Supporting Growth and Development in the Australian Community. Annual Report 2015 Arab Bank Australia Limited and its controlled entities Chairman’s Report Mr Geoffrey C E Wild AM In 2016 we reach our thirty year milestone of providing exceptional relationship banking to the Australian community in our key focus areas of Western Sydney and Metropolitan Melbourne. We are proud to be a member of a well regarded global group and remain true to our heritage, well capitalised and highly liquid. We consistently give back to the communities we serve and are welcoming the opportunity to partner with our existing and future customers as they maximise the opportunities from federal and state government investment in our key geographical areas. The encouraging growth in the portfolio in 2015 and the high quality of our lending book are supporting the continuous improvement in our fi nancial performance. We are proud of the gender and ethnic diversity of our team members. Collectively we have 49.6% male to 50.4% female team members with a good proportion of female representation across all tiers of the organisation. I would like thank everyone at Arab Bank Australia for their continued efforts and our loyal and growing customer base for their continued support. Geoffrey C E Wild AM Chairman 2 Arab Bank Australia Limited and its controlled entities Managing Director’s Report Mr Joseph Rizk OAM This year we are celebrating over 30 years of providing Arab Bank Australia Limited exceptional service to our customers in Australia. Over this Business Overview time we are proud to have built and maintained a strong affi nity with our community and the areas in which they Business Development choose to work and live. Our commitment to relationship The Bank has continued to drive business development in banking and personal service is a key strength and we a number of sectors and, as a result, achieved net growth greatly value our loyal and expanding customer base, as of 21% in the loan portfolio. This has been supported demonstrated by the 21% growth in our loan portfolio by continued investment in improving the staff skill sets achieved in 2015. through tailored training and sales coaching, as well as a We expect the signifi cant planned and proposed federal number of initiatives targeted at particular industries and government infrastructure projects in Sydney and sectors, all in the context of actual and anticipated growth Melbourne to provide increased economic prosperity for in certain asset classes, namely, commercial, construction, our customers and we are proudly partnering with key residential and trade. thought leaders in these areas to support our customers In 2015, the Bank continued to focus on the signifi cant and community in maximising opportunities. opportunities that are starting to, and will continue to, arise Arab Bank Australia is committed to the best practice from investment by the Federal and State Governments fundamentals of banking as demonstrated by our strong in infrastructure in Western Sydney and Melbourne. The liquidity and capital ratios. This is consistent with our Bank’s long- term presence in Western Sydney, coupled parent, Arab Bank Plc and it’s wider highly regarded with ongoing investment in increasing its brand profi le fi nancial institution group which has operated within some in this region to position the Bank as a strategic partner of the most challenging environments across the globe and focus of knowledge, have been signifi cant drivers in since 1930. generating increased volumes of business for the Bank. My team and I look forward to supporting you and In addition to its domestic business and the improved your family’s journey in achieving your fi nancial needs exchange rate for exporters, the Bank has seen increased and aspirations. activity in its trade fi nance portfolio and welcomes the increased focus by the Federal and State Governments which we anticipate to benefi t our customers with trading requirements in the Middle East and North Africa region. The Bank is proud to be a member of a global group which are recognised as a leading provider of trade fi nance in Joseph Rizk OAM this region. Director The Bank is consistently looking at ways to better service its customers and align itself with their needs, which includes maintaining a responsive business model which can respond to our customers’ evolving core needs. To this end, the Bank made the decision to close its Campsie and Auburn branches in 2015, in line with changing demographics and the increased usage of online capabilities, ensuring an effective and relevant branch network. 3 Arab Bank Australia Limited and its controlled entities Managing Director’s Report (continued) Customer Service Enhancements Risk Management The Bank is successfully utilising its automatic, straight- The bank is committed to maintaining a robust risk through-processing loan origination system to grow its management framework and has built and maintained retail lending portfolio, and this has resulted in a number sound credit risk policies which have resulted in lower risk, of efficiencies and cost savings in terms of processing a diversified loan portfolio and significant improvement in and approving home loans. The Bank also successfully non-performing loans and provisioning requirements. introduced a mortgage offset feature, which will allow The Board is committed to ensuring that the Bank has a customers to make significant savings on their home sound risk culture. loan repayments. Compliance Framework Capital and Treasury The Bank maintains a Compliance Management The Bank maintains a solid capital position and has and Framework that aims to continually adapt to the evolving will continue to meet the requirements required for the regulatory risk environment. This Framework is underpinned transition to Basel III. by a culture of individual accountability and responsibility The Bank’s self-funding ratio remains above 80%, through based on a Three Lines of Defence model. the support of its loyal and expanding customer base The Bank’s compliance risk management program is ensuring that the Bank is not reliant on global wholesale designed to ensure the Bank’s operations are aligned markets for funding. with applicable governing laws and regulations, whilst A strong liquidity position is also maintained with a loan to keeping the process customer- focused. As existing risks deposit ratio averaging 90% and liquid asset investments evolve and new risks emerge, initiatives are applied in co- constituting close to 25% of total assets. The bank is ordination between the compliance function and the lines of under the Basel III Liquidity Coverage Ratio regime business to manage obligations and responsibilities. (commenced January 2015) and at all times is in excess In combatting financial crime, the Bank’s approach has of APRA and board requirements in our holdings of high been a process of continual improvement of the overall quality liquid assets. process for detecting unusual activity and proactively Foreign exchange activity continues to grow for the Bank’s increasing awareness and skillsets of staff among the expanding niche customer base and the Bank seeks front line and the support function. to maintain competitive customer exchange rates on a Human Resources consistent basis in not only the major currencies but also specialising in the local currencies of the Middle East. With significant focus on Health & Safety in the workplace and the changes in legislation, the bank has formalised Technology and Projects its ‘Health & Wellbeing’ program with the introduction of a The Bank’s technology and project office delivered a number of ‘Lunch & learn’ sessions throughout the year, number of initiatives designed to improve the Bank’s focusing on how to stay healthy and create a better work income generating capability and reduce the costs of life balance. The Health & Wellbeing program also provides doing so. These included delivery of a collaboration and free flu vaccinations for all staff, along with the sponsoring document management solution, tablets, mobile loan of a number of different sporting initiatives where ABAL origination and a new loan product. Given the evolving staff are invited and encouraged to participate, such as threat landscape, a focussed review of IT security was the ‘Steptember’ initiative run held by the Cerebral Palsy undertaken to ensure the Bank is well positioned to protect Foundation. The Bank is also experiencing a more stable its customers’ information. Through the re-negotiation of workforce with a decrease in labour turnover a third year contracts with the Bank’s major suppliers and rationalisation in a row. 51% of our employees have now had five years of the application portfolio significant and sustainable cost or more tenure with the company which strengthens our savings were also achieved in 2015. position in relation to knowledge and expertise not being lost. Overall the gender diversity within the company is fairly Operations equal with 49.6% of staff being male and 50.4% female In the course of 2015 we have continued to refine our and this is fairly consistent across all levels of processes to sustain the deliverance of exceptional the organisation. customer service both now and in the future. We have broadened our customer service footprint through Community Support additional ATMs and online capabilities in addition to our In 2015, Arab Bank Australia sustained its on-going existing branch network, fee free transactions through commitment to supporting wider community causes Westpac group ATM’s and deposit taking services through through the financial support of medical research, the arts, the NAB and Australia Post network. education and a number of charities and causes. The Bank continues to uphold its core philosophy of ‘supporting the communities we serve’. The primary focus for community involvement is the Bank’s ability to make a significant and identifiable difference to an organisation or cause.