Against strong competition, ABC International Bank (ABCIB) continued to expand its client base and maintain its market share of financing trade and project and structured finance flows between Europe and the MENA region during 2006, according to its annual report.
In 2006, ABCIB reported a pre-tax profit of £16.8mn compared with £16.2mn in 2005. The bank’s total operating income stood at £46.3mn (compared with £45.7mn at the end of 2005) of which 56% related to interest income and the balance to fee and commission income.
Earnings from the four main product groups were as follows: Trade & Commodity Finance & Financial Institutions contributed £21.9mn in operating income, Project & Structured Finance £5mn, Islamic Asset Management £4.1mn and Treasury £3.1mn.
The primary focus of the bank is its highly successful trade finance business, it claims. “We have also continued to develop our growing activities in project finance, Islamic banking and treasury services,” states the report. “We also launched an initiative in 2006 to work in partnership with a select group of European banks on complex financing transactions for public and private MENA sponsors. In 2007, we plan to play an active role in promoting London as a global centre for Islamic finance, trade and investments to our MENA clients, despite intensifying competition for business.”
Against the background of a generally favourable economic operating environment, typified by strong MENA region growth in output and trade, and accompanied by buoyant market liquidity, ABCIB’s trade finance team has successfully expanded both its origination capabilities and asset distribution activities during 2006, resulting in another year of record performance at both the revenue and net income levels, according to the report.
Attention to the needs of ABCIB’s established client base remains at the heart of the trade finance team’s operational success. Those customers range from small to medium-sized enterprises to global leaders in their field, covering sectors as diverse as basic agricultural commodities, high-tech telecommunications and transport equipment.
“During 2006, we focused on both enlarging the client base and deepening existing ‘core “client relationships,” says the report. “In terms of the former, the intensive and coordinated marketing activities of our trade finance specialists located at ABCIB London as well as in all our overseas branches, representative and marketing offices have produced excellent results, with the contribution of the Istanbul office, in its first full year of operation, surpassing expectations.
“Integral to our successful efforts to deepen our “core “client relationships has been the bank’s niche ability to accommodate a wide – and expanding – range of MENA region risks, maintaining our credit lines in the face of conditions to which other institutions have reacted by reducing or even freezing limit availability.
“Equally, we have endeavoured to remain at the forefront of product choice, continuing to build upon our existing, diversified range of traditional trade finance products – including documentary letters of credit, guarantees, bonding, ECA-supported business and forfaiting – by further developing innovative trade receivables discounting facilities with hybrid corporate and credit insurance structures. Our recognised ability to provide tailor-made finance solutions has once again been an essential part of our continued successful performance and maintenance of client relations.”
In addition to growing its client base through more intensive and coordinated marketing activities the group has also deepened existing relationships, as long-standing customers have increasingly availed themselves of its specialist, niche ability to provide imaginative, tailor-made trade solutions whilst accommodating MENA region risks. The group has established a strong and dynamic client base, ranging from SMEs to global leaders in their fields and spanning business sectors as diverse as primary commodities and high-tech telecommunications equipment.
Building upon its existing and diversified range of traditional trade finance products, trade finance was particularly active in developing its trade receivables and discounting facilities, including hybrid structures involving corporate and credit insurance elements.
From an initial focus on the telecommunications sector, the group has been at the forefront of specialised, bespoke receivables discounting product development.
The trade finance group’s activities centre around the two hubs in London and Bahrain. Taking full advantage of the favourable operating environment arising from strong regional trade flows and buoyant market liquidity, the trade finance units expanded both their origination and asset distribution activities during the year.
Underpinned by ABC Group’s matrix management approach, the experience gained in ABCIB London in spearheading the imaginative structuring of facilities has provided a valuable product template for ABC Group as a whole, whilst the heightened synergy that has developed between the London and Bahrain hubs has been amply demonstrated by the Bahrain unit’s success in distributing the new assets created in London to investors within the MENA region.
The group anticipates that more capital goods exporters will take up this highly versatile product.
The Bahrain unit has likewise continued to develop its client base – both corporate and correspondent bank customers – originating over US$150mn of primary business in 2006. Its available for sale and held-for-investment portfolios now exceed US$600mn and continue to grow apace, with a noteworthy contribution from the Singapore representative office, which now concentrates on direct Far East trade finance business to the Bahrain office.
The MENA region’s economic development has created many opportunities for ABCIB, accompanied however by an intensification of competition from other international banks.
Despite this, ABCIB continued to build its European-MENA trade finance franchise in 2006, expanding its key relationships and its overall client base. Its success has been largely due to the imaginative use of new financing techniques – first developed to meet the specific needs of some of its European exporting customers and then rolled out as discrete product initiatives in their own right – combined with the ability to harness the new synergies offered by the ABC Group net work to access the skills and/or placement power of Bahrain-based specialists.