Arab Jordan Investment Bank's ratings affirmed

These Ratings are set at the same level as CI's Sovereign Ratings for Jordan. The Outlook for the Bank's Long-Term Foreign Currency Rating is revised to 'Negative' from 'Stable', as is the case with other Jordanian banks, in line with the 'Negative' Outlook CI recently appended to Jordan's Sovereign Long-Term Foreign Currency Rating of 'BB'. This reflects AJIB's incorporation in Jordan and its exposure to Jordanian sovereign debt. Accordingly, the Bank's ratings remain highly correlated with the sovereign's creditworthiness. A possible downgrade of the sovereign or any improvement in Jordan's creditworthiness would have a corresponding effect on AJIB's ratings.

On the basis of the Bank's solid capital adequacy, high liquidity, and better than average profitability the Financial Strength Rating (FSR) is affirmed at 'BBB'. The FSR is constrained by credit and deposit concentrations, a relatively high level of restructured loans, and the difficult operating environment. The 'Stable' Outlook for the FSR is maintained. The Support factor of '3' is affirmed, in view of the high probability of support from the Jordanian authorities in case of need.

AJIB is a well managed institution and follows a clear business strategy. Notwithstanding the steady growth in the balance sheet over the years, the business franchise remains modest in terms of size and market share in the Jordanian banking sector. AJIB's solid capital adequacy has been consistently better than the sector average and provides a good buffer against potential setbacks. Liquidity is strong, in common with other Jordanian banks, and rests on a growing customer deposit base. The significant holdings of liquid and quasi-liquid assets, coupled with the comparatively low share of loans in total assets underscores the Bank's conservative lending policy.

Despite the post-2008 marked growth in non-performing loans (NPLs), albeit from a rather low base, AJIB's overall loan asset quality remains satisfactory in the face of a marked economic slowdown in Jordan. The NPL ratio remains below the sector average and loan-loss reserve coverage is improving. Encouragingly, NPLs recorded a marginal decline in 2012. However, the operating environment in Jordan remains challenging and credit risks are still relatively high. AJIB's solid capital base, in combination with its high liquidity, is a major risk mitigant in this regard.

Supported by diversified sources of revenue streams and good cost control, AJIB's profitability at both the operating and net profit levels has consistently been better than the Jordanian industry average. Net profit reached a record level in 2012, on the back of significantly higher net interest income. Importantly, operating profit continues to provide effective risk absorption capacity.

Established in 1978, AJIB is focused on commercial banking and serves a base of corporate and high net worth customers, including Jordanian government entities. The business strategy seeks to develop private and retail banking in order to further diversify risk assets, sources of funding, and income. In September 2010 AJIB raised its stake in London-based Jordan International Bank Plc to 21.24% from 16.9% after purchasing (together with Housing Bank for Trade and Finance) the shares of the other Jordanian banks.

Jordan International Bank Plc was incorporated in the United Kingdom in 1984 to provide a range of financial services and products to banking institutions, corporations, and private clients, both UK and overseas residents. AJIB's largest shareholder is the Al-Qadi family, the founding owners, who own 40% of shares. Other shareholders include Sheikh Hamad Bin Jassin Bin Jaber Al-Thani (the incumbent Prime Minister of Qatar and acting Foreign Minister, 9.09%), Arab Investment Company (Saudi Arabia, 10.25%), and Libyan Foreign Bank (12.79%). The Bank reported consolidated total assets of JD1,033m ($1.45bn) and total capital of JD156m ($220m) at end 2012.