Bahrain’s Ahli United Bank reports 5% profit increase for 2019

Bank’s full year profit jumps to $730.5 million as provisions for credit losses drop

KFH suspended the acquisition of Bahrain’s Ahli United until December. Andrew Henderson / The National

Bahrain’s Ahli United Bank (AUB), which is merging with Kuwait Finance House, reported a 5 per cent increase in its full-year net profit on the back of higher net operating income and lower provisions for bad loans.

The net profit attributable to the owners of the bank for the 12-month period ending December 31 climbed to $730.5 million (Dh2.68 billion), the lender said in a statement to Bahrain Bourse, where its shares trade. Net operating income for the period rose 5 per cent year-on-year to $1.18bn.

"AUB has achieved record results and sustained its excellent core performance for 2019 driven by its well-managed business model based on diversification and cross-border flows," the lender's chairman, Meshal Alothman, said.

AUB is currently in the midst of being acquired by Kuwait Finance House, in a deal that would be the Gulf's first major cross-border bank merger for several years. The deal was approved by Kuwait Finance House's shareholders last month.

The lender's interest income, investment income as well as fees and other income also rose for the year. Interest income rose 11 per cent to $1.84bn, investment income 34 per cent to $81.7m and fees and other income 5 per cent to $284m.

Provision for credit losses dropped 37 per cent to $54.4m during the period. Operating expenses, on the other hand, rose to $353.7m at the end of 2019, from $328.2m in 2018.

Total assets at the end of 2019 jumped 13 per cent to $40.2bn.  Customer deposits rose 8 per cent to $25.51bn and loans and advances increased 6 per cent to $20.7bn.

The bank proposed a dividend of 20 per cent of share nominal value, or 5 cents per share, which is equivalent to 18.85 Bahraini fils per share. A 10 per cent bonus share issue was also proposed.

If KFH's acquisition of AUB is completed, it will create the world's largest Islamic bank in terms of total assets, with a combined $103.9bn of total assets as at December 31, 2019.

“This transaction will position KFH as a dominant bank in the GCC as the addition of AUB's solid corporate banking franchise complements its large and strong  domestic retail customer base,” Moody’s Investor's Service said in a note last month. It affirmed the baseline credit assessment of both KFH and AUB Kuwait at Baa3 but changed the outlook on KFH's long-term deposit rating to positive from stable, stating that it will become a "dominant" bank in the Gulf.