BMB Investment Bank (BMB) is embarking on a re-engineering and restructuring plan aimed at developing it into a niche investment bank with multiple business lines, which will secure a diversified and sustainable income stream going forward. Part of this restructuring includes creating a leaner institution and to this end, the Bank has claimed that it has implemented measures that will achieve cost savings of almost 40%. These savings will be reflected in the Bank’s financials starting in the third quarter.
In the second quarter of the year, the bank has carried out an analysis of its main line of business; its private equity portfolio. As a result of this exercise, and due to additional information becoming available in the second quarter of the year, there was a further reduction in the fair value of certain private equity investments which made such reductions significant at 30 June 2009.
As a result of the above, the Bank has taken additional provisions on its private equity portfolio of $12.7 million in the second quarter of 2009, resulting in a net loss of $19.7 million for the first six months of the year as compared to a profit of $4.2 million in the corresponding period prior year. The second quarter, however, has seen the Bank’s trading investment portfolio recover as income from trading investments produced a profit of $2.0 million in the second quarter, as compared to a loss of $2 million in the first quarter of the year. Total assets at 30 June 2009 declined to $84.1 million primarily as a result of decreases in fair values on private equity fund investments. Meanwhile, the Bank’s Basel II capital adequacy ratio remains at a healthy 17.37% at the end of the quarter, as compared to 22.8% at the end of 2008.
Akbar Habib, CEO, said: “The Bank’s performance continues to suffer the effects of its legacy portfolio, and impairment provisions on the private equity funds continue unabated as a result of the cleaning up process of all aspects of the Bank’s operations and the reclassification of the private equity portfolio. We do not anticipate any further significant markdowns on our investment portfolio and in all likelihood an improved economic outlook should have a positive contribution on the Bank’s overall performance.”
