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BCC Group Annual Report & Accounts
Report of the Directors
The Directors have pleasure in placing before you the Consolidated Statement of Condition and Consolidated Statement of Earnings of BCCI Holdings (Luxembourg) S.A., its subsidiaries and affiliates for the financial year ended December 31,1981 together with the Auditors Reports.
1981 has again been a year of all round progress. Not only has the Group maintained a sustained and dynamic growth in its total resources but also a real growth in its distributable profit. This is a matter of great satisfaction to the Management as it reflects the result of initial planning and efforts in structuring a global presence and building up strength at the grass root level. The profit after tax and provisions including certain non-recurring exceptional items rose by nearly 200 per cent., while excluding these items the increase was 136 percent. The contribution to earnings from various geographical areas remained fairly even.
Capital Fund
In close support of the growing base of Assets and global operations during 1981 the Capital Fund was raised by U.S. Dollars 170 million to U.S. Dollars 462 million, that is, an increase of 58 percent of this sum, U.S. Dollars 100 million was contributed by shareholders by a Rights Issue of 500,000 shares at a premium of U.S. Dollars 150 per share of the nominal value of U.S. Dollars 50. As a further measure to strengthen the Capital Fund, no Cash Dividends were paid. Instead, Stock Dividends were issued for an amount of U.S. Dollars 42,500,000. The balance of the increase in Capital Fund was constituted by the transfer of profit to General and Other Reserves and some increase in the amount of minority interest. The Retained Earnings carried forward at the year end remained at about the same level as last year. The leverage of Capital Fund to Liabilities was 6.7 per cent. at the end of 1981, compared with 5.8 per cent. a year ago.
Assets
The total Assets of the Group increased to U.S. Dollars 7.3 billion and showed a 38 per cent. Growth repeating the 1980 performance. As against this, Loans and Advances increased at a lesser rate of 29 percent., indicating the Management's planned policy of recasting its Earning Asset structure, particularly its Risk Assets. Surplus Funds generated were applied in other Earning Assets of a more liquid nature, that is, in investment in Securities and Bonds, of which a substantial part was in short term investments and in placements with other prime banks.
The year end composition of Assets was 45 per cent. in Loans and Advances, 8 per cent. in short, medium and long-term investments and 41 per cent. in placements with Banks on a short-term basis leaving 6 per cent. as non-earning Assets. Expressed as a percentage of Deposits and Other Funds, the respective Assets work out at 49 percent for Loans and Advances and 44 percent for placements with Banks as against 52 per cent. for Loans and Advances and 43 percent for placements with Banks at the end of 1980.
Liabilities
Total Deposits and Other Funds increased by 37 per cent. to U.S. Dollars 6.7 billion with Customers' Deposits increasing also by 37 per cent. to approximately US. Dollars 5.7 billion. Although Due to Banks increased by 44 percent., the percentage of the total from this source is still held at 10 percent of total Liabilities and Capital Fund indicating the Management's desire to meet the bulk of the funding requirement from a widely dispersed customer deposit base.
Reserves
At the end of 1 981 the General and Other Reserve Fund stood at U.S. Dollars 189 million, reflecting an increase of 87 per cent. This was entirely attributable to cash contributions by Shareholders in the form of share premiums or by appropriations from profit.
The Provisions and Reserves for possible loan losses have been significantly increased during 1981 to an amount representing 2 per cent. of Loans and Advances outstanding.
It is the intention of the Management to always maintain a prudent Reserve Ratio.
Operating Results
As mentioned earlier, 1981 witnessed fruition of past investment in people and places; our global operation produced a total Profit after provision and before tax of US. Dollars 124.7 million, an increase of 161 per cent. on the corresponding amount in the previous year. This includes exceptional non-recurring items of U.S. Dollars 15 million. The distributable profit showed a significant increase even after excluding these exceptional items and providing for taxes. This profit expressed as a return on average shareholders' equity for the year was 20 per cent., while pre-tax profits produced a return of 2.06 per cent. on Average Assets for the year.
The Group Structure
At the close of 1981, six more countries were added to our global operation making a total of 51 countries in which we have offices. The international network of branches and offices currently numbers 248. Our policy continues to be to operate within the broad spectrum of commercial banking where our principal activity is trade related and short-term in nature.
With an operation of this size the development of our staff has the highest priority and we now have 6 full-time Training Academies strategically located in Egypt, Hongkong, Nigeria, Pakistan, the United Kingdom and Zimbabwe. These centres not only cater for the technical and on-the-job educational needs of our current manpower of over 6,300 but also train on an average 150 newly appointed officers annually.
The Directors take this opportunity to thank the Central Banks and Supervisory Agencies in countries where the Group Banks are operating for the valuable guidance extended by them whenever needed.
The Directors wish to place on record their appreciation for the loyalty, devotion and service rendered by the members of staff whose individual and collective efforts and aspirations are reflected in the progress of the Group. Their ability and commitment continue to promote confidence in the strength of the Group.
'The Directors propose that the shareholders adopt the Consolidated Statement of Condition and 'Consolidated Statement of Earnings as submitted.
Agha Hasan Abedi
Director and President
March 1, 1982