The Arab Bank breaks income records in 2006

The impressive statistics follow a pretty hectic year for the bank which started with a substantial increase in the amount of its paid-up capital and also involved a major overhaul of its European operations.

All round growth

The Arab Bank's year end figures certainly make attractive reading for Chairman and CEO Abdel Hamid Shoman, with the pre-tax earnings representing a 24.1 per cent lift on 2005. Indeed, after provisions and tax have been taken care of, the net income of $374.3 million is actually a 31.6 per cent spike on the previous year's returns.

Shoman revealed earlier this week that the group's total assets amounted to $32.5 billion by the end of 2006, while the total balance sheet rose $9.5 billion through the year to hit $46.6 billion. Meanwhile, on a day to day business level, customer deposits grew to $21.8 billion in 2006, representing a solid increase of 12.8 per cent, while direct credit facilities reached $14.2 billion, a rise of 20.8 per cent.

But it was in the area of shareholders' equity that the biggest gains were made and the group is now pushing into the top 100 international banks. The Arab Bank decided in late 2005 to issue 180 million new shares to its shareholders in a private subscription and this was completed last February. The process pushed the bank's paid up capital above $500 million and added a sizeable $1.8 billion to its shareholders' equity which now stands at nearly $6 billion, making it the largest banking group by equity in the Arab region.

Shoman put the improved results down to a range of plans and products launched during the year which helped attract small and medium sized deposits into the bank. He also stated that the capital increase had not as yet made any appreciable impact on the bank's financial performance.

European restructuring

But one area where the injection of capital has already been making a difference is in the group's restructuring of its European banking business. The Europe Arab Bank is a new entity, incorporated in the UK last year, which has now taken control of the business previously carried out by the bank's various European branches and subsidiaries. The Arab Bank has pumped 500 million euros into the new operation with the hope that the EAB can capture much of the increasing business being carried out between Europe and the Mena region.

Separate operations in Frankfurt, Paris, Rome, Vienna and Madrid have now been brought under the umbrella of the London office and the bank is looking to expand its network of branches right across the continent in due course. The subsidiary will be looking to exploit the hard-earned reputation of its parent as a leading bank in the Middle East as it seeks to generate new business, with a particular emphasis on trade, private banking, corporate finance and treasury.

Good ratings

Last year, Europe Arab Bank's CEO Phillip Monks told European CEO magazine that one of the bank's first objectives was to achieve an A+ rating. If it does manage to garner an impressive ranking in the near future, then it will simply be following its parent's lead. Earlier this month, Standard and Poor's assigned the Arab Bank A- long-term and A-2 short-term counterparty credit ratings.

This rating follows in the wake of an A- from Fitch and an A3 from Moody's, two other internationally recognised ratings agencies. Abdel Hamid Shoman will be hoping that such indicators of the bank's performance and strength will help it to achieve new income records come the end of 2007.