Bahrain-based Al Baraka Banking Group reported a 16.84% fall in net income for the full-year 2019 to $180.2 million compared to $216.7 million in 2018.
Its Europe segment saw the biggest drop in net income, from $48.42 million in 2018 to $2.47 million in 2019, a plunge of 94.9%. Turkey falls under the Group’s Europe segment.
The bank said in a bourse filing on Monday (Feb 24) net income was hit by “monetary and geopolitical developments that prevailed during most months of the year in countries where the Group’s units operate”.
It added that it also had to provide provisions for its banking unit in Turkey, “in order to enhance the integrity of its financial conditions and enable it to continue growing in the Turkish market”.
Credit rating agency S&P in November gave Al Baraka Turk a negative outlook (B/Negative/B), saying it could lower the ratings if solvency deterioration accelerates because of lower earnings retention, continuous pressure on margins, and a hike in credit costs, as well as its exposure to the lira devaluation.
“In line with other Turkish banks, Al Baraka Turk's business risk and financial risk profiles are vulnerable to the deteriorating economic and business environment in Turkey, with the lira's depreciation, weak economic prospects, and higher political risks,” said S&P.
In December, the Turkish bank conducted a rights issue to increase its capital from 900 million liras ($146.63 million) to 1.35 billion liras ($220 million). The majority of the rights were assigned to the Group’s chairperson’s company Dallah Al Baraka Holding Company, which became 15.38% owner of the Turkish bank’s shares. Dallah Al Baraka assigned its voting power to Al Baraka Bank, resulting in the bank controlling 53.4% voting power, it explained in its financial statements.
Al Baraka Banking Group’s net income attributable to shareholders for full-year 2019 fell 18% to $105.7 million compared to $129.1 million in 2018.
“The year 2019 saw the continuation of unfavourable international economic developments such as the trade war and unstable oil prices, in addition to the financial and geopolitical developments in some countries where our units operate,” said Adnan Ahmed Yousif, President and CEO of the Group.
The Shariah-compliant banking group’s assets increased by 10% to reach $26.26 billion versus $23.83 billion at the end of 2018.
Al Baraka operates in 17 countries: Jordan, Egypt, Tunisia, Bahrain, Sudan, Turkey, South Africa, Algeria, Pakistan, Lebanon, Saudi Arabia, Syria, Morocco and Germany, in addition to two branches in Iraq and two representative offices, in Indonesia and Libya.
Its Middle East business is its biggest earner, bringing in 65.66% of total net income, equivalent to $118.29 million, a rise of 3.18% from 2018.
North Africa accounted for 26.02% of 2019 net income, equivalent to $46.89 million. This is equivalent to a growth of 24.07% from 2018.
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