(MENAFN Press) 20 January 2012
Jordan Ahli Bank's Ratings Affirmed
Capital Intelligence (CI), the international credit rating agency, announced today that it has affirmed Jordan Ahli Bank's (JAB)'s Long and Short-term Foreign Currency Ratings at 'BB' and 'B' respectively. These ratings are set at the same level as CI's sovereign ratings for Jordan. The agency affirmed the Bank's 'BB' Financial Strength Rating (FSR) on the basis of its strong liquidity, forthcoming capital injection, and improved asset quality and operating profit in 2011. Conversely, the FSR is constrained by a below peer-average capital adequacy ratio, moderate level of unprovided non-performing loans (NPLs), ongoing elevated credit risk in the market combined with a challenging economic environment. The Support factor remains '3' given the high likelihood of official support in case of need. All ratings carry a 'Stable' Outlook.
JAB remains a significant institution in terms of size in Jordan's firmly supervised banking system. Although NPLs rose in 2010 due to the effects of the slowdown across key sectors of Jordan's economy, encouragingly NPLs declined in 2011 as a result of collections, write-offs and rescheduling. Consequently, the Bank's NPL ratio improved and is currently similar to Jordan's industry average. JAB has achieved relative success in resolving legacy impaired credits in the past through strong remedial measures. Loan-loss reserve coverage for NPLs improved to an adequate level in 2011 due to the fall in impaired loans. In this regard, the rebound in operating profitability has strengthened JAB's capacity to create provisions as necessary.
The Bank's sources of income are reasonably diversified and continue to benefit income generation. While many peer banks saw a further decline in profitability in 2010 and into the current year, JAB's operating and net profit recovered, albeit from a low base, on the back of strong net interest income growth coupled with good cost control. That performance translated into an improved ROAA ratio that was on par with the Jordanian industry average. However, the combination of a comparatively large cost base and sustained provisioning continued to depress profitability to some degree.
Liquidity, which remains high as is the case with other Jordanian banks, reflects the relatively low share of loans in JAB's total assets coupled with a growing pool of customer deposits. Although a capital increase was underway at the time of writing, the balance sheet will remain only adequately capitalised post the rights issue and there will be just limited scope for risk assets expansion. The Bank's relatively high dividend payout ratio continued to restrict the rate of internal capital generation.
JAB (the name adopted in 2006 for the erstwhile Jordan National Bank) was established in Amman in 1955. The Bank provides a universal banking service in Jordan through its sizeable network of 44 branches and brokerage subsidiary. Abroad, JAB has a small banking subsidiary in Lebanon (Al-Ahli International Bank operating 3 branches in Beirut), and branches in Palestine (6) and Cyprus (1). There is very little lending activity in Palestine in view of the ongoing difficult operating environment, while in Lebanon and Cyprus the focus is on treasury and to a lesser extent lending. JAB's major shareholders include the Mouasher family (25%), Abraaj Capital (11%), Byblos Bank (Lebanon, 10.3%) and Jordan Investor Centre (part of the Mouasher group of companies, 6%). The Bank reported consolidated total assets of JOD2.5 billion (USD3.5 billion) and total capital of JOD232mn (USD327mn) at end-September 2011.
Senior Credit Analyst
Tel: 357 2534 2300
Senior Credit Analyst
Rating Committee Chairman
The information sources used to prepare the credit ratings are the rated entity and public information. Capital Intelligence had access to the accounts and other relevant internal documents of the issuer for the purpose of the rating and considers the quality of information available on the issuer to be satisfactory for the purposes of assigning and maintaining credit ratings. Capital Intelligence does not audit or independently verify information received during the rating process.
The rating has been disclosed to the rated entity and released with no amendment following that disclosure. Ratings on the issuer were first released in August 1989. The ratings were last updated in February 2010.
The principal methodology used in determining the ratings is Bank Rating Methodology. The methodology and the meaning of each rating category and definition of default, as well as information on the attributes and limitations of CI's ratings, can be found at www.ciratings.com