Arab Bank : Annual Report 2023

Arab Bank Group

Annual Report 2023

Arab Bank Group

TABLE OF CONTENTS

CHAIRMAN'S MESSAGE

CEO'S MESSAGE

BOARD OF DIRECTORS' REPORT

4 5

- -NUMBER OF ARAB BANK SHARES OWNED BY SENIOR EXECUTIVES

NUMBER OF ARAB BANK SHARES OWNED BY THE RELATIVES OF MEMBERS OF THE BOARD OF DIRECTORS

75 76

- - - - - - -

NUMBER OF ARAB BANK SHARES OWNED BY THE RELATIVES OF SENIOR EXECUTIVES

77

BOARD OF DIRECTORS COMPENSATIONS AND BENEFITS PAID IN 2023

78

EXECUTIVE MANAGEMENT COMPENSATION AND BENEFITS IN 2023

79

ARAB BANK'S DONATIONS DURING YEAR 2023

80

TRANSACTIONS WITH RELATED PARTIES

81

ENVIRONMENTAL PROTECTION

82

CORPORATE SOCIAL RESPONSIBILITY

83

ARAB BANK GROUP

-CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR 2023

-INDEPENDENT AUDITOR'S REPORT

97 194

ARAB BANK PLC

- -FINANCIAL STATEMENTS FOR THE YEAR 2023

INDEPENDENT AUDITOR'S REPORT

201 293

ATTESTATION STATEMENTS

299

CORPORATE GOVERNANCE CODE

303

GOVERNANCE REPORT

321

DISCLOSURE ABOUT CORPORATE GOVERNANCE

329

AGENDA OF THE 94TH ORDINARY GENERAL ASSEMBLY MEETING

330

ADDRESSES OF ARAB BANK MAJOR BRANCHES, SUBSIDIARIES, AFFILIATES AND SISTER COMPANY

331

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CHAIRMAN S MESSAGE

The global economy faced further challenges and pressures in 2023, leading to a slowdown in growth rates in most regions of the world. A tight monetary policy, introduced in 2022 to combat the highest wave of inflation in four decades, carried into 2023. Its impact was felt strongly across most economic sectors, but was mitigated to some extent by strong consumer spending, particularly in the United States. The global economy also saw declines in trade, investment, and credit demand. Conversely, global inflation rates declined as the result of falling fuel and food prices, improved supply chains, and rising interest rates. Meanwhile, geopolitical tensions deepened in 2023, putting further pressure on the economies of the world and the region.

In our region, economies have been affected differently by global developments. In oil-exporting countries, especially those in the Gulf, consecutive oil production reduction policies have led to a decline in the growth of the oil sector. On the other hand, the non-oil sector continued to experience strong growth momentum, supported by economic reform programs, high government spending, and private consumption, despite rising interest rates. GCC countries also maintained low inflation rates. Oil-importing Arab countries saw a tangible improvement in their current account deficit, supported by a decrease in the trade deficit resulting from the global decline in oil and commodity prices, and strong flows of tourism revenues and remittances from expatriate workers in most of these countries. Economic growth rates were moderate in some oil-importing Arab countries, supported by ongoing economic reform policies and low inflation rates. However, some countries faced a decrease in economic growth rates amid exchange rate depreciation and rising inflation rates. Oil-importing Arab countries are facing an increase in the cost of servicing their public debt as the result of a sharp rise in financing costs.

During 2023, many banks in the region continued to maintain flexible policies towards their customers, particularly relating to interest rates rises, in an effort to support individuals and corporates deal with sharp increases in the financing costs due to the economic developments. Banks did not fully pass on the increase in interest rates to customers, enabling them to maintain the quality of their credit portfolios. The Arab banking sector was also generally able to maintain high levels of capital adequacy, liquidity, profitability, and rely on a broad and stable funding base. Judicious credit policies enabled them to mitigate the negative repercussions of economic challenges and prepare to capitalize on available growth opportunities. Additionally, the banking sector witnessed an increase in the adoption of digital and Fintech solutions throughout the year, which are continuously gaining significance among various customer bases, especially the youth.

Despite the challenges that the world and the region witnessed in 2023, Arab Bank continued its solid performance and results driven by its presence across the different markets, particularly in the GCC region, as net profit before provisions and tax improved by 34% to reach $1.81 billion. The bank's strong underlying performance speaks to the successful execution of its strategy, which focuses on delivering sustainable growth and building a resilient business model capable of generating positive results, despite regional and international challenges. This strong performance has reinforced the Group's leading position and its ability to continue to meet shareholders' and customers' expectations.

Arab Bank continued to leverage its expertise in regional markets and its extensive global and regional network, supported by a wide range of comprehensive services and digital channels, to provide integrated banking and financing solutions to its customers, including corporates, institutions, and individuals across various sectors and segments. Additionally, the bank took part in financing infrastructure projects, vital initiatives, and intra-regional trade to help drive sustainable economic development locally and regionally.

During the year, Arab Bank continued to reinforce its community investments by supporting community initiatives and activities as part of its CSR and sustainability program, "Together". Through this program, the bank is contributing to health, poverty alleviation, education, environmental protection, orphan support, and women empowerment. In addition, the Abdul Hameed Shoman Foundation, Arab Bank's social and cultural responsibility arm, continues to support the fields of scientific research, cultural enlightenment, innovation, and promoting reading. During 2023, Arab Bank also adopted its Environmental, Social, and Governance (ESG) strategy, which provides a framework for managing these issues and integrating them into the bank's business model.

As part of Arab Bank's expansion strategy, and in line with efforts to expand its footprint in promising markets, the bank is preparing to launch operations in the Iraqi market during 2024, so as to provide comprehensive banking solutions and services to current and future customers. In line with the Group's focus on expanding its wealth management and private banking business, Arab Bank Switzerland acquired the majority stake in Swiss bank Gonet & Cie SA in 2023. The new banking group will take on a major role in the Swiss wealth management industry.

As we embark on a new year in the journey of our institution, we look forward to building on the achievements of the past nine decades, grounded in our strong institutional approach, prudent banking policies, and an extensive interconnected banking network. We will continue to prioritize the interests of our customers, shareholders, and the communities in which we operate, while looking ahead through our forward-looking vision towards the promising opportunities that the banking industry holds, including new technological advancements and meeting the evolving needs and expectations of our customers.

To conclude, I would like to take the opportunity to thank the Central Bank of Jordan for its pivotal role in sustaining the resilience and stability of the Jordanian banking system under all circumstances.

I would also like to extend our sincere appreciation and gratitude to our shareholders and valued customers for their loyalty and trust. A special thank you also goes to our employees across the different markets for their diligent efforts and dedication. As ever, we remain confident in Arab Bank's ability to deliver the best results and achievements.

Sabih Taher Masri Chairman of the Board of Directors

MESSAGE FROM THE CHIEF EXECUTIVE OFFICER

Arab Bank Group achieved a net income after tax of $829.6 million, compared to $544.3 million in 2022. The Group also maintained its solid financial position, with Group equity of $11.4 billion and an increased net profit before provisions and tax by 34%, to reach $1.81 billion.

By the end of 2023, the Group's total assets grew by 6% to reach $68.3 billion, and loans increased by 5% to reach $37.1 billion, compared to $35.4 billion last year. The Group's deposits also saw 6% growth, reaching $50.6 billion compared to $47.7 billion last year.

Arab Bank delivered robust results during 2023, with a growth in the bank's net operating profit, driven by an increase in core banking income, across various sectors and markets in the region with a clear focus on enhancing non-interest income contribution and revenue diversification. The Group's liquidity and asset quality remain solid, with the loan-to-deposit ratio standing at 73.2% and credit provisions held against non-performing loans continue to exceed 100%. Arab Bank Group maintains a strong capital base composed predominantly of common equity with a capital adequacy ratio of 17.5%. This ratio is higher than the minimum required by the Central Bank of Jordan according to Basel III regulations.

Arab Bank also remained committed to sustainability and its Environmental, Social and Governance (ESG) priorities, successfully issuing $250 million in sustainable Additional Tier 1 (AT1) Capital Securities. The issuance marks the first and largest sustainable perpetual AT1 issue in Jordan and was listed on the International Securities Market (ISM) and the Sustainable Bond Market of the London Stock Exchange.

Arab Bank's digital transformation efforts continue, with the bank continuing to provide value for its customers through the establishment of Acabes International Pvt Ltd, Arab Bank's technology arm, as a global capability center. It supports the bank's businesses worldwide and provides customers with a seamless digital experience.

During 2023, Arab Bank received several international recognitions, most notably Bank of the Year 2023 in the Middle East from the London-based The Banker magazine, owned by the Financial Times. The bank was also named Best Bank in the Middle East 2023 for the eighth consecutive year by the New York-based international publication, Global Finance. Additionally, the bank received 18 awards in recognition of its corporate and consumer digital banking services in Jordan and the MENA region.

In conclusion, I would like to thank our valued customers for their continued trust and our loyal employees across the network for their continued loyalty and dedication.

Chief Executive Officer

MAIN BUSINESS ACTIVITIES OF ARAB BANK

Corporate and Institutional Banking

Arab Bank's Corporate and Institutional Banking (CIB) division manages the Group's corporate and institutional client base. It provides access to a full range of lending and financial solutions through an extensive branch network and electronic channels. CIB also offers a comprehensive range of advanced corporate digital banking solutions in line with the latest developments in the banking industry. The broad range and efficient delivery of its solutions enable Arab Bank to remain the bank of choice for local, regional, and international companies and institutions.

CIB is uniquely positioned to provide high quality products and services to meet clients' business requirements. The banking solutions offered are enriched by Arab Bank's global network, understanding of local markets, and in-depth expertise. Through its client-focused approach, CIB strengthens its franchise in key markets by building on and solidifying existing client relationships and adding new clients through targeted acquisition efforts.

The CIB division caters to clients' needs over the different stages of their business cycle and across different markets, providing consistent service levels at all levels of the network. CIB's objective is to provide its clients with an exceptional banking experience and a well-rounded range of tailored financial solutions, including products and services from across the bank's different business lines.

Digital transformation played a major role in facilitating CIB operations and improving companies' experience through electronic channels. Data analytics contributed to the decision-making process, maintaining competitiveness, and keeping pace with developments within the corporate business and digital banking landscape.

The quality of its staff underpins CIB's success. The division closely monitors the changing dynamics of the business environment and constantly invests in strengthening and expanding the capabilities and capacities of its teams and specialists to meet clients' needs and banking requirements.

Consumer Banking and Wealth Management

Consumer Banking and Wealth Management executes its strategy by developing the extensive range of services, solutions, and benefits offered throughout its vast branch network and integrated direct banking channels, both locally and regionally.

Advanced digital solutions enable Arab Bank to serve customers efficiently and to streamline our internal operations. New solutions are constantly under review and are introduced regularly to ensure that customers benefit from the latest and most effective direct banking services and channels. We also focus on providing our business partners with the latest digital solutions that enables them to expand their capabilities and enrich their offering.

Our family-focused model caters for both individuals and families, covering both the banking and non-banking needs of our customers. Our Arabi Junior program is designed for children under the age of 18, followed by the Shabab program for youth up to age 25. After that age, our focus shifts depending on the customer's financial position. The bank offers Arabi Extra for salaried customers, Arabi Premium for the middle-income segment, and the exclusive Elite program is offered to affluent customers while complimenting it with the newly established private banking and wealth management products and services.

A key element of the bank's long-term strategy is to offer banking solutions and services at a regional level. We do this by providing cross-border solutions and services to our Elite and Arabi Premium clients through the bank's branch network and online banking services.

Arab Bank also places importance on developing wealth management solutions to meet the diverse financial and investment goals of its clients. We closely monitor and measure the level of service we offer our customers. Providing a high level of service is important to us to maintain our leading position, strengthen our competitive edge, and improve our customers' satisfaction.

The bank remains focused on the strategic pillars that drive its digital strategy, including a focus on innovation and information technology, most importantly artificial intelligence and predictive analytics.

Treasury

Arab Bank's Treasury manages the bank's liquidity and market risks, and provides expert advice and dealing services to Arab Bank's customers around the globe. Through its state-of-the art systems, Arab Bank's Treasury remains fully up to date with, and prepared to adapt to, the latest market developments and regulatory standards, and is well positioned to meet a wide range of both bank and customer needs.

Arab Bank's Treasury has a broad mandate, including the following responsibilities:

• • To manage and optimise the liquidity of the bank within approved limits so that the business is always adequately funded

• • To manage the market risk of the bank within approved limits

• • To earn revenues from the effective management of liquidity and market risk

• • To execute bond, foreign exchange, and money market transactions with market professionals

• • To support the distribution of foreign exchange, derivatives, and other treasury products to customers

• • To advise internal stakeholders on the consumption and management of liquidity and market risk

It is important for Treasury to balance the need to maintain high liquidity with low credit and low market risk. This approach is consistent with the bank's objective of being fully liquid at all times and under all circumstances, wherever the bank operates.

Treasury's role in managing the bank's liquidity and market risk is to ensure that the bank generates surplus liquidity, but also to invest this liquidity prudently using the following instruments:

• • Short-term placements with central banks

• • Short-term deposits with high quality banks

• • A multi-currency portfolio of highly liquid bonds, treasury bills, and certificates of deposit

Arab Bank believes in the importance of protecting not only its own income, but also the income and interests of its clients, from market volatility. Therefore the Treasury department offers a full range of treasury products and services to clients throughout the bank's network, whether they are exporters, importers, or savers. These risk management and hedging tools include a broad range of products and derivatives for clients who require protection from interest rate and foreign exchange risks.

The following list contains basic information of Arab Bank plc's branch network and geographical coverage as of the end of 2023.

Branches & Staff Distribution According to Governorates

CountryOperating Since

Palestine

No. of Branches

1930

Egypt

1944

Plot 43 North 90 St.

5th Settlement - New Cairo Cairo

Tel. 0020 (2) 25877100 Fax. 0020 (2) 28133116

Lebanon

1944

P.O Box 11-1015 Riad El Solh Sq. Banks Street

Commercial Buildings Co. Bldg. Beirut - Lebanon

Tel. 00961 (1) 981155 Fax. 00961 (1) 980803/299

Qatar

1957

Grand Hammed St.119

Old AL Ghanim Area no.6

Building No. 67

Doha - Qatar

Tel. 00974 44387777

Fax. 00974 44410774

Bahrain

1960

P.O Box 813 Building No. 540

Road 1706 - Block 317 Diplomatic Area , Bahrain

Tel. 00973 17549000

Fax. 00973 17541116

Morocco

1962

P.O Box 13810

174 Mohamed V Street, Casablanca

Tel. 00212 (5) 2222 3152

Fax. 00212 (5) 2220 0233

United Arab Emirates

Abu Dhabi BranchDubai Branch

Address

34

P.O Box 1476 - Rafat Hotel Street Al Masyoon - Ramallah - Palestine

Tel. 00970 (2) 2978100

Fax. 00970 (2) 2982444

44

9

2

P.O Box 172

6

5

1963

8

Abu Dhabi:

P.O Box 875 Al-Naser St.

Sh. Tahnoun Bin Mohammad Building,

Tel. 00971 (2) 6392225

Fax. 00971 (2) 6212370

Dubai:

P.O Box 11364 - Emaar Square, Building #2

Tel. 00971 (4) 3737400 Fax. 00971 (4) 3385022

No. of Employees

919

1402

237

119

184

113

319

CountryOperating Since

Yemen 1972

No. of Branches

1972

P.O Box 475 & 1301 Zubairi Str. - Sana'a

Tel. 00967 (1) 276585/93 Fax. 00967 (1) 276583

United States of America

1982

Federal Agency - New York 50 East 52nd Street

(New York Agency)

Singapore

1984

3 Fraser street, Duo Tower #10-21, Singapore 189352

Tel. 0065 65330055

Fax. 0065 65322150

China

1985

Shanghai

South Korea (Representative Office)

1989

Algeria

2001

TotalAddress

6

1

New York, NY 1022 - 4213

Tel. 001 (212) 715 9700 Fax. 001 (212) 593 4632

1

1

Unit 4505 - 06 - Floor 45th IFC Two, No. 8 Century Avenue, Pudong New District, Shanghai PRC Zip Code: 200120

Tel. 0086 (21) 61607700 Fax. 0086 (21) 61607722

1

11

129

Seoul Square Bldg.,

5Fl. Hangangdaero 416 Jung-gu, Seoul 04637

South Korea

Tel. 0082 (2) 775 4290 Fax.0082 (2) 775 4294

N°12 Val d'Hydra (Residence Chabani) Hydra - Alger

Algeria

Tel. 00213 (21) 480002 Fax. 00213 (23) 471973

No. of Employees

135

1

47

22

3

245

3 746

10

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Arab Bank plc published this content on 31 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 March 2024 11:33:02 UTC.