First Gulf Bank's turnaround plan sound and stable

A positive showing by First Gulf Bank (FGB) after it announced its results yesterday was clear proof of the bank's turnaround strategy being sound and stable.

The bank's net profit which jumped 50 per cent in 2003 to Dh120.9 million compared to Dh80.6 million the previous year is considered by market experts as a strong recovery with promising potential.

The bank's scrip currently trading around Dh8.40 is likely to rise in the coming days, analysts said yesterday following the results.

"The price of FGB's shares has risen to Dh8.40 in the last two to three weeks as investors expected strong results from the bank. The price will remain stable and it is quite likely to go up in the coming days," said Ayman Mallak, a broker with National Financial Brokerage Co.

Since the bank will also be paying cash dividends of 10 per cent, the price of the share may go up, he added.

FGB's new strategic initiative of increasing its equity by Dh800 million by taking on a new partner through a bond issue is also a move in the right direction that will strengthen the bank's market position.

The issuance of convertible bonds will ensure the bank's growth as well as preserve the rights of shareholders adding value to their investment.

Understandably, the bonds issued to the new strategic partner will carry 1.5 per cent interest annually and will be priced at Dh8.60 per bond. After five years the bond will be converted into shares of FGB.

However, the new partner or partners will have no voting rights and will not be eligible for dividends or profits in the five-year period. "For five years, shareholders will benefit from the additional equity because they get their dividends whereas the new partner will not get any dividends," a senior official of the bank said.

It is yet to be seen who FGB's strategic partner in this equity boosting exercise is. But indications are that it could be local and some overseas financial institutions.

The bank is likely to name the partners by the end of this quarter.

Currently, the bank has an authorised and fully paid-up share capital of Dh389.4 million. Once the strategic partner is finalised, the equity of the bank will touch Dh1.189 billion.

FGB has six branches in the UAE.

First Gulf Bank, established in 1979 and headquartered in Abu Dhabi, provides financial services nationwide, with a wide distribution network of branches in different business and industrial areas like Abu Dhabi, Dubai, Sharjah, Ajman and Al Ain.

The bank offers a variety of financial services in corporate banking, treasury and investment, and retail services.