The fall in profit is due to higher provisions driven by poor economic conditions, and reflects the deterioration in the macro-economic environment throughout the region and globally.
The bank has to be satisfied with lower revenues from interest and fee income because of the impact of the Covid-19 outbreak and lower market interest rates and weakening oil prices.
The bank has entered the crisis period from a position of strength, according to ABG. Customer deposits during the period grew by 5 per cent to reach $35.9 billion compared with $34.1 billion in the previous year, while loans grew by 2 per cent to reach $26.7 billion as compared with $26.2 billion.
Strong capital base
The group maintained its strong and robust capital base with equity of $9.2 billion and a capital adequacy ratio (CAR) of 16.8 per cent calculated in accordance with Basel III regulations. The group enjoys high liquidity with loan-to-deposit ratio at 74.4 per cent and a provision coverage ratio (PCR) held against non-performing loans exceeding 100 per cent.
Sabih Masri (seen in the picture), chairman of the bank stated that the pandemic has come as a shock for the global economy, which is set to witness contraction in 2020. He added that the Covid-19 pandemic will continue to have material impact on businesses around the world and the economic environment in which they operate.
Nemeh Sabbagh, Chief Executive Officer (CEO), noted that the banking sector, globally and regionally, will inevitably face challenges as a result of the economic contraction, leading to higher cost of risk, and lower interest rates. He added that growth in the GCC countries has declined sharply also due to the plunge in oil prices since the outbreak of the pandemic.
Sabbagh said the bank opted to build larger provisions during the first half of 2020 against the anticipated financial implications of Covid-19, and this has also added to the drop in the reported net income after tax of the bank. He also added that the fall in profit for the bank’s affiliate in Saudi Arabia has also affected the bottom line of ABG.