Diversification pays off for Apicorp with profits up almost a third

Profits at Apicorp, the development bank owned by Arab oil exporters, jumped by 31 per cent in the first half of the year.

Profits at Arab Petroleum Investments Corporation (Apicorp), the development bank owned by Arab oil exporters, jumped by nearly a third in the first half of the year as it diversified itsinvestments into areas like shipping.

Apicorp, which is 17 per cent owned by the UAE Government, earned US$66 million during the first half of this year compared with $51m in 2012, the bank reported. Assets rose to $5.12 billion. Apicorp’s other owners are the nine other members of the Organization of Arab Petroleum Exporting Countries.

“Our strong profit growth reflects our ability to continuously expand our income streams while ensuring the optimal funding composition that supports sustainable growth,” Ahmad bin Hamad Al Nuaimi, the chief executive of Apicorp, said in a release. “We will continue to widen our investment and financing horizons by exploring new opportunities with a key focus on growing trade finance activities in the region.”

The bank kept its Aa3 Moody’s rating and a Prime-1 rating for short-term debt, it said.

This year the Al Khobar-based bank launched its $150m Apicorp Petroleum Shipping Fund, which focuses on oil product tanker charters and was the region’s first fund specialising in a particular type of ship. It also financed transactions between top trading houses and Arab refiners.

The rise in profits at Apicorp come as its members struggle with the highest break-even prices in recent memory.

In July the bank warned that some members were particularly vulnerable to price shocks. Iran needs an average oil price of $144 a barrel this year to break even, up from $127 last year. Saudi Arabia would need $98 a barrel this year, up from $94 last year, according to Ali Aissaoui, a senior consultant who serves as the bank’s economist. He did not specify a figure for the UAE but said all break-evens were up, with the exception of Kuwait’s.

As a group, Opec nations require oil to trade at an average of $105 to break even, compared to $99 last year, he said. Brent prices declined yesterday to $107 a barrel in London.

“The ultimate point is that no Opec member can expect to set expenditures that depend on other members surrendering market share,” wrote Mr Aissaoui in his report. “Countries would be more likely to spend what they could afford.”

The 37-year-old bank, which has a banking branch in Manama, offers finance for energy transactions – $130 billion as of this year – and capital to back oil and gas joint venture projects: $16 billion so far. The bank’s commitments since 1975 total $12bin.

“In the fourth quarter of this year, Apicorp will be conducting an extensive exercise to develop a new five-year strategic plan for 2014-18 that will further support our mandate of raising capital access and enhancing the financial performance of the Arab energy industry,” said Mr Al Nuaimi.