Boubyan Bank - Old Board to Resign New Board to Be Elected

 

AlQabas quotes informed sources that the Board of BB has informed the Central Bank and major shareholders that it intends to resign so that a new board can be elected.  Presumably this accords with the wishes of the new shareholders.  The article goes on to praise the old board for taking decisive steps to strengthen the bank, e.g., the decision to take KD66.9 million in provisions and raising additional capital.

The AlQ article says that of the nine member board, 5 new members will be elected and 4 from the old board re-elected.

I guessing the National Bank of Kuwait wants to tighten its grip.  A rather large chunk of capital was provision away for 2009 and that's definitely not the sort of results NBK is known for.

Kuwaiti Businessman's Assets Frozen for Bouncing KD 1.1 Million Check

AlQabas reports that a prominent (but unnamed) Kuwaiti business has had all his assets frozen for writing a KD 1.1 million check that had insufficient cover and was rejected for payment by his bank.

GFH Close to Deal on US$100 Million "Islamic" Loan?

 

So says The National quoting Ted Pretty, Acting CEO.   

Deal seems to be an initial partial  repayment followed by regularly scheduled amortization (repayments) over two years.

Dynamite Prize in Economics Awarded - Alan Greenspan's Work and Role Acknowledged

In case you missed it, Real World Economics has announced the results of their poll in which over 7,500 votes were cast to nominate the winner of the "Dynamite Prize in Economics".

Alan Greenspan, former head of the Federal Reserve Bank of the United States, won this prestigious award designed to recognize "the economist most responsible for causing the Global Financial Crisis."  

Runners up were Milton Friedman and Larry Summers.

In awarding the Prize, Edward Fullbrook, editor of the Real World Economics Review, noted that “They have been judged to be the three economists most responsible for the Global Financial Crisis. More figuratively, they are the three economists most responsible for blowing up the global economy.”

The prize was developed by the Real World Economics Review Blog in response to attempts by economists to evade responsibility for the crisis by calling it an unpredictable, “Black Swan” event. In reality, the public perception that economic theories and policies helped cause the crisis is correct.

An award richly deserved, though as with many "great contributions" it's clear that many hands labored to bring it about.  And perhaps one of the finest demonstrations we've seen of bipartisanship in the United States in a long long time.

Saudi Zain 31 December 2009 Earnings Announcement

 

Two announcements from Saudi Zain on 2009 results at the Tadawul (Saudi Stock Exchange) today.  One the commentary.  The second a summary of results.

The commentary on results begins by noting achievements:

1. 6 million subscribers or 18% market share.  As I posted earlier a very key metric especially in a market with over 100% penetration is spend per subscriber.  Apparently, there are a lot of fairly inactive "chips" in the Kingdom being claimed as subscribers by all the major telecom firms.
2. Company is offering voice, text and broadband services.
3. Extension of coverage to 83% of the inhabited areas of the Kingdom.
4. An gross operating profit of SAR 877 million.  Note this is before other expenses.
5. Then a quote of the auditors' "emphasis of matter" - which by the way is roughly 64% of the entire commentary so SZ is not putting too much sugar on the news.

Financial results:

1. Net loss of SAR3.099 billion versus net loss of SAR2,278 billion.  (Recall from my earlier post that amortization of SZ's license fee is a major expense burden).
2. Loss per share SAR2.21 versus SAR1.63 in 2008.
3. Gross operating profit of SAR877 million versus SAR16 million in 2008.
4. Loss from Operations of SAR2.467 billion versus SAR1.7 billion in 2008.
5. Greater loss due to fact that in 2008 (18 month period) the company was not fully in operations so 2009's cost of operations, marketing, and financing were higher.  While it is noted that for four months out of the extended 2008 reporting period the company had no revenues, clearly operating expenses were the cause for the increase in 2009's loss.

You'll notice that the numbers above differ from those in my earlier post.  That post was based on preliminary numbers.  The final audited numbers are here.

Other posts on SZ can be accessed using the label "Saudi Zain".

Boubyan Bank - KD 51.7 Million (US$181 Million) Net Loss for 2009

Since I wrote this this morning, AlQabas has published a report that BB took provisions of KD66.9 million.

Since I've been following the Rights Offering story, I thought I should continue with the 2009 earnings announcement as the two are clearly related.

Boubyan had a net loss of KD 51,694,899 for 2009.  I'm guessing that we'll see that provisions were the main culprit when more detailed financials are released.    Shareholders' equity declined from KD135,148,400 to KD87,134,661.  The recent Rights Offering has more than restored capital by raising KD126,704,771.

Also the Board quite sensibly has recommended against any dividend for 2009. 

[12:13:8]  مجلس ادارة بنك بوبيان يوصي بعدم توزيع ارباح عن عام 2009‏
يعلن سوق الكويت للأوراق المالية أن مجلس ادارة بنك بوبيان
قد اعتمد البيانات المالية السنوية للبنك للسنة المالية المنتهية ‏في
ِ31-12-2009، وفقا لما يلي:‏
ِ1) نتائج أعمال البنك:‏
البند          السنة المنتهية في 31-12-09   السنة المنتهية في 31-12-08‏
الربح (الخسارة)(د.ك)          (51,694,899)           1,846,045 ‏
ربحية (خسارة) السهم(فلس كويتي)     (44,36)                1,58 ‏
اجمالي الموجودات المتداولة 792,676,816            710,830,820 ‏
اجمالي الموجودات         964,778,554             840,460,750 ‏
اجمالي المطلوبات المتداولة 859,395,276           699,543,124 ‏
اجمالي المطلوبات           875,672,913           702,919,776 ‏
اجمالي حقوق المساهمين     87,134,661            135,148,400 ‏
بلغ اجمالي الايرادات من التعاملات مع الاطراف ذات الصلة مبلغ 3,938,027 د.ك
بلغ اجمالي المصروفات من التعاملات مع الاطراف ذات الصلة مبلغ 685,274 د.ك
علما بأن بنك الكويت المركزي قد وافق على هذه البيانات المالية بتاريخ
ِ24-02-2010.‏
ِ2) التوزيعات المقترحة:‏
أوصى مجلس ادارة البنك بعدم توزيع اى ارباح عن السنة المالية المنتهية
في 31-12-2009 .‏
وعليه سوف تعاد اسهم البنك الى التداول بعد عشر دقائق من نزول الاعلان .‏

Central Bank of UAE - Lifts Restrictions on Bonus Share Issue for 2009

 

You' recall earlier that the CB UAE  had imposed restrictions on UAE banks' dividends for 2009, limiting cash dividends to 50% of net profit and script or bonus share dividends to 60%.  The given rationale for the measure being to preserve liquidity and capital within the banking sector.

At that time I posted that the restriction on script dividends seemed strange as the issue of bonus shares actually was a stronger form of capital retention than a mere ban on the payment of cash dividends.  

The neat thing about bonus shares is that a shareholder desiring cash can sell the extra shares and thus receive cash, though in doing so he or she reduces his or her relative percentage ownership in the bank.  No cash leaves the bank because this is a secondary market transaction.  Cash is exchanged between shareholders.  Bonus shares also have a downside:  they dilute future earnings per share.

Apparently, bankers in the UAE "shared" my view and persuaded the CB to rescind its restriction on 2009 bonus share issuance.  Bonus shares up to 100% of 2009 profit may therefore be issued.  The article notes that this restirction on dividends was the first time the CB UAE had intervened in such a fashion.  Also it noted that bankers argued that stock dividends actually strengthened capital.  Shareholders are said to be happy though not as happy as they would have been with bigger cash dividends.

The limit on cash dividends was not lifted or modified.

Gulf Finance House -The Curious Cases of the US$100 Million Deutsche Bank Murabaha and The 4Q09 Purchase of US$35 Million in Treasury Shares

In an earlier post today I noted that Deutsche Bank had converted another US$10 million of its US$100 million murabaha bringing the total converted to US$50 million.  Since the conversion was being done at US$0.38 per share and the market price is much less, I wondered what the economic motive for such a transaction could be.

This seems to be a more complicated issue than I originally thought.

Let's rewind the video tape and go back to that magical date of "2 November/2 October 2009".   GFH announced that it successfully raised US$300 million in a rights offering and would soon have announcements that it had raised "US$450 million in fresh capital in just over a month".

On 15 November 2009, it announced that it had successfully placed a US$100 million convertible murabaha with Deutsche Bank.  "The announcement is the latest success in the broader GFH liquidity and capital management plan that includes rights issue subscriptions of over US$ 300 million dollars, the partial sale of Qinvest to Qatar Islamic Bank for approximately US$ 51 million and the planned placement of the first US$ 100 million convertible murabaha with Macquarie Group."   While the placement with Macquarie didn't go forward, not an inconsiderable achievement for one month's work.  Recall that the issuance of the convertible occurred before made its first of several downgrades of GFH.  At that happy time GFH was rated investment grade.

In Note 16 to its 2009 financials  GFH states that the proceeds of the US$100 million murabaha were US$80 million.  Right about now if you're like me, you're wondering what happened to US$20 million from the US$100 million deal announced.  That certainly was the impression I took from GFH's earlier press release.  They had obtained financing of US$100 million.  US$100 million of new cash from the fine people at DB.

So where is the "missing" US$20 million?

Is it the requirements of IFRS which makes one strip out the embedded option in the convertible?  But then  the US$20 million should be reflected somewhere else on the balance sheet.   I can't find it.  I do see US$1.226 as the equity component of the transaction.  But that still leaves a lot unaccounted for. And one might not use the word "proceeds" in describing this transaction.  The proceeds would have been US$100 million.  So this probably isn't the case.

Was this a murabaha facility of up to US$100 million?  That is, is the US$100 million the aggregate amount which DB can take down in several tranches?  The term "proceeds" might be used in this case, but one would expect that surely if this were a partial drawdown, it would have been disclosed.   كلام شريف  would be the operative phrase I think. 

Or did GFH issue a discounted instrument?  That is, the face value of the instrument issued reflects the cash to be paid at maturity for both principal and interest.  If one takes US$80 million at 8% per annum for three years, the future value is over US$100 million.   But I'd note the period appears to be less than three years: the announcement was 15 November and the maturity is 12 October 2012.   But then this can't be the case because wouldn't  كلام شريف  require that the bank say it had placed US$80 million rather than say it had placed US$100 million?  Or clarify that this was a discounted instrument? After all one doesn't typically count the interest on a non discounted bond as part of the capital raising.  It would seem to me that an issuer would want to be very clear as to just how much was raised, especially if iitwere in the "red zone" in terms of financial condition,

So, maybe I'm missing something here.  Or maybe GFH's disclosure is a bit incomplete.  

Anyone out there with the answer or an opinion, please chime in.

That leaves one more curious item:  GFH's 4Q09 purchase of US$35 million in Treasury Shares.  And to my mind this one is much more perplexing than the DB murabaha.

During 4Q09, GFH bought 93,806,001 of its own shares at an average cost of about US$0.37 per share. (For those of you who care, at the beginning of the year it held 8,448,808 shares purchased at an average cost of US$2.06 clearly from much happier days). GFH did not purchase any Treasury Shares in the First, Second or Third quarter of 2009.

Now this purchase is really hard to fathom: 

1. GFH acknowledges it has a liquidity problem - revenues are way down and upcoming debt maturities loom.  And this problem is at its highest point of intensity during 4Q09 - a time when no doubt GFH either has decided or has some inklings of the massive provisions it is going to take and the rather severe loss it is about to report.
2. GFH is required under its US$1 Billion Sukuk  Program to maintain US$400 million in consolidated tangible net worth.  GFH wound up at year end 2009 with roughly US$433 million in consolidated tangible net worth.  (The  US$17 million in good will at year end 2008 was written off in 2009.)  US$433 million doesn't appear to leave GFH with much breathing space relative to this covenant.  And a breach of this covenant could trigger an event of default and a potentially life t threatening acceleration of the maturity of the Sukuk (US$302 million outstanding at year end 2009).  
3. At the end of 2009 GFH had Basel II Capital Adequacy ratio of 12.91% dangerously close to the Central Bank of Bahrain 12% threshhold.  A fact that caused its auditor to raise an "emphasis of matter" in its audit opinion on the year.  Note a very rough calculation indicates that if GFH had not purchased these Treasury Shares, its CAR would be close to a very much more comfortable level of 14%.  A low CAR attracts all sorts of perhaps unwelcome attention from the Central Bank of Bahrain.  Potential restrictions on new business.  As well as demands for immediate remedial action.

So considering all these factors, what could be the possible motive for GFH  to buy Treasury Shares? 

This act weakens liquidity. It weakens its Basel II Capital Adequacy ratio.  And it leaves it potentially close to a breach of a covenant on a US$302 million outstanding Sukuk at a time when it is struggling to reschedule 2010 maturities.  All the more surprising because the Sukuk matures in 2011 and has a relatively benign  profit or interest rate on it - when compared to the market price for GFH debt. 

And that's why I wonder if somehow these two curious cases are connected.  It's hard to understand why one would decapitalize the bank at the very time that capital and liquidity are required.

Central Bank of UAE - January 2010 Banking Indicators Published

 

Of note are the continued  high level of provisions.   January's provisions were marginally higher than December's which indicates that problems still remain.

Boubyan Bank Capital Raising - Formal Announcement on Rights Offering 85.29% Take-up

Bank Boubyan formally announced the results of their Rights Offering, 496,881,458 shares were sold (85.29% of the amount offered) and capital increased KD49,688,145.

In case you're wondering, BB is speaking about the increase in paid in capital not capital in total.  The shares were offered at KD0.255 per share which represents a share premium of KD0.155 per share.  So the issue actually raised KD126,704,771.800 of which KD49,688,175 was added to paid in capital and the rest to share premium.

As noted in a previous post, the plan is to re-open the Rights Offering because the Legal and Fatwa Department wouldn't permit an offering to third parties.   Earlier post here.   And an earlier one here.

[12:7:17]  ِ.زيادة رأس مال بنك بوبيان
يعلن سوق الكويت للأوراق المالية بأن بنك بوبيان افاد بانتهاء
فترة الاكتتاب طبقا للمدة المحددة في تاريخ 07-02-2010‏
وتمت زيادة رأس مال البنك من 116.523.531/500 د.ك
الى 166.211.677/300 د.ك وذلك بالاكتتاب في
عدد 496.881.458 سهم بما يعادل نسبته 85.289% من
اجمالي الاسهم المطروحة للاكتتاب وعليه فقد تمت اضافة اسهم
زيادة رأس المال للمكتتبين في ارصدتهم بالتنسيق مع الشركة
الكويتية للمقاصة بتاريخ 23-02-20

Gulf Finance House -Deutsche Bank Converts Another US$10 Million to Shares - Stealth Exit from GFH?

 

GFH announced on the Bahrain Stock Exchange today that Deutsche Bank had converted another US$10 million of the murabaha to shares in GFH.  That's another 26,315,789.

Since the conversion was done at US$0.38 per share and GFH's shares are trading at  US$0.25 on the BSE and about US$0.01 to US$0.02 more per share on the KSE, it's seems logical that this conversion is a way for DB to exit its exposure to GFH.  

That's at a 28% to 32% discount.   And that frankly conversion doesn't make much sense.  If one wanted to make a "wise" investment in GFH shares, one could buy them on the open market now and when one got repaid from the murabaha have roughly 30% more shares.

I'll be waiting to see the 31 March 2010 financials to see if GFH has increased its Treasury shares in 1Q2010.

At this point based on previous announcements I've seen, DB has converted US$50 million in total for 131,578,946 shares which would give them just a whisker less than 7% in the bank which should require they be disclosed as a major shareholder.  Earlier post here.  As of today they are not shown as a major shareholder on the BSE website.  But then neither is the 26 November downgrade of GFH by S&P (the first of several downgrades) yet reflected on GFH's website.

And on that basis assuming that DB is still holding all the shares it converted it would have a paper loss of US$13,815,790 (assuming a current share price of US$0.275).   Hard to believe that DB would keep piling on loss upon loss.  This has to be a way to get out of the credit for them.

Kuwait to Face Severe Power Cuts This Summer

When you don't have a functioning government, even if you're very rich, sometimes basic infrastructure just doesn't get built.

As a public spirited citizen, but not a Kuwaiti, I'd like to offer one suggestion for electricity saving this Summer.  No A/C at the Majlis Al Umma nor in the offices of the deputies.

Limitless Seeks to Negotiate Multi-Year Contractor Payments

The National reports that Limitless is approaching contractors reportedly seeking four year payment terms.

As well it seems Limitless is scaling back or perhaps canceling other projects.

What's also interesting is the comment that despite earlier talk about Nakheel settling with contractors no payments have been made.

When you don't have cash, you can't pay.  And then it makes eminent sense to scale back or halt current or new projects.

On the topic of Nakheel, I posted last December on how contrary to what one might expect it was actually a source of cash to the DW Group rather than a cash drain as it apparently upstreamed loans within the Group.  If the funds used to pay its recently matured Sukuk are treated as replacement debt rather than a return of funds owed it by the Group, then its financial position will not have really improved.  It will just be a case of rotation of creditors.

Idiocy Knows No Borders: Missouri Gets Its Budget Priorities Straight

The Kansas City Star reports on the legislature's "wise" moves to deal with the budget deficit.  

Cut educational spending.  

But don't touch the tax exemption for yachts.

I wonder if "Boss Tom" would have supported the measure?

Kuwait International Bank Denies Knowledge of Any Takeover Attempt

KIB published an announcement on the Kuwait Stock Exchange denying any knowledge of a takeover or buyout attempt.  It also noted that any such action would require regulatory approval.

[11:5:53]  ِ.ايضاح من بنك الكويت الدولي بخصوص ما نشر فى احدى الصحف المحلية اليوم ‏
يعلن سوق الكويت للاوراق المالية بانه ورد الينا الان بان بنك الكويت ‏
الدولي يود ان يوضح بخصوص ما نشر فى احدى الصحف المحلية اليوم ‏
حول سعي تحالف للاستحواذ على حصة فى البنك ، يفيد البنك بان ادارة ‏
البنك ليس لديها علم بمضمون ما ورد فى الخبر .‏
وافاد البنك بان عمليات الاستحواذ تخضع لموافقة مسبقة من جهة الاشراف ‏
وفقا لاحكام القوانين والتعليمات الصادرة بهذا الشان .‏

Adnan Yousif Predicts Banks May Recover 60% on AlGosaibi and Saad Loans

Zawya Dow Jones interview with Adnan Yousif Monday on the sidelines of an Abu Dhabi conference.

1. Anticipates 60% recovery as both groups have assets.
2. Arab banks hold the largest share in the loans estimated as we've heard before at about US$20 billion.
3. Arab banks have "turned the page" on the two Groups through taking sufficient provisions.

He also commented on Dubai World situation saying that the lenders were primarily Emirati and international banks.  Not much exposure among other Arab banks.

With respect to loans to the Government of Dubai, he said the problems were not of inability to pay but rather temporary cashflow problems which will be overcome.

For those who don't know, Adnan is Chairman of the Board of the Union of Arab Banks as well as President/CEO of the AlBaraka Group.  He and his brothers (who use the surname Abdul Malik) are among the region's distinguished bankers.

Change of Ownership at Kuwait International Bank?

AlQabas reports that a group comprising a local company and some individual investors has formed to buy KIB (the ex Kuwait Real Estate Bank).   KREB converted to an Islamic Bank in 2005/2006.  

The acquirers will need Central Bank of Kuwait approval as well as an agreement with the BuKhamseen Group, the major shareholder. 

A while back you'll recall that there was news about the Settlement Committee taking action against Mr. Jawad Bu Khamseen.  Earlier posts here and here.  I wonder if this might be related to the potential for a sale of the Bu Khamseen Group's interests in KIB.

British Banks Negotiating With Saad and AlGosaibi

Okaz quotes the Lord Mayor of London, Nick Anstee not Boris, as saying that some British banks were in negotiations with Saad and AlGosaibi Groups over the settlement of outstanding debts.   He wouldn't name the banks nor the amounts involved.   But said that his country hoped for a speedy settlement.  The British banks should proceed in a just manner with the two groups and other banks so that the investigation of all of the documents used to obtain the loans could proceed.

His remarks were made during a visit to the Amir Muhammad bin Fahd University in Al-Dammam.

Having read the 5 February submission to the Supreme Court of New York, all I can say is "الله معهم".

Qatar Financial Centre Regulatory Authority

 

Announced a refreshed brand identity today.

Saudi Zain and the Mobile Market in Saudi Arabia

If you're following Saudi Zain, a couple of articles from the Saudi Gazette.

One on growth in the mobile phone market - a reminder that the number of subscribers is just one bit of the revenue equation, the other being spend per customer.

And another on competition in the market in Saudi.

And one on a promotion by Mobily.

And finally a brochure on Markaz's report on the GCC referred to in the second SG article.