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Gulf Investment rushes to shore up investor confidence

Gulf Investment Corporation (GIC) on Monday rushed to shore up investor confidence following news the bank was forced to shell out almost $250 million to cover losses related to the US subprime crisis.

Kuwait-based Gulf Investment was one of three banks weekly magazine Middle East Economic Digest (Meed) reported to have had to writedown an total of $1.5 billion in losses incurred as a result to exposure to risky, mortgage-related assets.
Gulf International Bank (GIB) was forced to take $1 billion in provisions, while Arab Banking Corporation and Gulf Investment were also forced to take additional provisions of $230 million and $246 million respectively, Meed said.

GIC highlighted the fact that ratings agency Standard & Poor’s had retained its A-/Stable/A-2 credit rating despite the writedowns, citing improved overall operating earnings and higher than expected revenues as factors softening the subprime impact.

GIC Chairman Yousef Hamad Al-Ebraheem said the affirmation of the bank's credit rating was strong evidence of its asset selection and diversification policy.

"The affirmation of the credit rating by Standards and Poor's will give the corporation the needed push to continue the implementation of its strategy," Al-Ebraheem said.

GIC said it made a net profit of $253 million in 2007 after allocating $246 million for provisions.

Ratings agency Standard & Poor’s recently warned that Gulf banks might be concealing the extent of losses relating to the US subprime mortgage crisis.

A survey of 20 regional banks last year indicated losses might be restricted to less that 1% of total assets, although dips in the portfolio value of some banks late in the year suggest exposure could be much larger.

Earlier this month, GIB, a lender owned by the Gulf Arab governments, announced it had suffered $757.3 million in losses during 2007, mainly due to exposure to its mortgage-related investments.

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