Annual Report 2012 - Al Baraka Investment and Development

president & chief executiVe’s report
(continued)
BAnqUe Al BARAKA d’AlgeRie s.p.A.
Founded 1991
Partly on account of reduced trade with the eurozone, Algeria’s
main trading area, the country’s GDP growth was a little less
than in 2011, at an estimated 2.6%. The rate of inflation however
surged to an estimated 8.9%, well above the 4.5% experienced
in recent years. The current account surplus continued to grow
as a result of consistently high oil and gas revenues and steady
non-hydrocarbon economic growth. Foreign exchange reserves
now stand at around $90 billion, compared with total external
debt of only $2.5 billion or 1.2% of GDP.
Algeria’s huge hydrocarbon reserves and ongoing revenues has
allowed the government to continue with its long term strategy of
investing in projects benefiting the Algerian people and reducing
unemployment. Increased inward foreign investment, encouraged by
a reformed, more flexible and simplified taxation system including
five years’ tax relief for new projects, has been partly responsible
for the increased infrastructure development. However, the main
impetus behind capital spending increases has been the government’s
current 5-year $286 billion development programme, aimed at
developing the non-hydrocarbons industries and the services
sector, increasing housing and reducing unemployment, which
is funded largely by the banking sector but which, if necessary,
could draw on the estimated $74 billion oil stabilisation fund.
The Central Bank increased the cash reserve rate for banks from
9% to 11%, while their capital adequacy ratio is required to be
maintained at 21%.
In 2012 Al Baraka Algeria’s total assets rose by 5% to $1.84 billion,
with increased liquid assets offset by a 2% decline in total financings
and investments. The Murabaha financings, the largest component
of financings, fell by 17% to $434 million, although this was partly
40 Annual Report 2012
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compensated by a 41% increase in Ijarah Muntahia Bittamleek at
$199 million. The drop in Murabaha turnover was the continuing
consequence of the stringent regulations introduced by the Central
Bank in 2010 to curb personal debt in Algeria. The asset growth
was funded by a 9% increase in customer deposits.
Reflecting this decline in Murabaha business, Al Baraka Algeria’s
total income from joint financings and investments fell by 11%
to $52 million. However, the share attributable to the IAH was
only 6% below that of the previous year, so that the bank’s share,
including its share as Mudarib, was $32 million, 14% lower than in
2011. Fees and banking commissions and other operating income
were together only 8% higher – a 39% increase in letters of credit
turnover – so that total operating income ended the year at
$111 million, little changed from 2011. Total operating expense
was 1% higher at $36 million, leaving a net operating income of
$75 million and, after significantly lower provisions and somewhat
higher taxation charge, producing a net profit of $54 million, 4%
higher than that for 2011. The growth in Algerian Dinar was much
higher at 11% as the Algerian Dinar fell by around 5% against the
US Dollar in 2012.
Al Baraka Algeria continued to develop its product range. In addition
to rolling out its successful microfinance facility product across
the whole country, it launched new Takaful insurance services and
an Ijara for rental payments. It has also completed the preparatory
work for the introduction in 2013 of a new Hajj and Umrah savings
product as well as a financing product specifically designed for
very small enterprises (VSEs). Its Visa card will be able to offer cash
advances to travellers abroad from the middle of 2013. Once its
core banking system is fully implemented it will launch a variety
of e-banking services. During the last quarter of 2012, Algeria
opened one more branch to expand its network. 2013 will also
see the opening of 4 new branches, bringing the network up to
30, with 45 planned by 2017.
(All figures in US Dollars unless otherwise stated)