| 1972 | 1973 | 1974 | 1975 | 1976 | 1977 | 1978 | 1979 | 1980 | 1981 | 1982 | 1983 | 1984 | 1985 | 1986 | 1987 | 1988 | 1989 | 1990 |1991 |
Annual Report & Accounts 1985
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, 1985 together with the Auditors' Report.
1985 was characterised by manifold and often adverse developments. The decrease in interest rates awaited by all countries. combined with lower inflation rates and lower prices for oil and other commodities, helped to stimulate the economies of many industrialised countries. The world economy as a whole, however. suffered from setbacks in output and decelarat1on in the growth of trade. The downward trend in oil prices, which was accelerated in 1985, resulted in transfer of purchasing power from oil exporting to certain developed economies. Primary prices suffered greatly, affecting the underdeveloped and developing economies. The decline in interest rates reduced some strain from the international debt problem. The debtor countries would have benefited more but for the fall in export commodity prices which kept their real interest rates high.
The volatility in exchange rates and their magnitude, have been both a cause and a consequence of large and fluctuating movement of international funds. Movement of capital more into financial assets than in productive investments has increased protectionism and compounded the complexity of the giant fiscal and monetary jigsaw puzzle. Some economies, where your Group operates, had to undergo massive devaluations as a result of forced economic readjustments.
In this scenario of adverse and unsettled conditions, particularly when the interaction of local and global events compound the consequences, a bank operating predominantly in the third world, could not have remained unaffected. However, on the whole, our commercial banking operations have again shown satisfactory results and institutional resilience. Our diversified global network provided the balance and the strength of our customer relationships provided the continuity in growth.
During the year our total assets increased by 16.1 % to U.S. $16,600 million from U.S. $14,300 million in 1984. Customer deposits increased over 21% to U.S. $12,700 million. Deposits and other funds increased by 14.6% to almost U.S. $15,000 million. Advances increased by 32.3% ·to U.S. $6,800 million. The commercial banking result before loan loss provision and taxation was U.S. $283 million.
As stated in our last report, the emphasis on improving the capital/asset ratio has continued to be a cornerstone of our policy. During 1985, our Capital Fund has increased to U.S. $1,190.4 million, increasing the capital/asset ratio to 7.18%.
Atter the year end, Capital Funds have been raised from U.S. $1,190.4 million to U.S. $1,510.4 million by further addition of U.S. $320 million; elevating the capital/asset ratio to 9%. This ratio, even allowing for asset growth during 1986, would be maintained at a high level.
The Group has continued to maintain its policy of high liquidity. Liquid assets including short term and readily marketable securities are now in excess of U.S. $8,600 million.
Other key financial ratios such as loans to customer deposits and capital fund to loans have, as in the previous year, been maintained at a highly conservative level.
While, our banking operations have shown satisfactory results. the treasury operation suffered a serious setback in option trading activities resulting in a one-off exceptional loss situation. Your Directors are, however, pleased to report that this exceptional loss has been adequately covered through shareholder support in the form of a subvention.
Further, management has issued appropriate guidelines and implemented suitable operational steps for strengthening this area of operation.
Following comments deal with the important aspects of 1985 financial statements:
Capital Fund
In pursuance of our policy, shareholders have provided additional Capital Funds to ensure the financial soundness and strength of the bank. As at December 31, 1985 total Capital Funds reached U.S. $1,190.4 million notwithstanding a transfer of U.S. $115 million from the reserves. relating to certain prior year adjustments as mentioned later.
Since year end, Capital Funds have been raised to U.S. $1,510.4 million by a further addition of U.S. $320 million thereby enhancing the capital/asset ratio to 9%.
Liabilities
Management has continued its emphasis on broadening the customer base of the bank as the primary source of funds.
Customer deposits rose by U.S. $2.222 million to U.S. $12,734 million including an amount of U.S. $672 million of National Bank of Oman, which was fully consolidated with the Group in 1985. This reflected an increase of 21 %. Total deposits and other funds reached U.S. $14,916 million, an increase of 14.6% notwithstanding a decrease of U.S. $339 million in borrowings from banks.
Assets
Loans and advances rose in 1985 by U.S. $1,668 million including U.S. $524 million of National Bank of Oman. Total loans and advances at year end stood at U.S. $6,836 million representing 41 % of total assets and 54% of customer deposits.
Maintaining high liquidity continues to be a major focus of our financial management. Al year-end liquid assets, including short-term and easily marketable securities, amounted to U.S. $8,604 million representing 52% of total assets.
Assisted by our geographical spread, covering 71 countries, our policy to concentrate our lending activities on self-liquidating trade-finance related transactions remains a source of strength and profitability to the Group. Exposure to countries with high external indebtedness continues to be strictly reviewed and largely consists of short-term transactions.
The Directors wish to place on record their appreciation for the loyalty, devotion and services rendered by the members of staff whose individual and collective efforts and aspirations are reflected in the progress of the Group. Their quality and commitment continue to promote confidence in the strength of the Group.
Agha Hasan Abedi
Director and President