Gulf Finance House, the leading Middle Eastern Islamic investment bank announced it will take. a US$ 300 million (non-cash) charge against its proprietary Dubailand position and correspondingly reduce the liabilities on its balance sheet by US$ 290 million. This action has no implications for the Bank’s clients. Furthermore, GFH has no remaining material exposure to Dubai.
The prudent move comes after the fallout from the global financial crisis over the last year and more recent events in the Dubai market that further underline the need to take measures designed to realign the restructured Bank's balance sheet. This announcement will in no way impact the significant cash reserves generated from the rights issue and the Bank anticipates raising further cash through continuing with the sale of non - core assets which it will announce in due course.
Esam Janahi, Chairman of the Bank commented on today’s announcement saying, “Market conditions over the last year have been extremely difficult and recent developments have further highlighted the need for a prudent and transparent approach. As a consequence, the Board has decided to take the necessary steps to deal with the situation appropriately. This action confirms our intention to take tough decisions especially when they are made with the very best long term interests of our shareholders in mind.”
Ted Pretty Acting Group CEO of Gulf Finance House also commented saying, “All our work over the past few months has been focused on shoring up our balance sheet and revising the business model to more efficiently serve the needs of the investment community and we’ve been very successful in this. Following today’s announcement, GFH has set aside sufficient provisions against its entire Dubai exposure. The Bank is not only confident of being able to meet its liabilities but also of its ability to engage in attractive investment opportunities as it renews its revenue generation activities in 2010 with the goal of building the world’s leading Islamic bank.”
GFH has recently been engaged in a period of comprehensive market research to establish investor sentiment following the global economic downturn. The results of this research has seen the Bank design a new business model comprising products and services specifically demanded by the contemporary investment community in a continuing difficult economic environment.
“The non – cash charge in assets is strictly only on GFH’s books and doesn’t affect our clients, nor does it affect the Bank’s cash flow,” added Chandan Gupta, newly appointed Group Chief Financial Officer at the Bank. “Furthermore, the liabilities on our balance sheet will be significantly reduced by US$ 290 million and the capital adequacy ratio will be approximately 17% compared to the 12.7% reported in Q3 2009."
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