GFH Q2 loss due to provisions; plans $300 million rights issue

Bahrain's Gulf Finance House (GFH) yesterday missed a forecast with its third consecutive quarterly loss due to provisions and a slump in income from investment placements.

The Islamic investment bank said net loss in the second quarter was $54 million (Dh198m), compared with a net profit of $104m a year ago. Analysts at Sico investment bank expected a quarterly net loss of $30m in a Reuters survey in July.

GFH said income from placing investments fell to $18m in the quarter from $199m. "During the second quarter of the year we've focused not only on the origination of new projects, but increasingly on the management and oversight of existing initiatives," Esam Janahi, Chairman of GFH, said in the statement.

Investors in the Gulf have been holding onto their funds since the global financial crisis reached the region late last year.

Total provisions for the quarter amounted to $38m, representing write-downs of investments and receivables, it said in a statement.

GFH has focused on developing and collecting investor money for large infrastructure and real estate projects in the region, sectors that have been severely hit by the economic downturn.

GFH said it had reduced operating costs by 60 per cent year-on-year during the second quarter.

Ahmed Fahour, the incoming CEO, said: "In one of the toughest trading years on record, GFH has continued to absorb the harshest effects of the downturn, adapt the business model to market conditions and lay the groundwork for the future."

Janahi said: "There have clearly been unprecedented challenges across the global marketplace over the past nine months but we're optimistic that during the second half of 2009 the bank's operating income will be close to break even point or better."

The bank yesterday said it plans to raise up to $300m of fresh capital through rights issue to strengthen the balance sheet and enable the bank to engage in high value investment opportunities arising from the global economic downturn.

The rights issue, which has already received the Central Bank of Bahrain's 'in principal' approval, will also support long term expansion and diversification plans of the bank as it looks to new geographies. The rights issue remains subject to shareholder approval.

GFH said it had appointed Bank of America Merrill Lynch as its financial advisor and corporate broker while KPMG will act as issue managers for the rights offering across the regional markets. (With inputs from Reuters)

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