I am profoundly honoured to present the 33rd annual report of the Bank, for the year ended 31st December 2008

The Year 2008 has witnessed an unprecedented global financial crisis, which had affected both the developed and developing economies of the world. What was perceived to be a smaller US-confined subprime crisis in 2007 has soon engulfed the whole world during the latter part of 2008 resulting in serious crisis through out the globe. The first half of 2008 witnessed high oil prices, booming economy and increasing liquidity. However, the latter part of the year saw a total reverse of things in the whole world. Big investment firms and banks have started collapsing and sought more financial assistance from the governments; liquidity became very tight, stock markets collapsed and a domino effect felt through out the various sectors. Many countries, especially in the developed economies officially declared that they are in recession. US registered their highest unemployment record, in the last sixteen years. The Euro-zone witnessed a fast downfall in their economic output. The Fed’s declared interest rate was almost zero and the European Central Bank’s official rate has also been taking a steep downward trend. Interest rates were reduced continuously to increase public spending. Governments are seriously considering to increase their own spending to fight the recession.

The general prediction is that 2009 would continue to feel the impact of the worsening recession and only towards the end of 2009, there could be signs of any recovery. US under the newly elected President is expected to come out with a massive recovery plan, to reduce taxes and increase public spending. Euro Zone is equally expected to reduce the interest rates further to boost customer credit and public spending. Worsening effects is expected in the Asian markets, since the recession hasn’t fully hit there yet.

The earnings of the corporate world is expected to continue to fall at least till the first half of the year. It is widely believed that corporates would be fundamentally changing their business model, to keep them afloat As regards the Middle East region is concerned, high oil prices which prevailed during the first half of the year, the investment income and the current account surpluses generated over a period of years, have helped the GCC countries to face the rough weather of the global financial crisis. The situation even gave them an opportunity to take stakes in the equity position of few major European / American banks during the first half of 2008. However, the oil prices which reached a peak of US $ 147 in July tumbled during the later part of the year, due to the recession effects and the weakening demands. The share markets through out the region also faced a steep downfall, as the liquidity in the market evaporated.

The countries in the region announced a series of liquidity support packages to their banking systems, with few countries taking direct equity stake and others offering long term deposit supports. All these proactive steps generally contained the situation.

The inflation is expected to fall down in the next year, as the countries are preparing to commit more on the public spending. GCC continues to be an attractive region for foreign investments due to its general economic strength with stable political environment.

Regarding United Arab Emirates, the country’s economic strength continues to be very high, due to its high level of GDP per capita, extensive reserves of oil and gas, and large holdings of offshore financial assets. The nominal GDP of UAE is expected to be US$ 249.9 billion for 2008 and is expected to be US $ 227 billion in 2009, due to the volatility in oil prices. The country runs the world’s biggest Sovereign Wealth Fund and its international investment portfolio is estimated to be more than US$ 200 billion, even after the recent steep falls in the global equity markets.

In spite of the global financial turmoil, UAE is expected to grow by around 4-5%. It’s hydrocarbon reserves are very high both in absolute and per capital terms. The volatility in the oil prices is not expected to be affect the country’s commitment on infrastructure commitments and public spending. Although the real estate prices are expected to go down, the country’s determination to overcome the situation is already demonstrated by Dubai government’s recent budget announcement to increase their public spending by more than 42% next year. Moody’s have recently reconfirmed their ratings for UAE at As2 – Stable.

On the banking sector, both the Central Bank and the government took a series of proactive decisions, including the liquidity support facility of AED 120 billion. Although there was a strain on the overall liquidity in the system, the general situation is quite comfortable. The estimated outflow of more than AED 200 billion from the system, has not affected the market much. The banking sector’s exposure to the real estate industry is believed to be the highest in the region and a reverse trend in this industry is likely to have an impact on the banking system. However, the central bank has confirmed that the banking industry is quite strong and well controlled. The year would witness emerging of a bigger real estate investment bank, with the merger of Amlak and Tamweel, two major real estate companies.

In spite of the global financial crisis, which dominated the major part of the year 2008, your bank is able to maintain its pace of growth and is able to achieve a commendable growth in total assets, loans and advances, deposits and bank placements.

The bank achieved a growth record of 32% in its total assets, from AED 10.4 billion in 2007 to AED 13.75 billion in 2008. The loans and advances reached a very high growth level of more than 78%, from an amount of AED 3.98 billion in 2007 to AED 7.1 billion in 2008. The deposits went up by more than 34% from AED 4.33 billion to AED 5.82 billion in 2008.

The increase in the total assets and the loans & advances resulted in an increase in the net interest income by more than 44%. The net interest income for the year was AED 322 million compared to AED 223 million for 2007. The bank’s trade finance activities continues to be on the increase which is reflected in its fee & commission income. The fee and commission income showed an impressive growth level of 64%, and the actual income amount was AED 168 million compared to the previous year amount of AED 103 million. The net operating income of the bank went up from AED 366 million to AED 438 million in 2008, recording an increase of 20%. The steep fall in the equity market had an impact on the bank’s investment income. The net profit reached a level of AED 296 million, compared to AED 311 million of last year, showing a marginal reduction, due to the provisions made on the investments.

Finally, I would like to extend my appreciation to the shareholders and my fellow board members for their unstinted support, which had helped me steer the bank through these difficult times to achieve a commendable performance. I would also like to extend my appreciation and gratitude to the management and staff, for their continuing dedication and commitment, which had helped the bank achieve and maintain a good growth record.