based Bank ABC (Arab Banking Corporation) has posted a $31 million Q1 net profit attributable to the shareholders of the parent company, which is 3% higher on the $30 million of the same period last year.

With cost of risk returning to pre-pandemic levels, it suggests a better economic outlook and the resilience of the group’s asset portfolio.

Total operating income grew both on a headline (36%) and underlying (28%) basis reflecting higher volumes, consistent margins and benefiting from consolidation of BBE.

Operating expenses

Operating expenses on a headline basis was higher than prior year, with integration of BBE and with the business returning to normal level of activity compared to previous year. The group remains focused on disciplined cost control while continuing investment into digital transformation to build its ‘bank of the future’.

The balance sheet remains strong with capital and liquidity ratios well above the regulatory requirements: the group’s T1 Ratio is 16.6%, comprising predominantly 14.7% CET1, LCR 247% and NSFR 124%.

Bank ABC’s Group Chairman, Saddek Omar El Kaber remarked: “We are extremely pleased with the group’s solid profitability for the first quarter of 2022, achieved despite geo-political, industry and market challenges. Bank ABC continues to achieve great progress on its transformation journey to build a ‘bank of the future’, while focusing firmly on its balance sheet strength, as evidenced by the group’s AT1 issue and the change in outlook to ‘Stable’ by Standard and Poor’s.”

Earnings per share for the period was $0.01, unchanged from the corresponding period last year.

Total comprehensive income attributable to the shareholders of the parent was $8 million, compared to a loss of $16 million reported for the same period last year. This arose from a net impact of foreign exchange translation in foreign subsidiaries and change in fair value of debt instruments.

On a headline basis, Total Operating Income was $247 million, 36% higher compared to $182 million reported for the same period last year. On an underlying basis, Total Operating Income was at $253 million for the period, compared to $197 million for the same period last year, benefitting from the consolidation of BBE.

Interest income

Net interest income was $177 million, 45% higher against $122 million reported for the same period last year, supported by higher loan volumes, consistent margins and the addition from BBE.

Operating expenses were at $159 million, 27% higher than $125 million for the same period last year, from a combination of consolidation of BBE as well as the group returning to a more normal level of activity. The group continues to enforce appropriate cost discipline without compromising on investments into the group’s digital transformation and strategic initiatives.

Headline net operating profit before credit loss expense and taxation was $88 million, 54% higher compared to $57 million reported for the same period last year. On an underlying basis, the group achieved a net operating profit before credit loss expense and taxation of $94 million for the quarter, 31% higher compared to $72 million in Q1 2021, also with the addition of BBE.

Impairment

Impairment charges (ECL) for the period were $25 million compared to $20 million reported for the same period last year, broadly in line with our historic credit loss experience.

Tax charge $20 million, compared to $1 million for the first quarter of 2021, the variance largely arising from the tax treatment of currency hedges in Banco ABC Brasil (BAB) which have an offsetting impact in Total Operating Income. On an underlying basis, tax charge for the period was at $17 million compared to $16 million for the same period last year.

Balance Sheet

Equity attributable to the shareholders of the parent and perpetual instrument holders at the end of the period was $4,221 million, compared to the $3,872 million at the 2021 year-end, 9% higher, benefiting from the Additional Tier 1 capital issued during the quarter and after absorbing dividends paid for 2021.

Total assets stood at $34.8 billion at the end of the period, broadly in line with the $34.9 billion at the 2021 year-end.

Loans and Advances were 2% higher for the quarter at $17.0 billion compared with levels of $16.8 billion at 2021 year-end reflecting the group’s selective underwriting and a strengthening in BRL FX rate.

Deposits were at $24.9 billion, compared to the levels of $25.8 billion at 2021 year-end.

Liquidity ratios are strong with LCR and NSFR at 247% and 124% respectively with comfortable buffer and liquid assets to deposits ratio at 51%.

Capital Ratios were strong, with CET1 at 14.7%, Tier 1 at 16.6% and total Capital Adequacy Ratio (CAR) at 17.6%.

Bank ABC is a leading player in the region’s banking industry and provides innovative wholesale financial products and services that include corporate banking, trade finance, project and structured finance, syndications, treasury products and Islamic banking. It also provides retail banking services through its network of retail banks in Jordan, Egypt, Tunisia and Algeria and through ila Bank in Bahrain.