The Middle East’s Best Banks went above and beyond through the crisis.
This year was an exceptional one for everyone, everywhere, but perhaps even more so in the Middle East, where the economic slowdown induced by the pandemic was amplified by the drastic drop in oil prices and production.
As a result, regional GDP contracted by 3.8% in 2020, reports the World Bank in its April update, adding that the estimated accumulated cost of the pandemic in terms of GDP losses to the region’s economies by the end of 2021 will amount to $227 billion.
To try and weather the storm, governments set up stimulus packages and borrowed massively to sustain health care, housing and social welfare. As is often the case in times of crisis, structural imbalances were pointed out as major impediments to economic recovery, and decision-makers pulled the reform agenda back from their priority lists.
Overall, banks showed resilience. There were no major crashes; and although mergers and acquisitions might pick up again in the aftermath of the pandemic, it should be for the best as the region is still mostly overbanked. Economic recovery is on the horizon but will depend greatly on the uptick in oil prices as well as on governments’ capacity to roll out successful vaccination campaigns and reopen their economies.
In that particularly challenging context, Arab Bank retains its title as Global Finance’s Best Bank in the Middle East for the sixth consecutive year. With only $54 billion in assets, the bank wins not on size but on its deft capacity to scale across the region—now with more than 600 branches spread over 16 Arab countries, including war-torn territories such as Yemen and Syria where it maintains a presence despite conflicts. The bank generates 70% of its income outside of Jordan.
Arab Bank CEO Nemeh Sabbagh attributes its success to sound fundamentals, prudent business practices, a well-diversified business model and unique cross-border capabilities. “These are important qualities for our stakeholders: our customers, staff, shareholders and the communities where we operate,” he says.
Another key element that makes Arab Bank stand out is its diversified revenue stream. In contrast to Gulf countries where the oil rent fuels banking powerhouses through state deposits, Jordan is deprived of hydrocarbons and Arab Bank is mainly funded by customer deposits outside its home market. Given the deterioration of the macroeconomic environment, Arab Bank had a tough year in 2020. It reports a severe drop in profits and a 77% drop in net income.
Throughout the months however, Arab Bank continued to support investments in the real economy through important water, agriculture, real estate and transport projects in several countries including Qatar, Egypt and Tunisia. Faced with the pandemic, Arab Bank also showed strong community engagement at the regional level, donating a total of $25 million to national relief funds in Jordan, Palestine and Egypt.
“Arab Bank took several strategic initiatives to help mitigate the unprecedented economic and market conditions of the Covid-19 global pandemic: safeguarding its healthy liquidity and capital ratios, maintaining resilient asset quality metrics and scaling up digital banking initiatives and channels across the group,” says Sabbagh. “We continue to stand by our customers, staff and communities to help them deal with the severe implications of this global pandemic. Our digitalization strategy, investments, and innovations in products and services over the past few years are serving us well in weathering the pandemic’s impact, providing seamless and uninterrupted services to all our customers across all our…
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