GFH reports 21% drop in Q3 net profit as impairment charges climb

A rise in the cost of financing has also affected its quarterly profitability

Bahrain-based GFH acquired 12 US hotels in a joint venture deal as the company continues to expand in the country. Reuters

GFH Financial Group, a Bahrain-based investment bank, reported a 21 per cent drop in its third-quarter net income as funding cost and impairments charges climbed.

Net profit attributable to the shareholders of the bank in the three months to the end of September declined to $24.4 million (Dh89.5m), GFH said on Thursday in a filing to the Dubai Financial Market where its shares trade.

Total expenses rose $68.6m in the third quarter of the year, up from $41.6m recorded for the same period in 2018, according to its financial statement.

The cost of financing during the reporting period rose to $30.9m, up from $9.4m from a year earlier, while the impairment allowances $16.2m from $7.3m.

The drop in quarterly income came despite a rise in the company’s investment banking and commercial banking businesses.

Total investment banking income at the end of September jumped to $35.6m from $658,000 recorded at the same period in 2018. A rise in the commercial banking income was less pronounced reaching $14.5m at the end of the third quarter, up from $12.6m.

The GFH group reported consolidated net profit of $70.2m for the nine-month period, a 33 per cent slide from $104.7m reported in the first nine months of 2018.

It attributed the decrease in profits to “lower contribution from the group’s commercial banking arm due to higher impairment provisions taken during second quarter of 2019”.

Net profit attributable to shareholders for the first nine months of 2019 slipped 29 per cent year-on-year to $73.6m. However, excluding one-off recovery income and restructuring income in the first nine months of 2018 of $57.8m, net profit grew by 61.4 per cent for the reporting period.

Total assets of the GFH Group increased to $6.14 billion as at 30 September 2019 from $4.43bn from a year earlier. Its liabilities also jumped by 78.6 per cent to $3.75bn from $2.1bn for the same period.