![](/cdn/assets/images/search/clock.png)
We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Name | Symbol | Market | Type |
---|---|---|---|
Gfh Sukuk 25 | LSE:95HX | London | Bond |
Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0 | - |
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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
END
QRFGZGMKLLGGMZG
(END) Dow Jones Newswires
May 19, 2021 05:14 ET (09:14 GMT)
1 Year Gfh Sukuk 25 Chart |
1 Month Gfh Sukuk 25 Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions