By Suleiman Al-Khalidi / Reuters
AMMAN: Arab Bank Group expects steady earnings from its core banking activities this year, cushioned by strong liquidity and a global presence that has minimized the impact of the region’s political turmoil, its chairman said on Wednesday.
Abdel Hamid Shoman said he hoped the bank, one of the Middle East’s major financial institutions, would continue the steady performance it achieved last year with 13 percent growth in net profit to $306 million, even though unrest in the Arab world made it difficult to predict the outlook.
“Matters are not clear so far but we expect our results in 2012 not to be less than last year, if not more,” Shoman said.
He said growth in the bank’s $45.6 billion balance sheet last year reflected its financial strength despite a difficult business climate that saw many global and regional banks’ earnings fall.
“We managed to boost our earnings despite a difficult year for banks globally which saw a rise in non-performing loans and deterioration of their loan portfolio as a result of their exposure to sovereign debt,” Shoman told Reuters.
“Despite our presence in a number of Arab countries that saw political and economic changes, the bank has been able to achieve operational profits from most of these countries,” he said.
A policy of putting aside heavy provisions made “our profits not appear as high as they should be,” Shoman added.
Bankers said Arab Bank set aside nearly $1 billion in provisions in the last two years to cover non-performing loans by businesses reeling from the global downturn, but was cushioned by a healthy capital base and $7.6 billion of shareholder equity.
Non-performing loans as of total of credit facilities were a minimal 6 percent with non-performing loans covered by 102 percent of provisions, Shoman said.
Investment analysts say the bank has traditionally had a lower risk appetite than peers and its favoring of capitalization and liquidity versus profitability.
Shoman said the bank would focus on keeping a high level of liquidity, which was 46.4 percent in 2011 with a capital adequacy of 15.1 percent.
“We enhanced our liquidity levels at a time when liquidity shortages are a source of concern for a lot of banks in the region and the world. Our very conservative policy aims at keeping very high liquidity levels,” Shoman added.
The Amman-based Arab Bank’s growth has long been tied to its regional and global expansion and it has built a reputation for low vulnerability to major political upheaval.
Despite the regional downturn, the bank’s traditionally loyal mainly Arab customer base raised deposits by more than 4 percent in 2011 to $31.7 billion.
Shoman said the bank’s geographic spread — 70 to 80 percent of its assets, funding, capital and revenue lie outside Jordan in 30 countries across five continents — would help the bank weather the turmoil that has hurt many of its peers.
Growth in Arab Bank’s traditional trade finance business conducted by its European and Asian subsidiaries helped buck the trend, with a healthy 6 percent rise in commissions last year, especially in the oil producing Gulf and Algeria, Shoman said.
A rebound in global oil prices was expected to improve the bank’s operations in the oil producing Gulf Arab states.
Arab Bank Group’s focus on top-tier assets and its steering away from significant lending to governmental entities has served it in a climate where banks exposed to former toppled governments in the Middle East had suffered, bankers say.
“We base our financing policy on whether the lending is feasible … and not on any personal considerations,” said Shoman.