Gulf banking: ADCB reports sub-prime losses
The reporting season in the Middle East this year has been an incongruous affair. There has been record revenue growth as the economic boom continues but some banks have had to be content with much smaller growth in their profits.
This is because, apparently unbeknown to some in the Middle East, there was a financial crisis over the past few months in the US.
One bank that has been more open than some on the issue is Abu Dhabi Commercial Bank. The bank has acknowledged losses related to the sub-prime crises that amounted to $152 million.
At least those credit impairments are not as bad as those suffered by Bahraini banks, Gulf International Bank (a $966 million writedown) and Arab Banking Corporation (a $230 million writedown); and Kuwait’s Gulf Investment Corporation (a $246 million writedown). These losses came to light as Euromoney was going to press.
"Our understanding was that there were substantial amounts of now illiquid US structured products distributed in the Middle East," says Eirvin Knox, chief executive at ADCB.
"We took a bigger provision than might have been required in order to take all the losses in the 2007 accounts." ADCB’s core earnings, which eliminate one-off gains and losses, were up 40% last year.