Assets sale to boost growth

Bahrain Islamic Bank is in plans to dispose of all its unproductive assets as part of a five-year plan to boost growth, a report said. 

The Bloomberg, in its report, quoting Chief Executive Officer Hassan Jarrar said, the bank is selling about 82 million dinars ($218m) of unproductive assets such as land and shares. 

The report also confirms that the bank sold 14m dinars-worth of these assets in the first half and plans the sale of a similar amount in the remainder of the year as it focuses on its main lending business. 

Jarrar, in a telephonic interview to Bloomberg, also said that the bank has appointed an external adviser to dispose of “all non-core investments,” including properties and shares in associate companies. 

“The main new challenge in Bahrain -- and the region -- is liquidity, which is causing a spike in the cost of funding in the local currency,” Jarrar said. “The rates banks pay now on Bahraini dinars can be as high as double that of the U.S. dollar rates.”

S&P Global Ratings downgraded Bahrain in February because its vulnerability to slumping oil prices has increased since 2009, while government spending has risen in response to the global economic crisis and civil unrest. Fitch expects Bahrain’s general government debt to rise to almost 80 per cent of gross domestic product this year, from 62pc in 2015, and sees the budget deficit widening to 15.4pc of economic output from 14.8pc.

Bahrain Islamic Bank, in which state-controlled National Bank of Bahrain BSC is the biggest shareholder, plans to boost revenue by 20 to 25pc annually, achieve a return on equity of 15pc to 16pc and cut its cost-to-income ratio to the mid-40pc from 60pc over two years, Jarrar said. The corporate and commercial business is a new focus, where financing increased 22pc in the first-half, while lending at its main retail segment grew 9pc, Jarrar said.

Bahrain’s “real estate sector is vibrant and investment is returning,” Jarrar said. 

“Prices of land, residences, hospitality and some retail-oriented properties are back to well above pre-crisis levels.”