Bahrain Islamic Bank swung to a net loss in the second quarter as it booked provisions against bad loans after the high-profile defaults of two major Saudi companies, the bank said yesterday.
The bank's net loss in the quarter ended June 30 was BD3.83 million (Dh37.31m, $10.16m) according to Reuters calculations, compared with a net profit of BD15.77m in the year-earlier quarter.
"The bank's management has set aside more provisions to deal with any future defaults in keeping with the directives of the Kingdom's regulatory authorities," it said in a statement. "This is particularly relevant following the release of confirmed reports about the failure of two major family businesses in a neighbouring Gulf country," said the bank, one of Bahrain's smallest by market capitalisation.
In neighbouring Saudi Arabia, family-owned groups Saad and Ahmad Hamad Algosaibi and Brothers (Ahab) are undergoing debt restructuring, and many Gulf Arab banks have said they face potential write-downs.
Stable second-quarter net profits at Saudi banks have prompted analysts to say the institutions have refrained from stating their exposures to these groups in the second quarter and that more provisioning will come later in the year.
"Foreign banks will be at a disadvantage in the debt restructuring, that is why their regulators could ask them for stricter provisioning," said Suleman Soorani, a banking analyst at Sico Investment Bank. Bahrain Islamic's net income before provisions also plunged to BD226,000 from BD16.07m in the year-earlier quarter.
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