Message from the Chief Executive Officer

THE CHIEF EXECUTIVE OFFICER JEAN CLAUDE GELHAAR

Jean-Claude Gelhaar Chief Executive Officer

The commercial developments and technical upgrades implemented to improve UBAF’s operating processes advanced steadily in 2019, cementing the trend set firmly in motion the previous year.

Commercially, the economic environment underpinning our activities international trade and the issuance of transaction guarantees - was favourable across almost all the countries in which we operate. We were able to sustain, and in many cases increase our positions in regions in which we have operated for many years, such as the Arab world, West and Central Africa and the Indian subcontinent, while successfully targeting new oppor tuni tie s in Eastern and English-speaking Africa. This diversified geographical coverage spanning dozens of emerging countries has allowed us to be more selective in terms of the business opportunities we pursue, while continuing to assist our exporting customers, who need a partner able to provide long-term support in regions often perceived as complex by the banking industry.

In 2019, no major developments affected the underlying commodities handled by UBAF, which remain concentrated in the energy (oil and its derivatives, LNG), agribusiness and capital goods sectors. The very traditional instruments we use (import and export documentary credit, SBLC, transaction guarantees, transactional finance, Islamic finance) also experienced business as usual. As the figures in this annual report confirm, volumes of flows processed and yearend outstandings have remained relatively stable for two years, apart from the more pronounced development seen in standby letters of credit and transaction guarantees, the latter relating to infrastructure projects mainly in the Arab world. Work has begun or continued on optimising our transaction processing and risk management processes in a quest for efficiency documented by UBAF in its 2019-2021 medium term plan, as requested and approved by its Board of Directors.

The year‘s achievements include introducing paperless procedures for some governance bodies, redesigning our website, acquiring a new counterparty rating platform externally and reorganising our back- and middleoff ice functions to support the replacement of our main tool for managing documentary credits and guarantees. We also enhanced our financial security by continuously updating our screening tools and KYC procedures. The operating results achieved in 2019 reflect our commercial efforts coupled with functional developments across UBAF. They are the result of a more selective approach to transactions and a commercial policy geared towards regular customers and counterparties, with a greater focus on financed assets associated with off-balance sheet transactions.

From a prudential standpoint, UBAF‘s weighted assets increased 10% during the year, allowing our CRD IV solvency ratio to stabilise at an annual average level of 13.3%. Our liquidity position also remained satisfactory, with an average LCR of 183%. UBAF’s NBI thus increased more than 20% over the year. This highly satisfactory performance marks a return to the level reached five years previously.

The diversification of our revenue sources was fully eff ective, since the growth achieved was spread across all the areas in which UBAF operates, without being concentrated in a specific country or activity.With general expenses firmly under control, we were able to generate gross operating income more than three times that of the previous year. The cost of risk rose significantly, due to the operational risk that materialised in a case of largescale external fraud aff ecting several banks in the Singapore financial market.

This was behind the deterioration in our net income. In accordance with our management policy, we recognised provisions to cover the loss in full, so that we can benefit in the future should these provision be reversed.

 


Jean-Claude Gelhaar Chief Executive Officer