Contents. Page No. Board of Directors. Mission Statement. Chairman s Message. AJIB s Achievements in Business Plan Objectives for 2013

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1 Annual Report 2012

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3 Contents Page No. Board of Directors Mission Statement Chairman s Message AJIB s Achievements in 2012 Business Plan Objectives for 2013 Highlights on Financial Figures Independent Auditor s Report Consolidated Statements of Financial Postion Notes to the Consolidated Financial Statements Domestic and International Branches, Offices, Subsidiaries and Affiliated Bank

4 Board of Directors Mr. Abdulkadir AlQadi Chairman H.E. Mr. Ali AlSuheimat Vice Chairman Mr. Hani AlQadi General Manager/ CEO Member Mr. Ibrahim Almazyad Representative of Arab Investment Company Member Mr. AlFaitouri AlMishat AlTheeb Representative of Libyan Foreign Bank Member H.E. Dr. Shabib Ammari * Member Mr. Samer AlQadi Member H.E. Mr. Mohammed Shareef Al Zoubi Representative of Al Yaqeen Investment Company Member Mr. Mohammed AlOkar Member Mr. Hussein AlDabbas Representative of Petra Company for Financial & Real Estate Investments Member Mr. Mahmoud Abul Rubb Member * During the period from 2/5/2012 to 5/12/2012, H.E. Dr. Ammari was a cabinet member in the government until he was recommended to rejoin the Board. 4

5 Mission Statement To be recognized as the leading investment and private bank in Jordan and in the region in products, and in the use of technology, by being client focused, innovative and having customer service excellence and highly skilled employees. 5

6 Chairman s Message Dear Shareholders, It is my pleasure to present to you, on behalf of the Board of Directors, the 34th annual report of Arab Jordan Investment Bank (AJIB). The report includes the consolidated balance sheet, the consolidated income statement, changes in shareholders equity and the cash flow statements for 2012, in addition to notes to the financial statements and a summary of the Bank s achievements during the year. In light of developments taking place in the global economy, the recovery is continuing though at a slower pace due to several factors; foremost of which is the declining economic growth in the Euro region. As economic growth levels in the developed countries remain low, no substantial change was witnessed in the unemployment rates. However, in the developing countries, the landscape looks somewhat different, where most of these countries have experienced strong growth in the beginning of 2012 that declined in the second half. It should be noted that after the global financial crisis in 2008, the factors that are still hindering economic growth have become well recognized in the economies of the world. In the developed countries, for example, there are key influential factors in play, notably the lack of structural financial reforms, and the continued weakness of the financial services sector, especially as the financial reforms undertaken so far have encountered many challenges and obstacles. Moreover, the financial systems in these countries remain weak, which is manifested in the declining financial positions of their Banks. The monetary policy overseen by the central Banks is the main factor that is still supporting economic growth, even though at low levels. Global economic growth rates declined to 3.3% in 2012 compared to 3.8% in The United States, for example, with a growth rate of 2.2%, was the sole promising economy among other developed countries. The Euro region recorded a decline in growth rate by 0.4%; the same percentage was recorded in Britain. Japan on the other hand recorded a growth rate of 2.2%. The year 2012 was better for developing countries including the Middle East and North Africa as they experienced a growth rate of 5.3%. For the second consecutive year, Jordan s economy is still vulnerable to external challenges due to the impact of the so called Arab Spring, which resulted in the deterioration of neighbouring countries economies. Such unfavourable impact was cause for the decreased foreign direct investment flows 6

7 and weaker trade exchanges, combined with internal pressures due to the increase in global food prices and fuel prices after cancelling or reducing the subsidy on the prices of oil derivatives by government, which will cause an increase in the inflation rate in Despite the aforementioned economic and political circumstances, Jordan s economy grew by 3% in 2012 compared to 2.6% in This growth can be attributed to the growth in a broad range of economic sectors that recorded accelerating growth levels such as the energy, trade, tourism, transportation, and communications sectors. On the other hand, there were sectors that continued to exhibit slow growth such as financial services, insurance and real estate. The inflation rate in 2012 amounted to 4.8% compared to 4.4% in 2011, mainly influenced by the global increase in prices of food and oil. As a consequence of the jolts suffered by Jordan s economy, the budget deficit after grants and aid amounted to 1.5 billion in 2012 as reflected in the statements of the Ministry of Finance. Net debt balance hiked up to 16.3 billion marking an increase of 2.9 billion with a monthly average of 240 million during the same year. Public revenues, on the other hand, amounted to 4.9 billion in 2012, including 4.8 billion of revenues from domestic tax and nontax sources. Receipts from foreign grants and aid to support the budget did not exceed 97 million while government spending amounted to 6.4 billion compared to 6.8 billion in With regard to the external trade sector, exports declined by 1.7% in 2012, while imports increased by 11% during the same year compared to This was mainly the result of the global increase in oil prices and the frequent interruption of gas imports from Egypt (which had to be replaced by more expensive heavy fuel to generate electricity), resulting in an increase in the trade balance deficit by 17%. As to Arab Jordan Investment Bank s (AJIB) results, total assets increased by 11.4% to exceed the threshold of one billion Jordanian Dinars for the first time in the Bank s history as it amounted to billion by the end of This was a significant achievement marking an important milestone in delivering on the Bank s strategic plan to enhance the Bank s asset size during Among the most significant budget items that experienced an increase in 2012 were credit facilities. Despite the difficult general economic situation, AJIB managed to create opportunities to increase its credit facilities portfolio to 418 million compared to 354 million in 2011, marking an increase of 18.2%, as compared to the increase in credit facilities granted from the Banking sector in Jordan which reached 12.4%. AJIB clients deposits reached 598 million by the end of the year compared to 571 million the year befor, an increase of 4.7% from the year 2011, while the increase in the Banking sector in general was 2.4% during This increase in deposits demonstrates clients continued trust in the Bank. AJIB s capital adequacy ratio amounted to 17.50%, which is more than double the minimum ratio required by the Basel Committee of 8%, and also greater than the minimum limit required by the Central Bank of Jordan of 12%. This ratio demonstrates the Bank s robust financial position and its strong capital base. During 2012, the Bank realized record profits amounting to 20.3 million before tax, compared to 16.4 million in 2011, an increase of 23.8%. In light of these excellent results, the Board of Directors recommends a distribution of cash dividends of 12 million, representing 12% of the Bank s paid up capital. Finally, and on behalf of the Board of Directors, I extend my sincere thanks and gratitude to all of our clients for the confidence they vested in us. I would also like to thank all of the employees of the Bank for their outstanding efforts exerted during the past year. With my regards, Abdulkadir AlQadi Chairman 7

8 AJIB s Achievements in Credit Corporate Banking Department Realizing the importance of meeting the various finance requirements of its corporate clientele, including leading institutions in the targeted sectors in Jordan, AJIB pursued its efforts and maintained its comprehensive strategy that is based on wellplanned diversification of its corporate credit portfolio. This strategy has yielded an integrated set of specialized Banking services that meet the needs of various companies. At a time when the world in general and the Arab world and Jordan in particular are experiencing a significant economic slowdown with adverse consequences affecting the various economic and social sectors, the Bank s clients managed to maintain their financial and economic positions, which is reflected in the quality of the Bank s credit portfolio. The Corporate Banking Department realized a considerable growth in the credit portfolio for direct facilities for companies and businesses. The majority of these facilities were concentrated in the energy and government sectors with low risk profiles. 8

9 Retail Banking Department Despite the economic and political conditions prevailing in the region combined with the new associated challenges and difficulties overwhelming the economic sectors in general and the Banking sector in particular, AJIB s Retail Banking Department managed to accomplish the tasks outlined in its plan for Given the intense competition in the retail Banking market, AJIB s achievements in 2012 demonstrate the effectiveness of its strategy aiming to promote retail Banking services through the launch of various products that expanded the Bank s targeted customer base and increased its market share. In response to the various customer needs and in order to keep pace with the latest trends in the Banking sector, the Department launched a number of new products supported by relevant marketing campaigns, including, but not limited to, the personal and housing loans campaigns which covered loans for employees in the public sector. In order to maintain the Bank s leading position in retail Banking and to cope with the slow economic growth, AJIB plans to keep following its conservative approach and to adopt a selective credit policy that focuses on providing the best credit services to meet the needs of its existing and potential customers. Moreover, the Retail Banking Department exerts extensive efforts to attract highly creditworthy individuals to ensure growth in its retail facilities portfolio, and maintain its quality at the same time, in line with the Bank s prudent credit strategy. 9

10 VIP Retail Banking Services 2 Documentary Credit Department Realizing the significance of services provided to the trade sector and their role in facilitating commercial transactions of all customers in this field, the Trade Finance Department prides itself on accomplishing a marked improvement in its services demonstrated by its excellent achievements during Documentary Credit Services In 2012, the Trade Finance Department recorded a tangible increase in the volume of letters of credits, guarantees and bills of collection over the levels achieved in A comprehensive plan was also implemented to develop the Bank s trade finance services in the main office and branches, which placed AJIB among the leading Banks operating in this field with notable success in The Bank will keep providing its clients with a wide range of Banking services and solutions that comply with its policy during the next year. 3 Transfers Department Due to the successful implementation of the new core Banking system since 2010, the Transfers Department continued to steadily develop while implementing the highest levels of compliance and control. New programs have been introduced to facilitate inbound and outbound money transfers. Moreover, a new archiving system was implemented for the inbound and outbound money transfers to meet customers needs in an accurate and timely manner. Transfers Services Such achievements would not have been possible without the efforts and dedication of our highly qualified taskforce working in branches and offices throughout the Kingdom, let alone the extended communication network linking the Department with international Banks; all of which augmented the Department s performance to achieve exceptional results in

11 VIP Banking Services 4 Deposits Services In order to maintain its professionalism and efficiency in meeting the various needs of its customers, the Deposits Department constantly endeavors to develop the skills of its customer service team and build their capabilities to ensure timely, effective and high quality services. Among the advantages of AJIB s deposit services is the diversity of such services in terms of their availability in all major currencies and the multiple options of maturity dates. On the other hand, all accounts provided by the Bank whether current, saving or term, offer a full range of features including but not limited to multiple currencies, and attractive interest rates. 5 VIP Banking Services The VIP Banking Department is focused on attending to the requirements of VIP customers and the provision of creative services. Tasked to deal with an elite class of customers with special needs, the Department endeavors to provide products and services especially designed to swiftly and efficiently respond to the Banking and investment needs of this customer class. In addition to providing sophisticated Banking services to our VIP clients during 2012, the Department maintained its diligent pursuits to offer innovative exclusive Banking and investment services. To this effect, the Department utilized the latest stateoftheart information technologies, not only to meet the various and ever changing needs of VIP customers, but also to anticipate their expectations by offering them corporate advice and consultation. 11

12 Customer Services Shmeisani Branch 6 International Investment Department Thanks to its leading position in international investment services as well as insight and knowledge of the forces that affected economies and moved markets in 2012, AJIB managed to maintain its leadership in the field of investment consultancy services where it had an impressive track record in The International Investment Department continued its endeavors to develop innovative solutions utilizing a customer oriented approach which places customers needs on top of its priorities. Retail Banking Services During 2012, the Department continued to build strategic partnerships with international institutions and Banks in order to utilize the best investment services and solutions that are offered worldwide. On the other hand, the International Investment Department recorded an impressive growth rate in the area of safe custody service. The Department successfully continued to provide quality investment solutions to its customers at rewarding rates of return, in addition to a fully integrated range of products and services in the field of international financial intermediation, investments, safe custody services, brokerage services and securities trading in the leading regional and global financial markets, which include stocks, bonds, sukuk, futures, currency, options as well as participation in underwriting and initial public offerings in most global markets. Customer Services Al Madina Branch 12

13 7 Treasury Department In line with the Bank s strategy aimed at providing the highest levels of safety and security for the Treasury Department clients, the Department s team closely monitored local and international markets and analyzed all developments, events and facts affecting this sector. The Department utilized the best available tools for the efficient and professional management of assets, liabilities and risks, while maintaining an adequate level of liquidity in order to achieve good growth rates in revenues, compared to what was achieved in Treasury Services The Treasury Department continued to monitor interest rates in the money markets, both for the Jordanian Dinar and various foreign currencies, in order to augment its understanding and enhance its ability to forecast exchange rates in the future. As a result of the short and long term prudent decisions taken by the Department during 2012, it has attained a leading position among local Banks. Moreover, the Treasury Department has performed its duties to the fullest and continued to provide worldclass consultancy services for trading in the money and capital markets, in addition to helping clients merge our treasury products with other Banking services to suit their financial needs and expectations. Moreover, the Department s integral services contributed to the provision of creative financial solutions and instruments to hedge against currency and interest rate fluctuations as well as informing customers of the latest developments in the international markets. Represented by its dedicated and highly competent team, the Department carried out precise risk assessments in the various components of the Banking processes and introduced potential solutions to mitigate and eliminate such risks. In general, AJIB played an active role in the market, whether through investing in fixed income instruments including government bonds, development bonds, corporate bonds and subscription in treasury bills, or following up on all circulars issued by the Central Bank of Jordan in this respect. In the future, the Treasury Department will seek to promote the local bond market and expand trading in favor of the Bank s clients. 13

14 Visa Cards Sevices 8 Visa Card and ATM Department In line with the objectives of the approved plan for the year 2012 and in order to offer our clients diversified cards options, two new types of Visa cards were introduced; namely Visa Infinite and Visa Platinum, which are classified as the top class cards by Visa International in terms of privileges offered to the Bank s special clients. AJIB is the first Bank in Jordan to issue these two cards at the same time, in addition to Visa Gold and Silver cards. ATM Service Tla a Al Ali Branch The launch of these two widely popular cards came in accordance with the Bank s policy to provide its clients with the highest quality products and services. Visa Infinite and Visa Platinum provide extra travel advantages such as medical and legal referral services, personal insurance, purchase protection schemes and many other additional services. The Bank continued the process of replacing the various old Revolving and Charge Visa card types with new visa cards with the highly secure chip. These types of cards provide the highest levels of safety and meet the Visa International quality standards In order to provide its Banking services in a flexible manner during working hours and beyond, the Bank expanded its ATM network by adding three new ATM locations during 2012 to provide Banking services to all customers around the clock. Electronic Marketing Campaigns on the ATM 14

15 Customer Services Al Zarqa Branch 9 Exchange Bureaus Realizing the importance of enhancing AJIB s presence in airports and border crossings and in line with its 2012 plan, the Bank s management sought to maintain its support to the existing exchange agencies at border posts so that they can provide enhanced Banking services to departing and arriving travelers. Such support provided by senior management throughout the year has resulted in developing the operations of exchange offices and helped them shift from providing basic currency exchange services, to providing comprehensive and integrated Banking services. Various types of customers can now utilize exchange offices to open all types of accounts, make money transfers and request credit cards. AJIB exchange offices have also provided the cash withdrawal service for holders of Visa, MasterCard and American Express cards through the ATMs distributed inside and outside Queen Alia International Airport and Marka Airport. These ATMs are connected to the Jordan network (JONET), Visa International and other providers of international cards services. 15

16 Information Technology Services 10 Information Technology Department As part of its endeavors to keep pace with the latest developments in Banking IT and comply with internationally accepted security standards, the Information Technology Department accomplished quantum advancements in 2012 by developing and updating all customer service software and electronic Banking channels. Specifically, the Department achieved the following: Archiving the work of all branches and offices in order to save files and documents in a modern and secure manner where they can be easily accessed and referred to. Activating the short message service (SMS) for all Banking services whereby customers get updated on their account transactions when they happen and wherever they are. Teller Services in one of our branchs Updating communication channels between the headquarters and the branches using optical fiber and microwave technology in order to ensure the highest levels of speed and security in completing transactions. Automating the reports of the Central Bank of Jordan in order to meet its requirements and regulations regarding electronic office control. Initiating work on developing a new system dedicated to the Compliance Department in order to monitor clients transactions in an accurate and comprehensive manner. Initiating work on developing a sophisticated risk management system that complies with the best international standards. Customer Services Al Wehdat Branch Electronically linking the Bank with the Jordanian Customs Department to facilitate and speed up the follow up on Bank guarantees issued in favor of the Customs Department. 16

17 One of the Training Courses for Bank Staff 11 Administrative Affairs, Human Resources Development and Training Realizing the significant role our employees play as a key factor in the Bank s success and excellence, senior management attaches great importance to the development of employees skills and capabilities. To this end, employees are assigned to attend seminars and training courses related to Banking and addressing the latest developments in the Banking scene at the local and international levels. On the other hand, management has endeavored to recruit promising Banking professionals, and provide extra care and support to its human resources by organizing many special activities and programs to instill a sense of affiliation, team work and dedication among the employees. Based on its belief that fostering human resources is the cornerstone of strategies that aim at achieving progress, success and growth in any business, the Department held several training courses and workshops during 2012 with the support and direction of senior management. Such support, combined with the outstanding effort and active work of the Training Department, have resulted in achieving the desired goals and success in improving employees capabilities and skills in all fields by enhancing their knowledge, refining their skills, improving their capabilities, and thus developing their overall performance. The number of staff who participated in training courses from all branches and offices around the Kingdom amounted to 250 employees. Eighty eight internal, local and external courses were held for the purpose of improving and developing skills. The most important internal courses held include: Foreign currency markets. Provisioning management workshop. Customer care management. Banking services. First aid. Antimoney laundering and antiterrorism financing. Visa Cards system (MXP). Oracle RDBMS course. Service Desk Agent training course. 17

18 Al Yasmeen Branch Emphasis was also placed on providing English language courses. These were held in several institutes and training centers. Other courses were held at the Institute of Banking Studies, Association of Banks in Jordan and the Union of Arab Banks, as well as other centers and institutes. In addition, 180 candidates who applied for jobs with the Bank sat for the admissions exam of the Bank. A number of students participated in Darb summer program 2012, which was organized by the LOYAC institution to train students of Jordanian universities. Thirty three trainees from different Jordanian universities are now being trained at AJIB as a mandatory academic requirement. 12 Retail Branches Network In order to achieve the main objectives of the 2012 plan with respect to branch network development, AJIB took all necessary actions to expand its branch and office network to cover new areas with high population density and booming commercial activities. Among the new additions inaugurated by the Bank this year was Jubaiha Branch, which is strategically located in a vibrant area, in addition to the Bank s new office at Taj Mall in Abdoun. In line with its policy and approach aiming at providing swift yet high quality and effective Banking products and services, the Bank s senior management ensured that these new branches and offices were provided with qualified staff, and equipped with advanced equipment and highly efficient communication systems. The Bank provides its customers with the latest Banking products and services not only during working hours but also at all other times. Accordingly, all branches and offices were augmented with ATMs to serve customers outside working hours and during weekends and official holidays. AJIB offices at malls and border posts work until late hours in addition to weekends and official holidays. 18

19 Aqaba Branch 13 New Head Office Building During the year 2012, construction works continued to proceed in the new headquarters project located along Zahran Street near the 6th Circle in Amman which comprises the General Management offices and the main Bank branch with a total area of around 30,000 m2. Early April of last year witnessed the completion of the skeleton works package with works underway in the finishes and electromechanical package activities, to be completed by the end of For the sake of ensuring the best working atmosphere within the building, the management commissioned a specialist consultant for conducting the interior design for the office spaces. The process of getting quotations for the supply of the office furniture is already under way since the end of last year in order to be made ready for installation in parallel with occupying the landmark building before the end of the year Customer Services TAJ Mall Office in Abdoun Meanwhile, a wellknown local consulting firm is undertaking the engineering supervision on the works, while a leading firm in the field of construction management is handling the management services for the whole works starting from the predesign phase, selection of the successful Architect/ Engineering firm and all the way into completion of the works for the project New Head Office building (Under Construction) Jabal Amman 19

20 Customer Services Four Seasons Hotel Office 14 Cyprus Branch AJIB s branch in Cyprus, offers specialist Banking services to High Net Worth clients and corporates, by providing a diverse range of products and financial services, beyond traditional deposit and lending activities. Customer Services in one of our branchs During 2012 the Cyprus branch, in addition to various other projects, has been engaged in a process of upgrading its systems, namely the core Banking system, (BANKS), the Cyprus clearing system (NCR), and Reuter s communications with the aim of providing better services to its clients. Visa Electron Card 20

21 The United Arab Jordan Company For Investment & Financial Brokerage Hall 15 AJIB Representative Office in Tripoli Libya Not only did the Representative Office in Tripoli promote AJIB services to the Libyan Banking sector and all its resident clients, but it has also endeavored to attract new customers through contacts to introduce the Bank and explain how the various Banking transactions can be facilitated by the Bank s competent team of professionals. On the other hand, the Representative Office was devoted to strengthen cooperative relations with the Banking sector and the different financial institutions in Libya including, but not limited to, private companies, corporations and individuals. The Office has also helped in following up all services and transactions related to the head office and branches and answered all inquiries of the clients. 16 The United Arab Jordan Company for Investment and Financial Brokerage The Company continued to provide its services in the field of local stock and securities trading in addition to providing its VIP customers with an ideal and convenient atmosphere. Trading volumes were good in spite of the declining stock prices and trading volumes at Amman Stock Exchange throughout Amman Stock Exchange s trading volume during 2012 amounted to 2 billion compared to 2.9 billion in the previous year. The number of traded stocks also declined in 2012 by 41.1% down to 2.4 billion shares transacted through contracts compared to 4.1 billion stocks traded in 2011 through 1.3 million contracts. Share turnover rate also decreased down to 33.9% compared to 85.2% in

22 Arab Jordan Investment Bank (Qatar) L.L.C. Offices Doha / Qatar 17 Arab Jordan Investment Bank (Qatar) L.L.C In its seventh year of operation, the subsidiary continued to provide timely and efficient full commercial Banking services in Qatar to its clients. The Credit Department maintained its high quality services to its corporate and high net worth customers. Credit facilities increased by 34.8% compared to last year as a result of granting new loans and facilities to existing and new AlBaraka Mall Office customers in various economic sectors. The Treasury Department continued its role in balancing the liquidity position of the subsidiary as well as effectively managing the Bank s assets and liabilities and monitoring the local and global financial markets. Customer Services Al Jubeiha Branch 22

23 Qatar Financial Center Tower, Where Arab Jordan Investment Bank (Qatar) L.L.C. Offices are Located Due to the strength and promising future of the Qatari Economy, and in order to expand and increase the subsidiary s operations and investments in the State of Qatar, and to accommodate our clients and local market needs, the Bank increased its capital by 100% to US$ 50 million in 2012 through a private placement to local and regional investors, thus reducing the Parent s ownership in the subsidiary from 100% to just over 50%. 23

24 The Opening Session of the 9 th Media and Telecommunications Convergence Conference 2012, Which is organized by Arab Advisors Group 18 The Arab Advisors Group (AAG) Arab Advisors Group is a member of the Arab Jordan Investment Bank Group, its objectives is to undertake studies and research in the sectors of telecommunications, media and technology and financial consulting, including economic feasibility studies and financial analysis for individuals and institutions, and investment in securities, where the company provides services in field studies in different markets in 19 Arab countries. One of the 9 th Media and Telecommunications Convergence Conference 2012 Sessions The number of companies subscribing to the Communication Strategic Research Service was 58 in 2012, while the total number of companies subscribing to the Media Strategic Research Service reached 31. In 2012, the company also implemented a range of consulting projects in Jordan, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates, Egypt, Morocco, Yemen, Lebanon, Iran, and some selected African countries, in addition to many consulting projects undertaken on behalf of several telecommunications and media companies in the Arab world. The company issued in 2012 a total of 625 research reports on the following sectors: 403 on the telecom sector, 195 for the media sector, and 27 for the Banking sector, including 45 on the Qatari companies in the sectors of telecommunications, media, and Banking. The company also held the 9 th Arab Advisors Group Convergence Jordan International Bank Plc in Moreau House Building, London UK 24

25 Jordan International Bank (JIB), London UK Summit 2012, where the conference witnessed great success, and the number of attendees was more than 600 from all over the world, in which major telecom and media companies participated. The company will hold the annual event for the 10 th consecutive year under its new name The Convergence Summit in June 2013 in Amman, Jordan. It is also worth mentioning that Arab Advisors Group is one of the major research companies in this area in the Arab world. 19 Jordan International Bank (JIB)/ London United Kingdom Having completed its restructuring process during 2011, which included a capital increase and changes in management, the year 2012 symbolized a milestone for JIB. The Bank moved to its new premises in the Knightsbridge neighborhood on Brompton Street, London, and some modifications were made on the Bank s logo to reflect the new image of the Bank. The Bank started providing corporate loan services to companies and individuals developing real estate projects in London, in addition to providing other private Banking services. Jordan International Bank is an affiliate of AJIB which has an ownership stake of 22.86%. After making losses over the past few years, JIB realized good profits in

26 Business Plan Objectives For 2013 The 2013 Business Plan focuses on maintaining business at the highest levels of transparency and credibility with our customers, in full conformity with the instructions of the regulatory authorities as follows: Continue enhancing the Bank s financial position and maintaining its main financial ratios within the limits that comply with the requirements of the Central Bank of Jordan and international standards. Enhance the Bank s competitiveness in the local market in terms of restructuring the services provided via ATM. This can be accomplished by adding new services that meet the needs of as many clients as possible, in addition to enhancing the ATM network by installing new and advanced equipment that help provide swift and safe services. Continue the replacement of the current Visa Electron Cards with a new type of cards with an electronic chip that grants its holder a high level of security. Through its plan for the year 2013, the Bank seeks to provide additional services for Visa card holders including the following: 26

27 1 Activate the short message service (SMS) on two phone numbers instead of one. 2 Add the cash deposit service, payment of phone, water and electricity bills and transfer between different accounts through ATMs. 3 Provide an additional service for the Visa Electron holders to enable them to transfer from the card s account to other accounts. 4 Provide credit card holders with the service of direct payment into the card account so they can reuse the card in the same day of deposit. Support the airport offices at the new Queen Alia International Airport terminal, expected to open in the first quarter of 2013, with an additional number of highly qualified and trained staff to ensure that all categories of customers, whether travelers or airport employees, are swiftly and professionally served. Continue updating and developing the current programs and adding new programs to keep pace with the latest development in the Banking industry to meet all customers needs at several levels with special focus on the programs related to enhancing internal control over the Bank s systems. The 2013 business plan will include in particular: 1 Finalizing the development of a new location for the Disaster Recovery Center in accordance with best international standards. 2 Devoting extra care to the electronic Banking services, especially services provided through smart phones and Internet for their effectiveness and significant role in meeting customers needs without having to leave their home or office to execute a transaction. 3 Updating the website of the Bank to inform its clients and all users on the various activities and services provided by the Bank and the latest Banking developments. Continue to give special attention to the Bank s outreach in terms of increasing the number of branches and offices taking the current economic conditions into consideration. New branches and offices will be opened to provide the main support to AJIB s various activities at all levels. Focus on the essential elements that support the Bank s various operations, including human resources and information technology for their vital and tangible role in improving customer service in terms of speed or accuracy; and hence, ensuring customer satisfaction. Develop a comprehensive plan to move to the new head office building and to make this process as smooth and comfortable as possible for clients and employees. 27

28 Highlights on Financial Figures Assets At the end of 2012, total assets amounted to million, compared to million at the end of 2011, a 11.4% increase. Assets are comprised of the items shown in the table overleaf. As shown, the bulk of the assets take the form of deposits with local and foreign Banks. Total cash and balances at Banks stood at million, or 22.6% of total assets, compared to million, or 21.4% of total assets in Regarding investments in securities, total value was million, compared to million in This portfolio constitutes 34.3% of total assets, compared to 38.3% of total assets in Net Loan portfolio, meanwhile, stood at million, compared to million in This portfolio constitutes 37.9% of total assets, compared to 35.8% in

29 The table below shows asset items in 2012, as compared to 2011, in million Cash and deposits with Banks Investments Net loans and advances Fixed assets Other assets Intangible assets Deferred taxable assets Total Analysis of Assets for the year 2012 in Millions. Cash & deposits with banks % Investments % Net loans & advances % Fixed assets % Other assets % Intangible assets % Deferred taxable assets % 29

30 Revenues The Bank recorded in 2012 total revenues of 65.7 million, compared to 55.5 million in Income from interest stood at 54.7 million, or 83% of total revenues compared to 43.9 million 2011, or 79% of total revenues, while net commission revenues stood at 4.5 million, compared to 4.4 million in Trading in foreign currencies recorded 4.6 million in profits in 2012, compared to 2.1 million in The following table shows the distribution of the various revenue sources in million Net Interest earned Net commission Foreign exchange trading Investment portfolio income (Loss) Other revenues Total Analysis of Revenues for the year 2012 in Millions. Net Interest earned % Net commission % Foreign exchange trading % Investment portfolio income 0.8 2% Other revenues % 30

31 Expenses Total expenses for 2012 amounted to 45.4 million compared to 39.1 million in 2011, an increase of about 6.3 million. Excluding interest and commissions paid, the other expenses have amounted to 20.6 million compared to 20.5 million in 2011, an increase of 0.5%. Provisions A sum of 3.8 million was allocated as a provision for this year; most of it in the form of general provisioning, to strengthen the Bank s financial position, The Bank also allocated additional provisions at a value of 388 thousand which included 265 thousand as endofservice allowances for employees who joined the Bank before it subscribed to the Social Security Corporation, and who were still on the payroll during the preparation of this report, and another 123 thousand as general provisions. The following table shows comparison for items of other expenses for 2012 and 2011, (Million s): Administrative and general expenses Depreciation Credit facilities provisions Other provisions Total Administrative and general expenses % Depreciation % Credit facilities provisions % Other provisions 0.4 2% 31

32 Loans The volume of credit facilities as at the end of 2012 amounted to million compared to million at the end of 2011, an increase of million, or 18.2%, although the Bank maintained its commitment to a policy of prudence and selectivity in providing new loans. The following table shows the classification of loans according to economic sectors (Million s): Financial Industry General Trade Construction Agriculture Share purchase Consumer loans Govermental and General Sectors Total Classification of Loans according to the economic sectors for the year 2012 in millions: Financial % Industry % General Trade % Construction % Agriculture % Share purchase % Consumer loans % Govermental and General Sectors % 32

33 Deposits Total deposits stood at million at the end of 2012 compared to million at the end of 2011, an increase of 77 million representing a growth rate of 10.2%. A Customers Deposits The level of customer deposits stood at million at the end of 2012 compared to million at the end of 2011, an increase of 26.5 million, a growth rate of 4.86%, including million inside the Kingdom, of which an equivalent of 108 million was in foreign currencies. B Banks Deposits The level of deposits from local Banks stood at million, while it stood at 55.5 million at the end of Regarding foreign Banks deposits, they amounted to million at the end of 2012, compared to million in Liquidity and assets management: Amount % Amount % Cash and deposits with Banks Shares and securities Total cash and semiliquid assets Credit extended Net Other assets Total Assets The abovestated table shows the increase in cash and semiliquid cash stood at million at the end 2012 compared to553.9 million at the end of 2011 an increase of 34.5 million representing a growth rate of 6.2%. 33

34 Profit and shareholders equity At the end of 2012 the Bank recorded profits before tax of million. By adding Retained Earnings of million and after gains on financail assets at fair value through the consolidated profit and loss statement at 9 thousand and after the removal of minority interests of thousand and allocating million as tax provision, the Board of Directors recommends to the General Assembly the distribution of net profits of million as follows: Item Sums in million Statutory Reserve Reserves for General Banking Risks 100 Proposed Dividends Retained earnings Total After the endorsement of the General Assembly of these distributions, Shareholders Equity will stand at compared to in 2011, an increase of representing an increase of 3.7%. 34

35 ARAB JORDAN INVESTMENT BANK (A PUBLIC SHAREHOLDING LIMITED COMPANY) AMMAN JORDAN CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012 TOGETHER WITH INDEPENDENT AUDITOR S REPORT

36 INDEPENDENT AUDITOR S REPORT AM/ To the Shareholders of Arab Jordan Investment Bank Amman Jordan Report on the Financial Statements We have audited the accompanying financial statements of Arab Jordan Investment Bank (Public Shareholding Limited Company) which comprise of the Consolidated Statement of Financial Position as of December 31, 2012, and the Consolidated statement of Income, and Comprehensive Income, Consolidated Statement of Changes in Shareholders Equity, and Consolidated statement of Cash Flow for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Bank s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of Arab Jordan Investment Bank as of December 31, 2012, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards. Report on the Legal and Regulatory Requirements The Bank maintains proper accounting records, and the accompanying consolidated financial statements are in agreement therewith and with the financial statements enclosed in the Board of Directors report. We recommend that the General Assembly of Shareholders approve these consolidated financial statements. The accompanying consolidated financial statements are a translation of the satutory financial statements in the Arabic Language to which reference should be made. Amman Jordan January 30, 2013 Deloitte and Touche (M.E) Jordan 36

37 CONSOLIDATED STATEMENT OF FINANCIAL POSITION December 31, Notes Assets Cash and balances at Central Bank of Jordan 4 103,541,164 48,026,132 Balances at banks and financial institutions 5 127,116, ,428,462 Deposits at banks and financial institutions 6 3,099,424 2,137,812 Financial Assets at Fair value through Profit & Loss 7 240, ,341 Financial Assets at Fair value through Other Comprehensive Income 8 15,173,554 15,857,090 Direct credit facilities net 9 391,933, ,203,041 Financial Assets at Amortized Cost ,097, ,183,149 Investment in associate company 11 8,125,421 5,886,359 Property and equipment net 12 30,462,084 25,118,245 Intangible assets net 13 1,619,473 1,642,775 Deferred tax assets 19/b 656, ,241 Other assets 14 19,839,554 13,657,636 Total Assets 1,032,905, ,258,283 Liabilities and Shareholders equity Liabilities: Banks and financial institutions deposits ,640, ,209,490 Customers deposits ,843, ,267,906 Cash margins 17 26,454,332 25,520,539 Sundry provisions 18 1,647,387 1,351,626 Income tax provision 19/a 5,814,275 5,263,513 Other liabilities 20 10,387,633 8,803,516 Total Liabilities 877,788, ,416,590 Shareholders equity Equity attributable to Bank s shareholders Paidup capital ,000, ,000,000 Share issuance premium 24 1,418,000 Statutory reserve 22 16,009,877 14,222,418 General banking risks reserve 22 3,193,021 3,093,021 Foreign currency translation adjustment , ,000 Fair Value reserve net after tax 25 (1,666,157) (1,048,338) Retained earnings 26,27 14,971,331 13,125,624 Total equity attributable to the Bank s shareholders 134,457, ,664,725 Non controllers interests 28 20,659, ,968 Total Shareholders Equity 155,117, ,841,693 Total Liabilities and Shareholders Equity 1,032,905, ,258,283 General Manager THE ACCOMPANYING NOTES FROM 1 TO 49 CONSTITUTE AN INTEGRAL PART OF THESE STATEMENTS AND SHOULD BE READ WITH THEM. Board of Directors Chairman 37

38 CONSOLIDATED STATEMENT OF INCOME For the Year Ended December 31, Notes Interest income 29 54,665,465 43,981,111 Interest expense 30 (24,795,963) (18,538,294) Net Interest Income 29,869,502 25,442,817 Commissions Income Net 31 4,482,351 4,395,851 Net Interest and Commissions Income 34,351,853 29,838,668 Foreign currencies income 32 4,555,737 2,082,111 Gain on financial assets at fair value through Profit & Loss ,463 3,810,284 Cash dividends from financial assets at fair value through Other Comprehensive Income , ,933 Other income 35 1,193, ,188 Total Income 40,882,377 37,120,184 Employees expenses 36 7,924,911 7,393,136 Depreciation and amortization 12, 13 1,449,800 1,327,567 Other expenses 37 7,039,793 6,364,351 Provision for impairment of direct credit facilities 9 3,802,752 5,181,000 Sundry provisions , ,468 Total Expenses 20,605,649 20,527,522 Profit from operations 20,276,728 16,592,662 Bank s share gain (losses) associate company 11 50,321 (169,576) Profit before income tax 20,327,049 16,423,086 Less : Income tax expense 19 (5,330,118) (4,510,965) Profit for the Year 14,996,931 11,912,121 Attributable to : Bank s Shareholders 13,723,484 11,763,278 Non controllers Interest 1,273, ,843 14,996,931 11,912,121 Basic and diluted earnings per share General Manager THE ACCOMPANYING NOTES FROM 1 TO 49 CONSTITUTE AN INTEGRAL PART OF THESE STATEMENTS AND SHOULD BE READ WITH THEM Board of Directors Chairman 38