First Gulf Bank pulls the plug on Libyan operations

First Gulf Bank chief Andre al Sayegh says the bank has weathered the ups and downs of the financial crisis and the Middle East's tumult, but adds that the future of the bank's Libyan operations are now uncertain.

Andre al Sayegh, the chief executive of First Gulf Bank, says business operations in Libya is wait and see.

First Gulf Bank has shut its operations in Libya to comply with UN sanctions just months after opening a second branch there, says its chief executive.

The Libyan business was part of an international expansion strategy, which has also opened offices in India, Singapore and Qatar.

"It's a case of wait and see, like for any other foreign investors," said Andre al Sayegh, the bank's chief executive, of the Libyan closure. "The bank has a management agreement, but it has been discontinued because force majeure is going on."

One of the Libyan branches is at the Rixos Hotel in Tripoli, where the Libyan government is currently housing a contingent of foreign reporters.

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First Gulf jointly managed the operation with the Libyan government economic and social development fund, each side having provided half of the bank's US$400 million (Dh1.46 billion) of authorised capital.

"We cannot judge the political issues," Mr al Sayegh said. "Nobody has a crystal ball."

The bank, which is the fourth-largest in the UAE by assets, would abide by sanctions imposed by the UN Security Council while Muammar Qaddafi remains in power. First Gulf is listed on the Abu Dhabi stock market.

The bank's international expansion will go ahead despite the Libyan setback, Mr al Sayegh said. It is seeking to upgrade its representative offices in Qatar and India, following the upgrade of its Singapore office to a full branch in 2009.

"We're looking more towards Asia just now," he said. Mr al Sayegh said he expected the UAE to benefit from uncertainty elsewhere in the region.

"We're privileged to be present in Abu Dhabi," he said.

"There is a lot to do in Abu Dhabi. Our balance sheet can support those projects, and it's very important to play a role as a financial institution within the domestic economy."

First Gulf Bank plans to focus on investment banking, investment management and careful management of the bank's balance sheet. It reported profits of Dh3.42bn last year, a increase of 3.3 per cent on 2009, as provisions for bad loans stabilised.

The financial crisis has taught banks the importance of moderate lending strategies and improving asset quality, he said, predicting impairment charges would decline across the industry this year as economic recovery picked up.

"As well as that, we will start seeing, if not this year maybe next year, some reversal of provisioning … because provisions were taken on some of these institutions and corporates [that] are still healthy and operating in the country," Mr al Sayegh said.

"You cannot play with the balance sheet of financial institutions, and this is what some did not really understand, unfortunately."

Although the bank may experience bursts of aggressive growth, its expansion of credit would be measured and carefully considered, he said.