By ; Mohamed El Kholy
Arab Bank Group closed 2020 reporting net income after tax of $195.3 million as compared to $846.5 million in 2019, recording a drop of 77%. Group equity grew to reach $9.4 billion.
The Board of Directors has recommended to the shareholders the distribution of 12% cash dividends for the financial year 2020.
The year 2020 was challenging for the global and regional banking sectors due to economic contraction, higher cost of risk, and lower interest rates in addition to the plunge in oil prices since the outbreak of the pandemic.
The Bank entered the crisis from a position of strength, with stable credit quality coupled with sound liquidity and capital ratios. The drop in profits is attributable to the build up of higher provisions, driven by the deterioration of the macro-economic environment regionally and globally, and to lower revenues from interest and fee income due to the Covid-19 pandemic and to lower market interest rates and weakening oil prices.
Group net operating income is at $ 1,007 million, 25% lower than the prior period as a result of a decrease in net interest and commission income, and the drop in the contribution of the bank’s associates in the Gulf. Customer deposits grew by 7% to reach $ 38.7 billion as compared to $ 36.2 billion, while loans grew by 1% to reach $26.5 billion as compared $ 26.1 billion. The Group maintained its strong and robust capital base with equity of $9.4 billion and a capital adequacy ratio of 16.8% calculated in accordance with Basel III regulations. The Group enjoys high liquidity with a loan-to-deposit ratio of 68.4%, while credit provisions held against non-performing loans continue to exceed 100%.
Mr. Sabih Masri, Chairman of the Board of Directors remarked that the Covid-19 pandemic has had a material impact on businesses around the world and the economic environments in which they operate. In an effort on safeguard their economies, governments and regulatory authorities launched various programs to mitigate the impact of the crisis. He added that the bank dealt with these challenges while maintaining its strong liquidity and capital positions.
Mr. Nemeh Sabbagh, Chief Executive Officer, stated that the Group took several strategic initiatives to help mitigate these unprecedented economic and market conditions, safeguarding its healthy liquidity and capital ratios, maintaining resilient asset quality metrics, and scaling up digital banking initiatives and channels across the Group.
Mr. Sabbagh also highlighted that the increased provisions taken across the Group are in accordance with the guidelines of International Financial Reporting Standard # 9, and as per the bank’s internal expected credit loss model, and include general provisions built due to the current economic situation in Lebanon.
Arab Bank was careful to support both its corporate and consumer customers who were impacted by the pandemic. Arab Bank was also actively involved in community programs in line with initiatives by governments and regulators to alleviate the burden on customers by restructuring, deferring or reducing instalments and by lowering interest rates for the most exposed sectors, especially small and medium-sized companies.
Arab Bank Group has also donated $25 million as part of its social responsibility in support of national efforts to combat the COVID-19 crisis and to mitigate its health, economic and social repercussions on citizens.
Mr. Masri concluded by stating that while the negative impact of the pandemic is unprecedented, its effect on the Group is well cushioned by the bank’s resilience, the strength of its franchise, and the success of its diversified business model.
The 2020 financial statements are subject to the approval of the Central Bank of Jordan.