Arab Bank Group Annual Report 2012 T AB
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Arab Bank Group Annual Report 2012 t AB CHAIRMAN’S MESSAGE 4 l E O CEO’S Message 6 Board Of Directors’ REport f CON - MAIN BUSINESS ACtIVItIES Of ARAB BANK 10 - Geographical Coverage 14 - Branches & StAff Distribution According tO Governorates 15 t EN - Addresses Of Arab Bank Branches and Offices Abroad 16 t - TotAl EMplOyees Of Arab Bank Group 20 S - CApItAl Investment Of Arab Bank 21 - Subsidiaries & Sister Company 22 - DetailEd INformation on the Bank’S Subsidiaries & Sister Company 34 - MEMBERS Of tHE BOARd Of dIRECtORS 39 - SENIOR EXECUtIVES 49 - NUMBER Of SHARES OWNEd By MAJOR SHAREHOLDERS AS At 31 dECEMBER 2012 & 2011 65 - CompEtItiveness and Market Share 66 - PatentS & Government Protection 68 - Major SUppliers and ClientS 69 - Government or INternational OrganizAtions RegulAtions 70 - Arab Bank OrganizAtion Chart / Head Office 71 - NUMBER Of StAFF ANd ACAdEMIC QUAlIfCAtIONS 72 - Training Courses vs. Trainees in Jordan & Arab Areas in 2012 MAtrix 74 - RISK MANAGEMENt 76 - AccomplishmentS 2012 87 - Financial IMpact Of Non-Recurring Operations 91 2 t AB - Time Series DatA for Major Financial INdicators (2008 – 2012) 92 l - Financial Performance 93 E O - FUtURE OUTLOOK ANd PLANS fOR 2013 102 f - EXternal AUdItors’ Compensation in jordan and abroad 105 CON - Number Of Arab Bank Shares Owned By Members Of the Board 106 - Number Of Arab Bank Shares Owned By Senior Executives 108 t - Number Of Arab Bank Shares Owned By the RElAtives Of the Board Members 110 EN - Number Of Arab Bank Shares Owned By the RElAtives Of the Senior Executives 114 t S - Board Compensation and BenefItS in 2012 118 - Executive Management compensation and benefItS in 2012 120 - Arab Bank’S Donations during Year 2012 122 - Transactions witH RElAtEd Parties 123 - ENVIRONMENtAl pROtECtION 125 - CORpORAtE SOCIAl RESpONSIBIlITY 128 ARAB BANK GROUp 137 - ConsolIdAtEd Financial StAtementS fOR tHE yEAR 2012 - indEpendent audItor’S REport 210 ARAB BANK PLC 213 - Financial StAtementS fOR tHE yEAR 2012 - indEpendent audItor’S REport 284 ATTEStAtION StAtEMENtS 286 CORpORAtE GOVERNANCE GUIdE 289 the agendas Of the 83rd annual ordinary general assembly meeting and the 304 EXtraordinary General Assembly Addresses Of arab bank major branches, subsidiaries, AffIliates and sister company 305 3 CHAIRMAN , S MESSAGE distinguished Shareholders, the financial crisis, which started approximately five years ago, has affected the global economy greatly creating unprecedented challenges for most economies across the world. despite the fact that many of these challenges still persist with high levels of uncertainty, there are some signs of recovery globally, including some positive indicators of certain economic data in the United States as well as avoiding worst case scenarios in other markets. In addition, the increased likelihood of resolving the debt crisis in Europe has created a more optimistic outlook on the overall global economic situation. the slowdown of the global economy and its inconsistent performance, along with shrinking investment flows, rising unemployment rates in addition to difficulties in coordinating decision making within countries and between influential countries indicate that the path ahead remains difficult for the foreseeable future. As for the region, the transformations that the Arab world has witnessed and is still witnessing, have created a whole new set of circumstances which has affected the economic situation in most of the Arab world in terms of opportunities and challenges. While some of the countries in the region have moved forward in implementing economic and financial reforms, and the first signs of recovery started to appear in some of the Arab financial markets, there is still a prevailing state of caution across the business and investment environment in the region. this cautious state is driven primarily by the low growth rates in several Arab countries as well as growing public budget deficits, increased public debt levels and unemployment rates. the banking industry is at the heart of these economic developments, as it is considered one of the most affected and, to a greater extent, also the most pivotal in these financial and economic situations. It is at this point that the banking industry, regionally and globally, continues to deal with a number of challenges imposed by the economic crisis. Accordingly banks continue to develop their strategies and policies, prioritizing risk management and strong corporate governance practices to optimize and improve the overall banking industry over the long term in order to better cope with such crises. despite these difficult conditions and constantly changing environment on a global and regional level, we at Arab Bank stayed true to our banking principles relying on our extensive experience in dealing with the region’s challenges. 4 CHAIRMAN the Bank’s sound strategy in combination with its accumulated experience and prudent banking approach played a great role in the Bank’s ability to deal with the current challenges in the region. Accordingly the Bank was able, given its exemplary reputation and the high level of trust it enjoys, to continue being a safe haven for deposits and investments of a wide spectrum of individual and corporate customers across the Arab world. this is reflected in the positive results , achieved by Arab Bank during the year, whereby our profits grew 15% compared S MESSAGE to the previous year. We stand today at the beginning of a new era for Arab Bank’s journey of success; a journey which was founded by the Shoman family over eight decades ago. I take this opportunity to affirm the Bank’s commitment to continue its successful journey locally, regionally and globally based on our long-standing values and sound strategic direction built on the foundations of institutionalized work ethics and prudent financial policies. today we look to the next phase of Arab Bank’s journey with optimism, standing fully-confident that we are at a forefront of a new era of leadership and outstanding performance which will benefit our shareholders, customers, employees and the communities where we operate. In conclusion, I would like to thank the Central Bank of Jordan for the effective and vital role that it plays in maintaining the safety and stability of the Jordanian banking sector. My sincere thanks and appreciation also go to our customers for their continued trust and patronage. I would also like to thank our employees in the different areas for their outstanding performance, professionalism, loyalty and dedication to their institution, assuring you of our ongoing commitment to continue our journey of success and accomplishments. Sabih Taher Masri Chairman of the Board of directors 5 Board of Report d irectors , M essage f rom distinguished Shareholders, Arab Bank Group has continued to achieve outstanding results despite the eco- t nomic challenges globally and regionally. during the 2012 financial year, the he Group has managed to achieve a growth in net profit after provisions and taxes of 15% to reach USd 352.1 million compared to USd 305.9 million in 2011. profits C before taxes equaled to USd 562.9 million dollars. the growth in profits comes as results of an increase in operating revenue. hie this outstanding performance reflects Arab Bank Group’s ability to handle and cope with any evolving circumstances and still achieve the best possible results f E relying on a strong and solid banking foundation, prudent credit policies, diligent monitoring by the Bank’s management and strategies and policies development, xecu ensuring the necessary steps are implemented to maintain and enhance the Bank’s position building on its capabilities. In parallel to profit growth, the Group’s deposits increased by USd 1.2 billion to reach USd 32.9 billion in 2012 compared to USd 31.7 billion at the end of 2011. this increase in the volume of deposits t indicates the great trust instilled by Arab Bank customers which continues to be ive reinforced year after year. Net operating income during the year grew by 8% as a result of a healthy increase Off in net interest income and maintaining operating expenses under control, taking into consideration the provisions that have been accounted for as income. Arab Bank has continued its prudent policies with regards to its asset quality and credit icer portfolio, and has in that respect, fully provided for the exposures of Saad and Al Gosaibi, and has increased the provisioning coverage on all non performing loans to reach in excess of 100%, excluding the value of held collaterals . , the capital adequacy ratio at the end of 2012 equaled to 15.1% almost double the 8% minimum required by the Basel Committee and higher than the minimum required by the Central Bank of Jordan of 12% which reflects the strong capital base of the Bank. In 2012 Arab Bank has received numerous international awards and recognitions in various fields, earning Bestt rade finance provider in the Middle East and North Africa, Best project and Infrastructure finance provider in the Middle East and Best Consumer Internet Bank in Jordan for the fourth consecutive year from Global finance magazine. In addition Arab Bank was also named Best Bank and Best In- vestment Bank in Jordan for four years in a row and Best fX and Cash Manage- 6 Message from the Chief Executive Officer, ment service provider in the Middle East from the global financial magazine EMEA finance. the Banker magazine also named Arab Bank as Bank of the year in addi- tion to being recognized as Best Bank in Jordan for the fifth consecutive year by Euromoney magazine. Since its establishment, Arab Bank maintains its contributions to the develop- ment of Arab economies by playing an effective and critical role in funding vital projects in addition to promoting intra-regional and global trade. the Bank has also focused on supporting small and medium enterprises (SMEs) through the establishment of a specialized unit to serve this sector.