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DIFC_A4 Ad_Banker ME_EN_AW.indd 1 14/08/2018 17:21 elcome to the ninth edition of the BME100. For almost a decade, the BME100 has served as a benchmark for financial institutions in the W . The BME100 is a ranking of financial institutions licensed and domiciled within the Middle East region. To be included in this ranking an institution must have its head office based INTRODUCTION in the Middle East and be regulated by one of the region’s central . Every year, in the second quarter of the year, we undertake a study of published audited financial reports from financial institutions in the region. This year we have adopted a rigorous new methodology, which you can read about in detail from page six. Because this marks a new chapter for the BME100, we won’t draw on any comparisons to last year’s rankings. Instead, we will simply present the top 100 banks and the 10 fastest-growing banks in the region. Also in this edition, you’ll find a country-by-country analysis of the results. Notably absent from this section is , which only has one in the index, Mansour Bank. We felt that an analysis of one sole bank might be misrepresentative of the country as a whole. There is also a separate analysis of Islamic banks’ performance. One aspect that remains the same is our user-friendly format. Last year, we updated our design to make the data easier on the eyes. You’ll find the results of the research laid out in graphs and infographics, punctuated with sharp commentary. We launched the BME100 because we wanted to give the region a fact-fuelled analysis of the banking and finance sectors’ performance across the Middle East. We all know that numbers don’t lie, so we thought it best to let them speak for themselves. An interesting story has unfolded over the last nine years. Countries such as have loosened their grip on the index whereas banks in the UAE have tightened theirs. Lower oil prices have blacked many banks out of the index, but shifting dynamics have clearly given opportunity to others. Last year saw an Islamic bank top the index for the first time, and this year we have a newly-created entity at number one. Each year the BME100 has told a different story. First Abu Dhabi Bank debuted at number one in this year’s index, following its creation via a merger between First Gulf Bank and National Bank of Abu Dhabi. Could this signal a new dawn in an industry that is widely considered overripe for mergers?

Only time will tell. See you next year!

bankerme.net 3

6 METHODOLOGY 8 PUTTING THE BEST FINANCIAL INSTITUTIONS ON THE MAP 10 BEST 100 BANKS

P.O. Box 502491, Media City, UAE 12 FASTEST GROWING FINANCIAL INSTITUTIONS Tel: +971 4 391 4681 Fax: +971 4 390 9576

bankerme.com 14 18 ABU DHABI ISLAMIC BANK: INVESTING IN THE FUTURE CHAIRMAN Saleh Al Akrabi 20 DUBAI ISLAMIC BANK: UPGRADED BANKING CHIEF EXECUTIVE OFFICER TONY LONG [email protected] 21 MASHREQ BANK: 50 GOLDEN YEARS Tel: +971 4 391 4681 SAUDI ARABIA EDITOR - BANKER MIDDLE EAST 22 NABILAH ANNUAR [email protected] 26 BAHRAIN Tel: +971 4 391 3726 30 BANK ABC ISLAMIC: BANKS WITHOUT BORDERS EDITORS BUSINESS DEVELOPMENT ISLA MACFARLANE MANAGERS [email protected] DANIEL BATEMAN 32 Tel: +44 7875 429476 [email protected] Tel: +971 4 375 2526 MATT AMLÔT 36 [email protected] AKASH AMBALE Tel: +971 4 391 3716 [email protected] Tel: +971 4 433 5320 JORDAN WILLIAM MULLALLY 40 [email protected] Tel: +971 4 391 3718 NEEMA SAJNANI [email protected] 44 PALESTINE WEB EDITOR Tel: +971 4 391 3717 JESSICA COMBES [email protected] ADVERTISING 48 Tel: +971 4 364 2024 [email protected] EDITORIAL ASSISTANT 52 BANK OF : TRIUMPHING OVER ADVERSITY KUDA MUZORIWA [email protected] Tel: +971 4 391 3729 53 ISLAMIC BANKS EDITORIAL [email protected] 57 APPENDIX

CHIEF DESIGNER SENIOR DESIGNER BUENAVENTURA R. JALUAG, JR. FLORANTE MAGSAKAY [email protected] [email protected] Tel: +971 4 391 3719 Tel: +971 4 391 3724

DIGITAL MANAGER EVENTS MANAGER SIYAMUDHEEN PAINAYIL NATALIA KAILA [email protected] [email protected] Tel: +971 4 391 3722 Tel: +971 4 365 4538 FINANCE & EVENTS MARKETING DATA EXECUTIVE MANAGER KHALED TAHA CRIS BALATBAT [email protected] [email protected] Tel: +971 4 433 5322 Tel: +971 4 391 3725

FINANCE & DATA MANAGER SHAIS MEMON, ACCA, CMA 18 21 30 [email protected] Tel: +971 4 391 3727

HR & OFFICE MANAGER ADMINISTRATION & RIZZA INFANTE SUBSCRIPTIONS [email protected] CAROL BASA Tel: +971 4 391 4682 [email protected] Tel: +971 4 391 3709 [email protected]

©2018 CPI Financial. All rights reserved. No part of this publication may be reproduced or used in any form of advertising without prior permission in writing from the editor.

Printed by United Printing & Publishing - Abu Dhabi, UAE

PUBLISHED BY CPI FINANCIAL FZ LLC 20 52 REGISTERED AT DUBAI MEDIA CITY, DUBAI, U.A.E.

bankerme.net 5 Methodology How we’ve ranked the region’s top financial institutions

SCOPE INSTITUTIONS ur analysis covers financial institutions in The BME100 ranking includes institutions from the

METHODOLOGY Middle Eastern countries, excluding Qatar. below categories: Within our chosen countries we have limited w Conventional banks; Oourselves to coverage of only the domestic w Islamic banks; institutions, which are domiciled and licensed in one of w Investment banks; the countries included in the analysis. w , w Investment and asset management companies. EXCHANGE RATES We gathered and analysed data from over 125 In compiling our index of the region’s leading banks, institutions within the region and filtered the top 100 we use the figures published in their annual reports institutions based on their total assets value to ensure and convert them to US dollar so that we can directly the institution is sizeable enough to make it into the top compare them against each other. 100 ranking. Out of these 100 institutions, one third are Most countries in the Middle Eastern region have Islamic and the remaining are conventional. pegged their currencies to the US dollar, hence they Different parameters have been used to rank these have had a fixed exchange rate against the US dollar institutions, which are elaborated on below along with for many years. The only significant exception to this the reasons for including those as a parameter. is Kuwait, which decided to drop its dollar peg in 2007 and peg its currency to a weighted basket of SCORING SYSTEM international currencies. The exchange rates taken from We have adopted a rigorous evaluation process to rank the central banks of each country as at 31 December the best 100 financial institutions in the region and have 2017 are mentioned below: adopted various financial parameters to evaluate them based on different weightages. The financial institutions that have been ranked the best institutions or the fastest Exchange Rate Country Currency Against USD growing have cumulatively scored as the best based on respective parameters for each ranking. UAE AED 3.6725 KSA SAR 3.750 Best Bank: points are given to each bank out of 100 Kuwait KWD 0.332 based on eight different parameters with their respective weightages mentioned below: Oman OMR 0.385 Bahrain BHD 0.376 Parameter Points Iran IRR 36,064 Total Assets 20 Iraq IQD 1,184.94 Net Profit Margin 20 Jordan JOD 0.709 Revenue 10 Lebanon LBP 1,507.5 Net Profit 10 Syria SYP 515.24 Return on Assets 10 Palestine USD* 1.00 Return on Equity 10 *Palestinian institutions use the US dollar as their currency Assets Turnover 10 Debt to Equity Ratio 10 Total 100

NOTE: Since most of the institutions in the BME100 are banks, the words ‘Bank’ and ‘Institution’ have been used interchangeably

6 Out of 100, the top bank based on any parameter The growth of the bank is considered relative to its scores the full points for that parameter and every other own size; therefore, we use the percentages for assets, institution is scored relative to that. For example, First Abu liabilities, revenues and net profit growth instead of the Dhabi Bank (FAB) is the biggest in terms of Total Assets growth in dollar ($) size. so it scores the full 20 points in that parameter and sets the benchmark for that parameter. The scoring of the CAPITAL ADEQUACY remaining banks for that parameter is done relative to that. The Capital Adequacy Ratio (CAR) is a measure of a Consideration has been given to an institution’s size bank’s available capital expressed as a percentage and efficiency and the cumulative score, based on all of a bank’s risk-weighted credit exposures. The parameters, is calculated to rank the institution. Capital Adequacy Ratio is used to protect depositors and promote the stability and efficiency of financial WEIGHTAGES FOR DIFFERENT PARAMETERS— systems around the world. Two types of capital are AND WHY WE USE THEM measured: Tier 1 capital, which can absorb losses Total Assets, Revenues and Net Profit: The size of without a bank being required to cease trading; the bank is a very important consideration. These are and Tier 2 capital, which can absorb losses in the event based entirely on size and have a combined weightage of a winding-up and so provides a lesser degree of of 40 points out of 100. protection to depositors. The reason minimum capital adequacy ratios (CARs) Net Profit Margin: Weightage of 20 points is given to are critical is to make sure that banks have enough net profit margin as this demonstrates how cost efficient of a cushion to absorb a reasonable amount of losses the bank is in generating the amount of revenues. before they become insolvent and consequently lose The benchmark used in this regard is 20 per cent. depositors’ funds. The capital adequacy ratios ensure the efficiency and stability of a nation’s financial system Return on Assets and Assets Turnover: With a by lowering the risk of banks becoming insolvent. combined weightage of 20 points for these two parameters, Under Basel III, a bank’s Tier 1 and Tier 2 capital must these demonstrate how well the bank has been utilising be at least eight per cent of its risk-weighted assets. The its assets to generate revenues and profitability. minimum capital adequacy ratio (including the capital conservation buffer) is 10.5 per cent. It is customary for Return on Equity and Debt to Equity Ratios: the central bank in each jurisdiction to issue specific The two ratios with a combined weightage of 20 points guidelines in this regard and stipulate penalties for demonstrate how well the bank has been using the contravention of this requirement. shareholders’ equity and the funds of the depositors We have calculated the Capital Adequacy Ratio (CAR) (liabilities for the bank). Therefore, a bank with higher debt for each country. This has been calculated as a weighted to equity ratio will score higher than other banks that have average of CAR ratios of all major banks in that country; a greater proportion of their capital as shareholders’ equity. that is, the ones that made it to BME100 listing, which comprises of the region’s top 100 banks based on total FASTEST GROWING BANK assets. The weight of each bank in the calculation is its Points are given to each bank out of 70, based on four total assets divided by the total assets of all the banks in different parameters. Namely: that country, included in the top 100 banks. The Capital Adequacy Ratio of each institution Parameter Points mentioned in BME100 along with their total equity capital is mentioned in the appendix, starting on page 57. Assets Percentage Change 20 Liabilities Percentage Change 20 Revenues Percentage Change 20 Net Profit Percentage Change 10 Total 70

bankerme.net 7 Financial institutions in the region 1 7 16 LEBANON IRAQ 5 JORDAN 11

COUNTRIES IN THE BME100 PALESTINE

KUWAIT 17 22

12 BAHRAIN

UNITED ARAB EMIRATES SAUDI ARABIA 9

OMAN

8 here are 17 new entries to the BME100 this year. There have also been some departures. The Trade Bank of Iraq slipped out of the index, T but Mansour Bank entered at number 59 to keep the Iraqi flag flying. Remarkably, First Abu Dhabi Bank has debuted at number one. The UAE has the largest presence in the BME100 which, given the high number of domestic financial institutions operating in the country, perhaps isn’t surprising. After three years of lower oil prices, GCC banks have been able to breathe a sigh of relief as prices rebounded. However, the dramatic fall in oil four years ago spurred Gulf countries to step up their diversification efforts and wean themselves off hydrocarbons. There will be winners and losers as GCC countries reshape their economies. However, strong capitalisation, a high composition of deposit funding and solid earnings are expected to shield GCC banks as they face the new economic dawn.

CAPITAL ADEQUACY RATIO BY COUNTRY (CAR)

25.00%

20.50% 21.05% 20.00% 18.70% 17.64% 17.17% 16.49% 14.72% 14.80% 15.00%

10.00%

5.00%

0.00% United Arab Kuwait Saudi Arabia Bahrain Oman Jordan Palestine Lebanon Emirates

bankerme.net 9 Best 100 Banks

he newly-created First FINANCIAL INSTITUTION RANKING COUNTRY Abu Dhabi Bank (FAB) First Abu Dhabi Bank 1 United Arab Emirates shot straight to the top National 2 Saudi Arabia spot to be ranked the T Emirates NBD 3 United Arab Emirates Best Financial Institution in the Middle East. Al Rajhi Bank 4 Saudi Arabia Born out of a merger between Dubai Islamic Bank 5 United Arab Emirates National Bank of Abu Dhabi and Samba Financial Group 6 Saudi Arabia BEST 100 BANKS First Gulf Bank, FAB is now the Abu Dhabi Commercial Bank 7 United Arab Emirates largest bank in the UAE and one Saudi British Bank (SABB) 8 Saudi Arabia of the largest in the MENA region. 9 Bahrain The combined strengths of the National Bank of Kuwait 10 Kuwait two former banks has given FAB Banque Saudi Fransi 11 Saudi Arabia an impressive footprint. The bank BLOM Bank 12 Lebanon operates in 19 countries outside Riyad Bank 13 Saudi Arabia the UAE with 103 branches and 603 ATMs/CDMs in total. Arab National Bank 14 Saudi Arabia FAB is considered to be the Bank Audi 15 Lebanon safest bank in the UAE and one Abu Dhabi Islamic Bank 16 United Arab Emirates of the safest banks worldwide 17 Bahrain with Moody’s rating of Aa3 and 18 Kuwait a rating of AA- from S&P and Bank 19 Bahrain Fitch, making it the highest rated Eskan Bank 20 Bahrain bank in the UAE. Alinma Bank 21 Saudi Arabia As a result of the merger, FAB Waha Capital 22 United Arab Emirates managed to reduce its operating costs by 12 per cent on average Mashreq 23 United Arab Emirates compared to the previous year. It The Saudi Investment Bank 24 Saudi Arabia is a shining example of what can National Bank of Umm Al-Qaiwain 25 United Arab Emirates be achieved when UAE banks Bank 26 Oman combine forces. Union National Bank 27 United Arab Emirates Bank AlBilad 28 Saudi Arabia Commercial Bank of Dubai 29 United Arab Emirates ABC Islamic Bank 30 Bahrain 31 Lebanon Alafco Aviation Lease and Finance Company 32 Kuwait Alawwal Bank 33 Saudi Arabia BBK 34 Bahrain The Housing Bank for Trade & Finance 35 Jordan Arab Bank 36 Jordan Bank of Beirut 37 Lebanon Boubyan Bank 38 Kuwait Bank AlJazira 39 Saudi Arabia Bank of Palestine 40 Palestine The National Bank of Ras Al-Khaimah (RAKBANK) 41 United Arab Emirates Banque Bemo 42 Lebanon Emirates Islamic 43 United Arab Emirates Ahli Bank - Oman 44 Oman Ahli United Bank - Kuwait 45 Kuwait National Bank of Fujairah 46 United Arab Emirates Commercial Bank of Kuwait 47 Kuwait Burgan Bank 48 Kuwait Bank of Jordan 49 Jordan First National Bank 50 Lebanon

10 FINANCIAL INSTITUTION RANKING COUNTRY BLC Bank 51 Lebanon GFH Financial Group BSC 52 Bahrain Emirates Investment Bank 53 United Arab Emirates Sharjah Islamic Bank 54 United Arab Emirates Bank Dhofar 55 Oman Quds Bank 56 Palestine Gulf Bank 57 Kuwait Oman Arab Bank 58 Oman Mansour Bank 59 Iraq (Bank ABC) 60 Bahrain The National Bank 61 Palestine Invest Bank - Jordan 62 Jordan Bank Al-Etihad 63 Jordan Bank 64 Oman Cairo Amman Bank 65 Jordan Bank of Sharjah 66 United Arab Emirates Arab Jordan Investment Bank 67 Jordan Arab Banking Corporation (Jordan) 68 Jordan Capital Bank of Jordan 69 Jordan First Energy Bank 70 Bahrain Societe Generale de Banque Jordanie 71 Jordan Ajman Bank 72 United Arab Emirates Al Ahli Bank of Kuwait 73 Kuwait Kuwait International Bank 74 Kuwait Noor Bank 75 United Arab Emirates Commercial Bank International 76 United Arab Emirates HSBC Bank Oman 77 Oman Gulf International Bank 78 Bahrain Kuwait Finance House - Bahrain 79 Bahrain Jordan Kuwait Bank 80 Jordan Warba Bank 81 Kuwait Al Salam Bank - Bahrain 82 Bahrain Islamic International Arab Bank 83 Jordan Jordan Islamic Bank 84 Jordan Jordan Ahli Bank 85 Jordan Alubaf Arab International Bank 86 Bahrain Palestine Islamic Bank 87 Palestine Finance House 88 United Arab Emirates Jordan Commercial Bank 89 Jordan Bahrain Islamic Bank 90 Bahrain United Arab Bank 91 United Arab Emirates Arab Islamic Bank 92 Palestine Bank Nizwa 93 Oman Safwa Islamic Bank 94 Jordan National Bank of Oman 95 Oman 96 Bahrain 97 Bahrain Al Baraka Islamic Bank 98 Bahrain Alizz Islamic Bank 99 Oman Invest Bank 100 United Arab Emirates

bankerme.net 11 FASTEST GROWING FINANCIAL INSTITUTIONS

THE 10 FASTEST GROWING FINANCIAL INSTITUTIONS

FINANCIAL INSTITUTION COUNTRY RANKING Warba Bank Kuwait 1 Bank Al-Etihad Jordan 2 Bank Nizwa Oman 3 Alafco Aviation Lease and Finance Company Kuwait 4 Alizz Islamic Bank Oman 5 Eskan Bank Bahrain 6 Alinma Bank Saudi Arabia 7 Bahrain Islamic Bank Bahrain 8 Ajman Bank United Arab Emirates 9 Bank AlBilad Saudi Arabia 10 FASTEST GROWING FINANCIAL INSTITUTIONS FASTEST

arba Bank tops our index as the fastest Digitisation is something all Middle Eastern banks growing bank in the Middle East. It has must face. Banks that won’t adapt to the changing been said that no one ever gets anywhere times will be quickly replaced by those that will. It is W by standing still, and Warba Bank has no surprise that our fastest growing bank is an early certainly proved itself to be an institution that keeps adopter of new technology. moving forward. Warba upgraded its online and mobile banking Warba Bank adopted a new strategic plan in 2017, applications in 2017, so a wide range of transactions and it has already started to bear fruit. The bank’s can be conducted at the customers’ convenience. growth figures in the first year of its new plan are The bank also updated its offerings. In 2017, the impressive; Net Profit has soared an incredible 163 per Corporate Banking Group of Warba introduced new cent, Total Revenues by 62 per cent and Total Assets services and products in the areas of working capital by 57 per cent. finance, residential facility financing and outlet financing. The bank’s financing portfolio increased by 53 per Warba’s arm also played a big cent and Customer Deposits rose by 35 per cent. These part in the bank’s growth; in 2017, Warba Investment figures are testament to the new plan’s success. Banking Group was involved in many high value 2017 was a very busy year for the bank. Warba Bank transactions as a Mandated Lead Arranger, Investment marketed a $250 million Tier 1 Capital Sukuk Issuance Agent and Bookrunner. which proved extremely popular; it was five times A telling variety of institutions have clustered at the oversubscribed, and the proceeds were distributed to top of our Fastest Growing Financial Institutions ranking. investors, further boosting investor confidence in the bank. There are a variety of domiciles, conventional and Islamic The bank’s distribution network has now grown to 12 institutions, which shows that opportunities for growth exist branches with more expansion planned this year. everywhere for companies that can attune to the times.

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ABU DHABI

UNITED ARAB EMIRATES TOP 10 FINANCIAL INSTITUTIONS IN THE UAE

FINANCIAL INSTITUTIONS RANKING First Abu Dhabi Bank 1 Emirates NBD 2 Dubai Islamic Bank 3 Abu Dhabi Commercial Bank 4 Abu Dhabi Islamic Bank 5 Waha Capital 6 Mashreq 7 National Bank of Umm Al-Qaiwain 8 Union National Bank 9 Commercial Bank of Dubai 10

irst Abu Dhabi Bank went straight to number are expected to remain strong, according to Moody’s. one in the rankings, although it isn’t entirely a Stabilising oil prices and international bond issuances will stranger to the BME100. It came into existence continue to support funding and liquidity conditions in the Fin April 2017, following the merger of First Gulf country. UAE banks will remain primarily deposit-funded, Bank and the National Bank of Abu Dhabi. Last year, with a fair recourse to more volatile market funding. although it had published agglomerated data for 2016, According to the UAE Central Bank’s September the banks remained two separate institutions for the 2017 Monthly Statistical Bulletin, the banking purpose of our analysis. This year, however, as a gestalt system’s net loan/deposit ratio had improved to 91 entity it is a shining example of what a successful per cent as of 30 September 2017, from 96 per cent merger can achieve. as of 30 September 2016. With 46 commercial banks for 9.5 million people, Nonetheless, years of lower oil prices have taken their the UAE is widely considered to be overbanked and toll. The IMF has warned that a faster rise in US interest rumours of further mergers are rife. rates or higher financial market volatility could increase However, as single entities, UAE banks are generally borrowing costs for banks. Problem loans are also considered to be in good health. In fact, economic expected to creep up, largely because banks’ loan books resilience, strong capitalisation, stable funding and are dominated by real estate and government institutions. liquidity conditions make UAE banks the envy of the GCC. As UAE banks prepare to face technology disruption Faster economic growth this year is likely to support and regulatory change over the coming months, they the banking system’s credit growth, and capital levels may decide that they are stronger together.

14 NOTE: All figures are in US dollars ('000)

GROWTH OF FINANCIAL INSTITUTIONS FROM 2016 TO 2017

8.0% 7.2% 7.0%

6.0% 5.3% 5.3% 5.0%

4.0%

3.0% 2.3% 2.0%

1.0%

0.0% Assets Liabilities Revenues Net Profit

PARAMETERS 2017 2016 $ Change % Change Assets 656,236,141 623,134,508 33,101,633 5.3% Liabilities 562,635,791 534,217,361 28,418,430 5.3% Revenues 23,762,779 23,218,637 544,142 2.3% Net Profit 10,669,308 9,956,801 712,506 7.2%

FASTEST GROWING FINANCIAL INSTITUTION: AJMAN BANK

FINANCIAL PARAMETERS ASSETS LIABILITIES REVENUES NET PROFIT

2016 4,357,134 3,809,434 137,581 34,185

2017 5,453,412 4,878,746 154,036 36,110

PERCENTAGE CHANGE 25.16% 28.07% 11.96% 5.63%

bankerme.net 15 NOTE: All figures are in US dollars ('000)

TOP 10 INSTITUTIONS IN UAE BY ASSETS

First Abu Dhabi Bank 182,156,105 Emirates NBD 128,079,587 Abu Dhabi Commercial Bank 72,158,828 Dubai Islamic Bank 56,456,640 Mashreq 34,088,015 Abu Dhabi Islamic Bank 33,567,760 Union National Bank 29,276,543 Commercial Bank of Dubai 19,173,331 UNITED ARAB EMIRATES Emirates Islamic 16,849,929 The National Bank of Ras Al-Khaimah (RAKBANK) 13,216,381

TOP 10 INSTITUTIONS IN UAE BY REVENUES

First Abu Dhabi Bank 5,318,716 Emirates NBD 4,227,999 Abu Dhabi Commercial Bank 2,424,825 Dubai Islamic Bank 2,093,156 Abu Dhabi Islamic Bank 1,692,115 Mashreq 1,638,028 The National Bank of Ras Al-Khaimah (RAKBANK) 1,037,398 Union National Bank 988,757 Commercial Bank of Dubai 750,057 Emirates Islamic 651,407

TOP 10 INSTITUTIONS IN UAE BY NET PROFIT

First Abu Dhabi Bank 2,981,556 Emirates NBD 2,272,511 Dubai Islamic Bank 1,226,511 Abu Dhabi Commercial Bank 1,164,767 Abu Dhabi Islamic Bank 626,310 Mashreq 568,967 Union National Bank 451,247 Commercial Bank of Dubai 272,816 The National Bank of Ras Al-Khaimah (RAKBANK) 220,695 Emirates Islamic 191,150

16 TOP 10 INSTITUTIONS IN UAE BY RETURN ON ASSETS (ROA)

Waha Capital 4.25% National Bank of Umm Al-Qaiwain 2.67% Dubai Islamic Bank 2.36% Abu Dhabi Islamic Bank 1.87% Emirates NBD 1.82% The National Bank of Ras Al-Khaimah (RAKBANK) 1.78% Mashreq 1.69% First Abu Dhabi Bank 1.66% Abu Dhabi Commercial Bank 1.63% Union National Bank 1.57%

TOP 10 INSTITUTIONS IN UAE BY DEBT-TO-EQUITY RATIO In Times

United Arab Bank 8.58 Ajman Bank 8.49 Emirates Islamic 7.47 Commercial Bank International 7.41 Abu Dhabi Commercial bank 7.17 Emirates NBD 6.92 Commercial Bank of Dubai 6.75 Bank of Sharjah 6.50 National Bank of Fujairah 6.50 Abu Dhabi Islamic Bank 6.44

AVERAGE CAPITAL ADEQUACY RATIO (CAR) OF FINANCIAL INSTITUTIONS IN THE COUNTRY

18.70%

bankerme.net 17 INVESTING IN THE FUTURE Khamis Buharoon, ADIB’s Vice Chairman and Acting CEO, explains how ADIB plans to stay ahead of increasing competition ABU DHABI ISLAMIC BANK ccording to our data, ADIB’s net profit rose over 17 per cent in 2017; this is more than double the average for UAE banks. How Adid the bank manage to buck the trend? “We had a great year in 2017, with net profit rising nearly 18 per cent to AED 2.3 billion. ADIB experienced robust growth across our businesses, while we maintained a disciplined approach to cost and risk management. During the year, we welcomed approximately 62,000 new customers with a strong offering of products and services, easily accessed through digital platforms. “Our income is also diversified with fee income increasing in the last couple of years to complement our income on products. Revenue from fees and commissions increased to AED 477.7 million in H1 2018. We are revamping our transaction banking and trade finance solutions, with several new offerings.”

Islamic banks in our database saw an average 16.8 per cent rise in profits compared to 1.5 per cent for conventional banks; why have Islamic banks out performed in 2017? Khamis Buharoon “Shari’ah-compliant principles put an emphasis on simplicity, transparency and treating customers fairly. This has allowed Islamic banks to minimise risky investments, reducing financing to non-performing businesses or preventing them from overstretching beyond what What distinguishes ADIB in the UAE banking sector? they do best – which is providing customers with a “The UAE continues to be one of the largest and most high-quality banking experience. In addition, Islamic competitive banking markets in the region. banking is increasingly seen to be more attractive and “For ADIB, our size and scale, particularly our branch we have reached a period where many Islamic banks are network, enables us to invest heavily in attracting new successfully implementing innovation programmes. customers. This is both in the branches and in digital “Whether it is through technology or offering new banking channels, particularly through mobile solutions products and services, Islamic banks are attracting more as customers demand full access to their banking and more new customers.” services anytime, anywhere.

18 “ADIB has seen a rise in digital transactions, whereby WE BELIEVE THERE IS A STRONG 90 per cent of the bank’s transactions are now being conducted through digital channels. However, our research APPETITE FOR ISLAMIC BANKING’S ETHICAL shows that customers still value the human touch from APPROACH, WHICH GIVES AN EXCELLENT branches and, while we recognise the significance of OPPORTUNITY TO GROW BEYOND OUR digital, banks must not lose sight of the importance of direct and personal interaction with customers.” TRADITIONAL CUSTOMER BASE.

Where do Islamic banks need to innovate, and how is ADIB leading innovation? “It is important that we remain focused on providing a competitive, innovative and high-quality customer What have ADIB’s greatest milestones been so far experience, if we want to keep growing. We believe this year? there is a strong appetite for Islamic banking’s ethical “Reaching one million customers represented a major approach, which gives an excellent opportunity to grow milestone for ADIB. It is a testament to the size and beyond our traditional customer base. scale of the bank and its ability to provide market- “We are now investing in future growth, by leading products and services. Launching our smart enhancing customer service and productivity banking and seeing the uptake from customers, through investing heavily in the digital transformation was another milestone for the bank. Reaching programme. Our focus on technology has been well- these milestones motivates us to do more for received by customers, with over 90 per cent of our customers.” transactions now conducted through automated or digital platforms. Whether it is our new generation What are ADIB’s goals for the next year? of digitally-enhanced branches, ADIB Express, or our “We want to offer our customers a superior banking smartbanking community, we are at the forefront of experience based around their needs. As our customers innovation in the region’s banking sector.” become more digitally savvy, we are investing strongly in our infrastructure to digitise our services and present What are the greatest challenges Islamic banks are our customers with a safe, convenient and efficient facing globally, and what progress is being made mobile and online banking experience. to overcome these? “Technological innovations are transforming the “Globally, the biggest challenge for Islamic banks is still environment, and banks in the region are to overcome preconceptions of what Islamic banking shifting their focus to better serve customers. ADIB’s means. A great deal of progress has been made in robust strategy and ability to deliver award-winning developing educational programmes which explain customer service and products can deliver solid and the main principles of Shari’ah finance, including the sustainable growth. associated terminology. More still needs to be done in “In addition, we will continue to focus on increasing this field, but, as shown when ADIB took over Barclay’s fee income through transaction banking, correspondent operations in the UAE, we retained nearly all customers banking, Takaful Islamic insurance, as people appreciate what Islamic banking represents and investment banking. This has proved an area of once they have had an opportunity to experience it.” success for the bank and we will seek to grow this over the coming year.” The UAE’s economic growth has outpaced its GCC neighbours; what are the factors behind this and What are ADIB’s biggest challenges going to be what does it mean for the UAE banking sector? over the next year? “The UAE economy has been resilient over the last three “Many people would argue that the banking sector is years thanks to its diversification strategy, investment crowded. However, competition is something ADIB from government and a resurgent oil price. The IMF has welcomes. It means that banks need to invest in indicated that GDP growth will sit at two per cent for innovation and product delivery to stay ahead, which this year and three per cent for next year. This increase is good for the customer. This will inevitably sort out in pace of growth should give confidence to the whole winners and losers in the long run—those who have financial and banking sector and provide opportunities the financial strength and innovation to compete, and across wholesale and retail banking. In the long-term, those who don’t. Through investment in digital banking this can create a virtuous cycle which is good for the technology, we are confident that we can remain ahead country’s long-term economic development.” of the pack.”

bankerme.net 1919 UPGRADED BANKING

Dubai Islamic Bank posted strong results for 2017; and with upgraded outlooks from several rating agencies, its outstanding performance looks set to continue

ubai Islamic Bank posted a strong set of

DUBAI ISLAMIC BANK DUBAI results for 2017. Total income for the year increased to AED 10,199 million from AED 8,636 million in 2016, an impressive increase D Dubai Islamic Bank, Head Office of 18 per cent compared to 2016. Net revenue for 2017 totalled AED 7,687 million, an as we continue to make progress on our growth and increase of 14 per cent compared with AED 6,761 million expansionary agenda in both local and international in 2016. According to the bank, a new stream of clients markets. The bank has weathered the challenges was a key driver for the double digit rise in profitability; across the region as well as those emanating from the deposits rose by 20 per cent to AED 147.2 billion. global economic slowdown extremely well and with a Net profit for 2017 rose to AED 4,504 million from more positive outlook forecast for the UAE and global AED 4,050 million in 2016, an increase of 11 per cent, economy, the coming years look even more promising.” for which the bank credits a combination of robust core Dubai Islamic Bank Group Chief Executive Officer, Dr. business growth and efficient cost management. Adnan Chilwan, concluded, “Nearly a decade ago, we Dubai Islamic Bank Managing Director, Abdulla Al established our plans to bring the company out from the Hamli, said, “The UAE continues to be one of the leading effects of the global economic meltdown and back on Islamic finance markets, with assets now reaching around track. As the incredible growth story of DIB unfolded, so $150 billion, a seven per cent growth this year. did the challenges of oil prices and economic slowdown. “We remain well-positioned to capitalise on But these have only made us stronger, more resilient improving economic conditions in the UAE, where GDP and even more focused than ever before.” is expected to increase in 2018 in the run up towards “The evolution in the last four years has seen a major economic events such as the EXPO 2020.” complete transformation in size and business with the Capital adequacy ratio remained robust at 17.0 per cent balance sheet as well related key metrics of financing as of 31 December 2017, whilst Tier 1 ratio stood at 16.5 and deposits nearly doubling or more during the period. per cent; both ratios are well above regulatory requirement. Further, the profitability has risen nearly three times with Total assets grew by 19 per cent to reach to AED 207.3 both ROEs and ROAs witnessing a steep climb as well. billion. Return on equity stood at 18.7 per cent in 2017, Simultaneously, the business model has completely while return on assets remained steady at 2.34 per cent. transformed with a significantly more diversified The bank’s performance caught the attention of ratings portfolio minimizing concentration risks.” agencies. During 2017, Moody’s upgraded DIB’s long- “The momentum established in the first three year of term issuer ratings to ‘A3’ from Baa1; outlook ‘Stable’. In growth has carried through from the preceding period July 2017, Fitch has upgraded the bank’s standalone VR with the bank registering another 16 per cent jump in the to ‘bb+’’ from ‘bb’. Clearly, the ratings agencies are in financing book in 2017. Despite this strong performance, agreement that the bank’s performance is sustainable. liquidity remains intact with 91 per cent Finance to His Excellency Mohammed Ibrahim Al Shaibani, Deposit Ratio as the bank continues to preserve its Director-General of His Highness The Ruler’s Court capacity to maintain the impetus into the new year. of Dubai and Chairman of Dubai Islamic Bank, said, “A double digit rise of 11 per cent in profitability is “The UAE banking system retains its strong financial a clear indication of the focus on quality growth with fundamentals with sector assets crossing the $700 Group Net Profit crossing AED 4.5 billion and this will billion mark, making it the largest in the GCC. remain a critical objective going into 2018 as well.” “2017 has been another remarkable year for the bank

20 50 GOLDEN YEARS

Mashreq Bank celebrated its 50th birthday in 2017 MASHREQ BANK n its 50th year of business, Mashreq is looking to the future following a successful 2017. It achieved a net profit of AED 2.1 billion—a 6.5 per cent increase on I2017. Loan-to-deposit ratio remained robust at 82.5 per cent at the end of December 2017 and total assets increased by 1.9 per cent to reach AED 125.2 billion. Capital adequacy ratio also continued to be significantly higher than the regulatory limit at 18.3 per cent. Over the year, the bank saw a 23.5 per cent growth in Islamic finance. Its corporate finance division also managed to close twenty deals with an aggregate deal value of AED 20 billion. Mashreq’s retail banking segment also had a busy year with the launch of Neo, the first full service digital bank in the GCC region to provide access to international markets. The launch marks the largest ever in Mashreq’s retail division, and offers investment opportunities in foreign equities, gold trading and foreign currency accounts. Moreover, Neo leverages big data, new technologies HE Abdul Aziz Al Ghurair, Chief Executive Officer of Mashreq Bank and advanced analytics to offer a 360-degree view of a customers’ investments. Mashreq also introduced Apple Pay for easier payments and partnered with Union Pay to increase “2017 was a milestone year for Mashreq Bank. online card acceptance in the UAE. In addition to consistently reporting strong financial Mashreq’s CEO, Abdul Aziz Al Ghurair said, “We results and continuing to grow our business, we are pleased to report the financial results for Mashreq also celebrated our 50 Year Anniversary in the UAE. Bank in 2017. Despite global economic uncertainty 2017 also saw the official launch of Mashreq Neo, and the slight slowdown in the GCC region, we saw our full-service digital bank and the first digital bank steady growth across all divisions of the bank, and our in the region. We will continue to focus on providing net profit stood at AED 2.1 billion, up by 6.5 per cent innovative products and services and strengthening compared to last year. our digital capabilities to meet the evolving demands of our customers and maintain our leadership position in the market. Innovation has been at the heart of the bank for the past 50 years and this will continue well I AM CONFIDENT THAT WE ARE WELL- into the future. “Moving forward, we will also continue to support POSITIONED TO CAPITALISE ON THE the ongoing economic agenda of the UAE. While IMPROVING ECONOMIC BACKDROP IN THE there may be challenges ahead, I am confident that UAE. I LOOK FORWARD TO SEIZING THESE we are well-positioned to capitalise on the improving economic backdrop in the UAE. I look forward to OPPORTUNITIES AND CONTINUING THIS seizing these opportunities and continuing this MOMENTUM INTO 2018. momentum into 2018.”

bankerme.net 21 SAUDI ARABIA SAUDI ARABIA SAUDI

RIYADH

TOP 10 FINANCIAL INSTITUTIONS IN SAUDI ARABIA

FINANCIAL INSTITUTIONS RANKING National Commercial Bank 1 Al Rajhi Bank 2 Samba Financial Group 3 Saudi British Bank (SABB) 4 Banque Saudi Fransi 5 Riyad Bank 6 Arab National Bank 7 Alinma Bank 8 The Saudi Investment Bank 9 Bank AlBilad 10

ogether with the UAE, Saudi Arabia dominates changes in liquidity conditions, according to the IMF. the top 10. This is no mean feat, considering The model in place for over a decade whereby banks how hard Saudi Arabia’s economy has been hit relied almost exclusively on domestic deposits for T by lower oil prices. funding and on SAMA for draining chronic excess However, its banks remain liquid and resilient, with liquidity cannot continue. the IMF convinced that all banks will be able to meet However, Saudi banks now have a fair wind their regulatory capital requirements come what may. behind them. The Saudi economy is expected to rebound Lower government spending drags on economic in 2018, buoyed by increased oil production and rising growth, in turn dampening credit demand and prices. The non-oil economy is faring better too, as the weakening corporate and consumer borrowers’ ability to Kingdom ups its efforts to create a diversified economy. repay debt. As the Saudi Government reins in spending, Our data shows that Saudi Arabian banks bounced problem loans could start to rise. back in 2017 after bearing the brunt of falling oil prices Banks’ funding strategies and SAMA’s liquidity in 2016. The winds of change may continue to blow in management framework will have to adjust to structural Saudi Arabia, but the dust is settling.

22 NOTE: All figures are in US dollars ('000)

GROWTH OF FINANCIAL INSTITUTIONS FROM 2016 TO 2017

10.0% 8.9%

8.0%

6.0% 4.3% 4.0%

2.0% 0.4%

0.0% 2.3% -0.7% -2.0% Assets Liabilities Revenues Net Profit

PARAMETERS 2017 2016 $ Change % Change Assets 592,876,751 590,719,931 2,156,819 0.4% Liabilities 497,297,277 500,754,864 -3,457,587 -0.7% Revenues 23,180,347 22,234,965 945,381 4.3% Net Profit 12,034,011 11,055,388 978,623 8.9%

FASTEST GROWING FINANCIAL INSTITUTION IN SAUDI ARABIA: ALINMA BANK

FINANCIAL PARAMETERS ASSETS LIABILITIES REVENUES NET PROFIT

2016 27,927,963 22,813,707 887,414 400,606

2017 30,668,018 25,175,444 1,166,122 536,362

PERCENTAGE CHANGE 9.81% 10.35% 31.41% 33.89%

bankerme.net 23 NOTE: All figures are in US dollars ('000)

TOP 10 INSTITUTIONS IN SAUDI ARABIA BY ASSETS

National Commercial Bank 118,364,231 Al Rajhi Bank 91,497,741 SAUDI ARABIA SAUDI Samba Financial Group 60,696,288 Riyad Bank 57,675,246 Banque Saudi Fransi 51,447,702 SABB 50,030,758 Arab National Bank 45,787,120 Alinma Bank 30,668,018 Alawwal Bank 26,631,955 The Saudi Investment Bank 25,012,325

TOP 10 INSTITUTIONS IN SAUDI ARABIA BY REVENUES

National Commercial Bank 4,895,222 Al Rajhi Bank 4,241,294 Riyad Bank 2,172,886 Samba Financial Group 2,104,418 SABB 1,918,886 Banque Saudi Fransi 1,755,673 Arab National Bank 1,708,961 Alinma Bank 1,166,122 Alawwal Bank 992,382 Bank AlBilad 789,276

TOP 10 INSTITUTIONS IN UAE BY NET PROFIT

National Commercial Bank 2,657,242 Al Rajhi Bank 2,432,194 Samba Financial Group 1,339,811 SABB 1,054,554 Riyad Bank 1,052,266 Banque Saudi Fransi 941,836 Arab National Bank 809,082 Alinma Bank 536,362 The Saudi Investment Bank 376,213 Alawwal Bank 356,138

24 TOP 10 INSTITUTIONS IN SAUDI ARABIA BY RETURN ON ASSETS (ROA)

Al Rajhi Bank 2.67% National Commercial Bank 2.24% Samba Financial Group 2.18% SABB 2.11% Riyad Bank 1.81% Banque Saudi Fransi 1.78% Arab National Bank 1.77% Bank AlBilad 1.60% The Saudi Investment Bank 1.50% Bank AlJazira 1.27%

TOP 10 INSTITUTIONS IN SAUDI ARABIA BYDEBT-TO-EQUITY RATIO In Times Bank AlBilad 7.33 Bank AlJazira 6.73 Alawwal Bank 6.34 National Commercial Bank 5.91 Arab National Bank 5.85 The Saudi Investment Bank 5.57 Al Rajhi Bank 5.15 Banque Saudi Fransi 5.09 SABB 4.61 Riyad Bank 4.60

AVERAGE CAPITAL ADEQUACY RATIO (CAR) OF FINANCIAL INSTITUTIONS IN THE COUNTRY

20.50%

bankerme.net 25 BAHRAIN BAHRAIN

MANAMA

TOP 10 FINANCIAL INSTITUTIONS IN BAHRAIN

FINANCIAL INSTITUTIONS RANKING Ahli United Bank 1 National Bank of Bahrain 2 Investcorp Bank 3 Eskan Bank 4 ABC Islamic Bank 5 BBK 6 GFH Financial Group BSC 7 Arab Banking Corporation (Bank ABC) 8 First Energy Bank 9 Gulf International Bank 10

ou have to get to number nine on the index the main domestic intermediators, remain healthy in before you find a Bahraini bank. When we terms of liquidity, capitalisation, and leverage. launched the BME100, Bahraini banks took up The has pointed out that Y a quarter of the index—there are now just 17 the capital adequacy ratio of the banking sector banks left in the running. Still, this is one more than last reached 19.8 per cent as of September 2017, well year and, despite a challenging few years, there is cause above the regulatory requirement. Retail deposits for cheer. Bahrain Islamic Bank features in the top 10 of continued to grow reaching $45.1 billion in October our fastest growing banks, and four new Bahraini banks 2017, increasing by almost 4.5 per cent compared to have entered the index. the same period in 2016. International agencies agree that Bahrain’s economy Asset quality is on an improving trend, but the is the one of the most vulnerable in the GCC, with only system-wide nonperforming loan ratio is still in the modest oil reserves that the economy is dangerously high single digits, according to S&P’s estimation, reliant on. With sky-high government debt and political and some large banks carry high amounts of tensions continuing to bubble below the surface, restructured exposures. observers have not been kind about Bahrain’s outlook. BMI research says that credit growth at Bahrain’s The IMF has slashed Bahrain’s GDP growth forecast banks will accelerate for the rest of 2018, boosting to just 1.6 per cent for 2018, citing ongoing fiscal asset growth, however tightening fiscal policy could consolidation and weaker investor sentiment. curb economic activity and limit asset growth from However, Bahrain’s large financial sector remains next year. For now, Bahrain’s banks are swimming among the country’s greatest assets. Its retail banks, against the tide.

26 NOTE: All figures are in US dollars ('000)

GROWTH OF FINANCIAL INSTITUTIONS FROM 2016 TO 2017

10.0% 3.6% 3.7% 5.0%

0.0%

-5.0%

-10.0%

-15.0%

-20.0% -18.9% -22.7% -25.0% Assets Liabilities Revenues Net Profit

PARAMETERS 2017 2016 $ Change % Change Assets 142,798,267 137,749,831 5,048,435 3.7% Liabilities 111,304,451 107,303,628 4,000,824 3.7% Revenues 4,604,617 5,954,903 -1,350,287 -22.7% Net Profit 1,788,149 2,205,236 -417,086 -18.9%

FASTEST GROWING FINANCIAL INSTITUTION IN BAHRAIN: ESKAN BANK

FINANCIAL PARAMETERS ASSETS LIABILITIES REVENUES NET PROFIT

2016 1,693,635 1,079,731 61,870 43,854

2017 1,963,835 1,266,056 78,880 57,293

PERCENTAGE CHANGE 15.95% 17.26% 27.49% 30.64%

bankerme.net 27 NOTE: All figures are in US dollars ('000)

TOP 10 INSTITUTIONS IN BAHRAIN BY ASSETS BAHRAIN

Ahli United Bank 33,241,885 Arab Banking Corporation (Bank ABC) 29,499,000 Gulf International Bank 25,471,300 BBK 10,008,245 Ithmaar Bank 8,623,455 National Bank of Bahrain 8,248,777 Al Salam Bank-Bahrain 4,226,755 Gulf Finance House Financial Group BSC 4,110,457 Kuwait Finance House-Bahrain 3,484,907 Bahrain Islamic Bank 3,267,678

TOP 10 INSTITUTIONS IN BAHRAIN BY REVENUES

Ahli United Bank 1,119,372 Arab Banking Corporation (Bank ABC) 869,000 Investcorp Bank 421,726 BBK 380,476 Gulf International Bank 360,300 National Bank of Bahrain 277,846 Ithmaar Bank 237,231 Gulf Finance House Financial Group BSC 211,648 Al Salam Bank-Bahrain 167,489 Kuwait Finance House-Bahrain 125,638

TOP 10 INSTITUTIONS IN UAE BY NET PROFIT

Ahli United Bank 666,514 Arab Banking Corporation (Bank ABC) 253,000 National Bank of Bahrain 162,261 BBK 157,529 Investcorp Bank 120,259 Gulf Finance House Financial Group BSC 103,188 Gulf International Bank 70,000 Eskan Bank 57,293 Kuwait Finance House-Bahrain 53,223 Al Salam Bank-Bahrain 48,019

28 TOP 10 INSTITUTIONS IN BAHRAIN BY RETURN ON ASSETS (ROA)

Ahli United Bank 4.7% Arab Banking Corporation (Bank ABC) 3.1% Gulf International Bank 2.8% BBK 2.1% Ithmaar Bank 2.0% National Bank of Bahrain 1.6% Al Salam Bank-Bahrain 1.6% Gulf Finance House Financial Group BSC 1.4% Kuwait Finance House-Bahrain 1.1% Bahrain Islamic Bank 0.9%

TOP 10 INSTITUTIONS IN BAHRAIN BY DEBT-TO-EQUITY RATIO

In Times Gulf International Bank 9.57 BBK 6.51 National Bank of Bahrain 5.93 Ahli United Bank 5.80 Arab Banking Corporation (Bank ABC) 5.69 ABC Islamic Bank 3.68 Al Salam Bank-Bahrain 2.76 Eskan Bank 1.81 Ithmaar Bank 1.57 Investcorp Bank 1.32

AVERAGE CAPITAL ADEQUACY RATIO (CAR) OF FINANCIAL INSTITUTIONS IN THE COUNTRY

21.05%

bankerme.net 29 30 BANK ABC ISLAMIC W explains how the bank is setting a global benchmark global a setting is bank the how explains Islamic, Bank ABC of Director Managing Hassan, Hammad BORDERS WITHOUT BANKS regulatory approvals. regulatory to subject markets these in services banking Islamic of establishment the towards ABC Bank parent, the with closely work will and markets MENA in finance Islamic ofdevelopments the evaluating carefully “Weare year? the of rest the forbank’s objectives the are What clients.”institutional for solutions management liquidity Shari’ah-compliant providing in active very been havewe front, product the On mandates. markets capital regional key led successfully year,has the Bank of the beginning the Since financing. syndicated and Sukuk both – markets capital in active been has bank the 2018, in far so markets emerging in volatility to due activity subdued “Despite 2018? in far so been bank’smilestones the have What globe.”the across investors reach them help and clients our to markets capital to access provide to Additionally,able competition. are the we from us differentiates Group’soptimally networkABC using DIFC requirements. banking Shari’ah-compliant their service to able are and in operate they that geographies different the across clients our of needs the understand we world, Arab the in roots has that bank a Group’sAs network. the on leveragingexpertise and knowledge ground on-the- provide to able are we markets, MENA in interest DIFC. in ABC’sbranch Bank and Bahrain in office head its through markets GCC covers Islamic ABC Bank presence. regional or country-specific a either with banks Islamic mostly are which competitors, its to comparison in unique quite Islamic ABC Bank Thismakes Brazil. and America North East, Far the , markets, MENA in “Our ability to cover our clients from Bahrain and the and Bahrain from clients our cover to “Ourability growing a have corporates GCC-based “Asmany ABC Group that has a global presence global a has that Group ABC Bank the of part is Islamic ABC “Bank market? banking Shari’ah the in unique Islamic ABC Bank makes hat Hammad Hassan ADDITIONAL LIQUIDITY FORTHEM. FINANCE IFITOPENSUPAVENUES OF INDIFFERENT BUTWOULD ACCEPT ISLAMIC AND BORROWERS,ORTHOSEWHOARE SHARI’AH-COMPLIANT INVESTORS BASE, THEREAREEITHERSTRICTLY

AMONGST OURCORPORATE CLIENT “From our Bahrain and DIFC hubs, we will continue in the Middle East. Morocco has issued Islamic banking to expand the Islamic wholesale banking business regulations and is expected to be followed by Algeria. by originating new clients and maintaining our lead “Jordan and already offer Islamic banking and so in Islamic capital markets—both Sukuk and does Tunisia. In most of the markets, the development of syndicated financing.” Islamic finance has been on account of investor demand – this has also led to the growth of Islamic of capital markets What innovations has Bank ABC Islamic brought and drawn regulators’ attention to put in the required to the Islamic banking market? infrastructure to support Islamic finance.” “As we are a wholesale bank, our focus has always been towards providing innovative solutions to our corporate What proportion of your customer base is Muslim? and institutional clients. “We service corporate and institutional clients. Institutional “For the corporate client segment, we have been able clients can be clearly segmented as Shari’ah-compliant to add value across the supply chain for our clients. A or conventional, and only Shari’ah-complaint institutional recent example is helping one of Bank ABC’s corporate clients require Islamic financing solutions. Amongst our clients from Asia by providing a Shari’ah-compliant corporate client base, there are either strictly Shari’ah- financing solution for its buyers in the Middle East, and compliant investors and borrowers, or those who are then distributing this risk to Islamic investors in the GCC indifferent but would accept Islamic finance if it opens up markets. This created value across the supply chain avenues of additional liquidity for them. and made Islamic financing relevant to an otherwise “As a provider of Shari’ah-compliant solutions, it is conventional client in Asia. important for us to ascertain and determine that our “On the institutional front, we have the widest range clients’ business is not related to non-Shari’ah-compliant of solutions ranging from liquidity management to trade products and services.” finance, hedging and capital markets. Our overnight liquidity management fund, ABC Clearing Company, is very popular amongst institutional clients as it provides them with a Shari’ah-compliant investment option for overnight or short term liquidity.” THERE HAS BEEN CONTINUED VOLATILITY IN EMERGING MARKETS, What have Bank ABC Islamic’s most popular WHICH HAS ADVERSELY AFFECTED offerings been in 2018? “In terms of volume, Murabahah-based products remain INVESTOR CONFIDENCE. THIS HAS the most popular amongst corporate Islamic clients. NEGATIVELY IMPACTED THE ABILITY OF For institutional clients, IIFM-based Collateralised MANY ISSUERS ACROSS THE REGION TO Murabahah, which can be considered an equivalent of TAP CAPITAL MARKETS, AND HENCE MANY repo and reverse repo facilities, has been popular with our clients.” DEALS HAVE BEEN PUT ON HOLD.

What will Bank ABC Islamic’s greatest challenges be for the next 12 months? “There has been continued volatility in emerging What is the next stage of evolution for Islamic banking? markets, which has adversely affected investor “In order to keep pace with its conventional counterpart, confidence. This has negatively impacted the ability of Islamic banking needs to be at the cutting edge of many issuers across the region to tap capital markets, technological advancements. Islamic banking services and hence many deals have been put on hold. Geo- providers will have to keep pace with the developments political stability in the region is essential for financial in digital banking and fintech to be able to meet the market activity to pick up again.” requirements of their client base that is getting increasingly more sophisticated.” How has awareness of Islamic banking grown over the last few years? How will Bank ABC Islamic support the development “In the GCC, Islamic banking now co-exists with of Islamic banking globally? conventional banking. In countries like Saudi Arabia, “Bank ABC Islamic will continue to leverage on the banks no longer offer conventional retail banking network of its parent, Bank ABC and will be working products, as the entire retail client base prefers Islamic towards the establishment of Islamic finance in the banking. Awareness of Islamic banking is on the rise markets in which the Group operates.”

bankerme.net 3131 KUWAIT

KUWAIT KUWAIT

TOP 10 FINANCIAL INSTITUTIONS IN KUWAIT

FINANCIAL INSTITUTIONS RANKING National Bank of Kuwait 1 Kuwait Finance House 2 Alafco Aviation Lease & Finance Company 3 Boubyan Bank 4 Ahli United Bank - Kuwait 5 Commercial Bank of Kuwait 6 Burgan Bank 7 Gulf Bank 8 Al Ahli Bank of Kuwait 9 Kuwait International Bank 10

he National Bank of Kuwait won the country As of Q2 2017, banks featured high capitalisation, a place in the top 10, but Kuwait’s real claim steady profitability, low non-performing loans, and to fame is that it boasts the fastest growing high loan-loss provisioning. Moreover, banks have T bank in the Middle East: Warba Bank. Kuwait’s maintained strong liquidity buffers. Private sector presence in the index has grown steadily over the years, deposit growth has declined in recent years, but this starting from just seven in 2014 to 11 in 2017. Kuwait has partly been offset by an increase in public sector banks have seen some modest climbs and modest falls, deposits, the IMF said. which suitably sums up their economic scenario. While the growth of credit to the private sector has also Kuwait is in the same boat as its GCC peers, but slowed mildly on a year-on-year basis since July 2016, the is facing lower oil prices from a position of strength, underlying trend has remained above 5.5 per cent. thanks to large financial buffers, low debt, and a sound The CBK has been proactive in improving supervision financial sector. Nonetheless, lower oil prices have and regulation. Enhancing the crisis management and weakened fiscal and external positions and generated preparedness and the liquidity forecasting frameworks large fiscal financing needs, according to the IMF. would help further strengthen financial sector resilience, The banking sector has remained sound, although according to the IMF. deposit and credit growth have somewhat slowed. Kuwait’s modesty obviously does it credit.

32 NOTE: All figures are in US dollars ('000)

GROWTH OF FINANCIAL INSTITUTIONS FROM 2016 TO 2017

10.0% 8.1% 8.0%

6.0%

4.0% 2.0% 2.0% -1.8% -1.6% 0.0%

2.0%

-4.0% Assets Liabilities Revenues Net Profit

PARAMETERS 2017 2016 $ Change % Change Assets 233,882,220 238,143,584 -4,261,364 -1.8% Liabilities 203,701,635 207,106,230 -3,404,595 -1.6% Revenues 8,212,008 8,052,116 159,892 2.0% Net Profit 2,753,958 2,546,772 207,185 8.1%

FASTEST GROWING FINANCIAL INSTITUTION IN KUWAIT: WARBA BANK

FINANCIAL PARAMETERS ASSETS LIABILITIES REVENUES NET PROFIT

2016 3,682,281 3,372,619 74,932 8,414

2017 5,340,488 4,812,006 114,410 20,386

PERCENTAGE CHANGE 45.03% 42.68% 52.68% 142.29%

bankerme.net 33 NOTE: All figures are in US dollars ('000)

KUWAIT TOP 10 INSTITUTIONS IN KUWAIT BY ASSETS

National Bank of Kuwait 78,417,473 Kuwait Finance House 52,283,075 Burgan bank 22,334,976 Gulf Bank 17,118,678 Commercial Bank of Kuwait 13,236,705 Al Ahli Bank of Kuwait 13,137,729 Boubyan Bank 11,959,024 Ahli United Bank-Kuwait 11,040,901 Kuwait International Bank 5,771,205 Warba Bank 5,340,488

TOP 10 INSTITUTIONS IN KUWAIT BY REVENUES

National Bank of Kuwait 2,477,931 Kuwait Finance House 2,148,434 Burgan bank 721,163 Gulf Bank 546,331 Al Ahli Bank of Kuwait 472,867 Commercial Bank of Kuwait 454,663 Boubyan Bank 378,214 Ahli United Bank-Kuwait 361,666 Alafco Aviation Lease and Finance Company 342,803 Kuwait International Bank 193,527

TOP 10 INSTITUTIONS IN KUWAIT BY NET PROFIT

National Bank of Kuwait 1,031,039 Kuwait Finance House 645,045 Burgan bank 208,042 Commercial Bank of Kuwait 167,169 Gulf Bank 144,648 Boubyan Bank 143,590 Ahli United Bank-Kuwait 133,925 Al Ahli Bank of Kuwait 107,681 Alafco Aviation Lease and Finance Company 98,840 Kuwait International Bank 53,593

34 TOP 10 INSTITUTIONS IN KUWAIT BY RETURN ON ASSETS (ROA)

Alafco Aviation Lease and Finance Company 3.28% National Bank of Kuwait 1.31% Commercial Bank of Kuwait 1.25% Boubyan Bank 1.23% Kuwait Finance House 1.21% Ahli United Bank-Kuwait 1.16% Kuwait International Bank 0.91% Burgan Bank 0.90% Gulf Bank 0.83% Al Ahli Bank of Kuwait 0.79%

TOP 10 INSTITUTIONS IN KUWAIT BY DEBT-TO-EQUITY RATIO In Times Warba Bank 9.11 Gulf Bank 8.45 Boubyan Bank 7.78 Burgan Bank 7.55 Kuwait Finance House 7.20 Ahli United Bank-Kuwait 6.84 Al Ahli Bank of Kuwait 6.62 National Bank of Kuwait 6.31 Kuwait International Bank 6.26 Commercial Bank of Kuwait 5.71

AVERAGE CAPITAL ADEQUACY RATIO (CAR) OF FINANCIAL INSTITUTIONS IN THE COUNTRY

17.64%

bankerme.net 35 OMAN OMAN

MUSCAT

TOP 9 FINANCIAL INSTITUTIONS IN OMAN

FINANCIAL INSTITUTIONS RANKING Bank Muscat 1 Ahli Bank - Oman 2 Bank Dhofar 3 Oman Arab Bank 4 Bank Sohar 5 HSBC Bank Oman 6 Bank Nizwa 7 National Bank of Oman 8 Alizz Islamic Bank 9

mani banks peak at number 26 in the BME100 Moreover, high concentrations of loans to single rankings. However, two feature in the top borrowers and to the real-estate sector pose downside 10 Fastest Growing Banks. Our data reflects risks to asset quality. Othe struggles Oman’s banks are facing with However, Moody’s expects capital to remain sound, declining profits. although profitability is expected to decline. Net interest Compounded by participating in OPEC oil production margins will likely remain stable while loan loss provisioning cuts in 2017, low oil prices and fiscal austerity continue could increase somewhat as problem loans rise. to weigh on Oman’s economy. Fiscal and current Funding and liquidity conditions will remain tight, account deficits remain large, according to the World as high domestic government borrowing limits funds Bank, and with Oman increasingly resorting to external available to lend to the wider economy. Nonetheless, the borrowing to finance its deficits, public debt is government’s international bond issuances, slower credit rising rapidly. growth and higher oil prices will moderate the pressure. According to Moody’s, the Government’s tighter The IMF noted that the Omani banking system purse strings could paralyse Oman’s banking sector, remains well capitalised and deposits have increased, as its capacity to support the country’s banks will liquidity conditions appear to have eased, and credit to be limited and liquidity conditions will be tightened. the private sector continues to grow. In one of the Slower economic growth is expected to drive a marginal Arab world’s oldest nations, nothing is likely to weakening in problem loans, according to the rating agency. change quickly.

36 NOTE: All figures are in US dollars ('000)

GROWTH OF FINANCIAL INSTITUTIONS FROM 2016 TO 2017

8.0% 5.4% 6.0% 3.6% 4.0% 2.7% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0%

-12.0% -11.6% -14.0% Assets Liabilities Revenues Net Profit

PARAMETERS 2017 2016 $ Change % Change Assets 76,550,715 72,600,133 3,950,582 5.4% Liabilities 64,002,353 61,778,735 2,223,618 3.6% Revenue 2,805,456 2,731,173 74,283 2.7% Net Profit 838,946 949,412 -110,466 -11.6%

FASTEST GROWING FINANCIAL INSTITUTION IN OMAN: BANK NIZWA

FINANCIAL PARAMETERS ASSETS LIABILITIES REVENUES NET PROFIT

2016 1,341,991 598,075 45,199 285

2017 1,811,802 878,577 58,236 9,848

PERCENTAGE CHANGE 35.01% 46.90% 28.84% 3350.99%

bankerme.net 37 NOTE: All figures are in US dollars ('000)

OMAN TOP 9 INSTITUTIONS IN OMAN BY ASSETS

Bank Muscat 28,959,020 Bank Dhofar 11,044,759 National Bank of Oman 9,013,901 Bank Sohar 7,383,943 HSBC Bank Oman 6,061,810 Oman Arab Bank 5,563,066 Ahli Bank-Oman 5,232,680 Bank Nizwa 1,811,802 Alizz Islamic Bank 1,479,733

TOP 9 INSTITUTIONS IN OMAN BY REVENUES

Bank Muscat 1,255,006 National Bank of Oman 367,808 Bank Dhofar 345,836 Oman Arab Bank 202,179 Bank Sohar 198,483 HSBC Bank Oman 195,580 Ahli Bank-Oman 150,119 Bank Nizwa 58,236 Alizz Islamic Bank 32,209

TOP 9 INSTITUTIONS IN OMAN BY NET PROFIT

Bank Muscat 459,265 Bank Dhofar 123,867 National Bank of Oman 114,353 Ahli Bank-Oman 69,266 Oman Arab Bank 69,043 Bank Sohar 65,796 HSBC Bank Oman 49,653 Bank Nizwa 9,848 Alizz Islamic Bank -7,792

38 TOP 8 BANKS IN OMAN BY RETURN ON ASSETS (ROA)

Bank Muscat 1.6% Ahli Bank-Oman 1.4% Oman Arab Bank 1.3% National Bank of Oman 1.3% Bank Dhofar 1.2% Bank Sohar 0.9% HSBC Bank Oman 0.8% Bank Nizwa 0.6%

TOP 9 INSTITUTIONS IN OMAN BY DEBT-TO-EQUITY RATIO In Times

Bank Dhofar 6.23 Bank Sohar 6.22 HSBC Bank Oman 6.22 Oman Arab Bank 6.00 Ahli Bank-Oman 5.61 National Bank of Oman 5.35 Bank Muscat 5.13 Alizz Islamic Bank 1.97 Bank Nizwa 0.94

AVERAGE CAPITAL ADEQUACY RATIO (CAR) OF FINANCIAL INSTITUTIONS IN THE COUNTRY

17.17%

bankerme.net 39 JORDAN AMMAN JORDAN

TOP 10 FINANCIAL INSTITUTIONS IN JORDAN

FINANCIAL INSTITUTIONS RANKING The Housing Bank for Trade & Finance 1 Arab Bank 2 Bank of Jordan 3 Invest Bank - Jordan 4 Bank Al-Etihad 5 Arab Jordan Investment Bank 6 Arab Banking Corporation - Jordan 7 Capital Bank of Jordan 8 Societe Generale de Banque Jordanie 9 Jordan Kuwait Bank 10

ordan has grown its presence in the BME100 according to Moody’s. Jordanian banks also have a more than any other country this year. Jordan’s concentration of exposure to the Jordanian Government, Bank Al-Etihad also comes in second place in our which links their credit profiles to that of the sovereign. Jrankings of the fastest growing banks. However, Moody’s says that Jordan’s banks will be However, such accolades can’t detract from the protected from their high credit risk by solid capital levels fact that its banking system in under pressure. An and strong liquidity. Moody’s expects capital levels at unprecedented influx of refugees from Syria have put Jordan’s banks to remain solid, given the modest growth a strain on Jordan’s already fragile economy, which is in risk-weighted assets and some profit retention. among the smallest in the Middle East. Fresh funds Banks are expected to maintain solid liquidity buffers, from Saudi Arabia, Kuwait and the UAE may help to which stood at 39 per cent of total assets as at the ease the burden of austerity – if it is spent wisely. end of September 2017. Moody’s also expects stable Real GDP growth is expected to creep up to profitability at the nation’s banks, as higher interest rates 2.5 per cent this year, from around 2.3 per cent in 2017. will lead to higher net interest margins that will counter However, despite this gradual rebound, economic elevated loan loss provisions. growth will remain below potential. A financial stability report from the country’s own Against this backdrop, it is unsurprising that credit Central Bank ranked Jordan third among 19 European risk at Jordanian banks is high, affected by rising countries that have developed a similar index. It claimed interest rates, inflation and rising unemployment. As a that Jordan enjoys a “healthy, sound, and stable” banking result, non-performing loans are expected to increase, sector. Our own index doesn’t entirely disagree.

40 NOTE: All figures are in US dollars ('000)

GROWTH OF FINANCIAL INSTITUTIONS FROM 2016 TO 2017

4.5% 4.2% 4.0% 4.0% 3.5% 3.0% 2.6% 2.5% 2.0% -4.0% 1.5%

1.0% 0.6% 0.5% 0.0% Assets Liabilities Revenues Net Profit

PARAMETERS 2017 2016 $ Change % Change Assets 102,662,647 98,522,331 4,140,315 4.2% Liabilities 81,025,154 77,941,539 3,083,615 4.0% Revenues 4,199,578 4,093,165 106,413 2.6% Net Profit 1,166,708 1,160,134 6,573 0.6%

FASTEST GROWING FINANCIAL INSTITUTION IN JORDAN: BANK AL-ETIHAD

FINANCIAL PARAMETERS ASSETS LIABILITIES REVENUES NET PROFIT

2016 3,610,353 3,172,830 142,125 41.235

2017 5,038,470 4,391,769 207,517 49,082

PERCENTAGE CHANGE 39.56% 38.42% 46.01% 19.03%

bankerme.net 41 NOTE: All figures are in US dollars ('000)

TOP 10 INSTITUTIONS IN JORDAN BY

JORDAN ASSETS

Arab Bank 48,163,721 The Housing Bank for Trade & Finance 11,482,285 Jordan Islamic Bank 5,954,328 Bank Al-Etihad 5,038,470 Jordan Kuwait Bank 3,994,650 Cairo Amman Bank 3,941,251 Jordan Ahli Bank 3,849,015 Bank of Jordan 3,617,958 Islamic International Arab Bank 2,894,329 Capital Bank of Jordan 2,821,915

TOP 10 INSTITUTIONS IN JORDAN BY REVENUES

Arab Bank 1,983,999 The Housing Bank for Trade & Finance 459,864 Bank of Jordan 218,643 Bank Al-Etihad 207,517 Jordan Islamic Bank 207,293 Cairo Amman Bank 177,675 Jordan Kuwait Bank 172,330 Jordan Ahli Bank 167,448 Capital Bank of Jordan 130,669 Islamic International Arab Bank 106,788

TOP 10 INSTITUTIONS IN JORDAN BY NET PROFIT

Arab Bank 532,963 The Housing Bank for Trade & Finance 176,593 Jordan Islamic Bank 76,360 Bank of Jordan 64,329 Bank Al-Etihad 49,082 Cairo Amman Bank 42,268 Islamic International Arab Bank 40,617 Capital Bank of Jordan 38,521 Jordan Kuwait Bank 38,019 Arab Jordan Investment Bank 24,224

42 TOP 10 INSTITUTIONS IN JORDAN BY RETURN ON ASSETS (ROA)

Bank of Jordan 1.86% The Housing Bank for Trade & Finance 1.57% Invest Bank-Jordan 1.56% Islamic International Arab Bank 1.43% Capital Bank of Jordan 1.36% Jordan Islamic Bank 1.30% Arab Bankin Corporation (Jordan) 1.16% Bank Al-Etihad 1.13% Cairo Amman Bank 1.13% Arab Bank 1.11%

TOP 10 INSTITUTIONS IN JORDAN BY DEBT-TO-EQUITY RATIO In Times Societe Generale de Banque Jordanie 9.08 Jordan Commercial Bank 8.24 Jordan Ahli Bank 7.91 Arab Jordan Investment Bank 7.38 Cairo Amman Bank 7.05 Bank Al-Etihad 6.79 The Housing Bank for Trade & Finance 6.29 Arab Banking Corporation (Jordan) 6.04 Jordan Kuwait Bank 5.05 Invest Bank-Jordan 5.00

AVERAGE CAPITAL ADEQUACY RATIO (CAR) OF FINANCIAL INSTITUTIONS IN THE COUNTRY

16.49%

bankerme.net 43 PALESTINE PALESTINE PALESTINE

TOP 5 FINANCIAL INSTITUTIONS IN PALESTINE

FINANCIAL INSTITUTIONS RANKING Bank of Palestine 1 Quds Bank 2 The National Bank 3 Palestine Islamic Bank 4 Arab Islamic Bank 5

lthough, with the exception of Iraq, Palestine cent for the year. Rapid credit growth within the limited boasts the least number of banks in the pool of corporates, some of which are connected, BME100 the ones present do pack a punch. increases banks’ exposure concentration. AThree of them feature in the top 10 of the Although progressing slowly, moves toward Fastest Growing Banks. Their performance is a triumph reunification offer a potential bright spot. In Gaza, over adversity. growth could rebound in the near term to the high Rigid border constraints, spending cuts and threats of single digits and stabilise over the medium term at further donor funding declines have ravished Palestine’s more than five per cent per annum, the IMF said. local economy. Although GDP growth is estimated at These improvements could gradually reduce poverty close to three per cent in 2017, the economic outlook and unemployment. However, without progress toward has become more tenuous, and prospects of meaningful reunification, the Palestinian economy would stagnate at gains in the fight against unemployment and poverty around 2.3 per cent growth. remain dim, the IMF warned. Reunification is an expensive business, and Palestine Capital adequacy, delinquent loans, and bounced is reliant on generous donor financing to ease cross- cheques have worsened, according to the IMF, calling border transactions and plug financial leakages. for the banking sector to come under closer scrutiny. Even in the best-case scenario, Palestinian banks may Private sector credit growth eased as activity slowed still have to put in the most impressive performance for during 2017, however it still averaged close to 20 per the smallest returns.

44 NOTE: All figures are in US dollars ('000)

GROWTH OF FINANCIAL INSTITUTIONS FROM 2016 TO 2017

25.0% 22.0% 20.1% 20.4% 20.0%

15.0%

10.0% 6.2%

5.0%

0.0% Assets Liabilities Revenues Net Profit

PARAMETERS 2017 2016 $ Change $ Change Assets 9,091,325 7,569,487 1,521,838 20.1% Liabilities 7,189,451 5,969,282 1,220,169 20.4% Revenues 399,657 327,628 72,029 22.0% Net Profit 95,328 89,753 5,575 6.2%

FASTEST GROWING FINANCIAL INSTITUTION IN PALESTINE: ARAB ISLAMIC BANK

FINANCIAL PARAMETERS ASSETS LIABILITIES REVENUES NET PROFIT

2016 794,136 322,638 26,971 6,221

2017 1,041,104 448,613 33,906 6,403

PERCENTAGE CHANGE 31.10% 39.05% 25.71% 2,93%

bankerme.net 45 NOTE: All figures are in US dollars ('000)

TOP 5 INSTITUTIONS IN PALESTINE BY ASSETS PALESTINE Bank of Palestine 4,884,823 The National Bank 1,079,399 Quds Bank 1,075,630 Arab Islamic Bank 1,041,104 Palestine Islamic Bank 1,010,369

TOP 5 INSTITUTIONS IN PALESTINE BY REVENUES

Bank of Palestine 220,935 Quds Bank 53,678 Palestine Islamic Bank 51,484 The National Bank 39,655 Arab Islamic Bank 33,906

TOP 5 INSTITUTIONS IN PALESTINE BY NET PROFIT

Bank of Palestine 54,009 Palestine Islamic Bank 14,531 Quds Bank 11,180 The National Bank 9,205 Arab Islamic Bank 6,403

46 TOP 5 INSTITUTIONS IN PALESTINE BY RETURN ON ASSETS (ROA)

Palestine Islamic Bank 1.60% Bank of Palestine 1.20% Quds Bank 1.10% The National Bank 0.94% Arab Islamic Bank 0.70%

TOP 5 INSTITUTIONS IN PALESTINE BY DEBT-TO-EQUITY RATIO In Times

The National Bank 10.06 Bank of Palestine 9.86 Quds Bank 9.47 Arab Islamic Bank 0.76 Palestine Islamic Bank 0.53

AVERAGE CAPITAL ADEQUACY RATIO (CAR) OF FINANCIAL INSTITUTIONS IN THE COUNTRY

14.72%

bankerme.net 47 LEBANON BEIRUT LEBANON

TOP 7 FINANCIAL INSTITUTIONS IN LEBANON

FINANCIAL INSTITUTIONS RANKING BLOM Bank 1 Bank Audi 2 Byblos Bank 3 Bank of Beirut 4 Banque Bemo 5 First National Bank 6 BLC Bank 7

ebanon’s banks all hover below the top 10 in the The headline fiscal balance posted an improvement BME100, and barely break into the top 40 on in 2017 to a deficit of 7.3 per cent of GDP, partly due to our list of Fastest Growing Banks. This is hardly one-off revenues from taxing higher bank profits arising Lsurprising. Lebanon’s economic situation is from ’s (BdL) financial operations underlined by high public debt, current account deficit, undertaken in 2016. and urgent funding needs. The IMF estimates that public The Government’s high and increasing debt burden debt is above 150 per cent of GDP, and will continue to and reliance on the banking system to finance its large rise rapidly. budget deficit render domestic banks susceptible The country’s sovereign credit ratings paint a bleak to sovereign event risk and increase financial risks, picture. Moody’s downgraded Lebanon from B2 to B3 in Moody’s said. Total banking system assets equalled August 2017, while Fitch and S&P have maintained their over four times GDP at the end of 2016, one of the ratings at B-/B3 equivalent. highest levels globally, driven by banks’ large Lebanon’s economic growth remains low, estimated sovereign exposures. at about 1-1.5 per cent in 2017 and 2018, according to Deposit inflows, which finance Lebanon’s twin the IMF. The traditional drivers of growth in Lebanon are deficits, slowed down in 2017 mostly due to some subdued with real estate and construction weak and a limited outflows during the November 2017 political strong rebound is unlikely soon. Under current policies crisis. The BdL has increased interest rates through growth is projected to gradually increase towards three its monetary and financial operations, especially on per cent over the medium term. Inflation spiked to five local currency products, to support inflows and arrest per cent in 2017 as the cost of oil imports rose and the dollarisation. However, it could be a long time before US dollar weakened. banks feel any relief.

48 NOTE: All figures are in US dollars ('000)

GROWTH OF FINANCIAL INSTITUTIONS FROM 2016 TO 2017

10.0% 8.2% 4.9% 4.8% 5.0% -26.9% 0.0%

-5.0%

-10.0%

-15.0%

-20.0%

-25.0%

-30.0% Assets Liabilities Revenues Net Profit

PARAMETERS 2017 2016 $ Change % Change Assets 129,859,791 123,777,355 6,082,436 4.9% Liabilities 117,256,446 111,860,742 5,395,704 4.8% Revenues 3,692,256 5,048,064 -1,355,808 -26.9% Net Profit 1,519,345 1,404,047 115,299 8.2%

FASTEST GROWING FINANCIAL INSTITUTION IN LEBANON: BANK OF BEIRUT

FINANCIAL PARAMETERS ASSETS LIABILITIES REVENUES NET PROFIT

2016 17,207,396 14,898,413 421,288 201,371

2017 18,374,519 16,021,064 469,079 204,420

PERCENTAGE CHANGE 6.78% 7.54% 11.34% 1.51%

bankerme.net 49 NOTE: All figures are in US dollars ('000)

TOP 7 INSTITUTIONS IN LEBANON BY ASSETS LEBANON

Bank Audi 43,751,839 BLOM Bank 32,544,016 Byblos Bank 22,661,703 Bank of Beirut 18,374,519 BLC Bank 5,869,461 First National Bank 4,889,917 Banque Bemo 1,769,357

TOP 7 INSTITUTIONS IN LEBANON BY REVENUES

Bank Audi 1,460,375 BLOM Bank 1,012,853 Bank of Beirut 469,079 Byblos Bank 455,443 BLC Bank 129,015 First National Bank 103,583 Banque Bemo 49,181

TOP 7 INSTITUTIONS IN LEBANON BY NET PROFIT

Bank Audi 558,955 BLOM Bank 485,272 Bank of Beirut 204,420 Byblos Bank 170,119 BLC Bank 46,488 First National Bank 36,283 Banque Bemo 18,383

50 TOP 7 INSTITUTIONS IN LEBANON BY RETURN ON ASSETS (ROA)

BLOM Bank 1.56% Bank Audi 1.27% Bank of Beirut 1.15% Banque Bemo 1.04% BLC Bank 0.80% Byblos Bank 0.78% First National Bank 0.77%

TOP 7 INSTITUTIONS IN ULEBANON BY DEBT-TO-EQUITY RATIO In Times

Byblos Bank 11.06 First National Bank 10.07 BLOM Bank 9.83 BLC Bank 9.45 Bank Audi 9.45 Banque Bemo 9.19 Bank of Beirut 6.81

AVERAGE CAPITAL ADEQUACY RATIO (CAR) OF FINANCIAL INSTITUTIONS IN THE COUNTRY

14.80%

bankerme.net 51 TRIUMPHING OVER ADVERSITY Bank of Beirut BANK OF BEIRUT BANK espite the economic slowdown in Lebanon, Bank of Beirut strengthened its franchise through above average growth in total assets Dand deposits in 2017. This was driven by the good performance of its international business and sustained growth within the Lebanese market. The performance was characterised by remarkable growth in all main financial indicators. Capitalising on its large branch network and diversified product range, the Bank of Beirut achieved gains in market shares in both Bank of Beirut Headquarters, Beirut commercial and retail businesses. On a consolidated basis, the bank’s total assets reached $18.4 billion, sign of the bank’s financial health, and Bank of Beirut’s growing by 6.73 per cent year-on-year. The growth in size confidence to disburse dividends to our stakeholders. was mainly funded by the growth in deposits and equity. “Risk management continues to be a priority. The consolidated total net profit after tax increased Continuing our strong performance in 2016 and 2017, in 2017 by 1.51 per cent to $204.4 million, compared we remain resolute in maintaining a responsible, to $201 million for the year 2016. The bank said that diversified growth strategy. Responding effectively to the positive performance was driven by growth in our home market’s political and economic challenges business activities, efficient management of interest has helped Bank of Beirut to build an exceptional culture rate margins, a high commission base and an effective of commitment, resilience and a passion for positive cost containment policy, and a focus on consistently outcomes, even in adversity. increasing the operating noninterest base revenues. “We are well prepared to withstand both external Bank of Beirut reflected a very healthy set of capital impacts from unpredictable changes in the markets ratios in 2017. The bank has strengthened its capital and evolving banking laws and regulations, driven by base to fund its expansion strategy, in addition to political and economic factors. complying comfortably with Basel III requirements. “In this respect, we are committed to conducting Salim G. Sfeir, Group Chairman of Bank of Beirut, business within the effective and prudent regulations elucidated, “2017 was a year of continuing progress. Bank of overseen by the Central Bank of Lebanon and the Beirut’s strong performance reflects the first-rate execution of Banking Control Commission of Lebanon, which we our growth strategy. While remaining true to our traditional view as crucial for the protection and soundness of the banking values, focusing on earnings and building trust, we entire Lebanese financial sector. have significantly expanded our investment in the emerging “At the same time, these social and economic digital economy, extending our reach to serve valued challenges provide opportunities to serve our customers in new and innovative ways. communities. That sustainability, durability and “On a consolidated level, as at 31 December 2017, commitment to serve is built into our group DNA. We the Bank’s total assets reached $18.40 billion, growing continue our investment in professional development by 6.73 per cent year-on-year. This growth was mainly and talent acquisition. With business units in nine funded by increases in deposits and equity. Total countries, increasing our diversity and inclusion helps to Shareholders’ equity reached $2.352 billion. build a responsive, relevant and empathetic culture. “Even with strong asset growth, we achieved a 1.15 per “Together, serving great customers with continuously cent Return On Average Assets (ROAA) in 2017. Dividend improving service and management disciplines, I yield per common share is still rising, attaining 4.06 per am confident in our ability to deliver sustainable and cent in 2017, compared to 3.53 per cent in 2016, a clear profitable growth, ‘Beyond Borders’.”

52 Islamic Financial Institutions in BME100

BANK NAME COUNTRY ISLAMIC RANK BME 100 RANK ISLAMIC BANKS Al Rajhi Bank Saudi Arabia 1 4 Dubai Islamic Bank United Arab Emirates 2 5 Abu Dhabi Islamic Bank United Arab Emirates 3 16 Kuwait Finance House Kuwait 4 18 Alinma Bank Saudi Arabia 5 21 Bank AlBilad Saudi Arabia 6 28 ABC Islamic Bank Bahrain 7 30 Boubyan Bank Kuwait 8 38 Bank AlJazira Saudi Arabia 9 39 Emirates Islamic United Arab Emirates 10 43 Ahli United Bank - Kuwait Kuwait 11 45 GFH Financial Group BSC Bahrain 12 52 Sharjah Islamic Bank United Arab Emirates 13 54 First Energy Bank Bahrain 14 70 Ajman Bank United Arab Emirates 15 72 Kuwait International Bank Kuwait 16 74 Noor Bank United Arab Emirates 17 75 Gulf International Bank Bahrain 18 78 Kuwait Finance House - Bahrain Bahrain 19 79 Warba Bank Kuwait 20 81 Al Salam Bank - Bahrain Bahrain 21 82 Islamic International Arab Bank Jordan 22 83 Jordan Islamic Bank Jordan 23 84 Palestine Islamic Bank Palestine 24 87 Bahrain Islamic Bank Bahrain 25 90 Arab Islamic Bank Palestine 26 92 Bank Nizwa Oman 27 93 Safwa Islamic Bank Jordan 28 94 Ithmaar Bank Bahrain 29 96 Khaleeji Commercial Bank Bahrain 30 97 Al Baraka Islamic Bank Bahrain 31 98 Alizz Islamic Bank Oman 32 99

bankerme.net 53 DOMICILE OF ISLAMIC BANKS IN BME100

2 Intitutions 3 Intitutions

6% 9% 2 Intitutions 6%

10 Intitutions 31% ISLAMIC BANKS 32 6 Intitutions Financial 19% Institutions

13% 16% 4 Intitutions 5 Intitutions

United Arab Emirates Saudi Arabia Kuwait Bahrain Oman Jordan Palestine

slamic finance has been feeling the effects of Although growth has moderated, the industry has slowing economies. The global Islamic finance enjoyed some progress. It is hardly surprising that industry grew to be worth more than $2.4 trillion Islamic financial institutions from the UAE, Saudi Arabia Iat the end of 2017, according to the Global Islamic and Kuwait dominate the top spots for Islamic financial Finance Report 2018, marking the fourth consecutive institutions in the BME100 rankings. year that the industry registered a single digit growth Islamic banking shone during the global financial crisis, and the fifth consecutive year that the growth rate has having dodged the bullet fired by derivatives in 2007. Ten been on a declining trend. years on, the world is a different place. In 2017, the world Islamic finance hasn’t been immune to falling oil staged an impressive economic recovery but Islamic prices. The industry remains concentrated primarily in banks continue to face the same challenges. oil-exporting countries, with GCC countries, Malaysia Shari’ah boards and external Shari’ah audits are some and Iran accounting for more than 80 per cent of the GCC countries are steps in the right direction; however, industry’s assets, according to S&P. Therefore, lower standardised documentation, a homogenous Shari’ah oil prices and governments’ cuts to investment have interpretation and greater market awareness are all elusive punctured the industry’s growth prospects. goals that the industry can’t afford to lose sight of. S&P estimates that the industry’s growth rate will stabilise at about five per cent in 2018, which is lower than the average over the past decade. S&P also ISLAMIC INSTITUTIONS IN BME100 predicts that profitability will deteriorate again in 2018 Year-on-Year Growth as the cost of funding continues to rise alongside +16.8% credit losses. Islamic banks’ revenue growth will also Net Profit decelerate. However, like their conventional cousins, +4.7% GCC Islamic banks have relatively low cost bases Revenues which will help protect profitability. Capitalisation is +5.8% generally a positive factor for GCC Islamic banks. Liabilities However, S&P notes previous rapid financing growth +5.5% was not matched by additional capital. Few GCC banks Assets have issued capital-boosting Sukuk and those that have 2017 2016 are primarily in the UAE and Saudi Arabia.

54 NOTE: All figures are in US dollars ('000)

REVENUES IN 2017

25% $17,567,578

75% $52,123,228

Islamic Institutions Conventional Institutions

REVENUES IN 2016

24% $16,778,928

76% $53,902,617

Islamic Institutions Conventional Institutions

bankerme.net 55 NOTE: All figures are in US dollars ('000)

ASSETS IN 2017

23% ISLAMIC BANKS $449,602,173

77% $1,485,234,039

Islamic Institutions Conventional Institutions

ASSETS IN 2016

23% $426,158,051

77% $1,457,783,593

Islamic Institutions Conventional Institutions

56 The below table shows the Capital Adequacy Ratio (CAR) for each financial institution included in the BME100, listed in alphabetical order.

NO. INSTITUTION NAME COUNTRY TOTAL EQUITY (USD ‘000) CAPITAL ADEQUACY RATIO (CAR) 1 ABC Islamic Bank Bahrain 332,851 31.20% 2 Abu Dhabi Commercial Bank United Arab Emirates 8,834,565 19.09%

3 Abu Dhabi Islamic Bank United Arab Emirates 4,512,774 17.02% APPENDIX 4 Ahli Bank - Oman Oman 791,758 16.70% 5 Ahli United Bank Bahrain 4,888,154 17.00% 6 Ahli United Bank - Kuwait Kuwait 1,408,398 18.00% 7 Ajman Bank United Arab Emirates 574,665 15.62% 8 Al Ahli Bank of Kuwait Kuwait 1,725,117 17.23% 9 Al Baraka Islamic Bank Bahrain 1,727,500 17.27% 10 Al Rajhi Bank Saudi Arabia 14,866,911 23.29% 11 Al Salam Bank - Bahrain Bahrain 1,124,250 21.43% 12 Alafco Aviation Lease and Finance Company Kuwait 863,682 N/A 13 Alawwal Bank Saudi Arabia 3,626,586 20.34% 14 Alinma Bank Saudi Arabia 5,492,574 21.00% 15 Alizz Islamic Bank Oman 498,291 16.67% 16 Alubaf Arab International Bank Bahrain 313,851 37.00% 17 Arab Bank Jordan 8,409,272 15.28% 18 Arab Banking Corporation (Bank ABC) Bahrain 4,412,000 18.70% 19 Arab Banking Corporation (Jordan) Jordan 226,011 18.88% 20 Arab Islamic Bank Palestine 592,491 15.94% 21 Arab Jordan Investment Bank Jordan 309,391 15.95% 22 Arab National Bank Saudi Arabia 6,684,257 17.56% 23 Bahrain Islamic Bank Bahrain 2,436,239 19.40% 24 Bank AlBilad Saudi Arabia 2,023,678 18.54% 25 Bank Al-Etihad Jordan 646,701 14.33% 26 Bank AlJazira Saudi Arabia 2,354,357 20.94% 27 Bank Audi Lebanon 4,187,901 16.90% 28 Bank Dhofar Oman 1,526,676 15.44% 29 Bank Muscat Oman 4,722,943 18.45% 30 Bank Nizwa Oman 933,225 17.25% 31 Bank of Beirut Lebanon 2,353,455 N/A 32 Bank of Jordan Jordan 619,402 19.76% 33 Bank of Palestine Palestine 449,962 14.68% 34 Bank of Sharjah United Arab Emirates 1,107,674 17.93% 35 Bank Sohar Oman 1,022,326 16.22% 36 Banque Bemo Lebanon 173,698 17.85% 37 Banque Saudi Fransi Saudi Arabia 8,443,035 19.39% 38 BBK Bahrain 1,332,008 20.01% 39 BLC Bank Lebanon 561,526 18.40% 40 BLOM Bank Lebanon 3,005,563 18.50% 41 Boubyan Bank Kuwait 1,362,521 19.41% 42 Burgan Bank Kuwait 2,613,434 16.20% 43 Byblos Bank Lebanon 1,879,385 17.80% 44 Cairo Amman Bank Jordan 489,496 15.04% 45 Capital Bank of Jordan Jordan 493,312 15.18% 46 Commercial Bank International United Arab Emirates 671,929 14.80% 47 Commercial Bank of Dubai United Arab Emirates 2,472,636 15.04% 48 Commercial Bank of Kuwait Kuwait 1,972,952 18.71% 49 Dubai Islamic Bank United Arab Emirates 7,863,994 17.20% 50 Emirates Investment Bank United Arab Emirates 154,931 14.81%

bankerme.net 57 The below table shows the Capital Adequacy Ratio (CAR) for each financial institution included in the BME100, listed in alphabetical order.

NO. INSTITUTION NAME COUNTRY TOTAL EQUITY (USD ‘000) CAPITAL ADEQUACY RATIO (CAR) 51 Emirates Islamic United Arab Emirates 1,990,248 17.36% 52 Emirates NBD United Arab Emirates 16,163,795 21.88%

APPENDIX 53 Eskan Bank Bahrain 697,779 133.40% 54 Finance House United Arab Emirates 245,936 N/A 55 First Abu Dhabi Bank United Arab Emirates 27,831,018 17.80% 56 First Energy Bank Bahrain 700,001 53.90% 57 First National Bank Lebanon 441,817 13.56% 58 Gulf Bank Kuwait 1,811,078 17.80% 59 GFH Financial Group BSC Bahrain 2,402,146 17.36% 60 Gulf International Bank Bahrain 2,410,900 15.60% 61 HSBC Bank Oman Oman 839,626 16.92% 62 Invest Bank United Arab Emirates 691,602 15.93% 63 Invest Bank - Jordan Jordan 252,182 15.86% 64 Investcorp Bank Bahrain 1,145,213 31.70% 65 Islamic International Arab Bank Jordan 1,785,249 16.50% 66 Ithmaar Bank Bahrain 3,361,814 13.92% 67 Jordan Ahli Bank Jordan 431,857 14.12% 68 Jordan Commercial Bank Jordan 210,918 13.70% 69 Jordan Islamic Bank Jordan 4,216,697 23.00% 70 Jordan Kuwait Bank Jordan 660,665 18.67% 71 Khaleeji Commercial Bank Bahrain 1,264,633 17.00% 72 Kuwait Finance House Kuwait 6,373,861 17.76% 73 Kuwait Finance House - Bahrain Bahrain 1,753,146 24.30% 74 Kuwait International Bank Kuwait 794,852 19.05% 75 Mansour Bank Iraq 244,822 N/A 76 Mashreq United Arab Emirates 5,752,599 17.16% 77 National Bank of Bahrain Bahrain 1,191,090 36.30% 78 National Bank of Fujairah United Arab Emirates 1,331,692 17.50% 79 National Bank of Kuwait Kuwait 10,726,208 17.80% 80 National Bank of Oman Oman 1,418,854 17.34% 81 National Bank of Umm Al-Qaiwain United Arab Emirates 1,136,450 34.61% 82 National Commercial Bank Saudi Arabia 17,140,159 20.00% 83 Noor Bank United Arab Emirates 1,592,991 17.90% 84 Oman Arab Bank Oman 794,663 15.69% 85 Palestine Islamic Bank Palestine 659,123 14.18% 86 Quds Bank Palestine 102,731 13.02% 87 Riyad Bank Saudi Arabia 10,299,465 19.60% 88 SABB Saudi Arabia 8,925,459 20.99% 89 Safwa Islamic Bank Jordan 1,122,838 30.89% 90 Samba Financial Group Saudi Arabia 11,915,241 21.10% 91 Sharjah Islamic Bank United Arab Emirates 1,502,867 21.14% 92 Societe Generale de Banque Jordanie Jordan 189,128 19.39% 93 The Housing Bank for Trade & Finance Jordan 1,574,373 17.11% 94 The National Bank Palestine 97,567 15.95% 95 The National Bank of Ras Al-Khaimah (RAKBANK) United Arab Emirates 2,142,531 20.69% 96 The Saudi Investment Bank Saudi Arabia 3,807,751 20.38% 97 Union National Bank United Arab Emirates 5,300,612 19.40% 98 United Arab Bank United Arab Emirates 589,416 13.20% 99 Waha Capital United Arab Emirates 1,135,425 N/A 100 Warba Bank Kuwait 528,482 22.46%

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