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BCC Group Annual Report & Accounts
Report of the Directors
The Directors have pleasure in placing before you the Consolidated Statements of Condition and Statements of Earnings of BCCI Holdings (Luxembourg) S.A., and its subsidiaries and affiliates, for the financial year ended December 31, 1979, together with the Auditors' Reports.
During 1979, the balanced growth of the Group has been maintained with the establishment of offices in some selected locations and an increase in business reflecting the impact of the past expansion. As in the previous years our emphasis has continued on the growth of capital funds and management resources to remain compatible with the overall growth of the Group. The geographical spread of assets and liabilities is well distributed between Europe, Middle East, Africa and Asia.
Consolidated Resources and Capital Funds
The total resources of the Group increased by 40% during the year to US$3.9 billion from US$2.8 billion at the end of 1978.
Capital Funds increased by 32% to US$225.9 million. The ratio of these funds to external liabilities of the Group now stands at 6.07%. It is your Board's policy to continue enlargement of Capital Funds, in order to keep in line with internationally accepted standards of a sound financial base proportionate to our obligations.
Asset Management
During 1979, the mix of assets produced a marginal variation from the previous year. The quantum of loans and advances viz-a-viz placements with banks continued to reflect Managements' policy of maintaining adequate liquidity.
Loans and advances amounted to 51.17% of total assets compared with 51.37% at the end of 1978 and 56.23% of the total deposits and other funds as against 56.31% of last year. The placements with prime banks, primarily for short-term periods represented 37.26% of the total assets as compared with 34.97% in 1978.
The investment portfolio of Government and marketable securities was maintained at about the same level as in the preceding year, thereby shifting a greater emphasis during the year of placing the Group's liquidity in short-term money with prime banks.
Loans relating to Government sponsored refinance schemes, primarily funded by Central Banks and Government agencies, showed a 22% decrease at year-end compared to 1978.
This portfolio is now expected to phase out over the coming years. It remains the Bank's policy to concentrate on self-liquidating trade-financing.
Liability Management
During the year customer deposits increased by about 45% to US$2,944 million, while placements by banks and government agencies with the Group banks increased by 18% to US$622 million.
Reserves
During 1979, after appropriations, the General and Other Reserves increased by 50% to US$75.6 million from US$50.8 million at the end of 1978, while the Retained Earnings stood at US$16.2 million as compared to US$10.7 million.
Once again this year, the Management decided to continue the policy of added caution and prudence in respect of loan loss reserves, which were increased to US$24.4 million, from US$15.5 million at the end of 1978, representing 1.20% of loans outstanding.
Operating Results
Operating profit for the Group, excluding pre-acquisition profit, increased by 22% to US$34,355,927 as compared to US$28,125,805 during 1978.
After-tax and other provisions and elimination of minority interest in the Group, the net surplus available was US$12,774,015 up by 24% from US$10,282,775 in 1978. This net surplus could have been substantially more but for the prudent loan loss reserve policy which the management has continued to pursue.
The return on average equity capital, before tax, and year-end provisions was 22.1% Earnings before tax and year-end provisions on average funds employed were 1.13% as compared to 1.14% in 1978.
International Network
The year under report produced two new significant investments, firstly the acquisition of a majority shareholding in the Hong Kong Metropolitan Bank Limited, an established commercial bank with seven branches in Hong Kong. Secondly, the establishment with local association of a new bank in Nigeria, named Bank of Credit and Commerce International (Nigeria) Limited, which is to undertake commercial banking through a countrywide network of branches.
The international network of Group Banks' branches (excluding that of affiliates) increased to 143, including seven branches of the newly acquired Hong Kong Metropolitan Bank, as compared to 121 branches in 1978. The BCC Group now operates in 40 countries as compared to 37 countries in 1978, mostly through its branches and in some cases through representative offices.
The Directors take this opportunity to thank the Central! Bank and Supervisory Agencies in the countries where the Group Banks are operating for the guidance extended by them during 1979.
The Directors are confident that with the available experienced managerial talent and the emphasis that has been placed on management development programmes, the Group banks are in a strong position to maintain their progress and balanced growth, combined with a continuing process of consolidation and rationalisation.
The Directors wish to place on record their appreciation for the loyalty, devotion and service rendered by members of the staff throughout the whole Group and whose individual and collective efforts make this progress possible.
The Directors propose that the Shareholders adopt the Consolidated Statement of Conditions and Statement of Earnings as submitted.
Agha Hasan Abedi
Director and President