Gulf bank completes capital increase

January 26, 2009

, KUWAIT CITY, Jan 26 – Kuwait\’s Gulf Bank has completed the process of doubling its capital in the face of heavy losses incurred in derivatives deals last year, a senior bank official said on Monday.

"We have completed the rights issue to double the bank\’s capital to raise 376 million dinars ($1.3bn)," an amount equal to the loss, general manager for the board of directors affairs, Fawzi al-Thunayan told AFP.

He said that existing shareholders subscribed to 850.6 million shares or 68 percent of the increase, paying a total of 255.2 million dinars ($886m).

Kuwait Investment Authority (KIA), the 300-billion-dollar sovereign wealth fund, bought the remainder of 403.3 million shares or 32 percent of the increase, raising 121 million dinars.

After the capital increase, the state-owned KIA now owns a 16-percent stake in the emirate\’s second largest commercial bank, Thunayan said.

The bank\’s capital now stands at 250.7 million dinars ($870.5m).

The board of directors said in November it would step down once the capital increase is completed.

The central bank of Kuwait said late October that the Gulf Bank incurred losses from derivatives deals which the bank carried out on behalf of clients who defaulted. The bank had said the losses were 375 million dinars.

A few days later, Bassam al-Ghanem resigned as chairman and his brother Qutaiba al-Ghanem replaced him.

Trading in Gulf Bank shares has been suspended on the Kuwait Stock Exchange since the losses were announced, but Thunayan expects trading to resume soon.

Following the losses, the government of the oil-rich emirate guaranteed deposits at all banks operating in the country and the central bank has pumped hundreds of millions of dinars into the banking system.

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