The Housing Bank for Trade and Finance H Update

Transcription

1 H Update Recommendation: Reiterate SELL The Housing Bank for Trade and Finance H Update Figure 1: Shareholder Structure (August 6, 2009) Iran Foreign Investments Company 3.975% Oman's Ministry of Finance 2.976% Social Security Corporation % Free Float 9.224% Libyan Foreign Bank % Source: Securities Depository Centre Ticker: THBK JR (Bloomberg) Last (6-August-2009): JD Week Low (12-July-2009): JD Week High (4-September 2008): JD 9.76 Target Price: JD 4.11 Kuwait Real Estate Investment Consortium % Serene Zawaydeh Head of Research Awraq Investments Qatar National Bank 33.95% Ownership Structure Jordan s Housing Bank for Trade and Finance (Ticker: THBK) is 71.4% owned by Arab investors. Qatar National Bank is the bank s primary shareholder, with 33.95% share. Other Arab shareholders include: Kuwait Real Estate Investment Consortium (18.613%); Libyan Foreign Bank (15.873%) and Oman s Ministry of Finance (2.976%). Iran Foreign Investments Company s ownership stood at 3.975% in August The Social Security Corporation owns 15.4% while free float is 9.2%. Financial Indicators The Housing Bank for Trade and Finance witnessed a 59% drop in net income attributable to shareholders in H and 11% in Net income stood at JD 26.3 million in H1 2009, JD 38.5 million below net income for H which stood at JD 64.8 million. Net income stood at JD 7 million in Q compared to JD 35 million in Q The trailing 12 months Earnings per Share at the end of H stood at JD 0.228, compared to JD EPS for The profit margin slipped to 7.59% in Q compared to 21.8% in Q and 31.1% in Q The bank distributed JD 0.25 dividends per share in 2009, compared to JD 0.30 per share in Total credit facilities increased by 19.9% in 2008 and 1.3% in H to reach JD 2.42 billion by end of June Net credit facilities increased by 21% in 2008 to reach JD 2.34 billion, then declined by 0.22% in the first half of The gap between total credit facilities and net credit facilities increased from JD 51.3 million at the end of 2008 to JD 86 million at the end of June This accompanied an increase in allowance for impairment credit facilities losses, which reached JD 68 million in June 2009 compared to JD million in December Interest income increased by 6.9% in 2008 to reach JD 301 million, after having increased by 30% in Interest income amounted to JD million in H1 2009, representing a 0.7% growth over H Interest income declined by 2.8% in Q to reach JD 72.3 million compared to JD 74.4 million in Q Despite a 7.5% increase in customers deposits in 2008, interest expense declined by 4% due lower interest rates on deposits. Customers Deposits increased by 6.8% in the first half of 2009 to reach JD billion compared to JD billion at the end of Interest expense reached JD 54.5 million in the first half of 2009, representing an 11% increase over interest expense for the first half of 2008, which stood at JD 49 million. In Q2 2009, interest expense declined by 2% to reach JD 27 million compared to JD 27.5 million in Q Awraq Investments Tel: Fax: Toll Free: P.O. Box Amman Jordan

2 Total Assets recorded double digit growth in 2006 and 2007, increasing by 28% and 22.5% respectively. Assets increased by 8.2% in 2008 and 3.3% in Q1 2009, and then dropped by 1% in the second quarter of Assets reached JD billion at the end of June 2009, compared to JD 5.43 billion at the end of Net credit facilities accounted for 42% of total assets at the end of June 2009, compared to 43% at the end of 2008 and 38.6% at the end of Return on Assets declined to 1% based on net income for the trailing 12 months ending June 2009 compared to 1.8% for 2008 and 2.1% for Shareholders Equity declined to JD 846 million at the end of June 2009, compared to JD 869 million at the end of Return on equity declined to 6.8% based on net income for the trailing 12 months ending June 2009 compared to 11% for 2008 and 12.7% for Earning Assets reached JD billion at the end of Q and accounted for 74.8% of total assets, compared to JD billion for 2008, accounting for 79.7% of total assets. Cash with central banks dropped by 11% in 2008 and reached JD 994 million, thereby constituting 18% of total assets. In 2007, it had increased by 30% reaching JD 1.11 billion and constituted 22% of total assets. In the second quarter of 2009, cash with central banks increased by 15% over Q reaching JD billion by end of June 2009, and constituted 23.7% of total assets, compared to JD 1.14 billion by end of March Total liabilities increased from JD 4.56 billion at the end of 2008 to reach JD billion at the end of March 2009, then dropped by 1.5% to reach JD billion at the end of June Customers deposits are the primary constituent of the bank s liabilities, which accounted for 85.4% of total liabilities at the end of June Banks and financial institutions deposits constituted 5.5% of total liabilities at the end June 2009 and stood at JD million. These deposits had increased by 33% in 2008 to reach JD 307 million by year end, then dropped by 18% in Q to reach JD 252 million by end of March Figure 2: THBK Balance Sheet Indicators JD Million 6,000 5,000 4,000 3,000 2,000 1,000 0 Total Assets Shareholders Equity Return on Equity 76.4% 4,096 3, % 79.7% 5,020 4, ,431 4, % 12.7% 11.0% 2.3% 2.1% 1.8% Dec-06 Dec-07 Dec-08, Bloomberg Total Liabilities Return on Assets Earning Assets/ Total Assets 100% 869 5, % 4, % 1.0% 846 Jun-09 80% 60% 40% 20% 0% The Housing Bank for Trade & Finance Figure 3: THBK Income Statement Indicators Interest Income Interest Expense Net Income Attributable to Bank's Shareholders Profit Margin 400 Awraq Investments Tel: Fax: Toll Free: P.O. Box Amman Jordan JD Million % % % H1 2009, Bloomberg % 40.0% 30.0% 20.0% 10.0% 0.0% [2]

3 Valuation This valuation is based on P/E and P/BV peer analysis for the same set of local and regional peers considered in our valuation issued on December 1, The target price was JD 5.9 per share with a Sell recommendation. The local peers considered include: Cairo Amman Bank; Jordan Kuwait Bank; Union Bank for Savings and Investments; and Bank of Jordan. The regional peers considered are: Burgan Bank (Kuwait); Al Ahli Bank of Kuwait (Kuwait); Union National Bank (UAE); and Doha Bank (Qatar). Weights of 20% for the P/E valuation and 80% for the P/BV valuation were applied. The average P/E and P/BV used in the weighted valuation for the local and regional peers was calculated using two methods. The first method, which is based on Market Capitalization, yielded JD 3.68 per share. The second method, which is based on Simple Average P/E and P/BV, yielded JD The target price of JD 4.11 per share is calculated using the average for both methods. The Housing Bank for Trade and Finance traded at JD 7.20 on August 6, The target price is 43% lower than the current market price. Therefore we maintain our Sell recommendation for THBK. Figure 4: Valuation Valuation THBK Average P/E and Average P/BV calculated as: Total Market Capitalization/ Total Earnings and Total Market Capitalization / Total Shareholders Equity Average for Peers Weight Average Regional Peers THBK Valuation based on Regional Peers Weighted valuation Average Local Peers THBK Valuation based on Local Peers Weighted valuation P/BV 80% P/E 20% Regional peers 3.73 Local peers 3.64 THBK Valuation based on Average for Local and Regional Peers 3.68 Valuation THBK Simple Average P/E and Simple Average P/BV Average for Peers Weight Average Regional Peers THBK Valuation based on Regional Peers Weighted valuation Average Local Peers THBK Valuation based on Local Peers Weighted valuation P/BV 80% P/E 20% Regional peers 5.45 Local peers 3.62 THBK Valuation based on Average for Local and regional Peers 4.54 Target Price Average for Both Methods 4.11 THBK Price on 6/8/ Target Price vs Market price % -43% Source: Awraq Investments [3]

4 Stock Price Volatility The share price of The Housing Bank for Trade and Finance had peaked in 2006 reaching JD 12.46, after reaching JD in The share price did not reach these levels again. The highest price recorded in 2007 was JD 7.21 and JD 9.76 in The Bank s share has been resilient despite the global financial crisis. This is mainly because free float is limited to 9.2% of the shareholder structure. THBK s share price maintained its strength throughout the last quarter of 2008 despite the decline in stock markets following the global financial crisis. THBK s price traded between JD 8.35 and JD 9.2 during November The share recorded its 52-week low price of JD 7.02 on July 12, This accompanied a drop in Amman Stock Exchange Unweighted Banking index which hit a 52-week low level on July 14, 2009 closing at points. Qatar National Bank had bought 20.6% of The Housing Bank for Trade and Finance at on July 22, 2007 at JD 6 per share. It bought another 9.4% on September 24, 2007 at JD 5.98 per share. Qatar National Bank has since then increased its ownership to 33.95% by acquiring additional shares on the market. This helped the share price from deteriorating massively during the last few months despite the drop in stock market prices. Figure 5: THBK Annual Low and High Stock Price (JD) Figure 6: THBK Stock Price vs Amman Stock Exchange Unweighted Banking Index THBK Stock Price ASE Unweighted Banks Index /1/2008 1/30/2008 2/28/2008 3/28/2008 4/26/2008 5/25/2008 6/23/2008 7/22/2008 8/20/2008 9/18/ /17/ /15/ /14/2008 1/12/2009 2/10/2009 3/11/2009 4/9/2009 5/8/2009 6/6/2009 7/5/2009 8/3/2009 Source: Bloomberg Source: Amman Stock Exchange, Bloomberg [4]

5 The Housing Bank for Trade & Finance Financial Analysis 1. Credit Facilities by Segment The corporate segment is the largest recipient of credit facilities. Corporate lending increased by 30% and 39% in 2007 and 2008 respectively to reach JD billion in 2008 compared to JD 975 million in In the first half of 2009, it decreased by 1% to reach JD 1.34 billion. Corporate Credit facilities constituted 55.4% of gross direct credit facilities in H1 2009, compared to 56.6% in Mortgages and commercial real estate credit facilities constituted 19.3% of gross credit facilities in 2008 and increased to 20.1% in H Lending to the government constituted 7.5% of total credit facilities in June 2009 compared to 6.7% in 2008; while retail credit constituted 17.1% of credit facilities in June 2009 compared to 17.4% in Consumer lending increased by 6% in 2008 to reach JD million compared to JD 392 million in It declined by 0.4% in the first half of 2009 to reach JD million in June Lending to government dropped in 2007 and 2008 by 4% and 18% respectively, to reach JD 160 million in It increased by 13.2% in the first half of 2009 to reach JD 181 million by end of June. Residential mortgages increased by 28% in 2007 to reach JD million, then increased by 7% in 2008 to reach JD 462 million. Residential mortgages reached JD 486 million in H1 2009, representing a 5% increase over Figure 7: THBK Gross Direct Credit Facilities by Segment Gross Direct Credit Facilities Corporate Lending Consumer Lending Residential Mortgages & Commercial Real Estate Lending to Government and Public Sector 1,500 1,355 1,342 JD Million 1, Dec 06 Dec 07 Dec-08 Jun-09 Figure 8: THBK Segment Credit Facilities % of Total Credit Facilities % of Gross Direct Credit Facilities Corporate Retail Residential Mortgages and Commercial Real Estate Government 100% 12.4% 9.8% 6.7% 7.5% 80% 20.5% 21.7% 19.3% 20.1% 60% 40% 20% 0% 21.6% 19.6% 45.5% 48.9% Dec 06 Dec 07 Dec % 17.1% 56.6% 55.4% Jun-09 Awraq Investments Tel: Fax: Toll Free: P.O. Box Amman Jordan [5]

6 2. Credit Facilities Analysis Interest income from individuals, real estate borrowers, corporate and government clients increased by 24% in 2008 to reach JD 189 million compared to JD 153 million in This was accompanied by a 20% increase in total credit facilities which reached JD 2.4 billion in 2008, up from JD billion in The bank charges the highest average interest rate on credit cards for individuals, with the interest income on credit facilities having increased from 16% in 2006 to 19.3% in Credit card facilities, which constituted only 0.5% of total credit facilities in 2008, reached JD 11.6 million in 2008 compared to JD 10.5 million in 2007, and generated JD 2.25 million interest income in 2008 versus JD 1.8 million in Large corporate overdraft facilities had the lowest average interest rate in 2008, which stood at 6.6%, with JD 18 million interest income being generated from JD 278 million credit facilities. Large corporate loans and discounted bills accounted for 35.6% of total credit facilities, and reached JD 852 million in June This segment generated interest income of JD 28.7 million in H1 2009, and had generated JD 60 million interest income during It had the lowest interest rate in H (3.47%). Residential mortgages and commercial real estate had the lowest interest rate in 2006 (5.4%), then increased to 7.2% in 2008 and stood at 3.79% in H Interest income from real estate financing reached JD 33 million in 2008 and JD 18.4 in H1 2009, with credit facilities amounting to JD 462 million in 2008 and JD 482 million at the end of June The following figures provide the interest income to credit facilities ratio by segment, and the contribution of each segment s credit facilities from total credit facilities. Figure 10: Segment Credit Facilities as % of Total Credit 1. Retail Overdraft Facilities Figure 9: Interest Income from Credit Facilities by Segment % of Total Credit Facilities 2. Retail Loans and Discounted Bills Interest Income / Credit Facilities H Retail Credit Cards Individual (retail customers) Overdraft facilities 6.40% 9.42% 9.04% 3.85% Loans and discounted bills 8.97% 9.82% 10.43% 5.18% Credit cards 15.96% 17.05% 19.31% 11.54% Residential mortgages & commercial Real estate 5.36% 6.63% 7.18% 3.79% CORPORATE ENTITIES Large corporate customers Overdraft facilities 7.25% 7.56% 6.62% 3.75% Loans and discounted bills 6.43% 5.25% 7.19% 3.37% SMEs Overdraft facilities 7.07% 12.16% 7.85% 4.51% Loans and discounted bills 8.24% 11.91% 7.45% 4.94% Government & public sector 8.59% 8.70% 9.50% 4.28% Minimum 5.36% 5.25% 6.62% 3.37% Maximum 15.96% 17.05% 19.31% 11.54% 9: 12.4% 9: 9.8% 9: 6.7% 8: 6.2% 8: 6.6% 7: 3.7% 8: 9.8% 7: 3.3% 7: 5.5% 5: 7.7% 5: 8.0% 4: 20.5% 4: 21.7% 3: 0.49% 3: 0.53% 3: 0.49% 2: 20.1% 2: 18.2% 2: 16.0% 1: 1.0% 1: 0.9% 1: 0.9% The Housing Bank for Trade & Finance Awraq Investments Tel: Fax: Toll Free: P.O. Box Amman Jordan 6: 22.5% 6: 31.0% 6: 35.0% 5: 11.6% 4: 19.3% Residential Mortgages and Commercial Real Estate 5. Large Corporate Overdraft Facilities 6. Large Corporate Loans and Discounted Bills 7. SME Overdraft Facilities 8. SME Loans and Discounted Bills 9. Government and Public Sector 9: 7.5% 8:5.3% 7: 3.3% 6: 35.6% 5: 11.8% % 3: 0.45% 2: 16.3% 1: 0.6% Jun-09 Government SME Large Corporates Real Estate Retail [6]

7 3. Deposits Analysis Total customers deposits reached JD 3.74 billion in 2008 compared to JD 3.5 billion in Interest expense due to customers deposits decreased from JD 90 million in 2007 to JD 89.2 million in The drop in interest expense on deposits highlights the decline in interest rate paid on deposits, which decreased for both savings deposits and time and notice deposits. Customers deposits increased by 6.8% in H to reach JD billion, with interest expense reaching JD 47.4 million in the first half of Time and notice deposits carried the highest interest rate compared to other types of deposits between 2006 and In 2008, time and notice deposits received an interest rate of 3.8% on average compared to 4.3% in In 2008, time and notice deposits constituted 52.9% of total deposits then declined to 51.4% in the first half of Interest expense on time deposits amounted to JD 75.8 million in 2008 and JD 41 million in H It accounted for 85% of total interest expense paid on customers deposits in 2008 and 87.6% in H Certificates of deposits received the highest interest rate in H which stood at 2.06% compared to 2.01% for time and notice deposits. The average interest expense paid for savings deposits was 1.15% in 2008 and 0.48% in H Interest expense on savings reached JD 11.4 million in 2008 and JD 5 million in H1 2009, and constituted 12.8% and 10.6% of interest expense on customers deposits in 2008 and H respectively. Savings deposits increased by 6.5% in the first half of 2009 to reach JD billion compared to JD 991 million by end of 2008, and accounted for Savings 26.3% of total customers deposits. Current accounts obtain the lowest interest rate, which stood at 0.24% in 2008 and 0.09% in H with the total interest expense being JD 1.9 million for 2008 and JD 809,509 for H Current accounts constituted 22.3% of total customers deposits and amounted to JD 895 million at the end of June The average interest rate on banks and financial institutions deposits declined from 3.5% in 2007 to 1.08% in This accompanied a drop in interest expense paid on banks and financial institutions deposits by 59% in 2008 to reach JD 3.3 million in 2008 compared to JD 8 million in 2007, and stood at JD million in H Interest expense on margin accounts also declined to 1.61% in 2008 and was 1.04% in H Figure 12: Customers Deposits by Segment as % of Total Customers Deposits Figure 11: Interest Expense on Customers Deposits by Segment % of Total Customers' Deposits 1. Current Accounts & Demand deposits H Savings deposits Interest Expense / Banks and 3. Time and Notice Deposits financial institutions deposits 3.57% 3.50% 1.08% 0.67% Interest Expense / Customers 4. Certificates of deposit Deposits 5. Other deposits Current accounts & demand deposits 0.19% 0.21% 0.24% 0.09% 0.07% 0.19% 0.03% 0.08% 0.02% 0.06% 0.02% 0.06% Saving deposits 1.11% 1.21% 1.15% 0.48% 45.6% 50.5% 52.9% 51.4% Time and notice deposits 3.76% 4.34% 3.81% 2.01% Certificates of deposits 1.25% 2.63% Others 0.50% 0.31% Interest Expense / Margin Accounts 2.72% 1.95% 3.45% 2.06% 0.48% 0.29% 1.61% 1.04% 32.4% 27.5% 26.3% 26.3% 21.7% 21.8% 20.7% 22.3% Dec-06 Dec-07 Dec-08 Jun-09 The Housing Bank for Trade & Finance Awraq Investments Tel: Fax: Toll Free: P.O. Box Amman Jordan [7]

8 4. Investments Analysis The global drop in stock prices, following the financial crisis, was reflected in a decline in the value of trading and available for sale investments for The Housing Bank for Trade and Finance. Available for sale investments decreased by 4.2% in the first half of 2009 to reach JD 587 million by end of June 2009 compared to JD million at the end of In the first half of 2008, available for sale investments had increased by 13.7% to reach JD 694 million compared to JD 610 million at the end of Trading investments decreased from JD 16.3 million at the end of 2007 to JD 13.4 million at the end of 2008, and dropped further in the first half of 2009 to reach JD 9 million by end of June In 2008, the bank reclassified some of its debt investments into held to maturity bonds, which increased by 60% reach JD million at the end of 2008, compared to JD 376 million at the end of An 11% increase in held to maturity investments in Q was followed by a 28% drop in Q to reach JD 481 million by end of June The interest income on held to maturity investments increased by 64% in 2008 to reach JD 31.6 million and stood at JD 17.8 million in H The bank s losses from available for sale investments amounted to JD 25.8 million in 2008, compared to gains of JD 8.93 million in 2007 and JD million in In the first quarter of 2009, the bank lost JD 6.11 million compared to a loss of JD 1 million in Q The bank gained JD 3.8 million in the second quarter of 2009, bringing the total loss from available for sale investments to JD 2.3 million for the first half of Trading investments generated a gain of JD 150,893 in H1 2009, representing an 88% drop over H gain from trading investments which amounted to JD 1.26 million. Losses from trading investments amounted to JD 223,814 in 2008, compared to losses of JD 1.55 million in Figure 13: Gains from Trading and Available for Sale Investments Gains (Losses) from Trading Investments Gains (Losses) from Available for Sale Investments (10) (6.1) (20) (30) (25.8) Q Q JD Million Figure 14: THBK Investments: Trading, Available for Sale and Held to Maturity JD Million Trading Investments Available for Sale Investments Held to Maturity Investments Q Q [8]

9 The Housing Bank for Trade & Finance 5. Impact of Financial Crisis on Investments and Loan-Book The effect of the financial crisis was reflected in an increase in impairment loss on available for sale investments in 2008 and an increase in provision for credit losses in H Impairment loss on available for sale investment reached JD million in 2008, compared to JD 6.27 million in Provisions for credit losses increased in the second quarter of 2009 to JD 26 million, up from JD 5.7 million in Q1 2009, bringing the total provisions for credit losses to JD 31.6 million for the first half of Trading investments decreased by JD 4.3 million in the first half of 2009 compared to JD 153,931 for the same period last year. The Housing Bank for Trade and Finance has positive cash flow from operating activities. However, net cash from operating activities dropped by 66% in 2008 to reach JD 189 million compared to JD 561 million in In H1 2009, operating cash flow reached JD 172 million compared to JD 166 for H The bank s non-performing loans amounted to JD million at the end of 2008, and constituted 2.7% of total loans. In the first half of 2009, non-performing loans increased by JD 104 million to reach JD million, which accounted for 7% of total loans. Non-performing loans are expected to increase as the macro- economic environment is expected to deteriorate and is expected to affect companies in various sectors and individual borrowers, thus increasing the probability of defaulting. Figure 15: Provision for Credit Losses, Impairment Loss, Decrease in Trading Investments Provision for Credit Losses Impairment Loss on Available-for-Sale Investments 40 Decrease (Increase) in Trading Investments JD Million Q Q H H Figure 16: Cash Flow from Operations, Investments and Financing Activities JD Million Net cash from operating activities Net cash (used in) from nvesting activities 800 Net cash (used in) from financing activities (204) H H Awraq Investments Tel: Fax: Toll Free: P.O. Box Amman Jordan [9]

10 APPENDIX The Housing Bank for Trade & Finance The following is a comparison of financial ratios between The Housing Bank for Trade and Finance, and local and regional peers. A1. Net Interest Margin The Housing Bank for Trade and Finance had the highest net interest margin compared to local and regional peers for the years 2004, 2005 and Its net interest margin peaked in 2005 reaching 6.46%, and decreased to 4.9% in Cairo Amman Bank had the highest net interest margin in 2008, which stood at 5.02%. Burgan Bank and United National Bank had the lowest net interest margins between 2004 and BURG had a net interest margin of 2.18% in 2004, and increased to 2.51% in Figure 17: Net Interest Margin Comparison Net Interest Margin Ticker The Housing Bank for Trade and Finance THBK JR Cairo Amman Bank CABK JR Jordan Kuwait Bank JOKB JR Union Bank for Savings and Investments UBSI JR Bank of Jordan BOJX JR Burgan Bank - Kuwait BURG KK Union National Bank - U.A.E UNB UH Al Ahli Bank of Kuwait ABK KK Doha Bank - Qatar DHBK QD Minimum BURG UNB UNB BURG BURG, UNB Maximum THBK THBK BOJX THBK CABK Note: Net interest margin = Net Interest Income / Average Earning Assets Net Interest Income = Interest Income + Investment Income - Interest Expense Earning Assets = Marketable Securities & ST Investments + Total Loans + Interbank Assets + LT Investments & LT Receivables Total Loans = Total Advances to Customers Average earning assets is the average of the most recent and prior-year balances. Ratio is based on trailing 12 month net interest income. Source: Bloomberg [10]

11 A2. Efficiency Ratio The Efficiency Ratio (also known as Cost to Income Ratio) measures costs compared to revenues. It is computed by dividing the Operating Expenses by [Net Interest Income + Commission & Fees Received + Other Operating Income + Investment Income - Commissions & Fees Paid + Taxable Equivalent Adjustment]. The Efficiency Ratio for The Housing Bank for Trade and Finance retreated in 2008 and in the first quarter of 2009, compared to 2007 and Q respectively. The efficiency ratio for 2007 was 35.4% and increased to 40.54% for In the second quarter of 2009, the efficiency ratio reached 36.93% compared to 44.21% in Q Higher efficiency ratio is a negative indicator, as it accompanies increased expenses and declined income. Operating expenses increased by 17% in 2008 to reach JD 99.4 million compared to JD 84.6 million in The operating expenses for Q were 3% higher than Q and 9% higher than Q expenses which stood at JD 24.5 million. Other operating income increased from JD 6.25 million in Q to reach JD 6.96 million in Q Net interest income increased by 14% in 2008 to reach JD 198 million compared to JD million in It declined by 3% in the second quarter of 2009 to reach JD million compared to JD 46.9 million in Q Union National Bank had the best efficiency ratio in 2004, 2005, 2007, and in Q1 2009, which stood at 27.72%. Al Ahli Bank of Kuwait had the best efficiency ratio for 2008, which stood at 25.83%. Figure 18: Efficiency Ratio Comparison Efficiency Ratio Ticker Q Q The Housing Bank for Trade and Finance THBK JR Cairo Amman Bank CABK JR Jordan Kuwait Bank JOKB JR Union Bank for Savings and Investments UBSI JR Bank of Jordan BOJX JR Burgan Bank - Kuwait BURG KK Union National Bank - U.A.E UNB UH Al Ahli Bank of Kuwait ABK KK Doha Bank - Qatar DHBK QD Minimum UNB UNB ABK UNB ABK BURG UNB Maximum CABK BOJX CABK CABK CABK CABK CABK Source: Bloomberg [11]

12 A3. Loan to Deposit Ratio The Housing Bank for Trade and Finance had the highest loan to deposit ratio in 2008, which reached 63.2% then declined to 58.6% by end of Q It stood at 59.83% by end of Q Total loans grew at a Compound Annual Growth Rate (CAGR) of 27% between 2004 and 2008, increasing from JD 912 million at the end of 2004 to reach JD billion in In the first quarter of 2009, total loans dropped by 1% to reach JD billion then increased by 2.1% in the second quarter of 2009 to reach JD 2.4 billion by end of June. Total deposits increased at a CAGR of 18% between 2004 and Total deposits increased from JD billion at the end of 2004 to reach JD 3.76 billion by end of 2008, and increased by 6.8% in Q to reach JD 4.02 billion. It slightly declined in the second quarter of 2009 reaching JD billion by end of June. Figure 19: THBK Loans, Deposits, and Loan to Deposit Ratio The Housing Bank for Trade and Finance Total Loans Total Deposits 5,000 Total Loans to Total Deposits 63.2% 57.5% 58.6% 54.7% 56.4% 4, % 3,501 3,765 4,020 2,833 3,000 2,370 2,378 2,354 1,919 1,976 2,000 1,629 1, ,000 JD milion Q % 60% 50% 40% 30% 20% 10% 0% Figure 20: Loan to Deposit Ratio Comparison Total Loans to Total Deposits Ticker The Housing Bank for Trade and Finance THBK JR Cairo Amman Bank CABK JR Jordan Kuwait Bank JOKB JR Union Bank for Savings and Investments UBSI JR Bank of Jordan BOJX JR Burgan Bank - Kuwait BURG KK Union National Bank - U.A.E UNB UH Al Ahli Bank of Kuwait ABK KK Doha Bank - Qatar DHBK QD Minimum Source: Bloomberg CABK CABK BURG CABK Maximum UNB CABK ABK JOKB JOKB ABK Awraq Investments Tel: Fax: Toll Free: P.O. Box Amman Jordan [12]

13 A4. Peers Stock Prices The stock price of The Housing Bank for Trade and Finance has been the most resilient compared to its peers: The 52 week low price recorded on 12-July-2009 is 28% lower than the 52 week high price. This is the lowest gap between the 52-week low and 52-week high level. Amman Stock Exchange Banking Index dropped by 38% between August 2008 and July 2009, to reach 3,299 points on July 14, 2009 compared to the 52-week high level recorded on August 10, The regional peers underwent a steeper drop in stock prices compared to the considered Jordanian banks. United National Bank s 52-week low price was 83% lower than the 52-week high price. The financial crisis certainly has affected the banking industry in Jordan and in the Gulf. Figure 21: Peer Comparison of 52Wk Low and High Stock Prices THBK JR Price (JD) Date % Decline CABK JR Price (JD) Date % Decline 52 Wk High Sep Wk High Aug Wk Low Jul-09-28% 52 Wk Low Jul-09-53% Close Aug-09-26% Close Aug-09-41% BOJX JR Price (JD) Date % Decline JOKB JR Price (JD) Date % Decline 52 Wk High Aug Wk High Aug Wk Low Nov-08-33% 52 Wk Low Apr-09-46% Close Aug-09-27% Close Aug-09-42% UBSI JR Price (JD) Date % Decline ASE Unweighted Banking Index Price Date % Decline 52 Wk High Sep Wk High Aug Wk Low Jul-09-46% 52 Wk Low 3, Jul-09-38% Close Aug-09-43% Close 3,423 5-Aug-09-35% BURG KK Price (KW Fils) Date % Decline DHBK QD Price (QR) Date % Decline 52 Wk High Aug Wk High Aug Wk Low Mar-09-71% 52 Wk Low Mar-09-71% Close Aug-09-57% Close Aug-09-47% ABK KK Price (KW Fils) Date % Decline UNB UH Price (DH) Date % Decline 52 Wk High 1, Oct Wk High Aug Wk Low Mar-09-57% 52 Wk Low Jan-09-83% Close Aug-09-54% Close Aug-09-54% Source: Bloomberg, Amman Stock Exchange [13]

14 Figure 22: Local Peers Stock Prices Figure 23: Regional Peers Stock Prices THBK JR CABK JR BOJX JR JOKB JR UBSI JR ABK KK BURG KK UNB UH DHBK QD [14] QAR, AED 1-Jan Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar-09 9-Apr-09 8-May-09 6-Jun-09 5-Jul-09 3-Aug-09 KWD Jan Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar-09 9-Apr-09 8-May-09 6-Jun-09 5-Jul-09 3-Aug-09 JD Source: Bloomberg Source: Bloomberg

15 Disclaimer Awraq Investments and its affiliates obtain information from sources they believe to be reliable, but do not warrant its accuracy or fitness for a particular purpose, and disclaim for themselves and their information providers all liability arising from the use. The Information in this publication is provided in good faith for informational purposes only. The information provided is not offered as tax, legal, or investment advice, or an offer to buy or sell securities or otherwise. The information provided in this publication may be displayed and printed for your personal, non-commercial use only. You may not reproduce, re-transmit, distribute, disseminate, sell, publish, broadcast, or circulate the information in any form or media to anyone, without the expressed written consent of Awraq Investments. Awraq Investments is not liable for any loss resulting from any action taken or reliance made by any person on any information or material posted by it. You should make your own inquiries and seek independent advice from relevant industry professionals before acting or relying on any information or material made available to you in this publication. You rely on this information at your own risk. Awraq Investments, its subsidiaries, parent, and/or any connected parties, may act or trade and/or enter into any transaction that maybe inconsistent or disregard any information contained herein. [15]