Algeria's economic growth rebounded somewhat in 2010 from the 2.1% slump experienced in 2009 (compared with an average for 2003-08 of 3.5% annual growth), to an estimated 3.8% growth in 2010. The current account surplus, which had fallen in 2009 to only 2.7% of GDP compared with over 22% in each of the prior two years, likewise rose, to an estimated 20.7% of GDP or $34.5 billion. Algeria's foreign exchange reserves now stand at $148.1 billion, compared with total external debt of $5.5 billion. The average rate of inflation however deteriorated, to an estimated 5.5% from 4.6% in 2009.

The latest 5-year plan (2011-15) envisages aggregate public expenditure rising to $286 billion. As part of this plan, the government has permitted a slight relaxation in foreign trade procedures, in that manufacturers will now be allowed to import raw materials to the value of DZD2 million each year without the need for an import letter of credit to be established (in 2009 it had decreed that all imports had to be backed by letters of credit). Under other recent changes, the State will in future own a share in all banks and financial institutions and will be represented on their boards (albeit without voting). Al Baraka Algeria's total assets rose in 2010 by 18% to $1.6 billion, despite a drop of 10% in its total financings and investments to $726 million resulting from Central Bank regulations introduced in 2009 to curb personal financings, and the impact of local currency depreciation against the US dollar, estimated to have reduced the dollar value of assets by 3.5%. The impact of the new regulations was to cause the Murabaha and Salam portfolios to decline by 11% and 38% respectively. However, the bank was able to expand its Ijara Muntahia Bittamleek portfolio partly in compensation, and this portfolio grew by some 44% in total. Also as a consequence, liquid assets grew by 62% to $761 million. Asset growth was funded
by the rise in unrestricted investment accounts and customer current and other accounts which together rose by 13% to $1.20 billion (unrestricted investment accounts expanding by 21% to $613 million).

Due to the impact of the restrictions on new financings, the bank's joint income from sales receivables and jointly financed contracts and investments aggregated $62 million, 3% below the equivalent for 2009. After accounting for the investors’ share of this income, which however rose by 11% over the year to $17 million, the bank's own share including its share as Mudarib amounted to $44 million, 8% less than the previous year. Including revenue from banking services and other operating income, however, its total operating income was 17% higher than in 2009 at $105 million. Largely due to reduced staff costs, the operating expenses were 7% lower at $27 million, leaving a net operating profit of $78 million, 28% higher than the previous year's $61 million. Following deductions for the year's provisions and taxation charges, both of which were higher than in 2009, the net profit arrived at was $44 million, 10% above 2009's result. Overall, the Algerian dinar's depreciation against the US dollar had a 3.5% negative impact on the bank's net income.

The unit significantly expanded its trade finance business over the year, showing a significant increase in its issuance of Letters of Credit and Letters of Guarantee, which surged by 179% to reach $1.04 billion in aggregate. Consequently, its revenues from banking services increased 64% in 2010.

Al Baraka Algeria also returned to network expansion in 2010, as the year saw preparatory work completed on 5 branches, one of which opened for business in 2010 while 4 others awaited only the approval of the authorities before opening. Under its strategic plan the bank intends to expand its network from the present 21 branches to 47 by 2015, all with ATMs installed. Products newly introduced in 2010 included musharaka, Qard Hasan and Ijarah micro finance loans (under which scheme small loans more than doubled over the course of the year) and real estate finance (which expanded by nearly 30%). Looking to 2011 and beyond, the bank intends to launch Takaful insurance, Hajj and Umrah savings accounts and to promote lease purchase facilities, a new international withdrawal card and e-banking services. It will also start work on its new 15-storey headquarters building, which should be ready for occupation in 2013.

Mr. Mohammed Seddik Hafid
Board Member & General Manager
Hai Bouteldja Houidef, Villa No.1
Rocade Sud, Ben Aknoun, Algiers,
Algeria
Tel: +21321916 450 to 56
       +21321 916 458/57
Fax: +21321 91 27 63
www.albaraka-bank.com