Amman Stock ExchangeAmman Stock Exchange

Prepared by Shaher Suleiman, assistant general manager/internal audit department at the Jordan Kuwait BankJordan Kuwait Bank, the study showed that the midyear pretax profits were $62 million or 11.6 per cent higher than the figure posted at the end of June 2006.

"Arab BankArab Bank, the Housing BankHousing Bank and Jordan Kuwait BankJordan Kuwait Bank realised the highest profits of $284.7 million, $101.8 million and $45.3 million respectively," said the study.

It added that profits of Jordan Ahli BankJordan Ahli Bank, Bank of JordanBank of Jordan, Cairo Amman BankCairo Amman Bank, Capital BankCapital Bank and Société Générale Bank declined by $4.2 million, $4 million, $4.7 million, $1 million and $0.7 million respectively.

Noting that profits regressed as a result of the burden of reserves required, mostly against nonperforming loans, the analyst indicated that banks did not suffer from a drop in profits as was the case in 2006 when most banks were hit due to their heavy reliance and significant investments in the securities portfolio, the price of which dropped sharply then.

By analysing the profit structure of banks, it was found to be still highly reliant on the net interests and commission revenue line items.

The net interest/net operating income ratio was 66.7 per cent compared to 67 per cent of the same period in 2006. The best ratios were achieved by the Housing BankHousing Bank (70.2 per cent) and the Jordan Kuwait BankJordan Kuwait Bank (70 per cent), while the lowest ratio was that of the Jordan Bank for Investment and FinanceJordan Bank for Investment and Finance (47.6 per cent).

Interest rates for credit facilities have increased more than the rates for deposits. This is reflected positively on the net interest and commissions which have increased by $118 million or 15.5 per cent to $863 million.

"Although the rise in interest rates was attractive to depositors, it pushed the average cost of funds to 3.7 per cent compared to 3.1 per cent during the same period of 2006," the study said pointing out that the lowest cost of funds was at Bank of JordanBank of Jordan (2.9 per cent), while it was highest at Jordan Investment and Finance BankJordan Investment and Finance Bank (5.7 per cent).

The analyst examined deposits at banks and calculated a 9.3 per cent growth in customers' deposits which went up by $2.75 billion to $32.48 billion. The growth rate during the first half of 2006 stood at 3.2 per cent.

These deposits financed 62.3 per cent of total assets of banks, the analysis showed.

"Customers' deposits increased at all banks except at Capital BankCapital Bank and Jordan Commercial BankJordan Commercial Bank. The highest increase was registered by Arab BankArab Bank ($1.624 billion), followed by the Housing BankHousing Bank ($507 million) and Jordan Kuwait BankJordan Kuwait Bank ($160.7 million).

The highest growth rate was that of ABC Bank (13.2 per cent) followed by the Jordan Kuwait BankJordan Kuwait Bank (13 per cent).

As banks depend on deposits of other banks, such a category increased by $822 million at a rate of 15.1 per cent to $6.28 billion.

"The Arab BankArab Bank was the bank that relied most on this type of fund resources, whereby its share of total bank deposits amounted to 67 per cent, while the Jordan Islamic BankJordan Islamic Bank is the least reliant on such funds due to the unique nature of its operations," the analyst deduced.

Banks in the study were divided into four groups accourding to the size of their as follows:

-Group (A), includes the Arab BankArab Bank.

-Group , includes large banks with assets in excess of $2 billion.

-Group (C), includes medium banks with asset size ranging between $1 billion and $2 billion.

-Group (D), includes small banks with assets less than $1 billoin.

By Samir Ghawi

© Jordan Times 2007

 

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