Gfh Sukuk 25 Regulatory News (95HX)

Independent auditors' report on review of condensed consolidated interim financial information

To the Board of Directors

GFH Financial Group BSC

Manama, Kingdom of Bahrain

We have reviewed the accompanying 30 June 2023 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 30 June 2023;

· the condensed consolidated income statement for the three month and six-month periods ended 30 June 2023;

· the condensed consolidated statement of changes in owners' equity for the six-month period ended 30 June 2023;

· the condensed consolidated statement of cash flows for the six-month period ended 30 June 2023;

· the condensed consolidated statement of changes in restricted investment accounts for the six-month period ended 30 June 2023;

· the condensed consolidated statement of sources and uses of zakah and charity fund for the six-month period ended30 June 2023; 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 FAS 41, "Interim Financial Reporting". Our responsibility is to express a conclusion on this condensed consolidated interim financial information based on our review.

We conducted our review in accordance with the International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of 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.

Based on our review, nothing has come to our attention that causes us to believe that the accompanying 30 June 2023 condensed consolidated interim financial information is not prepared, in all material respects, in accordance with FAS 41, "Interim Financial Reporting".

10 August 2023

Note

30 June

2023

31 December 2022

30 June

2022

(reviewed)

(audited)

(reviewed)

ASSETS

Cash and bank balances

398,578

858,239

674,570

Treasury portfolio

8

4,944,127

4,210,020

3,355,545

Financing assets

9

1,535,395

1,435,238

1,457,758

Investment in real estate 

10

1,320,989

1,287,085

1,185,905

Proprietary investments

11

1,033,743

1,005,053

1,100,176

Co-investments

12

169,471

142,051

136,069

Receivables and other assets

13

726,535

589,869

540,197

Property and equipment

207,223

232,736

70,009

Total assets

10,336,061

9,760,291

8,520,229

LIABILITIES

Clients' funds

151,190

123,300

148,073

Placements from financial institutions

2,959,023

3,790,870

2,826,616

Placements from non-financial institutions and individuals

1,182,960

1,064,258

585,285

Customer current accounts

225,831

131,234

222,574

Term financing

14

1,975,706

1,942,198

1,988,847

Other liabilities

15

630,094

423,363

457,220

Total liabilities

7,124,804

7,475,223

6,228,615

Equity of investment account holders

16

2,159,380

1,213,674

1,249,544

OWNERS' EQUITY

Share capital

1,015,637

1,015,637

1,015,637

Treasury shares

(123,293)

(105,598)

(70,283)

Statutory reserve

36,995

36,995

27,970

Investment fair value reserve

(55,527)

(53,195)

(58,839)

Retained earnings

90,860

95,831

62,629

Share grant reserve

8,530

6,930

-

Total equity attributable to shareholders of the Bank

973,202

996,600

977,114

Non-controlling interests

78,675

74,794

64,956

Total owners' equity

1,051,877

1,071,394

1,042,070

Total liabilities, equity of investment account holders and owners' equity

10,336,061

9,760,291

8,520,229

Six months ended

Three months ended

Note

30 June

2023

(reviewed)

30 June

2022

(reviewed)

30 June

2023

(reviewed)

30 June

2022

(reviewed)

Investment banking

Deal related income

80,890

41,514

38,726

17,824

Asset management

9,627

3,584

6,704

2,595

90,517

45,098

45,430

20,419

Commercial banking

Income from financing

53,704

42,975

26,485

21,747

Treasury and investment income

45,464

26,617

19,951

14,822

Fee and other income

14,629

1,960

9,161

(1,363)

Less: Return to investment account holders

(27,385)

(18,638)

(13,241)

(10,123)

Less: Finance expense

(45,170)

(16,055)

(26,592)

(7,975)

41,242

36,859

15,764

17,108

Treasury and Proprietary Investments

Finance and treasury portfolio income, net

121,989

49,792

64,308

24,168

Direct investment income, net

4,152

3,247

1,097

757

Income from co-investments, net

6,566

9,128

2,846

4,694

Share of profit from equity-accounted investees

17,244

10,500

10,426

10,500

Income from sale of assets

5,713

1,932

5,641

-

Leasing and operating income

8,877

7,265

4,447

6,137

Other income, net

2,340

9,893

390

1,918

Finance expenses - Repo and FI

(124,874)

(51,580)

(63,518)

(29,590)

42,007

40,177

25,637

18,584

Total income

173,766

122,134

86,831

56,111

Other operating expenses

78,266

59,565

37,166

25,266

Finance expense - Term financing and others

31,359

20,062

10,598

9,072

Impairment allowances

17

6,952

(2,869)

6,316

(4,254)

Total expenses

116,577

76,758

54,080

30,084

Profit for the period

57,189

45,376

32,751

26,027

Attributable to:

Shareholders of the Bank

54,616

42,180

30,609

23,062

Non-controlling interests

2,573

3,196

2,142

2,965

57,189

45,376

32,751

26,027

Earnings per share

Basic and diluted earnings per share (US cents) 18

1.55

1.21

0.86

0.66

Attributable to shareholders of the Bank

Share capital

Treasury shares

Statutory reserve

Investment fair value reserve

Retained earnings

Share grant reserve

Total

Non-Controlling Interests

(NCI)

Total owners' equity

Balance at 1 January 2023

1,015,637

(105,598)

36,995

(53,195)

95,831

6,930

996,600

74,794

1,071,394

Profit for the period

-

-

-

-

54,616

-

54,616

2,573

57,189

Fair value changes during the period

-

-

-

(2,332)

-

-

(2,332)

(479)

(2,811)

Total recognised income and expense

-

-

-

(2,332)

54,616

-

52,284

2,094

54,378

Long Term Incentive Plan (LTIP)

-

-

-

-

-

1,600

1,600

-

1,600

Transfer to zakah and charity fund

-

-

-

-

(1,000)

-

(1,000)

-

(1,000)

Dividends declared for 2022

-

-

-

-

(56,261)

-

(56,261)

-

(56,261)

Purchase of treasury shares

-

(47,169)

-

-

-

-

(47,169)

-

(47,169)

Sale of treasury shares

-

29,474

-

-

(2,326)

-

27,148

-

27,148

Additional NCI without a change in control

-

-

-

-

-

-

-

5,747

5,747

Loss of control

-

-

-

-

-

-

-

(3,960)

(3,960)

Balance at 30 June 2023

1,015,637

(123,293)

36,995

(55,527)

90,860

8,530

973,202

78,675

1,051,877

Attributable to shareholders of the Bank

Non-Controlling Interests

(NCI)

Total owners' equity

Share capital

 Treasury shares

 Statutory reserve

Investment fair value reserve

Foreign currency translation reserve

Retained earnings

Total

Balance at 1 January 2022

1,000,637

(48,498)

27,970

(28,561)

(70,266)

81,811

963,093

205,027

1,168,120

Profit for the period

-

-

-

-

-

42,180

42,180

3,196

45,376

Transfer on reclassification from FVTE to amortised cost

-

-

-

41,320

-

-

41,320

-

41,320

Fair value changes during the period

-

-

-

(69,084)

-

-

(69,084)

(2,335)

(71,419)

Transfer to income statement on disposal of sukuk

-

-

-

(2,514)

-

-

(2,514)

-

(2,514)

Total recognised income and expense

-

-

-

(30,278)

-

42,180

11,902

861

12,763

Bonus Shares Issued

15,000

-

-

-

-

(15,000)

-

-

-

Dividend Declared

-

-

-

-

-

(45,000)

(45,000)

-

(45,000)

Purchase of treasury shares

-

(53,650)

-

-

-

-

(53,650)

-

(53,650)

Transfer to Zakah and Charity Fund

-

-

-

-

-

(1,483)

(1,483)

-

(1,483)

Sale of treasury shares

-

31,865

-

-

-

121

31,986

-

31,986

Transferred to income statement on deconsolidation of subsidiaries

-

-

-

-

70,266

-

70,266

-

70,266

Adjusted on deconsolidation of subsidiaries

-

-

-

-

-

-

-

(141,295)

(141,295)

Additional NCI on acquisition of subsidiary

-

-

-

-

-

-

-

363

363

Balance at 30 June 2022

1,015,637

(70,283)

27,970

(58,839)

-

62,629

977,114

64,956

1,042,070

30 June 2023

(reviewed)

30 June 2022 (reviewed)

OPERATING ACTIVITIES

Profit for the period

57,189

45,376

Adjustments for:

Treasury and proprietary investments

(42,007)

(40,117)

Foreign exchange loss/ (gain)

2,238

(1,305)

Finance expense

31,359

(20,062)

Impairment allowances

6,952

(2,869)

Depreciation and amortisation

4,299

776

60,030

(18,201)

Changes in:

Placements with financial institutions (original maturities of more than 3 months)

418,680

-

Financing assets

(106,914)

(146,756)

Receivable and other assets

(97,132)

(8,709)

CBB Reserve and restricted bank balance

(8,230)

(982)

Clients' funds

27,890

(68,689)

Customer current accounts

94,597

89,528

Placements from financial, non-financial institutions and individuals

(713,145)

359,808

Equity of investment account holders

945,706

(108,800)

Other liabilities

153,685

74,136

Net cash from operating activities

775,167

171,335

INVESTING ACTIVITIES

Payments for purchase of equipment

(2,581)

(74)

Purchase of proprietary investment securities, net

(52,891)

415

Purchase of treasury portfolio, net

(237,445)

(269,077)

Cash acquired on acquisition of subsidiary

1,346

407

Cash paid on acquisition of subsidiary

(7,000)

(5,215)

Proceeds from sale of real estate

11,771

-

Dividends received from proprietary investments and co-investments

20,659

25,528

Payment for purchase of real estate

(12,026)

(22,652)

Net cash used in investing activities

(278,167)

(270,668)

FINANCING ACTIVITIES

Financing liabilities, net

33,773

149,146

Purchase of GFH sukuk, net

-

(2,028)

Finance expense paid

(153,228)

(82,531)

Dividends paid

(57,861)

(44,147)

Sale/(Purchase) of treasury shares,net

(17,694)

(21,785)

Net cash used in financing activities

(195,010)

(1,345)

Net increase / (decrease) in cash and cash equivalents during the period

301,990

(100,678)

Cash and cash equivalents at 1 January

1,041,064

844,344

Cash and cash equivalents at 30 June *

1,343,054

743,666

Cash and cash equivalents comprise:

Cash and balances with banks (excluding CBB reserve balance and restricted cash)

320,957

615,504

Placements with financial institutions (original maturities of 3 months or less)

1,022,097

128,162

1,343,054

743,666

30 June 2023 (reviewed)

Balance at 1 January 2023

Movements during the period

Balance at 30 June 2023

Company

No of units (000)

Average value per share US$

Total US$ 000's

Investment/ (withdrawal) US$ 000's

Revalua-tion 

US$ 000's

Gross income US$ 000's

Dividends paid

US$ 000's

Group's fees as an agent US$ 000's

Administration expenses US$ 000's

No of units (000)

Average value per share US$

Total US$ 000's

Mena Real Estate Company KSCC

150

0.33

50

-

-

-

-

-

-

150

0.33

50

Al Basha'er Fund

12

7.87

94

-

-

-

-

-

-

12

7.87

94

Safana Investment (RIA 1)

1,247

2.65

3,305

-

-

-

-

-

-

1,247

2.65

3,305

Shaden Real Estate Investment

WLL (RIA 5)

269

2.65

713

-

-

-

-

-

-

269

2.65

713

4,162

4,162

30 June 2022 (reviewed)

Balance at 1 January 2022

Movements during the period

Balance at 30 June 2022

Company

No of units (000)

Average value per share US$

Total US$ 000's

Investment/ (withdrawal) US$ 000's

Revaluation 

US$ 000's

Gross income US$ 000's

Dividends paid

US$ 000's

Group's fees as an agent US$ 000's

Administration expenses US$ 000's

No of units (000)

Average value per share US$

Total US$ 000's

Mena Real Estate Company KSCC

150

0.33

50

-

-

-

-

-

-

150

0.33

50

Al Basha'er Fund

12

7.87

94

-

-

-

-

-

-

12

7.87

94

Safana Investment (RIA 1)

1,247

2.65

3,305

-

-

-

-

-

-

1,247

2.65

3,305

Shaden Real Estate Investment

WLL (RIA 5)

269

2.65

713

-

-

-

-

-

-

269

2.65

713

4,162

-

-

-

-

-

-

4,162

30 June

2023

(reviewed)

30 June

2022

(reviewed)

Sources of zakah and charity fund

Contribution by the Group

2,472

2,529

Non-Islamic income

543

21

Total sources

3,015

2,550

Uses of zakah and charity fund

Contributions to charitable organisations

(1,666)

(1,775)

Total uses

(1,666)

(1,775)

0BSurplus of sources over uses

1,349

775

Undistributed zakah and charity fund at beginning of the period

5,924

5,196

1BUndistributed zakah and charity fund at end of the period

7,273

5,971

Represented by:

Zakah payable

1,675

826

Charity fund

5,598

5,145

7,273

5,971

Investee name

Country of incorporation

Effective ownership interests as at 30 June 2023

Activities

GFH Partners Ltd

United Arab Emirates

100%

Investment management

GFH Capital S.A.

Saudi Arabia

100%

Investment management

GFH Financial Group Limited

United Kingdom

100 %

Hold Co for Investment management

Khaleeji Bank BSC ('KHB')

Kingdom of Bahrain

85.14%

Islamic retail bank

Al Areen Project companies

100%

Real estate development

GBCORP Tower Group Ltd

62.91%

Own & lease real estate

GBCORP B.S.C (c)*

42.91%

Islamic investment firm

Residential South Real Estate Development Company W.L.L. (RSRED)

100%

Real estate development

Harbour House Row Towers W.L.L.

100%

Own & lease real estate

Al Areen Hotels W.L.L.

100%

Hospitality management services

Britus International School for Special Education W.L.L

100%

Educational institution

Gulf Holding Company KSCC

State of Kuwait

53.63%

Investment in real estate

SQ Topco II LLC

United States

51%

Property asset management Company

Big Sky Asset Management LLC

United States

51%

Real estate investment manager

Roebuck A M LLP

United Kingdom

60%

Property asset management Company

No.

Item

 No Specified Maturity

 Less than 6 months

 More than 6 months and less than one year

 Over one year

 Total weighted value

Available Stable Funding (ASF):

1

Capital:

2

Regulatory Capital

966,799

-

-

58,002

1,024,801

3

Other Capital Instruments

-

-

-

-

-

4

Retail deposits and deposits from small business customers:

5

Stable deposits

139,154

37,534

20,217

188,071

6

Less stable deposits

-

1,923,203

526,675

229,429

2,434,320

7

Wholesale funding:

8

Operational deposits

9

Other Wholesale funding

-

4,085,457

664,714

1,230,386

2,549,645

10

Other liabilities:

11

NSFR Shari'a-compliant hedging contract liabilities

-

-

-

12

All other liabilities not included in the above categories

-

518,418

4,345

38,021

38,021

13

Total ASF

6,234,857

Required Stable Funding (RSF):

14

Total NSFR high-quality liquid assets (HQLA)

2,192,181

-

-

-

109,136

15

Deposits held at other financial institutions for operational purposes

16

Performing financing and sukuk/ securities:

-

1,629,287

-

952,685

1,054,175

17

Performing financial to financial institutions by level 1 HQLA

-

-

-

-

-

18

Performing financing to financial institutions secured by non-level 1 HQLA and unsecured performing financing to financial institutions

-

16,598

-

1,137,067

974,806

19

Performing financing to non- financial corporate clients, financing to retail and small business customers, and financing to sovereigns, central banks and PSEs, of which:

-

205,680

141,959

240,090

329,878

20

With a risk weight of less than or equal to 35% as per the CBB Capital Adequacy Ratio guidelines

-

-

-

-

-

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

-

-

-

-

-

23

Securities/sukuk that are not in default and do not qualify as HQLA, including exchange-traded equities

-

943,524

26,988

583,953

1,069,209

24

Other assets:

25

Physical traded commodities, including gold

-

-

26

Assets posted as initial margin for Shari'a-compliant hedging contracts contracts andcontributions to default funds of CCPs

-

-

-

-

27

NSFR Shari'a-compliant hedging assets

-

-

-

3,035

5 Financial risk management (continued)

28

NSFR Shari'a-compliant hedging contract liabilities before deduction of variationmargin posted

-

-

-

-

29

All other assets not included in the above categories

2,337,031

-

-

-

2,337,031

30

OBS items

-

-

-

57,876

31

Total RSF

2,795,089

168,948

2,913,795

5,935,146

32

NSFR(%)

105%

No.

Item

No Specified Maturity

Less than 6 months

More than 6 months and less than one year

Over one year

Total weighted value

Available Stable Funding (ASF):

1

Capital:

2

Regulatory Capital

1,004,974

-

-

53,171

1,058,145

3

Other Capital Instruments

-

-

-

-

-

4

Retail deposits and deposits from small business customers:

5

Stable deposits

-

158,056

15,076

26,054

190,530

6

Less stable deposits

-

1,684,867

423,803

328,355

2,226,158

7

Wholesale funding:

8

Operational deposits

-

-

-

-

-

9

Other Wholesale funding

-

3,548,055

931,464

1,303,542

2,656,368

10

Other liabilities:

11

NSFR Shari'a-compliant hedging contract liabilities

-

-

-

12

All other liabilities not included in the above categories

-

311,371

-

43,201

43,201

13

Total ASF

6,174,402

Required Stable Funding (RSF):

14

Total NSFR high-quality liquid assets (HQLA)

1,761,766

87,048

15

Depsoits held at other financial institutions for opetational purposes

16

Performing financing and sukuk/ securities:

1,576,916

790,425

908,398

17

Performing financial to financial institutions by level 1 HQLA

-

-

-

-

-

18

Performing financing to financial institutions secured by non-level 1 HQLA and unsecured performing financing to financial institutions

-

-

94,704

1,050,345

940,145

19

Performing financing to non- financial corporate clients, financing to retail and small business customers, and financing to sovereigns, central banks and PSEs, of which:

-

294,926

102,548

279,352

380,316

20

With a risk weight of less than or equal to 35% as per the CBB Capital Adequacy Ratio guidelines

-

-

-

-

-

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

-

-

-

-

-

No.

Item

No Specified Maturity

Less than 6 months

More than 6 months and less than one year

Over one year

Total weighted value

23

Securities/sukuk that are not in default and do not qualify as HQLA, including exchange-traded equities

-

945,435

388,631

426,531

1,093,564

24

Other assets:

-

-

-

-

-

25

Physical traded commodities, including gold

-

-

26

Assets posted as initial margin for Shari'a-compliant hedging contracts contracts andcontributions to default funds of CCPs

-

-

-

-

27

NSFR Shari'a-compliant hedging assets

-

-

-

-

28

NSFR Shari'a-compliant hedging contract liabilities before deduction of variationmargin posted

-

-

-

-

29

All other assets not included in the above categories

2,090,285

-

-

-

2,090,285

30

OBS items

-

-

-

43,344

31

Total RSF

2,817,278

585,882

2,546,653

5,543,102

32

NSFR(%)

111%

Average balance

30 June 2023

(reviewed)

31 December 2022

(audited)

Stock of HQLA

495,139

272,429

Net cashflows

214,439

213,055

LCR %

237%

134%

Minimum required by CBB

100%

100%

30 June 2023

(reviewed)

31 December 2022

(audited)

CET 1 Capital before regulatory adjustments

992,734

1,020,249

Less: regulatory adjustments

-

-

CET 1 Capital after regulatory adjustments

992,734

1,020,249

T 2 Capital adjustments

60,243

52,628

Regulatory Capital

1,052,977

1,072,877

Risk weighted exposure:

Credit Risk Weighted Assets

6,459,029

6,799,081

Market Risk Weighted Assets

47,926

54,624

Operational Risk Weighted Assets

436,932

431,784

Total Regulatory Risk Weighted Assets

6,943,887

7,285,489

Investment risk reserve (30% only)

2

2

Profit equalization reserve (30% only)

3

3

Total Adjusted Risk Weighted Exposures

6,943,882

7,285,484

Capital Adequacy Ratio (CAR)

15.16%

14.73%

Tier 1 Capital Adequacy Ratio

14.30%

14.00%

Minimum CAR required by CBB

12.50%

12.50%

30 June

2023

31 December 2022

30 June

2022

(reviewed)

(audited)

(reviewed)

Placements with financial institutions

1,079,143

729,311

128,162

Derivatives

At fair value through income statement

3,035

2,675

-

Equity type investments

At fair value through equity

- Quoted sukuk

33,008

32,966

32,844