Bank of Palestine's first-half profit declines

Salary cut to public sector workers weighs on economy

Bank of Palestine saw net profit fall 9 per cent in the first half of 2019 as public sector workers were hit by a salary cut. EPA

Bank of Palestine Group reported a 9 per cent fall in net profit in the first half of 2019 as it grappled with difficult economic conditions in the country following salary cuts to government workers.

Net profit fell to $22.5 million (Dh82.6m), despite gross income edging up 4 per cent to $115.4m.

“The economy in Palestine has entered a recession because the economic cycle remains dependent on the Palestinian National Authority salaries to public sector employees. The salary cut from March 2019 has negatively affected funding to private sector suppliers," said the bank's chairman Hashim Shawa.

He said the weaker economic environment hit the bank's bottom line as accounting rules meant it needed to make additional provisions to cushion against the effects of a downturn.

Despite this, the Ramallah-based bank recorded a 3 per cent increase in customer deposits to $3.85 billion, which Mr Shawa said demonstrated customers' "confidence in the bank and the successful execution of the savings campaigns launched by the bank".

Gross loans also increased by 6 per cent to $2.96bn, bringing total assets up 6 per cent to $4.95bn.

Rushdi Ghalayani said the bank had increased loans to the government to weather a short-term salary crisis, while not deviating from a plan to increase government loans at the expense of corporate and retail lending.

“In terms of business operations, the bank continues to look for risk guarantee programs to support its commitment in lending [to] the SME sector since we enjoy excellent relations with international donor agencies cooperating in a wide range of guarantee funds helping the bank to mitigate risk," he said.

The Bank of Palestine has a network of 74 branches across the country, serving more than 917,000 customers.

The most recent GDP data from the State of Palestine Central Bureau of Statistics showed that GDP in the first quarter of 2019 was 3.8 per cent higher than in the first quarter of 2018, but 2.5 per cent lower than the last quarter of 2018.