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| 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 : 7426L
GFH Financial Group B.S.C
17 May 2022
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GFH FINANCIAL GROUP BSC
CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
31 MARCH 2022
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 : Ghazi Faisal Ebrahim Alhajeri , Chairman
Edris Mohammed Rafi Alrafi, Vice Chairman
Jassim Al Seddiqi, (Resigned 04 April 2022)
Hisham Ahmed Alrayes
Rashid Nasser Al Kaabi
Ali Murad
Ahmed Abdulhamid AlAhmadi
Alia Al Falasi
Fawaz Talal Al Tamimi
Darwish Al Ketbi
Chief Executive Officer : Hisham Ahmed Alrayes
Auditors : KPMG Fakhro
CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the three months ended 31 March 2022
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 9-31
Independent auditors' report on review of condensed consolidated
interim financial information
To the Board of Directors
GFH Financial Group BSC
Manama, Kingdom of Bahrain
We have reviewed the accompanying 31 March 2022 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 2022;
* the condensed consolidated income statement for the
three-month period ended 31 March 2022;
* the condensed consolidated statement of changes in
owners' equity for the three-month period ended 31
March 2022;
* the condensed consolidated statement of cash flows
for the three-month period ended 31 March 2022;
* the condensed consolidated statement of changes in
restricted investment accounts for the three-month
period ended 31 March 2022;
* the condensed consolidated statement of sources and
uses of zakah and charity fund for the three-month
period ended 31 March 2022; 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 and presentation
as stated in note 2 of this condensed consolidated interim financial
information. Our responsibility is to express a conclusion on this
condensed consolidated interim financial information based on our
review.
We conducted our review in accordance with the International Standard
on Review Engagements 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity". A review of
interim financial information consists of making inquiries, primarily
of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with Auditing
standards for Islamic Financial Institutions and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes
us to believe that the accompanying 31 March 2022 condensed consolidated
interim financial information is not prepared, in all material respects,
in accordance with the basis of preparation and presentation as stated
in note 2 of this condensed consolidated interim financial information.
11 May 2022
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2022 US$ 000's
Note 31 March 31 December 31 March
2022 2021 2021
(reviewed) (audited) (reviewed)
ASSETS
Cash and bank balances 544,481 722,471 805,917
Treasury portfolio 9 3,161,058 3,089,925 2,021,232
Financing assets 10 1,440,867 1,311,002 1,259,791
Investment in real estate 11 1,074,445 1,905,598 1,820,683
Proprietary investments 12 1,165,305 211,638 174,474
Co-investments 13 119,368 171,877 120,449
Receivables and other assets 548,789 531,488 697,301
Property and equipment 63,427 139,687 143,223
Total assets 8,117,740 8,083,686 7,043,070
=========== ============ ===========
LIABILITIES
Clients' funds 163,925 216,762 84,613
Placements from financial, non-financial
institutions and individuals 2,759,348 3,052,092 2,589,838
Customer current accounts 142,021 133,046 159,162
Term financing 14 1,931,838 1,750,667 1,253,204
Other liabilities 625,728 404,654 420,795
----------- ------------ -----------
Total liabilities 5,622,860 5,557,221 4,507,612
----------- ------------ -----------
Total equity of investment account
holders 1,400,059 1,358,344 1,341,312
OWNERS' EQUITY
Share capital 1,000,638 1,000,638 975,638
Treasury shares (62,933) (48,498) (65,623)
Statutory reserve 27,970 27,970 19,548
Investment fair value reserve (31,703) (28,561) (7,176)
Foreign currency translation reserve - (70,266) (42,777)
Retained earnings 101,050 81,811 36,674
Share grant reserve - - 1,093
----------- ------------ -----------
Total equity attributable to
shareholders of the Bank 1,035,022 963,094 917,377
Non-controlling interests 59,799 205,027 276,769
----------- ------------ -----------
Total owners' equity 1,094,821 1,168,121 1,194,146
----------- ------------ -----------
Total liabilities, equity of
investment account holders and
owners' equity 8,117,740 8,083,686 7,043,070
=========== ============ ===========
The Board of Directors approved the condensed consolidated interim financial information on 11 May 2022 and signed on its behalf by:
Ghazi Faisal Ebrahim Alhajeri 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 2022 US$ 000's
Three months ended
Note 31 March 31 March
2022
(reviewed) 2021
(reviewed)
Investment banking income
Asset management 989 805
Deal related income 23,690 16,785
------------ ------------
24,679 17,590
------------ ------------
Commercial banking income
Income from financing 21,228 21,658
Treasury and investment income 11,795 10,814
Fee and other income 3,323 1,556
Less: Return to investment account holders (8,515) (8,289)
Less: Finance expense (8,080) (8,566)
------------ ------------
19,751 17,173
------------ ------------
Income from proprietary and co-investments
Income from sale of real estate assets 1,932 3,434
Leasing and operating income 1,128 1,144
Direct investment income, net 2,490 9,852
Income from co-investments 7,235 3,690
------------ ------------
12,785 18,120
------------ ------------
Treasury and other income
Finance and treasury portfolio income, net 25,624 29,650
Other income, net 7,975 7,856
------------ ------------
33,599 37,506
------------ ------------
Total income 90,814 90,389
------------ ------------
Operating expenses 34,299 32,185
Finance expense 35,781 33,665
Impairment allowances 15 1,385 5,200
Total expenses 71,465 71,050
Profit for the period 19,349 19,339
============ ============
Attributable to:
Shareholders of the Bank 19,118 16,122
Non-controlling interests 231 3,217
19,349 19,339
================ =======
Earnings per share
Basic and diluted earnings
per share (US cents) 0.54 0.52
---------------- -------
Ghazi Faisal Ebrahim Alhajeri 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 2022 US$ 000's
Attributable to shareholders of the Bank
Foreign
Investment currency Total
Share Treasury Statutory fair value translation Retained Non-Controlling owners'
capital shares reserve reserve reserve earnings Total Interests equity
----------
Balance at 1
January 2022 1,000,638 (48,498) 27,970 (28,561) (70,266) 81,811 963,094 205,027 1,168,121
Profit for the
period - - -- - - 19,118 19,118 231 19,349
Transfer on
reclassification
from FVTE to
amortised cost
(Note 9) - - - 41,320 - - 41,320 - 41,320
Fair value
changes during
the period - - - (42,889) - - (42,889) (4,165) (47,054)
Transfer to
income statement
on disposal of
sukuk - - - (1,573) - - (1,573) -- (1,573)
Total recognised
income and
expense - - - (3,142) - 19,118 15,976 (3,934) 12,042
Purchase of
treasury shares - (23,942) - - - - (23,942) - (23,942)
Sale of treasury
shares - 9,507 - - - 121 9,628 - 9,628
Transferred to
income statement
on
deconsolidation
of subsidiaries 70,266 - 70,266 - 70,266
Adjusted on
deconsolidation
of subsidiaries
(Note 21) - - - - - - - (141,294) (141,294)
Balance at 31
March 2022 1,000,638 (62,933) 27,970 (31,703) - 101,050 1,035,022 59,799 1,094,821
========== ========== =========== ============ ============ ========= ========== ================ ==========
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 2022 (continued) 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 - - - - - (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 CASH FLOWS-
for the three months ended 31 March 2022 US$ 000's
31 March
2022
31 March
(reviewed) 2021 (reviewed)
OPERATING ACTIVITIES
Profit for the period 19,349 19,339
Adjustments for:
Income from commercial banking (11,692) (10,648)
Income from proprietary investments (9,725) (13,542)
Income from dividend and loss on treasury
investments (36,659) (22,084)
Foreign exchange gain (443) (925)
Finance expense 38,812 42,230
Impairment allowances 1,385 5,200
Depreciation and amortisation 397 1,147
1,424 20,717
Changes in:
Placements with financial institutions
(original maturities of more than 3 months) - (97,237)
Financing assets (63,606) 7,475
Other assets (35,359) (44,701)
CBB Reserve and restricted bank balance 233 (21,766)
Clients' funds (52,837) (46,322)
Customer current accounts 5,581 18,407
Equity of investment account holders 41,715 184,319
Payables and accruals 221,072 (44,242)
-----------------
Net cash from / (used) in operating activities 118,223 (23,350)
-----------------
INVESTING ACTIVITIES
Payments for purchase of equipment - (195)
Proceeds from sale of proprietary investment
securities, net (31,771) 27,253
Purchase of treasury portfolio, net (201,439) (142,151)
Proceeds from sale of investment in real
estate 660 200
Dividends received from proprietary investments
and co-investments 7,657 3,758
Advance paid for development of real estate (1,106) (15,681)
Net cash used in investing activities (225,999) (126,816)
FINANCING ACTIVITIES
Financing liabilities, net 200,976 164,128
Finance expense paid (60,080) (41,446)
Placements from financial and non-financial
institutions (292,744) 173,482
Dividends paid (114) (73)
Purchase of treasury shares, net (14,435) (1,644)
-----------------
Net cash (used) in / from financing activities (166,397) 294,447
-----------------
Net (decreased) increase in cash and cash
equivalents during the period (274,173) 144,281
Cash and cash equivalents at 1 January 844,344 655,455
------------ -----------------
Cash and cash equivalents at 31 March
* 570,171 799,736
============ -----------------
Cash and cash equivalents comprise:
Cash and balances with banks (excluding
CBB reserve balance and restricted cash) 486,630 738,916
Placements with financial institutions
(original maturities of 3 months or less) 83,541 60,820
------------ -----------------
570,171 799,736
============ =================
* net of expected credit loss of US$ 49 thousands (31 March 2021: US$ 55 thousands).
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 2022
31 March
2022 Balance at 1 January Balance at 31 March
(reviewed) 2022 Movements during the period 2022
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 7.87 94 (2) - - - - - 12 7.70 92
Safana
Investment
(RIA
1) 6,254 2.65 16,573 (13,268) - - - - - 1,247 2.65 3,305
Shaden Real
Estate
Investment
WLL (RIA 5) 3,434 2.65 9,100 (8,387) - - - - - 269 2.65 713
Locata
Corporation
Pty
Ltd (RIA 6) 2,633 1.0 2,633 (2,633) - - - - - - -
28,450 (24,290) - - - - - 4,160
========= ============ ============ ========= ========= ========= ============== =========
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 - - - - - - 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
========= ============ ============ ========= ========= ========= ============== =========
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 2022 US$ 000's
31 March 31 March
2022 2021
(reviewed) (reviewed)
Sources of zakah and charity fund
Contribution by the Group 1,059 610
Non-Islamic income 15 9
-------------- --------------
Total sources 1,074 619
-------------- --------------
Uses of zakah and charity fund
Contributions to charitable organisations (22) (653)
-------------- --------------
Total uses (22) (653)
-------------- --------------
0B Surplus of sources over uses 1,052 (34)
Undistributed zakah and charity fund at
beginning of the period 5,173 5,343
-------------- --------------
1B Undistributed zakah and charity fund
at end of the period 6,225 5,309
============== ==============
Represented by:
Zakah payable 2,000 1,521
Charity fund 4,225 3,788
-------------- --------------
6,225 5,309
============== ==============
The accompanying notes 1 to 21 form an integral part of the condensed consolidated interim financial information.
1 Reporting entity
The condensed consolidated interim financial information for the three months ended 31 March 2022 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 2022 Activities
GFH Capital Limited United Arab 100% Investment
Emirates management
---------------- ------------ -------------------
GFH Capital S.A. Saudi Arabia 100% Investment
management
---------------- ------------ -------------------
Khaleeji Commercial Bank Kingdom of 81.17% Islamic retail
BSC ('KHCB') Bahrain bank
---------------- ------------ -------------------
Al Areen Project companies 100% Real estate
development
---------------- ------------ -------------------
GBCORP BSC (c) (GBCORP) 62.91% Islamic investment
firm
------------ -------------------
Residential South Real 100% Real estate
Estate Development Company development
(RSRED)
------------ -------------------
Athena Private School 100% Educational
for Special Education institution
WLL
---------------- ------------ -------------------
Gulf Holding Company KSCC State of Kuwait 53.63% Investment
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.
GFH Group has carried out a group restructuring program (the 'program') which involves the spinning out of its infrastructure and real estate assets under a new entity "Infracorp B.S.C." ("Infracorp"), which has been capitalized with more than US$1 billion in infrastructure and development assets. Infracorp will specialise in investments focusing on accelerating growth and development of sustainable infrastructure assets and environments across the gulf and global markets.
Under this program certain real estate and infrastructure assets as well as certain investments in securities, equity accounted investees and subsidiaries have been transferred from the Group to Infracorp for an in-kind consideration in the form of Sukuk and/ or equity shares issued by Infracorp. A majority stake of 60% in Infracorp was divested during the period ended 31 March 2022. See note 21 for more details.
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).
The accounting policies used in the preparation of annual audited consolidated financial information of the Group for the year ended 31 December 2020 and 31 December 2021 were in accordance with FAS as modified by CBB (refer to the Group's audited financial statements for the year ended 31 December 2021 for the details of the COVID-19 related modifications applied). Since the CBB modification were specific to the financial year 2020 and no longer apply to both the current and comparative periods presented, the Group's interim financial information for the three months ended 31 March 2022 has been prepared in accordance with FAS issued by AAOIFI (without any modifications).
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 2021. 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 2021.
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 2021, except those arising from adoption of the following standards and amendments to standards effective from 1 January 2022. 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 2022:
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.
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.
There was no material impact on the Group upon adoption of this standard.
3 Significant accounting policies (continued) b. New standards, amendments and interpretations issued but not yet effective
(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 with an option to early adopt.
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.
The Group is assessing the impact of adoption of this standard.
(ii) 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 2023 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 statements.
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 2021.
Russia-Ukraine conflict
On 24 February 2022, a military conflict between Russia and Ukraine emerged (the "conflict"). Owing to this various countries and international bodies have imposed trade and financial sanctions on Russia and Belarus. Further, various organisations have discontinued their operations in Russia. This conflict has resulted in an economic downturn and increased volatility in commodity prices due to disruption of supply chain.
The management has carried out an assessment of its portfolio and has concluded that it does not have any direct exposures to / from the impacted countries. However, indirect impact is pervasive in the market and at this stage it is difficult to quantify the full impact of this conflict since it depends largely on the nature and duration of uncertain and unpredictable events, such as further military action, additional sanctions, and reactions to ongoing developments by global financial markets. The management will continue to closely monitor impact of this evolving situation on its portfolio to assess indirect impact, if any. During the quarter ended 31 March 2022, the Group's investment portfolio reduced in market value by US$ 42,889 for investments carried as FVTE and US$ 8,509 for investments carried as FVTPL due to volatile market movements. However, the Group does not trade in such securities and does not expect to liquidate any of it's market portfolio in short term.
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 2021.
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".
The Consolidated NSFR calculated as per the requirements of the CBB rulebook, is as follows:
As at 31 March 2022
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:
-----------------------------------------------------------------------------------------------
2 Regulatory Capital 1,062,118 - - 51,603 1,113,721
--------------------------- ------------- ---------- ---------- ---------- ---------------
3 Other Capital Instruments - - - - -
--------------------------- ------------- ---------- ---------- ---------- ---------------
4 Retail deposits and deposits from small business customers:
-----------------------------------------------------------------------------------------------
5 Stable deposits - 172,042 31,482 3,764 197,112
--------------------------- ------------- ---------- ---------- ---------- ---------------
6 Less stable deposits - 1,170,922 444,681 110,204 1,564,247
--------------------------- ------------- ---------- ---------- ---------- ---------------
7 Wholesale funding:
-----------------------------------------------------------------------------------------------
8 Operational deposits - - - - -
--------------------------- ------------- ---------- ---------- ---------- ---------------
Other Wholesale
9 funding - 2,680,912 1,010,893 825,859 1,939,245
--------------------------- ------------- ---------- ---------- ---------- ---------------
10 Other liabilities:
-----------------------------------------------------------------------------------------------
11 NSFR Shari'a-compliant
hedging contract
liabilities - - -
--------------------------- ------------- ---------- ---------- ---------- ---------------
All other liabilities
not included in
12 the above categories - 473,834 19,605 93,700 93,700
--------------------------- ------------- ---------- ---------- ---------- ---------------
13 Total ASF 4,908,025
--------------------------- ------------- ---------- ---------- ---------- ---------------
Required Stable Funding (RSF):
------------------------------------------------------------------------------------------------------
Total NSFR high-quality
14 liquid assets (HQLA) 1,612,213 85,050
--------------------------- ------------- ---------- ---------- ---------- ---------------
15 Deposits held at
other financial
institutions for
operational purposes - - - - -
--------------------------- ------------- ---------- ---------- ---------- ---------------
Performing financing
16 and sukuk/ securities: - 625,155 - 747,977 729,554
--------------------------- ------------- ---------- ---------- ---------- ---------------
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
18 to financial institutions - 4,992 - 1,068,615 910,819
--------------------------- ------------- ---------- ---------- ---------- ---------------
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: - 293,863 142,118 215,988 358,382
--------------------------- ------------- ---------- ---------- ---------- ---------------
5 Financial risk management (continued)
More than
6 months
Less and less Total
No Specified than than one Over weighted
No. Item Maturity 6 months year one year value
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 - - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
Securities/sukuk
that are not in
default and do
not qualify as
HQLA, including
exchange-traded
23 equities - 720,475 411,474 466,445 1,032,419
------------------------ ------------- ---------- ---------- ---------- ----------
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
29 the above categories 1,784,983 - - - 1,784,983
------------------------ ------------- ---------- ---------- ---------- ----------
30 OBS items - - - 36,062
------------------------ ------------- ---------- ---------- ---------- ----------
31 Total RSF 1,644,484 553,591 2,499,025 4,937,270
------------------------ ------------- ---------- ---------- ---------- ----------
32 NSFR (%) 99.44%
------------------------ ------------- ---------- ---------- ---------- ----------
As at 31 December 2021
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):
---------------------------------------------------------------------------------------------
1 Capital:
------------------------ ------------- ---------- ---------- ---------- ----------
2 Regulatory Capital 1,070,314 - - 49,953 1,120,267
------------------------ ------------- ---------- ---------- ---------- ----------
Other Capital
3 Instruments - - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
Retail deposits
and deposits
from small business
4 customers:
------------------------ ------------- ---------- ---------- ---------- ----------
5 Stable deposits - 182,112 25,962 2,749 200,420
------------------------ ------------- ---------- ---------- ---------- ----------
6 Less stable deposits - 1,314,514 430,372 90,957 1,661,355
------------------------ ------------- ---------- ---------- ---------- ----------
7 Wholesale funding:
------------------------ ------------- ---------- ---------- ---------- ----------
8 Operational deposits - - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
Other Wholesale
9 funding - 2,860,814 861,346 773,058 1,896,078
------------------------ ------------- ---------- ---------- ---------- ----------
10 Other liabilities:
------------------------ ------------- ---------- ---------- ---------- ----------
NSFR Shari'a-compliant
hedging contract
11 liabilities - - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
All other liabilities
not included
in the above
12 categories - 136,864 18,759 71,437 71,437
------------------------ ------------- ---------- ---------- ---------- ----------
13 Total ASF 4,949,558
------------------------ ------------- ---------- ---------- ---------- ----------
Required Stable Funding (RSF):
---------------------------------------------------------------------------------------------
Total NSFR high-quality
liquid assets
14 (HQLA) 1,493,881 73,941
------------------------ ------------- ---------- ---------- ---------- ----------
5 Financial risk management (continued)
More than
6 months
Less and less Total
No Specified than than one Over weighted
No. Item Maturity 6 months year one year value
Deposits held
at other financial
institutions
for operational
15 purposes
------------------------ ------------- ---------- ---------- ---------- ----------
Performing financing
16 and sukuk/ securities: - 636,283 - 720,739 708,071
------------------------ ------------- ---------- ---------- ---------- ----------
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 - 5,000 - 174,023 150,419
------------------------ ------------- ---------- ---------- ---------- ----------
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: - 320,720 91,696 205,595 339,845
------------------------ ------------- ---------- ---------- ---------- ----------
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 - - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
Securities/sukuk
that are not
in default and
do not qualify
as HQLA, including
exchange-traded
23 equities - 615,521 634,536 291,421 916,449
------------------------ ------------- ---------- ---------- ---------- ----------
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 2,672,214 - - - 2,672,214
------------------------ ------------- ---------- ---------- ---------- ----------
30 OBS items - - - 27,946
------------------------ ------------- ---------- ---------- ---------- ----------
31 Total RSF 1,577,524 726,232 1,391,778 4,888,886
------------------------ ------------- ---------- ---------- ---------- ----------
32 NSFR (%) 101%
------------------------ ------------- ---------- ---------- ---------- ----------
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 2022 31 December
2021
--------------
Stock of HQLA 304,713 292,998
Net cashflows 202,146 148,599
LCR % 158% 221%
Minimum required by CBB 80% 80%
-------------- ------------
c. Capital Adequacy Ratio
31 March 2022 31 December
2021
CET 1 Capital before regulatory
adjustments 1,062,118 1,063,515
Less: regulatory adjustments - -
CET 1 Capital after regulatory
adjustments 1,062,118 1,063,515
T 2 Capital adjustments 51,603 53,374
Regulatory Capital 1,113,721 1,116,889
Risk weighted exposure:
Credit Risk Weighted Assets 6,735,161 7,574,496
Market Risk Weighted Assets 39,250 38,325
Operational Risk Weighted Assets 655,034 655,034
Total Regulatory Risk Weighted
Assets 7,429,445 8,267,855
Investment risk reserve (30%
only) 2 2
Profit equalization reserve (30%
only) 3 3
Total Adjusted Risk Weighted
Exposures 7,429,440 8,267,850
Capital Adequacy Ratio (CAR) 14.99% 13.51%
Tier 1 Capital Adequacy Ratio 14.30% 12.86%
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 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.
8 Appropriations
Appropriations, if any, are made when approved by the shareholders.
In the shareholders meeting held on 3 April 2022, the following were approved:
a) Cash dividend of 4.57% of the paid-up share capital amounting to US$ 45,000; b) Stock dividend of 1.5% of the paid-up share capital amounting to US$ 15,000; c) Appropriation of US$ 1,483 towards charity, civil society institutions and Zakat d) Transfer of US$ 8,422 to statutory reserve; and, e) Board remuneration of US$ 2,400.
The above transactions will be affected in the condensed consolidated interim financial information for the six month period ended 30 June 2022.
9 Treasury portfolio
31 March 31 December 31 March
2022 2021 2021
(reviewed) (audited) (reviewed)
Placements with financial
institutions 83,592 180,000 165,034
Equity type investments
At fair value through income
statement
* Structured notes* 339,154 403,986 370,830
Debt type investments
At fair value through equity*
* Quoted sukuk 929,507 1,656,088 774,742
At amortised cost
* Quoted sukuk * 1,818,172 860,616 714,013
* Unquoted sukuk 3,486 3,486 3,493
Less: Impairment allowances (12,853) (14,251) (6,880)
3,161,058 3,089,925 2,021,232
=========== ============ ===========
* Short-term and medium-term facilities of US$ 1,502,378 thousand ( 31 December 2021 : US$ 1,417,800 thousand) are secured by quoted sukuk of US$ 2,094,107 thousand ( 31 December 2021 : US$ 2,070,315 thousand), structured notes of US$ 339,154 thousand ( 31 December 2021 : US$ 403,986 thousand).
9. Treasury portfolio (Continue)
During the quarter, based on completion of the Group re-organization and on review of the over all market conditions, the Bank has re-assessed objective of a business model in which an asset is held at a portfolio level based what best reflects the way the business is managed and information is provided to management. It reassessed its objectives for the portfolio and the operation of those policies in practice. In particular, whether management's strategy focuses on earning contractual profit revenue, maintaining a particular profit rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of the assets. As part of this reassessment the Bank identified a portion of its portfolio of certain debt securities are held by the Group Central Treasury into a separate portfolio for long-term yield. These securities may be sold, but such sales are not expected to be more than infrequent mostly due to credit deterioration. Based on this reassessment, the Bank considers that these securities are held within a business model whose objective is to hold assets to collect the contractual cash flows. Erstwhile these securities were held in portfolio to meet business liquidity needs i.e. held to collect contractual cash flows and sell wherein investment strategy often resulted in sales activity.
The above is deemed to be a significant change in business model on how these identified securities are managed. Due to a change in the business model the Bank has reclassified these identified securities from FVTE to Investments at amortised cost. The impact of this reclassification due to business model change is set out below:
Fair Value Through Equity Transfer from Investment Fair Value Reserve Value as per Amortised Cost
(FVTE)
894,194 41,320 935,514
-------------------------------------------- ----------------------------
10 Financing assets
31 March 31 December 31 March
2022 2021 2021
(reviewed) (audited) (reviewed)
Murabaha 1,072,464 995,324 955,882
Musharaka - - 277
Wakala 239 239 239
Mudharaba 11,129 2,576 2,650
Istisnaa - - 4,047
Assets held-for-leasing 430,163 384,312 356,535
------------ -----------
1,513,995 1,382,451 1,319,630
Less: Impairment allowances (73,128) (71,449) (59,839)
----------- ------------ -----------
1,440,867 1,311,002 1,259,791
=========== ============ ===========
Murabaha financing receivables are net of deferred profits of US$ 54,072 thousands
(31 December 2021: US$ 46,130 thousands).
The movement on financing assets and impairment allowances is as follows:
Financing assets Stage 1 Stage 2 Stage 3 Total
Financing assets (gross) 1,285,165 117,318 111,512 1,513,995
Expected credit loss (22,613) (5,276) (45,239) (73,128)
--------- ------- -------- ---------
Financing assets (net) 1,262,552 112,042 66,273 1,440,867
========= ======= ======== =========
10. Financing assets (Continued)
Impairment allowances Stage 1 Stage 2 Stage 3 Total
At 1 January 2022 19,888 7,119 44,442 71,449
Net movement between
stages 1,872 (1,326) (546) -
Net charge for the
period 853 (517) 1,343 1,679
At 31 March 2022 22,613 5,276 45,239 73,128
======= ======= ======= ======
Financing assets Stage 1 Stage 2 Stage 3 Total
Financing assets (gross) 1,015,846 251,510 115,095 1,382,451
Expected credit loss (19,888) (7,119) (44,442) (71,449)
----------- --------- --------- ---------
Financing assets (net) 995,958 244,391 70,653 1,311,002
=========== ========= ========= =========
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
======== ======= ======= =======
11. Investment in real estate
31 March 31 December 31 March
2022 2021 2021
(reviewed) (audited) (reviewed)
Investment Property
* Land 472,352 529,076 481,315
* Building 155,758 63,758 63,757
----------- ------------ -----------
628,110 592,834 545,072
Development Property
* Land 100,385 592,926 767,640
* Building 345,950 719,838 507,971
----------- ------------ -----------
446,335 1,312,764 1,275,611
1,074,445 1,905,598 1,820,683
=========== ============ ===========
12. Proprietary investments
31 March 31 December 31 March
2022 2021 2021
(reviewed) (audited) (reviewed)
Equity type investments
At fair value through income
statement
* Unlisted fund 10,000 10,000 10,000
* Structured notes 41,539 41,197 -
----------- ------------ -----------
51,539 51,197 10,000
----------- ------------ -----------
At fair value through equity
* Listed securities 13 13 13
* Unquoted securities 992,536 91,425 87,484
----------- ------------ -----------
992,549 91,438 87,497
----------- ------------ -----------
Equity-accounted investees 121,217 69,003 76,977
----------- ------------ -----------
1,165,305 211,638 174,474
=========== ============ ===========
13. Co-investments
31 March 31 December 31 March
2022 2021 2021
(reviewed) (audited) (reviewed)
At fair value through equity
* Unquoted securities 108,738 164,547 115,189
At fair value through income
statement
* Unquoted securities 10,630 7,330 5,260
----------- ------------ -----------
119,368 171,877 120,449
=========== ============ ===========
14. Term financing
31 March 31 December 31 March
2022 2021 2021
(reviewed) (audited) (reviewed)
Murabaha financing 1,665,655 1,449,852 880,104
Sukuk 245,062 250,943 322,271
Ijarah financing 19,484 20,093 21,867
Other borrowings 1,637 29,779 28,962
---------- ----------- ----------
1,931,838 1,750,667 1,253,204
========== =========== ==========
15. Impairment allowances
Three months ended
31 March 31 March
2022 2021
(reviewed) (reviewed)
Expected credit loss on:
Bank balances 25 7
Treasury portfolio (1,398) 1,215
Financing assets, net (note 10) 1,679 3,485
Other receivables 1,077 25
1,383 4,732
Impairment on investment in equity securities 2 468
---------- ----------
1,385 5,200
========== ==========
16. Related party transactions
The significant related party balances and transactions as at 31 March 2022 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 2022 and joint management are and other
(reviewed) venture personnel interested entities) Total
Assets
Financing assets - 8,777 34,413 17,429 60,619
Proprietary investments 1,224,561 - 10,328 13,005 1,247,894
Co-investments - - - 102,720 102,720
Receivables and
prepayments 9,729 48 300 175,099 185,176
Liabilities
Placements from
financial, non-financial
institutions and
individuals - 3,907 29 - 3,936
Customer accounts 2,721 2,865 10,392 - 15,978
Payables and accruals - 2,499 - 374,919 377,418
Equity of investment
account holders 1,095 1,058 219,340 775 222,268
Income
Income from Investment
banking (769) - - 24,679 23,910
Income from commercial
banking -
* Income from financing - 456 759 - 1,215
* Less: Return to investment account holders (8) (5) (1,740) (3) (1,756)
* Less: Finance expense - (37) - - (37)
Income from proprietary
and co-investments - - - 9,474 9,474
Treasury and other
income - - - 318 318
Real estate income - 3,020 3,020
Expenses
Operating expenses - 2,296 - - 2,296
16 Related party transactions (continued)
Related parties as per FAS
1
Assets
Significant under
shareholders management
/ entities (including
in which special
Associates Key directors purpose
31 December 2021 and joint management are and other
(audited) venture personnel interested entities) Total
Assets
Treasury portfolio - - 37,148 - 37,148
Financing assets - 7,817 33,407 16,482 57,706
Proprietary investments 114,387 - 20,328 48,011 182,726
Co-investments - - - 76,794 76,794
Receivables and
prepayments 8,060 623 300 171,559 180,542
Liabilities
Placements from
financial, non-financial
institutions and
individuals - 4,430 - - 4,430
Customer accounts 1,488 366 10,517 64 12,435
Payables and accruals - 2,688 1,528 33,678 37,894
Equity of investment
account holders 1,088 355 54,276 772 56,491
31 March 2021
(reviewed)
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) - (2,579)
* 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 2022 ` US$ 000's
17. 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.
Investment Commercial Real estate Corporate
banking banking development and treasury Total
31 March 2022 (reviewed)
Segment revenue 24,679 19,751 3,060 43,324 90,814
Segment expenses (17,631) (10,581) (2,633) (40,620) (71,465)
Segment result 7,048 9,170 427 2,704 19,349
Segment assets 1,030,727 3,268,413 930,455 2,888,145 8,117,740
Segment liabilities 881,070 1,286,575 25,360 3,429,855 5,622,860
Other segment information
Impairment allowance (337) 1,678 - 44 1,385
Proprietary investments (Equity-accounted
investees) - 35,484 5,733 80,000 121,217
Equity of investment account holders - 1,307,214 - 92,845 1,400,059
Commitments - 163,404 15,843 - 179,247
----------- ----------- ------------- -------------- ----------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the three months ended 31 March 2022 ` US$ 000's
17 Segment reporting (continued)
Investment Commercial Real estate Corporate
banking banking development and treasury Total
31 March 2021 (reviewed)
Segment revenue 17,590 17,172 4,578 51,049 90,389
Segment expenses (18,267) (11,568) (5,848) (35,367) (71,050)
Segment result (677) 5,604 (1,270) 15,682 19,339
Segment assets 1,080,716 2,943,164 1,766,898 1,252,292 7,043,070
Segment liabilities 612,067 1,221,280 253,181 2,421,084 4,507,612
Other segment information
Impairment allowance 912 3,506 - 782 5,200
Proprietary investments (Equity-accounted
investees) 18,295 52,980 5,702 - 76,977
Equity of investment account holders - 1,071,630 - 269,682 1,341,312
Commitments - 149,387 35,705 - 185,092
----------- ----------- ------------- -------------- -----------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the three months ended 31 March 2022 US$ 000's
18. Commitments and contingencies
The commitments contracted in the normal course of business of the Group:
31 March 31 December 31 March
2022 2021 2021
US$ 000's US$ 000's US$ 000's
(reviewed) (audite (reviewed)
d)
Undrawn commitments to extend
finance 124,374 95,347 106,995
Financial guarantees 38,632 39,995 48,066
Capital commitment for infrastructure
development projects 14,502 16,171 21,617
Commitment to lend 1,739 3,915 8,414
179,247 155,428 185,092
============ ============ ============
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 2022 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.
19. 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.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the three months ended 31 March 2022 US$ 000's
19 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 Inter-relationship
unobservable between significant
inputs unobservable inputs
and fair value measurement
Structured Fair value of underlying Credit risk Ability of the Group
note reference portfolio adjusted of counterparty to hold the structure
for embedded derivatives and volatility note to maturity
that protect downside assumptions and impact of the
risk and cap upside potential for time to value of embedded
over the period of the maturity derivatives (strike
contract. prices and barriers
for coupon and principal).
----------------------------------------- ----------------- ----------------------------
Equity Discounted cash flow Marketability Ability of Group
investments factor and to exit these investments
Discount rate 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.
31 March 2022 (reviewed) 31 March 2021
(reviewed)
Profit or FVTE Profit or FVTE
loss Loss
-------------- -----------
Equity instruments- marketability factor ( +/- 10%) +/- 1,063 +/- 20,274 +/- 526 +/- 20,267
Structure notes- impact in underlying index( +/- 5%) +/- 16,958 - +/- 18,542 -
-------------- ------------ ----------- -----------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the three months ended 31 March 2022 US$ 000's
19 Financial instruments (continued)
The table below analyses the financial instruments carried at fair value, by valuation method.
31 March 2022 (reviewed) Level Level Level Total
1 2 3
i) Proprietary investments
Investment securities carried
at fair value through:
* income statement - 51,539 - 51,539
* equity 900,013 - 92,536 992,549
---------- ------- ------------ ----------
900,013 51,539 92,536 1,044,088
---------- ------- ------------ ----------
ii) Treasury portfolio
Investment securities carried
at fair value through:
* income statement - - 339,154 339,154
* equity 929,507 - - 929,507
---------- ------- ------------ ----------
929,507 - 339,154 1,268,661
---------- ------- ------------ ----------
iii) Co-investments
Investment securities carried
at fair value through
* equity - - 108,738 108,738
* income statement - - 10,630 10,630
---------- ------- ------------ ----------
- - 119,368 119,368
---------- ------- ------------ ----------
1,829,520 51,539 551,058 2,432,117
========== ======= ============ ==========
31 December 2021 (Audited) Level Level Level Total
1 2 3
i) Proprietary investments
Investment securities carried
at fair value through:
* income statement - 51,197 - 51,197
* equity 13 - 91,425 91,438
---------- --------- --------- ----------
13 51,197 91,425 142,635
---------- --------- --------- ----------
ii) Treasury portfolio
Investment securities carried
at fair value through:
* income statement - 224,086 179,900 403,986
* equity 1,656,088 - - 1,656,088
---------- --------- --------- ----------
1,656,088 224,086 179,900 2,060,074
---------- --------- --------- ----------
iii) Co-investments
Investment securities carried
at fair value through
* equity - - 164,547 164,547
* income statement - - 7,330 7,330
---------- --------- --------- ----------
171,877 171,877
---------- --------- --------- ----------
1,656,101 275,283 443,202 2,374,586
========== ========= ========= ==========
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the three months ended 31 March 2022 US$ 000's
19 Financial instruments (continued)
The following table analyses the movement in Level 3 financial assets during the period:
31 March 31 December
2022 2021
(reviewed) (audited)
At beginning of the period 443,203 390,567
Transfer from Level 2 159,254 24,650
Disposals at carrying value (58,878) (27,531)
Purchases 15,988 69,129
Fair value changes during the period (8,509) (13,612)
------------ ------------
At end of the period 551,058 443,203
============ ============
20. 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$ 5,734 million (31 December 2021: US$ 5,297 million). During the period, the Group had charged management fees amounting to US$ 989 thousands (31 March 2021: US$ 805 thousands) to its assets under management.
2. Custodial assets comprise of discretionary portfolio management ('DPM') accepted from investors amounting to US$ 594,906 thousands out of which US$ 502,667 thousands has been invested to the Bank's own investment products. Further, the Bank is also holding Sukuk of US$ 16,033 thousands on behalf of the investors.
21. DECONSOLIDATION OF SUBSIDIARIES
GFH Group has carried out a group restructuring program (the 'program') which involves the spinning off of its infrastructure and real estate assets under a new entity "Infracorp" ("the Company"), which wase capitalized with US$1.1 billion in infrastructure and development assets. Infracorp will specialise in investments focusing on accelerating growth and development of sustainable infrastructure assets and environments across the Gulf and global markets.
Under this program certain real estate and infrastructure assets were transferred from the group entities, including the Bank, to Infracorp for an in-kind consideration financed by US$ 200 million of equity shares and US$ 900m of Hybrid Sukuk (perpetual equity) issued by Infracorp.
The transfer of these assets were affected in the quarter ended 31 March 2022. Subsequent to the transfer of these assets GFH sold 60% of its equity in Infracorp to third party investors, resulting in loss of controlling stake and this resulted in Infracorp no longer being a subsdiary of GFH as at
31 March 2022 and has been accounted for as an equity accounted investee. The results of operation of Infracorp till the date of its disposal are consolidated in these condensed interim consolidated financial statements. The impact of the disposal of Infracorp is presented below:
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the three months ended 31 March 2022 US$ 000's
21. DECONSOLIDATION OF SUBSIDIARIES (continued)
31 March
2022
(reviewed)
ASSETS
Cash and bank balances 80,119
Treasury portfolio 50,912
Financing assets 38,100
Real estate investment 847,221
Proprietary investment 67,861
Co-Investments 120,735
Receivables & prepayments 87,645
Property and equipments 81,200
Total 1,373,793
-------------------
LIABILITIES
Term financing 24,467
Payables and accruals 108,032
-------------------
Total 132,499
-------------------
Non-controling interest 141,294
-------------------
Net assets transferred 1,100,000
===================
Consideration on the date of transfer:
Equity in Infracorp 200,000
Hybrid perpetual sukuk 900,000
-------------------
1,100,000
===================
31 March
2022
(reviewed)
Net profit for three months ended 31 March
2022 included in the Condensed Consolidated
Income statement (438)
-------------------
The assets of the business forming part of Infracorp were not necessarily operated as stand-alone segment and largely reflect land bank and infrastructure development projects of the Bank that were carved-out under a new business model. Hence, the net assets transferred in infracorp were not classified as discountinued operations other than as disclosed below in relation to its industrial operations.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the three months ended 31 March 2022 US$ 000's
A. Results of discontinued operation
31 March 31 March
2022 2021
Revenue 5,391 5,226
Expenses 5,347 5,305
---------
Net profit 44 (79)
========= =========
B. Cash flows used in discontinued operation
31 March 31 March
2022 2021
Net cash flow from operating activities 182 (863)
Net cash flow used in investing activities (317) (1)
Net cash flow from financing activities 3 266
---------
Net cash flows used in discontinued
operation (132) (598)
========= =========
C. Effect of disposal on the financial position of the Group
31 March 31 December
2022 2021
Property, plant and equipment 75,704 76,019
Inventories 6,767 5,895
Trade and other receivables 18,021 18,289
Cash and cash equivalents 2,397 2,528
Total liabilities and borrowings (48,419) (48,305)
---------
Net assets 54,470 54,426
========= ============
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END
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