Bahrain-based investment bank Investcorp yesterday announced $526 million (Dh1.93 billion) losses for the first half of 2009 driven by mark-to-market accounting requirements.
Despite the substantial loss, the bank said it remains well-capitalised and has $1.5bn of liquidity in cash liquid co-investments.
Investcorp's asset portfolio was also impacted by the exceptionally severe market conditions over the last six months. The scale of recent market turmoil was such that, notwithstanding the relative out performance of alternatives, all asset returns became correlated and witnessed unprecedented levels of value declines over a very short period of time.
Investcorp remains strongly capitalised, with a capital adequacy ratio of more than 13 per cent, exceeding Bank for International Settlements (BIS) minimum requirements of eight per cent and the Central Bank of Bahrain's target levels of 12 per cent.
The bank said management fee income grew 10 per cent to $62m, underpinned by record asset under management growth in the two previous fiscal years.
The bank is targeting to raise $250m through the issuance of a Tier I preference shares. The assets under management dropped to $10.3bn in the first half of 2009 against $12.8bn for the 2008 financial year.
The bank said its new real estate credit fund has made $175m of investments in distressed loans over the last eight months.
The Gulf private equity business closed Gulf Opportunity Fund I, completed one acquisition and expects to close its second acquisition in the near future.
Nemir A Kirdar, Executive Chairman and CEO, said: "We all know that the last six months have seen extraordinarily devastating for financial markets and an unprecedented downturn was witnessed across all asset classes, fuelled by a dramatic loss of liquidity.
"Along with other financial institutions around the world, Investcorp's asset portfolio has been equally impacted. We continue to be profitable in our fee generating activities by providing and managing investment products for our clients, although we had a decline in our balance sheet co-investments, a significant amount of which are unrealised and driven by mark-to-market accounting requirements."
He added: "We are cautiously optimistic about the outlook for the coming six months. In hedge funds, we have refocused our portfolio with continued emphasis on risk management in every aspect of the business."