GIB posts $757m loss on subprime exposure

Manama: Gulf International Bank (GIB), owned by the Gulf Arab governments, said it suffered a $757.3 million net loss in 2007, mainly due to the US subprime mortgage crisis, and has raised $1 billion in new capital.

The result, which compares with a profit of $255.5 million in 2006, was affected by "provisions related to structured investment vehicles... and collateralised debt obligations... incorporating exposures to the US subprime sector", the Bahrain-based bank said in a statement.

The bank said it increased its share capital by $1 billion to $2.5 billion after posting the results, which included an operating profit of $292.1 million, up 34 per cent on 2006.

"The shareholders confirmed their ongoing support to the bank with the investment of an additional $1 billion of capital," Chairman Shaikh Ebrahim Al Khalifa said in the statement.

The bank is owned by the Saudi Arabian Monetary Agency and the governments of the six Gulf Arab states - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE.

Fitch Ratings yesterday downgraded GIB's individual rating to 'C/D' from 'C', while affirming its long-term issuer default rating 'A' with a stable outlook.

"The downgrade... reflects the bank's considerable, mainly structured credit market-related, impairment charges and trading losses of $1.05 billion in 2007, equivalent to a very high 57 per cent of end-2006 equity," Fitch said.

Standard & Poor's Ratings Services said it affirmed its 'A-/A-2' long- and short-term counterparty credit ratings on GIB with a stable outlook.