IBB - Annual report and financial statements 2009

 

30 July 2010
Source : IBB

Chairman's statement

The Bank’s fi nancial performance for the year ended 31 December 2009 has continued to be impacted by the challenging economic environment. The UK was in recession for the majority of 2009, negatively impacting the housing market, unemployment, disposable incomes and market yields. In addition, there has been increased regulatory focus on minimum liquidity and capital adequacy requirements.

Despite the difficult conditions, the past twelve months have seen strong growth in both customer fi nance assets and customer deposits.

Highlights

* Customer financing increased by 97% to £46.2m
* Deposits increased by 18% to £186.6m
* Customer numbers increased by 6% to just under 50,000
* Launch of 12, 18 and 24 month term deposits
* Enhancements to the Home Purchase Plan product range
* Winner of Global Finance Best UK Islamic Financial Institution 2009 award

Current environment and trading performance

The major impact of the ongoing market conditions has been to reduce the Bank’s revenues throughout the year.
A significant source of revenue for the Bank is the return earned from investing customer deposits on the Islamic interbank market.

Yields in the interbank markets declined during the fi rst half of 2009 and have since remained at historic low levels, resulting in a reduction in operating income to £1.6m (2008: £4.9m) and a loss for the year of £9.5m (2008: £5.9m).

The directors implemented specificactions during the year to mitigate the decline in revenues. These included growth in higher yielding customer finance assets and achieving cost reductions through operational effi ciencies that regrettably involved a number of redundancies at the Bank’s head office at the end of 2009. These actions have continued in 2010.

Products

The Home Purchase Plan (“HPP”) product achieved strong growth, resulting in a near 100% increase in the Bank’s customer fi nance assets. The HPP range was expanded during the year with a fi xed rental product and a product adapted for the Scottish market. It is also pleasing to note that this new business was achieved in accordance with prudent credit policies, with currently no arrears within the HPP and commercial property fi nance portfolios.

The Bank continues to use retail deposits to fund all customer fi nance assets and has no reliance on wholesale funding. Growth in longerterm savings products was achieved during the year with the launch of a wider range of term deposits in July 2009 and continued growth in the Notice Savings account launched in the prior year.

Capital

As noted in the Interim Report, the Bank raised new capital of £7.5m via a placing of new shares in January 2009. While the Bank continues to have suffi cient capital for its current requirements, the Board is in ongoing discussions with its advisors and interested parties regarding the raising of additional capital to support planned future growth. If additional capital is not raised, the Bank will need to scale back its growth plans and operations during 2010 in order to ensure that regulatory capital requirements continue to be achieved.

Outlook

The challenging market conditions look set to persist into 2010 and the directors and management will continue to identify opportunities to mitigate the adverse effects. We will maintain tight cost control and focus on growth in low risk secured customer fi nance assets funded by longer-term savings deposits.

Finally, I would like to extend my thanks and gratitude to Islamic Bank of Britain’s customers, employees, Sharia Supervisory Committee scholars and shareholders for their continued support and commitment to the Bank.

Mohsen Moustafa
Chairman

See the annual report