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INTRODUCTION
W
elcome to the ninth edition of the BME100. For almost a decade, the BME100 has served as a benchmark for financial institutions in the Middle East. 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 in the Middle East and be regulated by one of the region’s central banks. 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 Iraq, which only has one bank 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 Bahrain 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!
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6 8 10 12 14 18 20 21 22 26 30 32 36 40 44 48 52 53 57
METHODOLOGY PUTTING THE BEST FINANCIAL INSTITUTIONS ON THE MAP BEST 100 BANKS FASTEST GROWING FINANCIAL INSTITUTIONS UNITED ARAB EMIRATES ABU DHABI ISLAMIC BANK: INVESTING IN THE FUTURE DUBAI ISLAMIC BANK: UPGRADED BANKING MASHREQ BANK: 50 GOLDEN YEARS SAUDI ARABIA BAHRAIN BANK ABC ISLAMIC: BANKS WITHOUT BORDERS KUWAIT OMAN JORDAN PALESTINE LEBANON BANK OF BEIRUT: TRIUMPHING OVER ADVERSITY ISLAMIC BANKS APPENDIX
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METHODOLOGY
Methodology How we’ve ranked the region’s top financial institutions SCOPE
O
ur analysis covers financial institutions in Middle Eastern countries, excluding Qatar. Within our chosen countries we have limited ourselves to coverage of only the domestic institutions, which are domiciled and licensed in one of the countries included in the analysis. EXCHANGE RATES In compiling our index of the region’s leading banks, we use the figures published in their annual reports and convert them to US dollar so that we can directly compare them against each other. Most countries in the Middle Eastern region have pegged their currencies to the US dollar, hence they have had a fixed exchange rate against the US dollar for many years. The only significant exception to this is Kuwait, which decided to drop its dollar peg in 2007 and peg its currency to a weighted basket of international currencies. The exchange rates taken from the central banks of each country as at 31 December 2017 are mentioned below:
Country
Currency
Exchange Rate Against USD
UAE
AED
3.6725
KSA
SAR
3.750
Kuwait
KWD
0.332
Oman
OMR
0.385
Bahrain
BHD
0.376
Iran
IRR
36,064
Iraq
IQD
1,184.94
Jordan
JOD
0.709
Lebanon
LBP
1,507.5
Syria
SYP
515.24
Palestine
USD*
1.00
*Palestinian institutions use the US dollar as their currency
INSTITUTIONS The BME100 ranking includes institutions from the below categories: w Conventional banks; w Islamic banks; w Investment banks; w Financial services, w Investment and asset management companies. We gathered and analysed data from over 125 institutions within the region and filtered the top 100 institutions based on their total assets value to ensure the institution is sizeable enough to make it into the top 100 ranking. Out of these 100 institutions, one third are Islamic and the remaining are conventional. Different parameters have been used to rank these institutions, which are elaborated on below along with the reasons for including those as a parameter. SCORING SYSTEM We have adopted a rigorous evaluation process to rank the best 100 financial institutions in the region and have adopted various financial parameters to evaluate them based on different weightages. The financial institutions that have been ranked the best institutions or the fastest growing have cumulatively scored as the best based on respective parameters for each ranking. Best Bank: points are given to each bank out of 100 based on eight different parameters with their respective weightages mentioned below: Parameter
Points
Total Assets
20
Net Profit Margin
20
Revenue
10
Net Profit
10
Return on Assets
10
Return on Equity
10
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
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Out of 100, the top bank based on any parameter scores the full points for that parameter and every other institution is scored relative to that. For example, First Abu Dhabi Bank (FAB) is the biggest in terms of Total Assets so it scores the full 20 points in that parameter and sets the benchmark for that parameter. The scoring of the remaining banks for that parameter is done relative to that. Consideration has been given to an institution’s size and efficiency and the cumulative score, based on all parameters, is calculated to rank the institution. WEIGHTAGES FOR DIFFERENT PARAMETERS— AND WHY WE USE THEM Total Assets, Revenues and Net Profit: The size of the bank is a very important consideration. These are based entirely on size and have a combined weightage of 40 points out of 100. Net Profit Margin: Weightage of 20 points is given to net profit margin as this demonstrates how cost efficient the bank is in generating the amount of revenues. The benchmark used in this regard is 20 per cent. Return on Assets and Assets Turnover: With a combined weightage of 20 points for these two parameters, these demonstrate how well the bank has been utilising its assets to generate revenues and profitability. Return on Equity and Debt to Equity Ratios: The two ratios with a combined weightage of 20 points demonstrate how well the bank has been using the shareholders’ equity and the funds of the depositors (liabilities for the bank). Therefore, a bank with higher debt to equity ratio will score higher than other banks that have a greater proportion of their capital as shareholders’ equity. FASTEST GROWING BANK Points are given to each bank out of 70, based on four different parameters. Namely: Parameter
Points
Assets Percentage Change
20
Liabilities Percentage Change
20
Revenues Percentage Change
20
Net Profit Percentage Change
10
Total
70
The growth of the bank is considered relative to its own size; therefore, we use the percentages for assets, liabilities, revenues and net profit growth instead of the growth in dollar ($) size. CAPITAL ADEQUACY The Capital Adequacy Ratio (CAR) is a measure of a bank’s available capital expressed as a percentage of a bank’s risk-weighted credit exposures. The Capital Adequacy Ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. Two types of capital are measured: Tier 1 capital, which can absorb losses without a bank being required to cease trading; and Tier 2 capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors. The reason minimum capital adequacy ratios (CARs) are critical is to make sure that banks have enough of a cushion to absorb a reasonable amount of losses before they become insolvent and consequently lose depositors’ funds. The capital adequacy ratios ensure the efficiency and stability of a nation’s financial system by lowering the risk of banks becoming insolvent. Under Basel III, a bank’s Tier 1 and Tier 2 capital must be at least eight per cent of its risk-weighted assets. The minimum capital adequacy ratio (including the capital conservation buffer) is 10.5 per cent. It is customary for the central bank in each jurisdiction to issue specific guidelines in this regard and stipulate penalties for contravention of this requirement. We have calculated the Capital Adequacy Ratio (CAR) for each country. This has been calculated as a weighted average of CAR ratios of all major banks in that country; that is, the ones that made it to BME100 listing, which comprises of the region’s top 100 banks based on total assets. The weight of each bank in the calculation is its total assets divided by the total assets of all the banks in that country, included in the top 100 banks. The Capital Adequacy Ratio of each institution mentioned in BME100 along with their total equity capital is mentioned in the appendix, starting on page 57.
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COUNTRIES IN THE BME100
Financial institutions in the region 1 7 LEBANON
16
5
IRAQ
11
JORDAN PALESTINE
KUWAIT
12
17
22
BAHRAIN
UNITED ARAB EMIRATES
SAUDI ARABIA
9 OMAN
8
T
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, 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% 20.00%
18.70%
21.05%
17.64%
17.17%
16.49%
15.00%
14.72%
14.80%
Palestine
Lebanon
10.00%
5.00%
0.00% United Arab Emirates
Kuwait
Saudi Arabia
Bahrain
Oman
Jordan
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BEST 100 BANKS 10
Best 100 Banks
T
he newly-created First Abu Dhabi Bank (FAB) shot straight to the top spot to be ranked the Best Financial Institution in the Middle East. Born out of a merger between National Bank of Abu Dhabi and First Gulf Bank, FAB is now the largest bank in the UAE and one of the largest in the MENA region. The combined strengths of the two former banks has given FAB an impressive footprint. The bank operates in 19 countries outside the UAE with 103 branches and 603 ATMs/CDMs in total. FAB is considered to be the safest bank in the UAE and one of the safest banks worldwide with Moody’s rating of Aa3 and a rating of AA- from S&P and Fitch, making it the highest rated bank in the UAE. As a result of the merger, FAB managed to reduce its operating costs by 12 per cent on average compared to the previous year. It is a shining example of what can be achieved when UAE banks combine forces.
FINANCIAL INSTITUTION First Abu Dhabi Bank National Commercial Bank Emirates NBD Al Rajhi Bank Dubai Islamic Bank Samba Financial Group Abu Dhabi Commercial Bank Saudi British Bank (SABB) Ahli United Bank National Bank of Kuwait Banque Saudi Fransi BLOM Bank Riyad Bank Arab National Bank Bank Audi Abu Dhabi Islamic Bank National Bank of Bahrain Kuwait Finance House Investcorp Bank Eskan Bank Alinma Bank Waha Capital Mashreq The Saudi Investment Bank National Bank of Umm Al-Qaiwain Bank Muscat Union National Bank Bank AlBilad Commercial Bank of Dubai ABC Islamic Bank Byblos Bank Alafco Aviation Lease and Finance Company Alawwal Bank BBK The Housing Bank for Trade & Finance Arab Bank Bank of Beirut Boubyan Bank Bank AlJazira Bank of Palestine The National Bank of Ras Al-Khaimah (RAKBANK) Banque Bemo Emirates Islamic Ahli Bank - Oman Ahli United Bank - Kuwait National Bank of Fujairah Commercial Bank of Kuwait Burgan Bank Bank of Jordan First National Bank
RANKING 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
COUNTRY United Arab Emirates Saudi Arabia United Arab Emirates Saudi Arabia United Arab Emirates Saudi Arabia United Arab Emirates Saudi Arabia Bahrain Kuwait Saudi Arabia Lebanon Saudi Arabia Saudi Arabia Lebanon United Arab Emirates Bahrain Kuwait Bahrain Bahrain Saudi Arabia United Arab Emirates United Arab Emirates Saudi Arabia United Arab Emirates Oman United Arab Emirates Saudi Arabia United Arab Emirates Bahrain Lebanon Kuwait Saudi Arabia Bahrain Jordan Jordan Lebanon Kuwait Saudi Arabia Palestine United Arab Emirates Lebanon United Arab Emirates Oman Kuwait United Arab Emirates Kuwait Kuwait Jordan Lebanon
FINANCIAL INSTITUTION BLC Bank GFH Financial Group BSC Emirates Investment Bank Sharjah Islamic Bank Bank Dhofar Quds Bank Gulf Bank Oman Arab Bank Mansour Bank Arab Banking Corporation (Bank ABC) The National Bank Invest Bank - Jordan Bank Al-Etihad Bank Sohar Cairo Amman Bank Bank of Sharjah Arab Jordan Investment Bank Arab Banking Corporation (Jordan) Capital Bank of Jordan First Energy Bank Societe Generale de Banque Jordanie Ajman Bank Al Ahli Bank of Kuwait Kuwait International Bank Noor Bank Commercial Bank International HSBC Bank Oman Gulf International Bank Kuwait Finance House - Bahrain Jordan Kuwait Bank Warba Bank Al Salam Bank - Bahrain Islamic International Arab Bank Jordan Islamic Bank Jordan Ahli Bank Alubaf Arab International Bank Palestine Islamic Bank Finance House Jordan Commercial Bank Bahrain Islamic Bank United Arab Bank Arab Islamic Bank Bank Nizwa Safwa Islamic Bank National Bank of Oman Ithmaar Bank Khaleeji Commercial Bank Al Baraka Islamic Bank Alizz Islamic Bank Invest Bank
RANKING 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100
COUNTRY Lebanon Bahrain United Arab Emirates United Arab Emirates Oman Palestine Kuwait Oman Iraq Bahrain Palestine Jordan Jordan Oman Jordan United Arab Emirates Jordan Jordan Jordan Bahrain Jordan United Arab Emirates Kuwait Kuwait United Arab Emirates United Arab Emirates Oman Bahrain Bahrain Jordan Kuwait Bahrain Jordan Jordan Jordan Bahrain Palestine United Arab Emirates Jordan Bahrain United Arab Emirates Palestine Oman Jordan Oman Bahrain Bahrain Bahrain Oman United Arab Emirates
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FASTEST GROWING FINANCIAL INSTITUTIONS
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
W
arba Bank tops our index as the fastest growing bank in the Middle East. It has been said that no one ever gets anywhere by standing still, and Warba Bank has certainly proved itself to be an institution that keeps moving forward. Warba Bank adopted a new strategic plan in 2017, and it has already started to bear fruit. The bank’s growth figures in the first year of its new plan are impressive; Net Profit has soared an incredible 163 per cent, Total Revenues by 62 per cent and Total Assets by 57 per cent. The bank’s financing portfolio increased by 53 per cent and Customer Deposits rose by 35 per cent. These figures are testament to the new plan’s success. 2017 was a very busy year for the bank. Warba Bank marketed a $250 million Tier 1 Capital Sukuk Issuance which proved extremely popular; it was five times oversubscribed, and the proceeds were distributed to investors, further boosting investor confidence in the bank. The bank’s distribution network has now grown to 12 branches with more expansion planned this year.
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Digitisation is something all Middle Eastern banks must face. Banks that won’t adapt to the changing times will be quickly replaced by those that will. It is no surprise that our fastest growing bank is an early adopter of new technology. Warba upgraded its online and mobile banking applications in 2017, so a wide range of transactions can be conducted at the customers’ convenience. The bank also updated its offerings. In 2017, the Corporate Banking Group of Warba introduced new services and products in the areas of working capital finance, residential facility financing and outlet financing. Warba’s investment banking arm also played a big part in the bank’s growth; in 2017, Warba Investment Banking Group was involved in many high value transactions as a Mandated Lead Arranger, Investment Agent and Bookrunner. A telling variety of institutions have clustered at the top of our Fastest Growing Financial Institutions ranking. There are a variety of domiciles, conventional and Islamic institutions, which shows that opportunities for growth exist everywhere for companies that can attune to the times.
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UNITED ARAB EMIRATES
UNITED ARAB EMIRATES ABU DHABI
TOP 10 FINANCIAL INSTITUTIONS IN THE UAE
F
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 one in the rankings, although it isn’t entirely a stranger to the BME100. It came into existence in April 2017, following the merger of First Gulf Bank and the National Bank of Abu Dhabi. Last year, although it had published agglomerated data for 2016, the banks remained two separate institutions for the purpose of our analysis. This year, however, as a gestalt entity it is a shining example of what a successful merger can achieve. With 46 commercial banks for 9.5 million people, the UAE is widely considered to be overbanked and rumours of further mergers are rife. However, as single entities, UAE banks are generally considered to be in good health. In fact, economic resilience, strong capitalisation, stable funding and liquidity conditions make UAE banks the envy of the GCC. Faster economic growth this year is likely to support the banking system’s credit growth, and capital levels
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are expected to remain strong, according to Moody’s. Stabilising oil prices and international bond issuances will continue to support funding and liquidity conditions in the country. UAE banks will remain primarily deposit-funded, with a fair recourse to more volatile market funding. According to the UAE Central Bank’s September 2017 Monthly Statistical Bulletin, the banking system’s net loan/deposit ratio had improved to 91 per cent as of 30 September 2017, from 96 per cent as of 30 September 2016. Nonetheless, years of lower oil prices have taken their toll. The IMF has warned that a faster rise in US interest rates or higher financial market volatility could increase borrowing costs for banks. Problem loans are also expected to creep up, largely because banks’ loan books are dominated by real estate and government institutions. As UAE banks prepare to face technology disruption and regulatory change over the coming months, they may decide that they are stronger together.
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
PARAMETERS
Liabilities
2017
Revenues
2016
$ Change
Net Profit
% 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
11.96%
5.63%
PERCENTAGE CHANGE
25.16%
28.07%
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UNITED ARAB EMIRATES
NOTE: All figures are in US dollars ('000)
TOP 10 INSTITUTIONS IN UAE BY ASSETS 182,156,105
First Abu Dhabi Bank 128,079,587
Emirates NBD 72,158,828
Abu Dhabi Commercial Bank
56,456,640
Dubai Islamic Bank Mashreq
34,088,015
Abu Dhabi Islamic Bank
33,567,760
Union National Bank
29,276,543
Commercial Bank of Dubai
19,173,331
Emirates Islamic
16,849,929
The National Bank of Ras Al-Khaimah (RAKBANK)
13,216,381
TOP 10 INSTITUTIONS IN UAE BY REVENUES 5,318,716
First Abu Dhabi Bank 4,227,999
Emirates NBD 2,424,825
Abu Dhabi Commercial Bank
2,093,156
Dubai Islamic Bank Abu Dhabi Islamic Bank
1,692,115
Mashreq
1,638,028
The National Bank of Ras Al-Khaimah (RAKBANK) Union National Bank
1,037,398 988,757
Commercial Bank of Dubai
750,057
Emirates Islamic
651,407
TOP 10 INSTITUTIONS IN UAE BY NET PROFIT 2,981,556
First Abu Dhabi Bank 2,272,511
Emirates NBD 1,226,511
Dubai Islamic Bank
1,164,767
Abu Dhabi Commercial Bank Abu Dhabi Islamic Bank Mashreq Union National Bank Commercial Bank of Dubai
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626,310 568,967 451,247 272,816
The National Bank of Ras Al-Khaimah (RAKBANK)
220,695
Emirates Islamic
191,150
TOP 10 INSTITUTIONS IN UAE BY RETURN ON ASSETS (ROA) 4.25%
Waha Capital 2.67%
National Bank of Umm Al-Qaiwain
2.36%
Dubai Islamic Bank 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 8.58
United Arab Bank
8.49
Ajman Bank Emirates Islamic
7.47
Commercial Bank International
7.41 7.17
Abu Dhabi Commercial bank Emirates NBD Commercial Bank of Dubai Bank of Sharjah
6.92 6.75 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
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ABU DHABI ISLAMIC BANK
INVESTING IN THE FUTURE Khamis Buharoon, ADIB’s Vice Chairman and Acting CEO, explains how ADIB plans to stay ahead of increasing competition
A
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 did 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? “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 they do best – which is providing customers with a high-quality banking experience. In addition, Islamic banking is increasingly seen to be more attractive and we have reached a period where many Islamic banks are successfully implementing innovation programmes. “Whether it is through technology or offering new products and services, Islamic banks are attracting more and more new customers.”
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Khamis Buharoon
What distinguishes ADIB in the UAE banking sector? “The UAE continues to be one of the largest and most competitive banking markets in the region. “For ADIB, our size and scale, particularly our branch network, enables us to invest heavily in attracting new customers. This is both in the branches and in digital banking channels, particularly through mobile solutions as customers demand full access to their banking services anytime, anywhere.
“ADIB has seen a rise in digital transactions, whereby 90 per cent of the bank’s transactions are now being conducted through digital channels. However, our research shows that customers still value the human touch from branches and, while we recognise the significance of digital, banks must not lose sight of the importance of direct and personal interaction with customers.” 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 experience, if we want to keep growing. We believe there is a strong appetite for Islamic banking’s ethical approach, which gives an excellent opportunity to grow beyond our traditional customer base. “We are now investing in future growth, by enhancing customer service and productivity through investing heavily in the digital transformation programme. Our focus on technology has been wellreceived by customers, with over 90 per cent of transactions now conducted through automated or digital platforms. Whether it is our new generation of digitally-enhanced branches, ADIB Express, or our smartbanking community, we are at the forefront of innovation in the region’s banking sector.” What are the greatest challenges Islamic banks are facing globally, and what progress is being made to overcome these? “Globally, the biggest challenge for Islamic banks is still to overcome preconceptions of what Islamic banking means. A great deal of progress has been made in developing educational programmes which explain the main principles of Shari’ah finance, including the associated terminology. More still needs to be done in this field, but, as shown when ADIB took over Barclay’s operations in the UAE, we retained nearly all customers as people appreciate what Islamic banking represents once they have had an opportunity to experience it.” The UAE’s economic growth has outpaced its GCC neighbours; what are the factors behind this and what does it mean for the UAE banking sector? “The UAE economy has been resilient over the last three years thanks to its diversification strategy, investment from government and a resurgent oil price. The IMF has indicated that GDP growth will sit at two per cent for this year and three per cent for next year. This increase in pace of growth should give confidence to the whole financial and banking sector and provide opportunities across wholesale and retail banking. In the long-term, this can create a virtuous cycle which is good for the country’s long-term economic development.”
WE BELIEVE THERE IS A STRONG APPETITE FOR ISLAMIC BANKING’S ETHICAL APPROACH, WHICH GIVES AN EXCELLENT OPPORTUNITY TO GROW BEYOND OUR TRADITIONAL CUSTOMER BASE.
What have ADIB’s greatest milestones been so far this year? “Reaching one million customers represented a major milestone for ADIB. It is a testament to the size and scale of the bank and its ability to provide marketleading products and services. Launching our smart banking and seeing the uptake from customers, was another milestone for the bank. Reaching these milestones motivates us to do more for our customers.” What are ADIB’s goals for the next year? “We want to offer our customers a superior banking experience based around their needs. As our customers become more digitally savvy, we are investing strongly in our infrastructure to digitise our services and present our customers with a safe, convenient and efficient mobile and online banking experience. “Technological innovations are transforming the retail banking environment, and banks in the region are shifting their focus to better serve customers. ADIB’s robust strategy and ability to deliver award-winning customer service and products can deliver solid and sustainable growth. “In addition, we will continue to focus on increasing fee income through transaction banking, correspondent banking, Takaful Islamic insurance, wealth management and investment banking. This has proved an area of success for the bank and we will seek to grow this over the coming year.” What are ADIB’s biggest challenges going to be over the next year? “Many people would argue that the banking sector is crowded. However, competition is something ADIB welcomes. It means that banks need to invest in innovation and product delivery to stay ahead, which is good for the customer. This will inevitably sort out winners and losers in the long run—those who have the financial strength and innovation to compete, and those who don’t. Through investment in digital banking technology, we are confident that we can remain ahead of the pack.”
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DUBAI ISLAMIC BANK 20
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
D
ubai Islamic Bank posted a strong set of results for 2017. Total income for the year increased to AED 10,199 million from AED 8,636 million in 2016, an impressive increase of 18 per cent compared to 2016. Net revenue for 2017 totalled AED 7,687 million, an increase of 14 per cent compared with AED 6,761 million in 2016. According to the bank, a new stream of clients was a key driver for the double digit rise in profitability; deposits rose by 20 per cent to AED 147.2 billion. Net profit for 2017 rose to AED 4,504 million from AED 4,050 million in 2016, an increase of 11 per cent, for which the bank credits a combination of robust core business growth and efficient cost management. Dubai Islamic Bank Managing Director, Abdulla Al Hamli, said, “The UAE continues to be one of the leading Islamic finance markets, with assets now reaching around $150 billion, a seven per cent growth this year. “We remain well-positioned to capitalise on improving economic conditions in the UAE, where GDP is expected to increase in 2018 in the run up towards major economic events such as the EXPO 2020.” Capital adequacy ratio remained robust at 17.0 per cent as of 31 December 2017, whilst Tier 1 ratio stood at 16.5 per cent; both ratios are well above regulatory requirement. Total assets grew by 19 per cent to reach to AED 207.3 billion. Return on equity stood at 18.7 per cent in 2017, while return on assets remained steady at 2.34 per cent. The bank’s performance caught the attention of ratings agencies. During 2017, Moody’s upgraded DIB’s longterm issuer ratings to ‘A3’ from Baa1; outlook ‘Stable’. In July 2017, Fitch has upgraded the bank’s standalone VR to ‘bb+’’ from ‘bb’. Clearly, the ratings agencies are in agreement that the bank’s performance is sustainable. His Excellency Mohammed Ibrahim Al Shaibani, Director-General of His Highness The Ruler’s Court of Dubai and Chairman of Dubai Islamic Bank, said, “The UAE banking system retains its strong financial fundamentals with sector assets crossing the $700 billion mark, making it the largest in the GCC. “2017 has been another remarkable year for the bank
Dubai Islamic Bank, Head Office
as we continue to make progress on our growth and expansionary agenda in both local and international markets. The bank has weathered the challenges across the region as well as those emanating from the global economic slowdown extremely well and with a more positive outlook forecast for the UAE and global economy, the coming years look even more promising.” Dubai Islamic Bank Group Chief Executive Officer, Dr. Adnan Chilwan, concluded, “Nearly a decade ago, we established our plans to bring the company out from the effects of the global economic meltdown and back on track. As the incredible growth story of DIB unfolded, so did the challenges of oil prices and economic slowdown. But these have only made us stronger, more resilient and even more focused than ever before.” “The evolution in the last four years has seen a complete transformation in size and business with the balance sheet as well related key metrics of financing and deposits nearly doubling or more during the period. Further, the profitability has risen nearly three times with both ROEs and ROAs witnessing a steep climb as well. Simultaneously, the business model has completely transformed with a significantly more diversified portfolio minimizing concentration risks.” “The momentum established in the first three year of growth has carried through from the preceding period with the bank registering another 16 per cent jump in the financing book in 2017. Despite this strong performance, liquidity remains intact with 91 per cent Finance to Deposit Ratio as the bank continues to preserve its capacity to maintain the impetus into the new year. “A double digit rise of 11 per cent in profitability is a clear indication of the focus on quality growth with Group Net Profit crossing AED 4.5 billion and this will remain a critical objective going into 2018 as well.”
MASHREQ BANK
50 GOLDEN YEARS Mashreq Bank celebrated its 50th birthday in 2017
I
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 2017. 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 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 online card acceptance in the UAE. Mashreq’s CEO, Abdul Aziz Al Ghurair said, “We are pleased to report the financial results for Mashreq Bank in 2017. Despite global economic uncertainty and the slight slowdown in the GCC region, we saw steady growth across all divisions of the bank, and our net profit stood at AED 2.1 billion, up by 6.5 per cent compared to last year.
I AM CONFIDENT THAT WE ARE WELLPOSITIONED TO CAPITALISE ON THE IMPROVING ECONOMIC BACKDROP IN THE UAE. I LOOK FORWARD TO SEIZING THESE OPPORTUNITIES AND CONTINUING THIS MOMENTUM INTO 2018.
HE Abdul Aziz Al Ghurair, Chief Executive Officer of Mashreq Bank
“2017 was a milestone year for Mashreq Bank. In addition to consistently reporting strong financial results and continuing to grow our business, we also celebrated our 50 Year Anniversary in the UAE. 2017 also saw the official launch of Mashreq Neo, our full-service digital bank and the first digital bank in the region. We will continue to focus on providing innovative products and services and strengthening 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 into the future. “Moving forward, we will also continue to support the ongoing economic agenda of the UAE. While there may be challenges ahead, I am confident that we are well-positioned to capitalise on the improving economic backdrop in the UAE. I look forward to seizing these opportunities and continuing this momentum into 2018.” bankerme.net
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SAUDI ARABIA
SAUDI ARABIA
RIYADH
TOP 10 FINANCIAL INSTITUTIONS IN SAUDI ARABIA
T
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 the top 10. This is no mean feat, considering how hard Saudi Arabia’s economy has been hit by lower oil prices. However, its banks remain liquid and resilient, with the IMF convinced that all banks will be able to meet their regulatory capital requirements come what may. Lower government spending drags on economic growth, in turn dampening credit demand and weakening corporate and consumer borrowers’ ability to repay debt. As the Saudi Government reins in spending, problem loans could start to rise. Banks’ funding strategies and SAMA’s liquidity management framework will have to adjust to structural
22
changes in liquidity conditions, according to the IMF. The model in place for over a decade whereby banks relied almost exclusively on domestic deposits for funding and on SAMA for draining chronic excess liquidity cannot continue. However, Saudi banks now have a fair wind behind them. The Saudi economy is expected to rebound in 2018, buoyed by increased oil production and rising prices. The non-oil economy is faring better too, as the Kingdom ups its efforts to create a diversified economy. Our data shows that Saudi Arabian banks bounced back in 2017 after bearing the brunt of falling oil prices in 2016. The winds of change may continue to blow in Saudi Arabia, but the dust is settling.
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
PARAMETERS
Liabilities
Revenues
2017
2016
Net Profit
$ 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
887,414
400,606
2016
27,927,963 22,813,707
2017
30,668,018 25,175,444 1,166,122
PERCENTAGE CHANGE
9.81%
10.35%
31.41%
536,362 33.89%
bankerme.net
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SAUDI ARABIA
NOTE: All figures are in US dollars ('000)
TOP 10 INSTITUTIONS IN SAUDI ARABIA BY ASSETS 118,364,231
National Commercial Bank 91,497,741
Al Rajhi Bank 60,696,288
Samba Financial Group
57,675,246
Riyad Bank Banque Saudi Fransi
51,447,702
SABB
50,030,758
Arab National Bank Alinma Bank
45,787,120 30,668,018
Alawwal Bank
26,631,955
The Saudi Investment Bank
25,012,325
TOP 10 INSTITUTIONS IN SAUDI ARABIA BY REVENUES 4,895,222
National Commercial Bank
4,241,294
Al Rajhi Bank Riyad Bank
2,172,886
Samba Financial Group
2,104,418
SABB
1,918,886
Banque Saudi Fransi
1,755,673
Arab National Bank Alinma Bank Alawwal Bank Bank AlBilad
1,708,961 1,166,122 992,382 789,276
TOP 10 INSTITUTIONS IN UAE BY NET PROFIT 2,657,242
National Commercial Bank
2,432,194
Al Rajhi Bank 1,339,811
Samba Financial Group
1,054,554
SABB Riyad Bank
1,052,266
Banque Saudi Fransi
941,836
Arab National Bank Alinma Bank
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809,082 536,362
The Saudi Investment Bank
376,213
Alawwal Bank
356,138
TOP 10 INSTITUTIONS IN SAUDI ARABIA BY RETURN ON ASSETS (ROA) 2.67%
Al Rajhi Bank 2.24%
National Commercial Bank
2.18%
Samba Financial Group
2.11%
SABB Riyad Bank
1.81%
Banque Saudi Fransi
1.78%
Arab National Bank
1.77%
Bank AlBilad The Saudi Investment Bank Bank AlJazira
1.60% 1.50% 1.27%
TOP 10 INSTITUTIONS IN SAUDI ARABIA BY DEBT-TO-EQUITY RATIO In Times 7.33
Bank AlBilad
6.73
Bank AlJazira
6.34
Alawwal Bank
5.91
National Commercial Bank 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
Y
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 before you find a Bahraini bank. When we launched the BME100, Bahraini banks took up a quarter of the index—there are now just 17 banks left in the running. Still, this is one more than last year and, despite a challenging few years, there is cause for cheer. Bahrain Islamic Bank features in the top 10 of our fastest growing banks, and four new Bahraini banks have entered the index. International agencies agree that Bahrain’s economy is the one of the most vulnerable in the GCC, with only modest oil reserves that the economy is dangerously reliant on. With sky-high government debt and political tensions continuing to bubble below the surface, observers have not been kind about Bahrain’s outlook. The IMF has slashed Bahrain’s GDP growth forecast to just 1.6 per cent for 2018, citing ongoing fiscal consolidation and weaker investor sentiment. However, Bahrain’s large financial sector remains among the country’s greatest assets. Its retail banks,
26
the main domestic intermediators, remain healthy in terms of liquidity, capitalisation, and leverage. The Central Bank of Bahrain has pointed out that the capital adequacy ratio of the banking sector reached 19.8 per cent as of September 2017, well above the regulatory requirement. Retail deposits continued to grow reaching $45.1 billion in October 2017, increasing by almost 4.5 per cent compared to the same period in 2016. Asset quality is on an improving trend, but the system-wide nonperforming loan ratio is still in the high single digits, according to S&P’s estimation, and some large banks carry high amounts of restructured exposures. BMI research says that credit growth at Bahrain’s banks will accelerate for the rest of 2018, boosting asset growth, however tightening fiscal policy could curb economic activity and limit asset growth from next year. For now, Bahrain’s banks are swimming against the tide.
NOTE: All figures are in US dollars ('000)
GROWTH OF FINANCIAL INSTITUTIONS FROM 2016 TO 2017 10.0% 5.0%
3.6%
3.7%
0.0% -5.0% -10.0% -15.0% -20.0%
-18.9% -22.7%
-25.0% Assets
Liabilities
Revenues
PARAMETERS
2017
2016
$ Change
Net Profit
% 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
27.49%
30.64%
PERCENTAGE CHANGE
15.95%
17.26%
bankerme.net
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BAHRAIN
NOTE: All figures are in US dollars ('000)
TOP 10 INSTITUTIONS IN BAHRAIN BY ASSETS 33,241,885
Ahli United Bank
29,499,000
Arab Banking Corporation (Bank ABC)
25,471,300
Gulf International Bank 10,008,245
BBK 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 1,119,372
Ahli United Bank 869,000
Arab Banking Corporation (Bank ABC) 421,726
Investcorp Bank
380,476
BBK
360,300
Gulf International Bank National Bank of Bahrain
277,846
Ithmaar Bank
237,231
Gulf Finance House Financial Group BSC Al Salam Bank-Bahrain Kuwait Finance House-Bahrain
211,648 167,489 125,638
TOP 10 INSTITUTIONS IN UAE BY NET PROFIT 666,514
Ahli United Bank 253,000
Arab Banking Corporation (Bank ABC) National Bank of Bahrain
162,261
BBK
157,529
Investcorp Bank Gulf Finance House Financial Group BSC Gulf International Bank Eskan Bank
28
120,259 103,188 70,000 57,293
Kuwait Finance House-Bahrain
53,223
Al Salam Bank-Bahrain
48,019
TOP 10 INSTITUTIONS IN BAHRAIN BY RETURN ON ASSETS (ROA) 4.7%
Ahli United Bank 3.1%
Arab Banking Corporation (Bank ABC)
2.8%
Gulf International Bank 2.1%
BBK
2.0%
Ithmaar Bank
1.6%
National Bank of Bahrain Al Salam Bank-Bahrain
1.6%
Gulf Finance House Financial Group BSC
1.4%
Kuwait Finance House-Bahrain Bahrain Islamic Bank
1.1% 0.9%
TOP 10 INSTITUTIONS IN BAHRAIN BY DEBT-TO-EQUITY RATIO In Times 9.57
Gulf International Bank 6.51
BBK
5.93
National Bank of Bahrain Ahli United Bank
5.80
Arab Banking Corporation (Bank ABC)
5.69
ABC Islamic Bank
3.68
Al Salam Bank-Bahrain Eskan Bank Ithmaar Bank Investcorp Bank
2.76 1.81 1.57 1.32
AVERAGE CAPITAL ADEQUACY RATIO (CAR) OF FINANCIAL INSTITUTIONS IN THE COUNTRY
21.05% bankerme.net
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BANK ABC ISLAMIC
BANKS WITHOUT BORDERS Hammad Hassan, Managing Director of Bank ABC Islamic, explains how the bank is setting a global benchmark
W
hat makes Bank ABC Islamic unique in the Shari’ah banking market? “Bank ABC Islamic is part of the Bank ABC Group that has a global presence in MENA markets, Europe, the Far East, North America and Brazil. This makes Bank ABC Islamic quite unique in comparison to its competitors, which are mostly Islamic banks with either a country-specific or regional presence. Bank ABC Islamic covers GCC markets through its head office in Bahrain and Bank ABC’s branch in DIFC. “As many GCC-based corporates have a growing interest in MENA markets, we are able to provide on-theground knowledge and expertise leveraging on the Group’s network. As a bank that has roots in the Arab world, we understand the needs of our clients across the different geographies that they operate in and are able to service their Shari’ah-compliant banking requirements. “Our ability to cover our clients from Bahrain and the DIFC using ABC Group’s network optimally differentiates us from the competition. Additionally, we are able to provide access to capital markets to our clients and help them reach investors across the globe.” What have the bank’s milestones been so far in 2018? “Despite subdued activity due to volatility in emerging markets so far in 2018, the bank has been active in capital markets – both Sukuk and syndicated financing. Since the beginning of the year, the Bank has successfully led key regional capital markets mandates. On the product front, we have been very active in providing Shari’ah-compliant liquidity management solutions for institutional clients.” What are the bank’s objectives for the rest of the year? “We are carefully evaluating the developments of Islamic finance in MENA markets and will work closely with the parent, Bank ABC towards the establishment of Islamic banking services in these markets subject to regulatory approvals.
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Hammad Hassan
AMONGST OUR CORPORATE CLIENT BASE, THERE ARE EITHER STRICTLY SHARI’AH-COMPLIANT INVESTORS AND BORROWERS, OR THOSE WHO ARE INDIFFERENT BUT WOULD ACCEPT ISLAMIC FINANCE IF IT OPENS UP AVENUES OF ADDITIONAL LIQUIDITY FOR THEM.
“From our Bahrain and DIFC hubs, we will continue to expand the Islamic wholesale banking business by originating new clients and maintaining our lead in Islamic capital markets—both Sukuk and syndicated financing.” What innovations has Bank ABC Islamic brought to the Islamic banking market? “As we are a wholesale bank, our focus has always been towards providing innovative solutions to our corporate and institutional clients. “For the corporate client segment, we have been able to add value across the supply chain for our clients. A recent example is helping one of Bank ABC’s corporate clients from Asia by providing a Shari’ah-compliant financing solution for its buyers in the Middle East, and then distributing this risk to Islamic investors in the GCC markets. This created value across the supply chain and made Islamic financing relevant to an otherwise conventional client in Asia. “On the institutional front, we have the widest range of solutions ranging from liquidity management to trade 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.” What have Bank ABC Islamic’s most popular offerings been in 2018? “In terms of volume, Murabahah-based products remain the most popular amongst corporate Islamic clients. For institutional clients, IIFM-based Collateralised Murabahah, which can be considered an equivalent of repo and reverse repo facilities, has been popular with our clients.” What will Bank ABC Islamic’s greatest challenges be for the next 12 months? “There has been continued volatility in emerging markets, which has adversely affected investor confidence. This has negatively impacted the ability of many issuers across the region to tap capital markets, and hence many deals have been put on hold. Geopolitical stability in the region is essential for financial market activity to pick up again.” How has awareness of Islamic banking grown over the last few years? “In the GCC, Islamic banking now co-exists with conventional banking. In countries like Saudi Arabia, banks no longer offer conventional retail banking products, as the entire retail client base prefers Islamic banking. Awareness of Islamic banking is on the rise
in the Middle East. Morocco has issued Islamic banking regulations and is expected to be followed by Algeria. “Jordan and Egypt already offer Islamic banking and so does Tunisia. In most of the markets, the development of Islamic finance has been on account of investor demand – this has also led to the growth of Islamic of capital markets and drawn regulators’ attention to put in the required infrastructure to support Islamic finance.” What proportion of your customer base is Muslim? “We service corporate and institutional clients. Institutional clients can be clearly segmented as Shari’ah-compliant or conventional, and only Shari’ah-complaint institutional clients require Islamic financing solutions. Amongst our corporate client base, there are either strictly Shari’ahcompliant investors and borrowers, or those who are indifferent but would accept Islamic finance if it opens up avenues of additional liquidity for them. “As a provider of Shari’ah-compliant solutions, it is important for us to ascertain and determine that our clients’ business is not related to non-Shari’ah-compliant products and services.”
THERE HAS BEEN CONTINUED VOLATILITY IN EMERGING MARKETS, WHICH HAS ADVERSELY AFFECTED INVESTOR CONFIDENCE. THIS HAS NEGATIVELY IMPACTED THE ABILITY OF MANY ISSUERS ACROSS THE REGION TO TAP CAPITAL MARKETS, AND HENCE MANY DEALS HAVE BEEN PUT ON HOLD.
What is the next stage of evolution for Islamic banking? “In order to keep pace with its conventional counterpart, Islamic banking needs to be at the cutting edge of technological advancements. Islamic banking services providers will have to keep pace with the developments in digital banking and fintech to be able to meet the requirements of their client base that is getting increasingly more sophisticated.” How will Bank ABC Islamic support the development of Islamic banking globally? “Bank ABC Islamic will continue to leverage on the network of its parent, Bank ABC and will be working towards the establishment of Islamic finance in the markets in which the Group operates.”
bankerme.net
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KUWAIT
KUWAIT KUWAIT
TOP 10 FINANCIAL INSTITUTIONS IN KUWAIT
T
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 a place in the top 10, but Kuwait’s real claim to fame is that it boasts the fastest growing bank in the Middle East: Warba Bank. Kuwait’s presence in the index has grown steadily over the years, starting from just seven in 2014 to 11 in 2017. Kuwait banks have seen some modest climbs and modest falls, which suitably sums up their economic scenario. Kuwait is in the same boat as its GCC peers, but is facing lower oil prices from a position of strength, thanks to large financial buffers, low debt, and a sound financial sector. Nonetheless, lower oil prices have weakened fiscal and external positions and generated large fiscal financing needs, according to the IMF. The banking sector has remained sound, although deposit and credit growth have somewhat slowed.
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As of Q2 2017, banks featured high capitalisation, steady profitability, low non-performing loans, and high loan-loss provisioning. Moreover, banks have maintained strong liquidity buffers. Private sector deposit growth has declined in recent years, but this has partly been offset by an increase in public sector deposits, the IMF said. While the growth of credit to the private sector has also slowed mildly on a year-on-year basis since July 2016, the underlying trend has remained above 5.5 per cent. The CBK has been proactive in improving supervision and regulation. Enhancing the crisis management and preparedness and the liquidity forecasting frameworks would help further strengthen financial sector resilience, according to the IMF. Kuwait’s modesty obviously does it credit.
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%
Assets
Liabilities
0.0% 2.0% -4.0% 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
52.68%
142.29%
PERCENTAGE CHANGE
45.03%
42.68%
bankerme.net
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KUWAIT
NOTE: All figures are in US dollars ('000)
TOP 10 INSTITUTIONS IN KUWAIT BY ASSETS 78,417,473
National Bank of Kuwait 52,283,075
Kuwait Finance House 22,334,976
Burgan bank 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 2,477,931
National Bank of Kuwait
2,148,434
Kuwait Finance House 721,163
Burgan bank
546,331
Gulf Bank Al Ahli Bank of Kuwait Commercial Bank of Kuwait Boubyan Bank
472,867 454,663 378,214
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 1,031,039
National Bank of Kuwait 645,045
Kuwait Finance House 208,042
Burgan bank Commercial Bank of Kuwait Gulf Bank
144,648
Boubyan Bank
143,590
Ahli United Bank-Kuwait Al Ahli Bank of Kuwait Alafco Aviation Lease and Finance Company Kuwait International Bank
34
167,169
133,925 107,681 98,840 53,593
TOP 10 INSTITUTIONS IN KUWAIT BY RETURN ON ASSETS (ROA) 3.28%
Alafco Aviation Lease and Finance Company 1.31%
National Bank of Kuwait Commercial Bank of Kuwait
1.25%
Boubyan Bank
1.23% 1.21%
Kuwait Finance House
1.16%
Ahli United Bank-Kuwait Kuwait International Bank Burgan Bank
0.91% 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 9.11
Warba Bank 8.45
Gulf Bank 7.78
Boubyan Bank
7.55
Burgan Bank 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
O
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 rankings. However, two feature in the top 10 Fastest Growing Banks. Our data reflects the struggles Oman’s banks are facing with declining profits. Compounded by participating in OPEC oil production cuts in 2017, low oil prices and fiscal austerity continue to weigh on Oman’s economy. Fiscal and current account deficits remain large, according to the World Bank, and with Oman increasingly resorting to external borrowing to finance its deficits, public debt is rising rapidly. According to Moody’s, the Government’s tighter purse strings could paralyse Oman’s banking sector, as its capacity to support the country’s banks will be limited and liquidity conditions will be tightened. Slower economic growth is expected to drive a marginal weakening in problem loans, according to the rating agency.
36
Moreover, high concentrations of loans to single borrowers and to the real-estate sector pose downside risks to asset quality. However, Moody’s expects capital to remain sound, although profitability is expected to decline. Net interest margins will likely remain stable while loan loss provisioning could increase somewhat as problem loans rise. Funding and liquidity conditions will remain tight, as high domestic government borrowing limits funds available to lend to the wider economy. Nonetheless, the government’s international bond issuances, slower credit growth and higher oil prices will moderate the pressure. The IMF noted that the Omani banking system remains well capitalised and deposits have increased, liquidity conditions appear to have eased, and credit to the private sector continues to grow. In one of the Arab world’s oldest nations, nothing is likely to change quickly.
NOTE: All figures are in US dollars ('000)
GROWTH OF FINANCIAL INSTITUTIONS FROM 2016 TO 2017 8.0% 6.0%
5.4% 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
OMAN
NOTE: All figures are in US dollars ('000)
TOP 9 INSTITUTIONS IN OMAN BY ASSETS 28,959,020
Bank Muscat 11,044,759
Bank Dhofar
9,013,901
National Bank of Oman
7,383,943
Bank Sohar
6,061,810
HSBC Bank Oman 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 1,255,006
Bank Muscat 367,808
National Bank of Oman
345,836
Bank Dhofar
202,179
Oman Arab Bank Bank Sohar
198,483
HSBC Bank Oman
195,580
Ahli Bank-Oman Bank Nizwa Alizz Islamic Bank
150,119 58,236 32,209
TOP 9 INSTITUTIONS IN OMAN BY NET PROFIT 459,265
Bank Muscat 123,867
Bank Dhofar
114,353
National Bank of Oman
69,266
Ahli Bank-Oman Oman Arab Bank
69,043
Bank Sohar
65,796
HSBC Bank Oman
38
49,653
Bank Nizwa
9,848
Alizz Islamic Bank
-7,792
TOP 8 BANKS IN OMAN BY RETURN ON ASSETS (ROA) 1.6%
Bank Muscat
1.4%
Ahli Bank-Oman
1.3%
Oman Arab Bank National Bank of Oman
1.3%
Bank Dhofar
1.2% 0.9%
Bank Sohar HSBC Bank Oman Bank Nizwa
0.8% 0.6%
TOP 9 INSTITUTIONS IN OMAN BY DEBT-TO-EQUITY RATIO In Times Bank Dhofar
6.23
Bank Sohar
6.22 6.22
HSBC Bank Oman
6.00
Oman Arab Bank 5.61
Ahli Bank-Oman National Bank of Oman
5.35
Bank Muscat
5.13
Alizz Islamic Bank Bank Nizwa
1.97 0.94
AVERAGE CAPITAL ADEQUACY RATIO (CAR) OF FINANCIAL INSTITUTIONS IN THE COUNTRY
17.17% bankerme.net
39
JORDAN
JORDAN
AMMAN
TOP 10 FINANCIAL INSTITUTIONS IN JORDAN
J
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 more than any other country this year. Jordan’s Bank Al-Etihad also comes in second place in our rankings of the fastest growing banks. However, such accolades can’t detract from the fact that its banking system in under pressure. An unprecedented influx of refugees from Syria have put a strain on Jordan’s already fragile economy, which is among the smallest in the Middle East. Fresh funds from Saudi Arabia, Kuwait and the UAE may help to ease the burden of austerity – if it is spent wisely. Real GDP growth is expected to creep up to 2.5 per cent this year, from around 2.3 per cent in 2017. However, despite this gradual rebound, economic growth will remain below potential. Against this backdrop, it is unsurprising that credit risk at Jordanian banks is high, affected by rising interest rates, inflation and rising unemployment. As a result, non-performing loans are expected to increase,
40
according to Moody’s. Jordanian banks also have a concentration of exposure to the Jordanian Government, which links their credit profiles to that of the sovereign. However, Moody’s says that Jordan’s banks will be protected from their high credit risk by solid capital levels and strong liquidity. Moody’s expects capital levels at Jordan’s banks to remain solid, given the modest growth in risk-weighted assets and some profit retention. Banks are expected to maintain solid liquidity buffers, which stood at 39 per cent of total assets as at the end of September 2017. Moody’s also expects stable profitability at the nation’s banks, as higher interest rates will lead to higher net interest margins that will counter elevated loan loss provisions. A financial stability report from the country’s own Central Bank ranked Jordan third among 19 European countries that have developed a similar index. It claimed that Jordan enjoys a “healthy, sound, and stable” banking sector. Our own index doesn’t entirely disagree.
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
46.01%
19.03%
PERCENTAGE CHANGE
39.56%
38.42%
bankerme.net
41
JORDAN
NOTE: All figures are in US dollars ('000)
TOP 10 INSTITUTIONS IN JORDAN BY ASSETS 48,163,721
Arab Bank 11,482,285
The Housing Bank for Trade & Finance Jordan Islamic Bank Bank Al-Etihad
5,954,328 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 1,983,999
Arab Bank 459,864
The Housing Bank for Trade & Finance Bank of Jordan
218,643
Bank Al-Etihad
207,517
Jordan Islamic Bank Cairo Amman Bank
207,293 177,675
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 532,963
Arab Bank 176,593
The Housing Bank for Trade & Finance Jordan Islamic Bank 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 Arab Jordan Investment Bank
42
76,360
38,019 24,224
TOP 10 INSTITUTIONS IN JORDAN BY RETURN ON ASSETS (ROA) 1.86%
Bank of Jordan 1.57%
The Housing Bank for Trade & Finance
1.56%
Invest Bank-Jordan
1.43%
Islamic International Arab Bank
1.36%
Capital Bank of Jordan
1.30%
Jordan Islamic Bank 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 9.08
Societe Generale de Banque Jordanie 8.24
Jordan Commercial Bank
7.91
Jordan Ahli Bank
7.38
Arab Jordan Investment Bank
7.05
Cairo Amman Bank 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
A
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 boasts the least number of banks in the BME100 the ones present do pack a punch. Three of them feature in the top 10 of the Fastest Growing Banks. Their performance is a triumph over adversity. Rigid border constraints, spending cuts and threats of further donor funding declines have ravished Palestine’s local economy. Although GDP growth is estimated at close to three per cent in 2017, the economic outlook has become more tenuous, and prospects of meaningful gains in the fight against unemployment and poverty remain dim, the IMF warned. Capital adequacy, delinquent loans, and bounced cheques have worsened, according to the IMF, calling for the banking sector to come under closer scrutiny. Private sector credit growth eased as activity slowed during 2017, however it still averaged close to 20 per
44
cent for the year. Rapid credit growth within the limited pool of corporates, some of which are connected, increases banks’ exposure concentration. Although progressing slowly, moves toward reunification offer a potential bright spot. In Gaza, growth could rebound in the near term to the high single digits and stabilise over the medium term at more than five per cent per annum, the IMF said. These improvements could gradually reduce poverty and unemployment. However, without progress toward reunification, the Palestinian economy would stagnate at around 2.3 per cent growth. Reunification is an expensive business, and Palestine is reliant on generous donor financing to ease crossborder transactions and plug financial leakages. Even in the best-case scenario, Palestinian banks may still have to put in the most impressive performance for the smallest returns.
NOTE: All figures are in US dollars ('000)
GROWTH OF FINANCIAL INSTITUTIONS FROM 2016 TO 2017 25.0% 22.0%
20.4%
20.1%
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
PALESTINE
NOTE: All figures are in US dollars ('000)
TOP 5 INSTITUTIONS IN PALESTINE BY ASSETS 4,884,823
Bank of Palestine 1,079,399
The National Bank Quds Bank
1,075,630
Arab Islamic Bank
1,041,104
Palestine Islamic Bank
1,010,369
TOP 5 INSTITUTIONS IN PALESTINE BY REVENUES 220,935
Bank of Palestine Quds Bank
53,678
Palestine Islamic Bank
51,484 39,655
The National Bank
33,906
Arab Islamic Bank
TOP 5 INSTITUTIONS IN PALESTINE BY NET PROFIT 54,009
Bank of Palestine Palestine Islamic Bank Quds Bank The National Bank Arab Islamic Bank
46
14,531 11,180 9,205 6,403
TOP 5 INSTITUTIONS IN PALESTINE BY RETURN ON ASSETS (ROA) 1.60%
Palestine Islamic Bank 1.20%
Bank of Palestine
1.10%
Quds Bank
0.94%
The National Bank
0.70%
Arab Islamic Bank
TOP 5 INSTITUTIONS IN PALESTINE BY DEBT-TO-EQUITY RATIO In Times 10.06
The National Bank
9.86
Bank of Palestine
9.47
Quds Bank Arab Islamic Bank Palestine Islamic Bank
0.76 0.53
AVERAGE CAPITAL ADEQUACY RATIO (CAR) OF FINANCIAL INSTITUTIONS IN THE COUNTRY
14.72% bankerme.net
47
LEBANON
LEBANON
BEIRUT
TOP 7 FINANCIAL INSTITUTIONS IN LEBANON
L
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 BME100, and barely break into the top 40 on our list of Fastest Growing Banks. This is hardly surprising. Lebanon’s economic situation is underlined by high public debt, current account deficit, and urgent funding needs. The IMF estimates that public debt is above 150 per cent of GDP, and will continue to rise rapidly. The country’s sovereign credit ratings paint a bleak picture. Moody’s downgraded Lebanon from B2 to B3 in August 2017, while Fitch and S&P have maintained their ratings at B-/B3 equivalent. Lebanon’s economic growth remains low, estimated at about 1-1.5 per cent in 2017 and 2018, according to the IMF. The traditional drivers of growth in Lebanon are subdued with real estate and construction weak and a strong rebound is unlikely soon. Under current policies growth is projected to gradually increase towards three per cent over the medium term. Inflation spiked to five per cent in 2017 as the cost of oil imports rose and the US dollar weakened.
48
The headline fiscal balance posted an improvement in 2017 to a deficit of 7.3 per cent of GDP, partly due to one-off revenues from taxing higher bank profits arising from Banque du Liban’s (BdL) financial operations undertaken in 2016. The Government’s high and increasing debt burden and reliance on the banking system to finance its large budget deficit render domestic banks susceptible to sovereign event risk and increase financial risks, Moody’s said. Total banking system assets equalled over four times GDP at the end of 2016, one of the highest levels globally, driven by banks’ large sovereign exposures. Deposit inflows, which finance Lebanon’s twin deficits, slowed down in 2017 mostly due to some limited outflows during the November 2017 political crisis. The BdL has increased interest rates through its monetary and financial operations, especially on local currency products, to support inflows and arrest dollarisation. However, it could be a long time before banks feel any relief.
NOTE: All figures are in US dollars ('000)
GROWTH OF FINANCIAL INSTITUTIONS FROM 2016 TO 2017 8.2%
10.0% 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
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
ASSETS
6.78%
LIABILITIES
7.54%
11.34%
1.51%
bankerme.net
49
LEBANON
NOTE: All figures are in US dollars ('000)
TOP 7 INSTITUTIONS IN LEBANON BY ASSETS 43,751,839
Bank Audi 32,544,016
BLOM Bank 22,661,703
Byblos Bank
18,374,519
Bank of Beirut BLC Bank First National Bank Banque Bemo
5,869,461 4,889,917 1,769,357
TOP 7 INSTITUTIONS IN LEBANON BY REVENUES 1,460,375
Bank Audi 1,012,853
BLOM Bank Bank of Beirut
469,079
Byblos Bank
455,443
BLC Bank First National Bank Banque Bemo
129,015 103,583 49,181
TOP 7 INSTITUTIONS IN LEBANON BY NET PROFIT 558,955
Bank Audi 485,272
BLOM Bank 204,420
Bank of Beirut
170,119
Byblos Bank BLC Bank First National Bank Banque Bemo
50
46,488 36,283 18,383
TOP 7 INSTITUTIONS IN LEBANON BY RETURN ON ASSETS (ROA) 1.56%
BLOM Bank 1.27%
Bank Audi
1.15%
Bank of Beirut
1.04%
Banque Bemo 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 11.06
Byblos Bank
10.07
First National Bank
9.83
BLOM Bank BLC Bank
9.45
Bank Audi
9.45
Banque Bemo Bank of Beirut
9.19 6.81
AVERAGE CAPITAL ADEQUACY RATIO (CAR) OF FINANCIAL INSTITUTIONS IN THE COUNTRY
14.80% bankerme.net
51
BANK OF BEIRUT 52
TRIUMPHING OVER ADVERSITY Bank of Beirut
D
espite the economic slowdown in Lebanon, Bank of Beirut strengthened its franchise through above average growth in total assets and 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 commercial and retail businesses. On a consolidated basis, the bank’s total assets reached $18.4 billion, growing by 6.73 per cent year-on-year. The growth in size was mainly funded by the growth in deposits and equity. The consolidated total net profit after tax increased in 2017 by 1.51 per cent to $204.4 million, compared to $201 million for the year 2016. The bank said that the positive performance was driven by growth in business activities, efficient management of interest rate margins, a high commission base and an effective cost containment policy, and a focus on consistently increasing the operating noninterest base revenues. Bank of Beirut reflected a very healthy set of capital ratios in 2017. The bank has strengthened its capital base to fund its expansion strategy, in addition to complying comfortably with Basel III requirements. Salim G. Sfeir, Group Chairman of Bank of Beirut, elucidated, “2017 was a year of continuing progress. Bank of Beirut’s strong performance reflects the first-rate execution of our growth strategy. While remaining true to our traditional banking values, focusing on earnings and building trust, we have significantly expanded our investment in the emerging digital economy, extending our reach to serve valued customers in new and innovative ways. “On a consolidated level, as at 31 December 2017, the Bank’s total assets reached $18.40 billion, growing by 6.73 per cent year-on-year. This growth was mainly funded by increases in deposits and equity. Total Shareholders’ equity reached $2.352 billion. “Even with strong asset growth, we achieved a 1.15 per cent Return On Average Assets (ROAA) in 2017. Dividend yield per common share is still rising, attaining 4.06 per cent in 2017, compared to 3.53 per cent in 2016, a clear
Bank of Beirut Headquarters, Beirut
sign of the bank’s financial health, and Bank of Beirut’s confidence to disburse dividends to our stakeholders. “Risk management continues to be a priority. Continuing our strong performance in 2016 and 2017, we remain resolute in maintaining a responsible, diversified growth strategy. Responding effectively to our home market’s political and economic challenges has helped Bank of Beirut to build an exceptional culture of commitment, resilience and a passion for positive outcomes, even in adversity. “We are well prepared to withstand both external impacts from unpredictable changes in the markets and evolving banking laws and regulations, driven by political and economic factors. “In this respect, we are committed to conducting business within the effective and prudent regulations overseen by the Central Bank of Lebanon and the Banking Control Commission of Lebanon, which we view as crucial for the protection and soundness of the entire Lebanese financial sector. “At the same time, these social and economic challenges provide opportunities to serve our communities. That sustainability, durability and commitment to serve is built into our group DNA. We continue our investment in professional development and talent acquisition. With business units in nine countries, increasing our diversity and inclusion helps to build a responsive, relevant and empathetic culture. “Together, serving great customers with continuously improving service and management disciplines, I am confident in our ability to deliver sustainable and profitable growth, ‘Beyond Borders’.”
BANK NAME
COUNTRY
ISLAMIC RANK
BME 100 RANK
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
ISLAMIC BANKS
Islamic Financial Institutions in BME100
53
ISLAMIC BANKS
DOMICILE OF ISLAMIC BANKS IN BME100 3 Intitutions
2 Intitutions
6%
2 Intitutions
9% 6%
10 Intitutions
31%
32
19%
Financial Institutions 16%
6 Intitutions
13% 4 Intitutions
5 Intitutions United Arab Emirates
I
Saudi Arabia
Kuwait
slamic finance has been feeling the effects of slowing economies. The global Islamic finance industry grew to be worth more than $2.4 trillion at the end of 2017, according to the Global Islamic Finance Report 2018, marking the fourth consecutive year that the industry registered a single digit growth and the fifth consecutive year that the growth rate has been on a declining trend. Islamic finance hasn’t been immune to falling oil prices. The industry remains concentrated primarily in oil-exporting countries, with GCC countries, Malaysia and Iran accounting for more than 80 per cent of the industry’s assets, according to S&P. Therefore, lower oil prices and governments’ cuts to investment have punctured the industry’s growth prospects. 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 predicts that profitability will deteriorate again in 2018 as the cost of funding continues to rise alongside credit losses. Islamic banks’ revenue growth will also decelerate. However, like their conventional cousins, GCC Islamic banks have relatively low cost bases which will help protect profitability. Capitalisation is generally a positive factor for GCC Islamic banks. However, S&P notes previous rapid financing growth was not matched by additional capital. Few GCC banks have issued capital-boosting Sukuk and those that have are primarily in the UAE and Saudi Arabia.
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Bahrain
Oman
Jordan
Palestine
Although growth has moderated, the industry has enjoyed some progress. It is hardly surprising that Islamic financial institutions from the UAE, Saudi Arabia and Kuwait dominate the top spots for Islamic financial institutions in the BME100 rankings. Islamic banking shone during the global financial crisis, having dodged the bullet fired by derivatives in 2007. Ten years on, the world is a different place. In 2017, the world staged an impressive economic recovery but Islamic banks continue to face the same challenges. Shari’ah boards and external Shari’ah audits are some GCC countries are steps in the right direction; however, standardised documentation, a homogenous Shari’ah interpretation and greater market awareness are all elusive goals that the industry can’t afford to lose sight of.
ISLAMIC INSTITUTIONS IN BME100 Year-on-Year Growth Net Profit Revenues Liabilities Assets
+16.8% +4.7% +5.8% +5.5% 2017
2016
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
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ISLAMIC BANKS
NOTE: All figures are in US dollars ('000)
ASSETS IN 2017
23% $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
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Conventional Institutions
NO. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
INSTITUTION NAME ABC Islamic Bank Abu Dhabi Commercial Bank Abu Dhabi Islamic Bank Ahli Bank - Oman Ahli United Bank Ahli United Bank - Kuwait Ajman Bank Al Ahli Bank of Kuwait Al Baraka Islamic Bank Al Rajhi Bank Al Salam Bank - Bahrain Alafco Aviation Lease and Finance Company Alawwal Bank Alinma Bank Alizz Islamic Bank Alubaf Arab International Bank Arab Bank Arab Banking Corporation (Bank ABC) Arab Banking Corporation (Jordan) Arab Islamic Bank Arab Jordan Investment Bank Arab National Bank Bahrain Islamic Bank Bank AlBilad Bank Al-Etihad Bank AlJazira Bank Audi Bank Dhofar Bank Muscat Bank Nizwa Bank of Beirut Bank of Jordan Bank of Palestine Bank of Sharjah Bank Sohar Banque Bemo Banque Saudi Fransi BBK BLC Bank BLOM Bank Boubyan Bank Burgan Bank Byblos Bank Cairo Amman Bank Capital Bank of Jordan Commercial Bank International Commercial Bank of Dubai Commercial Bank of Kuwait Dubai Islamic Bank Emirates Investment Bank
COUNTRY Bahrain United Arab Emirates United Arab Emirates Oman Bahrain Kuwait United Arab Emirates Kuwait Bahrain Saudi Arabia Bahrain Kuwait Saudi Arabia Saudi Arabia Oman Bahrain Jordan Bahrain Jordan Palestine Jordan Saudi Arabia Bahrain Saudi Arabia Jordan Saudi Arabia Lebanon Oman Oman Oman Lebanon Jordan Palestine United Arab Emirates Oman Lebanon Saudi Arabia Bahrain Lebanon Lebanon Kuwait Kuwait Lebanon Jordan Jordan United Arab Emirates United Arab Emirates Kuwait United Arab Emirates United Arab Emirates
TOTAL EQUITY (USD ‘000) 332,851 8,834,565 4,512,774 791,758 4,888,154 1,408,398 574,665 1,725,117 1,727,500 14,866,911 1,124,250 863,682 3,626,586 5,492,574 498,291 313,851 8,409,272 4,412,000 226,011 592,491 309,391 6,684,257 2,436,239 2,023,678 646,701 2,354,357 4,187,901 1,526,676 4,722,943 933,225 2,353,455 619,402 449,962 1,107,674 1,022,326 173,698 8,443,035 1,332,008 561,526 3,005,563 1,362,521 2,613,434 1,879,385 489,496 493,312 671,929 2,472,636 1,972,952 7,863,994 154,931
CAPITAL ADEQUACY RATIO (CAR) 31.20% 19.09% 17.02% 16.70% 17.00% 18.00% 15.62% 17.23% 17.27% 23.29% 21.43% N/A 20.34% 21.00% 16.67% 37.00% 15.28% 18.70% 18.88% 15.94% 15.95% 17.56% 19.40% 18.54% 14.33% 20.94% 16.90% 15.44% 18.45% 17.25% N/A 19.76% 14.68% 17.93% 16.22% 17.85% 19.39% 20.01% 18.40% 18.50% 19.41% 16.20% 17.80% 15.04% 15.18% 14.80% 15.04% 18.71% 17.20% 14.81%
bankerme.net
APPENDIX
The below table shows the Capital Adequacy Ratio (CAR) for each financial institution included in the BME100, listed in alphabetical order.
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APPENDIX 58
The below table shows the Capital Adequacy Ratio (CAR) for each financial institution included in the BME100, listed in alphabetical order. NO. 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100
INSTITUTION NAME
COUNTRY
Emirates Islamic Emirates NBD Eskan Bank Finance House First Abu Dhabi Bank First Energy Bank First National Bank Gulf Bank GFH Financial Group BSC Gulf International Bank HSBC Bank Oman Invest Bank Invest Bank - Jordan Investcorp Bank Islamic International Arab Bank Ithmaar Bank Jordan Ahli Bank Jordan Commercial Bank Jordan Islamic Bank Jordan Kuwait Bank Khaleeji Commercial Bank Kuwait Finance House Kuwait Finance House - Bahrain Kuwait International Bank Mansour Bank Mashreq National Bank of Bahrain National Bank of Fujairah National Bank of Kuwait National Bank of Oman National Bank of Umm Al-Qaiwain National Commercial Bank Noor Bank Oman Arab Bank Palestine Islamic Bank Quds Bank Riyad Bank SABB Safwa Islamic Bank Samba Financial Group Sharjah Islamic Bank Societe Generale de Banque Jordanie The Housing Bank for Trade & Finance The National Bank The National Bank of Ras Al-Khaimah (RAKBANK) The Saudi Investment Bank Union National Bank United Arab Bank Waha Capital Warba Bank
United Arab Emirates United Arab Emirates Bahrain United Arab Emirates United Arab Emirates Bahrain Lebanon Kuwait Bahrain Bahrain Oman United Arab Emirates Jordan Bahrain Jordan Bahrain Jordan Jordan Jordan Jordan Bahrain Kuwait Bahrain Kuwait Iraq United Arab Emirates Bahrain United Arab Emirates Kuwait Oman United Arab Emirates Saudi Arabia United Arab Emirates Oman Palestine Palestine Saudi Arabia Saudi Arabia Jordan Saudi Arabia United Arab Emirates Jordan Jordan Palestine United Arab Emirates Saudi Arabia United Arab Emirates United Arab Emirates United Arab Emirates Kuwait
TOTAL EQUITY (USD ‘000) 1,990,248 16,163,795 697,779 245,936 27,831,018 700,001 441,817 1,811,078 2,402,146 2,410,900 839,626 691,602 252,182 1,145,213 1,785,249 3,361,814 431,857 210,918 4,216,697 660,665 1,264,633 6,373,861 1,753,146 794,852 244,822 5,752,599 1,191,090 1,331,692 10,726,208 1,418,854 1,136,450 17,140,159 1,592,991 794,663 659,123 102,731 10,299,465 8,925,459 1,122,838 11,915,241 1,502,867 189,128 1,574,373 97,567 2,142,531 3,807,751 5,300,612 589,416 1,135,425 528,482
CAPITAL ADEQUACY RATIO (CAR) 17.36% 21.88% 133.40% N/A 17.80% 53.90% 13.56% 17.80% 17.36% 15.60% 16.92% 15.93% 15.86% 31.70% 16.50% 13.92% 14.12% 13.70% 23.00% 18.67% 17.00% 17.76% 24.30% 19.05% N/A 17.16% 36.30% 17.50% 17.80% 17.34% 34.61% 20.00% 17.90% 15.69% 14.18% 13.02% 19.60% 20.99% 30.89% 21.10% 21.14% 19.39% 17.11% 15.95% 20.69% 20.38% 19.40% 13.20% N/A 22.46%
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