10 Aug 2023 15:34
GFH FINANCIAL GROUP BSC
CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
30 JUNE 2023 |
Commercial registration : 44136 (registered with Central Bank of Bahrain
as an Islamic wholesale Bank)
Registered Office : Bahrain Financial Harbour
Office: 2901, 29th Floor
Building 1398, East Tower
Block: 346, Road: 4626
Manama, Kingdom of Bahrain
Telephone +973 17538538
Directors : Ghazi Faisal Ebrahim Alhajeri, Chairman
Edris Mohammed Rafi Alrafi, Vice Chairman
Hisham Ahmed Alrayes
Rashid Nasser Al Kaabi
Ali Murad
Fawaz Talal Al Tamimi
Darwish Al Ketbi
Yusuf Abdulla Taqi
Chief Executive Officer : Hisham Ahmed Alrayes
Auditors : KPMG Fakhro
CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the six months ended 30 June 2023
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
Independent auditors' report on review of condensed consolidated interim financial information |
To the Board of Directors GFH Financial Group BSC Manama, Kingdom of Bahrain |
Introduction |
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. |
Scope of 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. |
Conclusion |
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 |
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023 US$ 000's
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 |
The Board of Directors approved the condensed consolidated interim financial information on 10 August 2023 and signed on its behalf by:
Ghazi Faisal Ebrahim Alhajeri Hisham Alrayes
Chairman Chief Executive Officer & Board member
The accompanying notes 1 to 24 form an integral part of the condensed consolidated interim financial information.
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 30 June 2023 US$ 000's
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 |
Ghazi Faisal Ebrahim Alhajeri Hisham Alrayes
Chairman Chief Executive Officer & Board member
The accompanying notes 1 to 24 form an integral part of the condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN OWNERS' EQUITY
for the six months ended 30 June 2023 US$ 000's
| 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 |
The accompanying notes 1 to 24 form an integral part of the condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN OWNERS' EQUITY
for the six months ended 30 June 2023 (continued) US$ 000's
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 |
The accompanying notes 1 to 24 form an integral part of the condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS-
for the six months ended 30 June 2023 US$ 000's
| 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 |
* net of expected credit loss of US$ 28 thousands (30 June 2022: US$ 21 thousands).
The accompanying notes 1 to 24 form an integral part of the condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN RESTRICTED INVESTMENT ACCOUNTS
for the six months ended 30 June 2023
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 |
The accompanying notes 1 to 24 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 six months ended 30 June 2023 US$ 000's
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 |
The accompanying notes 1 to 24 form an integral part of the condensed consolidated interim financial information.
1 Reporting entity
The condensed consolidated interim financial information for the six months ended 30 June 2023 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.
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 |
*Control though majority representation on board of directors.
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 Financial Accounting Standard FAS 41, Interim Financial Reporting ("FAS 41") issued by the Accounting and Auditing Organisation of Islamic Financial Institutions ("AAOIFI"). In line with the requirements of AAOIFI and the Central Bank of Bahrain (CBB) rule book, for matters not covered under AAOIFI standards the group uses guidance from the relevant International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB").
These condensed consolidated interim financial information are reviewed and not audited. The condensed consolidated interim financial information of the Group does not contain all information and disclosures required for the annual consolidated financial statements and should be read in conjunction with the Group's audited annual consolidated financial statements for the year ended 31 December 2022. 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 consolidated financial statements as at and for the year ended 31 December 2022.
3 Significant accounting policies
The accounting policies and methods of computation applied by the Group in the preparation of the condensed consolidated 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 2022, except those arising from certain changes in segment reporting and adoption of the following standards and amendments to standards effective from 1 January 2023. The impact of adoption of these standards and amendments is set out below.
a. New standards, amemdments and interpetations issued and effective for annual periods beginning on or after 1 January 2023:
(i) FAS 39 Financial Reporting for Zakah
AAOIFI has issued FAS 39 Financial Reporting for Zakah in 2021. The objective of this standard is to establish principles of financial reporting related to Zakah attributable to different stakeholders of an Islamic financial Institution. This standard supersedes FAS 9 Zakah and is effective for the financial reporting periods beginning on or after 1 January 2023.
This standard shall apply to institution with regard to the recognition, presentation and disclosure of Zakah attributable to relevant stakeholders. While computation of Zakah shall be applicable individually to each institution within the Group, this standard shall be applicable on all consolidated and separate / standalone financial statements of an institution.
This standard does not prescribe the method for determining the Zakah base and measuring Zakah due for a period. An institution shall refer to relevant authoritative guidance for determination of Zakah base and to measure Zakah due for the period. (for example: AAOIFI Shari'a standard 35 Zakah, regulatory requirements or guidance from Shari'a supervisory board, as applicable).
An institution obliged to pay Zakah by law or by virtue of its constitution documents shall recognise current Zakah due for the period as an expense in its financial statements. Where Zakah is not required to be paid by law or by virtue of its constitution documents, and where the institution is considered as an agent to pay Zakah on behalf of certain stakeholders, any amount paid in respect of Zakah shall be adjusted with the equity of the relevant stakeholders.
The Group has adopted this standard and will provide the necessary additional disclosures in its annual financial statements.
3. Significant accounting policies (continued)
a. New standards, amemdments and interpetations issued and effective for annual periods beginning on or after 1 January 2023: (continued)
(ii) FAS 41 Interim financial reporting
This standard prescribes the principles for the preparation of condensed interim financial information and the relevant presentation and disclosure requirements, emphasizing the minimum disclosures specific to Islamic financial institutions in line with various financial accounting standards issued by AAOIFI. This standard is also applicable to the institutions which prepare a complete set of financial statements at interim reporting dates in line with the respective FAS's.
This standard is effective for financial statements for the period beginning on or after 1 January 2023. The Group has adopted this standard for the basis of preparation of its condensed consolidated interim financial information. The adoption of this standard did not have any significant impact on the Group's interim financial information.
b. New standards, amendments and interpretations issued but not yet effective
(i) FAS 1 General Presentation and Disclosures in the Financial Statements
AAOIFI has issued the revised FAS 1 General Presentation and Disclosures in the Financial Statements in 2021. This standard describes and improves the overall presentation and disclosure requirements prescribed in line with the global best practices and supersedes the earlier FAS 1. It is applicable to all the Islamic Financial Institutions and other institutions following AAOIFI FAS's. This standard is effective for the financial reporting periods beginning on or after 1 January 2024 with an option to early adopt.
The revision of FAS 1 is in line with the modifications made to the AAOIFI conceptual framework for financial reporting.
Some of the significant revisions to the standard are as follows:
a) Revised conceptual framework is now integral part of the AAOIFI FAS's;
b) Definition of Quasi equity is introduced;
c) Definitions have been modified and improved;
d) Concept of comprehensive income has been introduced;
e) Institutions other than Banking institutions are allowed to classify assets and liabilities as current and non-current;
f) Disclosure of Zakah and Charity have been relocated to the notes;
g) True and fair override has been introduced;
h) Treatment for change in accounting policies, change in estimates and correction of errors has been introduced;
i) Disclosures of related parties, subsequent events and going concern have been improved;
j) Improvement in reporting for foreign currency, segment reporting;
k) Presentation and disclosure requirements have been divided into three parts. First part is applicable to all institutions, second part is applicable only to banks and similar IFI's and third part prescribes the authoritative status, effective date an amendments to other AAOIFI FAS's; and
l) The illustrative financial statements are not part of this standard and will be issued separately.
The Group is assessing the impact of adoption of this standard and expects changes in certain presentation and disclosures in its consolidated financial statement in line with the wider market practice.
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 2022.
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 2022.
Regulatory ratios
a. Net stable funding Ratio (NSFR)
NSFR as a percentage is calculated as "Available stable funding" divided by "Required stable funding".
5 Financial risk management (continued)
The Consolidated NSFR calculated as per the requirements of the CBB rulebook, is as follows:
As at 30 June 2023
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% |
As at 31 December 2022
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 | - | - | - | - | - |
5 FINANCIAL RISK MANAGEMENT (continued)
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% |
b. Liquidity Coverage Ratio (LCR)
LCR is computed as a ratio of Stock of High Quality Liquid Assets (HQLA) over the Net cash outflows over the next 30 calendar days.
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% |
5 FINANCIAL RISK MANAGEMENT (continued)
c. Capital Adequacy Ratio
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% |
6 Seasonality
Due to the inherent nature of the Group's business (investment banking, commercial banking and Proprietary and treasury), the six-month results reported in this condensed consolidated interim financial information may not represent a proportionate share of the overall annual results.
7 Comparatives
Comparative figures have been regrouped in order to conform with the presentation for current period. Such regrouping did not affect previously reported profit for the period or total equity.
8 Treasury portfolio
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 |
| ||||||
|
| |||||||||
At fair value through income statement |
|
|
| |||||||
- Structured notes* | 390,631 | 371,978 | 365,964 |
| ||||||
- Quoted fund | 28,803 | - | - |
| ||||||
| ||||||||||
Debt type investments |
| |||||||||
At fair value through equity* |
| |||||||||
- Quoted sukuk | 805,585 | 846,205 | 849,750 |
| ||||||
| ||||||||||
At amortised cost |
|
|
| |||||||
- Quoted sukuk * | 2,619,503 | 2,240,354 | 1,987,956 |
| ||||||
- Unquoted sukuk | 3,494 | 3,494 | 3,494 |
| ||||||
| ||||||||||
Less: Impairment allowances | (19,075) | (16,963) | (12,625) |
| ||||||
| ||||||||||
4,944,127 | 4,210,020 | 3,355,545 | ||||||||
* Short-term and medium-term facilities of US$ 1,689,965 (31 December 2022: US$ 1,653,875 thousand) are secured by quoted sukuk of US$ 2,708,957 (31 December 2022: US$ 2,506,041 thousand), structured notes of US$ 390,631 (31 December 2022: US$ 371,928 thousand).
Amortised cost sukuk of US$ 2,619,503 thousand (31 December 2022: US$ 2,240,354 thousand) had a market value of US$ 2,443,410 thousand as at 30 June 2023 (31 December 2022: US$ 2,085,938 thousand).
9 Financing assets
30 June 2023 |
| 31 December 2022 | 30 June 2022 | ||
| (reviewed) | (audited) | (reviewed) | ||
Murabaha | 1,016,521 | 982,170 | 1,066,393 | ||
Wakala | 239 | 239 | 239 | ||
Mudharaba | 18,652 | 17,336 | 12,436 | ||
Ijarah assets | 571,112 | 499,865 | 449,360 | ||
1,606,524 | 1,499,610 | 1,528,428 | |||
Less: Impairment allowances | (71,129) | (64,372) | (70,670) | ||
1,535,395 | 1,435,238 | 1,457,758 |
Murabaha financing receivables are net of deferred profits of US$ 52,220 thousands (31 December 2022: US$ 50,133 thousands).
9 Financing assets (continued)
The movement on financing assets and impairment allowances is as follows:
Financing assets | Stage 1 | Stage 2 | Stage 3 | Total |
|
|
|
|
|
Financing assets (gross) | 1,219,642 | 291,391 | 95,491 | 1,606,524 |
Expected credit loss | (6,144) | (28,374) | (36,611) | (71,129) |
Financing assets (net) | 1,213,498 | 263,017 | 58,880 | 1,535,395 |
Impairment allowances | Stage 1 | Stage 2 | Stage 3 | Total |
|
|
|
|
|
At 1 January 2023 | 18,046 | 11,990 | 34,336 | 64,372 |
Net movement between stages | (5,082) | 3,774 | 1,308 | - |
Net charge for the period | (6,820) | 12,610 | 967 | 6,757 |
Write-offs | - | - | - | - |
At 30 June 2023 (reviewed) | 6,144 | 28,374 | 36,611 | 71,129 |
Financing assets | Stage 1 | Stage 2 | Stage 3 | Total |
| ||||
Financing assets (gross) | 1,286,549 | 143,496 | 69,565 | 1,499,610 |
Expected credit loss | (18,046) | (11,990) | (34,336) | (64,372) |
Financing assets (net) | 1,268,503 | 131,506 | 35,229 | 1,435,238 |
Impairment allowances | Stage 1 | Stage 2 | Stage 3 | Total |
At 1 January 2022 | 19,995 | 7,109 | 44,345 | 71,449 |
Net movement between stages | 2,296 | (1,411) | (885) | - |
Net charge for the period | (4,245) | 6,292 | 4,888 | 6,935 |
Write offs | - | - | (14,012) | (14,012) |
At 31 December 2022 (audited) | 18,046 | 11,990 | 34,336 | 64,372 |
Financing assets | Stage 1 | Stage 2 | Stage 3 | Total |
| ||||
Financing assets (gross) | 1,293,478 | 140,040 | 94,910 | 1,528,428 |
Expected credit loss | (22,245) | (6,162) | (42,263) | (70,670) |
Financing assets (net) | 1,271,233 | 133,878 | 52,647 | 1,457,758 |
Impairment allowances | Stage 1 | Stage 2 | Stage 3 | Total |
At 1 January 2022 | 19,995 | 7,109 | 44,345 | 71,449 |
Net movement between stages | 1,859 | (1,302) | (557) | - |
Net charge for the period | 391 | 355 | 870 | 1,616 |
Writeoffs | - | - | (2,395) | (2,395) |
At 30 June 2022 (Reviewed) | 22,245 | 6,162 | 42,263 | 70,670 |
10 Investment in real estate
30 June 2023 |
| 31 December 2022 | 30 June 2022 | ||
| (reviewed) | (audited) | (reviewed) | ||
Investment Property | |||||
- Land | 572,314 | 556,215 | 520,773 | ||
- Building | 199,177 | 194,050 | 165,716 | ||
771,491 | 750,265 | 686,489 | |||
Development Property | |||||
- Land | 154,183 | 147,393 | 100,405 | ||
- Building | 395,315 | 389,427 | 399,011 | ||
549,498 | 536,820 | 499,416 | |||
|
| ||||
1,320,989 | 1,287,085 | 1,185,905 |
11 Proprietary investments
30 June 2023 |
| 31 December 2022 | 30 June 2022 | ||
| (reviewed) | (audited) | (reviewed) | ||
Equity type investments | |||||
At fair value through income statement | |||||
- Unquoted securities | 2,942 | 9,480 | 10,000 | ||
- Listed securities | 14,830 | - | 7,464 | ||
17,772 | 9,480 | 17,464 | |||
At fair value through equity | |||||
- Listed securities | - | - | 13 | ||
- Equity type Sukuk | 833,051 | 836,251 | - | ||
- Unquoted securities | 56,999 | 55,893 | 959,190 | ||
| 890,050 |
| 892,144 | 959,203 | |
|
|
| |||
Equity-accounted investees | 125,932 |
| 103,471 | 123,509 | |
Impairment allowance | (11) |
| (42) | - | |
1,033,743 | 1,005,053 | 1,100,176 |
12 Co-investments
30 June 2023 |
| 31 December 2022 | 30 June 2022 | ||
| (reviewed) | (audited) | (reviewed) | ||
At fair value through equity | |||||
- Unquoted securities | 160,532 | 131,553 | 125,439 | ||
At fair value through income statement | |||||
- Unquoted securities | 8,939 | 10,498 | 10,630 | ||
|
|
| |||
169,471 | 142,051 | 136,069 |
13 RECEIVABLES AND OTHER ASSETS
30 June 2023 |
| 31 December 2022 | 30 June 2022 | ||
| |||||
Investment banking receivables | 206,390 | 193,923 | 142,120 | ||
Receivable from equity-accounted investees | 62,000 | 62,000 | - | ||
Financing to projects, net | 10,765 | 26,744 | 45,034 | ||
Receivable on sale of development properties | 21,787 | 16,341 | 45,368 | ||
Advances and deposits | 90,321 | 96,641 | 116,564 | ||
Employee receivables | 12,195 | 5,067 | 18,508 | ||
Profit on sukuk receivable | 18,172 | 18,766 | 11,423 | ||
Lease rentals receivable | 5,460 | 6,117 | 2,549 | ||
Assets held for sale | 29,147 | - | - | ||
Goodwill and intangibles | 30,675 | 12,571 | 8,830 | ||
Prepayments and other receivables | 247,033 | 161,015 | 160,908 | ||
Less: impairment allowance net (note 17) | (7,410) | (9,316) | (11,107) | ||
| |||||
| 726,535 |
| 589,869 | 540,197 |
14 Term financing
30 June 2023 |
| 31 December 2022 |
| 30 June 2022 | |
(reviewed) | (audited) | (reviewed) | |||
Murabaha financing * | 1,716,001 | 1,680,940 | 1,719,685 | ||
Sukuk ** | 241,807 | 242,076 | 248,743 | ||
Ijarah financing | 16,298 | 17,603 | 18,862 | ||
Other borrowings | 1,600 | 1,579 | 1,557 | ||
|
|
|
| ||
| 1,975,706 |
| 1,942,198 | 1,988,847 |
*Murabaha financing comprise:
Short-term and medium-term facilities of US$ 1,689,965 thousand (31 December 2022: US$ 1,653,875 thousand) are secured by quoted sukuk of US$ 2,708,957 thousand (31 December 2022: US$ 2,506,041 thousand) and structured notes of US$ 390,631 thousand (31 December 2022: US$ 332,455 thousand).
** Sukuk
Represents outstanding unsecured sukuk certificates with a profit rate of 7.5% p.a. repayable by 2025. The outstanding sukuk also includes accrued profit of US$ 7,417 thousand.
15 OTHER LIABILITIES
30 June 2023 |
| 31 December 2022 | 30 June 2022 | ||
| |||||
Employee related accruals | 12,005 | 15,544 | 990 | ||
Deal related payables * | 369,819 | 138,567 | 131,330 | ||
Board member allowances and accruals | - | 1,500 | - | ||
Unclaimed dividends | 3,154 | 4,754 | 5,428 | ||
Mudaraba profit accrual | 13,021 | 13,184 | 11,123 | ||
Provision for employees' leaving indemnities | 4,627 | 4,125 | 3,725 | ||
Zakah and Charity fund | 7,273 | 5,924 | 5,971 | ||
Advance received from customers** | 7,869 | 6,648 | 7,219 | ||
Accounts payable | 108,785 | 127,968 | 185,768 | ||
Other accrued expenses and payables | 100,236 | 105,149 | 105,666 | ||
Liabilities held for sale | 3,305 | - | - | ||
| |||||
| 630,094 |
| 423,363 | 457,220 |
*Represents amounts payable against assets acquired as part of investment banking deals along with payable for ongoing project related costs of the said SPVs. These payables on receipt of funds from investment banking receivables and underlying SPV's are usually settled within 12 months.
** Represents amount received in advance from the customers on account of real estate assets to be delivered by the Group.
16 EQUITY OF INVESTMENT ACCOUNT HOLDERS
30 June 2023 |
| 31 December 2022 | 30 June 2022 | |
994,540 | 30,278 | 46,976 | ||
1,164,840 | 1,183,396 | 1,202,569 | ||
| ||||
2,159,380 |
| 1,213,674 | 1,249,544 |
From financial institutions
From non-financial institutions and individuals
17 Impairment allowances
| Six months ended | Three months ended | |||
| 30 June 2023 (reviewed) | 30 June 2022 (reviewed) | 30 June 2023 (reviewed) | 30 June 2022 (reviewed) | |
Expected credit loss on: | |||||
Bank balances | 20 | 11 | 22 | (14) | |
Treasury portfolio (note 8) | 2,112 | (1,626) | (1,907) | (228) | |
Financing assets, net (note 9) | 6,757 | 1,616 | 8,448 | (63) | |
Other receivables (note 13) | (1,906) | (2,871) | (148) | (3,948) | |
| 6,983 | (2,870) | 6,415 | (4,253) | |
Impairment on investment in equity securities | (31) | 1 |
| (99) | (1) |
6,952 | (2,869) |
| 6,316 | (4,254) |
18 Earning Per Share
The calculation of basic earning per share has been based on the following profit attributable to the ordinary shareholders and weighted-average number of ordinary shares outstanding. The Group does not have any diluted potentially ordinary shares as of the reporting dates. Hence, the basic and diluted earning per share is similar.
| Six months ended | Three months ended | |||
| 30 June 2023 (reviewed) | 30 June 2022 (reviewed) | 30 June 2023 (reviewed) | 30 June 2022 (reviewed) | |
Profit attributable to shareholders of the Bank | 54,616 | 42,180 | 30,609 | 23,062 | |
Weighted Average number of shares outstanding during the period | 3,528,590 | 3,485,422 | 3,547,177 | 3,473,959 | |
Earnings per share | |||||
Basic and diluted earnings per share (US cents) | 1.55 | 1.21 |
| 0.86 | 0.66 |
19 Related party transactions
The significant related party balances and transactions as at 30 June 2023 are given below:
| Related parties as per FAS 1 | Assets under management (including special purpose and other entities) | Total | ||
30 June 2023 (reviewed) | Associates and joint venture | Key management personnel | Significant shareholders / entities in which directors are interested | ||
Assets | |||||
Cash and bank balances | - | - | - | 13,754 | 13,754 |
Treasury portfolio | - | - | - | 68,058 | 68,058 |
Financing assets | 49,938 | 11,308 | 82,960 | 18,821 | 163,027 |
Proprietary investments | 833,050 | - | - | - | 833,050 |
Co-investments | - | - | - | 158,252 | 158,252 |
Receivables and prepayments | 96,657 | 11,555 | 1,507 | 214,293 | 324,012 |
Liabilities | |||||
Placements from financial, non-financial institutions and individuals | - | 5,302 | 6,398 | - | 11,700 |
Current accounts | 2,944 | 8 | 1,207 | 32,942 | 37,101 |
Payables and accruals | 1,613 | 8,747 | 3,154 | 380,964 | 394,478 |
Equity of investment account holders | 5,812 | 4,905 | 21,927 | 18,077 | 50,721 |
| |||||
Income | |||||
Investment banking | - | - | - | 81,851 | 81,851 |
Commercial banking | |||||
- Income from financing | - | 324 | 133 | - | 457 |
- Less: Return to investment account holders | (24) | (117) | (2,653) | (8) | (2,802) |
- Less: Finance expense | - | (125) | (6,430) | - | (6,555) |
Treasury and proprietary investments | 17,251 | - | 403 | 3,536 | 21,190 |
Expenses | |||||
-Operating expenses | 3 | (790) | - | (37) | (824) |
- Staff Cost | - | (5,670) | (347) | - | (6,017) |
- Finance Cost | - | - | - | (1,262) | (1,262) |
19 Related party transactions (continued)
Related parties as per FAS 1 | Assets under management (including special purpose and other entities) | Total | |||
31 December 2022 (audited) | Associates and joint venture | Key management personnel | Significant shareholders / entities in which directors are interested | ||
Assets | |||||
Cash and bank balances | - | - | - | 12,777 | 12,777 |
Treasury portfolio | - | - | - | 70,656 | 70,656 |
Financing assets | - | 8,411 | 38,181 | 18,201 | 64,793 |
Proprietary investments | 836,251 | - | 6,058 | - | 842,309 |
Co-investments | - | - | - | 142,665 | 142,665 |
Receivables and prepayments |
62,045 |
5,326 |
721 |
198,231 |
266,323 |
Liabilities | |||||
Placements from financial, non-financial institutions and individuals |
- |
3,379 |
22,697 |
24,077 |
50,153 |
Current accounts |
1,918 |
183 |
2,003 |
13,973 |
18,077 |
Payables and accruals |
36,009 |
1,565 |
|
139,529 |
177,103 |
Equity of investment account holders |
3,239 |
2,875 |
33,328 |
148,114 |
187,556 |
30 June 2022 (reviewed) | |||||
Income | |||||
Investment banking | - | - | - | 20,419 | 20,419 |
Commercial banking | |||||
- Income from financing | - | 300 | 626 | - | 926 |
- Fee and other income | (1,809) | - | - | - | (1,809) |
- Less: Return to investment account holders | (13) | (13) | (9,599) | (5) | (9,630) |
- Less: Finance expense | - | (101) | - | - | (101) |
Treasury and proprietary investments | 10,500 | 27,613 | 38,113 | ||
Real Estate Income | - | 3,020 | - | - | 3,020 |
Expenses | |||||
Operating expenses | - | 790 | - | 37 | 827 |
Staff Cost | - | 4,545 | - | - | 4,545 |
Finance Cost | - | - | - | 2,162 | 2,162 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the six months ended 30 June 2023 ` US$ 000's
20 Segment reporting
The Group is organised into business units based on their nature of operations and independent reporting entities and has three reportable operating segments namely investment banking, commercial banking and treasury and proprietary.
| Investment banking | Commercial banking | Proprietary and treasury | Total |
30 June 2023 (reviewed) | ||||
Segment revenue | 90,517 | 41,242 | 42,007 | 173,766 |
Segment expenses | (62,510) | (24,469) | (22,646) | (109,625) |
Impairment allowance | - | (2,857) | (4,095) | (6,952) |
Segment result | 28,007 | 13,916 | 15,266 | 57,189 |
Segment assets | 438,297 | 3,909,935 | 5,987,829 | 10,336,061 |
Segment liabilities | 411,581 | 2,196,056 | 4,517,167 | 7,124,804 |
Other segment information |
| |||
Proprietary investments (Equity-accounted investees) | - | 10,777 | 115,155 | 125,932 |
Equity of investment account holders | - | 1,293,664 | 865,716 | 2,159,380 |
Commitments | 55,485 | 170,656 | - | 226,141 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the six months ended 30 June 2023 ` US$ 000's
20 Segment reporting (continued)
Investment banking | Commercial banking | Proprietary and treasury | Total | |
30 June 2022 (reviewed) | ||||
Segment revenue | 45,098 | 36,859 | 40,177 | 122,134 |
Segment expenses | (39,803) | (16,429) | (23,395) | (79,627) |
Impairment allowance | 3,763 | (2,196) | 1,302 | 2,869 |
Segment result | 9,058 | 18,234 | 18,084 | 45,376 |
31 Dec 2022 (audited) | ||||
Segment assets | 201,828 | 3,785,535 | 5,772,928 | 9,760,291 |
Segment liabilities | 171,359 | 1,761,879 | 5,541,985 | 7,475,223 |
Equity of investment account holders | - | 1,189,016 | 24,658 | 1,213,674 |
Other segment information | ||||
Proprietary investments (Equity-accounted investees) | - | 5,303 | 98,168 | 103,471 |
Commitments | 55,485 | 142,992 | 7,007 | 205,484 |
21 Commitments and contingencies
The commitments contracted in the normal course of business of the Group:
30 June 2023 (reviewed) | 31 December 2022 (audited) | 30 June 2022 (reviewed) | |||
| |||||
Undrawn commitments to extend finance | 126,804 |
| 100,422 | 122,480 | |
Financial guarantees | 43,852 |
| 49,044 | 76,562 | |
Capital commitment for infrastructure development projects | 55,485 |
|
55,485 | 60,446 | |
Commitment to lend | - |
| 533 | 1,610 | |
| |||||
226,141 |
| 205,484 | 261,098 |
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 30 June 2023 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.
22 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.
22 Financial instruments (continued)
Fair value hierarchy
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).
The following table shows the valuation techniques used in measuring Level 3 fair values, as well as the significant unobservable inputs used:
Type | Valuation technique | Significant unobservable inputs | Inter-relationship between significant unobservable inputs and fair value measurement |
Structured note | Fair value of underlying reference portfolio adjusted for embedded derivatives that protect downside risk and cap upside potential over the period of the contract. | Credit risk of counterparty and volatility assumptions for time to maturity | Ability of the Group to hold the structure note to maturity and impact of the value of embedded derivatives (strike prices and barriers for coupon and principal).
|
Equity investments
| Discounted cash flow | Marketability factor and Discount rate | Ability of Group to exit these investments and there impact on the overall value as these are unquoted investments. |
The potential effect of change in assumptions used above would have the following effects.
| 30 June 2023 (reviewed) | 30 June 2022 (reviewed) | ||||
Profit or loss | FVTE | Profit or Loss | FVTE | |||
Equity instruments- marketability factor (±10%) | ±894 | ±21,753 | ±1,063 | ±18,464 | ||
Structure notes- impact in underlying value (±5%) | ±19,532 | - | ±18,298 | - | ||
Proprietary Investments- impact of change in value (±5%) |
±889 | - |
±873 | - | ||
Quoted Fund- impact in underlying value (±5%) | ±1,440 | - | - | - | ||
22 Financial instruments (continued)
The table below analyses the financial instruments carried at fair value, by valuation method.
30 June 2023 (reviewed) | Level 1 | Level 2 | Level 3 | Total |
i) Proprietary investments | ||||
Investment securities carried at fair value through: | ||||
- income statement | 17,772 | - | - | 17,772 |
- equity | 833,051 | - | 56,999 | 890,050 |
850,823 | - | 56,999 | 907,822 | |
ii) Treasury portfolio | ||||
Investment securities carried at fair value through: | ||||
- income statement | - | - | 422,469 | 422,469 |
- equity | 838,593 | - | - | 838,593 |
838,593 | - | 422,469 | 1,261,062 | |
iii) Co-investments |
| |||
Investment securities carried at fair value through | ||||
- equity | - | - | 160,532 | 160,532 |
- income statement | - | - | 8,939 | 8,939 |
- | - | 169,471 | 169,471 | |
1,689,416 | - | 648,939 | 2,338,355 |
31 December 2022 (audited) | Level 1 | Level 2 | Level 3 | Total |
|
|
|
| |
(i) Proprietary investments | ||||
Investment securities carried at fair value through: | ||||
- income statement | 9,480 | - | - | 9,480 |
- equity | 836,251 | - | 55,893 | 892,144 |
845,731 | - | 55,893 | 901,624 | |
(ii) Treasury portfolio | ||||
Investment securities carried at fair value through: | ||||
- income statement | - | - | 374,653 | 374,653 |
- equity | 879,171 | - | - | 879,171 |
879,171 | - | 374,653 | 1,253,824 | |
iii) Co-investments | ||||
Investment securities carried at fair value through equity | - | - | 131,553 | 131,553 |
Investment securities carried at fair value through income statement | - | - | 10,498 | 10,498 |
- | - | 142,051 | 142,051 | |
1,724,902 | - | 572,597 | 2,297,499 |
22 Financial instruments (continued)
The following table analyses the movement in Level 3 financial assets during the period:
30 June 2023 | 31 December 2022 | ||
(reviewed) | (audited) | ||
| |||
At beginning of the period | 572,597 | 667,289 | |
Disposals at carrying value | (30,330) |
| (134,550) |
Purchases | 73,556 | 88,256 | |
Fair value changes during the period | 33,116 | (48,398) | |
At end of the period | 648,939 | 572,597 |
23 ASSETS UNDER MANAGEMENT AND CUSTODIAL ASSETS
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$ 8,418 (31 December 2022: US$ 7,845 million). During the period, the Group had charged management fees amounting to US$ 9,627 (30 June 2022: US$ 3,584 thousands) to its assets under management.
24 Acquisition of subsidiary
During the period, the Group intends to sell the below mentioned subsidiary in next 12 months.
% stake acquired | Place of incorporation | Nature of activities | |
Al Areen Leisure & Tourism The Lost Paradise of Dilmum Waterpark | 100% | Kingdom of Bahrain | Leisure & Hospitality |
Consideration
The total consideration amounted to US$ 32,000 thousand and includes cash and deferred consideration. Deferred consideration of US $ 25m will be paid over a period of 3 years including a profit rate of 6.5% per annum.