L.
Office No 204, Building No 49,
Al Hidaya Building No 2,
Government Road,
Manama 305, Bahrain
Tel: (973) 226087/226848
Fax: (973) 241179
Tlx: 9436/9437 ABCBAH BN
Abdul Hameed H Naqi,
General Manager
(22 Branches)
PO Box 926691, Amman 11190,
Jordan
Tel: (962)(6) 5664183-5/5621801-7
(General)
Tel: (962)(6) 5692713/5692723
(Dealing Room)
Tel: (962)(6) 5695084
(Foreign Department)
Tel: (962)(6) 5623684
(Main Branch)
Fax: (962)(6) 5686291
Tlx: 22258/21114 ABC JO; 23022
ABCFX JO
E-mail: info@arabbanking.com.jo
Mohammad Abdullah Al-Mannai,
Chairman
Dr Ziad Fariz, Chief Executive Officer
PO Box 367
54 Avenue des Trois Freres
Bouaddou, Bir Mourad Rais
Algiers, Algeria
Tel: (213)(21)
541537/541534/541600
Fax: (213)(21) 541604/541222
Tlx: 62509 / 62510 ABC DZ
E-mail: abcbank@wissal.dz
Mustapha Achour, General Manager
Arab Banking Corporation – Egypt
(S.A.E.)
5 Midan Al Saray Al Koubra
Garden City
Cairo, Egypt
Tel: (202) 7951513 / 7956236
Fax: (202) 7956239
Email: abcegypt@arabbanking.com.eg
Omar el-Adb,
Managing Director and Chief Executive
Hani Seif El Nasr,
Chief Executive Officer
Tarek Helmy, FVP,
Corporate Group Head
Hassan Serag, FVP,
Head of Retail Banking
Gamal Negm, FVP, Head of Credit
Hana El Helaly, AVP,
Head of Marketing & Corporate
Communications
Affiliate
Arab Financial Services Company
(E.C.)
Tel: (973) 290333
Fax: (973) 291323/290050
Tlx: 7212 AFS BN
Mahmood Al Koofi, General Manager
Fax: (973) 291122
ABC Tunisie
ABC Building
Les Berges du Lac,
2045 Tunis, Tunisia
Tel: (216)(1) 861861;
(216)(1) 861110 (Treasury)
Fax: (216)(1) 860921
Tlx: 12505 ABCTU TN
E-mail: abc.tunis@arabbanking.com
Direct Dealing Reuters Code: ABCT
Swift: ABCOTNTT
Ezzedine Saidane, General Manager
63
ABC Directory
CONTINUED
Investment Group
INTERNATIONAL DIVISION
Division Head
George Morton, Senior Vice President
Tel: (973) 543319
Fax: (973) 535639
Branches
Grand Cayman
c/o ABC New York Branch
32nd Floor, 277 Park Avenue
New York, NY 10172-3299,USA
Tel: (1)(212) 5834720
Fax: (1)(212) 5830921
Tlx: 661978/427531 ABCNY
Geoffrey Milton, First Vice President
& General Manager
Milan
Via Santa Maria Fulcorina 6
20123 Milan, Italy
Tel: (39)(02) 863331 (General);
(39)(02) 861574 (Dealing Room)
Fax: (39)(02) 86450117
Tlx: 322240 ABC Mil (General);
322080 ABC FX I
(Dealing Room)
Direct Dealing Reuters Code: ABCX
SWIFT: ABCOITMM
Marco Simonelli, General Manager
Sami Bengharsa,
Deputy General Manager
Angelo Fossati,
Business Development Manager
Maurizio Testori, Operations Manager
Luca Gajani, Head of Credit
Guido Bacci, Chief Dealer
New York
32nd Floor, 277 Park Avenue
New York, NY 10172-3299, USA
Tel: (1)(212) 5834720
Fax: (1)(212) 5830921
Tlx: 661978/427531 ABCNY
(General); 421911/661979 ABCFX
(Dealing Room)
Direct Dealing Reuters Code: ABCN
Geoffrey Milton, First Vice President
& General Manager
Tel: (1)(212) 5834863
Robert Fitzsimons, Assistant General
Manager & Treasurer
Tel: (1)(212) 5834779
Derek Hudson, Assistant General
Manager, Latin America Group
Tel: (1)(212) 5834876
Thomas J. Cahalane, Assistant General
Manager, Operations
Tel: (1)(212) 5834747
Barbara Sanderson,
Vice President/Senior Credit Officer,
Credit Department
Tel: (1)(212) 5834752
Grant McDonald, Vice President/Senior
Lending Officer, Corporate Banking
Tel: (1)(212) 5834759
Louise Bilbro, Assistant General
Manager, NY Corporate Group
Tel: (1)(212) 5834758
Glenn Corrales, Vice President/Lending
Officer, Latin America
Tel: (1)(212) 5834873
Kenneth J Carroll, Assistant General
Manager and Controller
Tel: (1)(212) 5834761
Charles Azzara, Vice President,
Corporate Lending
Tel: (1)(212) 5834753
64
Singapore
Arab Banking Corporation (B.S.C.)
9 Raffles Place #35-01 Republic Plaza
Singapore 048619
Tel: (65) 5359339 General
(65) 533 0629 Dealers
Telex & Answerback:RS 28989
ABCSNG General
RS 28991 ABCSNG Dealers
Fax: (65) 532 6288 / 532 3998
General
Cable: ABCBANK
SWIFT: ABCOSGSG
Reuters Dealing Code: ABCS
John P. Meads, General Manager:
George Yee, VP & Deputy Branch
Manager
Tan Boon Cheng, Head, Operations
and Financial Control
Cecilia Lai, Corporate Finance Manager
Foo Mui Lian, Branch Credit Officer
Rose Lim, Acting Head, Trade Finance
Support
Vivien Ng, Gregory Lim,
Dealers (Treasury)
Representative Offices
Houston
600 Travis Street, Suite 1900
Houston, Texas 77002, USA
Tel: (1)(713) 2278444
Fax: (1)(713) 2276507
Wahid O. Bugaighis, First Vice
President & Chief Representative
Los Angeles
555 South Flower Street, 46th Floor
Los Angeles, CA 90071, USA
Tel: (1)(213) 6890121
Fax: (1)(213) 6891048
Richard Whelan, Chief Representative
Subsidiaries
ABC Finanziaria S.p.A.
Via Santa Maria Fulcorina 6
20123 Milan, Italy
Tel: (39)(02) 863331
Fax: (39)(02) 86450117
Marco Simonelli, General Manager
Tel: (39)(02) 86333229
Fax: (39)(02) 86333285
Walter Trovo, Director
Tel: (39)(02) 86333214
Fax: (39)(02) 86333285
ABC (IT) Services Ltd.
Arab Banking Corporation House
1-5 Moorgate,
London EC2R 6AB, UK
Tel: (44)(20) 77764050
Fax: (44)(20) 76062708
Tlx: 915687 ABC G
E-mail: abcits@arabbanking.com
Sael Al Waary, Director
Arab Banking Corporation Daus & Co GmbH
Niedenau 13-19,
D-60325 Frankfurt am Main,
PO Box 170218,
60076 Frankfurt am Main, Germany
Tel: (49)(69) 714030
Fax: (49)(69) 71403240 (General);
(49)(69) 71403299 (Corporate
and Financial Institutions);
(49)(69) 71403350 (Treasury)
Tlx: 414811 DAUS D
Direct Dealing Reuters Code: ABDF
(FX + MM)
Swift: ABCADEFF
E-mail: daus.abc@arabbanking.com
Ghazi M. Abdul-Jawad,
Chairman of the Supervisory Board
Jens-Ove Stier, General Manager
Juergen Blumschein, General Manager
(Head Office)
1-5 Moorgate, London
EC2R 6AB, UK
Tel: (44)(20) 77764000 (General)
Fax: (44)(20) 76069987
Tlx: 893748 ABC GEN G
Sheikh Khalid Ali Alturki, Chairman
Stanislas M. Yassukovich,
Deputy Chairman & Executive Director
Abdulmagid A. Breish,
Investment Coordinator
Omar el-Abd, Senior Vice President
Tel: (973) 530776
Avenida Paulista 37, 14th/15th Floors
CEP 01311-902, São Paulo, SP. Brazil
Tel: (55)(11) 31702000
Fax: (55)(11) 31702001
Tito Enrique da Silva Neto, President
Banco Atlantico S.A.
(274 Branches)
Gran Via 48, 28013 Madrid, Spain
Tel: (34)(91) 5389000
Fax: (34)(91) 5415474
Tlx: 22009/22109 ATLCO E
Abdulmohsen Yousef Al-Hunaif,
Chairman
Tel: (34)(91) 5389018
Fax: (34)(91) 5423469
Manuel Montecelos,
Tel: (34)(91) 5389042
Fax: (34)(91) 5413625
E-mail: manuelmontecelos@
batlantico.es
ABC International Bank plc,
London (Branch)
1-5 Moorgate,
London EC2R 6AB, UK
Tel: (44)(20) 77764000 (General);
(44)(20) 77264091 (Dealing Room)
Fax: (44)(20) 76069987
Tlx: 893748 ABC GEN G (General);
892171 ABC FXL G
(Dealing Room)
Direct Dealing Reuters Code: ABCL
Michael Duval, General Manager
International Bank of Asia Ltd.
(27 Domestic Branches)
International Bank of Asia Bldg.
38 Des Voeux Road,
Central, Hong Kong
Tel: (852) 28426222
Fax: (852) 28101483
Tlx: 63394 IBA HX
Direct Dealing Reuters Code: IBAX
E-mail: corpcomm@iba.com.hk
Sheikh Ali Jarrah Al-Sabah, Chairman
Mike Murad, Vice Chairman,
Managing Director &
Michael Ipson, Executive Vice President,
Corporate and Investment Banking Group
Bashar Samra, Executive Vice President,
Consumer Banking Group
David Chan, Executive Vice President,
Financial Control & Support Group
ABC International Bank plc,
Paris (Branch)
49/51 Avenue George V
75008 Paris, France
Tel: (33)(1) 49525400
Fax: (33)(1) 47207469
Tlx: 648343 ABC F (General);
648483 ABCORP F (Dealing Room)
Direct Dealing Reuters Code: ABCP
Jean-Marie Zambelli, General Manager
ABC Securities (Egypt) S.A.E
1191 Corniche El Nile Street,
World Trade Center
Offices Building, 6th Floor,
PO Box 781, Ataba 11511,
Cairo, Egypt
Tel: (20)(2) 5745488/5745366
Fax: (20)(2) 5780416/5780417
Omar el-Abd, Managing Director &
Chief Executive

2000 - Bank ABC

Transcription

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