On my behalf and the Board of Directors, it is a great pleasure to share with you the 63rd annual report of Jordan Ahli Bank, which includes the Board of Directors’ report on the bank’s results, main activities and closing accounts for 2018. We will also outline the bank’s plan for 2019.
It is a deep privilege to celebrate yet another fruitful year in our bank’s history, marking the 64th anniversary of this institution’s deeply entrenched heritage. We take great pride in the many achievements and successes that Jordan Ahli Bank has attained throughout its historic journey; a journey filled with historic, national and regional challenges, transitions and opportunities. Today, we reinforce our commitment towards continuing to grow the financial performance, social impact and remarkable legacy of Ahli Bank.
Ahli Bank is the first bank in the region to officially develop and deploy a “shared prosperity” strategy. Our shared prosperity framework is a holistic business model that seeks to directly impact all of our stakeholders in a positive way that we hope will ultimately become a model for ‘conscious capitalism’ in the financial services industry and beyond. The shared prosperity framework has identified six key stakeholders: our shareholders, our customers, our employees, our regulators, our community, and our partners. We are identifying key performance indicators that clearly measure value creation to each of these stakeholders in a direct, delightful and meaningful way. We believe that this holistic view of corporate value creation is a moral and ethical imperative that will become a requirement for sustainable, inclusive and responsible growth and value creation in the 21st century. We are excited to share the details of this framework in stages as it evolves, matures and delivers the desired impact, but I assure you that it is creating an immense sense of shared purpose and meaning for our board and our family of employees as we redefine Ahli Bank’s role in the economy, in society and around the world.
Digitization and Innovation
The age of exponential digitization is upon us, and the financial services industry is evolving steadily and rapidly. Ahli Bank is embracing all of the formidable opportunities that this new age of disruption presents to value creation. Over the past 3 years, we have invested a substantial amount of resources in upgrading our strategy, IT infrastructure, and corporate culture to enable the organization to advance and thrive in this new age of accelerating change. One of our innovation initiatives includes officially launching the ‘Ahli Fintech Accelerator’, the region’s first fintech subsidiary to be owned by a bank. Ahli FinTech Accelerator aims to accelerate the development of FinTech startups with local, regional and global growth potential, and to integrate their value offerings within our portfolio of products and services. Some of our other innovation programs include but are not limited to: the creation of the Ahli Labs team (a group of banking and computer science experts that lead the development of valuable and scalable fintech IPs & capabilities), employee hackathons to enable enterprise-level engagement with our innovation objectives, a public API sandbox to help developers integrate and pilot solutions on our system, and partnerships with academia that have enabled us to solve for challenges with students across the country. Ahli Bank’s innovation programs aim to secure our position as the innovation leader in the Jordanian banking sector. Together with other financial industry & ecosystem players, including most notably the Central Bank of Jordan, we aim to establish Jordan as a primary regional hub for innovation in the field of financial technology entrepreneurship.
During the first quarter of 2018, Ahli Bank completed the purchase of the real estate holding of “Al Ahlia Enterprises”, in order to design and build a new ‘campus’ to serve the needs of Ahli Bank staff, customers, and the community at large. The objectives for building the new campus are multifaceted, and include 1. to consolidate our presence into one management building (instead of four) in order to reduce organizational and cost inefficiencies, 2. to create a unique work environment & empower a corporate culture that encourages innovation, coordination, teamwork, and a substantially better employee experience in order to retain and attract the best minds in the industry, 3. to create unique and delightful ways to engage with customers and the community and 4. to bolster our brand equity.
Ahli Bank’s board and executive team have embraced the values of governance like few other organizations in the region, as we absolutely recognize the importance and impact of adhering to the highest standards of corporate governance. Over the past few years, we have recruited Deloitte to benchmark our governance systems against global best practices. Deloitte’s first assessment was conducted in 2015, where it was deemed that Ahli Bank needed to make many improvements to its governance practices in order to comply with global best practices. Clear gaps were identified, and our board, in partnership with our executive team, has been working tirelessly over the past few years to address the majority of Deloitte’s recommendations. Deloitte was hired to conduct another governance audit in 2018 to assess improvement, and the results indicated that Ahli Bank is now not only fully ‘compliant with global best practices’, but is also close to ‘exceeding’ them pending the implementation of a few remaining governance programs. We are honored and proud to have made this quantum leap in our governance culture and frameworks, and not only see this as core organizational value, but also as a great source of competitive advantage in our industry.
We launched our Investor Relations (IR) function many years ago, and IR outreach is now maturing. Ahli Bank is now receiving share coverage from distinguished analysts including EFG Hermes, and we are attending global investment conferences to meet with institutional investors and promote Ahli Bank’s investment story, in addition to preparing regular updates by our (IR) team that are shared with interested investors. It will take time for our IR ambitions to mature, but is a worthy journey that we hope will lead to more global exposure as well as more active trading on our share.
Despite the exceptional circumstances and mounting economic pressures facing the Kingdom, the bank continued its progress and was able to further improve its financial performance during 2018. In particular, the bank’s well-thought out strategy of improving the quality of our credit portfolio by aggressively 1. attracting the best customers with the right risk/return profile, and 2. aggressively improving our bad debt coverage ratio by heavily provisioning debt beginning in 2016, has proven to be fruitful in terms of boosting portfolio quality and profitability. As a result, the bank was able to comfortably comply with the new IFRS9 international accounting standards where more conservative standards for classifying, measuring, and provisioning financial assets were introduced.
By end of 2018, provisions dropped by a remarkable 88.7%, while the rate of non-performing loans to gross credit facilities (after deducting commissions and interest in-suspense) was recorded at 5.86% by the end of 2018 compared to 7.38% in 2017. Net credit facilities recorded a drop of 4.0% to stand at JD 1.425 billion, in line with the bank’s strategy to reduce exposure according to its risk appetite. These and other KPIs reflect the improved quality of the bank’s credit portfolio, as well as its ability to meet any other obligations in the future.
Moreover, the notable decline in allocations along with a 20% drop in total expenses, contributed to a 60% growth in after-tax net profits standing at JD 21.28 million compared to JD 13.32 million in 2017. In addition, the bank managed to increase interest income, while stabilizing net interest revenues despite the hike in interest rates on deposits witnessed during the last two years. The bank was also able to maintain its base of customer deposits with a balance of JD 1.911 billion, while preserving efforts to control cost of funds. Capital Adequacy Ratio (CAR) was recorded at 14.73% compared to 14.04% in 2017, also an excellent indicator of the bank’s growing strength and resilience.
I conclude this letter by expressing my most sincere gratitude to our loyal clients as well as to our esteemed shareholders for their unwavering trust and confidence in the prospects and aspirations of our pioneering establishment. I would also like to extend our appreciation to our entire family of employees for their unrelenting and dedicated efforts in actively seeking to fulfill our ambitious goals. Finally, I would like to thank the regulatory authorities in Jordan, Palestine and Cyprus, and especially commend the efforts of the Central Bank of Jordan, The Jordan Securities Commission, the Companies Control Department, the Palestine Monetary Authority, and the Central Bank of Cyprus for ensuring the soundness of the banking sector in Jordan as well as the respective regions in which we operate. We are honored to operate and thrive beneath the wise and loving Hashemite leadership, and are optimistic and excited for what is to come.
Saad Nabil Mouasher
Chairman of the Board
You can also read about The Jordanian Economy for 2018