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WorldJanuary 2 2013

Arab Bank's new chairman looks to maintain leading role

Sabih Al-Masri, the new chairman of Arab Bank, talks about his plans for the lender, the benefits of cross-border activity and his vision to help the Arab world grow.
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Arab Bank's new chairman looks to maintain leading role

The abrupt resignation of Arab Bank’s former chairman, Abdel Hamid Shoman, in August 2012 marked the end of an 80-year reign for the Shoman family. Founded in Jerusalem in 1930 by Abdel’s late grandfather with paid-up capital of 15,000 Palestinian pounds, Arab Bank made history as the first private financial institution in the Arab world. It has since grown to become one of the Middle East’s largest banks, with $45.6bn in assets.

After serving at the bank for nearly 40 years, Mr Abdel’s resignation was prompted by a dispute over the way the bank was being managed. A new chairman, Sabih Al-Masri, was appointed to take over the reins at the end of August. In his first interview since the appointment, he talks to The Banker about his vision for taking the bank forward.

Strategic direction

“The overall strategic direction of the bank has not changed,” says Mr Al-Masri. “Our growth strategy is to target high-calibre corporate customers and focus on financing projects in infrastructure and economic sectors that show high rates of growth. These are our highest priorities. This is evident in the bank’s continued involvement in financing core infrastructure projects, ranging from power generation to airports, not just in Jordan, but the region as a whole.”

Indeed, Arab Bank continues to play a leading role in project financing by providing advisory, underwriting and funding services, as well as guaranteeing numerous sizeable transactions in the Middle East and northern Africa region.

Recent examples include financing for the construction of a new $410m international airport in Oman, an $800m toll road in the United Arab Emirates, a fertiliser plant in Egypt and a greenfield steel complex in Bahrain. It has also issued guarantees for sizeable cash advances to two large power projects in Saudi Arabia.

Mr Al-Masri believes the bank is exceptionally well placed to benefit from the potential increase in cross-border activity by its customers across its extensive network. “We are investing in our cross-border services, leveraging our network to better serve our corporate and consumer customers. From a corporate perspective, we will pursue merit-based transactions with both existing and new customers across the region, with an emphasis on deals where we can leverage our local insight, structured financing capabilities or deployment of specialised banking products,” he says.

“The consumer retail level has also witnessed solid growth recently, and we plan to capitalise on this front by enhancing products tailored to specific segments, taking into account their age groups, income and requirements.” 

Global reach

Today, the bank boasts the widest Arab banking branch network in the world. With capital of more than $30bn, it operates more than 600 branches across 30 countries, spanning five continents, making it present in every Arab country except for Iraq and Kuwait.

The bank used to have operations in Iraq before its branches were nationalised in 1964, but it is now looking to return. It is also hoping to resume operations in Libya in the near future, where it currently has a 19% stake in Al Wahda Bank.

“We understand that we are witnessing an unprecedented change in the region, a change that can potentially be for the greater good,” says Mr Al-Masri. “Our diversified operational model means we have balanced growth across business lines and segments, giving us the strength and flexibility to cope under any circumstances.”

While Arab Bank is headquartered in Jordan, only one-fifth of its assets and one-quarter of its deposits are based there. This has meant that in spite of the ongoing economic and political volatility in the region, the bank has successfully maintained strong financial growth, with net profits growing by 13% to $305.9m during 2011, owing to an increase in its core earnings.

“Arab Bank will continue to play a leading role in financing projects aimed at supporting infrastructure development initiatives that directly support the economic aspirations of the region,” says Mr Al-Masri. “The vision of Arab Bank is to help the Arab world grow and develop both economically and socially, and for the bank to be a facilitator that ultimately benefits the communities that we serve.”

The bank’s growth has continued into 2012, recording a 13% annualised increase in net profit to $484.5m for the first nine months of the year on the back of a rise in operating and net interest income. Operating income grew 6.6%% to reach $1.33bn, up from $1.25bn. Meanwhile, the bank’s capital adequacy ratio currently stands at 14.7%, significantly higher than the minimum 8% stipulated by the Basel Committee.

Such numbers are a reminder of why the bank has been successful in carving out a reputation as one of the most stable financial institutions in the Middle East and north Africa region. In July 2012, credit rating agency Fitch affirmed Arab Bank’s rating at A- with a 'stable' outlook, meaning its role as a leading Arab bank seems assured for the foreseeable future.

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Read more about:  Middle East , Jordan