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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 Statement of Earnings of BCCI Holdings (Luxembourg) S.A. and its subsidiaries and affiliates for the year ended December 31, 1978 together with the Auditors' Reports.
The policy initiated during 1977 for growth balanced with consolidation, has been maintained during the year 1978.
Total Resources and Capital Funds
The progress of the Group Banks has continued along sound lines in all areas of operation. Total Resources of the Group have increased to over US$2.8 billion, as against US$2.2 billion in 1977, a growth of 27.30%. This was supported by a 50.48% increase in the Capital base from US$113.9 million to US$171.4 million, resulting in an improvement in the ratio of capital funds to external liabilities, from 5.46% in 1 977 to 6.52%, which compares well with international standards. It would be our policy to continue to enlarge the capital base during the ensuing years to provide additional financial strength to the Group.
Asset Management
Currently the 'earning assets' of the Group Banks amount to 94.63% of total resources. The funds placed with non-group banks, predominantly prime banks, amounted to US$750 million representing 26.78% of the total assets.
The investment in Government securities and marketable bonds was substantially enlarged to US$201.4 million from US$93.8 million at the end of 1977. This represents 7.19% of total assets as compared to 4.26% last year and provides an additional source of liquidity. The "short-term" component of these investments was 53.88% as against 41.59% at the end of 1977.
The loans and advances portfolio showed a growth during the year from US$1,165 million to US$1,439 million, an increase of 23.46% mostly in short-term commercial facilities. The portfolio includes loans against real estate totalling US$176 million, which are almost entirely medium term and extended on commercial basis. They are primarily funded by Central Banks and Government agencies under refinancing schemes in support of Government sponsored real estate development programmes.
The total loans and advances portfolio constituted 51.37% of total assets as compared to 52.96% at the end of 1977, and 56.87% of total "deposits and other funds" as against 58.08% last year.
Loan Loss Reserves
Your Management, as a matter of added caution and prudence, decided to raise the loan loss reserve to US$15,500,000 as against US$5,500,000 at the end of 1977 which has resulted in improving the ratio of loan loss reserve to outstanding loans to 1.1%, as compared to 0.5% at the end of 1977. The loan loss reserve is in addition to the "free reserves" of US$48.4 million available to the Group.
Liabilities Management
The Group Banks continue to expand their deposit base and at the end of 1978 the total deposits, excluding Government Refinance funds and bank deposits, stood at US$2,005,366,000, an increase of 18.58% over the previous year.
The geographical spread of the deposit base showed further improvement through an increased contribution from our operations in Africa, Asia and Europe.
Operating Results
The operating profit for the year, before tax and year-end provisions and reserves amounted to US$28,125,805 as against US$25,965,889 in 1977. After taxation and special provisions against loan loss reserves mentioned earlier and other year-end transfers, the net surplus for the year stood at US$10,715,264.
The pre-tax earnings (before year-end provisions and reserves) amounted to 20.94% on the average capital funds available to the Group during the year and 1.14% on average total funds employed. The corresponding ratios, after tax, work out at 16.94% and 0.93% respectively.
International Branch Network/New Affiliates
In the year under report comparatively fewer branches were opened. In the view of Management all these branches have an early profit potential. The global network of Group Banks' branches (excluding that of affiliates) increased to 121 in 37 countries as compared to 106 branches in 32 countries at the end of 1977. The year also witnessed the establishment of two new subsidiaries. Bank of Credit and Commerce International (Swaziland) Limited, registered at Manzini, in the Kingdom of Swaziland and BCCI Canada Inc., a finance company registered at Toronto, Canada. Additionally an affiliate bank, Premier Bank Limited, was established at Accra, Ghana.
Pursuant to a rationalisation programme, effective from January 1, 1979, branches of Bank of Credit and Commerce International (Overseas) Limited in the United Kingdom were taken over by Bank of Credit and Commerce International S.A. At the same time, branches of Bank of Credit and Commerce International S.A. in the Sultanate of Oman and the Arab Republic of Egypt were taken over by Bank of Credit and Commerce International (Overseas) Limited. The transfer of these branches were made with the approval of appropriate Regulatory Authorities.
The Directors propose that the Shareholders adopt the Consolidated Statement of Condition and Statement of Earnings as submitted.
The Directors take this opportunity to thank the Central Banking and Supervisory Agencies in the countries where the Group Banks are operating for the guidance extended by them during the year 1978.
The Directors are confident that with the available pool of highly experienced managerial talent and the emphasis that has been placed on management development programmes, the Group Banks are in a strong position to continue their progress and growth combined with a continuing process of consolidation.
The Directors place on record their appreciation for the loyalty, devotion and services rendered by the members of the staff, whose individual and collective efforts made the progress of the Group possible.
Agha Hasan Abedi
Director and President.