million during H-1/2008 versus US$ 29.9 million in H-1/2009, the adjusted consolidated operating income for H-1/2009 was US$382.4 million, a 2.2% increase over the core operating income level of US$374.2 million generated in the same period of 2008, despite a reduction in the loans and advances portfolio. This was achieved against the backdrop of a continuing challenging business environment impacted by global recessionary trends with related ripple effects which are increasingly visible in the region.
Net interest income increased by 6.8 % to US$ 224.4 million (H1/2008: US$ 210.2 million) due to lower funding costs and credit re-pricing, despite a small drop in loans and advances balances. Net operating income was impacted by a higher loan loss provisioning level of US$ 128.0 million (H-1/2008: US$48.6 million). This charge includes an average 65% provision on its entire Saudi impaired corporate portfolio to ensure a very conservative and precautionary approach to managing these accounts given the evolving nature of these situations. As a result, AUB reported a lower net profit of US$57.6 million in Q-2/2009(Q-2/2008: US$117.4 million).
The Bank’s proactive and disciplined approach towards process streamlining and cost management reduced total operating expenses by 21.7 % to US$ 116.8 million, down from $149.2 million for the same period of 2008. Cost to income ratio accordingly improved to a very satisfactory level of 28.3% as compared to 32.4% during H-1/08.
Overall, the Group’s Return on Average Equity stood at 14.1 % and its Return on Average Assets was at 1.4 % in H1 2009. The resultant basic and diluted earnings per share stood at 3.0 US cents for the half year ended 30 June 2009.
The Group’s total assets saw a growth of 9.6% to US$ 25.9 billion from $23.6 billion at 31 December 2008, underpinned by a significant increase in customers’ deposits by 18.5% over the six months period since 31 December 2008, a further testimony to the confidence reposed in AUB by its customers. Loans and advances declined over the same period by 3.8% to US$ 13.1 billion (31 December 2008: US$13.6 billion) reflecting the Bank’s conservative risk taking stance and very selective portfolio selections.
“Q/2-2009 represented a watershed quarter for AUB in which, the Bank was able to maintain core earnings despite the continuing repercussions of the global financial crisis further exacerbated by regional corporate failures. It is comforting to note the resilience and underlying strength of the Bank’s fundamental earnings power achieved through the collective effort of management and staff to navigate the business forward in these turbulent times", said Fahad Al-Rajaan, Chairman, AUB. "Our priorities, since the global financial crisis began in the second half of 2008, have been focused to further re-inforce the Bank’s capital and liquidity base and its risk management capabilities, to promptly recognize and deal with any asset impairments in a pro-active and sufficient manner, to streamline processes and contain operating costs whilst ensuring our continuing ability to service clients and develop business strategies”.