BURGAN BANK GROUP INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION 31 MARCH (UNAUDITED)
Interim Condensed Consolidated Statement of Financial Position Notes ASSETS Cash and cash equivalents 3 640,512 567,352 506,979 Treasury bills and bonds with CBK and others 455,135 419,079 445,472 Due from banks and other financial institutions 772,604 843,176 554,029 Loans and advances to customers 2,405,752 2,252,348 2,147,013 Investment securities 162,717 148,585 131,342 Other assets 116,314 99,536 64,716 Property and equipment 49,828 49,175 47,911 Intangible assets 170,768 172,521 177,517 TOTAL ASSETS 4,773,630 4,551,772 4,074,979 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Due to banks 207,870 291,604 232,441 Due to other financial institutions 704,619 650,533 497,749 Deposits from customers 3,039,782 2,795,779 2,559,037 Other borrowed funds 4 107,604 107,864 107,800 Other liabilities 5 144,718 140,283 131,472 TOTAL LIABILITIES 4,204,593 3,986,063 3,528,499 SHAREHOLDERS' EQUITY Share capital 6 154,497 147,140 147,140 Share premium 129,559 129,559 129,559 Treasury shares 6 (36,193) (33,139) (18,730) Statutory reserve 45,625 45,625 40,365 Voluntary reserve 46,003 46,003 40,743 Treasury shares reserve 36,554 36,552 36,569 Investments revaluation reserve 7,627 5,846 8,787 Share based compensation reserve 563 561 554 Foreign currency translation reserve (1,563) (1,912) (243) Other reserves 554 554 533 Retained earnings 66,657 70,499 42,279 Equity attributable to the equity holders of the Bank 449,883 447,288 427,556 Non controlling interests 119,154 118,421 118,924 TOTAL SHAREHOLDERS' EQUITY 569,037 565,709 546,480 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 4,773,630 4,551,772 4,074,979 Khalid Al Zouman Chief Financial Officer Majed Essa Al Ajeel Chairman Eduardo Eguren Linsen Chief Executive Officer The attached notes 1 to 13 form an integral part of this interim condensed consolidated financial information. 3
Interim Condensed Consolidated Income Statement Period ended (Unaudited) Three months ended Notes Interest income 45,425 41,412 Interest expense (17,382) (15,834) Net interest income 28,043 25,578 Fee and commission income 9,830 9,836 Fee and commission expense (659) (333) Net fee and commission income 9,171 9,503 Net gain from foreign currencies 3,809 2,106 Net investment income 105 (10) Dividend income 100 877 Other income 1,390 748 Operating income 42,618 38,802 Staff expenses (7,322) (6,932) Other expenses (8,736) (8,853) Operating profit before provision 26,560 23,017 Provision for impairment of loans and advances (5,020) (4,432) Provision for impairment of investment securities (1,180) (1,265) Profit before taxation 20,360 17,320 Taxation 7 (2,835) (3,448) Profit for the period 17,525 13,872 Attributable to: Equity holders of the Bank 17,538 11,822 Non controlling interests (13) 2,050 17,525 13,872 Fils Fils Basic and diluted earnings per share - attributable to the equity holders of the Bank 8 11.9 7.8 The attached notes 1 to 13 form an integral part of this interim condensed consolidated financial information. 4
Interim Condensed Consolidated Statement of Comprehensive Income Period ended (Unaudited) Three months ended Profit for the period 17,525 13,872 Other comprehensive income (loss) Financial assets available for sale: Net fair value gain (loss) 1,257 (910) Net transfer to income statement 1,157 1,144 Foreign currency translation adjustment 462 (3,928) Other comprehensive income (loss) for the period 2,876 (3,694) Total comprehensive income for the period 20,401 10,178 Attributable to: Equity holders of the Bank 19,668 9,451 Non controlling interests 733 727 20,401 10,178 The attached notes 1 to 13 form an integral part of this interim condensed consolidated financial information. 5
Interim Condensed Consolidated Statement of Changes in Equity Period ended (Unaudited) Share capital Share premium Treasury shares Statutory reserve Attributable to the equity holders of the Bank Voluntary reserve Treasury shares reserve Investment revaluation reserve Share based compensation reserve Foreign currency translation reserve Other reserves Retained earnings Total Non controlling interests Total equity Balance at 1 January 147,140 129,559 (33,139) 45,625 46,003 36,552 5,846 561 (1,912) 554 70,499 447,288 118,421 565,709 Profit (loss) for the period - - - - - - - - - - 17,538 17,538 (13) 17,525 Other comprehensive income for the period - - - - - - 1,781-349 - - 2,130 746 2,876 Total comprehensive income for the period - - - - - - 1,781-349 - 17,538 19,668 733 20,401 Bonus shares issued (note 6) 7,357 - - - - - - - - - (7,357) - - - Cash dividend paid (note 6) - - - - - - - - - - (14,023) (14,023) - (14,023) Purchase of treasury shares - - (3,057) - - - - - - - - (3,057) - (3,057) Sale of treasury shares - - 3 - - 2 - - - - - 5-5 Share based compensation expense - - - - - - - 2 - - - 2-2 Balance as at 154,497 129,559 (36,193) 45,625 46,003 36,554 7,627 563 (1,563) 554 66,657 449,883 119,154 569,037 Balance at 1 January 140,133 129,559 (16,401) 40,365 40,743 36,567 8,732 549 2,183 533 37,464 420,427 118,197 538,624 Profit for the period - - - - - - - - - - 11,822 11,822 2,050 13,872 Other comprehensive income (loss) for the period - - - - - - 55 - (2,426) - - (2,371) (1,323) (3,694) Total comprehensive income (loss) for the period - - - - - - 55 - (2,426) - 11,822 9,451 727 10,178 Bonus shares issued (note 6) 7,007 - - - - - - - - - (7,007) - - - Purchase of treasury shares - - (2,340) - - - - - - - - (2,340) - (2,340) Sale of treasury shares - - 11 - - 2 - - - - - 13-13 Share based compensation expense - - - - - - - 5 - - - 5-5 Balance as at 147,140 129,559 (18,730) 40,365 40,743 36,569 8,787 554 (243) 533 42,279 427,556 118,924 546,480 The attached notes 1 to 13 form an integral part of this interim condensed consolidated financial information. 6
Interim Condensed Consolidated Statement of Cash Flows Period ended (Unaudited) Three months ended Note Operating activities Profit before taxation 20,360 17,320 Adjustments: Net investment income (105) 10 Provision for impairment of loans and advances 5,020 4,432 Provision for impairment of investment securities 1,180 1,265 Dividend income (100) (877) Depreciation and amortisation 2,685 2,588 Share based compensation expense 2 5 Operating profit before changes in operating assets and liabilities 29,042 24,743 Changes in operating assets and liabilities: Treasury bills and bonds with CBK and others (36,056) 21,497 Due from banks and other financial institutions 76,023 (69,803) Loans and advances to customers (163,875) (14,223) Other assets (16,778) 6,596 Due to banks (83,734) (70,846) Due to other financial institutions 54,086 (10,456) Deposits from customers 244,003 (5,789) Other liabilities 3,711 5,747 Taxation paid (2,111) (1,166) Net cash from (used in) operating activities 104,311 (113,700) Investing activities Purchase of investment securities (34,828) (13,419) Proceeds from sale of investment securities 22,035 13,614 Purchase of property and equipment, net of disposals (1,876) 190 Dividends received 100 846 Net cash (used in) from investing activities (14,569) 1,231 Financing activities Other borrowed funds (260) (1,275) Purchase of treasury shares (3,057) (2,340) Sale of treasury shares 5 13 Cash dividend paid (14,023) - Net cash used in financing activities (17,335) (3,602) Net increase (decrease) in cash and cash equivalents 72,407 (116,071) Effect of foreign currency translation 753 (1,889) Cash and cash equivalents at 1 January 567,352 624,939 Cash and cash equivalents at 3 640,512 506,979 Interest received Additional cash flow information: 41,003 41,979 Interest paid 22,555 21,638 The attached notes 1 to 13 form an integral part of this interim condensed consolidated financial information. 7
1. INCORPORATION AND REGISTRATION Burgan Bank S.A.K. (the Bank ) is a public shareholding company incorporated in the State of Kuwait by Amiri Decree dated 27 December 1975 listed on the Kuwait Stock Exchange and is registered as a Bank with the Central Bank of Kuwait ( CBK ). The Bank s registered address is P.O. Box 5389, Safat 12170, State of Kuwait. The interim condensed consolidated financial information of the Bank and its subsidiaries (collectively the Group ) for the period ended were authorised for issue in accordance with a resolution of the Board of Directors on 15 April. The principal activities of the Group are explained in note 9. The Bank is a subsidiary of Kuwait Projects Company Holding K.S.C. (the Parent Company ). 2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES The interim condensed consolidated financial information of the Group have been prepared in accordance with International Accounting Standard ( IAS ) 34: Interim Financial Reporting except as noted below. The accounting policies used in the preparation of this interim condensed consolidated financial information are consistent with those used in the preparation of the annual consolidated financial statements for the year ended. The annual consolidated financial statements for the year ended were prepared in accordance with the regulations of the State of Kuwait for financial services institutions regulated by the CBK. These regulations require adoption of all International Financial Reporting Standards ( IFRS ) except for the IAS 39: Financial instruments: Recognition and Measurement ( IAS 39 ) requirement for collective provision, which has been replaced by the CBK s requirement for a minimum general provision. The interim condensed consolidated financial information do not contain all information and disclosures required for full consolidated financial statements prepared in accordance with IFRS, and should be read in conjunction with the annual consolidated financial statements for the year ended. Further, results for the three months ended are not necessarily indicative of the results that may be expected for the financial year ending. 3. CASH AND CASH EQUIVALENTS Cash in hand and in current account with banks & other financial institutions (OFI s) 327,184 329,234 128,000 Balances with CBK 5,778 776 1,688 Due from banks and OFI s maturing within thirty days 307,550 237,342 377,291 640,512 567,352 506,979 8
4. OTHER BORROWED FUNDS Effective interest rate Subordinated notes 8.125% 107,604 107,864 107,270 Other borrowing subsidiary - - - 530 107,604 107,864 107,800 5. OTHER LIABILITIES Accrued interest payable 15,460 20,633 12,929 Staff benefits 9,476 9,335 8,584 Provision for non - cash credit facilities 19,354 18,791 21,375 Sundry creditors - subsidiaries 8,480 7,935 11,766 Other balances 91,948 83,589 76,818 144,718 140,283 131,472 6. SHAREHOLDERS EQUITY a) The authorised, issued and fully paid up share capital of the Bank comprises 1,544,967,180 shares (31 December : 1,471,397,310 shares and : 1,471,397,310 shares) of 100 fils each. b) Treasury shares Number of shares held 72,810,419 62,759,847 32,810,832 Percentage of shares held 4.71% 4.27% 2.23% Market value - 30,944 29,183 15,093 c) Dividend and bonus shares At the annual general meeting of the shareholders held on 12 March, cash dividend of 10 fils per share (2010: Nil) and 5% bonus shares (2010: 5%) for the financial year ended were approved and issued. This resulted in an increase in the number of authorised and issued shares by 73,569,870 shares and share capital by KD 7,357 thousand. 7. TAXATION Three months ended National Labour Support Tax 459 308 Contribution to the Kuwait Foundation for the Advancement of Science 165 111 Zakat 183 115 Taxation arising from overseas subsidiary 2,028 2,914 9 2,835 3,448
8. EARNINGS PER SHARE Basic and diluted earnings per share is computed by dividing the profit for the period attributable to equity holders of the Bank by the weighted average number of shares outstanding during the period less treasury shares. The computation of basic and diluted earnings per share is as follows: Three months ended KD 000's KD 000's (Restated) Profit for the period attributable to equity holders of the Bank 17,538 11,822 Shares Shares Weighted average number of outstanding shares, net of treasury shares 1,475,692,909 1,513,585,157 Basic and diluted earnings per share (fils) 11.9 7.8 Basic and diluted earnings per share for the comparative period presented has been restated to reflect the effect of bonus shares issued on 12 March (note 6). 9. SEGMENT INFORMATION For management purposes, the Group organises its operations by geographic territory in the first instance, primarily Kuwait and International. All operations outside Kuwait are classified as International. Within its Kuwait operations, the Group is organised into the following business segments. Banking: incorporating private customer current account, business current and savings accounts, deposits, investment products, credit and debit cards, consumer and housing loans, overdrafts, commercial loans and other credit facilities Treasury and investment banking: incorporating money market, foreign exchange, Treasury bills and bonds and Central bank bonds, investments and fund management. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on segment result after provisions which in certain respects are measured differently from operating profit or loss in the interim condensed consolidated financial information. 10
9. SEGMENT INFORMATION (continued) The table below presents income and results and certain assets and liabilities information regarding the Group s operating segments. International Kuwait Operations Operations Group Treasury and investment Banking banking Total KD 000's KD 000's Total Net interest income 13,534 2,336 15,870 12,173 28,043 Segment operating income 17,831 3,763 21,594 21,024 42,618 Depreciation and amortisation expenses (557) (95) (652) (2,033) (2,685) Segment result before provisions 14,458 3,194 17,652 12,809 30,461 Write back of (provision for) impairment of loans and advances 749 1,437 2,186 (7,206) (5,020) Impairment of investment securities - - - (1,180) (1,180) Segment result after provisions 15,207 4,631 19,838 4,423 24,261 Unallocated expenses (3,901) - (3,901) Profit for the period before taxation 15,937 4,423 20,360 Total assets 1,771,420 1,327,894 3,099,314 1,674,316 4,773,630 Total liabilities 1,175,632 1,819,407 2,995,039 1,209,554 4,204,593 Intangible assets - - - 170,768 170,768 Banking Kuwait Operations Treasury and investment banking Total KD 000's International Operations Group Total KD 000's Net interest income 14,301 (659) 13,642 11,936 25,578 Segment operating income 18,365 1,108 19,473 19,329 38,802 Depreciation and amortisation expenses (570) (89) (659) (1,929) (2,588) Segment result before provisions 15,230 622 15,852 11,373 27,225 Write back of (provision for) impairment of loans and advances 683 (2,370) (1,687) (2,745) (4,432) Impairment of investment securities - (1,265) (1,265) - (1,265) Segment result after provisions 15,913 (3,013) 12,900 8,628 21,528 Unallocated expenses (4,208) - (4,208) Profit for the period before taxation 8,692 8,628 17,320 Total assets 1,564,918 946,839 2,511,757 1,563,222 4,074,979 Total liabilities 1,191,473 1,203,205 2,394,678 1,133,821 3,528,499 Intangible assets - - - 177,517 177,517 11
10. TRANSACTIONS WITH RELATED PARTIES The Group has entered into transactions with certain related parties (Parent Company, directors and key management personnel of the Group and entities controlled, jointly controlled or significantly influenced by such parties) who were customers of the Group during the period. The Others column in the table below mainly represent transactions with entities that are either controlled or significantly influenced by the Parent Company. The terms of these transactions are approved by the Group s management. The balances and transactions are as follows: Parent Company Others Balances Due from banks and other financial institutions - 125,893 125,893 216,103 152,708 Loans and advances to customers - 229,719 229,719 163,045 108,737 Investment securities 3,695 38,883 42,578 41,507 39,342 Investment securities managed by a related party - 3,820 3,820 5,175 550 Due to banks - 1,526 1,526 2,949 2,875 Due to other financial institutions - 47,059 47,059 36,330 46,347 Deposits from customers 1,555 38,324 39,879 51,020 42,523 Commitments Letters of credit - 1,579 1,579 1,536 1,520 Letters of guarantee - 9,071 9,071 11,349 6,190 Parent Company Others Transactions Interest income 20 4,461 4,481 15,167 2,584 Interest expense 329 215 544 1,633 445 Fee and commission income 33 209 242 1,154 207 Fee and commission expense - 1 1 235 33 Dividend income - - - 968 851 No. of Board members / Group executive staff Board members Loans and advances 1 300 300 8 Deposits from customers 8 1,817 1,833 1,537 Group executive staff Loans and advances 14 341 335 417 Deposits from customers 23 1,139 1,360 1,492 Letters of guarantee 1 1 1 1 12
10. TRANSACTIONS WITH RELATED PARTIES (continued) Key management compensation Remuneration paid or accrued in relation to the Group s "key management" (deemed for this purpose to comprise Directors in relation for their committee service, the Chief Executive Officer and other Senior Officers) was as follows: Three months ended Short term employee benefits including salary and bonus 937 763 Accrual for end of service indemnity 145 194 Accrual for cost of long term incentive rights 366-1,448 957 11. COMMITMENTS AND CONTINGENT LIABILITIES Acceptances 28,632 33,369 20,092 Letters of credit 315,534 246,929 263,966 Letters of guarantee 533,883 538,421 540,903 Undrawn commitments to extend credit 183,409 168,634 156,712 1,061,458 987,353 981,673 12. DERIVATIVES The table below shows the notional amounts of derivatives outstanding as of the reporting date. The notional amount of a derivative s underlying asset, reference rate or index is the basis upon which changes in the value of derivatives are measured. The net positive fair value of the derivative instruments as at is KD 800 thousand ( : KD 49 thousand and : KD 62 thousand) and is included in the carrying amount of other assets. Derivatives held for trading: (non-qualifying hedges) Forward swaps / foreign exchange contracts 63,297 21,447 10,265 13
13. SUBSEQUENT EVENTS Subsequent to the reporting date, the Bank has entered into an agreement with Eurobank EFG to acquire a 99.26% stake in Eurobank Tekfen, Turkey. Under the terms of the Share Purchase Agreement ( SPA ), the Bank has agreed to acquire the stake for a consideration value of TRY 641 million (KD 99 million) representing 0.98x based on 30 September shareholders equity. In addition, the Bank has also agreed to acquire an additional portfolio of Turkish loans from EFG amounting to EURO 214 million (KD 78 million). The total consideration will be funded fully from the Bank s existing internal cash resources. The final execution of the transaction is subject to regulatory approvals from Central Bank of Kuwait ( CBK ) and Turkey s Banking Regulation and Supervision Agency ( BRSA ). 14