Faysal Islamic Bank of Bahrain E.C. Financial & Business Analysis For the Year to 31 December 1999 "A year of consolidation with deposit levels maintained and reduced income offset by lower provisions"

Ownership and Legal Status

Faysal Islamic Bank of Bahrain E.C. (FIBB) was incorporated in Bahrain as an exempt company on 14 July 1982, having obtained an offshore banking license from the Bahrain Monetary Agency (BMA). A commercial banking license was obtained from the BMA in 1993. The Bank's shares are listed on the Bahrain Stock exchange, while the shares of Faysal Bank Limited, a subsidiary, are listed on stock exchanges in Pakistan. The Bank has fully paid capital of US$100 million, held at 31 December 1998 53% by Dar Al-Maal Al-slami Trust, a pan-Islamic organisation with over 25 financial and business companies represented in 15 companies of the world. Other investors own the remaining 47% of the Company.

The Year in Brief

Total Assets decreased by 6.8% to US$1092 million at 31 December 1999 (1998: US$1173 illion), while Net Income for the year was marginally higher by 1.9% to US$4.062 million (1998: US$3.985 million). Total deposits (including restricted investment accounts) fell by 0.7% to US$1,527 million (1998: US$1,538 million).

Total Revenues were sharply lower by 43% ay US$26.1 million (1998: US$46.6 million). Net Income from investments and Islamic financing decreased by 37% to US$12.8 million (1998: US$20.2 million), while other revenues decreased by 56% to US$7.4 million (1998: US$16.9 million).

On the expense side, administrative and general expenses were 32% lower at US$18.7 million (1998: US$27.3 million), with total expenses 28.3% lower at US$20.95 million (1998: US$29.23 million). Provisions were 62% lower than the previous year at US$8.53 million (1998: US$22.3 million). As a percentage of operating income, expenses were 80% (1998: 62%). No dividend or Directors' remuneration was recommended for the year.

Business Highlights

• 1999 was a year of consolidation for FIBB. During the year, the Bank focussed on improving the quality of assets and better diversification of risk. Despite the unfavourable and competitive environment, total deposits were maintained at US$1.5 billion. A cost control exercise during the year helped to reduce expenses by 28.3%. It was decided to retain the years net profit of US$4 million in the Group to strengthen the capital base.
  
  
• In Pakistan, the Bank's 60% subsidiary Faysal Bank Limited continued to consolidate its position while building adequate contingency provisions and reducing operating losses. It is anticipated by management that this Bank will report positive results in 2000.
  
  
• During the year, the two commercial branches in Bahrain maintained their growth and contributed significantly to the Bank's earnings and deposits. A third branch is projected to begin operations in Bahrain in 2000. By inaugurating this third branch, located at the second important business center in Bahrain, the network of commercial operations in Bahrain should contribute significantly to the Country's industrial and commercial sectors as well as to its financial market.
  
  
• In line with global trends, and to strengthen the Bank's capital base as well as its competitive edge in the market, it is proposed to merge the Bank with the Islamic Investment Company of the Gulf (Bahrain) E.C., a subsidiary of Dar Al-Maal Al-Islami, subject to the approval of shareholders and regulatory authorities. The aim is for the Bank to maintain a leading role in the Islamic sector.