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Sat 11 Apr 2009 03:49 PM

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Gulf Bank to make Q1 profit on back of rescue plan

December's bailout from shareholders covered $1.29bn loss in derivitives.

Kuwait's troubled Gulf Bank expects to post a profit in the first quarter after a bailout by shareholders to cover $1.29bn in derivatives losses, its chairman said on Saturday.

Trading in Gulf Bank, in which sovereign wealth fund Kuwait Investment Authority (KIA) owns a 16 percent stake after a restructuring plan ordered by the central bank, could resume "within days", Kutayba Al Ghanim said.

"There will be profit in the first quarter," Ghanim told Reuters on the sidelines of a shareholders meeting.

"Profit will be better than last year." But he did not elaborate.

In 2008, Kuwait's fourth-largest bank by market value made a full-year net loss of KD359.5m ($1.24bn), compared with a net profit of KD130.44m the previous year, citing losses on derivatives transactions.

In January, it made net loss of KD1.6m, a relative improvement on fourth-quarter losses of KD445.5m, the lender said last month.

In December, shareholders approved a rescue plan worked out by the government to raise KD375m in an emergency rights issue to cover derivatives losses of the same amount.

In the following month, KIA bought the remaining unsubscribed stock, taking a 16 percent stake in Gulf Bank.

In October, the central bank halted trading in Gulf Bank until the end of a restructuring plan that saw Chairman Bassam Al Ghanim replaced by his brother Kutayba.

"Stock trading will start soon after this meeting by a central bank decision," Ghahim told shareholders on Saturday. "I think trading will resume within days."

Ghanim voiced optimism the lender is now able to weather market conditions and said it would expand its activities and seek more opportunities in Kuwait in 2009.

"The bank now has a capital adequacy ratio of 13.82 percent," he said.

"This is a strong balance sheet that will give us the financial strength and flexibility to weather the continuing turbulence and uncertainty of the global financial markets."

The bank was to announce a new chairman and a new board later on Saturday as the next step of the revamp, after the board resigned in November.

Gulf Bank's troubles prompted the government last year to guarantee all deposits in Kuwaiti banks in a bid to restore confidence and calm fears that the sector's exposure to the global credit crisis ran deeper than first thought.

Separately, Kuwait's central bank governor was cited as saying on Saturday that the country's banking sector does not face any risks related to suspension or reduction in finance facilities between Kuwaiti and foreign banks.

"The effect on the banking sector due to the global financial crisis is considered limited till this moment," Sheikh Salem Abdul Aziz Al Sabah told state news agency KUNA. (Reuters)

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