Bahrain's Ithmaar Bank yesterday launched a US$200 million (Dh734.5m) rights issue to bolster its balance sheet and finance an expansion following $175m of losses during the final three months of last year. The rights issue, or an offer to existing shareholders to buy additional stock in the company, was part of a capital-raising plan that included an Islamic bond through which the bank hopes to raise up to $400m, Ithmaar said.
Bahrain's banks and investment companies have shown resilience during the global downturn, but a few large ones, including Gulf Finance House and Arcapita, announced losses for last year, heightening the worry about the health of the financial services sector in the island nation. Financial services accounts for about 27 per cent of Bahrain's GDP. The losses have led several companies to raise capital from shareholders.
Arab Banking Corporation, a wholesale bank in Bahrain, plans to raise $1.1 billion through a rights issue in the coming months as it reconfigures its business after incurring $880m of losses in 2008. Still, Rasheed al Maraj, the governor of the Bahrain central bank, said yesterday the country's banks had a loan-to-deposit ratio of between 75 and 80 per cent, a lower figure than for many countries in the Gulf. In the UAE, for example, banks have nearly 5 per cent more loans than deposits, according to the most recent central bank figures. Lower loan-to-deposit ratios are an indicator of financial stability.
Sheikh Ahmed bin Mohammed Al Khalifa, the finance minister, said yesterday the ratio of Bahrain's debt to its GDP was at 27 per cent. Gulf countries have some of the lowest ratios of public debt to GDP in the world, thanks to large oil revenues and a relatively small amount of government debt issuance. The unemployment rate in Bahrain was 3.8 per cent, Sheikh Al Khalifa said, adding that the government had boosted the state budget by 202m dinars (Dh1.96bn) for infrastructure projects this year.
The subscription period for Ithmaar's rights issue, the time investors will be given to decide if they want to buy new shares and participate in the transaction, is to end on March 25. The new shares are to be offered at 25 US cents each, a premium to their price of about 19 cents on the Bahrain Stock Exchange on Wednesday. * with agencies @Email:firstname.lastname@example.org