TIDM95HX
RNS Number : 8781F
GFH Financial Group B.S.C
09 November 2022
GFH FINANCIAL GROUP BSC
CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
30 SEPTEMBER 2022
Commercial registration : 44136 (registered with Central Bank of Bahrain
as an Islamic wholesale Bank)
Registered Office : Bahrain Financial Harbour
Office: 2901, 29(th) Floor
Building 1398, East Tower
Block: 346, Road: 4626
Manama, Kingdom of Bahrain
Telephone +973 17538538
Directors : Ghazi Faisal Ebrahim Alhajeri , Chairman
Edris Mohd Rafi Mohd Saeed Alrafi, Vice Chairman
Jassim Al Seddiqi, (Resigned wef 04 April 2022)
Hisham Ahmed Alrayes
Rashid Nasser Al Kaabi
Ali Murad
Ahmed Abdulhamid AlAhmadi, (Resigned wef 07 June 2022)
Alia Al Falasi
Fawaz Talal Al Tamimi
Darwish Al Ketbi
Yusuf Abdulla Taqi, (Appointed wef 19 June 2022)
Chief Executive Officer : Hisham Ahmed Alrayes
Auditors : KPMG Fakhro
CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
for the nine months ended 30 September 2022
CONTENTS Page
Independent auditors' report on review of condensed consolidated
interim financial
information 1
Condensed consolidated interim financial information
Condensed consolidated statement of financial position 2
Condensed consolidated income statement 3
Condensed consolidated statement of changes in owners' equity
4-5
Condensed consolidated statement of cash flows 6
Condensed consolidated statement of changes in restricted investment accounts 7
Condensed consolidated statement of sources and uses of zakah and charity fund 8
Notes to the condensed consolidated interim financial
information 9-34
Independent auditors' report on review of condensed consolidated
interim financial information
To the Board of Directors
GFH Financial Group BSC
Manama, Kingdom of Bahrain
We have reviewed the accompanying 30 September 2022 condensed consolidated
interim financial information of GFH Financial Group BSC (the "Bank")
and its subsidiaries (together the "Group"), which comprises:
* the condensed consolidated statement of financial
position as at 30 September 2022;
* the condensed consolidated income statement for the
three-month and nine-month periods ended 30 September
2022;
* the condensed consolidated statement of changes in
owners' equity for the nine-month period ended 30
September 2022;
* the condensed consolidated statement of cash flows
for the nine-month period ended 30 September 2022;
* the condensed consolidated statement of changes in
restricted investment accounts for the nine-month
period ended 30 September 2022;
* the condensed consolidated statement of sources and
uses of zakah and charity fund for the nine-month
period ended 30 September 2022; and
* notes to the condensed consolidated interim financial
information.
The Board of Directors of the Bank is responsible for the preparation
and presentation of this condensed consolidated interim financial
information in accordance with the basis of preparation and presentation
as stated in note 2 of this condensed consolidated interim financial
information. Our responsibility is to express a conclusion on this
condensed consolidated interim financial information based on our
review.
We conducted our review in accordance with the International Standard
on Review Engagements 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity". A review of
interim financial information consists of making inquiries, primarily
of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with Auditing
standards for Islamic Financial Institutions and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes
us to believe that the accompanying 30 September 2022 condensed consolidated
interim financial information is not prepared, in all material respects,
in accordance with the basis of preparation and presentation as stated
in note 2 of this condensed consolidated interim financial information.
09 November 2022
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2022 US$ 000's
Note 30 September 31 December 30 September
2022 2021 2021
(reviewed) (audited) (reviewed)
ASSETS
Cash and bank balances 550,978 722,471 479,444
Treasury portfolio 8 3,749,371 3,090,049 2,726,882
Financing assets 9 1,473,711 1,311,002 1,275,680
Investment in real estate 10 1,270,291 1,905,598 1,851,407
Proprietary investments 11 1,108,063 211,514 172,148
Co-investments 12 135,334 171,877 135,813
Receivables and other assets 13 642,925 531,488 655,455
Property and equipment 73,679 139,687 138,134
-------------
Total assets 9,004,352 8,083,686 7,434,963
============= ============ =============
LIABILITIES
Clients' funds 84,010 216,762 132,610
Placements from financial, non-financial
institutions and individuals 4,154,673 3,052,092 2,947,392
Customer current accounts 157,589 133,046 130,977
Term financing 14 1,957,119 1,750,667 1,311,877
Other liabilities 539,479 404,654 485,554
------------- ------------ -------------
Total liabilities 6,892,870 5,557,221 5,008,410
------------- ------------ -------------
Total equity of investment account
holders 1,090,593 1,358,344 1,218,909
OWNERS' EQUITY
Share capital 1,015,638 1,000,638 1,000,638
Treasury shares (99,788) (48,498) (35,779)
Statutory reserve 27,970 27,970 24,058
Investment fair value reserve (75,070) (28,561) (13,717)
Foreign currency translation reserve - (70,266) (53,762)
Retained earnings 86,661 81,811 44,422
Share grant reserve - - 1,093
------------- ------------ -------------
Total equity attributable to
shareholders of the Bank 955,411 963,094 966,953
Non-controlling interests 65,478 205,027 240,691
------------- ------------ -------------
Total owners' equity 1,020,889 1,168,121 1,207,644
------------- ------------ -------------
Total liabilities, equity of
investment account holders and
owners' equity 9,004,352 8,083,686 7,434,963
============= ============ =============
The Board of Directors approved the condensed consolidated
interim financial information on 09 November 2022 and signed on its
behalf by:
Ghazi Faisal Ebrahim Alhajeri Hisham Alrayes
Chairman Chief Executive Officer & Board member
The accompanying notes 1 to 24 form an integral part of the
condensed consolidated interim financial information.
CONDENSED CONSOLIDATED INCOME STATEMENT
for the nine months ended 30 September 2022 US$ 000's
Nine months ended Three months
ended
Note 30 September 30 September 30 September 30 September
2021 2021
2022 (reviewed) 2022 (reviewed)
(reviewed) (reviewed)
Investment banking income
Asset management 5,885 2,354 2,301 755
Deal related income 67,838 55,786 26,324 22,648
------------- -------------- -------------
73,723 58,140 28,625 23,403
------------- -------------- -------------
Commercial banking income
Income from financing 68,435 58,842 25,460 19,058
Treasury and investment
income 43,953 46,292 17,336 12,968
Fee and other income 2,979 4,021 1,019 1,765
Less: Return to investment
account holders (28,626) (23,950) (9,988) (7,856)
Less: Finance expense (28,285) (26,716) (12,230) (9,159)
------------- -------------- -------------
58,456 58,489 21,597 16,776
------------- -------------- -------------
Income from proprietary
and co-investments
Income from sale of assets 12,643 12,268 10,711 4,922
Leasing and operating
income 13,859 4,135 6,594 2,001
Direct investment income,
net 3,451 14,405 204 440
Share of profit from
equity-accounted
investees 19,281 (61) 8,781 (16)
Dividend from co-investments 24,583 10,445 8,718 5,433
-------------- ------------- -------------- -------------
73,817 41,192 35,008 12,780
-------------- ------------- -------------- -------------
Treasury and other income
Finance and treasury portfolio
income, net 74,387 89,607 22,283 30,710
Other income, net 13,495 23,179 3,602 5,928
------------- -------------- -------------
87,882 112,786 25,885 36,638
------------- -------------- -------------
Total income 293,878 270,607 111,115 89,597
-------------- ------------- -------------- -------------
Operating expenses 83,971 86,638 24,406 26,877
Finance expense 138,151 98,252 57,460 34,856
Impairment allowances 15 281 17,441 3,150 3,733
Total expenses 222,403 202,331 85,016 65,466
Profit for the period 71,475 68,276 26,099 24,131
-------------- ------------- -------------- -------------
Attributable to:
Shareholders of the Bank 66,235 60,340 24,055 23,296
Non-controlling interests 5,240 7,936 2,044 835
-------
71,475 68,276 26,099 24,131
======= ======= ======= =======
Earnings per share
Basic and diluted earnings per
share (US cents) 16 1.91 1.76 0.73 0.68
------- ------- ------- -------
Ghazi Faisal Ebrahim Alhajeri Hisham Alrayes
Chairman Chief Executive Officer & Board member
The accompanying notes 1 to 24 form an integral part of the
condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN OWNERS'
EQUITY
for the nine months ended 30 September 2022 US$ 000's
Attributable to shareholders of the Bank
Foreign
Investment currency Total
30 September 2022 Share Treasury Statutory fair value translation Retained Non-Controlling owners'
(reviewed) capital shares reserve reserve reserve earnings Total Interests (NCI) equity
----------
Balance at 1
January 2022 1,000,638 (48,498) 27,970 (28,561) (70,266) 81,811 963,094 205,027 1,168,121
Profit for the
period - - - - - 66,235 66,235 5,240 71,475
Transfer on
reclassification
from FVTE to
amortised cost
(Note 8) - - - 41,320 - - 41,320 - 41,320
Fair value
changes during
the period - - - (85,315) - - (85,315) (3,072) (88,387)
Transfer to
income statement
on disposal of
sukuk - - - (2,514) - - (2,514) - (2,514)
Total recognised
income and
expense - - - (46,509) - 66,235 19,726 2,168 21,894
Bonus shares
issued 15,000 - - - - (15,000) - - -
Dividend declared - - - - - (45,000) (45,000) - (45,000)
Purchase of
treasury shares - (83,177) - - - - (83,177) - (83,177)
Transfer to zakah
and charity fund - - - - - (1,483) (1,483) - (1,483)
Sale of treasury
shares - 31,887 - - - 98 31,985 - 31,985
Transferred to
income statement
on
deconsolidation
of subsidiaries - - - - 70,266 - 70,266 - 70,266
Adjusted on
deconsolidation
of subsidiaries
(Note 22) - - - - - - - (142,080) (142,080)
Additional NCI on
acquisition of
subsidiary (Note
23) - - - - - - - 363 363
---------- ---------- ----------- ----------- ------------ --------- --------- ---------------- ----------
Balance at 30
September 2022 1,015,638 (99,788) 27,970 (75,070) - 86,661 955,411 65,478 1,020,889
========== ========== =========== =========== ============ ========= ========= ================ ==========
The accompanying notes 1 to 24 form an integral part of the
condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN OWNERS'
EQUITY
for the nine months ended 30 September 2022 (continued) US$
000's
Attributable to shareholders of the Bank Non Total
-controlling owners'
interests equity
Foreign
Investment currency Share
30 September 2021 Share Treasury Statutory fair value translation Retained grant
(reviewed) capital shares reserve reserve reserve earnings reserve Total
----------
Balance at 1 January 2021
(as previously reported) 975,638 (63,979) 19,548 5,593 (46,947) 22,385 1,093 913,331 272,733 1,186,064
Effect of adoption of FAS
32 - - - - - (2,096) - (2,096) - (2,096)
---------- ---------- ----------- ----------- ------------ --------- -------- --------- ------------- ----------
Balance at 1 January 2021
(restated) 975,638 (63,979) 19,548 5,593 (46,947) 20,289 1,093 911,235 272,733 1,183,968
Profit for the period - - - - - 60,340 - 60,340 7,936 68,276
Fair value changes during
the period - - - 2,693 - - - 2,693 439 3,132
Transfer to income
statement on disposal of
sukuk - - - (22,003) - - - (22,003) - (22,003)
Total recognised income
and expense - - - (19,310) - 60,340 - 41,030 8,375 49,405
Bonus Shares issued for
2020 25,000 - - - - (25,000) - - - -
Dividends declared for
2020 - - - - - (17,000) - (17,000) - (17,000)
Transfer to zakah and
charity fund - - - - - (1,572) - (1,572) (142) (1,714)
Transfer to statutory
reserve - - 4,510 - - (4,510) - - - -
Purchase of treasury
shares - (26,777) - - - - - (26,777) - (26,777)
Sale of treasury shares - 54,977 - - - 4,092 - 59,069 - 59,069
Foreign currency
translation differences - - - - (6,815) - - (6,815) (2,022) (8,837)
Acquisition of NCI without
a change in control (Note
20) - - - - - 7,783 - 7,783 (38,253) (30,470)
Balance at 30 September
2021 1,000,638 (35,779) 24,058 (13,717) (53,762) 44,422 1,093 966,953 240,691 1,207,644
========== ========== =========== =========== ============ ========= ======== ========= ============= ==========
The accompanying notes 1 to 24 form an integral part of the
condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS-
for the nine months ended 30 September 2022 US$ 000's
30 September
2022 30 September
(reviewed) 2021 (reviewed)
OPERATING ACTIVITIES
Profit for the period 71,475 68,276
Adjustments for:
Income from commercial banking (43,135) (45,959)
Income from proprietary investments (73,817) (24,789)
Income from dividend and gain on treasury
investments (77,273) (129,189)
Foreign exchange (gain) (9,911) (1,505)
Finance expense 138,151 124,967
Impairment allowances 281 17,441
Depreciation and amortisation 1,317 3,533
7,088 12,775
Changes in:
Placements with financial institutions
(original maturities of more than 3 months) (270,415) (96,339)
Financing assets (162,709) (8,414)
Other assets (265,250) (53,684)
CBB Reserve and restricted bank balance (10,876) (13,342)
Clients' funds (132,752) 1,675
Placements from financial and non-financial
institutions 1,102,581 529,392
Customer current accounts 24,543 (9,779)
Equity of investment account holders (267,751) 61,916
Payables and accruals 99,160 20,516
------------------
Net cash generated from operating activities 123,619 444,716
------------------
INVESTING ACTIVITIES
Payments for purchase of equipment (443) (1,054)
Purchase of proprietary investment securities,
net (44,662) 32,020
Purchase of treasury portfolio, net (319,498) (730,773)
Cash acquired on acquisition of a subsidiary 1,353 -
Proceeds from sale of investment in real
estate - 1,061
Cash paid on acquisition of a subsidiary (9,205) -
Dividends received from proprietary investments
and co-investments 26,817 14,154
Advance paid for development of real estate (8,367) (6,688)
Net cash used in investing activities (354,005) (691,280)
FINANCING ACTIVITIES
Financing liabilities, net 244,577 222,800
Finance expense paid (134,724) (116,618)
Purchase of GFH sukuk, net (8,135) -
Dividends paid (44,651) (17,485)
Purchase of treasury shares, net (51,287) 28,200
------------------
Net cash generated from financing activities 5,780 116,897
------------------
Net decrease in cash and cash equivalents
during the period (224,606) (129,667)
Cash and cash equivalents at 1 January 844,344 655,455
-------------- ------------------
Cash and cash equivalents at 30 September 619,738 525,788
============== ------------------
Cash and cash equivalents comprise:
Cash and balances with banks (excluding
CBB Reserve balance and restricted cash) 482,020 421,631
Placements with financial institutions
(original maturities of 3 months or less) 137,718 104,157
-------------- ------------------
619,738 525,788
============== ==================
The accompanying notes 1 to 24 form an integral part of the
condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN RESTRICTED
INVESTMENT ACCOUNTS
for the nine months ended 30 September 2022
30
September
2022 Balance at 1 January Balance at 30 September
(reviewed) 2022 Movements during the period 2022
Average Average
value Group's value
No of per Investment/ Gross Dividends fees as Administration No of per
units share Total (withdrawal) Revaluation income paid an agent expenses units share Total
Company (000) US$ US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's (000) US$ US$ 000's
----- ------- --------- ------------ ----------- --------- --------- --------- -------------- ----- ------- ---------
Mena Real
Estate
Company
KSCC 150 0.33 50 - - - - - - 150 0.33 50
Al Basha'er
Fund 12 7.87 94 - - - - - - 12 7.87 94
Safana
Investment
(RIA
1) 1247 2.65 3,305 - - - - - - 1247 2.65 3,305
Shaden Real
Estate
Investment
WLL (RIA
5) 269 2.65 713 - - - - - - 269 2.65 713
4,162 - - - - - - 4,162
========= ============ =========== ========= ========= ========= ============== =========
30 September
2021 Balance at 1 January Balance at 30 September
(reviewed) 2021 Movements during the period 2021
Average Average
value Group's value
No of per Investment/ Gross Dividends fees as Administration No of per
units share Total (withdrawal) Revaluation income paid an agent expenses units share Total
Company (000) US$ US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's US$ 000's (000) US$ US$ 000's
----- ------- --------- ------------ ----------- --------- --------- --------- -------------- ----- ------- ---------
Mena Real
Estate
Company
KSCC 150 0.33 50 - - - - - - 150 0.33 50
Al Basha'er
Fund 12 7.91 95 (2) - - - - - 12 7.91 95
Safana
Investment
(RIA
1) 6,254 2.65 16,573 - - - - - - 6,254 2.65 16,573
Shaden Real
Estate
Investment
WLL (RIA 5) 3,434 2.65 9,100 - - - - - - 3,434 2.65 9,100
Locata
Corporation
Pty
Ltd (RIA 6) 2,633 1.00 2,633 (45) 5 119 - - - 2,633 1.03 2,712
28,451 (47) 5 119 - - - 28,530
========= ============ =========== ========= ========= ========= ============== =========
The accompanying notes 1 to 24 form an integral part of the
condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF SOURCES AND USES OF ZAKAH
AND CHARITY FUND
for the nine months ended 30 September 2022 US$ 000's
30 September 30 September
2022 2021
(reviewed) (reviewed)
Sources of zakah and charity fund
Contribution by the Group 2,548 1,714
Non-Islamic income 51 30
Total sources 2,599 1,744
---------------- ----------------
Uses of zakah and charity fund
Contributions to charitable organisations (1,890) (1,911)
Total uses (1,890) (1,911)
---------------- ----------------
0B Surplus / (deficit) of sources over
uses 709 (167)
Undistributed zakah and charity fund at
beginning of the period 5,192 5,346
1B Undistributed zakah and charity fund
at end of the period 5,901 5,179
================ ================
Represented by:
Zakah payable 753 1,013
Charity fund 5,148 4,166
5,901 5,179
============== ==============
The accompanying notes 1 to 24 form an integral part of the
condensed consolidated interim financial information.
1 Reporting entity
The condensed consolidated interim financial information for the
nine months ended 30 September 2022 comprise the financial
information of GFH Financial Group BSC (GFH or the "Bank") and its
subsidiaries (together referred to as "the Group").
The following are the principal subsidiaries consolidated in the
condensed consolidated interim financial information.
Effective
ownership
interests
as at 30
Country of September
Investee name incorporation 2022 Activities
GFH Capital Limited United Arab 100% Investment
Emirates management
---------------- ----------- -------------------
GFH Capital S.A. Saudi Arabia 100% Investment
management
---------------- ----------- -------------------
Khaleeji Commercial Bank Kingdom of 85.14% Islamic retail
BSC ('KHCB') Bahrain bank
---------------- ----------- -------------------
Al Areen Project companies 100% Real estate
development
---------------- ----------- -------------------
GBCORP Tower Group Ltd 62.91% Own & lease
real estate
----------- -------------------
GBCORP B.S.C (c) 62.91% Islamic investment
firm
----------- -------------------
Residential South Real 100% Real estate
Estate Development Company development
(RSRED)
----------- -------------------
Harbour House Row Towers 100% Own & lease
W.L.L. real estate
----------- -------------------
Britus International School 100% Educational
for Special Education W.L.L institution
---------------- ----------- -------------------
Gulf Holding Company KSCC State of Kuwait 53.63% Investment
in real estate
---------------- ----------- -------------------
SQ Topco II LLC (Note 23) United States 51% Property
asset management
Company
---------------- ----------- -------------------
Big Sky Asset Management United States 51% Real estate
LLC investment
(Note 23) manager
---------------- ----------- -------------------
Roebuck A M LLP United Kingdom 60% Property
asset management
Company
---------------- ----------- -------------------
The Bank has other investment holding companies, SPV's and
subsidiaries, which are set up to supplement the activities of the
Bank and its principal subsidiaries.
GFH Group has carried out a group restructuring program (the
'program') which involves the spinning out of its infrastructure
and real estate assets under a new entity "Infracorp B.S.C."
("Infracorp"), which has been capitalized with more than US$1
billion in infrastructure and development assets. Infracorp will
specialise in investments focusing on accelerating growth and
development of sustainable infrastructure assets and environments
across the gulf and global markets.
Under this program certain real estate and infrastructure assets
as well as certain investments in securities, equity accounted
investees and subsidiaries have been transferred from the Group to
Infracorp for an in-kind consideration in the form of Sukuk and/ or
equity shares issued by Infracorp. A majority stake of 60% in
Infracorp equity was divested during the period ended
31 March 2022. See note 22 for more details.
2 Basis of preparation
The condensed consolidated interim financial information of the
Group has been prepared in accordance with applicable rules and
regulations issued by the Central Bank of Bahrain ("CBB"). These
rules and regulations require the adoption of all Financial
Accounting Standards (FAS) issued by the Accounting and Auditing
Organisation of Islamic Financial Institutions (AAOIFI).
The accounting policies used in the preparation of annual
audited consolidated financial information of the Group for the
year ended 31 December 2020 and 31 December 2021 were in accordance
with FAS as modified by CBB (refer to the Group's audited financial
statements for the year ended 31 December 2021 for the details of
the COVID-19 related modifications applied). Since the CBB
modification were specific to the financial year 2020 and no longer
apply to both the current and comparative periods presented, the
Group's interim financial information for the nine months ended 30
September 2022 has been prepared in accordance with FAS issued by
AAOIFI (without any modifications).
These condensed consolidated interim financial information are
reviewed and not audited. The condensed consolidated interim
financial information does not include all the information required
for full annual financial statements and should be read in
conjunction with the Group's last audited consolidated financial
statements for the year ended 31 December 2021. However, selected
explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in the
Group's financial position and performance since the last annual
audited consolidated financial statements as at and for the year
ended 31 December 2021.
3 Significant accounting policies
The accounting policies and methods of computation applied by
the Group in the preparation of the condensed consolidated interim
financial information are the same as those used in the preparation
of the Group's last audited consolidated financial statements as at
and for the year ended 31 December 2021, except those arising from
adoption of the following standards and amendments to standards
effective from 1 January 2022. The impact of adoption of these
standards and amendments is set out below.
a. New standards, amendments and interpetations issued and
effective for annual periods beginning on or after 1 January
2022:
FAS 38 Wa'ad, Khiyar and Tahawwut
AAOIFI has issued FAS 38 Wa'ad, Khiyar and Tahawwut in 2020. The
objective of this standard is to prescribe the accounting and
reporting principles for recognition, measurement and disclosures
in relation to shariah compliant Wa'ad (promise), Khiyar (option)
and Tahawwut (hedging) arrangements for Islamic financial
institutions. This standard is effective for the financial
reporting periods beginning on or after 1 January 2022.
This standard classifies Wa'ad and Khiyar arrangements into two
categories as follows:
a) "ancillary Wa'ad or Khiyar" which is related to a structure
of transaction carried out using other products i.e. Murabaha,
Ijarah Muntahia Bittamleek, etc.; and
b) "product Wa'ad and Khiyar" which is used as a stand-alone
Shariah compliant arrangement.
Further, the standard prescribes accounting for constructive
obligations and constructive rights arising from the stand-alone
Wa'ad and Khiyar products.
There was no material impact on the Group upon adoption of this
standard.
3 Significant accounting policies (continued)
b. New standards, amendments and interpretations issued but not yet effective
(i) FAS 39 Financial Reporting for Zakah
AAOIFI has issued FAS 39 Financial Reporting for Zakah in 2021.
The objective of this standard is to establish principles of
financial reporting related to Zakah attributable to different
stakeholders of an Islamic financial Institution. This standard
supersedes FAS 9 Zakah and is effective for the financial reporting
periods beginning on or after 1 January 2023 with an option to
early adopt.
This standard shall apply to institution with regard to the
recognition, presentation and disclosure of Zakah attributable to
relevant stakeholders. While computation of Zakah shall be
applicable individually to each institution within the Group, this
standard shall be applicable on all consolidated and separate /
standalone financial statements of an institution.
This standard does not prescribe the method for determining the
Zakah base and measuring Zakah due for a period. An institution
shall refer to relevant authoritative guidance for determination of
Zakah base and to measure Zakah due for the period.
The Group is assessing the impact of adoption of this
standard.
(ii) FAS 1 General Presentation and Disclosures in the Financial
Statements
AAOIFI has issued the revised FAS 1 General Presentation and
Disclosures in the Financial Statements in 2021. This standard
describes and improves the overall presentation and disclosure
requirements prescribed in line with the global best practices and
supersedes the earlier FAS 1. It is applicable to all the Islamic
Financial Institutions and other institutions following AAOIFI
FAS's. This standard is effective for the financial reporting
periods beginning on or after 1 January 2023 with an option to
early adopt.
The revision of FAS 1 is in line with the modifications made to
the AAOIFI conceptual framework for financial reporting. Some of
the significant revisions to the standard are as follows:
a) Revised conceptual framework is now integral part of the
AAOIFI FAS's;
b) Definition of Quasi equity is introduced;
c) Definitions have been modified and improved;
d) Concept of comprehensive income has been introduced;
e) Institutions other than Banking institutions are allowed to
classify assets and liabilities as current and non-current;
f) Disclosure of Zakah and Charity have been relocated to the
notes;
g) True and fair override has been introduced;
h) Treatment for change in accounting policies, change in
estimates and correction of errors has been introduced;
i) Disclosures of related parties, subsequent events and going
concern have been improved;
j) Improvement in reporting for foreign currency, segment
reporting;
k) Presentation and disclosure requirements have been divided
into three parts. First part is applicable to all institutions,
second part is applicable only to banks and similar IFI's and third
part prescribes the authoritative status, effective date an
amendments to other AAOIFI FAS's; and
l) The illustrative financial statements are not part of this
standard and will be issued separately.
The Group is assessing the impact of adoption of this standard
and expects changes in certain presentation and disclosures in its
consolidated financial statements.
4 Estimates and judgements
Preparation of condensed consolidated interim financial
information requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and
expenses. Actual results may differ from these estimates. The areas
of significant judgments made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were similar to those applied to the audited consolidated financial
statements as at and for the year ended 31 December 2021.
Russia-Ukraine conflict
On 24 February 2022, a military conflict between Russia and
Ukraine emerged (the "conflict"). Owing to this various countries
and international bodies have imposed trade and financial sanctions
on Russia and Belarus. Further, various organisations have
discontinued their operations in Russia. This conflict has resulted
in an economic downturn and increased volatility in commodity
prices due to disruption of supply chain.
The management has carried out an assessment of its portfolio
and has concluded that it does not have any direct exposures to /
from the impacted countries. However, indirect impact is pervasive
in the market and at this stage it is difficult to quantify the
full impact of this conflict since it depends largely on the nature
and duration of uncertain and unpredictable events, such as further
military action, additional sanctions, and reactions to ongoing
developments by global financial markets. The management will
continue to closely monitor impact of this evolving situation on
its portfolio to assess indirect impact, if any. During the period
ended 30 September 2022, the Group's investment portfolio reduced
in market value by US$ 85,315 thousand for investments carried as
FVTE and US$ 37,753 thousand for investments carried as FVTPL due
to volatile market movements. However, the Group does not trade in
such securities and does not expect to liquidate any of it's market
portfolio in short term.
5 Financial risk management
The Group's financial risk management objectives and policies
are consistent with those disclosed in the audited consolidated
financial statements for the year ended 31 December 2021.
Regulatory ratios
a. Net stable funding Ratio (NSFR)
The objective of the NSFR is to promote the resilience of banks'
liquidity risk profiles and to incentivise a more resilient banking
sector over a longer time horizon. The NSFR limits overreliance on
short-term wholesale funding, encourages better assessment of
funding risk across all on-balance sheet and off-balance sheet
items, and promotes funding stability.
NSFR as a percentage is calculated as "Available stable funding"
divided by "Required stable funding".
The Consolidated NSFR calculated as per the requirements of the
CBB rulebook, is as follows:
As at 30 September 2022
More than
6 months
Less and less
No Specified than than one Over Total weighted
No. Item Maturity 6 months year one year value
Available Stable Funding (ASF):
------------------------------------------------------------------------------------------------------
1 Capital:
-----------------------------------------------------------------------------------------------
2 Regulatory Capital 997,943 46,501 1,044,444
--------------------------- ------------- ---------- ---------- ---------- ---------------
3 Other Capital Instruments
--------------------------- ------------- ---------- ---------- ---------- ---------------
4 Retail deposits and deposits from small business customers:
-----------------------------------------------------------------------------------------------
5 Stable deposits 166,869 14,517 19,248 191,565
--------------------------- ------------- ---------- ---------- ---------- ---------------
6 Less stable deposits 1,337,336 370,139 231,057 1,767,783
--------------------------- ------------- ---------- ---------- ---------- ---------------
7 Wholesale funding:
-----------------------------------------------------------------------------------------------
8 Operational deposits
--------------------------- ------------- ---------- ---------- ---------- ---------------
Other Wholesale
9 funding 3,107,783 1,207,584 1,093,578 2,354,639
--------------------------- ------------- ---------- ---------- ---------- ---------------
10 Other liabilities:
-----------------------------------------------------------------------------------------------
11 NSFR Shari'a-compliant
hedging contract
liabilities
--------------------------- ------------- ---------- ---------- ---------- ---------------
All other liabilities
not included in
12 the above categories 365,804 44,576 44,576
--------------------------- ------------- ---------- ---------- ---------- ---------------
13 Total ASF 5,403,007
--------------------------- ------------- ---------- ---------- ---------- ---------------
Required Stable Funding (RSF):
------------------------------------------------------------------------------------------------------
Total NSFR high-quality
14 liquid assets (HQLA) 1,668,845 80,767
--------------------------- ------------- ---------- ---------- ---------- ---------------
15 Deposits held at
other financial
institutions for
operational purposes
--------------------------- ------------- ---------- ---------- ---------- ---------------
Performing financing
16 and sukuk/ securities: 1,009,668 785,258 818,920
--------------------------- ------------- ---------- ---------- ---------- ---------------
17 Performing financial
to financial institutions
by level 1 HQLA
--------------------------- ------------- ---------- ---------- ---------- ---------------
Performing financing
to financial institutions
secured by non-level
1 HQLA and unsecured
performing financing
18 to financial institutions 20,151 1,077,124 925,631
--------------------------- ------------- ---------- ---------- ---------- ---------------
Performing financing
to non- financial
corporate clients,
financing to retail
and small business
customers, and
financing to sovereigns,
central banks and
PSEs, of
19 which: 286,701 99,807 280,746 375,739
--------------------------- ------------- ---------- ---------- ---------- ---------------
5 Financial risk management (continued)
More than
6 months
No Specified Less and less Total
Maturity than than one Over weighted
No. Item ," 6 months year one year value
20 With a risk weight
of less than or
equal to 35% as
per the CBB Capital
Adequacy Ratio
guidelines
------------------------ ------------- ---------- ---------- ---------- ----------
21 Performing residential
mortgages, of which:
------------------------ ------------- ---------- ---------- ---------- ----------
22 With a risk weight
of less than or
equal to 35% under
the CBB Capital
Adequacy Ratio
Guidelines
------------------------ ------------- ---------- ---------- ---------- ----------
Securities/sukuk
that are not in
default and do
not qualify as
HQLA, including
exchange-traded
23 equities 924,114 423,972 455,845 1,129,889
------------------------ ------------- ---------- ---------- ---------- ----------
24 Other assets:
------------------------ ------------- ---------- ---------- ---------- ----------
25 Physical traded
commodities, including
gold
------------------------ ------------- ---------- ---------- ---------- ----------
26 Assets posted as
initial margin
for Shari'a-compliant
hedging contracts
and
contributions
to default funds
of CCPs
------------------------ ------------- ---------- ---------- ---------- ----------
27 NSFR Shari'a-compliant
hedging assets
------------------------ ------------- ---------- ---------- ---------- ----------
28 NSFR Shari'a-compliant
hedging contract
liabilities before
deduction of variation
margin posted
------------------------ ------------- ---------- ---------- ---------- ----------
All other assets
not included in
29 the above categories 1,915,363 1,915,363
------------------------ ------------- ---------- ---------- ---------- ----------
30 OBS items 40,406
------------------------ ------------- ---------- ---------- ---------- ----------
31 Total RSF 2,220,483 543,930 2,598,974 5,286,714
------------------------ ------------- ---------- ---------- ---------- ----------
32 NSFR (%) 102%
------------------------ ------------- ---------- ---------- ---------- ----------
As at 31 December 2021
More than
6 months
Less and less Total
No Specified than than one Over weighted
No. Item Maturity 6 months year one year value
Available Stable Funding (ASF):
---------------------------------------------------------------------------------------------
1 Capital:
------------------------ ------------- ---------- ---------- ---------- ----------
2 Regulatory Capital 1,070,314 - - 49,953 1,120,267
------------------------ ------------- ---------- ---------- ---------- ----------
Other Capital
3 Instruments - - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
Retail deposits
and deposits
from small business
4 customers:
------------------------ ------------- ---------- ---------- ---------- ----------
5 Stable deposits - 182,112 25,962 2,749 200,420
------------------------ ------------- ---------- ---------- ---------- ----------
6 Less stable deposits - 1,314,514 430,372 90,957 1,661,355
------------------------ ------------- ---------- ---------- ---------- ----------
7 Wholesale funding:
------------------------ ------------- ---------- ---------- ---------- ----------
8 Operational deposits - - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
Other Wholesale
9 funding - 2,860,814 861,346 773,058 1,896,078
------------------------ ------------- ---------- ---------- ---------- ----------
10 Other liabilities:
------------------------ ------------- ---------- ---------- ---------- ----------
NSFR Shari'a-compliant
hedging contract
11 liabilities - - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
All other liabilities
not included
in the above
12 categories - 136,864 18,759 71,437 71,437
------------------------ ------------- ---------- ---------- ---------- ----------
13 Total ASF 4,949,558
------------------------ ------------- ---------- ---------- ---------- ----------
Required Stable Funding (RSF):
---------------------------------------------------------------------------------------------
Total NSFR high-quality
liquid assets
14 (HQLA) 1,493,881 73,941
------------------------ ------------- ---------- ---------- ---------- ----------
5 Financial risk management (continued)
More than
6 months
Less and less Total
No Specified than than one Over weighted
No. Item Maturity 6 months year one year value
Deposits held
at other financial
institutions
for operational
15 purposes
------------------------ ------------- ---------- ---------- ---------- ----------
Performing financing
16 and sukuk/ securities: - 636,283 - 720,739 708,071
------------------------ ------------- ---------- ---------- ---------- ----------
17 Performing financial
to financial
institutions
by level 1 HQLA - - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
Performing financing
to financial
institutions
secured by non-level
1 HQLA and unsecured
performing financing
to financial
18 institutions - 5,000 - 174,023 150,419
------------------------ ------------- ---------- ---------- ---------- ----------
Performing financing
to non- financial
corporate clients,
financing to
retail and small
business customers,
and financing
to sovereigns,
central banks
and PSEs, of
19 which: - 320,720 91,696 205,595 339,845
------------------------ ------------- ---------- ---------- ---------- ----------
20 With a risk weight
of less than
or equal to 35%
as per the CBB
Capital Adequacy
Ratio guidelines - - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
21 Performing residential
mortgages, of
which: - - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
22 With a risk weight
of less than
or equal to 35%
under the CBB
Capital Adequacy
Ratio Guidelines - - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
Securities/sukuk
that are not
in default and
do not qualify
as HQLA, including
exchange-traded
23 equities - 615,521 634,536 291,421 916,449
------------------------ ------------- ---------- ---------- ---------- ----------
24 Other assets:
------------------------ ------------- ---------- ---------- ---------- ----------
25 Physical traded
commodities,
including gold - -
------------------------ ------------- ---------- ---------- ---------- ----------
26 Assets posted
as initial margin
for Shari'a-compliant
hedging contracts
and
contributions
to default funds
of CCPs - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
27 NSFR Shari'a-compliant
hedging assets - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
28 NSFR Shari'a-compliant
hedging contract
liabilities before
deduction of
variation
margin posted - - - -
------------------------ ------------- ---------- ---------- ---------- ----------
All other assets
not included
in the above
29 categories 2,672,214 - - - 2,672,214
------------------------ ------------- ---------- ---------- ---------- ----------
30 OBS items - - - 27,946
------------------------ ------------- ---------- ---------- ---------- ----------
31 Total RSF 1,577,524 726,232 1,391,778 4,888,886
------------------------ ------------- ---------- ---------- ---------- ----------
32 NSFR (%) 101%
------------------------ ------------- ---------- ---------- ---------- ----------
5 Financial risk management (continued)
b. Liquidity Coverage Ratio (LCR)
LCR has been developed to promote short-term resilience of a
bank's liquidity risk profile. The LCR requirements aim to ensure
that a bank has an adequate stock of unencumbered high-quality
liquidity assets (HQLA) that consists of assets that can be
converted into cash immediately to meet its liquidity needs for a
30-calendar day stressed liquidity period. The stock of
unencumbered HQLA should enable the Bank to survive until day 30 of
the stress scenario, by which time appropriate corrective actions
would have been taken by management to find the necessary solutions
to the liquidity crisis.
LCR is computed as a ratio of Stock of HQLA over the Net cash
outflows over the next 30 calendar days.
Average balance
30 September 31 December
2022 2021
-------------
Stock of HQLA 264,151 292,998
Net cashflows 194,780 148,599
LCR % 142% 221%
Minimum required by CBB 100% 80%
------------- ------------
c. Capital Adequacy Ratio
30 September 31 December
2022 2021
CET 1 Capital before regulatory
adjustments 1,014,810 1,063,515
Less: regulatory adjustments - -
CET 1 Capital after regulatory
adjustments 1,014,810 1,063,515
T 2 Capital adjustments 52,944 53,374
Regulatory Capital 1,067,754 1,116,889
Risk weighted exposure:
Credit Risk Weighted Assets 7,478,848 7,574,496
Market Risk Weighted Assets 35,956 38,325
Operational Risk Weighted Assets 655,034 655,034
Total Regulatory Risk Weighted
Assets 8,170,839 8,267,855
Investment risk reserve (30%
only) 2 2
Profit equalization reserve (30%
only) 3 3
Total Adjusted Risk Weighted
Exposures 8,170,834 8,267,850
Capital Adequacy Ratio (CAR) 13.07% 13.51%
Tier 1 Capital Adequacy Ratio 12.42% 12.86%
Minimum CAR required by CBB 12.50% 12.50%
------------- ------------
6 Seasonality
Due to the inherent nature of the Group's business (investment
banking, commercial banking and leisure and hospitality management
business), the nine-month results reported in this condensed
consolidated interim financial information may not represent a
proportionate share of the overall annual results.
7 Comparatives
The comparative figures have been regrouped in order to conform
with the presentation for current year. Such regrouping did not
affect previously reported profit for the period or total
equity.
8 Treasury portfolio
30 September 31 December 30 September
2022 2021 2021
(reviewed) (audited) (reviewed)
Placements with financial
institutions 408,228 180,000 207,223
Equity type investments
At fair value through equity
* Quoted sukuk 31,793 20,344 20,436
At fair value through income
statement
* Structured notes 315,437 403,986 443,956
Debt type investments
At fair value through equity
* Quoted sukuk 879,487 1,635,744 1,309,638
At amortised cost
* Quoted sukuk * 2,125,947 860,616 751,771
* Unquoted sukuk 3,494 3,486 3,493
Less: Impairment allowances (15,015) (14,127) (9,635)
3,749,371 3,090,049 2,726,882
============= ============ =============
* Short-term and medium-term facilities of US$ 1,671,696
thousand ( 31 December 2021 : US$ 1,417,800 thousand) are secured
by quoted sukuk of US$ 2,295,705 thousand ( 31 December 2021 : US$
2,070,315 thousand), structured notes of US$ 315,437 thousand ( 31
December 2021 : US$ 403,986 thousand).
Reclassification
During the period, based on completion of the Group
re-organization and on review of the overall balance sheet funding
structure the Bank has reassessed its business model of managing
its yielding treasury portfolio. In anticipation of the short-term
and long-term liquidity needs, during the first quarter of 2022,
the Bank has re-assessed the objective of its treasury portfolio
wherein it would manage the underlying assets the following
distinct business models:
i) Held-to-collect business model
This portfolio includes short-term and long-term Sukuk and
treasury instruments that are held to meet core liquidity
requirements of high-quality liquid assets and are typically held
to their contractual maturity. Assets under this model are
classified and measured at amortised cost. Although management
considers fair value information, it does so from a liquidity
perspective, and the main focus of its review of financial
information under this business model is on the credit quality and
contractual returns.
8 Treasury portfolio (continued)
ii) Classified as fair value through P&L
These include instruments that do not meet the contractual cash
flow characteristic and include embedded option features or
instruments held under an active trading portfolio for short-term
profit taking. This portfolio includes structured notes and other
hybrid debt-type instruments that are do not have a typical
constant yield features.
iii) Both held-to-collect and for sale business model
The remaining fixed income treasury portfolio is held under
active treasury management to collect both contract cash flows and
for sale. These include Sukuk and other treasury instruments where
yield is determinable. The key management personnel consider both
of these activities as integral in achieving the objectives set for
the Treasury business unit. This portfolio, while generating
returns primarily through yield, is also held to meet expected or
unexpected commitments, or to fund anticipated acquisitions or
growth in other business units. Assets under this model are
classified and measured at fair value through equity.
Until 31 December 2021, the Bank classified its whole Sukuk
portfolio as FVTE only under a 'both held-to-collect and for sale'
business model. The Board of Directors have assessed that the group
re-organisation has significantly changed the liquidity management
and strategy within the Bank and the above classification of the
treasury portfolio best reflects the way the assets will be managed
in order to meet the objectives of the new business model and the
way information is provided to management. Due to the above change
in the business model, the Bank has reclassified its treasury
portfolio as at 1 January 2022 as follows:
US$ 000's
Assets subject to Fair value through Reversal of Reclassified
reclassification equity (FVTE) amounts recognized to amortised
in investment cost
fair value reserve
Sukuk 894,194 41,320 935,514
------------------- -------------------- --------------
9 Financing assets
30 September 31 December 30 September
2022 2021 2021
(reviewed) (audited) (reviewed)
Murabaha 1,062,836 995,324 968,412
Wakala 239 239 239
Mudharaba 14,166 2,576 2,599
Assets held-for-leasing 470,017 384,312 372,769
------------
1,547,258 1,382,451 1,344,019
Less: Impairment allowances (73,547) (71,449) (68,339)
------------- ------------ -------------
1,473,711 1,311,002 1,275,680
============= ============ =============
9. Financing assets (continued)
Murabaha financing receivables are net of deferred profits of
US$ 54,817 thousands
(31 December 2021: US$ 44,979 thousands).
The movement on financing assets is as follows:
30 September 2022 (reviewed) Stage 1 Stage 2 Stage 3 Total
Financing assets (gross) 1,256,399 190,061 100,798 1,547,258
Expected credit loss (24,473) (6,058) (43,016) (73,547)
--------- ------- --------
Financing assets (net) 1,231,926 184,003 57,782 1,473,711
========= ======= ======== =========
31 December 2021 (audited) Stage 1 Stage 2 Stage 3 Total
Financing assets (gross) 1,015,953 251,500 114,998 1,382,451
Expected credit loss (19,995) (7,109) (44,345) (71,449)
--------- ------- --------
Financing assets (net) 995,958 244,391 70,653 1,311,002
========= ======= ======== =========
30 September 2021 (reviewed) Stage 1 Stage 2 Stage 3 Total
Financing assets (gross) 1,027,826 185,082 131,111 1,344,019
Expected credit loss (19,286) (7,958) (41,095) (68,339)
--------- ------- --------
Financing assets (net) 1,008,540 177,124 90,016 1,275,680
========= ======= ======== =========
The movement on impairment allowances is as follows:
Stage 1 Stage 2 Stage 3 Total
At 1 January 2022 19,991 7,109 44,345 71,445
Net movement between
stages 1,279 (1,719) 440 -
Net charge for the period 3,203 668 1,164 5,035
Writeoffs - - (2,933) (2,933)
At 30 September 2022
(reviewed) 24,473 6,058 43,016 73,547
======= ======= ======= =======
Stage 1 Stage 2 Stage 3 Total
At 1 January 2021 20,841 6,255 28,914 56,010
Net movement between
stages 796 822 (1,618) -
Net charge for the period (1,640) (64) 18,080 16,376
Transfer to off balance
sheet - - (12) (12)
Disposal (2) 96 (1,019) (925)
At 31 December 2021 (audited) 19,995 7,109 44,345 71,449
======= ======= ======= ======
9. Financing assets (continued)
Stage 1 Stage 2 Stage 3 Total
At 1 January 2021 20,841 6,255 28,914 56,010
Net movement between
stages 1,231 398 (1,629) -
Net charge for the period (2,786) 1,305 14,463 12,982
Write-offs - - (11) (11)
Transfer to Off-BS ECL - - (642) (642)
At 30 September 2021
(reviewed) 19,286 7,958 41,095 68,339
======= ======= ======= ======
10 Investment in real estate
30 September 31 December 30 September
2022 2021 2021
(reviewed) (audited) (reviewed)
Investment Property
* Land 518,997 529,076 481,370
* Building 221,482 63,758 64,098
------------- ------------ -------------
740,479 592,834 545,468
Development Property
* Land 129,405 592,926 788,217
* Building 400,407 719,838 517,722
------------- ------------ -------------
529,812 1,312,764 1,305,939
1,270,291 1,905,598 1,851,407
============= ============ =============
11 Proprietary investments
30 September 31 December 30 September
2022 2021 2021
(reviewed) (audited) (reviewed)
Equity type investments
At fair value through income
statement
* Structured notes 38,610 41,197 -
17,254 -
* Listed securities -
* Unlisted fund 10,000 10,000 10,000
------------- ------------ -------------
65,864 51,197 10,000
------------- ------------ -------------
At fair value through equity
* Listed securities - 13 13
* Unquoted securities * 923,009 91,425 84,409
------------- ------------ -------------
923,009 91,438 84,422
------------- ------------ -------------
Equity-accounted investees
* 119,383 69,003 77,726
Less: Impairment allowances (193) (124) -
------------- ------------ -------------
1,108,063 211,514 172,148
============= ============ =============
* Comprises of Bank's 40% equity stake in issued share capital
of Infracorp B.S.C. (c) ("IC") and holdings of perpetual sukuk
issued by IC.
12 Co-investments
30 September 31 December 30 September
2022 2021 2021
(reviewed) (audited) (reviewed)
At fair value through equity
* Unquoted securities 124,704 164,547 128,229
At fair value through income
statement
* Unquoted securities 10,630 7,330 7,584
------------- ------------ -------------
135,334 171,877 135,813
============= ============ =============
13 Receivables and other assets
30 September 31 December 30 September
2022 2021 2021
(reviewed) (audited) (reviewed)
Investment banking receivables 198,868 148,985 156,255
Financing to projects, net 47,727 42,383 43,428
Receivable on sale of development
properties - 59,914 14,296
Advances and deposits 106,360 58,222 92,432
Employee receivables 16,725 18,898 33,244
Profit on sukuk receivable 17,863 17,273 26,907
Lease rentals receivable 4,974 2,175 355
Prepayments and other receivables 255,432 194,313 293,407
Less: Impairment allowances
net of write-off (5,024) (10,675) (4,869)
642,925 531,488 655,455
============= ============ =============
14 Term financing
30 September 31 December 30 September
2022 2021 2021
(reviewed) (audited) (reviewed)
Murabaha financing * 1,699,286 1,449,852 896,150
Sukuk ** 238,030 250,943 276,271
Ijarah financing 18,235 20,093 109,964
Other borrowings 1,568 29,779 29,492
------------ ----------- ------------
1,957,119 1,750,667 1,311,877
============ =========== ============
* Murabaha financing comprise :
Short-term and medium-term facilities of US$ 1,671,696 thousand
(31 December 2021: US$ 1,417,800 thousand) are secured by quoted
sukuk of US$ 2,295,705 thousand (31 December 2021: US$ 2,070,315
thousand), structured notes of US$ 315,437 thousand (31 December
2021: US$ 403,986 thousand).
** Sukuk
During 2020, the Group raised US$ 500,000 thousand through
issuance of unsecured sukuk certificates with a profit rate of 7.5%
p.a. repayable by 2025. The Bank has repurchased cumulative sukuk
of US$ 264,921 thousand during the year ended 31 December 2020 and
2021 and the period ended 30 September 2022. The outstanding sukuk
also includes accrued profit of US$ 3,514 thousand.
15 Impairment allowances
Nine months ended
30 September 30 September
2022 2021
(reviewed) (reviewed)
Expected credit loss on:
Bank balances (15) (2)
Treasury portfolio 888 3,531
Financing assets, net (note 9) 5,035 13,078
Other receivables (5,651) (248)
Commitments and financial guarantees (46) 393
Impairment on investment in equity securities 70 689
------------ ------------
281 17,441
============ ============
16 Earnings per share
The calculation of basic earning per share has been based on the
following profit attributable to the ordinary shareholders and
weighted-average number of ordinary shares outstanding. The Group
does not have any diluted potentially ordinary shares as of the
reporting dates. Hence, the basic and diluted earning per share is
similar.
Nine months ended Three months ended
30 September 30 September 30 September 30 September
2022 2021 2022 2021
(reviewed) (reviewed) (reviewed) (reviewed)
Profit for the
period attributable
to shareholders
of the Bank 66,235 60,340 24,055 23,296
Weighted average
number of shares
outstanding during
the period (in
thousands) 3,460,779 3,430,821 3,300,757 3,406,213
Basic and diluted
earning per share
(US Cents) 1.91 1.76 0.73 0.68
============= ============= ============= =============
17 Related party transactions
The significant related party balances and transactions as at 30
September 2022 are given below:
Related parties as per
FAS 1
Assets
Significant under
shareholders management
/ entities (including
in which special
Associates Key directors purpose
30 September and joint management are and other
2022 (reviewed) venture personnel interested entities) Total
Assets
Cash and bank
balances - - - 13,350 13,350
Treasury portfolio - - - 70,934 70,934
Financing assets - 8,048 39,538 17,429 65,015
Proprietary investments 981,517 - 149,748 11,252 1,142,517
Co-investments - - 5,430 118,685 124,115
Receivables and
prepayments 84,378 17,007 1,021 215,122 317,528
Liabilities
Placements from
financial, non-financial
institutions and
individuals - 3,403 - 6,793 10,196
Customer accounts 2,406 2,265 2,589 14,523 21,783
Payables and accruals 87,746 2,715 - 142,650 233,111
Equity of investment
account holders 37,792 671 32,657 38,786 109,906
Income
Income from Investment
banking - - - 73,723 73,723
Income from commercial
banking
* Income from financing - 443 944 - 1,387
* Fee and other income - - - - -
* Less: Return to investment account holders (21) (11) (5,546) (11) (5,589)
* Less: Finance expense - (66) (1,390) - (1,456)
Income from proprietary
and co-investments 16,872 - - 37,431 54,303
Treasury and other
income - - 2,873 2,468 5,341
Real estate income - - - - -
Expenses
Operating expenses
* Staff cost - (6,191) - - (6,191)
Finance cost - (531) - (4,605) (5,136)
17 Related party transactions (continued)
Related parties as per FAS
1
Assets
Significant under
shareholders management
/ entities (including
in which special
Associates Key directors purpose
and joint management are and other
31 December 2021 venture personnel interested entities) Total
(audited)
Assets
Cash and bank
balance - - - 14,725 14,725
Treasury portfolio - - 37,148 - 37,148
Financing assets - 7,817 33,407 16,482 57,706
Proprietary investments 114,387 - 20,328 48,011 182,726
Co-investments - - - 76,794 76,794
Receivables and
prepayments 8,060 623 300 171,559 180,542
Liabilities
Placements from
financial, non-financial
institutions and
individuals - 4,430 - 231,117 235,547
Customer accounts 1,488 366 872 14,725 17,451
Payables and accruals - 2,688 1,528 33,678 37,894
Equity of investment
account holders 1,088 355 54,276 772 56,491
30 September 2021
(reviewed)
Income
Income from Investment
banking - - - 53,040 53,040
Income from commercial
banking
* Income from financing - 310 2,332 - 2,642
* Fee and other income (1,915) - - 698 (1,217)
* Less: Return to investment account holders 24 3 5,111 13 5,151
* Less: Finance expense - 50 - - 50
Income from proprietary
and co-investments (61) - 8,017 15,891 23,847
Income from real
estate - 120 - - 120
Treasury and other
income - - (819) 957 138
Operating expenses
- Staff cost - (6,202) - - (6,202)
Finance Cost - - (743) (117) (860)
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the nine months ended 30 September 2022 ` US$ 000's
18 Segment reporting
The Group is organised into business units based on their nature
of operations and independent reporting entities and has four
reportable operating segments namely investment banking, commercial
banking and corporate and treasury.
Investment Commercial Corporate
banking banking and treasury Total
30 September 2022 (reviewed)
Segment revenue 73,723 58,456 161,699 293,878
Segment expenses (59,169) (28,159) (135,075) (222,403)
Segment result 14,554 30,297 26,624 71,475
Segment assets 999,680 3,439,369 4,565,303 9,004,352
Segment liabilities 781,689 1,791,806 4,319,375 6,892,870
Equity of investment account holders - 1,083,191 7,402 1,090,593
Other segment information
Impairment allowance - 4,600 (4,319) 281
Proprietary investments (Equity-accounted investees) - 33,650 85,733 119,383
Commitments 56,400 154,135 25,117 235,652
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the nine months ended 30 September 2022 ` US$ 000's
18 Segment reporting (continued)
Investment Commercial Corporate
banking banking and treasury Total
30 September 2021 (reviewed)
Segment revenue 58,140 58,489 153,978 270,607
Segment expenses (40,568) (35,126) (126,637) (202,331)
Segment result 17,572 23,363 27,341 68,276
Segment assets 1,067,151 2,780,492 3,587,320 7,434,963
Segment liabilities 716,567 1,148,308 3,143,535 5,008,410
Equity of investment account holders - 1,078,062 140,847 1,218,909
Other segment information
Impairment allowance 917 13,341 3,183 17,441
Proprietary investments (Equity-accounted investees) 18,274 53,688 5,764 77,726
Commitments - 146,279 21,888 168,167
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the nine months ended 30 September 2022 US$ 000's
19 Commitments and contingencies
The commitments contracted in the normal course of business of
the Group:
30 September 31 December 30 September
2022 2021 2021
US$ 000's US$ 000's US$ 000's
(reviewed) (audited) (reviewed)
Undrawn commitments to extend
finance 111,363 95,347 104,459
Financial guarantees 66,866 39,995 41,820
Capital commitment for infrastructure
development projects 56,890 16,171 16,974
Commitment to invest 533 3,915 4,914
235,652 155,428 168,167
============= ============ =============
Performance obligations
During the ordinary course of business, the Group may enter
performance obligations in respect of its infrastructure
development projects. It is the usual practice of the Group to pass
these performance obligations, wherever possible, on to the
companies that own the projects. In the opinion of the management,
no liabilities are expected to materialise on the Group at 30
September 2022 due to the performance of any of its projects.
Litigations, claims and contingencies
The Group has several claims and litigations filed against it in
connection with projects promoted by the Bank in the past and with
certain transactions. Further, claims against the Group entities
also have been filed by former employees and customers. Based on
the advice of the Bank's external legal counsel, the management is
of the opinion that the Bank has strong grounds to successfully
defend itself against these claims. Where applicable, appropriate
provision has been made in the books of accounts. No further
disclosures regarding contingent liabilities arising from any such
claims are being made by the Bank as the directors of the Bank
believe that such disclosures may be prejudicial to the Bank's
legal position.
20 Financial instruments
Fair values
Fair value is an amount for which an asset could be exchanged,
or a liability settled, between knowledgeable, willing parties in
an arm's length transaction. This represents the price that would
be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date.
The fair value of quoted Sukuk carried at amortised cost (net of
impairment allowances) of USD 2,125,947 thousand (31 December 2021:
USD 860,616 thousand) is USD 2,063,969 thousand as at 30 September
2022 (31 December 2021: USD 883,618 thousand). There are no
material changes in the fair values of the Sukuk's carried at
amortised cost subsequent to the reporting date until the date of
signing the condensed consolidated interim financial information
for the period ended 30 September 2022.
Underlying the definition of fair value is a presumption that an
enterprise is a going concern without any intention or need to
liquidate, curtail materially the scale of its operations or
undertake a transaction on adverse terms.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the nine months ended 30 September 2022 US$ 000's
20 Financial instruments (continued)
Fair value hierarchy
The different levels have been defined as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e.as prices) or indirectly (i.e. derived from
prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The following table shows the valuation techniques used in
measuring Level 3 fair values, as well as the significant
unobservable inputs used:
Type Valuation technique Significant Inter-relationship
unobservable between significant
inputs unobservable inputs
and fair value measurement
Structured Fair value of underlying Credit risk Ability of the Group
note reference portfolio of counterparty to hold the structure
adjusted for embedded and volatility note to maturity
derivatives that protect assumptions and impact of the
downside risk and cap for time to value of embedded
upside potential over maturity derivatives (strike
the period of the contract. prices and barriers
for coupon and principal).
--------------------------------------- ----------------- ----------------------------
Equity Discounted cash flow Marketability Ability of Group
investments factor and to exit these investments
Discount rate and their impact
on the overall value
as these are unquoted
investments.
--------------------------------------- ----------------- ----------------------------
The potential effect of change in assumptions used above would
have the following effects.
30 September 2022 (reviewed) 30 September 2021
(reviewed)
Profit or FVTE Profit or FVTE
loss Loss
------------------ -----------
Equity instruments- marketability factor ( +/- 10%) 2,788 14,771 758 21,264
Structure notes- impact in underlying index ( +/- 5%) 18,202 - 22,698 -
------------------ ------------ ----------- -------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the nine months ended 30 September 2022 US$ 000's
20 Financial instruments (continued)
The table below analyses the financial instruments carried at
fair value, by valuation method.
Level Level Level Total
30 September 2022 (reviewed) 1 2 3
i) Proprietary investments
Investment securities carried
at fair value through:
* income statement - 48,610 17,254 65,864
* equity 900,000 - 23,009 923,009
---------- -------- -------- ----------
900,000 48,610 40,263 988,873
---------- -------- -------- ----------
ii) Treasury portfolio
Investment securities carried
at fair value through:
* income statement - 230,900 84,537 315,437
* equity 911,280 - - 911,280
---------- -------- -------- ----------
911,280 230,900 84,537 1,226,717
---------- -------- -------- ----------
iii) Co-investments
Investment securities carried
at fair value through
* equity - - 124,704 124,704
* income statement - - 10,630 10,630
---------- -------- -------- ----------
- - 135,334 135,334
---------- -------- -------- ----------
1,811,280 279,510 260,134 2,350,924
========== ======== ======== ==========
Level Level Level Total
31 December 2021 (audited) 1 2 3
i) Proprietary investments
Investment securities carried
at fair value through:
* income statement - 51,197 - 51,197
* equity 13 - 91,425 91,438
---------- --------- --------- ----------
13 51,197 91,425 142,635
---------- --------- --------- ----------
ii) Treasury portfolio
Investment securities carried
at fair value through:
* income statement - 224,086 179,900 403,986
* equity 1,656,088 - - 1,656,088
---------- --------- --------- ----------
1,656,088 224,086 179,900 2,060,074
---------- --------- --------- ----------
iii) Co-investments
Investment securities carried
at fair value through
* equity - - 164,547 164,547
* income statement - - 7,330 7,330
---------- --------- --------- ----------
171,877 171,877
---------- --------- --------- ----------
1,656,101 275,283 443,202 2,374,586
========== ========= ========= ==========
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the nine months ended 30 September 2022 US$ 000's
20 Financial instruments (continued)
The following table analyses the movement in Level 3 financial
assets during the period:
30 September 31 December
2022 2021
(reviewed) (audited)
At beginning of the period 443,202 390,567
Total gains / (losses) in income statement (37,753) (17,223)
Transfer from Level 2 (78,109) 24,650
Disposals at carrying value (29,634) (27,532)
Purchases (37,572) 69,129
Fair value changes during the period - 3,611
------------- ------------
At end of the period 260,134 443,202
============= ============
21 Assets under management and custodial assets
The Group provides corporate administration, investment
management and advisory services to its project companies, which
involve the Group making decisions on behalf of such entities.
Assets that are held in such capacity are not included in these
consolidated financial statements. At the reporting date, the Group
had assets under management of US$ 7,346 million (31 December 2021:
US$ 5,297 million). During the period, the Group had charged
management fees amounting to US$ 5,885 thousands (30 September
2021: US$ 2,354 thousands) to its assets under management.
Assets under management includes funds under discretionary
portfolio management ('DPM') accepted from investors amounting to
US$ 661,694 thousands (31 December 2021: US$ 639,599 thousand ) out
of which US$ 641,737 thousands (31 December 2021: US$ 407,877
thousand ) has been invested in to Bank's own investment
products.
22 Deconsolidation of subsidiaries
During the period, GFH Group has carried out a group
restructuring program (the 'program') which involves the spinning
off of its infrastructure and real estate assets under a new entity
"Infracorp" ("the Company"), which wase capitalized with US$1.1
billion in infrastructure and development assets. Infracorp will
specialise in investments focusing on accelerating growth and
development of sustainable infrastructure assets and environments
across the Gulf and global markets.
Under this program certain real estate and infrastructure assets
were transferred from the group entities, including the Bank, to
Infracorp for an in-kind consideration financed by US$ 200 million
of equity shares and US$ 900m of Hybrid Sukuk (perpetual equity)
issued by Infracorp.
The transfer of these assets were affected in the quarter ended
31 March 2022. Subsequent to the transfer of these assets GFH sold
60% of its equity in Infracorp to third party investors, resulting
in loss of controlling stake and this resulted in Infracorp no
longer being a subsidiary of GFH as at
30 September 2022 and has been accounted for as an equity
accounted investee. The results of operation of Infracorp till the
date of its disposal are consolidated in these condensed interim
consolidated financial statements. The impact of the disposal of
Infracorp is presented below:
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the nine months ended 30 September 2022 US$ 000's
22. Deconsolidation of subsidiaries (continued)
30 September
2022
(reviewed)
ASSETS
Cash and bank balances 80,119
Treasury portfolio 50,912
Financing assets 38,100
Real estate investment 847,221
Proprietary investment 67,861
Co-Investments 120,735
Receivables & prepayments 87,645
Property and equipments 81,201
Total 1,373,794
-------------
LIABILITIES
Term financing 24,467
Payables and accruals 108,032
-------------
Total 132,499
-------------
Non-controlling interest 141,295
-------------
Net assets transferred 1,100,000
=============
Consideration on the date of transfer:
Equity in Infracorp 200,000
Hybrid perpetual sukuk 900,000
-------------
1,100,000
=============
30 September
2022
(reviewed)
Net profit included in the current period condensed
consolidated income statement ** (438)
-------------
** Net profits includes cumulative profit from all the assets
and subsidiaries transferred as part of the consolidation of
subsidiaries
Discontinuing operations :
The assets of the business forming part of Infracorp were not
necessarily operated as stand-alone segment and largely reflect
land bank and infrastructure development projects of the Bank that
were carved-out under a new business model. Hence, the net assets
transferred in infracorp were not classified as discountinued
operations other than as disclosed below in relation to its
industrial operations.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the nine months ended 30 September 2022 US$ 000's
22. Deconsolidation of subsidiaries (continued)
A. Results of discontinued operation
30 September 30 September
2022 2021
Revenue 5,391 5,226
Expenses 5,347 5,305
-------------
Net profit 44 (79)
============= =============
B. Cash flows used in discontinued operation
30 September 30 September
2022 2021
Net cash flow from operating activities 182 (863)
Net cash flow used in investing activities (317) (1)
Net cash flow from financing activities 3 266
-------------
Net cash flows used in discontinued
operation (132) (598)
============= =============
23 Acquisition of subsidiaries
During the year, the Group acquired controlling stake in the
following subsidiaries.
% stake acquired Place of Nature of activities
incorporation
SQ Topco II LLC 51% United States Property asset
management Company
Big Sky Asset Management LLC 51% United States Real estate investment
manager
-------------- -----------------------
Consideration transferred and non-controlling interests
The consideration transferred for the acquisition was in the
form of cash and in-kind for the services rendered by the Group.
The consideration transferred is generally measured at fair value
and the stake held by shareholders other than the Group in the
subsidiaries is recognised in the consolidated financial statements
under "Non-controlling interests" based on the proportionate share
of non-controlling shareholders' in the recognised amounts of the
investee's net assets or fair value at the date of acquisition of
the investee on a transaction by transaction basis based on the
accounting policy choice of the Group. Where consideration includes
contingent consideration payable in future based on performance and
service obligations of continuing employees, these are accounted
under IFRS 2 - Share based payments.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the nine months ended 30 September 2022 US$000
23 Acquisition of subsidiaries (continued)
Identifiable assets acquired and liabilities assumed
Entity acquired was considered as a business. The fair value of
assets, liabilities, equity interests have been reported on a
provisional basis. If new information, obtained within one year
from the acquisition date about facts and circumstances that
existed at the acquisition date, identifies adjustments to the
above amounts, or any additional provisions that existed at the
acquisition date, then the acquisition accounting will be revised.
Revisions to provisional acquisition accounting are required to be
done on a retrospective basis.
The reported amounts below represent the adjusted acquisition
carrying values of the acquired entities at the date of acquisition
reported on a provisional basis as permitted by accounting
standards.
Total
Intangible asset 8,350
Trade receivables 1,353
Cash and bank balances 2,045
Total assets 11,748
Accruals and other liabilities 1,722
Total liabilities 1,722
Total net identifiable assets and liabilities
(A) 10,026
Total
Consideration 9,205
Non-controlling interests recognised 821
Total consideration (B) 10,026
Goodwill / Bargain purchase (B-A) -
For the purpose of consolidated statement of cash flows, net
cash acquired on business combination is given below:
Total
Cash and bank balances acquired as part of business
combination 1,353
Less: Cash consideration (9,205)
Net cash flows from acquisition of subsidiaries (7,852)
=======
The Group has also acquired assets under management of US $
1,315,915 thousand along with the above acquisition. Income for the
first nine months assuming the transaction was done at the
beginning of the year would have been USD 1,200 thousand.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
for the nine months ended 30 September 2022 US$000
24 Appropriations
Appropriations, if any, are made when approved by the
shareholders.
In the shareholders meeting held on 3 April 2022, the following
were approved:
a) Cash dividend of 4.57% of the paid-up share capital amounting to US$ 45,000;
b) Stock dividend of 1.5% of the paid-up share capital amounting to US$ 15,000;
c) Appropriation of US$ 1,483 towards charity, civil society institutions and Zakat
d) Transfer of US$ 8,422 to statutory reserve; and,
e) Board remuneration of US$ 2,400.
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END
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