Islamic investment bank Gulf Finance House (GFH) has booked a $300 million provision over its exposure to a Dubai development project.
GFH, will take a $300 million (non-cash) charge against its proprietary Dubailand position and correspondingly reduce the liabilities on its balance sheet by $290 million, Gulf Finance House has said in a statement. "Furthermore, GFH has no remaining material exposure to Dubai," the statement added.
Commenting on the development Gulf Finance House Chairman Esam Janahi said, "Market conditions over the last year have been extremely difficult and recent developments have further highlighted the need for a prudent and transparent approach".
"As a consequence, the board has decided to take the necessary steps to deal with the situation appropriately. This action confirms our intention to take tough decisions especially when they are made with the very best long term interests of our shareholders in mind," Janahi added.
The investment bank further said that the said action has no implications for its clients. "The non-cash charge in assets is strictly only on GFH's books and doesn't affect our clients, nor does it affect the bank's cash flow," Chandan Gupta, the newly appointed Group Chief Financial Officer at the Bank said.
Meanwhile, Gulf Finance House Acting Group CEO Ted Pretty said, "... GFH has set aside sufficient provisions against its entire Dubai exposure."
The move comes after the fallout from the global financial crisis over the last year and more recent events in the Dubai market that further underline the need to take measures designed to realign the Bank's balance sheet.
This announcement will in no way, impact the significant cash reserves generated from the rights issue and the Bank anticipates raising further cash through continuing with the sale of non-core assets which it will announce in due course, the statement added.
