Press Releases - AlBaraka Turk Participation Bank, after Increasing its Operating Income by 28% in 2006, Continues to Expand its Operations in the Turkish Market



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Kingdom of Bahrain, Manama (April 15, 2007)

AlBaraka Turk Participation Bank, after Increasing its Operating Income by 28% in 2006, Continues to Expand its Operations in the Turkish Market

AlBaraka Turk Participation Bank, one of AlBaraka Banking Group’s Units (ABG), announced that it posted a big increase in its operating income and net income of 28% and 52.4% respectively in 2006, according to a press release issued by the Bank after convening its Ordinary General Meeting on Thursday 12 April 2006, which approved the Bank's final accounts for 2006.

Mr. Adnan Ahmed Yousif, Chairman of AlBaraka Turk Participation Bank and Chief Executive Officer of AlBaraka Banking Group said after the meeting that the results achieved by the Bank in 2006 were excellent, especially if we consider the economic conditions prevailing in Turkey and the intense competition in the market. Al Baraka Banking Group owns a 68% stake in the capital of the Bank.

The Chairman of the Bank said that the Bank in 2006 opened a number of branches and launched many new Shari'a-compliant and highly competitive investment and financing products and services. This had a very positive impact on the gross income from financing and investments which increased by 21% to reach US$149.8 million. After deducting the share of the unrestricted investment account holders, who received US$107.1 million, an increase of 34% compared to what they received in 2005, and taking into account the Bank's share in income as a Mudarib as and the share of its own investments, the Bank's share in income from these investments dropped by just 3% compared to 2005, to reach US$42.7 million. However, in view of the big increase in the Bank's earnings from its own financing and investment operations, which increased by a remarkable 147% to reach US$30.9 million, and the income from banking operations, fees and commissions, the operating income increased by 28% to reach US$117.1 million. The drop in depreciation and amortization charges and other expenses lessened the effect of the increase in staff expenses. In spite of increased provisions, the net operating income increased by 89.3% in comparison to 2005 to reach US$61.33 million. In view of the substantial drop in taxes in 2006 and the absence of any inflation-related cash losses, the net income witnessed an excellent increase of 52.46% compared to 2005, to reach US$50.72 million.

The increase in net income resulted in improvements in the return on average equity and on average total assets, which went up from 27.93% and 2.69% respectively in 2005 to 34.07% and 3.24% in 2006.

In 2006, the assets of the Bank increased by 26.44% to reach US$1.75 billion compared to US$1.46 billion as at the end of 2005. This increase in assets was the result of an increase in Murabaha finance operations which increased by 27% to reach US$1.28 billion and financial leasing transactions (Ijarah muntahiyya bittamleek), which increased by 8% to reach US$103 million. These increases were financed by a big increase in customer deposits as a result of the opening of new branches and increasing the range of investment products. Customer current account and other accounts increased by 10% and unrestricted investment accounts by 19%, which reflected in an increase of 24.82% in the volume of deposits to reach US$1.51 billion in 2006, which, in turn, financed 86.5% of the Bank's total assets. As for shareholders’ equity, it grew by 32.54%, to reach US$169.73 million as at the end of 2006.

Commenting on these results, Mr. Adnan Ahmed Yousif said that the excellent results achieved by the Bank in 2006 were the result of the hard work of the Bank's executive management and the strong support that the parent company (ABG) extended to its subsidiary Units. He added that Turkey was considered as one of the key markets of the Group because of the variety and abundance of economic activities and huge promising opportunities.

Although the Bank is the smallest of the four participation banks in Turkey, it is considered to be the best of them all, even in terms of conventional banking standards. The Bank held the first position in terms of total assets and deposits per branch and employee and it managed to maintain this position in 2006 in spite of increasing the number of its branches by twenty new branches to reach a total of 63 branches. Each of these branches is equipped with an automatic teller machine (ATM).

Mr. Adnan Yousif added that the conditions of the Turkish economy contributed to the improvement in performance that the Bank achieved. Turkey continued in 2006 the implementation of its 3-year economic stability programme which it signed with the International Monetary Fund (IMF), in spite of a weak Turkish Lira in the second half of 2006 and an increase in inflation rate, which led the Central Bank to tighten its monetary policy in a bid to control inflation.

Mr. Adnan Yousif added that in view of the Bank's desire to obtain maximum benefit from the ever increasing opportunities in the Turkish market, the Board of Directors of the Bank provided all the necessary support required for expanding the Bank's branch network and increasing the number of installed ATMs. For this purpose, the Bank intends to open new branches and develop and market new products during 2007. The Bank's plan for the coming period also includes increasing the acquisition of customer deposits both in local and foreign currencies, with special focus on small to medium size customers, focusing on marketing its credit cards and alternative delivery channels, e.g. Internet I and Banking Services Call Centre. The Bank also will also continue its preparations towards complying with the requirements of Basle II, enhancing its anti-money laundering procedures and increasing banking services earnings, fees and commissions. At the same time, the Bank continues to take appropriate measures to rationalize expenses with view to achieving sustainable increase in dividend payouts to shareholders as well as continuing with measures in preparation for launching its IPO in an opportune time.

Al Baraka Turk Participation Bank is one of the Banking Units of Al Baraka Banking Group’s (ABG), which is a leading international Islamic bank. ABG offers retail, corporate and investment banking and treasury services strictly in accordance with the principles of the Shari'a. The authorized capital of ABG is US$1.5 billion and shareholders' equity was about US$1 billion as at the end of 2006. The Group has a wide geographical presence in the form of subsidiary banking Units in ten countries, which in turn conduct business through more than 215 branches. These banking Units are Banque Al Baraka D'Algerie, Al Amin Bank, Bahrain, Al Baraka Islamic Bank, Bahrain, the Egyptian Saudi Finance Bank, Egypt, Jordan Islamic Bank, Jordan, Al Baraka Bank Lebanon, Lebanon, Al Baraka Bank Ltd, South Africa, Al Baraka Bank Sudan, Sudan, Bank Et-tamweel Al Saudi Al Tunisi, Tunisia, AlBaraka Turk Participation Bank, Turkey and AlBaraka Bank, Pakistan.