pdf - 1.26 MB - Ahli United Bank

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pdf - 1.26 MB - Ahli United Bank

GROUP CEO & MANAGING

DIRECTOR’S STATEMENT

WE WILL CONTINUE OUR EFFORTS TO MITIGATE RISK AND

TARGET SELECTIVE BUSINESS GROWTH OPPORTUNITIES THAT

FOCUS ON CONTRA-CYCLICAL SECTORS WHILE IMPLEMENTING

RIGOROUS COST MANAGEMENT MEASURES ACROSS ALL

AREAS OF OUR BUSINESS AND ENSURING THAT CAPITAL

PRESERVATION IS ALWAYS THE FOREMOST PRIORITY IN AN

ENVIRONMENT OF HEIGHTENED RISKS.

18

ANNUAL REPORT 2008

2008 was an exceptional year marked by a global financial crisis and unprecedented fallouts and challenges for markets and

financial institutions everywhere. While AUB was not immune to the ripple effects of the crisis, our focus since early in the year was

geared to anticipate and mitigate, to the extent possible, its adverse impact on our financial position and balance sheet. Having

recognised the early signs of a potentially widening contagion and worsening operating environment, we responded by realigning

our business model, and taking precautionary and corrective measures with particular focus on liquidity, asset quality, risk and

operational management.

As a result, AUB was able to end the year on an overall positive profitability note, posting a net profit of US$ 255.7 million compared

to US$ 296.3 million for 2007. While this represents a drop of 13.7% from the previous year, it nevertheless reflects a prudent

and required approach to address prevailing market conditions which have considerably increased risk levels. On a positive and

encouraging note, our core business earnings continued to show healthy and diversified growth, generating a 4.5% increase in

total operating income to a record US$ 665.5 million (2007: US$ 637.0 million), despite difficult market conditions.

AUB’s profits for 2008 were impacted by our conservative stance towards prevailing market and business risks. The bank increased

its net provisions to US$ 98.6 million as compared to US$ 26.2 million in 2007 to adequately cover identified loan risks. This decision

will maintain our specific provisions against identified problem loans at a solid 90% level, further backed by our strong collective

impairment provisions. Non-performing loans stand at an acceptable 1.9% of our overall loan and advances portfolio (1.2% in 2007).

AUB has also pro-actively identified and written-off all its impaired international securities and investments, generating a net loss of

US$ 12.4 million against a net profit of US$ 25 million on the same non-trading investments account in 2007. This is a practical and tangible

demonstration of our risk asset management approach which centres on immediate problem recognition and prompt implementation of

required remedial actions including full write-offs as implemented in 2008 to ensure a healthy balance sheet going forward.

Given our assessment of increased risk levels, asset growth was also de-accelerated from the second half of 2008 with focus directed

towards deposit accumulation and liability management. In this respect, client deposits increased by a very solid 22.2% to US$ 13.2

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