Arab Bank Group is set for another year of record profits

The trend continued in 2006 as the bottom line grew by another 28.3% during the first nine months of the year as compared to the corresponding period of 2005. The bank's record profits stem from the trickle down effects of surging energy prices. Following the boom in its stock price in 2005, driven by irrational market euphoria, and owing to the subsequent market correction in 2006, the Arab Bank stock is trading near its fair value, according to Arab Advisors Group analysis and calculations.

A new equity report, 'Arab Bank Group Initial Coverage' was released by the Arab Advisors Group's Financial Markets Strategic Research Service on December 12, 2006. This report can be received from the Arab Advisors Group free of charge. The 51-page report provides a comprehensive background on the Arab Bank Group' and a detailed analysis of its performance during 2005 and up to September-end 2006.

The Arab Bank Group is thoroughly profiled, highlighting its major accomplishments during the aforementioned period, including an examination of its major strengths and challenges that lie ahead. The report concludes by offering our opinion on the fair value of the Arab Bank Group' equity. The valuation is based on both historical information and a set of justified assumptions. Arab Advisors Group's analysis of the stock price yields a fair value estimate of JD 20.91.

Arab Advisors Group's analysis reveals that despite its stellar performance during 2005, the following first nine months of 2006 and a positive outlook for 2007, the Arab Bank remains exposed to certain unfavorable conditions. With the possible legal contingency of its New York operation, the Arab Bank Group could be facing yet more legal fees and penalties.

More over, and despite great improvements over preceding years, the Bank still has ample room for improvement in areas such as net profit margin, and return on assets and equity especially when compared to the regional peers listed in the report. Having said that, it must be noted that unlike the mentioned peers, the Arab Bank Group's net profit is mainly sourced from core banking operations with minimal contribution from investment portfolios dependant on volatile capital markets.