MANAMA: Bahrain-based Gulf Finance House (GFH), the leading Middle Eastern Islamic investment bank, on Wednesday announced that it would take a $300 million (non-cash) charge against its proprietary Dubailand position and correspondingly reduce the liabilities on its balance sheet by $290 million.
“This action has no implications for the bank’s clients and GFH has no remaining material exposure to Dubai,” the bank stated categorically.
“The prudent move comes after the fallout from the global financial crisis over the last year and more recent events in the Dubai market that further underline the need to take measures designed to realign the restructured bank’s balance sheet. This announcement will in no way impact the significant cash reserves generated from the rights issue and the bank anticipates raising further cash through continuing with the sale of non — core assets which it will announce in due course,” the bank said in a statement.
Esam Janahi, chairman of the bank, said that market conditions over the last year had been extremely difficult and recent developments have further highlighted the need for a prudent and transparent approach.
As a consequence, Janahi added, the board has decided to take the necessary steps to deal with the situation appropriately. “This action confirms our intention to take tough decisions especially when they are made with the very best long-term interests of our shareholders in mind,” he said.
Ted Pretty, acting group CEO of GFH, underlined the importance of Wednesday’s announcement and said all their work over the past few months had been focused on shoring up our balance sheet and revising the business model.
He said the new approach would help to more efficiently serve the needs of the investment community and we’ve been very successful in this. “Following today’s (Wednesday’s) announcement, GFH has set aside sufficient provisions against its entire Dubai exposure. The bank is not only confident of being able to meet its liabilities but also of its ability to engage in attractive investment opportunities as it renews its revenue generation activities in 2010 with the goal of building the world’s leading Islamic bank,” he added.
GFH has recently been engaged in a period of comprehensive market research to establish investor sentiment following the global economic downturn. The results of this research has seen the bank design a new business model comprising products and services specifically demanded by the contemporary investment community in a continuing difficult economic environment.
“The non — cash charge in assets is strictly only on GFH’s books and doesn’t affect our clients, nor does it affect the bank’s cash flow,” said Chandan Gupta, newly appointed group chief financial officer at the Bank.