TIDM95HX
RNS Number : 1396Z
GFH Financial Group B.S.C
19 May 2021
GFH FINANCIAL GROUP BSC
CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
31 MARCH 2021
Commercial registration : 44136 (registered with Central Bank of Bahrain
as an Islamic wholesale Bank)
Registered Office : Bahrain Financial Harbour
Office: 2901, 29(th) Floor
Building 1398, East Tower
Block: 346, Road: 4626
Manama, Kingdom of Bahrain
Telephone +973 17538538
Directors : Jassim Al Seddiqi, Chairman
H.E. Shaikh Ahmed Bin Khalifa Al-Khalifa , Vice Charirman
(resigned wef 25 Feb 2021)
Hisham Ahmed Alrayes
Rashid Nasser Al Kaabi
Ghazi Faisal Ebrahim Alhajeri
Ali Murad
Ahmed Abdulhamid AlAhmadi
Alia Al Falasi
Fawaz Talal Al Tamimi
Edris Mohammed Rafi Alrafi
Chief Executive Officer : Hisham Ahmed Alrayes
Auditors : KPMG Fakhro
CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the three months ended 31 March 2021
CONTENTS Page
Independent auditors' report on review of condensed consolidated
interim financial
information
1
Condensed consolidated interim financial information
Condensed consolidated statement of financial position 2
Condensed consolidated income statement 3
Condensed consolidated statement of changes in owners' equity
4-5
Condensed consolidated statement of cash flows 6
Condensed consolidated statement of changes in restricted investment accounts 7
Condensed consolidated statement of sources and uses of zakah and charity fund 8
Notes to the condensed consolidated interim financial
information 9-30
Supplementary information (not reviewed) 31-33
Independent auditors' report on review of condensed consolidated
interim financial information
To
The Board of Directors
GFH Financial Group BSC
Manama
Kingdom of Bahrain 11 May 2021
Introduction
We have reviewed the accompanying 31 March 2021 condensed
consolidated interim financial information of GFH Financial Group
BSC (the "Bank") and its subsidiaries (together the Group"), which
comprises:
-- the condensed consolidated statement of financial position as at 31 March 2021;
-- the condensed consolidated income statement for the three-month period ended 31 March 2021;
-- the condensed consolidated statement of changes in owners'
equity for the three-month period ended 31 March 2021;
-- the condensed consolidated statement of cash flows for the
three-month period ended 31 March 2021;
-- the condensed consolidated statement of changes in restricted
investment accounts for the three-month period ended 31 March
2021;
-- the condensed consolidated statement of sources and uses of
zakah and charity fund for the three-month period ended 31 March
2021; and
-- notes to the condensed consolidated interim financial information.
The Board of Directors of the Bank is responsible for the
preparation and presentation of this condensed consolidated interim
financial information in accordance with the basis of preparation
stated in note 2 of the condensed consolidated interim financial
information. Our responsibility is to express a conclusion on this
condensed consolidated interim financial information based on our
review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements 2410, "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity". A
review of condensed consolidated interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with Auditing Standards for Islamic
Financial Institutions and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the accompanying 31 March 2021 condensed
consolidated interim financial information is not prepared, in all
material respects, in accordance with the basis of preparation
stated in Note 2 of the condensed consolidated interim financial
information.
Other matter
Due to the outbreak of the novel coronavirus (COVID-19) in early
2020, the Central Bank of Bahrain vide its circular OG/124/2020
dated 30 March 2020 had exempted all public shareholding companies
and locally incorporated banks from preparation and publication of
condensed consolidated interim financial information for the
three-month period ended 31 March 2020. We have not reviewed the
comparative information for the three-month period ended 31 March
2020 presented in this condensed consolidated interim financial
information which has been extracted from management accounts of
the Group and, we do not express any review conclusion on them.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2021 US$ 000's
note 31 March 31 December 31 March
2021 2020 2020
(reviewed) (audited) (unreviewed)
ASSETS
Cash and bank balances 805,917 536,502 380,199
Treasury portfolio 9 2,021,232 1,878,546 1,670,938
Financing assets 10 1,259,791 1,267,266 1,372,183
Investment in real estate 11 1,820,683 1,812,315 1,686,715
Proprietary investments 12 174,474 216,108 301,551
Co-investments 13 120,449 126,319 97,334
Receivables and prepayments 697,301 605,658 522,407
Property and equipment 143,223 144,149 107,020
----------- ------------ --------------
Total 7,043,070 6,586,863 6,138,347
=========== ============ ==============
LIABILITIES
Clients' funds 84,613 130,935 95,373
Placements from financial, non-financial
institutions and individuals 2,589,838 2,418,000 2,360,528
Customer current accounts 159,162 140,756 142,017
Term financing 14 1,253,204 1,089,077 754,951
Payables and accruals 420,795 465,038 371,926
----------- ------------ --------------
Total 4,507,612 4,243,806 3,724,795
----------- ------------ --------------
Equity of investment account
holders 1,341,312 1,156,993 1,169,464
OWNERS' EQUITY
Share capital 8 975,638 975,638 975,638
Treasury shares (65,623) (63,979) (90,303)
Statutory reserve 8 19,548 19,548 125,312
Investment fair value reserve (7,176) 5,593 (4,831)
Foreign currency translation
reserve (42,777) (46,947) (35,427)
Retained earnings 8 36,674 22,385 (4,940)
Share grant reserve 1,093 1,093 1,198
----------- ------------ --------------
Total equity attributable to
shareholders of Bank 917,377 913,331 966,647
Non-controlling interests 276,769 272,733 277,441
Total owners' equity 1,194,146 1,186,064 1,244,088
----------- ------------ --------------
Total liabilities, equity of
investment account holders and
owners' equity 7,043,070 6,586,863 6,138,347
=========== ============ ==============
The Board of Directors approved the condensed consolidated
interim financial information on 11 May 2021 and signed on its
behalf by:
Jassim Al Seddiqi Hisham Alrayes
Chairman Chief Executive Officer & Board member
The accompanying notes 1 to 21 form an integral part of the
condensed consolidated interim financial information.
CONDENSED CONSOLIDATED INCOME STATEMENT
for the three months ended 31 March 2021 US$ 000's
Three months ended
31 March 31 March
2021
(reviewed) 2020
(unreviewed)
Investment banking income
Asset management 805 838
Deal related income 16,785 13,613
------------ --------------
17,590 14,451
------------ --------------
Commercial banking income
Income from financing 21,658 22,095
Treasury and investment income 10,814 8,188
Fee and other income 1,556 2,082
Less: Return to investment account holders (8,289) (9,358)
Less: Finance expense (8,566) (8,002)
------------ --------------
17,173 15,005
------------ --------------
Income from proprietary and co-investments
Direct investment income, net 9,852 8,085
Dividend from co-investments 3,690 2,246
------------ --------------
13,542 10,331
------------ --------------
Real estate income
Development and sale 3,434 2,820
Rental and operating income 1,144 594
------------ --------------
4,578 3,414
------------ --------------
Treasury and other income
Finance income 3,197 7,756
Dividend and net gain on treasury investments 26,453 11,034
Other income, net 17 7,856 7,467
------------ --------------
37,506 26,257
------------ --------------
Total income 90,389 69,458
------------ --------------
Operating expenses 32,185 26,741
Finance expense 33,665 32,307
Impairment allowances 18 5,200 3,628
Total expenses 71,050 62,676
Profit for the period 19,339 6,782
============ ==============
Attributable to:
Shareholders of the Bank 16,122 5,082
Non-controlling interests 3,217 1,700
19,339 6,782
======= ======
Earnings per share
Basic and diluted earnings
per share (US cents) 0.53 0.15
The Board of Directors approved the condensed consolidated
interim financial information on 11 May 2021 and signed on its
behalf by:
Jassim Al Seddiqi Hisham Alrayes
Chairman Chief Executive Officer & Board member
The accompanying notes 1 to 21 form an integral part of the
condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN OWNERS'
EQUITY
for the three months ended 31 March 2021 US$ 000's
Attributable to shareholders of the Bank
Foreign
Investment currency Share Non Total
31 March 2021 Share Treasury Statutory fair value translation Retained grant -controlling owners'
(reviewed) capital shares reserve reserve reserve earnings reserve Total interests equity
--------
Balance at 1
January 2021
(as previously
reported) 975,638 (63,979) 19,548 5,593 (46,947) 22,385 1,093 913,331 272,733 1,186,064
Effect of
adoption of
FAS 32 (note
3) - - - - - (2,096) - (2,096) - (2,096)
-------- ---------- ----------- ----------- ------------ --------- -------- --------- ------------- ----------
Balance at 1
January 2021
(restated) 975,638 (63,979) 19,548 5,593 (46,947) 20,289 1,093 911,235 272,733 1,183,968
Profit for the
period - - - - 16,122 - 16,122 3,217 19,339
Fair value
changes during
the period - - (4,479) - - - (4,479) 358 (4,121)
Transfer to
income
statement on
disposal of
sukuk - - (8,290) - - - (8,290) - (8,290)
Total
recognised
income and
expense - - (12,769) - 16,122 - 3,353 3,575 6,928
Transfer to
zakah and
charity fund
(subsidiaries) - - - - (338) - (338) (272) (610)
Purchase of
treasury
shares - (23,824) - - - - - (23,824) - (23,824)
Sale of
treasury
shares - 22,180 - - - 601 - 22,781 - 22,781
Foreign
currency
translation
differences - - - - 4,170 - - 4,170 733 4,903
Balance at 31
March 2021 975,638 (65,623) 19,548 (7,176) (42,777) 36,674 1,093 917,377 276,769 1,194,146
======== ========== =========== =========== ============ ========= ======== ========= ============= ==========
The accompanying notes 1 to 21 form an integral part of the
condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN OWNERS'
EQUITY
for the three months ended 31 March 2021 (continued) US$
000's
Attributable to shareholders of the Bank
Foreign
Investment currency Share Non Total
31 March 2020 Share Treasury Statutory fair value translation Retained grant -controlling owners'
(unreviewed) capital shares reserve reserve reserve earnings reserve Total interests equity
--------
Balance at 1
January 2020 975,638 (73,419) 125,312 (4,831) (29,425) 10,070 1,198 1,004,543 288,328 1,292,871
Profit for
the period - - - - - 5,082 - 5,082 1,700 6,782
Total
recognised
income and
expense - - - - - 5,082 - 5,082 1,700 6,782
Modification
loss on
financing
assets (note
2) - - - - - (14,016) - (14,016) (11,279) (25,295)
Transfer to
zakah and
charity fund - - - - - (320) - (320) (258) (578)
Issue of
shares under
incentive
scheme - (25,052) - - - - - (25,052) - (25,052)
Purchase of
treasury
shares - (25,397) - - - - - (25,397) - (25,397)
Sale of
treasury
shares - 33,565 - - - (5,756) - 27,809 - 27,809
Foreign
currency
translation
differences - - - - (6,002) - - (6,002) (1,050) (7,052)
Balance at
31 March
2020 975,638 (90,303) 125,312 (4,831) (35,427) (4,940) 1,198 966,647 277,441 1,244,088
======== ========== =========== =========== ============ ========= ======== ========== ============= ==========
The accompanying notes 1 to 21 form an integral part of the
condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS-
for the three months ended 31 March 2021 US$ 000's
31 March
2021
31 March
(reviewed) 2020 (unreviewed)
OPERATING ACTIVITIES
Profit for the period 19,339 6,782
Adjustments for:
Income from commercial banking (10,648) (8,188)
Income from proprietary investments (13,542) (7,931)
Income from dividend and gain / (loss)
on treasury investments (22,084) (13,209)
Foreign exchange (gain) / loss (925) 372
Finance expense 42,230 32,307
Impairment allowances 5,200 3,628
Depreciation and amortisation 1,147 654
20,717 14,415
Changes in:
Placements with financial institutions
(original maturities of more than 3 months) (97,237) 145,458
Financing assets 7,475 (99,406)
Other assets (44,701) (16,806)
CBB Reserve and restricted bank balance (21,766) 35,587
Clients' funds (46,322) 24,515
Placements from financial and non-financial
institutions 171,838 (86,721)
Customer current accounts 18,407 (5,470)
Equity of investment account holders 184,319 (49,081)
Payables and accruals (44,242) (94,926)
-------------------
Net cash from/(used in) operating activities 148,488 (132,435)
-------------------
INVESTING ACTIVITIES
Payments for purchase of equipment (195) (118)
Proceeds from sale of proprietary investment
securities, net 27,253 3,681
Purchase of treasury portfolio, net (142,151) (124,992)
Proceeds from sale of investment in real
estate 200 171
Dividends received from proprietary investments
and co-investments 3,758 2,288
Advance paid for development of real estate (15,681) (2,551)
Net cash used in investing activities (126,816) (121,521)
FINANCING ACTIVITIES
Financing liabilities, net 164,128 352,033
Finance expense paid (41,446) (54,721)
Dividends paid (73) (122)
Purchase of treasury shares, net - (16,884)
-------------------
Net cash from financing activities 122,609 280,306
-------------------
Net increase in cash and cash equivalents
during the period 144,281 26,350
Cash and cash equivalents at 1 January 655,455 367,533
------------ -------------------
Cash and cash equivalents at 31 March * 799,736 393,883
============ -------------------
Cash and cash equivalents comprise:
Cash and balances with banks (excluding
CBB Reserve balance and restricted cash) 738,916 331,692
Placements with financial institutions
(original maturities of 3 months or less) 60,820 62,191
------------ -------------------
799,736 393,883
============ ===================
* net of expected credit loss of US$ 55 thousand (31 March 2020:
US$ 8 thousand).
The accompanying notes 1 to 21 form an integral part of the
condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN RESTRICTED
INVESTMENT ACCOUNTS
for the three months ended 31 March 2021
31 March
2021 Balance at 1 January Balance at 31 March
(reviewed) 2021 Movements during the period 2021
Average Average
value Group's value
No of per Investment/ Gross Dividends fees as Administration No of per
units share Total (withdrawal) Revalua-tion income paid an agent expenses units share Total
Company (000) US$ US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's (000) US$ US$ 000's
----- ------- --------- ------------ ------------ --------- --------- --------- -------------- ----- ------- ---------
Mena Real
Estate
Company
KSCC 150 0.33 50 - - - - - - 150 0.33 50
Al Basha'er
Fund 12 7.91 95 (2) - - - - - 12 7.91 95
Safana
Investment
(RIA
1) 6,254 2.65 16,573 - - - - - - 6,254 2.65 16,573
Shaden Real
Estate
Investment
WLL (RIA 5) 3,434 2.65 9,100 - - - - - - 3,434 2.65 9,100
Locata
Corporation
Pty
Ltd (RIA 6) 2,633 1 2,633 - - - - - - 2,633 1 2,633
28,451 - - - - - - 28,451
========= ============ ============ ========= ========= ========= ============== =========
31 March 2020 Balance at 1 January Balance at 31 March
(unreviewed) 2020 Movements during the period 2020
Average Average
value Group's value
No of per Investment/ Gross Dividends fees as Administration No of per
units share Total (withdrawal) Revalua-tion income paid an agent expenses units share Total
Company (000) US$ US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's (000) US$ US$ 000's
----- ------- --------- ------------ ------------ --------- --------- --------- -------------- ----- ------- ---------
Mena Real
Estate
Company
KSCC 150 0.33 50 - - - - - - 150 0.33 50
Al Basha'er
Fund 13 7.91 103 (5) - - - - - 13 7.91 103
Safana
Investment
(RIA
1) 6,254 2.65 16,573 - - - - - - 6,254 2.65 16,573
Shaden Real
Estate
Investment
WLL (RIA 5) 3,434 2.65 9,100 - - - - - - 3,434 2.65 9,100
Locata
Corporation
Pty
Ltd (RIA 6) 2,633 1 2,633 - - - - - - 2,633 1 2,633
28,459 (5) - - - - - 28,459
========= ============ ============ ========= ========= ========= ============== =========
The accompanying notes 1 to 21 form an integral part of the
condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF SOURCES AND USES OF ZAKAH
AND CHARITY FUND
for the three months ended 31 March 2021 US$ 000's
31 March 31 March
2021 2020
(reviewed) (unreviewed)
Sources of zakah and charity fund
Contribution by the Group 610 578
Non-Islamic income 9 98
-------------- ---------------
Total sources 619 676
-------------- ---------------
Uses of zakah and charity fund
Contributions to charitable organisations (653) (54)
-------------- ---------------
Total uses (653) (54)
-------------- ---------------
0B Surplus of sources over uses (34) 622
Undistributed zakah and charity fund at
beginning of the period 5,343 5,407
-------------- ---------------
1B Undistributed zakah and charity fund
at end of the period 5,309 6,029
============== ===============
Represented by:
Zakah payable 1,521 962
Charity fund 3,788 5,067
-------------- --------------
5,309 6,029
============== ==============
The accompanying notes 1 to 21 form an integral part of the
condensed consolidated interim financial information.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
1 Reporting entity
The condensed consolidated interim financial information for the
three months ended 31 March 2021 comprise the financial information
of GFH Financial Group BSC (GFH or the "Bank") and its subsidiaries
(together referred to as "the Group").
The following are the principal subsidiaries consolidated in the
condensed consolidated interim financial information.
Effective
ownership
interests
Country of as at 31
Investee name incorporation March 2021 Activities
GFH Capital Limited United Arab 100% Investment
Emirates management
---------------- ------------ ---------------------
Khaleeji Commercial Bank Kingdom of 55.41% Islamic retail
BSC ('KHCB') Bahrain bank
---------------- ------------ ---------------------
Al Areen Project companies 100% Real estate
development
---------------- ------------ ---------------------
Falcon Cement Company 51.72% Cement manufacturing
BSC (c) ('FCC')
------------ ---------------------
GBCORP BSC (c) (GBCORP) 50.41% Islamic investment
firm
------------ ---------------------
Residential South Real 100% Real estate
Estate Development Company development
(RSRED)
------------ ---------------------
Athena Private School 100% Educational
for Special Education institution
WLL
---------------- ------------ ---------------------
Morocco Gateway Investment Cayman Islands 90.27% Real estate
Company ('MGIC') development
---------------- ------------ ---------------------
Tunis Bay Investment 82.97% Real estate
Company ('TBIC') development
---------------- ------------ ---------------------
Energy City Navi Mumbai 80.27% Real estate
Investment Company & development
Mumbai IT & Telecom Technology
Investment Company (together
"India Projects")
---------------- ------------ ---------------------
Gulf Holding Company State of Kuwait 51.18% Investment
KSCC in real estate
---------------- ------------ ---------------------
Roebuck A M LLP United Kingdom 60% Property
asset management
Company
---------------- ------------ ---------------------
The Bank has other investment holding companies, SPV's and
subsidiaries, which are set up to supplement the activities of the
Bank and its principal subsidiaries.
2 Basis of preparation
The condensed consolidated interim financial information of the
Group has been prepared in accordance with applicable rules and
regulations issued by the Central Bank of Bahrain ("CBB"). These
rules and regulations require the adoption of all Financial
Accounting Standards (FAS) issued by the Accounting and Auditing
Organisation of Islamic Financial Institutions (AAOIFI), except
for:
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
2 Basis of preparation (continued)
i. recognition of modification losses on financial assets
arising from payment holidays provided to customers impacted by
COVID-19 without charging additional profits, in equity instead of
profit or loss as required by FAS. Any other modification gain or
loss on financial assets are recognised in accordance with the
requirements of applicable FAS.;
ii. recognition of financial assistance received from the
government and/ or regulators as part of its COVID-19 support
measures that meets the government grant requirement, in equity,
instead of profit or loss as required by the statement on
"Accounting implications of the impact of COVID-19 pandemic" issued
by AAOIFI to the extent of any modification loss recognised in
equity as a result of (a) above. In case this exceeds the
modification loss amount, the balance amount is recognized in the
profit or loss account. Any other financial assistance is
recognised in accordance with the requirements of FAS; and
iii. recognition of specific impairment allowances and expected
credit losses in line with the specific CBB guidelines for
application of staging rules issued as part of its COVID-19
response measures.
The above framework for basis of preparation of the condensed
consolidated interim financial information is hereinafter referred
to as 'Financial Accounting Standards as modified by CBB'. The
modification to accounting policies have been applied
retrospectively.
Modification loss
During the quarter ended 31 March 2020, based on a regulatory
directive issued by the CBB as concessionary measures to mitigate
the impact of COVID-19, the one-off modification loss amounting to
US$ 25,295 thousand arising from the six month payment holiday
provided to financing customers without charging additional profits
was recognised directly in equity.
In line with the requirements of AAOIFI and the CBB rule book,
for matters not covered by AAOIFI standards, the group takes
guidance from the relevant International Financial Reporting
Standards ("IFRS") issued by the International Accounting Standards
Board ("IASB"). Accordingly, the condensed consolidated interim
financial information of the Group has been presented in condensed
form in accordance with the guidance provided by International
Accounting Standard 34 - 'Interim Financial Reporting', using
'Financial Accounting Standards as modified by CBB'.
These condensed consolidated interim financial information are
reviewed and not audited. The condensed consolidated interim
financial information does not include all the information required
for full annual financial statements and should be read in
conjunction with the Group's last audited consolidated financial
statements for the year ended 31 December 2020. However, selected
explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in the
Group's financial position and performance since the last annual
audited consolidated financial statements as at and for the year
ended 31 December 2020.
Due to the outbreak of the novel coronavirus (COVID-19) in early
2020, the Central Bank of Bahrain had exempted all public
shareholding companies and locally incorporated banks from
preparation and publication of their condensed consolidated interim
financial information for the three-month period ended 31 March
2020. Accordingly, the comparatives for the condensed consolidated
statement of financial position have been extracted from the
audited consolidated financial statements for the year ended 31
December 2020 and comparatives for the condensed consolidated
income statement, cash flows, changes in equity, changes in
restricted investment accounts and sources and uses of zakah and
charity fund have been extracted from the management accounts of
the Group for the three month period ended 31 March 2020 and
adjusted for accounting policy changes, if any, applied in
preparation of the annual consolidated financial statements for the
year ended 31 December 2020. Hence, the comparative information
included in the current period financial position, income
statement, cash flows, changes in equity, changes in restricted
investment accounts and sources and uses of zakah and charity fund
were not reviewed.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
3 Significant accounting policies
The accounting policies and methods of computation applied by
the Group in the preparation of the condensed cfaonsolidated
interim financial information are the same as those used in the
preparation of the Group's last audited consolidated financial
statements as at and for the year ended 31 December 2020, except
those arising from adoption of the following standards and
amendments to standards effective from 1 January 2021. The impact
of adoption of these standards and amendments is set out below.
a. Adoption of new standards during the period
i. FAS 32 - Ijarah
AAOIFI issued FAS 32 "Ijarah" in 2020, this standard is
effective for financial periods beginning on or after 1 January
2021. The standard supersedes the existing FAS 8 "Ijarah and Ijarah
Muntahia Bittamleek"
FAS 32 sets out principles for the classification, recognition,
measurement, presentation and disclosure of Ijarah (Ijarah asset,
including different forms of Ijarah Muntahia Bittamleek)
transactions entered into by the Islamic financial institutions as
a lessor and lessee.
The Group has applied FAS 32 "Ijarah" from 1 January 2021. The
impact of adoption of this standard is disclosed in (b) below.
(a) Change in accounting policy
Identifying an Ijarah
At inception of a contract, the Bank assesses whether the
contract is Ijarah, or contains an Ijarah. A contract is Ijarah, or
contains an Ijarah if the contract transfers the usufruct (but not
control) of an identified asset for a period of time in exchange
for an agreed consideration.
Measurement
For a contract that contains an Ijarah component and one or more
additional Ijarah or non-Ijarah components, the Bank allocates the
consideration in the contract to each Ijarah component on the basis
of relative stand-alone price of the Ijarah component and the
aggregate estimated stand-alone price of the non-Ijarah components,
that may be charged by the lessor, or a similar supplier, to the
lessee.
At the commencement date, a lessee shall recognise a
right-of-use (usufruct) asset and a net ijarah liability.
i) Right-of-use (usufruct) asset
On initial recognition, the lessee measures the right-of-use
asset at cost. The cost of the right-of-use asset comprises of:
-- The prime cost of the right-of-use asset;
-- Initial direct costs incurred by the lessee; and
-- Dismantling or decommissioning costs.
The prime cost is reduced by the expected terminal value of the
underlying asset. If the prime cost of the right-of-use asset is
not determinable based on the underlying cost method (particularly
in the case of an operating Ijarah), the prime cost at commencement
date may be estimated based on the fair value of the total
consideration paid/ payable (i.e. total Ijarah rentals) against the
right-of-use assets, under a similar transaction.
After the commencement date, the lessee measures the
right-of-use asset at cost less accumulated amortisation and
impairment losses, adjusted for the effect of any Ijarah
modification or reassessment.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
3 Significant accounting policies (continued)
The Bank amortises the right-of-use asset from the commencement
date to the end of the useful economic life of the right-of-use
asset, according to a systematic basis that is reflective of the
pattern of utilization of benefits from the right-of-use asset. The
amortizable amount comprises of the right-of-use asset less
residual value, if any.
The Bank determines the Ijarah term, including the contractually
binding period, as well as reasonably certain optional periods,
including:
-- Extension periods if it is reasonably certain that the Bank
will exercise that option; and/ or
-- Termination options if it is reasonably certain that the Bank
will not exercise that option.
The Bank carries out impairment assessment in line with the
requirements of FAS 30 "Impairment, Credit Losses and Onerous
Commitments" to determine whether the right-of-use asset is
impaired and to account for any impairment losses. The impairment
assessment takes into consideration the salvage value, if any. Any
related commitments, including promises to purchase the underlying
asset, are also considered in line with FAS 30 "Impairment, Credit
Losses and Onerous Commitments".
ii) Net ijarah liability
The net ijarah liability comprises of the gross Ijarah
liability, plus deferred Ijarah cost (shown as a
contra-liability).
The gross Ijarah liability shall be initially recognised as the
gross amount of total Ijarah rental payables for the Ijarah term.
The rentals payable comprise of the following payments for the
right to use the underlying asset during the Ijarah term:
-- Fixed Ijarah rentals less any incentives receivable;
-- Variable Ijarah rentals including supplementary rentals;
and
-- Payment of additional rentals, if any, for terminating the
Ijarah (if the Ijarah term reflects the lessee exercising the
termination option).
Advance rentals paid are netted-off with the gross Ijarah
liability.
Variable Ijarah rentals are Ijarah rentals that depend on an
index or rate, such as payments linked to a consumer price index,
financial markets, regulatory benchmark rates, or changes in market
rental rates. Supplementary rentals are rentals contingent on
certain items, such as additional rental charge after provision of
additional services or incurring major repair or maintanence. As of
31 March 2021, the Bank did not have any contracts with variable or
supplementary rentals.
After the commencement date, the Bank measures the net Ijarah
liability by:
-- Increasing the net carrying amount to reflect return on the
Ijarah liability (amortisation of deferred Ijarah cost);
-- Reducing the carrying amount of the gross Ijarah liability to
reflect the Ijarah rentals paid; and
-- Re-measuring the carrying amount in the event of reassessment
or modifications to Ijarah contract, or to reflect revised Ijarah
rentals.
-- The deferred Ijarah cost is amortised to income over the
Ijarah terms on a time proportionate basis, using the effective
rate of return method. After the commencement date, the Bank
recognises the following in the income statement:
-- Amortisation of deferred Ijarah cost; and
-- Variable Ijarah rentals (not already included in the
measurement of Ijarah liability) as and when the triggering events/
conditions occur
Ijarah contract modifications
After the commencement date, the Bank accounts for Ijarah
contract modifications as follows:
-- Change in the Ijarah term: re-calculation and adjustment of
the right-of-use asset, the Ijarah liability, and the deferred
Ijarah cost; or
-- Change in future Ijarah rentals only: re-calculation of the
Ijarah liability and the deferred Ijarah cost only, without
impacting the right-of- use asset.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
3 Significant accounting policies (continued)
An Ijarah modification is considered as a new Ijarah component
to be accounted for as a separate Ijarah for the lessee, if the
modification both additionally transfers the right to use of an
identifiable underlying asset and the Ijarah rentals are increased
corresponding to the additional right-of-use asset. For
modifications not meeting any of the conditions stated above, the
Bank considers the Ijarah as a modified Ijarah as of the effective
date and recognises a new Ijarah transaction. The Bank recalculates
the Ijarah liability, deferred Ijarah cost, and right-of-use asset,
and de-recognise the existing Ijarah transaction and balances.
Expenses relating to underlying asset
Operational expenses relating to the underlying asset, including
any expenses contractually agreed to be borne by the Bank, are
recognised by the Bank in income statement in the period incurred.
Major repair and maintenance, takaful, and other expenses
incidental to ownership of underlying assets (if incurred by lessee
as agent) are recorded as receivable from lessor.
Recognition exemptions and simplified accounting for the
lessee
A lessee may elect not to apply the requirements of Ijarah
recognition and measurement of recognizing right-of-use asset and
lease liability for the following:
-- Short-term Ijarah; and
-- Ijarah for which the underlying asset is of low value.
Short-term Ijarah exemption can be applied on a whole class of
underlying assets if they have similar characteristics and
operational utility. However, low-value Ijarah exemption can only
be applied on an individual asset/ Ijarah transaction, and not on
group/ combination basis.
Impact as lessor on accounting for Ijara Muntahia Bittamleek
contracts
There was no change in the accounting policies for Ijarah
Muntahia Bittamleek portfolio upon adoption of this standard.
(b) Impact on adoption of FAS 32
The impact of adoption of FAS 32 as at 1 January 2021 has
resulted in an increase in right-of-use asset and an increase in
lease liability as stated below. The lease contracts comprise
office premises, school premises, leasehold lands, ATM sites,
branches etc.
Total Assets Total Liabilities Total Equity
and EIAH
Closing balance (31 December
2020) 6,586,863 5,400,799 1,186,064
Impact on adoption:
Right-of-use asset 58,949 - -
Lease liability - 61,045 -
Opening impact of FAS 32 - - (2,096)
------------- ------------------ ----------------
Balance on date of initial
application of 1 January
2021 6,645,812 5,461,844 1,183,968
------------- ------------------ ----------------
b. New standards, amendments and interpretations issued but not yet effective
(i) FAS 38 Wa'ad, Khiyar and Tahawwut
AAOIFI has issued FAS 38 Wa'ad, Khiyar and Tahawwut in 2020. The
objective of this standard is to prescribe the accounting and
reporting principles for recognition, measurement and disclosures
in relation to shariah compliant Wa'ad (promise), Khiyar (option)
and Tahawwut (hedging) arrangements for Islamic financial
institutions. This standard is effective for the financial
reporting periods beginning on or after 1 January 2022.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
3 Significant accounting policies (continued)
This standard classifies Wa'ad and Khiyar arrangements into two
categories as follows:
a) "ancillary Wa'ad or Khiyar" which is related to a structure
of transaction carried out using other products i.e. Murabaha,
Ijarah Muntahia Bittamleek, etc.; and
b) "product Wa'ad and Khiyar" which is used as a stand-alone
Shariah compliant arrangement.
Further, the standard prescribes accounting for constructive
obligations and constructive rights arising from the stand-alone
Wa'ad and Khiyar products.
The Group is currently evaluating the impact of adopting this
standard.
4 Estimates and judgements
Preparation of condensed consolidated interim financial
information requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and
expenses. Actual results may differ from these estimates. The areas
of significant judgments made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were similar to those applied to the audited consolidated financial
statements as at and for the year ended 31 December 2020. However,
the process of making the required estimates and assumptions
involved further challenges due to the prevailing uncertainties
arising from COVID-19 and required use of management
judgements.
5 Financial risk management
The Group's financial risk management objectives and policies
are consistent with those disclosed in the audited consolidated
financial statements for the year ended 31 December 2020.
Regulatory ratios
a. Net stable funding Ratio (NSFR)
The objective of the NSFR is to promote the resilience of banks'
liquidity risk profiles and to incentivise a more resilient banking
sector over a longer time horizon. The NSFR limits overreliance on
short-term wholesale funding, encourages better assessment of
funding risk across all on-balance sheet and off-balance sheet
items, and promotes funding stability.
NSFR as a percentage is calculated as "Available stable funding"
divided by "Required stable funding".
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
5 Financial risk management (continued)
The Consolidated NSFR calculated as per the requirements of the
CBB rulebook, as of 31 March 2021 and 31 December 2020 is as
follows:
More than
6 months
Less and less
No Specified than than one Over Total weighted
No. Item Maturity 6 months year one year value
Available Stable Funding (ASF):
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1 Capital:
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Regulatory
2 Capital 1,028,633 - - 59,884 1,088,517
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
3 Other Capital
Instruments - - - - -
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
4 Retail deposits and deposits from small business customers:
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
5 Stable deposits - - - - -
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
Less stable
6 deposits - 795,510 484,387 189,296 1,341,203
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
7 Wholesale funding:
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
8 Operational
deposits - - - - -
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
Other Wholesale
9 funding - 2,229,507 940,625 759,322 1,724,180
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
10 Other liabilities:
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
11 NSFR
Shari'a-compliant
hedging contract
liabilities - - - - -
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
All other
liabilities
not included
in the above
12 categories - 90,097 13,108 132,086 132,086
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
13 Total ASF - - - - 4,285,986
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
Required Stable Funding (RSF):
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total NSFR
high-quality
liquid assets
14 (HQLA) - - - - 50,932
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
15 Deposits held
at other
financial
institutions
for operational
purposes - - - - -
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
16 Performing
financing
and sukuk/
securities: - - - - -
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
17 Performing
financial
to financial
institutions
by level 1 HQLA - - - - -
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
Performing
financing
to financial
institutions
secured by
non-level
1 HQLA and
unsecured
performing
financing
to financial
18 institutions - 624,279 - - 93,642
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
Performing
financing
to non- financial
corporate
clients,
financing to
retail and small
business
customers,
and financing
to sovereigns,
central banks
and PSEs, of
19 which: - 139,288 111,138 985,796 963,140
------------------ ----------------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
5 Financial risk management (continued)
More than
6 months
Less and less
No Specified than than one Over Total weighted
No. Item Maturity 6 months year one year value
With a risk
weight
of less than
or equal to 35%
as per the CBB
Capital Adequacy
20 Ratio guidelines - - - 35,931 23,355
------------------ -------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------------
21 Performing
residential
mortgages, of
which: - - - - -
------------------ -------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------------
22 With a risk
weight
of less than
or equal to 35%
under the CBB
Capital Adequacy
Ratio Guidelines - - - - -
------------------ -------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------------
Securities/sukuk
that are not
in default and
do not qualify
as HQLA,
including
exchange-traded
23 equities - 737,288 198,714 224,961 667,524
------------------ -------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------------
24 Other assets: - - - - -
------------------ -------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------------
25 Physical traded
commodities,
including gold - - - - -
------------------ -------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------------
26 Assets posted
as initial margin
for
Shari'a-compliant
hedging contracts
and
contributions
to default funds
of CCPs - - - - -
------------------ -------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------------
27 NSFR
Shari'a-compliant
hedging assets - - - - -
------------------ -------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------------
28 NSFR
Shari'a-compliant
hedging contract
liabilities
before
deduction of
variation
margin posted - - - - -
------------------ -------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------------
All other assets
not included
in the above
29 categories 2,616,643 - - - 2,616,643
------------------ -------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------------
30 OBS items - - - 17,401
------------------ -------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------------
31 Total RSF - 1,500,855 309,852 1,246,688 4,432,637
------------------ -------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------------
32 NSFR (%) - - - - 97%
------------------ -------------------------- ------------------------- --------------------------------- ----------------------------- -----------------------------------
More than
6 months
Less and less Total
No Specified than than one Over weighted
No. Item Maturity 6 months year one year value
Available Stable Funding (ASF):
-----------------------------------------------------------------------------------------------
Capital:
1 Regulatory Capital 1,009,571 - - 85,635 1,095,206
-------------------------- ------------- ---------- ---------- ---------- ----------
2 Other Capital Instruments - - - - -
-------------------------- ------------- ---------- ---------- ---------- ----------
Retail deposits and deposits from small business customers:
3 Stable deposits - - - - -
-------------------------- ------------- ---------- ---------- ---------- ----------
4 Less stable deposits - 793,480 306,688 231,458 1,221,609
-------------------------- ------------- ---------- ---------- ---------- ----------
Wholesale funding:
5 Operational deposits - - - - -
-------------------------- ------------- ---------- ---------- ---------- ----------
Other Wholesale
6 funding - 2,042,390 485,665 1,016,610 1,845,431
-------------------------- ------------- ---------- ---------- ---------- ----------
Other liabilities:
NSFR Shari'a-compliant
hedging contract
7 liabilities - - - - -
-------------------------- ------------- ---------- ---------- ---------- ----------
All other liabilities
not included in
8 the above categories - 81,718 29,287 182,725 182,725
-------------------------- ------------- ---------- ---------- ---------- ----------
9 Total ASF - - - - 4,344,971
-------------------------- ------------- ---------- ---------- ---------- ----------
Required Stable Funding (RSF):
-----------------------------------------------------------------------------------------------
Total NSFR high-quality
10 liquid assets (HQLA) - - - - 50,531
-------------------------- ------------- ---------- ---------- ---------- ----------
Deposits held at
other financial
institutions for
11 operational purposes - - - - -
-------------------------- ------------- ---------- ---------- ---------- ----------
Performing financing
12 and sukuk/ securities: - 453,447 20,628 906,357 838,420
-------------------------- ------------- ---------- ---------- ---------- ----------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021
5 Financial risk management (continued)
More
than
6 months
Less and less Total
No Specified than than Over weighted
No. Item Maturity 6 months one year one year value
13 Performing financial
to financial institutions
by level 1 HQLA - - - - -
------------------------------ ------------- ---------- ---------- ---------- ----------
Performing financing
to financial institutions
secured by non-level
1 HQLA and unsecured
performing financing
14 to financial institutions - 127,045 - 214,171 245,568
------------------------------ ------------- ---------- ---------- ---------- ----------
Performing financing
to non- financial
corporate clients,
financing to retail
and small business
customers, and financing
to sovereigns, central
banks and PSEs, of
15 which: - 147,516 101,279 - 124,398
------------------------------ ------------- ---------- ---------- ---------- ----------
With a risk weight
of less than or equal
to 35% as per the
CBB Capital Adequacy
16 Ratio guidelines - - - 22,064 14,342
------------------------------ ------------- ---------- ---------- ---------- ----------
17 Performing residential
mortgages, of which: - - - - -
------------------------------ ------------- ---------- ---------- ---------- ----------
18 With a risk weight
of less than or equal
to 35% under the CBB
Capital Adequacy Ratio
Guidelines - - - - -
------------------------------ ------------- ---------- ---------- ---------- ----------
Securities/sukuk that
are not in default
and do not qualify
as HQLA, including
19 exchange-traded equities - 260,664 19,500 395,881 535,963
------------------------------ ------------- ---------- ---------- ---------- ----------
20 Other assets: - - - - -
------------------------------ ------------- ---------- ---------- ---------- ----------
21 Physical traded commodities,
including gold - -
------------------------------ ------------- ---------- ---------- ---------- ----------
22 Assets posted as initial
margin for Shari'a-compliant
hedging contracts
and
contributions to
default funds of CCPs - - - - -
------------------------------ ------------- ---------- ---------- ---------- ----------
23 NSFR Shari'a-compliant
hedging assets - - - - -
------------------------------ ------------- ---------- ---------- ---------- ----------
24 NSFR Shari'a-compliant
hedging contract liabilities
before deduction of
variation
margin posted - - - - -
------------------------------ ------------- ---------- ---------- ---------- ----------
All other assets not
included in the above
25 categories 2,652,216 - - - 2,652,216
------------------------------ ------------- ---------- ---------- ---------- ----------
26 OBS items - - - - 13,743
------------------------------ ------------- ---------- ---------- ---------- ----------
27 Total RSF - 988,673 141,407 1,538,473 4,475,181
------------------------------ ------------- ---------- ---------- ---------- ----------
28 NSFR (%) - - - - 97%
------------------------------ ------------- ---------- ---------- ---------- ----------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
5 Financial risk management (continued)
b. Liquidity Coverage Ratio (LCR)
LCR has been developed to promote short-term resilience of a
bank's liquidity risk profile. The LCR requirements aim to ensure
that a bank has an adequate stock of unencumbered high-quality
liquidity assets (HQLA) that consists of assets that can be
converted into cash immediately to meet its liquidity needs for a
30-calendar day stressed liquidity period. The stock of
unencumbered HQLA should enable the Bank to survive until day 30 of
the stress scenario, by which time appropriate corrective actions
would have been taken by management to find the necessary solutions
to the liquidity crisis.
LCR is computed as a ratio of Stock of HQLA over the Net cash
outflows over the next 30 calendar days.
Average balance
31 March 2021 31 December
2020
--------------
Stock of HQLA 256,136 244,049
Net cashflows 120,716 103,188
LCR % 215% 240%
Minimum required by CBB 80% 80%
-------------- ------------
c. Capital Adequacy Ratio
31 March 2021 31 December
2020
CET 1 Capital before regulatory
adjustments 1,028,633 1,025,835
Less: regulatory adjustments - -
CET 1 Capital after regulatory
adjustments 1,028,633 1,025,835
T 2 Capital adjustments 59,884 76,062
Regulatory Capital 1,088,517 1,115,945
Risk weighted exposure:
Credit Risk Weighted Assets 7,608,664 7,647,064
Market Risk Weighted Assets 55,250 72,038
Operational Risk Weighted Assets 552,821 552,821
Total Regulatory Risk Weighted
Assets 8,216,735 8,271,923
Investment risk reserve (30%
only) 2 2
Profit equalization reserve (30%
only) 3 3
Total Adjusted Risk Weighted
Exposures 8,216,731 8,271,918
Capital Adequacy Ratio (CAR) 13.25% 13.49%
Tier 1 Capital Adequacy Ratio 12.52% 12.57%
Minimum CAR required by CBB 12.50% 12.50%
-------------- ------------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
6 Seasonality
Due to the inherent nature of the Group's business (investment
banking, commercial banking and leisure and hospitality management
business), the three-month results reported in this condensed
consolidated interim financial information may not represent a
proportionate share of the overall annual results.
7 Comparatives
The comparative figures have been regrouped in order to conform
with the presentation for current year. Such regrouping did not
affect previously reported profit for the period or total equity.
FAS 32 was adopted prospectively effective 1 January 2021 and
comparative figures have not been restated.
8 Appropriations
Appropriations, if any, are made when approved by the
shareholders.
In the shareholders meeting held on 6 April 2021, the following
were approved:
a) Cash dividend of 1.86% of the paid-up share capital amounting to US$ 17 million;
b) Stock dividend of 2.56% of the paid-up share capital amounting to US$ 25 million;
c) Appropriation of US$ 1,104 thousand towards charity, civil
society institutions and Zakat for the year 2020;
d) Transfer of US$ 4,509,500 to statutory reserve; and
e) The reduction of the capital by cancelling treasury shares
amounting up to a maximum of 141,335,000 shares worth up to
US$37,453,775 as a result of cancelling the market maker agreement,
subject to the approval of the competent regulatory
authorities.
The above transactions will be affected in the condensed
consolidated interim financial information for the six month period
ended 30 June 2021.
9 Treasury portfolio
31 March 31 December 31 March
2021 2020 2020
(reviewed) (audited) (unreviewed)
Placements with financial
institutions 165,034 169,998 374,026
Equity type investments
At fair value through income
statement
* Structured notes 370,830 368,431 340,318
Debt type investments
At fair value through equity
* Quoted sukuk 774,742 648,991 344,283
At amortised cost
* Quoted sukuk * 714,013 693,737 613,551
* Unquoted sukuk 3,493 3,493 3,493
Less: Impairment allowances (6,880) (6,104) (4,733)
2,021,232 1,878,546 1,670,938
=========== ============ =============
* Includes quoted sukuk of US$ 302,440 thousand (31 December
2020: US$ 302,260 thousand) pledged against term-financing of US$
200,085 thousand (31 December 2020: US$ 200,204 thousand).
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 'US$ 000's
10 Financing assets
31 March 31 December 31 March
2021 2020 2020
(reviewed) (audited) (unreviewed)
Murabaha 955,882 969,152 1,071,578
Musharaka 277 276 277
Wakala 239 239 13,280
Mudharaba 2,650 2,690 2,776
Istisnaa 4,047 3,565 5,946
Assets held-for-leasing 356,535 345,342 391,587
------------ -------------
1,319,630 1,321,264 1,485,444
Less: Impairment allowances (59,839) (53,998) (113,261)
----------- ------------ -------------
1,259,791 1,267,266 1,372,183
=========== ============ =============
Murabaha financing receivables are net of deferred profits of
US$ 44,979 thousand (31 December 2020: US$ 50,032 thousand).
The movement on financing assets and impairment allowances is as
follows:
Financing assets Stage 1 Stage 2 Stage 3 Total
Financing assets (gross) 995,020 192,125 132,485 1,319,630
Expected credit loss 16,484 8,345 35,010 59,839
--------
Financing assets (net) 978,536 183,780 97,475 1,259,791
======== ======== ======== =========
Impairment allowances Stage 1 Stage 2 Stage 3 Total
At 1 January 2021 21,173 6,255 28,926 56,354
Net movement between
stages (79) 674 (595) -
Net charge for the
period (4,610) 1,416 6,679 3,485
-------- ------- ------- -------
At 31 March 2021 16,484 8,345 35,010 59,839
======== ======= ======= =======
Financing assets Stage 1 Stage 2 Stage 3 Total
31 December 2020 (audited)
Financing assets (gross) 1,025,534 149,350 146,380 1,321,264
Expected credit loss 21,389 5,130 27,479 53,998
----------
Financing assets (net) 1,004,145 144,220 118,901 1,267,266
========== ======== ======== ==========
Impairment allowances Stage 1 Stage 2 Stage 3 Total
At 1 January 2020 12,149 7,241 88,319 107,709
Net movement between
stages 228 (4,512) 4,285 1
Net charge for the
period 9,298 2,401 (2,542) 9,157
Write-offs - - (29,204) (29,204)
Disposal (286) - (33,379) (33,665)
At 31 December 2020 21,389 5,130 27,479 53,998
======= ======== ========= =========
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
11 Investment in real estate
31 March 31 December 31 March
2021 2020 2020
(reviewed) (audited) (unreviewed)
Investment Property
* Land 481,315 481,315 384,915
* Building 63,757 63,757 45,190
----------- ------------ -------------
545,072 545,072 430,105
Development Property
* Land 767,640 761,032 780,253
* Building 507,971 506,211 476,357
----------- ------------ -------------
1,275,611 1,267,243 1,256,610
1,820,683 1,812,315 1,686,715
=========== ============ =============
12 Proprietary investments
31 March 31 December 31 March
2021 2020 2020
(reviewed) (audited) (unreviewed)
Equity type investments
At fair value through income
statement
* Unlisted fund 10,000 10,000 -
----------- ------------ -------------
10,000 10,000 -
----------- ------------ -------------
At fair value through equity
* Listed securities 13 19,060 15,308
* Unquoted securities 87,484 108,998 165,166
----------- ------------ -------------
87,497 128,058 180,474
----------- ------------ -------------
Equity-accounted investees 76,977 78,050 121,077
----------- ------------ -------------
174,474 216,108 301,551
=========== ============ =============
13 Co-investments
31 March 31 December 31 March
2021 2020 2020
(reviewed) (audited) (unreviewed)
At fair value through equity
* Unquoted securities 115,189 126,319 97,334
At fair value through income
statement
* Unquoted securities 5,260 - -
----------- ------------ -------------
120,449 126,319 97,334
=========== ============ =============
14 Term financing
31 March 31 December 31 March
2021 2020 2020
(reviewed) (audited) (unreviewed)
Murabaha financing 880,104 748,265 399,751
Sukuk 322,271 289,818 303,938
Ijarah financing 21,867 22,303 23,939
Other borrowings 28,962 28,691 27,323
---------- ----------- ------------
1,253,204 1,089,077 754,951
========== =========== ============
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
15 Impairment allowances
Three months ended
31 March 31 March
2021 2020
(reviewed) (ureviewed)
Expected credit loss on:
Bank balances 7 3
Treasury portfolio 1,215 102
Financing assets, net (note 10) 3,485 3,523
Other receivables 6 -
Commitments and financial guarantees 19 -
---------- -----------
4,732 3,628
Impairment on investment in equity securities 468 -
---------- -----------
5,200 3,628
========== ===========
16 Government assistance and subsidies
Governments and central banks across the world have responded
with monetary and fiscal interventions to stabilize economic
conditions. The Government of Kingdom of Bahrain has announced
various economic stimulus programmes ("Packages") to support
businesses in these challenging times.
For further details of cumulative government grants and
subsidies received in 2020, please also refer the 2020 annual
audited consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
17 Related party transactions
The significant related party balances and transactions as at 31
March 2021 are given below:
Related parties as per FAS
1
Assets
Significant under
shareholders management
/ entities (including
in which special
Associates Key directors purpose
31 March 2021 and joint management are and other
(reviewed) venture personnel interested entities) Total
Assets
Treasury portfolio - - 35,000 - 35,000
Financing assets - 9,523 28,994 21,017 59,534
Proprietary investments 113,045 - 25,267 142,093 280,406
Co-investments - - - 109,402 109,402
Receivables and
prepayments 5,455 - 31,063 161,425 197,943
Liabilities
Placements from
financial, non-financial
institutions and
individuals - 6,655 - - 6,655
Customer accounts 324 271 54,300 4,675 59,570
Payables and accruals - 627 4,014 38,174 42,815
Equity of investment
account holders 1,106 1,395 77,049 820 80,370
Income
Income from Investment
banking - - - 17,590 17,590
Income from commercial
banking
* Income from financing - 212 1,106 - 1,318
* Fee and other income (1,170) - 5 - (1,165)
* Less: Return to investment account holders (19) - (2,560) - (2,589)
* Less: Finance expense - (122) (772) - (894)
Income from proprietary
and co-investments (37) - 8,017 5,310 13,290
Treasury and other
income - - 656 316 972
Expenses
Operating expenses - 7,825 - 24 7,849
Transactions during
the period
Sale of proprietary
investment - - 27,063 62,002 89,065
----------- ------------- ------------- ------------ ---------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
17 Related party transactions (continued)
Related parties as per FAS
1
Assets
Significant under management
shareholders (including
/ entities special
Associates in which purpose
31 December 2020 and joint Key management directors and other
(audited) venture personnel are interested entities) Total
Assets
Treasury portfolio - - 35,000 - 35,000
Financing assets - 9,485 17,695 29,848 57,028
Proprietary investments 114,250 - 16,058 49,170 179,478
Co-investments - - - 70,715 70,715
Receivables and
prepayments 4,622 - - 132,616 137,238
Liabilities
Placements from
financial, non-financial
institutions and
individuals - 5,584 112,567 - 118,151
Customer accounts 358 225 17,995 3,212 21,790
Payables and accruals - 500 2,732 74,242 77,474
Equity of investment
account holders 1,095 639 99,580 865 102,179
31 March 2020
(unreviewed)
Income
Income from Investment
banking - - - 13,613 13,613
Income from commercial
banking
- Income from
financing - 212 1,106 - 1,318
- Fee and other
income - - 5 - 5
- Less: Return
to investment
account holders (19) - (2,560) (11) (2,589)
- Less: Finance
expense - (122) (772) - (894)
Income from proprietary
and co-investments (839) - - 2,246 1,407
Treasury and other
income - - - 316 316
Expenses
Operating expenses - 7,562 385 16 7,963
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 ` US$ 000's
18 Segment reporting
The Group is organised into business units based on their nature
of operations and independent reporting entities and has four
reportable operating segments namely real estate development,
investment banking, commercial banking and corporate and
treasury.
Real estate Investment Commercial Corporate
development banking banking and treasury Total
31 March 2021 (reviewed)
Segment revenue 4,578 17,590 17,172 51,049 90,388
Segment expenses (5,848) (18,267) (11,568) (35,367) (71,050)
Segment result (1,270) (677) 5,604 15,682 19,339
Segment assets 1,766,898 1,080,716 2,943,164 1,252,292 7,043,070
Segment liabilities 253,181 612,067 1,221,280 2,421,084 4,507,612
Other segment information
Impairment allowance - 912 3,506 782 5,200
Proprietary investments (Equity-accounted
investees) 5,702 18,295 52,980 - 76,977
Equity of investment account holders - - 1,071,630 269,682 1,341,312
Commitments 35,705 - 149,387 - 185,092
------------- ----------- ----------- -------------- -----------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 ` US$ 000's
18 Segment reporting (continued)
Real estate Investment Commercial Corporate
development banking banking and treasury Total
31 March 2020 (unreviewed)
Segment revenue 3,414 14,451 15,005 36,588 69,458
Segment expenses (5,848) (9,996) (9,358) (37,474) (62,676)
Segment result (2,434) 4,455 5,647 (886) 6,782
Segment assets 1,864,987 869,302 2,381,435 1,022,623 6,138,347
Segment liabilities 316,488 757,728 1,062,487 1,588,092 3,724,795
Other segment information
Impairment allowance - - 3,628 - 3,628
Proprietary investments (Equity-accounted
investees) 5,702 22,527 92,848 - 121,077
Equity of investment account holders - - 1,168,869 595 1,169,464
Commitments 28,564 - 177,199 - 205,763
------------- ----------- ----------- -------------- -----------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
19 Commitments and contingencies
The commitments contracted in the normal course of business of
the Group:
31 March 31 December 31 March
2021 2020 2020
US$ 000's US$ 000's US$ 000's
(reviewed) (audited) (unreviewed)
Undrawn commitments to extend
finance 106,995 83,260 149,886
Financial guarantees 48,066 27,003 27,313
Capital commitment for infrastructure
development projects 21,617 22,449 14,064
Commitment to lend 8,414 13,000 14,500
185,092 145,712 205,763
============ ============ ==============
Performance obligations
During the ordinary course of business, the Group may enter
performance obligations in respect of its infrastructure
development projects. It is the usual practice of the Group to pass
these performance obligations, wherever possible, on to the
companies that own the projects. In the opinion of the management,
no liabilities are expected to materialise on the Group at 31 March
2021 due to the performance of any of its projects.
Litigations, claims and contingencies
The Group has several claims and litigations filed against it in
connection with projects promoted by the Bank in the past and with
certain transactions. Further, claims against the Group entities
also have been filed by former employees and customers. Based on
the advice of the Bank's external legal counsel, the management is
of the opinion that the Bank has strong grounds to successfully
defend itself against these claims. Where applicable, appropriate
provision has been made in the books of accounts. No further
disclosures regarding contingent liabilities arising from any such
claims are being made by the Bank as the directors of the Bank
believe that such disclosures may be prejudicial to the Bank's
legal position.
20 Financial instruments
Fair values
Fair value is an amount for which an asset could be exchanged,
or a liability settled, between knowledgeable, willing parties in
an arm's length transaction. This represents the price that would
be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date.
Underlying the definition of fair value is a presumption that an
enterprise is a going concern without any intention or need to
liquidate, curtail materially the scale of its operations or
undertake a transaction on adverse terms.
The COVID-19 pandemic has resulted in a global economic slowdown
with uncertainties in the economic environment. The global capital
and commodity markets have also experienced great volatility and a
significant drop in prices. The Group's fair valuation exercise
primarily relies on quoted prices from active markets for each
financial instrument (i.e. Level 1 input) or using observable or
derived prices for similar instruments from active markets (i.e.
Level 2 input) and has reflected the volatility evidenced during
the period and as at the end of the reporting date in its
measurement of its financial assets and liabilities carried at fair
value. Where fair value measurements was based in full or in part
on unobservable inputs (i.e. Level 3), management has used its
knowledge of the specific asset/ investee, its ability to respond
to or recover from the crisis, its industry and country of
operations to determine the necessary adjustments to its fair value
determination process.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
20 Financial instruments (continued)
Fair value hierarchy
The table below analyses the financial instruments carried at
fair value, by valuation method. The different levels have been
defined as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e.as prices) or indirectly (i.e. derived from
prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
31 March 2021 (reviewed) Level Level Level Total
1 2 3
i) Proprietary investments
Investment securities carried
at fair value through:
* income statement - 10,000 - 10,000
* equity 13 - 87,484 87,497
------------- --------- --------- ----------
13 10,000 87,484 97,497
------------- --------- --------- ----------
ii) Treasury portfolio
Investment securities carried
at fair value through:
* income statement - 216,504 154,326 370,830
* equity 774,742 - - 774,742
------------- --------- --------- ----------
774,742 216,504 154,326 1,145,572
------------- --------- --------- ----------
iii) Co-investments
Investment securities carried
at fair value through
* equity - - 115,189 115,189
* income statement 5,260 5,260
------------- --------- --------- ----------
120,449 120,449
------------- --------- --------- ----------
774,755 226,504 362,259 1,363,518
============= ========= ========= ==========
31 March 2020 (unreviewed) Level Level Level Total
1 2 3
i) Proprietary investments
Investment securities carried
at fair value through:
* income statement - - - -
* Equity 15,308 - 165,166 180,474
--------- -------- --------- ---------
15,308 - 165,166 180,474
--------- -------- --------- ---------
ii) Treasury portfolio
Investment securities carried
at fair value through:
* income statement - 157,250 183,068 340,318
* equity 344,283 - - 344,283
--------- -------- --------- ---------
344,283 157,250 183,068 684,601
--------- -------- --------- ---------
iii) Co-investments
Investment securities carried
at fair value through equity - - 97,334 97,334
--------- -------- --------- ---------
359,591 157,250 445,568 962,409
========= ======== ========= =========
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the three months ended 31 March 2021 US$ 000's
20 Financial instruments (continued)
The following table analyses the movement in Level 3 financial
assets during the period:
31 March 31 December
2021 2020
(reviewed) (audited)
At beginning of the period 390,567 221,741
Gains (losses) in income statement 255 (1,326)
Transfer (to) / from Level 2 (924) 155,250
Disposals at carrying value (32,898) (41,685)
Purchases 3,972 63,623
Fair value changes during the period 1,287 (7,036)
------------ ------------
At end of the period 362,259 390,567
============ ============
21 ASSETS UNDER MANAGEMENT AND CUSTODIAL ASSETS
1. The Group provides corporate administration, investment
management and advisory services to its project companies, which
involve the Group making decisions on behalf of such entities.
Assets that are held in such capacity are not included in these
consolidated financial statements. At the reporting date, the Group
had assets under management of US$ 4,363 million (31 December 2020:
US$ 4,360 million) During the period, the Group had charged
management fees amounting to US$ 805 thousand (31 March 2020
(unreviewed): US$ 838 thousand) to its assets under management.
2. Custodial assets comprise of discretionary portfolio
management ('DPM') accepted from investors amounting to US$ 460,873
thousand out of which US$ 161,791 thousand has been invested to the
Bank's own investment products. Further, the Bank is also holding
Sukuk of US$ 38,056 thousand on behalf of the investors.
(The attached information do not form part of the condensed
consolidated interim financial information)
On 11 March 2020, the Coronavirus (COVID-19) outbreak was
declared, a pandemic by the World Health Organization (WHO) and has
rapidly evolved globally. This has resulted in a global slowdown
with uncertainties in the economic environment. This included
disruption to capital markets, deteriorating credit markets and
liquidity concerns. Authorities have taken various measures to
contain the spread including implementation of travel restrictions
and quarantine measures.
The pandemic as well as the resulting measures have had a
significant knock-on impact on the Bank and its principal
subsidiaries and its associates (collectively the "Group"). The
Group is actively monitoring the COVID-19 situation, and in
response to this outbreak, has activated its business continuity
plan and various other risk management practices to manage the
potential business disruption on its operations and financial
performance.
The Central Bank of Bahrain (CBB) announced various measures to
combat the effect of COVID- 19 to ease liquidity conditions in the
economy as well as to assist banks in complying with regulatory
requirements. Theses measure include the following:
-- Payment holiday for 6 months to eligible customers without any additional profits;
-- Concessionary repo to eligible retail banks at zero Percent;
-- Reduction of cash reserve ratio from 5% to 3%;
-- Reductions of liquidity coverage ratio (LCR) and net stable
funding ratio (NSFR) from 100% to 80%;
-- Aggregate of modification loss and incremental expected
credit losses (ECL) provisions for stage 1 and stage 2 from March
to December 2020 to be added to Tier 1 capital for two years ending
31 December 2020 and 31 December 2021. And to deduct this amount
proportionality from Tier 1 capital on an annual basis for three
years ending December 2022, 31 December 2023 and 31 December
2024.
The onset of COVID-19 and the aforementioned measures resulted
in the following significant effects to the financial position and
operations of the Group:
-- The CBB mandated 6-month payment holiday required the retail
banking subsidiary of the Group to recognize a one-off modification
loss directly in equity. The modification loss has been calculated
as the difference between the net present value of the modified
cash flows calculated using the original effective profit rate and
the carrying value of the financial assets on the date of
modification.
-- The Government of Kingdom of Bahrain has announced various
economic stimulus programmes ("Packages") to support businesses in
these challenging times. The Group received various forms of
financial assistance representing specified reimbursement of a
portion of staff costs, waives of fees, levies and utility charges
and zero cost funding received from the government and/or
regulators, in response to its COVID-19 support measures. This has
been recognized directly in the Group's equity.
-- The mandated 6 months payments holiday also included the
requirement to suspend minimum payments and service fees on credit
card balances and reduction in transaction related charges, this
resulted in a significant decline in the Group's fees income from
its retail banking operations.
-- The strain caused by COVID-19 on the local economy resulted
in a slow-down in the sale of new asset management products and
booking of new corporate financing assets by the Group. During the
three months ended 31 March 2021, financing assets bookings were
lower by 52.26% than the same period of the previous year.
-- Decreased consumer spending caused by the economic slow-down
in the booking of new consumer financing assets by the Bank,
whereas, deposit balances decreased compared to the same period of
the previous year. These effects partly alleviated the liquidity
stress faced by the Group due to the mandated 6 months payments
holiday. The Group's liquidity ratios and regulatory CAR were
impacted but it continues to meet the revised regulatory
requirement. The consolidated CAR, LCR and NSFR as of 31 March 2021
was 13.25%, 215% and 97% respectively.
-- The stressed economic situation resulted in the Bank
recognizing incremental ECL on its financing exposures.
-- The overall economic effect of the pandemic was also
reflected in the displacement and volatility in global debt and
capital markets in Q1 02021 due to which the group had to recognize
valuation losses on its Sukuk.
In addition to the above areas of impact, due to the overall
economic situation certain strategic business and investment
initiatives have been postponed until there is further clarity on
the recovery indicators and its impact on the business environment.
Overall, for the three-,month period ended 31 March 2021, the Bank
achieved a net profit of USD 16.57 million, which is higher than
USD 5.08 million in the same period of the previous year,
registering a increase of 226 %.
A summary of the significant areas of cumulative financial
impact on the Bahrain banking operations described above since
March 2020 is as follows:
Net Impact Net Impact Net Impact
recognized on the Group's recognized
in the Group's consolidated in the Group's
consolidated financial consolidated
income statement position owners' equity
USD' 000 USD' 000 USD' 000
Average reduction of cash
reserve - 26,058 -
Concessionary repo at 0%
(#) (737) 129,676 (737)
Modification loss - (25,072) (25,072)
Modification loss amortization 25,072 25,072 -
ECL attributable to COVID-19 (5,172) (5,172) -
Government grants - - 4,953
Lower fee income (retail
banking) (830) - -
----------------- ------------------- ---------------
# Concessionary repo was only provided in the prior year and no
such facilities continue in the current period.
Information reported in the table above only include components
or line items in the financial statements where impact was
quantifiable and material. Some of the amounts reported above
include notional loss of income or incremental costs and hence may
not necessarily reconcile with amounts reported in the interim
financial information for 31 March 2021.
The above supplementary information is provided to comply with
CBB circular number OG/259/2020 (reporting of Financial Impact of
COVID-19), dated 14 July 2020 and only covers impact on Bahrain
banking operations of the Group. This information should not be
considered as indication of the results if the entire year or
relied upon for any other purposes. Since the situation of COVID-19
is uncertain and is still evolving, the above impact is as of date
of preparation of this information. Circumstances may change which
may result in this information to be out-of-date. In addition, this
information does not represent a full comprehensive assessment of
COVID-19 impact on the Group. This information has not been subject
to a formal review by external auditors.
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END
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