Cairo Amman Bank's ratings affirmed

These Ratings are set in line with CI's Sovereign Ratings for Jordan. The Bank's Financial Strength Rating (FSR) was affirmed at 'BBB-' on the basis of its strong liquidity, sound loan asset quality, strong profitability, and good Capital Adequacy Ratio (CAR). The FSR is constrained by risk exposure to Palestine and the ongoing difficult domestic and regional operating environment. In view of the high likelihood of support from the Central Bank of Jordan in case of need, the Support Level of '3' is maintained. The Outlook for all Ratings is 'Stable'.

CAB continues to demonstrate sound risk metrics, reflecting good risk management practices. In spite of an ongoing challenging operating environment attributed to Jordan's economic slowdown, the Bank has maintained sound asset quality, as evidenced by its lower than sector average non-performing loan ratio and good loan-loss reserve coverage. CAB has an established retail business franchise (loans and deposits), aided by its extensive branch network in the country.

The Bank also operates a branch network in Palestine, but these outlets act primarily as deposit takers, as the credit policy in Palestine remains cautious in view of the prevailing difficult environment. As such, CAB's liquidity ratios remain strong, as is the case with peer banks, reflecting the relatively low share of loans in total assets, coupled with a strong customer deposit base. Relatively cheap retail customer funds contributed a major share to total customer deposits.

The balance sheet remains comfortably capitalised, benefiting from a strong rate of internally-generated capital. A historically low dividend payout ratio has served to reinforce the capital base. CAB's sources of income are well diversified, and profitability as measured by the returns on average assets (ROAA) ratio has strengthened considerably, on the back of higher net interest and non-interest income. The Bank's good net interest income generation is attributed to the sector best interest differential. Although net profit and ROAA slipped in H1 2012, this was off a high base of comparison with the previous year. The operating environment in Jordan remains challenging due to the economic slowdown and lending conditions exacerbated by elevated geopolitical risk factors. Nevertheless, CAB's effective risk management, in combination with its better than average risk absorption capacity places it in good stead to face potential setbacks in the market.

CAB was established in 1960 as a Jordanian chartered public shareholding company to take over the local and Palestinian operations of Egyptian government-owned Banque du Caire. The Bank currently has the second largest representation in Palestine among Jordanian banks (after Arab Bank plc). While the lion's share of CAB's business is retail banking, the emphasis on corporate and SME banking has grown over the years, bringing diversification to risk assets and earnings. The largest shareholders are represented by family members of two prominent Jordanian business groups (namely Masri and Talhouni), who in aggregate hold nearly one-half of the Bank's share capital. Egypt's state-owned Banque Misr owns 10.8% of shares. The Bank's total assets as at end-June 2012 amounted to JD1.9bn ($2.7bn) and total capital was JD222m ($313m).