MENAFN - Jordan Times
Nonperforming loans account for 40.5% of total IDB credit facilities - Jordan
(MENAFN - Jordan Times) AMMAN — Credits extended by the Industrial Development Bank (IDB) increased by JD15.31 million or 12.2 per cent to JD140.71 million last year but nonperforming loans accounted for 40.5 per cent of the total.
According to the notes of the auditor on the financial statements as of December 31, 2006, the nonperforming loans amount to JD57.02 million compared to JD51.59 million, or 41.1 per cent of the total, in 2005.
The bank mentioned in the 42nd annual report that it was able to collect JD28.52 million of loan repayments last year. Of the amount, JD25.83 were due in 2006 and JD2.69 million were due from previous years. Accordingly, the IDB put the collection rate at 79.29 per cent (77.52 per cent in 2005).
IDB Chairman Mufleh Aqel told the shareholders in the annual report that the bank approved 118 medium- and long-term loans last year for a total of JD48.32 million. Industrial projects accounted for 74.9 per cent of the total financing.
In 2005, the number of loans was 148 and the amount was JD28.97 million.
Finance lease, accounting for 40.1 per cent of total loans extended in 2006, surged by 59 per cent reaching JD32.26 million through 46 transactions compared to JD20.21 million through 54 deals in 2005.
Financing of small enterprises and craftsmen was extended to 176 beneficiaries, down from 208 in 2005 although the amount remained stable at JD2.4 million.
The IDB netted JD8.54 million from the difference between JD11.02 million of earned interests and commissions and JD2.48 million of interest paid.
As a result of losses or lower earnings from investments and other sources of revenue, the gross income declined to JD9.67 million compared to JD10.82 million in 2005.
After taking into account various expenditures, depreciation, currency exchange rates and the surplus provision for diminution of direct credit facilities, the bank's net profit stood at JD7.87 million, a 15.48 per cent or JD1.44 million drop from the JD9.31 million recorded in 2005.
"The drop resulted from fluctuations in foreign exchange rates, the decline in share prices and the burdens that were brought by the liquidation of some companies besides the rise in the rediscount rate," Aqel wrote in the annual report.
Despite the lower profit, the IDB is distributing JD4.52 million in cash dividends to shareholders at a rate of 20 per cent for holders of preferred shares and 10 per cent for holders of ordinary shares.
In 2005, the IDB distributed JD3.32 million in cash dividends.
The bank's balance sheet as of December 31, 2006 shows a 19.3 per cent rise in total assets and a 7.15 per cent rise in shareholders equity.
Shareholders equity increased from JD51.7 million in 2005 to JD55.39 million at the end of last year. Of the 2006 amount, JD24 is capital and the rest are retained earnings, reserves and net accumulated change in the fair value besides issuance premium.
The capital comprises 2,775,000 ordinary shares in which the government has stake and 21,225,000 preferred shares subscribed to by the private sector.
Liabilities totalled JD81.75 million, more than half in "borrowed funds." Cash collateral amounted to JD11.53 million and "other liabilities" were given at JD22.99 million.
The assets included JD91.31 in net credit facilities, JD27.66 million of cash balances at banks and other banking institutions. Financial investments available for sale on held until maturity (net) or for trading totalled JD10.5 million down from JD12.82 million at the end of 2005.
In explaining the competitive position of the bank in the market, the annual report said the IDB was the only specialised institution for financing short- and long-term industrial and tourism projects.
"Since there is no other institution entrusted with such a task and since the IDB does not perform commercial businesses like other banks operating in the country while those banks carry out the functions of the IDB, this means that the bank encounters strong competition," the report explanation said.
The bank expects stiffer competition if new banks enter the local market.
The IDB calculated its total credit facilities to be 11 per cent of the overall JD1.28 billion extended by all banks in the Kingdom to the industrial and tourism sectors.
After facing resolute official and practical opposition to transform the bank into a commercial entity that would provide all banking operations, the strategic plan shifted into serious negotiations with an investor in Jordan and in partnership with one of the Gulf Islamic banks to raise IDB capital and transform its business to Islamic principles while introducing unprecedented Islamic services to the market.
The IDB employed 103 workers at its head office and four offices in Amman and Aqaba.
Main shareholders are: The Social Security Corporation (11.8 per cent), the government of Jordan (8.7 per cent), European Investment Bank (8 per cent), Arab Bank (6.7 per cent), Jordan International Insurance (4 per cent).
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