Union of Arab General Secretariat – Research Department

04/12/2009

The Arab investment banks

In this study, we analyze the performance of the Arab investment banks in 2008 and 2007. These banks had consolidated assets of $54 billion, with aggregate deposits of about $24 billion. Besides, the aggregate loans given by those banks are about $20 billion. Regarding the shareholders equity, the Arab investment banks have an aggregate equity of about $7 billion. Finally, they have realized total losses of about $200 million. (Table 1)

1. The distribution of the Arab investment banks according to country of origin

Table 1 presents the distribution of the investment banks among the Arab countries and the consolidated figures for each country. has the highest number of investment banks, with consolidated assets of $40.5 billion, consolidated deposits of $13.4 billion, consolidated loans of $14 billion, consolidated equity of $5.6 billion, and consolidated losses of $462 million. The distribution of other banks is as follows: 3 banks from Egypt (with assets of $9.7 billion), 1 from Jordan (with assets of $909 million), 5 banks from Lebanon (with assets of $2.3 billion), 1 bank from Sudan (with assets of $117 million), and 1 bank from UAE Tunisia with assets of $16 billion).

Table 1: the geographical distribution of the Arab investment banks (figures in $million) Country Number Total Total Total Shareholder Total Of banks Assets deposits loans Equity profits Bahrain 9 40,554 13,428 14,107 5,595 (462) Egypt 3 9,668 5,691 7,829 875 219 Jordan 1 908 340 472 167 10 Lebanon 5 2,272 262 1,560 430 25 Sudan 1 117 1 23 48 8 UAE 1 102 5 49 27 0.2 Total 20 53,621 24,040 19,727 7,142 (199.8)

2. The financial highlights of the Arab investment banks

Table 2 shows some financial highlights of the Arab investment banks in terms of assets, deposits, loans, shareholders equity, and profits.

1 The has occupied the first place in the list in terms of assets ($77 billion) and loans ($51.2 billion). The first bank in terms of deposits is the (Saudi) National Commercial Bank ($45.8 billion). The first bank in terms of equity is the (Jordanian) Arab bank ($7.5 billion). Finally, the first bank in terms of profits is the (Saudi) Al Rajhi bank ($1.7 billion). The smallest bank in terms of assets is Banque de L'habitat de Tunisie ($3.2 billion). The bank with the lowest amount of deposits is Bank (Bahrain) with deposits of $376 million. The bank with the lowest amount of loans is Awal Bank (Bahrain), with loans of $36 million only. The bank with the lowest equity is the National Commercial Bank (Libya) with equity of $127 million. Finally, the bank that recorded the worst profits is the Arab Banking Corporation (Bahrain) with losses of $844 million.

3. Soundness and riskiness of the top 100 Arab banks

Table 3 shows the soundness and riskiness of the top 100 Arab banks. The first 2 columns show the equity-to-asset ratios for these banks (percentage and ranking). We notice that the bank with the highest ratio is Al Khaliji Commercial Bank (Qatar), with a ratio of 36.37%, whereas the bank with the lowest ratio is Gulf Bank (Kuwait), with a ratio of 0.77% only. This shows the wide dispersion of Arab banks in terms of capitalization (and soundness). The second ratio (Deposits/Assets) is important and shows the reliance of banks on deposits to finance their assets. We see from Table 3 that Faisal Islamic Bank (Egypt) is the bank with the highest reliance on deposits (92%), whereas Aawal Bank has on 9.77% of its assets financed with deposits. The third ratio (Loans/Assets) shows how much the banks dedicate of the available funds to private sector lending. Again, Faisal Islamic Bank has obtained the first rank and invests 90% of its assets in loans. At the bottom of the list, we see Awal Bank with a ratio of 0.50% only. The fourth ratio (Loans/Deposits) demonstrates the aggressiveness of banks in lending and their risk attitude. The highest this ratio, the more the bank is aggressive. The Commercial Bank of Syria has the highest ratio (155%), and the Awal Bank has the lowest (5.09%). We notice here also that the GCC banks have in general the highest ratios. The fifth ratio (Equity/Loans) shows how much the banks' shareholders participate to cover the risks resulted from lending. A high ratio shows that the bank shareholders are willing to put more of their own funds to cover risks. We bypass Awal bank due to its (abnormally) high ratio. The bank with the highest ratio is investcorp (Bahrain) that exceeds 393%. On the other hand, Gulf Bank (Kuwait) recorded the lowest ratio (1.09%). Finally, the last ratio (Equity/Deposits) illustrates how much funds the bank's shareholders put of their own funds against each dollar of deposits. The highest ratio is recorded at Awal Bank (362%), which means that against every $1 of deposits received, the shareholders put $3.62 of their own money. The lowest ratio was recorded at Gulf Bank (Kuwait) (0.85%).

4. Profitability of the top 100 Arab banks

Table 4 shows the profitability of the Arab investment banks. In terms of total profits, we notice that Al Rajhi Bank has realized the highest amount of profits ($1.74 billion), despite the fact that it is not the largest bank in terms of assets. The worst profitability was recorded at the Arab Banking Corporation with losses of $844 million.

2 Table 2: financial highlights of the Arab investment banks Shareholders Assets Deposits Loans Profits Bank Equity 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 Arab Banking Corporation 28,486.0 32,744.0 10,728.0 10,791.0 11,931.0 12,329.0 2,088.0 2,157.0 (836.0) 149.0 Investcorp 3,533.0 4,373.0 558.0 643.0 341.0 147.0 1,237.0 1,382.0 151.0 302.0 Arab Investment Company 2,869.0 2,668.0 2,713.0 3,449.0 1,146.0 1,682.0 751.0 873.0 42.0 93.0 United Gulf Bank 377.0 383.0 61.0 438.0 8.0 292.0 815.0 662.0 215.0 268.0 Seera Investment Bank 219.0 257.0 na na na na 312.0 319.0 2.0 21.0 International Investment Bank 109.0 105.0 na na na na 211.0 216.0 14.0 21.0 Sico Bank 100.0 181.0 21.0 na na na 50.0 42.0 (1.0) 12.0 BMB Investment Bank 95.0 137.0 26.0 37.0 2.0 1.0 43.0 71.0 (14.0) 24.0 Investors Bank 8,351.0 8,573.0 na na na na 88.0 130.0 (35.0) (10.0) National Societe Generale 900.0 906.0 6,690.0 7,127.0 4,916.0 4,020.0 743.0 542.0 206.0 122.0 Egyptian Gulf Bank 417.0 451.0 757.0 752.0 583.0 405.0 109.0 124.0 13.0 12.0 Arab Investment Bank 908.0 908.0 382.0 393.0 192.0 185.0 23.0 27.0 na na Arab Jordan Investment Bank 968.0 715.0 472.0 472.0 340.0 340.0 167.0 167.0 10.0 10.0 Audi Saradar Investment Bank 766.0 692.0 658.0 326.0 54.0 61.0 120.0 135.0 135.0 6.0 Credit Libanais Investment Bank 279.0 275.0 679.0 582.0 131.0 121.0 75.0 74.0 74.0 8.0 Mediterranee Investment Bank 220.0 218.0 43.0 41.0 68.0 79.0 179.0 175.0 175.0 5.0 Fransa Investment Bank 39.0 39.0 155.0 143.0 8.0 9.0 43.0 37.0 37.0 5.0 Arab Investment Bank 117.0 95.0 25.0 25.0 1.0 1.0 13.0 13.0 13.0 1.0 Financial Investment Bank 102.0 165.0 23.0 16.0 1.0 1.0 48.0 47.0 47.0 8.0 Arab Emirates Investment Bank 102.0 165.0 49.0 62.0 5.0 7.0 27.0 93.0 0.2 7.0

3 Table 3: the liquidity of the Arab investment banks Loans/Assets Deposits/Assets Loans/Deposits Bank 2008 2007 2008 2007 2008 2007 Arab Banking Corporation 41.88% 37.65% 37.66% 32.96% 111.21% 114.25% Investcorp 7.15% 3.41% 11.71% 14.93% 61.11% 22.86% Arab Investment Company 32.44% 38.46% 76.79% 78.87% 42.24% 48.77% United Gulf Bank 0.28% 10.94% 2.13% 16.42% 13.11% 66.67% Seera Investment Bank na na na na na na International Investment Bank na na na na na na Sico Bank na na 19.27% 0.00% na na BMB Investment Bank 2.00% 0.55% 26.00% 20.44% 7.69% 2.70% Investors Bank na na na na na na National Societe Generale 58.87% 46.89% 80.11% 83.13% 73.48% 56.41% Egyptian Gulf Bank 64.78% 44.70% 84.11% 83.00% 77.01% 53.86% Arab Investment Bank 46.04% 41.02% 91.61% 87.14% 50.26% 47.07% Arab Jordan Investment Bank 37.44% 37.44% 51.98% 51.98% 72.03% 72.03% Audi Saradar Investment Bank 5.58% 8.53% 67.98% 45.59% 8.21% 18.71% Credit Libanais Investment Bank 17.10% 17.49% 88.64% 84.10% 19.29% 20.79% Mediterranee Investment Bank 24.37% 28.73% 15.41% 14.91% 158.14% 192.68% Fransa Investment Bank 3.64% 4.13% 70.45% 65.60% 5.16% 6.29% Arab Investment Bank 2.56% 2.56% 64.10% 64.10% 4.00% 4.00% Financial Investment Bank 0.85% 1.05% 19.66% 16.84% 4.35% 6.25% Arab Emirates Investment Bank 4.90% 4.24% 48.04% 37.58% 10.20% 11.29%

4 Table 4: the capitalization of the Arab investment banks E/A E/L E/D Bank 2008 2007 2008 2007 2008 2007 Arab Banking Corporation 7.33% 6.59% 17.50% 17.50% 19.46% 19.99% Investcorp 25.95% 32.09% 362.76% 940.14% 221.68% 214.93% Arab Investment Company 21.26% 19.96% 65.53% 51.90% 27.68% 25.31% United Gulf Bank 28.41% 24.81% 10187.50% 226.71% 1336.07% 151.14% Seera Investment Bank 82.76% 83.29% na na na na International Investment Bank 96.35% 84.05% na na na na Sico Bank 45.87% 40.00% na na 238.10% na BMB Investment Bank 43.00% 39.23% 2150.00% 7100.00% na na Investors Bank 92.63% 94.89% na na na na National Societe Generale 8.90% 6.32% 15.11% 13.48% 11.11% 7.60% Egyptian Gulf Bank 12.11% 13.69% 18.70% 30.62% 14.40% 16.49% Arab Investment Bank 5.52% 5.99% 11.98% 14.59% 6.02% 6.87% Arab Jordan Investment Bank 18.39% 18.39% 49.12% 49.12% 35.38% 35.38% Audi Saradar Investment Bank 12.40% 18.88% 222.22% 221.31% 18.24% 41.41% Credit Libanais Investment Bank 9.79% 10.69% 57.25% 61.16% 11.05% 12.71% Mediterranee Investment Bank 64.16% 63.64% 263.24% 221.52% 416.28% 426.83% Fransa Investment Bank 19.55% 16.97% 537.50% 411.11% 27.74% 25.87% Arab Investment Bank 33.33% 33.33% 1300.00% 1300.00% 52.00% 52.00% Financial Investment Bank 41.03% 49.47% 4800.00% 4700.00% 208.70% 293.75% Arab Emirates Investment Bank 26.47% 56.36% 540.00% 1328.57% 55.10% 150.00%

5 Table 4: the profitability of the Arab investment banks Net Profits ROA ROE Bank 2008 2007 2008 2007 2008 2007 Arab Banking Corporation (836.0) 149.0 -2.93% 0.46% -40.04% 6.91% Investcorp 151.0 302.0 3.17% 7.01% 12.21% 21.85% Arab Investment Company 42.0 93.0 1.19% 2.13% 5.59% 10.65% United Gulf Bank 215.0 268.0 7.49% 10.04% 26.38% 40.48% Seera Investment Bank 2.0 21.0 0.53% 5.48% 0.64% 6.58% International Investment Bank 14.0 21.0 6.39% 8.17% 6.64% 9.72% Sico Bank (1.0) 12.0 -0.92% 11.43% -2.00% 28.57% BMB Investment Bank (14.0) 24.0 -14.00% 13.26% -32.56% 33.80% Investors Bank (35.0) (10.0) -36.84% -7.30% -39.77% -7.69% National Societe Generale 206.0 122.0 2.47% 1.42% 27.73% 22.51% Egyptian Gulf Bank 13.0 12.0 1.44% 1.32% 11.93% 9.68% Arab Investment Bank na na na na na na Arab Jordan Investment Bank 10.0 10.0 1.10% 1.10% 5.99% 5.99% Audi Saradar Investment Bank 135.0 6.0 19.0 2.66% 5.00% 14.07% Credit Libanais Investment Bank 74.0 8.0 7.0 1.01% 10.67% 9.46% Mediterranee Investment Bank 175.0 5.0 5.0 1.82% 2.79% 2.86% Fransa Investment Bank 37.0 5.0 6.0 2.75% 11.63% 16.22% Arab Investment Bank 13.0 1.0 1.0 2.56% 7.69% 7.69% Financial Investment Bank 47.0 8.0 10.0 10.53% 16.67% 21.28% Arab Emirates Investment Bank 93.0 0.2 7.0 4.24% 0.74% 7.53%

Union of Arab Banks – Research Department Email: [email protected] Phone: 00961 1 785711

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