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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, 1982 together with the Auditors' Reports.
1982 saw ten years completion in the life of the Group, and it would have been befitting to have had the opportunity to state that on our tenth anniversary our footings totalled ten billion dollars. However, our policy, based on natural growth, did not allow us to enjoy this coincidence, achievable though it could have been. In the event the Group's footing totalled US$9.6 billion as at December 31, 1982.
The results for the year reflect the continuing pattern of previous years with significant and sound growth in all the criteria of a bank's financial statement, which will be enumerated under their applicable headings later. We in BCCI feel happy that the problems in the global financial markets during 1982 had made no impact on our performance. It has been our consistent policy, from inception, to match the resources with effective but balanced utilisation. We have always given prime importance to liquidity and matching the terms of our assets with our sources of funds. In consequence our portfolio has a natural bias to self liquidating trade finance with little or no exposure in any cross currency risks.
Capital Fund
Again, no cash dividend was paid this year, however, capital dividends of US Dollars 60 million have been provided with US Dollars 20 million issued, and US Dollars 40 million proposed. Additionally, the shareholders subscribed for one million shares by way of rights issue, at US Dollars 40, with a nominal value of US Dollars 10 per share, and premium of US Dollars 30 per share. With transfers to General Reserves, retention and minority shareholders' increased interest, the Capital Fund produced an increase of US Dollars 178 million at year-end, a thirty eight percent increase, to US dollars 640 million. The leverage of Capital to Total Assets was 6.64% at year-end which is an improvement over 1981(6.29%). Without the rights issue the leverage could have been maintained but the Directors considered it prudent to approach the shareholders, whose support is unfailing for a financial statement containing healthy ratios with measured growth.
Assets
The Group continued to show a compounded growth rate of about 30% in assets. During 1982 over US$2.3 billion was added to the asset base raising it to US$9.6 billion. The analysis of the structure of the year end assets shows a further moderation in the growth of the Advances portfolio which increased by 24% during 1982 as against 29% in 1981. Surplus funds generated continue to be effectively employed in increased placements with prime banks, which rose by 35% and a significant increase in Investments in Securities and Bonds, which rose by 54%. All such investments are in readily marketable bonds and securities.
At the year end the composition of Assets was 43% in Loans and Advances, 42% in Placement with Banks on a short-term basis and 9% in Securities and Bonds.
During the year the parent company's net investment in subsidiaries and affiliates amounted to US$74.5 million which included the cost of acquiring a 40% interest in the newly established Bank of Credit and Commerce (Emirates) in the United Arab Emirates. Investments in additional Premises and Equipment net of amortisation amounted to US$25 million. The total cash outlay in capital investments during 1982 of approximately US$100 million was adequately covered by the increase in Capital Funds of US$178 million.
Liabilities
At year-end the total of deposits and other funds showed an increase of US$2 billion during 1982. Customers' deposits increased by US$1.7 billion, a growth rate of 30% over 1981. Placements with us by banks increased by 48% during the year and represented 11% of the Group's funding at the year-end as against 10% in 1981. This increase reflects both an increase in the number of banks with which the Group has established relationships and the increased balances maintained by correspondent banks.
Reserves
The Group's policy continues to be to build up its general and other reserves from its distributable profit and from share premiums on a continuous basis. During 1982 the net transfer to reserves was US$43 million and the total now stands at US$232 million. The amount set aside in 1982 for possible loan losses amounts to US$62 million, bringing the net cumulative balance to US$115 million representing 2.8% of total loans and advances at the end of 1982.
Operating Results
1982 was another year of exceptional growth in operating profit, an increase of 78% in the year and the distributable profit after tax improved 100% to US Dollars 150 million, and US Dollars 135 million after minority interests. There were certain components of this growth that should be detailed. There was a non-recurring item of US Dollars 30 million from sale of branches in the UAE. In the latter half of 1982 the easing of interest rates produced much higher margins on the medium term proportion of our investment portfolio. Also, and a more permanent feature, the demand deposits increased by 50% over the year. This latter item is most significant, as it is again demonstrating the results of past investment in people and places.
The distributable profit expressed as a return on average shareholders' equity for the year was 28%. Pre-tax profits produced a return of 2.68% and after tax profit of 1.81% on average assets for the year.
The Group Structure
By the close of 1982 we had added another 6 countries to our global network, including Representative Offices in Beijing (Peking) — People's Republic of China and in Colombia, banking operations in Botswana, Maldives and Cyprus and Leasing Company in Malaysia.
The total number of countries in which we now have a direct presence is 57 with an international network of 280 offices.
A significant development for BCCI during 1982 was joining the VISA operation and issuing our own US Dollar and Pound Sterling Travellers Cheques which achieved a successful launch with the full assistance of our global network and correspondent relationships.
The Directors take considerable satisfaction from the establishment of several foundations for good causes in some of the countries where the Group is operating. It is expected that such foundations will be established in many more countries in the coming years. This is a result of our direct commitment to share our growing achievements and the resulting profits with the global community in which the BCC family operates. A contribution of US$12.5 million has been made out of our 1982 profits for various donations and grants.
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 the 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 11, 1983