GROWTH IN EVE RY lAYER - Bank ABC Reports... · 2 ABC Bank Annual Report 2007 Arab Banking...

GROWTH in eveRy layeR>Annual Report 2007

ABC Bank Annual Report 2007 2

Arab Banking Corporation (Jordan)Arab Banking Corporation (Jordan) was established in Jordan in early 1990 as a subsidiary of Arab Banking Corporation (B.S.C.), a Bahrain based Bank. The bank operates as a universal bank in the Hashemite Kingdom of Jordan providing commercial, retail and investment banking services.The Bank uses state-of-the-art banking technology to maintain its high level of customer service. Supported by the worldwide network of ABC units that are present in 21 countries, ABC (Jordan) offers a unique capability to meet customers’ needs and expectations inside and outside Jordan.ABC (Jordan) continues to pursue excellence with vigor for the ultimate benefit of its customers and shareholders.

CONTENTSOur Vision, Mission and Values 3Board of Directors 4Senior Executive Management 7Senior Executive Management of Arab Co-operation Financial for Investments Co. 8Director’s Report 10About Arab Co-operation Financial for Investments Co. (ABC Investments) 12Organization Chart 13Review of Operations 14Financial Indicators from 2003-2007 24Financial Ratios (2006 & 2007) 25The Bank’s standing in the Banking Sector 25

Capital Investment 25Owners of 5% or more of ABC (Jordan) shares 25Shareholdings of the Chairman, Members of the Board, Senior Management and their Relatives 26Acknowledgement of the Board of Directors 27 Independent Auditors’ Report 29Consolidated Balance Sheet 30Consolidated Income Statement 31Consolidated Statement of Changes in Equity 32Consolidated Cash Flow Statement 33Notes to the Consolidated Financial Statements 34Branches of Arab Banking Corporation (Jordan) & Arab Co-operation Financial for Investments Co. 74

Our plan is to increase our share in the Jordanian market by providing a wide range of banking and financial services thus reflecting ABC Group’s vast experience and international presence.

Growth in every layer 3

our vision, mission And vAlues

To be recognized as the innovative and proactive Bank in Jordan with the Capacity and Experience of a Premier Financial Group in the Region.

OuR MISSION

• To provide innovative and high quality services and products to our clients through user friendly, accessible facilities and delivery channels.

• To maximize benefits to our clients and transform their dealing with the Bank to a pleasant experience.

• To interact with the national and local community interests.

• To invest in providing a healthy and attractive environment for all personnel.

• To generate increasing value for our shareholders and safeguard the Bank’s assets.

OuR VAluES

• Complete appreciation of the customer• Working as one team with high productivity• Credibility and integrity• Transparency and full exchange of information• Compliance with the local international banking standards• Competency in procedures


1. Mr. Ghazi Abdul-Jawad Chairman of the Board till April 6th,2008Academic Achievements • M.A. in International Relations, Fletcher School of law and Diplomacy, Tufts university, Massachusetts, uSA. • B.A. in Political Science, lewis and Clark College, Oregon, uSA. • Fellow of the Chartered Institute of Bankers, united Kingdom. • Member of the International Finance Institute Task Force Committee, Washington, uSA. • Member of the Gulf Executive Strategic leadership Program Task Force committee. • Member of the Bretton Woods Committee. Professional experience • President & Chief Executive of Arab Banking Corporation B.S.C., Bahrain since 1997. • Chairman , Arab Banking Corporation (Egypt). • Chairman, Arab Financial Services (E.C) Bahrain. • Previously General Manager, Gulf International Bank (B.S.C.), Bahrain.• Over 35 years of work experience as a Senior General, Commercial Banker and in the government sector.

2. Mr Hassan Juma Chairman of the Board as of April 6th, 2008Academic Achievements• Fellow of the Chartered Institute of Management Accountants (uK).Professional experience • President & Chief Executive of Arab Banking Corporation (B.S.C)-April 2008• Member of the Board of Directors of National Bank of Bahrain, and appointed as Managing Director and Chief Executive- January 1997• General Manager and Chief Executive Officer, National Bank of Bahrain - 1984• Deputy General Manager, National Bank of Bahrain - 1982• Assistant General Manager /Administration & Finance, National Bank of Bahrain, -1979• Second Vice President, Chase Manhattan Bank, Bahrain, responsible for the Offshore Banking unit’s Operations - 1978• Head of Operations, Chase Manhattan Bank,

Bahrain-1975• Associate member of the Chartered Institute of Management Accountants (CIMA), and appointed as Accountant in the Accounting and Finance Department, Bapco -1971directorships• Board member, Arab Banking Corporation, Bahrain.• Board member, ABC International Bank, plc, u.K.• Chairman, Arab Banking Corporation, Egypt.• Director, National Bank of Bahrain.• Ex-Chairman, Bahrain Telecommunication Company, (Batelco) .• Ex-Chairman, umniah Mobile Company, Jordan .Awards• Bahrain Government’s Award for distinguished contributions towards the development of Bahraini nationals.• HR leadership Award, World HRD Congress – February 2006.• “Arab Banker of the Year – 2001” by the union of Arab Banks.• Muharraq Citizens leaders and Pioneers Award.

3. Dr. Saleh Al-HumaidanDeputy ChairmanAcademic Achievements • Ph.D. in Agricultural Economics, Oklahoma State university, uSA Professional experience • General Manager, Arab Investment Corporation, Saudi Arabia. • Chairman of the Board, Financial Investment Bank, Sudan. • Member of the Board of Directors, Arab Banking Corporation (Bahrain). • Member of the Board of Directors, Saudi International Petrochemicals Company, Saudi Arabia. • Member of the Board of Directors, Saudi Equity Fund.• Maintains extensive and diversified experience in the field of investment and economics as a result of working in the Ministry of Planning in Saudi Arabia, the Saudi Development Fund, the Arab Investment Corporation in Saudi Arabia and his participation in numerous conferences and seminars concerning investment and capital development in Arab countries.

BoArd of direCtors

21 3


4. H.E. Eng. Shafiq Zawaideh Member of the Board of DirectorsAcademic Achievements • M.A. in Engineering, uSA, 1965. • B.A. in Civil Engineering, Egypt, 1960. Professional experience• Chairman of the Board of Directors, Jordan Pipes Manufacturing Company.• Member of the Board of Directors, united Investors Company.• Member of the Board of Directors, Tameer.• Member of the Board of Directors, union Company for Cigarettes.• Minister of Housing and Public Works, 1988- 1989. • General Manager, Public Housing Corporation 1984- 1988. • Member, National Consultative Council 1978- 1979.• Public Contracting 1968- 1984.• Engineer, Greater Amman Municipality 1960- 1968. • Head, Heritage Association, Madaba. • Participated in the establishment of various banks and public share holding, private and limited liability companies.

5. Dr. Khaled Kawan Member of the Board of DirectorsAcademic Achievements • State Doctorate Degree in Banking laws, university of Paris, Sorbonne, France. Professional experience • Head of legal & Compliance and Corporate Secretary of Arab Banking Corporation (B.S.C.). • Member of the Board of Directors, Arab Banking Corporation, Egypt, (S.A.E.).

6. Mr. Yousef Abdelmaula Member of the Board of DirectorsAcademic Achievements • M.A. Sc. in Business Management, Hartford university, uSA, 1977. • B.A. Business Management, Benghazi university, libya 1970. Professional experience • Executive Manager, libyan Foreign Investment Board. • Member of the Board of Directors, Arab libyan Foreign Bank, libya.

• Member of the Board of Directors, Arab Banking Corporation (Bahrain).• Member of the Board of Directors, united Bank for Saving & Investment, Jordan (1992-2003)• Member of the Board of Directors, Sahara Bank, libya (1990-1996)• Member of the Board of Directors and Investment Portfolio Manager, Arab libyan Foreign Investment Company (1990-2002)

7. Dr. Marwan Al-SayehMember of the Board of DirectorsAcademic Achievements• Ph.D. in Electrical Engineering, Charles university Prague and Ecole Genie Electrique de lyon, 1971.• B. Sc. in Electrical Engineering, 1962.Professional experience• Managing Director of “Al Sayeh Project Development Consultancy” 1993 – Present • Regional Director for Arab Gulf region for AlCATEl–AlSTOM group based in Beirut, Kuwait 1964 –1993 • Vice Chairman of the Board of Directors of Century Investment Group • Vice Chairman of the Board of Directors of Accelerator Technology Holdings.• President of the French Foreign Trade Counselors for the Arab Gulf region.• Vice President of the French - Bahraini Business Club.• Member of the Board of Trustees and Member of the Management Committee of the Welfare Association, a Palestinian NGO. • As acknowledgment of the French Government in developing the trade business between France and the Arabian Gulf Region the French President awarded Dr. Al Sayeh the following decorations: - “Officier de la l’egion d’Honneur”. 1999- “Chevalier de l’ordre National du Merite” 1986

8. H.E. Mr. “Mohammad Akel” Al-BiltajiMember of the Board of DirectorsAcademic Achievements • london General Certificate Examination, 1959. • Higher Diploma in Education / Eartham College, uSA, 1962.• Senior Aviation Management Association.

4 5 6 7


Professional experience• Special Advisor to His Majesty King Abdulla II.• Senator – Jordanian Senate – Chairman, Tourism & Heritage Committee.• Chief Commissioner – Aqaba Special Economic Zone Authority (3years).• Chairman – Jordan Tourism Board (5years).• Minister of Tourism and Antiquities (5years.)• Senior Vice President Royal Jordanian Airlines (26years).• President – Arab Wings (2years).• Jordan Television – News Anchor (6years). • Industrial Training – Aramco (6years).• Holds a number of high Jordanian and Foreign decorations.

9. Mr. Hareb Al DarmakiMember of the Board of Directors as of April 6th, 2008Academic Achievements• Masters in International Studies, John Hopkins university, Washington DC, uSA, 1976• B.Sc in Economics & Politics, Bristol university, uK, 1974 Professional experience• Executive Director, Private Equities Department at the Abu Dhabi Investment Authority• Chairman of Gulf Capital• Supervisory Board Member of IPEF limited• Member of the Board of Directors of Q-Tel• Member of the Board of Directors of Arab Banking Corporation (ABC), Bahrain

10. Mr. Mubarak Al-Mansouri Member of the Board of Directors till April, 6th 2008Academic Achievements • Masters in Business Administration (MBA), university of West Florida (uWF), Pensacola, Florida. Professional experience• Founding Director General of Abu Dhabi Retirement Pensions and Benefits Fund (ADRPBF).• Member of the Board of Directors, Abu Dhabi National Company for Building Materials ( BIlDCO).• Member of the Board of Directors, Abu Dhabi Holding Company.• Member of the Board of Directors, uAE’s National Central Cooling Company (Tabreed).

• Member of the Board of Directors, Arab Banking Corporation (Bahrain).• Member of the Board of Directors, Arab International Bank, Egypt.

11. Mr. Nour NahawiMember of the Board of Directors & Chief Executive OfficerAcademic Achievements • M.A.in International Administration, Vermont, uSA 1974. • B.A. Business Management, Colby College, uSA, 1973. Professional experience• Managing Director & CEO, Arab Banking Corporation (Jordan) since 2006. • S.V.P. Head Arab World Division, Arab Banking Corporation (Bahrain) 2003- 2006. • CEO/ Managing Director BNP Paribas, Cairo 2000- 2003. • General Manager, BNP Paribas, Bahrain, 1996- 2000. • Regional Representative, Banque Paribas, Beirut, 1993- 1996. • General Manager, Banque Paribas, Muscat,1990 -1993. • Regional Manager, Banque Paribas, Bahrain,1988- 1990. • Deputy Manager, Banque Paribas North America Division , Paris, 1985- 1988. • Deputy General Manager, Banque Paribas, Abu Dhabi, 1981- 1985.• Branch Manager, Banque Paribas, london, 1979- 1981. • Deputy General Manager, Banque Paribas, Muscat, 1975- 1979.

9 10 118

BoArd of direCtors


senior exeCutive mAnAgement

Mr. Tarek AkelDeputy CEOAcademic Achievements • MBA in Finance, Baylor university • M.A. in Economics, Texas Tech university • BA in Int’l Economics, Texas Tech university Professional experience• Deputy CEO, Arab Banking Corporation (Jordan) • First Vice President, Arab Banking Corporation, BSC • Financial Consultant – Merrill lynch International Bank (Bahrain) • Investment Analyst, Central Asia, Middle East &North Africa Department, The International Finance Corporation, World Bank Group /Washington DC

Mr. Tony Mukbel Assistant CEO / Internal AuditAcademic Achievements • MSc. in Accounting, George Washington university, uSA. • B.A. in Accounting, university of Jordan, Jordan. • Certified Public Accountant (CPA), member of AICPA since 1983. Professional experience • Assistant CEO/ Internal Audit, Arab Banking Corporation (Jordan). • Chairman of the Board, Century Investment Group since 2003. • Board Member, Jordan Tourism Investment Co.• Board Member, National Chlorine Industries Co. • Over 20 Years experience in auditing financial institutions (uSA, Kuwait, united Arab Emirates, Qatar, Jordan).

Mrs. Nuha Matar Assistant CEO/ CreditAcademic Achievements • B.A. in Archaeology, university of Jordan. Professional experience • Assistant CEO/ Credit , Arab Banking Corporation (Jordan) • Board member in Jordan Travertine Co. • Credit Officer , HSBC Bank, Jordan

Mrs. Rana Naddeh Assistant CEO / Central OperationsAcademic Achievements • B.A. in Business Administration/ Economics, university of Jordan. Professional experience • Assistant CEO/ Central Operations, Arab Banking Corporation (Jordan). • Manager of the Central Operations unit, Arab Banking

Corporation (Jordan.) • Trade Finance Manager, union Bank for Savings and Investment

Mr. Hisham Al KayyaliAssistant CEO/ Retail BankingAcademic Achievements • B.A. in Business Administration, Beirut Arab university.Professional experience • Assistant CEO/ Retail Banking, Arab Banking Corporation (Jordan). • Regional Manager/ Head of Branches & e- Channels, Arab Banking Corporation (Jordan.) • Marketing & Sales Supervisor/ Gulf Bank, Kuwait• Member of the Board of Directors, Visa Jordan Card Services

Mr. Othman ShwaimatAssistant CEO / Treasury and Investment Academic Achievements • MBA in Finance, Arab Academy for Banking & Financial Sciences.• BA in Finance & Accounting, Yarmouk university. Professional experience• Assistant CEO / Treasury and Investment, Arab Banking Corporation (Jordan) 2008-Present. • Senior Manager Treasury & Investment, Jordan Kuwait Bank (Jordan) 2004- 2008 • Head of Asset liabilities Management & Money Market, Treasury, Standard Chartered bank (Jordan) 1999- 2004 • Assistant Manager / Treasury & Investment, Cairo Amman Bank (Jordan) 1989 -1999

Mr. Suleiman Mbaidin Acting Assistant CEO/ Administration and Human ResourcesAcademic Achievements• M.A. in Business Administration, university of Jordan, 2001• B.A. in Managerial Sciences, university of Mu’ta, 1993Professional experience• Acting Assistant CEO / Administration & Human Resources Arab Banking Corporation (Jordan) 2008 –Present• Executive Manager/ Human Resiurces Dept, Arab Banking Corporation (Jordan) 2005–2007. • Assistant Manager / Head of Administration & Employees Dept., Deposit Insurance Corporation 2000- 2005.• Senior Employee, Central Bank of Jordan 1994- 2000.


Mr. “Mohammed Naser” Abu Zahra Acting Assistant CEO / Corporate Banking Academic Achievements • MBA in Financial Management, Arab Academy For Banking &Financial Sciences • B.A. in Accounting. university of Jordan• Moody’s Risk Management Services from Moody’s Company Professional experience • Acting Assistant CEO/Corporate Banking, Arab Banking Corporation ( Jordan)• Executive Manager/ Corporate Banking Dept., Arab Banking Corporation (Jordan)• Senior Credit Officer/Corporate Department, Housing Bank for Trade & Finance. •.Principal credit officer, Islamic International Arab Bank/ Main branch• Credit officer, Jordan Islamic Bank/Main branch• More than 14 years experience in different banks in Jordan

senior exeCutive mAnAgement of ArAB Co-oPerAtion finAnCiAl for investments Co.

Mr. Khaled Zakaria Chief Executive OfficerAcademic Achievements • B.A. in Finance & Accounting, Yarmouk university. Professional experience • CEO, Arab Co-operation Financial for Investments Co. • More than 19 years experience in treasury and investment in different banks in Jordan.

Mr. Adnan Al Shoubky Deputy CEO/ Chief Operations OfficerAcademic Achievements • B.A. in Public Administration (Major) and Computer Science (Minor), Yarmouk university Professional experience • Deputy CEO / Chief Operations Officer, Arab Co-operation Financial for Investments Co.• More than 12 years experience in Internal Audit in Arab Banking Corporation.

Mr. Moataz Maraqa Deputy CEO/ Chief Investments OfficerAcademic Achievements • Masters in Banking &Finance, Arab Academy for Banking Studies • B.A. in Business Administration, university of Jordan Professional experience • Deputy CEO /Chief Investments Officer, Arab Co-operation Financial for Investments Co.• More than 14 years experience in investments and private banking at Banks and Financial Institutes

senior exeCutive mAnAgement

9

Net interest and commission grew by almost 16.5% and gross profit increased by 8.3%.


It gives me great pleasure to present to you the eighteenth annual report for the Arab Banking Corporation (Jordan) for the sixth time, consecutively. I would like to extend congratulations on behalf of the Board of Directors to the shareholders on the considerable achievements realized by your Bank which comes at the end of another year of continued growth. I hope that this report, inclusive of all statements, figures, declarations, and changes in the items of balance sheet, statements of income and cash flows, which were prepared in line with the requirements of the Jordan Securities Commission, will answer all your questions and inquiries regarding the Bank’s financial standing and performance. To begin with, I would like to express pride in our Bank›s accomplishments during -2007. Just like the previous year and the years before that, the results have been in line with the goals and targets established in the Bank’s annual plan, and have kept pace with the significant growth and progress of the Jordanian economy year after year. The sustained growth rates that the Jordanian economy is witnessing has reflected positively on the overall confidence in the economy and growth of the banking sector and its health. ABC Jordan has been in the vanguard of Jordanian banks in their stable and healthy growth. The Gross Domestic Product in has grown by 6 percent in real terms outpacing the population growth and inflation rates and almost matching last year’s rate. This growth was achieved despite the economic and financial pressure Jordan has faced as a result of the drastic increase in the process of imports including oil, grains, commodities and products manufactured in the Euro-zone. Jordan also faced a sharp decline in foreign aid from historic and budgeted levels. The government has also experienced a mounting fiscal deficit as a result of increases in salaries and current expenditure to keep pace with the increasing commodity prices and the increase in the burden of fuel subsidies which exceeded the budgeted levels dramatically. I commend the economic policy pursued during the year 2007 by the government of the Hashemite Kingdom of Jordan. Targeted fiscal spending on vital projects of national importance has reinforced the principles of the targeted economic development and was able to meet the requirements of balanced and sustained development and promoted stability. I would also like to emphasize on the importance of the prudent monetary policy followed by the Central Bank of Jordan which, in turn, has continued to buttress Jordan’s economic prosperity by preserving confidence in the country and its currency through controlling inflation rates, balancing interest rate structure, and above all, maintaining the attractiveness of savings in Jordanian Dinar and maintaining the exchange rate at the appropriate levels. The Central Bank of Jordan has performed its role in preserving the integrity and soundness of the banking sector while enabling it to continue prudent credit growth. As a result of these sound policies, the Kingdom’s foreign reserves increased to a record level of around $7 billion while the ratio of external debt to GDP dropped from 74 percent in 2006 to 71.6 percent in 2007.With this trust inspiring economic backdrop, the Bank has continued its march of targeted growth to preserve its market share and strengthen its competitive position is the market while maintaining its portfolio quality. The Management of the Bank worked to diversify its products and enhance the quality and effectiveness of the human resources and technological base. All of this contributed towards enhancing the Bank’s operating profits and consolidating its position in the domestic market. Before presenting a general overview of the financial achievements for the fiscal year ended December 31, 2007 and the outcome of the labor of the year, I would like to clarify a change in the reporting requirements of the Jordan Securities and Exchange Commission. This change which impacted the calculation of the Bank’s profits for this year led to decreasing the reported net profit by around one million Dinars. The total income realized has increased from 26.7 million Dinars in 2006 to 28.9 million Dinars in 2007; a growth of 2.2 million Dinars or 8.2 percent. However, the Bank reported net profit after tax was 10.6 million Dinars compared to a net profit after tax of around 11 million Dinars in the previous year. The main on-balance sheet items continued to in 2007. The Bank’s total assets increased from 517.7 million Dinars in 2006 to 601.2 million Dinars

direCtors' rePort


in 2007; a growth of 83.5 million Dinars or 16.1 percent. The Bank’s shareholders equity increased from 65.8 million Dinars in 2006 to 77.3 million Dinars by the end of 2007; an increase of 11.5 million Dinars or 17.4 percent.Client’s deposits recorded the remarkable growth both in absolute and percentage terms. Deposits increased from 251.5 million Dinars at the end of 2006 to 367.6 million Dinars at the end of 2007; an increase of 116.1 million Dinars, or 46.2 percent. Direct credit facilities increased from 240.5 million Dinars to 267.1 million Dinars, over the year; an increase of 26.6 million Dinars or 11 percent. The Bank has introduced new banking products and launched a number of electronic banking products and service outlets. This had a significant impact on the retail credit portfolio which recorded a growth rate of 18 percent in 2007. This is inline with the Bank’s strategic plan for growing the retail segment in the years 2007-2010. This plan is aimed at growing the lucrative credit portfolio and complementing the Bank’s product lines. As part of its continuing commitment to enhance customer services, the Bank has launched the second stage of the E-Banking Project in 2007. This new E-Banking product improves on the previous E-Banking solution in current account operations. A new service, Bank-Assurance, was launched in 2007 to provide comprehensive income, saving and education insurance programs. Building on the previous policies of the Bank management, a new organizational structure has been adopted and put into effect in the current year. The new structure includes a full job description for all positions, ranks and administrative and supervisory posts within the Bank. The Bank is in the process of introducing a new system to measure client satisfaction utilizing state of the art opinion-polling tools. The Bank’s investment arm, Arab Cooperation Financial Investment Company, has continued to provide clients with investment-based financial services achieving remarkable success despite the overall decline in the Jordanian capital markets. Such success is manifested in the increase in the net profit realized by the Company which has occupied an advanced position among investment companies operating in Jordan. Our investment arm has ranked fourth among all the brokerage companies registered on the Amman Stock Exchange with a market share of about 3.5 percent. In conclusion, I would like to extend sincere gratitude to His Majesty King Abdullah II Bin Al-Hussein for his enlightened leadership and tireless perseverance to achieve further development and prosperity in Jordan. I would also like to thank the Government, the Central Bank of Jordan and it officials and our colleagues in the other financial institutions active in Jordan for their continuous efforts exerted to promote growth of the Jordanian economy and the banking sector as well as preserving the confidence in the Jordanian economy and creating suitable investment climate in Jordan. Thanks are also extended to our clients for their continued loyalty and our employees for all their efforts which have contributed significantly in achieving this remarkable success. May peace and the blessings of Allah be upon you.

mr. ghazi Abdul JawadChairman

Corporate direct credit facilities portfolio grew by 14% to reach JD 160 million in 2007 (JD 140 million in 2006).


ABout ArAB Co-oPerAtion finAnCiAl for investments Co. (ABC investments)

The company, whose roots date back to the early nineteen nineties, concentrates exclusively on the fields of brokerage, corporate finance, equity research, investment and asset management for individual and institutional clients. With more than 55 employees, the company’s client accounts, ranging from brokerage to asset management, were in excess of 9,000 at the end of December 2007. ABC Investments’ presence full local, regional and international investment services. ABC Investments is a wholly owned subsidiary of the Arab Banking Corporation (Jordan). ABC Investments has a paid-up capital of JD 15.6 million ($22 million), with total assets in excess of JD 46 million ($65 million), ABCI enjoys strong and stable financial position.ABC Investments offers a wide spectrum of investment services, including local, Regional and International Brokerage, Asset Management, Financial Advisory and Corporate Finance. Moreover; ABCI is licensed by Jordan Securities Commission as a Financial Broker, Dealer, Investment Management, Margin Financing Financial Advisory and Issuance Management/ best efforts.Our mission at ABC Investments is to serve and offer our clients guidance and consultation on their investments with the philosophy of creating professional long-term partnerships with them through a wide range of alternative diversified investments and opportunities worldwide. At ABC Investments, we maintain certain values that ensure our clients receive maximum return on their investments and the quality of service they deserve. These values include integrity, customer focus, excellent performance, enthusiasm, innovation and accountability.

BROKERAGE SERvICESABC Investments offers its clients trading and investment services in local, regional and international markets. Below is a description of the markets that clients may invest in: local, regional and international Brokerage: Cash account, Margin account, Stocks, Bonds, Option, Futures, Short Sellingislamic investments: Islamic Products, Islamic DerivativesAsset management and investments Advisory: Portfolio Management «local market and Regional markets», Investments Advisory, Structure ProductsiPo managementresearch(JOD) 2007 2006Total Assets 46,625,058 42,484,184Total liabilities 23,724,299 22,185,534Owners Equity 22,900,759 20,298,650


Board of Directors Board Committees

Executive Committee

Risk Committee

Audit Committee

Compensation Committee

Audit Committee

Compliance

Internal Audit

Board Secretary

Deputy C.E.O.

ABCI

C.E.O.

HD of CreditHD of Corporate

BankingHD of Retail

Banking HD of TreasuryHD of Support

HR & Admin

IT

Corporate Comms

Retail Banking Corporate Banking

Strategic Dev., liaison &

Corespondent Banking

Risk Management

Retail Risk

Credit

Treasury

Investment

Financial Control

Operations

legal

orgAnizAtion ChArt

Corporate Governance CommitteeManagement Committees


revieW of oPerAtions

ABC Bank (Jordan) “retail banking business continued to grow steadily as a number of initiatives were implemented”.


ECONOMIC REvIEw Despite the slight drop in the growth rate of the GDP of Jordan in 2007 which was estimated at 5.8 percent from 2006’s levels, this growth is considered a confidence-inspiring accomplishment and a sign of solid economic performance in the country. Jordan has, along with the surrounding countries, faced a number of challenges caused by external events and yet managed to contain and adjust to those challenges and sustain the trend of economic which began the beginning of the third millennium. This sustainable growth is a strong indication of a solid open economy managed with vision and prudence which managed to create the environment for sustainable development and growth in a balanced and stable manner. Such prudence, along with an investment friendly legislative environment was instrumental in promoting foreign direct investment in Jordan. This is evident in success in attracting increasing amounts of foreign direct investment in Jordan seeking the promising returns in a low risk environment. As a result, the Jordanian economy has witnessed growth in most economic sectors in 2007, albeit in varying rates. Growth in finance, insurance, manufacturing and real-estate sectors was relatively high while growth in agriculture and extractive industries sectors lagged. Yet, the difference in growth among sectors of the Jordanian economy has not tarnished the overall outlook which remains promising with many healthy opportunities. This is due in part to the policies of strengthening the foundations of security and the rule of law, enhancing the partnership between the private and the public sectors, distribution of the economic development gains across different geographical areas and segments of society and strengthening the role of civil society. On the macro level, the growth of foreign direct investment was accompanied by decreasing external debt to GDP, maintaining confidence in the Jordanian Dinar many other facets of sound fiscal, monetary and social policy.

FINANCIAl RESulTSBuilding on this favorable background, Arab Banking Corporation (Jordan) has continued to implement its strategic plan aimed at enhancing its operating profits, increasing its market share, improving its product line and delivery channels, preserving its soundness, establishing corporate governance in addition to improving its competitiveness and enhancing the efficiency of its human resources. This enabled Arab Banking Corporation (Jordan) to record tangible growth in operations and in most on-balance sheet items. All of this made it possible for the Bank to improve its external agency credit rating from BBB- to BBB. Despite the challenging market conditions, Arab Banking Corporation (Jordan) has sustained

ABC Bank (Jordan) witnessed an impressive growth in its customers deposits base of 46.2% as a result of introducing new banking products and increasing distribution channels.


the profitability level achieved in the previous year. However, the new guidelines of Jordan Securities and Exchange Commission have impacted the calculation of the Bank’s profitability and led to a drop in net profits of about one million Dinars while the total income has increased from 26.7 million Dinars for 2006 to 28.9 million Dinars for 2007. The net profit after tax reached around 10.6 million Dinars for 2007, compared to a net profit of about 11 million Dinars for 2006. The Bank’s total assets grew from around 517.7 million Dinars at year-end 2006 to around 601.2 million Dinars at year-end 2007; an increase of 83.5 million Dinars, or 16.1 percent.

By year-end 2007, the shareholders equity had increased from around 65.8 million Dinars to around 77.3 million increasing by 11.5 million Dinars or 17.4 percent. This increase is due to the increase of the paid up capital from 44.8 million Dinars to around 56 million Dinars in line with the Central Bank of Jordan’s directive to increase the capital of licensed banks in Jordan. Customer deposits achieved a growth rate of 46.2 percent from around 251.5 million Dinars at yearend 2006 to around 367.6 million Dinars at the end of 2007. Direct credit facilities increased from around 240.5 million Dinars to around 267.1 million Dinars over the year; an increase of 26.6 million Dinars or 11 percent.

Thanks to the prudent policies of the Bank’s management, most of the critical financial ratios of the Bank have remained healthy. As the Return on Assets was around 1.9 percent and the Return on Equity reached 15 percent. The Capital Adequacy Ratio reached 20 percent at yearend significantly exceeding the required minimum Capital Adequacy Ratio per the Central Bank of Jordan (12 percent).

DEpOSITS The growth rate in customer deposits of 46.2 percent is one of the most significant achievements of the Bank’s Management for 2007. Customer deposits grew from around 251.5 million Dinars to around 367.6 million Dinars over the year while financial institutions placements decreased from around 97.6 million Dinars to around 75.2 million Dinars. Around 23 percent of customer deposits are in the form of current accounts, around 6 percent are in saving accounts and the balance covers term and demand deposits. The non -interest bearing deposits reached 17 percent from the total customer deposits.

With this remarkable growth in customer deposits, the Bank was able to finance its expansion plans and diversify its funding sources. By availing a variety of deposit product, the Bank managed to attract private sectors deposits from retail and corporate customers alike. This will allow the bank to reduce its funding cost and achieve higher margins.

CREDIT FACIlITIES pORTFOlIO IN 2007, the Bank continued to implement its growth plans adopted in 2006. Building on the successes of previous years the Bank continued successfully to implement its strategic plans of growing the credit portfolio without



compromising the quality. The Bank extended facilities to borrower in a number of economic sectors and activities provided financial services tailored to retail and corporate customers in line with its strategic plan, the credit policy and the Central Bank of Jordan regulations. The Bank has achieved balanced growth in the direct credit facilities (net) of around 11 percent from around 240.5 million Dinars at yearend 2006 to around 267.1 million Dinars at yearend 2007 or an increase of 26.6 million Dinars.

Not only has the portfolio grown in 2007. The quality has improved as well. The Management succeeded in decreasing overdue facilities through enforcing intensive follow-up procedures and enhancing collections. In addition, the Management strictly monitored the portfolio which resulted in a significant improvement in the over all quality. By applying well-coordinated conservative policies, the Bank has been able to decrease the size of non-performing loans (watch-list) after deducting interests in suspense to 1.9 percent of the direct facilities balance and improved the provisions coverage to exceed 100 percent from the total non-performing loans by the end of 2007.

RETAIl BANKING SERvICES The Bank had successfully embarked upon the implementation of its long-term retail banking plan into in the past few years. The plan called for improving the quality of the Bank’s assets, expanding the client base, improving the technology infrastructure and enhancing the skills and proficiency of human resources. Arab Banking Corporation (Jordan) has become better equipped to boost its market share and more competitive in its market than ever before.

Building on this, the Bank has introduced new banking products and launched a number of electronic channels and selling points. This resulted in attracting more client deposits and growing the retail assets portfolio by around 18.3 percent. In an effort to increase its retail market share and enhance its reach, the Bank inaugurated two branches in Western Amman during the year 2007 to serve a wide base of targeted customers in this area. One of the new branches is located in a major shopping mall to act as an advanced selling point serving a wide segment of current and potential customers in one of the most vibrant areas of the Amman. As part of its continuing commitment to improve customer service, the Bank launched the second stage of the E-Banking Project in 2007. This service is aimed at replacing the current electronic banking services with an electronic solution based on banking operations related to current accounts and providing superior service to its predecessor. Such service encompasses advanced security measures and introduces a safe banking channel for remittances, payments, external transfers, e-loans and much more. In line with the Bank’s strategy, the retail credit portfolio has grown to include more diversified credit products, such as personal, housing, car and credit card loans. This is an important objective of the Bank’s strategic retail banking plan to be implemented between the years 2007-2010 which aims to diversify the product and offer a wide variety of credit products.

We aim to achieve a competitive edge in the Jordanian market by maximizing benefits to all our stakeholders.


The Bank has continued to originate new developments on the current product profile. Combined with advertising campaigns and marketing activities, the Bank has managed to launch several new initiatives. One such initiative is the pre-paid card product which was launched in January 2007 to complement the existing credit card products line and to expand the options for customers to suite their different needs. Those needs include travel, salaries, internet and other uses and to meet the expected future product demand.

The Bank launched the pre-approved credit card product in 2007. This product is aimed at attracting clients of substantial financial means in the local and multi-national business as well high ranking governmental officials. A new scheme for financing the purchase of houses located in residential complex developments has been introduced in May 2007 availing loans up to 450 thousand Dinars. This product is aimed at complementing the existing housing loans program.

The Bank has started in April of this year to offer the Bank-Assurance service which entails the provision of comprehensive income insurance schemes saving plans for retirement, education, etc.

Just as in previous years, the Bank has encountered strong competition in the local market and mounting challenges related to the economic and structural changes in the local market. These changes have shifted the needs and requirements of the citizens and the operating parameters of the services sector; a shift apparent in the changes in customers’ needs and expectations. As such, and as a result of the Bank’s understanding of the nature of the vital changes taking place and the importance of continuously improving service while maintaining differentiation, a new system to measure client satisfaction has been implemented in all our branches by the end of 2007. The system is considered the most advanced surveying tool aimed at obtaining feedback from customers at the branches. It is expected that this system will assist the Bank in gaining new customers and maintaining current ones for the longest period possible by identifying the level of customer satisfaction which leads to improved service and additional business opportunities.

As for future developments in retail banking, the Bank is concentrating efforts towards realizing the following goals: 1. Raising the Bank’s share in banking retail sector and consolidating its standing in the local banking market. 2. Expanding the branch and ATM networks to better serve new retail and corporate customers in additional geographical areas in line with the Bank’s strategic goals. 3. Expanding the customer base while concentrating on attracting low-cost and stable deposits. 4. Working on enhancing the services presented to the retail sector, as well as providing more up-to-date banking products to complete the diversified credit product line provided to the retail sector. 5. Growing the retail lending portfolio while improving quality. 6. Working on upgrading branch network to provide a modern environment and to better serve the Bank’s customers’ needs.

CORpORATE CREDIT FACIlITIES MANAGEMENTSince 2006, Arab Banking Corporation (Jordan) has started reviving its corporate lending activities which comprises the largest part of the Bank’s credit portfolio and the bulk of its revenues. In parallel with the efforts to further develop the retail banking practice, a strategic corporate lending plan has been put into effect since the second half of 2006, and continued to be implemented during 2007.

In 2007, more concentration was placed on the commerce and industry sectors being the main areas of economic activity for corporates in Jordan especially the commerce sector and its ancillary activities. This sector provides opportunities for profitable commissions based business in the area of indirect facilities for letters of credit, bills and transfers. The credit facilities portfolio has increased from 140 million Dinars to 160 millions over 2006; a growth of 14%. New facilities totaling 86 million Dinars were provided to the corporate sector during the year.

The strategic growth plan continues to be successfully implemented. The goals the Bank aims to achieve in this plan are:



• To enhance the presence and standing of the Bank as a leading bank in the area of corporate and project finance. • To build bridges of cooperation with major players in all economic sectors, including banks, corporations and existing and potential borrowers.• To leverage the relationship between the Bank and the rest of ABC Network throughout the world to exchange information and data on available business opportunities and potential financing opportunities and to benefit from expertise and competences available at the different sister units. • To enhance the utilization of the credit facilities extended to customers to insure the highest return achievable. • To concentrate marketing efforts towards increasing the Bank’s revenues from indirect facilities through increasing and activating extended facilities. • To enhance the quality of the credit facilities portfolio through regular follow up on accounts.• To undertake all necessary administrative and legal procedures necessary to exit certain undesired credit relations. • To focus on early remedial action in troubled accounts to avoid deterioration of the quality of the credit facilities portfolio.

The results achieved through the Department’s operations in 2007 insured success in fulfilling such goals, as the Corporate Department achieved the following: • Credit facilities extended during the year 2007 amounted to 86 million Dinars. • The growth in direct credit accounts reached 14%, as the balance of the direct facilities portfolio grew to 160 million Dinars at yearend 2007 compared to 140 million Dinars at yearend 2006. • The growth in indirect credit facilities reached 21 percent at a volume of 125 million Dinars in 2007 compared to 103 million Dinars in 2006.

TREASuRY AND INvESTMENT As you are aware, the duties of our Treasury and Investment Department are:• Managing assets and liabilities under the guidance of the Bank’s Assets and liabilities Committee; • Daily cash management ;• Managing market risk and communicating in coordination with the executive management;• Determining and managing internal transfer pricing among the Bank’s various business lines; • Managing the Bank’s stock portfolio, foreign exchange positions and exposure and derivatives; and• Implementing procedures and controls in managing the treasury operations of the Bank in a manner that facilitates objective decision making effective management.

In line with the above and with the aim of achieving its objectives, the Treasury Department, the Treasury and Investment Department continued to build a profitable investment portfolio and assumed the responsibility of managing assets and liabilities striking a balance between currency and interest risks and profitability. The Department also endeavored to attract additional foreign exchange, futures and derivatives clients which contributed to the income of the Department. Due to these efforts, the revenues achieved by the Department in 2007 reached around 2.5 million Dinars.

The Treasury and Investment Department is one of the Bank’s key financing resources through the daily cash management activities and is key to managing the market risks as mentioned above. In 2007, the Department achieved positive results in raising its profit contribution through providing timely service to its clients in foreign exchange and financial derivatives trading, prudent activities in the money and capital markets area and maintained a well-diversified investment portfolio to insure maximum return with minimal risk.

ARAB CO-OpERATION FINANCIAl INvESTMENT The Company acts as the Bank’s investment and brokerage arm on the Amman Stock Exchange and other regional and international markets. The Company is a wholly-owned subsidiary of the Bank. It occupies an advanced position among investment companies operating on the Amman Stock Exchange ranking fourth in the market with a market share of 3.7 percent. The Company’s total assets were around 46.6 million Dinars at yearend 2007 compared to 42.5 million Dinars at yearend 2006.


Due to the above-mentioned factors and the improved performance of the Amman Stock Exchange in 2007 compared to previous years, the Company had a successful year in 2007 crowned by an increase in its net profit by 63 percent over last year›s. This success is due to concentrated execution in the market. This execution resulted in approaching the long-term operations model for the Company which strengthened the Company’s financial standing, raised its total assets to around 46.6 million Dinars and assisted in launching a re-examination of the Company’s financing margin and stock dealings services.

The Company has continued to progress on its planned expansion rout and has introduced new products such as Islamic investment, research, asset restructuring and expansion in its international investor base which has contributed in to diversifying its sources of revenues while decreasing its investment risk. In addition, the Company has established proper internal control systems and customer service office. This has been enabled the company to restructure its organization and establish new departments, including the Asset Management Department, the Research and Studies Department, Credit Control Department and Internal Monitoring Department. In 2007, the Company participated in the Initial Public Offering of the Dubai Ports Co., and was able to secure subscriptions of 80 million Dollars, placing it atop of Jordanian companies participating in this IPO. The Company has completed the development of a new electronic stock trading system for the domestic market. Jordan Securities and Exchange Commission’s approval has been obtained to list its trading system among the approved systems for electronic trading on the Amman Stock Exchange. The approval was obtained after passing a number of tests jointly with the staff of the Amman Stock Exchange. The Company has also worked tirelessly to upgrade its administrative accounting system along with upgrading the information management system to automate most daily operations in order to limit paper work and to improve efficiency.

RISK MANAGEMENT AND INTERNAl MONITORING SYSTEMS As mentioned elsewhere in this Report, the Bank has upgraded its organizational structure to facilitate executing its strategic plans and to comply with and utilize a group of advanced systems which focus on managing risks balancing and the risk and return equation. These systems cover a number of administrative layers and are distributed among the different levels of responsibility in the Bank from the Board to all executive levels. The most distinctive feature of the new organizational structure is separating the duties of the Credit Department from the newly-established Risk Management Department. This Department comprises three units specialized in dealing with risks; Market risk, operations Risk and Credit Risks. The Department is in charge of applying the required risk monitoring and reporting procedures in line with the Basel II requirements and the prevailing regulations of the Central Bank of Jordan as well as applying corporate governance standards.

In 2006, the Board of Directors of the Arab Banking Corporation (Jordan) created the Board Risk Committee which membership comprises members of the Bank’s Board of Directors and the Credit Risk Manager of parent company, ABC




BSC in Bahrain. The Committee holds periodic meetings during which it assesses risks in line with the principles and objectives established in the general framework of risk strategies and related policies. The Committee periodically communicates its assessment of the risk picture of the Bank to the Board of Directors.

One of the Committee›s basic objectives is approving credit limits ceilings at the sector and country levels in a manner compliant with international best practices and prudent banking standards and in compliance with the policies of the parent company in Bahrain. The Bank has empowered the Credit and Risk Department and provided it with qualified staff to evaluate the Bank’s response to the foregoing requirements. In the forefront of the goals set for the Board Risk Committee is creating a balanced formula that is based on attracting new credit facilities with high returns and low risks. Among the Committee’s goals also is exerting continuous efforts to collect past due facilities, reduce non-performing loans, increase debt allocations, improve the quality of the Bank’s procedures, strengthen the Bank’s financial standing and diversifying the loan portfolio by client, sector and geographical area in a manner insuring limiting credit and market risk.

In the same context, the Operational Risks unit emerging from the Bank’s General Risks Management Committee aims to strengthen internal monitoring and control systems through establishing a comprehensive set of written policies, procedures and instructions. These policies, procedures and instructions cover all laws and regulations in addition to activating the role of Compliance Monitoring Department to insure execution of operations while sustaining support of the Credit Operations Monitoring unit.

The Bank continued to focus on developing monitoring systems to manage various risks while paying special attention to dealing with current breaches related to operational risk guidelines. A number of specialized training courses have been conducted in cooperation with the expertise available at the parent company. Procedures requiring issuing monthly reports prepared by the various bank departments outlining any operational risk incidents were implemented. Recently, the Bank has acquired a new system specialized in monitoring and reporting operational risk from Chase Cooper Company through the parent company. This new system is expected to be implemented during the year 2008. The Risk Department is currently in the process of implementing procedures to obtain background information on the performance of all credit portfolios, including commercial, retail or investment portfolios in a way that enables the Department to apply the Internal Rating Based Advanced Approach (IRB) of Basel II in 2010 in compliance with the requirements of the Central Bank of Jordan. The Bank was able in the year 2007 to complete formulating the Business Continuity Plan and has started to create an implementation plan in coordination with the parent company in Bahrain. This plan will ensure business continuity in event of any disruption and reduce time and risk until the normal course of operations is restored.

TECHNOlOGICAl DEvElOpMENTSIn continuation of the Bank’s drive to upgrade its service and enhance it which includes the introduction the SMS service, electronic clearance and the new Integrated Network Management Environment (INME) in the past, in 2007, the Bank launched the second stage of E-Banking which aims at replacing the current platform with a new solution based current account operations. It is worth mentioning that the Bank has successfully developed and implemented a number of systems during the last two years including managing bank cards under the smart debit cards concept (EuroPay, MasterCard, Visa «EMV»), Anti-money laundering system AMl, credit evaluation system, managing safe deposit boxes, compliance and upgrading the Bank’s intranet.

ADMINISTRATIvE AND ORGANIZATIONAl DEvElOpMENT A new organizational structure of the Bank was approved and put into implementation during 2007. The new



organizational structure is one of the most significant and profound organizational developments of the Bank’s administrative process in years. This is especially true since the new structure includes specific job descriptions to all ranks of staff which resolves authority overlaps, precisely identifies the scope of responsibility for each job, ensures a smooth work and decision flow and contains errors upon occurrence and therefore facilitates the possibility of required correction with a minimal potential damage. As for administrative developments, the Board of Directors, in its continuing effort to maintain a qualified human resources, has approved a new salary and ranking scale this year for all Bank’s employees relying on a comprehensive salary survey conducted by a specialized consultancy firm. The purpose of this step is to develop human resource management system and fill the positions approved in the organizational structure in accordance with the salary system approved by the executive management.

The administrative and organizational developments in 2007 focused on three basic axes: 1- Approving the new salary scale and employee positioning: A modern salary scale was approved for the Bank’s staff reflecting the strong competition in the banking sector. under the new structure, 17 grades were created with their job descriptions along with minimum and maximum limits for basic salaries based on the job’s content, importance and connection with the Bank’s functions. The new scale is aimed at creating clear career track for employees as well as a clear hierarchical employment scale. 2- Intensifying the efforts in the field of training and development: The Bank’s management oversaw a qualitative transformation in its training activities during 2007 manifested in efforts aimed at enhancing skills, abilities and knowledge of staff in addition to pursuing modern banking and financial developments. 189 training workshops with participation of 1055 employees were conducted during 2007. 3- Adopting employee assessment system using Balanced Scorecards as of 1/1/2007, based on the following assessment modes: • Performance appraisal using Balanced Scorecards. • Performance appraisal using factors. • Self-assessment. This system aims at maximizing the benefits from knowledge, capabilities and qualifications of the Bank’s employees in executing the Bank’s activities and achieving the optimum utilization of human resources and developing such resources to best serve the Bank’s interest and its employees. This requires the employee’s active participation in the evaluation process in discussion of his/her performance level against pre-established appraisal criteria and objectives outlined in the Balanced Scorecards to identify strengths and weaknesses in the employee’s performance.

A considerable number of policies were approved in the context of the second stage of “Designing Human Resources Systems” project which includes designing the following policies and procedures: • Recruitment, selection, and appointment.• Training of human resources.• Professional ethics and conduct.

The following policies and procedures are in the process of being implemented: • Incentives and employees’ retention plans.• Promotions.• Policies and procedures manual for human resources.• Employee manual.

This system has been in place since 1/9/2007 enabling the bank to retain qualified staff and attract employees with high professional qualifications and advanced banking specialties on organized basis and in accordance with the Bank’s business needs.


(JD thousand)

Statement / year 2007 2006 2005 2004 2003

Pretax profits 15.215 15.952 16.527 8.382 7.433

Distributed Profits* 8.409 11.212 10.350 6.900 4.600

Total Shareholders’ Equity 77.342 65.781 52.921 43.024 35.095

Share Price 2.25 2.62 4.55 4.18 3.48

* 2007 proposed dividends

> KEY FIGuRES

finAnCiAl indiCAtors from 2003-2007

18.000 -

16.000 -

14.000 -

12.000 -

10.000 -

8.000 -

6.000 -

4.000 -

2.000 -

0 -

pRETAx pROFITS

2003 2004 2005 2006 2007

80.000 -

60.000 -

40.000 -

20.000 -

0 -

TOTAl SHAREHOlDERS’ EquITY

2003 2004 2005 2006 2007

12.000 -

10.000 -

8.000 -

6.000 -

4.000 -

2.000 -

0 -

DISTRIBuTED pROFITS

2003 2004 2005 2006 2007

5.00 -

4.50 -

4.00 -

3.50 -

3.00 -

2.50 -

2.00 -

1.50 -

1.00 -

0.50 -

0 -

SHARE pRICE

2003 2004 2005 2006 2007


(%) 2007 2006

Return on average equity (RoE) 14.8 18.5

Return on average assets (RoA) 1.9 2.4

Operating expenses/ total income 46.3 48.6

Direct credit facilities/

customers’ deposits and margin accounts 65.7 84.5

Capital adequacy 19.5 19.3

Non-performing facilities/ total direct facilities 3.9 5.1

Employee profitability (JD, 000) 23.3 27.9

finAnCiAl rAtios (2006 & 2007)

the BAnk’s stAnding in the BAnking seCtor

CAPitAl investment

oWners of 5% or more of ABC (JordAn) shAres

The Bank’s credit facilities market share stood at 2.2 percent of the total facilities extended in the Jordanian domestic market while the Bank’s share of the total deposits of the banking sector in Jordan stood at 2.3 percent. The Bank’s shareholders equity stood around 2.1 percent of the total equity of the banks in Jordan.

Capital investment reached (JD10.900.789)

The Arab Banking Corporation (B.S.C.), Bahrain, is the sole shareholder of ownership of 5% or more of the ABC (Jordan) shares, whereby the share ownership of ABC (Bahrain) reached 86.6715%.


Name Country of Number of Shares Registration 2007 2006Mr. Ghazi Abdul-Jawad Chairman Saudi Arabia 85721 68577till 6/4/2008Mr. Hassan Juma Chairman Bahrain 500 -as of 6/4/2008 (as of 6/4/2008)Dr. Saleh Al-Humaidan Deputy Saudi Arabia 1400 1120 ChairmanArab Banking Corporation, (B.S.C.) Bahrain, represented by: Mr. Nour Nahawi Member Bahrain 48590195 38871036Shereen Investments limited, represented by: Mr. Hareb Al Darmaki Member Jersey 500 -as of 6/4/2008 (as of 6/4/2008)Shereen Investments limited, represented by: Mr. Mubarak Al-Mansouri Member Jersey 500 - till 6/4/2008Arab Banking Corporation (Securities) W.l.l., Bahrain, represented by: Dr. Khaled Kawan Member Bahrain 1400 1120Mr. Yousef Abdelmaula Member libya 1015 812H.E. Mr. “Mohammad Akel” Al-Biltaji Member Jordan 2843 2275Dr. Marwan Al-Sayeh Member Jordan 10813 22100H.E.Mr.Shafiq Zawaideh Member Jordan 227500 182000

shAreholdings of the ChAirmAn, memBers of the BoArd, senior mAnAgement And their relAtives

> A) SHAREHOlDINGS OF THE CHAIRMAN AND MEMBERS OF THE BOARD:

Name Nationality Number of Shares 2007 2006Mr. Nour Nahawi CEO Jordanian 16250 13000Mr. Tony Mukbel Asst. CEO/ Jordanian 2292 1834 Head of Internal Audit

Name Nationality Number of Shares 2007 2006Muna Oweis H.E. Eng. Shafiq Zawaideh’s wife Jordanian 14318 11455

> B) SHAREHOlDINGS OF SENIOR MANAGEMENT

> C) SHAREHOlDINGS OF THE RElATIvES OF MEMBERS OF THE BOARD


ACknoWledgment of the BoArd of direCtors

The Board of Directors of the Arab Banking Corporation (Jordan) acknowledges, as far as it knows and believes, that there are no fundamental issues that could affect the Bank’s ability to continue its activity throughout the next fiscal year of 2008. The Board also acknowledges its responsibility for preparing the financial statements; that the information cited in the Board of Directors’ Report is in line with the enclosed financial statements; and that the Bank has an effective and efficient Internal Control System.

ghazi Abdul-Jawad saleh Al humaidan shafiq zawaideh Chairman of the Board Deputy Chairman Member of the Board of Directors

khaled kawan Yousef Abdelmaula marwan Al-sayeh Member of the Board of Directors Member of the Board of Directors Member of the Board of Directors

mohammad Akel Al-Biltaji mubarak Al-mansouri nour nahawiMember of the Board of Directors Member of the Board of Directors Managing Director / CEO

ACKNOwlEDGMENT OF AuTHENTICITY OF THE FINANCIAl STATEMENTS

The Management of the Arab Banking Corporation (Jordan) acknowledges the authenticity, accuracy and precision of the information and financial statements cited in this report.

ghazi Abdul-Jawad nour nahawi Basel Al-naber Chairman of the Board Managing Director / CEO Chief Financial Officer


CONTENTS

Independent Auditors’ Report 29

Consolidated Balance Sheet 30

Consolidated Income Statement 31

Consolidated Statement of Changes in Equity 32

Consolidated Cash Flow Statement 33

Notes to the Consolidated Financial Statements 34

ConsolidAted finAnCiAl stAtmentsAs of 31 deCemBer, 2007


We have audited the accompanying financial statements of Arab Banking Corporation (Jordan) (a public shareholding company), which comprise the consolidated balance sheet as at December 31, 2007 and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

DIRECTORS’ RESpONSIBIlITY FOR THE FINANCIAl STATEMENTS

The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

AuDITORS’ RESpONSIBIlITY

Our responsibility is to express an opinion on these 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 financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the 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 entity’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 financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpINIONIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Bank as of December 31, 2007 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Ernst & YoungAmman – Jordan17 February 2008

indePendent Auditors’ rePort


Notes 2007 2006

ASSETSCash and balances with Central Banks 4 46,990,561 49,557,019Balances at banks and financial institutions 5 158,863,426 122,563,536Deposits at banks and financial institutions 6 1,169,850 1,169,850Financial assets held for trading 7 359,166 139,749Direct credit facilities 8 267,108,022 240,529,765Financial assets available for sale 9 106,018,593 78,147,083Financial assets held to maturity 10 - 1,994,543Property and equipment 11 10,900,789 9,758,960Intangible assets 12 912,197 1,072,136Deferred tax assets 19 56,920 67,351Other assets 13 8,800,528 12,654,170 TOTAl ASSETS 601,180,052 517,654,162

liabilities And Equityliabilities - Banks and financial institutions’ deposits 14 75,157,123 97,579,976Customers’ deposits 15 367,634,049 251,488,306Margin accounts 16 38,991,631 30,180,516loans and borrowings 17 14,993,845 57,446,141Sundry provisions 18 452,728 122,728Income tax liabilities 19 5,408,145 4,965,214Deferred tax liabilities 19 365,017 - Other liabilities 20 20,832,747 10,089,910

TOTAl lIABIlITIES 523,835,285 451,872,791

Equity

Paid in capital 21 56,062,500 44,850,000Statutory reserve 22 8,562,083 7,004,848Voluntary reserve 22 420,994 2,663,494General banking risk reserve 22 2,529,960 2,099,960Cumulative changes in fair value 23 1,271,308 35,978Retained earnings 24 8,497,922 9,127,091

Total Equity 77,344,767 65,781,371

TOTAl lIABIlITIES AND EquITY 601,180,052 517,654,162

ConsolidAted BAlAnCe sheetfor the year ended 31 Decemeber 2007(in Jordanian Dinars)

The accompanying notes from 1 to 46 are integral part of these financial statements and should be read with them


Notes 2007 2006

Interest income 25 39,174,387 30,612,925Interest expense 26 (21,586,422) (15,621,457)

Net interest income 17,587,965 14,991,468

Net commission 27 2,116,119 1,923,206

Net interest and commission income 19,704,084 16,914,674

OTHER INCOME –Net gain from foreign currencies 28 1,316,855 676,579Net gain from financial assets held for trading 29 119,170 535,582Net gain from financial assets available for sale 30 239,283 658,052Other income 31 7,551,671 7,923,819

Gross profit 28,931,063 26,708,706

Employees’ expenses 32 (6,994,595) (5,854,506)Depreciation and amortisation 11 , 12 (1,187,907) (1,108,885)Other expenses 33 (5,223,672) (5,391,997)Impairment loss on direct credit facilities 8 20,351 1,598,617Sundry provisions 18 (330,000) -

Total expenses (13,715,823) (10,756,771)

Profit before tax 15,215,240 15,951,935

Income tax expense 19 (4,657,272) ( 4,960,687)

pROFIT FOR THE YEAR 10,557,968 10,991,248

BASIC AND DIluTED EARNINGS pER SHARE 34 0,188 0,196

ConsolidAted inCome stAtement for the year ended 31 Decemeber 2007(in Jordanian Dinars)



General Cumulative Paid in Statutory Voluntary Banking Risk Change in Retained Total Capital Reserve Reserve Reserve Fair Values Earnings Equity

2007 -Balance as of January 1,2007 44,850,000 7,004,848 2,663,494 2,099,960 35,978 9,127,091 65,781,371Net movement in cumulativechanges in fair value after tax - - - - 1,235,330 - 1,235,330Previous year adjustments - - - - - (229,902) (229,902)

Total income and expenses for theyear recognised directly in equity - - - - 1,235,330 (229,902) 1,005,428Profit for the year - - - - - 10,557,968 10,557,968

Total income and expenses for theyear recognised directly in equity - - - - 1,235,330 10,328,066 11,563,396Increase in capital 11,212,500 - (2,242,500) - - (8,970,000) -Transfer to/from reserves - 1,557,235 - 430,000 - (1,987,235) -

BAlANCE AS OF DECEMBER 31, 2007 56,062,500 8,562,083 420,994 2,529,960 1,271,308 8,497,922 77,344,767

2006 - Balance as of January 1, 2006 34,500,000 5,372,339 2,663,494 1,631,383 (1,833,325) 10,586,929 52,920,820Net movement in cumulativechanges in fair value after tax - - - - 1,869,303 - 1,869,303

Total income and expenses for the year recognised directly in equity - - - - 1,869,303 - 1,869,303Profit for the year - - - - - 10,991,248 10,991,248

Total income and expenses for the year recognised directly in equity - - - - 1,869,303 10,991,248 12,860,551Increase in capital 10,350,000 - - - - (10,350,000) -Transfer to/from reserves - 1,632,509 - 468,577 - (2,101,086) -

BAlANCE AS OF DECEMBER 31, 2006 44,850,000 7,004,848 2,663,494 2,099,960 35,978 9,127,091 65,781,371

ConsolidAted stAtement of ChAnges in eQuitY for the year ended 31 Decemeber 2007(in Jordanian Dinars)



Notes 2007 2006

CASH FlOwS FROM OpERATING ACTIvITIES

Profit before income tax 15,215,240 15,951,935

ADJuSTMENTS FOR -Depreciation and amortisation 1,187,907 1,108,885Impairment loss on direct credit facilities (20,351) (1,598,617)Sundry provisions 330,000 - Impairment loss on available for sale portfolio 942,072 - unrealised losses from trading investments 97,770 91,386Effect of exchange rate on cash and cash equivalents (1,126,559) (481,276)Previous years adjustments (229,902) - OpERATING pROFIT BEFORE CHANGES INOpERATING ASSETS AND lIABIlITIES 16,396,177 15,072,313

CHANGES IN ASSETS AND lIABIlITIES -Decrease (increase) in balances with Central Banks maturing after more than three months 9,999,204 (14,998,979)Decrease in deposits at banks and financialinstitutions maturing after more than three months - 712,461(Increase) decrease in financial assets held for trading (317,187) 9,335Increase in direct credit facilities (26,557,905) (29,768,803)Decrease in other operating assets 3,853,643 4,260,285Increase in customers’ deposits 116,145,743 7,527,791Increase in margin accounts 8,811,115 628,406Increase (decrease) in other liabilities 10,748,049 (14,148,091)utilised sundry provisions - (29,264)

NET CASH FROM (uSED IN) OpERATING ACTIvITIES BEFORE INCOME TAx 139,078,839 (30,734,546)

Income tax paid (4,203,910) (4,384,470)

NET CASH FROM (uSED IN) OpERATING ACTIvITIES 134,874,929 (35,119,016)

Cash Flows from Investing ActivitiesRedemption (purchase) of held to maturity investments 1,994,543 (1,994,543)Purchase of available for sale investments (59,035,196) (62,963,386)Proceeds from sale of available for sale investments 31,821,959 24,615,296Purchase of property and equipment (4,289,194) (3,434,824)Proceeds from sale of property and equipment 2,259,273 289,112Purchase of intangible assets (139,876) (609,427)

Net cash used in investing activities (27,388,491) (44,097,772)

CASH FlOwS FROM FINANCING ACTIvITIESProceeds from loans and borrowings - 49,215,375Repayment of loans and borrowings (42,452,296) (1,576,761)Dividends paid (5,212) (6,770)

Net cash (used in) from financing activities (42,457,508) 47,631,844

Effect of exchange rate changes on cash and cash equivalents 1,126,559 481,276

Net increase (decrease) in cash and cash equivalents 66,155,489 (31,103,668)

Cash and cash equivalents, beginning of the year 59,541,600 90,645,268

CASH AND CASH EquIvAlENTS, END OF THE YEAR 35 125,697,089 59,541,600

ConsolidAted CAsh floW stAtementfor the year ended 31 Decemeber 2007(in Jordanian Dinars)



1. GENERAl INFORMATIONArab Banking Corporation (Jordan) was established as public shareholding company on January 21, 1990 in accordance with the companies law act no (1) of (1989).Its registered office is at Amman; Jordan.The Bank provides its banking services through its main branch located in Amman and through its (14) branches in Jordan and its subsidiary (Arab Co-operation for Financial Investments).The bank shares are listed and traded in Amman Stock Exchange.The financial statements were authorized for issue by the Bank’s Board of Directors in their meeting no. (1) held on (February 17,2008). These financial statements require the General Assembly’s approval.

2. SIGNIFICANT ACCOuNTING pOlICIESThe significant accounting policies adopted in the preparation of the financial statements are set out below:Basis of preparationThe accompanying consolidated financial statements of the Bank and its subsidiary have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations (IFRICs), and in conformity with the applicable laws and regulations of the Central Bank of Jordan.The consolidated financial statements are prepared on a historical cost basis, except for financial assets held for trading, available-for-sale investments, derivative financial instruments and financial assets and financial liabilities held at fair value through profit or loss, that have been measured at fair value.The financial statements have been presented in Jordanian Dinars (JD) which is the functional currency of the Bank.Changes in accounting policies:Except as noted below the Bank’s accounting policies are consistent with those used in the previous year. As of 31 December, 2007 the Bank applied the following new IFRSs which had no effect on the Bank’s financial position or performance, but resulted in additional disclosures:IAS 1 – presentation of Financial Statements (revised 2005)The standard requires the presentation of additional disclosures to enable users of the financial statements to evaluate the entity’s objectives, policies and processes for managing capital.IFRS 7 – Financial Instruments: DisclosureThe standard requires disclosures that enable users of the financial statements to evaluate the significance of the entity’s financial instruments and the nature and extent of risks arising from those financial instruments.IFRIC 8 – Scope of IFRS 2 This interpretation requires IFRS 2 – Share-based Payment to be applied to any arrangements where equity instruments are issued for consideration which appears to be less than fair value. IFRIC 9 – Reassessment of Embedded Derivatives This interpretation establishes that the date to assess the existence of an embedded derivative is the date an entity first becomes a party to the contract, with reassessment only if there is a change to the contract that significantly modifies the cash flows.IFRIC 10 – Interim Financial Reporting and ImpairmentThis interpretation concludes that an entity shall not reverse an impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost. Summary of significant accounting policies:Basis of consolidation The consolidated financial statements comprise the financial statements of the Bank and its Subsidiary for which the Bank has the power to govern the financial and operating policies. All intra-company balances, transactions, income and expenses and profits and losses resulting from intra-company transactions that are recognised in assets or liabilities, are eliminated in full.There is one Subsidiary which is Arab Co-operation for Financial Investments Co. ltd. established on January 25, 1990. The Bank owned 100% of paid in capital amounted to JD 15,600,000 as of December 31, 2007. The Company’s main activities include asset management and brokerage in securities on behalf of its clients at Amman Stock Exchange and abroad in addition to offering financial consulting in connection with securities.The financial statements of the subsidiary are prepared for the same reporting year as the Bank, using consistent accounting policies.If separate financial statements as described in IAS 27 are prepared for the Bank, the investment in Subsidiary will be shown at cost in the balance sheet.Segmental reportingBusiness segments represent distinguishable components of the Bank that are engaged in providing products or services which are subject to risks and rewards that are different from those of other segments.

notes to the ConsolidAted finAnCiAl stAtementsfor the year ended 31 Decemeber 2007(in Jordanian Dinars)


Geographical segments are associated to products and services provided within a particular economic environment, which are subject to risks and rewards that are in different from those of other economic environments. Financial assets held for trading Financial assets held for trading are those purchased with the intent to be resold in the near future to generate gains as a result of changes in market prices of such investments. They are initially recognised at the fair value of consideration given and subsequently remeasured at fair value. All realised and unrealised gains or losses are transferred to the income statement, including any gains or losses resulting from the translation of such assets held in foreign currencies.Interest earned is included in interest income and dividends received are included in gains (losses) from financial assets and liabilities held for trading. Direct credit facilities Credit facilities are initially recognised at the fair value of consideration given and subsequently measured at amortised cost after allowance for credit losses and interest and commission in suspense.Impairment of direct credit facilities is recognised in the allowance for credit losses when events occur after the initial recognition of the facility that have an impact on the estimated future cash flows of the facilities that can be reliably estimated. The impairment is recorded in the income statement.Interest and commission arising on non-performing facilities is suspended when loans become impaired according to the Central Bank of Jordan’s regulations.loans and the related allowance for credit losses are written off when collection procedures become ineffective. The excess in the allowance of possible loan losses, if any, is transferred to the statement of income, and cash recoveries of loans that were previously written off are credited to the income statement.Financial assets available for sale Available-for-sale financial investments are those which are designated as such or do not qualify to be classified as designated at fair value through profit or loss, held-to-maturity or loans and advances. After initial measurement, available-for-sale financial investments are measured at fair value. unrealised gains and losses are recognised directly in equity as ‘Cumulative change in fair value reserve’. When the security is disposed of, the cumulative gain or loss previously recognised in equity is recognised in the income statement.The losses arising from impairment of such investments are recognised in the income statement and removed from the cumulative change in fair value reserve. Reversal of impairment on equity instruments is reflected in the cumulative change in fair value, while reversal of impairment on debt instruments is transferred to the income statement.Gains or losses on debt instruments resulting foreign exchange rate changes are transferred to the income statement. On equity instruments, such gains and losses are transferred to the cumulative change in fair value. Interest earned on available-for-sale financial investments is reported as interest income using the effective interest method.Trade and settlemtn dated accountingHeld-to-maturity financial investments are those which carry fixed or determinable payments and have fixed maturities and which the Bank has the positive intention and ability to hold to maturity.Held to maturity investments are initially recognised at cost, being the fair value of consideration given including directly attributable transaction costs. After initial measurement, held-to-maturity financial investments are subsequently measured at amortised cost using the effective interest method, less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate.Fair valueFor investments and derivatives quoted in an active market, fair value is determined by reference to quoted market prices. Bid prices are used for assets and offer prices are used for liabilitiesFor financial instruments where there is no active market fair value is normally based on one of the following methods:- Comparison with the current market value of a highly similar financial instrument.- The expected cash flows discounted at current rates applicable for items with similar terms and risk characteristics.- Option pricing models.The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount payable on demand.Where the fair value of an investment cannot be reliably measured, it is stated at the fair value of consideration given


or amortised cost and any impairment in the value is recorded in the income statement. Impairment of financial assetsThe Bank assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. If such evidence exists, the recoverable amount is estimated in order to determine the amount of impairment loss to be recognised in the income statement.Impairment is determined as follows:- For assets carried at amortised cost, impairment is based on the difference between the carrying value and the estimated cash flows discounted at the original effective interest rate.- For assets carried at fair value, impairment is the difference between the fair value of consideration given and the fair value.- For assets carried at cost, impairment is based on the difference between the fair value of consideration given and the present value of future cash flows discounted at the current market rate of return from a similar financial asset.Impairment is recognised in the income statement. If, in a subsequent period, the amount of the impairment loss decreases, the carrying value of the asset is increased to its recoverable amount. The amount of the reversal is recognised in the income statement except for equity instruments classified as available for sale investments for which the reversal is recognized in the statement of equity.property and equipmentProperty and equipment is measured at cost less accumulated depreciation and accumulated impairment in value. Depreciation is calculated using the straight-line method to write down the cost of property and equipment to their residual values over their estimated useful lives. land is not depreciated. Depreciation rates used are as follows: % Buildings 2- 15Equipment and furniture 9 -20Vehicles 15Computers 9 -25Others 10The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amounts, the assets are written down to their recoverable amount, and the impairment is recorded in the income statement.An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal.provisionsProvisions are recognised when the Bank has a present obligation (legal or constructive) arising from a past event and the costs to settle the obligation are both probable and able to be reliably measured.Employee end of service indemnityProvision for end of service indemnity is established by the bank to face any legal or contractual obligation at the end of employees’ services and is calculated based on the service terms as of the financial statements date.Income TaxTax expense comprises current tax and deferred taxes.Current tax is based on taxable profits, which may differ from accounting profits published in the income statement. Accounting profits may include non-taxable profits or tax deductible expenses which may be exempted in the current or subsequent financial years.Deferred tax is provided on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on laws that have been enacted or substantially enacted at the balance sheet date. The carrying values of deferred income tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.Fiduciary assetsAssets held in a fiduciary capacity are not recognised as assets of the Bank. Fees and commissions received for administering such assets are recognised in the income statement. A provision is recognised for decreases in the fair value of guaranteed fiduciary assets below their original principal amount.



OffsettingFinancial assets and financial liabilities are only offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and the Bank intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.Revenue and expense recognition Interest income is recorded using the effective interest method except for fees and interest on non performing facilities, on which interest is transferred to the interest in suspense account and not recognised in the income statement.Expenses are recognised on an accrual basis.Commission income is recognised upon the rendering of services. Dividend income is recognised when the right to receive payment is established.Trade and settlement date accounting Purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Bank commits to purchase or sell the asset. Fair value hedgesA fair value hedge is a hedge of the exposure to changes in the fair value of the Bank’s recognised assets or liabilities that is attributable to a particular risk.For designated and qualifying fair value hedges, the change in the fair value of a hedging derivative is recognised in the income statement. The change in the fair value of the hedged item attributable to the risk hedged is recorded as adjustment to the carrying value of the hedged item and is also recognised in the income statement.Cash flow hedges A cash flow hedge is a hedge of the exposure to variability in the Bank’s actual and expected cash flows which is attributable to a particular risk associated with a recognised asset or liability.For designated and qualifying cash flow hedges, the effective portion of the gain or loss on the hedging instrument is initially recognised directly in equity, and is subsequently transferred to the income statement in the period in which the hedged cash flows affect income, or at such time as the hedge becomes ineffective. The ineffective portion of the gain or loss on the hedging instrument is recognised immediately in the income statement.Hedge of net investments in foreign operationsHedges of net investments in a foreign operation are accounted for by measuring the fair value of the hedging instrument. The effective portion of the gain or loss on the hedging instrument is initially recognised directly in equity, while the ineffective portion of the gain or loss on the hedging instrument is recognised immediately in the income statement. On disposal of the foreign operation, the cumulative value of any such gains or losses recognised directly in equity is transferred to the income statement.For hedges which become ineffective, gains or losses resulting from the change in fair value of the hedge instrument is recognised directly in the income statement.Derivative financial instruments held for trading Derivative financial instruments such as foreign currency forward and future deals, interest rate forward and future deals, swaps, foreign currency options and others, are initially recorded at cost as other assets / liabilities, and subsequently carried at fair value in the balance sheet. Fair value is determined by reference to current market prices. In case such prices were not available, the method of valuation is stated. Changes in fair value are transferred to the income statement.Repurchase and resale agreementsAssets sold with a simultaneous commitment to repurchase at a specified future date (repos) will continue to be recognised in the Bank’s financial statements due to the Bank’s continuing exposure to the risks and rewards of these assets, using the same accounting policies. The proceeds of the sale are recorded under loans and borrowings. The difference between the sale and the repurchase price is recognised as an interest expense over the agreement term using the effective interest method.Assets purchased with a corresponding commitment to resell at a specified future date (reverse repos) are not recognised in the Bank’s financial statements as assets since the Bank is not able to control these assets. The related payments are recognised as part of deposits at banks and financial institutions or direct credit facilities as applicable, and the difference between purchase and resale price is recognised in the income statement over the agreement term using the effective interest method.Assets obtained by the BankAssets obtained by the Bank through calling upon collateral are shown in the balance sheet under “Other assets”


at the lower of their carrying value or fair value. Assets are revalued at the balance sheet date on an individual basis and losses from impairment are transferred directly to the income statement, while revaluation gains are not recognised as income. Reversal of previous impairment losses shall not result in a carrying value that exceeds the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years.Intangible assetsIntangible assets acquired through business combination are recorded at their fair value on that date. Other intangible assets are measured on initial recognition at cost. Intangible assets with finite lives are amortised over the useful economic life, while intangible assets with indefinite useful lives are assessed for impairment at each reporting date or when there is an indication that the intangible asset may be impaired.Internally generated intangible assets are not capitalised and are expensed in the income statement.Indications of impairment of intangible assets are reviewed for and their useful economic lives are reassessed at each reporting date. Adjustments are reflected in the current and subsequent periods. Intangible assets include computer software and programs. These intangibles are amortized over their estimated useful lives with rates ranging between 10% to 20% annually.Foreign currencies Transactions in foreign currencies are initially recorded in the functional currency at the rate of exchange ruling at the date of the transaction.Monetary assets and liabilities in foreign currencies are translated into respective functional currencies at rates of exchange prevailing at the balance sheet date as issued by Central Bank of Jordan. Any gains or losses are taken to the income statement.Translation gains or losses on non-monetary items carried at fair value (such as stocks) through equity are included in equity as part of the cumulative changes in fair value. For non-monetary items carried at fair value through profit and loss, such gains and losses are taken to the income statement.As at the reporting date, the assets and liabilities of foreign subsidiaries and overseas branches are translated into the Bank’s presentation currency at the rate of exchange ruling at the balance sheet date, and their income statements are translated at the weighted average exchange rates for the year. Exchange differences arising on translation are taken directly to a separate component of equity. On disposal of an entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is transferred to the income statement.Cash and cash equivalents Cash and cash equivalents comprises cash on hand and cash balances with banks and financial institutions that mature within three months, less banks and financial institutions deposits that mature within three months and restricted balances.

3. uSE OF ESTIMATESThe preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of financial assets and liabilities and disclosure of contingent liabilities. These estimates and assumptions also affect the revenues and expenses and the resultant provisions as well as fair value changes reported in equity. In particular, considerable judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of provisions required for non-performing credit facilities. Such estimates are necessarily based on assumptions about several factors involving varying degrees of judgment and uncertainty and actual results may differ resulting in future changes in such provisions.a) Provision for credit losses: The Bank reviews its loan portfolios to assess impairment based on Central Bank of Jordan instructions and International Financial Reporting Standards.b) Impairment losses on collaterals acquired by the Bank are determined based on appraisal reports prepared by certified appraisers. Provisions are recognised when impairment is determined at the financial statements date individually and any impairment is recorded in the income statement. Valuation is performed on a regular basis.c) Income tax is calculated based on the tax rates and laws that are applicable at the balance sheet date.d) A periodic review is performed on assets’ estimated useful lives and assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. e) Provision against lawsuits is provided for based on the Bank’s legal advisor opinion.



4. CASH AND BAlANCES wITH CENTRAl BANKS

(JOD) 2007 2006

Cash on hand 6,105,116 5,114,172

Balances at Central Banks-

Statutory cash reserve 24,585,833 19,444,198

Certificates of deposits* 16,299,612 24,998,649

TOTAl 46,990,561 49,557,019

*This item includes balances maturing within three to six months amounting to JD 4,999,775 as of 31 December 2007 (2006: JD 14,998,979). Certicates of deposits also include a restricted amount of JD 14,000,000 against Repurchase Agreement with Central Bank of Jordan as of December 31, 2006 (note 17).

5. BAlANCES AT BANKS AND FINANCIAl INSTITuTIONS local Banks and Foreign Banks and Total Financial Institutions Financial Institutions (JOD) 2007 2006 2007 2006 2007 2006

Current and demand deposits 373,540 97,683 9,823,176 9,044,269 10,196,716 9,141,952Deposits maturing

within 3 months 5,256,639 2,127,000 143,410,071 111,294,584 148,666,710 113,421,584

TOTAl 5,630,179 2,224,683 153,233,247 120,338,853 158,863,426 122,563,536

Non interest bearing balances at banks and financial institutions amounted to JD 7,367,516 as of 31 December 2007 (2006: JD 2,098,028).No cash balances were restricted as of December 2007 and 2006 respectively.

6. DEpOSITS AT BANKS AND FINANCIAl INSTITuTIONS local Banks and Foreign Banks and Total (JOD) Financial Institutions Financial Institutions 2007 2006 2007 2006 2007 2006

Term deposits maturing after

more than one year - - 1,169,850 1,169,850 1,169,850 1,169,850

TOTAl - - 1,169,850 1,169,850 1,169,850 1,169,850


7. FINANCIAl ASSETS HElD FOR TRADING

(JOD) 2007 2006 Quoted securities 353,967 28,000Managed funds - 111,749Other 5,199 -

TOTAl 359,166 139,749

8. DIRECT CREDIT FACIlITIES

(JOD) 2007 2006

CuSTOMER lENDINGOverdrafts * 24,269,824 32,145,271loans and bills ** 43,795,770 37,655,342Credit cards 5,736,862 3,865,857Residential mortgages 47,871,533 41,178,303

RESIDENTIAl MORTGAGESCorporate lendingOverdrafts 44,683,877 41,773,455loans and bills * 87,712,633 66,936,658

lending to governmental sectors 27,062,782 30,954,892

Total 281,133,281 254,509,778

less: Suspended interest (7,537,606) (7,459,880)less: Provision for impairment losses (6,487,653) (6,520,133)

DIRECT CREDIT FACIlITIES, NET 267,108,022 240,529,765

* Net of interest and commissions received in advance of JD 49,151 as of December 2007 (2006: JD 38,575).** Net of interest and commissions received in advance of JD 993,196 as of December 2007 (2006: JD 956,558)

At 31 December 2007, non-performing credit facilities amounted to JD 10,822,097 (2006: JD 12,977,166), representing 3.85% (2006: 5.10 %) of gross facilities granted.At 31 December 2007, non-performing credit facilities; net of suspended interest, amounted to JD 5,318,090 (2006: JD 7,020,753), representing 1.93% (2006: 2.82 %) of gross facilities granted after excluding the suspended interest.At 31 December 2007, credit facilities granted to the Government of Jordan amounted to JD 20,971,193 (2006: JD 24,156,418), representing 7.46% (2006: 9.49 %) of gross facilities granted.



A reconciliation of the allowance for impairment losses for direct credit facilities by class is as follows: Residential(JOD) Consumer mortgages Corporate Total

2007- At 1 January 2007 2,292,605 66,353 4,161,175 6,520,133Charge (surplus) for the year 413,523 31,047 (464,921) (20,351)Amounts written off (12,097) - (32) (12,129)

AT 31 DECEMBER 2007 2,694,031 97,400 3,696,222 6,487,653 Individual impairment 1,202,725 97,400 3,082,290 4,382,415Collective impairment 1,491,306 - 613,932 2,105,238

AT 31 DECEMBER 2007 2,694,031 97,400 3,696,222 6,487,653

Residential(JOD) Consumer mortgages Corporate Total

2006-At 1 January 2006 1,817,224 49,575 6,285,570 8,152,369Charge (surplus) for the year 505,743 16,778 (2,121,138) (1,598,617)Amounts written off (30,362) - (3,257) (33,619)

AT 31 DECEMBER 2006 2,292,605 66,353 4,161,175 6,520,133

Individual impairment 1,651,051 66,353 3,676,897 5,394,301Collective impairment 641,554 - 484,278 1,125,832

AT 31 DECEMBER 2006 2,292,605 66,353 4,161,175 6,520,133

Non-performing credit facilities that were settled or collected amounted to JD 2,092,086 during 31 December 2007 (2006: JD 2,479,495).A reconciliation of suspended interest on direct credit facilities by class is as follows: Residential(JOD) Consumer mortgages Corporate Total

2007-At 1 January 2007 829,016 36,795 6,594,069 7,459,880Add: Suspended interest during the year 187,788 46,691 803,577 1,038,056less: Amount transferred to income on recovery (124,493) - (756,805) (881,298)less: Amounts written off (31,440) - (47,592) (79,032)

AT 31 DECEMBER 2007 860,871 83,486 6,593,249 7,537,606

Residential(JOD) Consumer mortgages Corporate Total

2006-At 1 January 2006 697,987 31,006 7,569,644 8,298,637Add: Suspended interest during the year 269,104 5,789 867,893 1,142,786less: Amount transferred to income on recovery (120,862) - (1,252,636) (1,373,498)less: Amounts written off (17,213) - (590,832) (608,045)

AT 31 DECEMBER 2006 829,016 36,795 6,594,069 7,459,880


9. FINANCIAl ASSETS AvAIlABlE FOR SAlE

(JOD) 2007 2006 Quoted InvestmentsCorporate debt securities 8,306,050 10,679,615Other debt securities 3,048,700 2,960,075Equities 6,326,680 5,913,679

TOTAl quOTED INvESTMENTS 17,681,430 19,553,369

unquoted InvestmentsTreasury bills 13,128,778 12,224,278Government debt securities* 54,202,349 42,528,352Other debt securities 13,000,000 - Equities 8,006,036 3,841,084

Total unquoted investments 88,337,163 58,593,714

TOTAl FINANCIAl ASSETS AvAIlABlE FOR SAlE 106,018,593 78,147,083

Analysis of debt instruments Fixed rate 88,637,177 63,315,880Floating rate 3,048,700 5,076,440

TOTAl 91,685,877 68,392,320

Included in unquoted equities are investments carried at cost with value of JD 5,179,004 as of 31 December 2007 (2006: JD 1,014,052). The investments were stated at cost since the fair value could not be measured reliably and there is no indication of impairment in the values as of the balance sheet date.* This item includes an amount of JD 16,000,000 as of December 31, 2006 which is restricted against repurchase agreement with Central Bank of Jordan (Note 17).

10. FINANCIAl ASSETS HElD TO MATuRITY

(JOD) 2007 2006 uNquOTED INvESTMENTSTreasury bills - 1,994,543

TOTAl uNquOTED INvESTMENTS - 1,994,543



11. pROpERTY AND EquIpMENT

Furniture leasehold(JOD) land Buildings & Fixtures Vehicles Computers improvements Total

2007-Cost:At 1 January 2007 1,514,935 7,105,900 2,436,171 474,197 2,055,321 1,938,111 15,524,635Additions 2,419,634 328,561 542,921 66,410 401,734 389,016 4,148,276Disposals (920,700) (1,128,596) (37,283) (40,950) (283,028) (83,327) (2,493,884)

At 31 December 2007 3,013,869 6,305,865 2,941,809 499,657 2,174,027 2,243,800 17,179,027 Depreciation and impairment: At 1 January 2007 - 1, 841,079 1,586,035 240,912 1,331,978 841,583 5,841,587Depreciation charge during the year - 116,221 260,039 52,237 312,593 147,002 888,092Disposals - (19,792) (23,557) (41,614) (87,810) (61,838) (234,611)

At 31 December 2007 - 1,937,508 1,822,517 251,535 1,556,761 926,747 6,495,068 Net book value of property and equipment 3,013,869 4,368,357 1,119,292 248,122 617,266 1,317,053 10,683,959Advance payments on property and equipment - - 14,937 - 36,030 165,863 216,830

NET BOOK vAluE OF pROpERTY AND EquIpMENT AT 31 DECEMBER 2007 3,013,869 4,368,357 1,134,229 248,122 653,296 1,482,916 10,900,789

Furniture leasehold(JOD) land Buildings & Fixtures Vehicles Computers improvements Total

2006-Cost: At 1 January 2006 594,235 6,026,600 2,296,964 233,457 1,803,001 1,595,754 12,550,011Additions 920,700 1,079,300 331,968 240,740 262,722 523,482 3,358,912Disposals - - (192,761) - (10,402) (181,125) (384,288)

At 31 December 2006 1,514,935 7,105,900 2,436,171 474,197 2,055,321 1,938,111 15,524,635 Depreciation and impairment: At 1 January 2006 - 1,639,859 1,538,719 215,500 1,049,783 865,756 5,309,617Depreciation charge during the year - 201,220 215,498 25,412 292,483 123,834 858,447Disposals - - (168,182) - (10,288) (148,007) (326,477)

At 31 December 2006 - 1,841,079 1,586,035 240,912 1,331,978 841,583 5,841,587 Net book value of property and equipment 1,514,935 5,264,821 850,136 233,285 723,343 1,096,528 9,683,048Advance payments on property and equipment - - 26,912 - - 49,000 75,912

NET BOOK vAluE OF pROpERTY AND EquIpMENT AT 31 DECEMBER 2006 1,514,935 5,264,821 877,048 233,285 723,343 1,145,528 9,758,960

Fully depreciated property and equipment amounted to JD 4,979,252 as of December 31, 2007 (2006: JD 3,783,516).During year 2007, the Bank re-estimated the deprecation rate for some property and equipment items. The financial effect for these adjustment did not exceed JD 150,000.


12. INTANGIBlE ASSETS

(JOD) 2007 2006 Computer Software Computer Software

Cost: At 1 January, 1,072,136 713,147Additions 139,876 609,427Amortisation during the year (299,815) (250,438)

AT 31 DECEMBER 912,197 1,072,136

13. OTHER ASSETS

(JOD) 2007 2006

Accrued interest and revenue 2,362,701 1,726,819Cheques under collection 81,543 4,663,555Prepaid expenses 330,142 328,448Collateral pending sale 1,889,903 1,410,368Customers debit balances in subsidiary company 2,783,633 1,216,452Other 1,352,606 3,308,528

TOTAl 8,800,528 12,654,170

A reconciliation of assets obtained by the Bank by calling on collateral during the year is as follows:

(JOD) 2007 2006

At 1 January 1,410,368 1,883,871Additions 956,687 188,934Retirements (477,152) (662,437)

AT 31 DECEMBER 1,889,903 1,410,368

14. BANKS AND FINANCIAl INSTITuTIONS DEpOSITS

2007 2006 Inside Outside Inside Outside (JOD) Jordan Jordan Total Jordan Jordan Total

Current and demand deposits 6,395,370 25,634,993 32,030,363 2,119,270 7,313,401 9,432,671

Time deposits 15,352,608 27,774,152 43,126,760 16,149,015 71,998,290 88,147,305

AT 31 DECEMBER, 21,747,978 53,409,145 75,157,123 18,268,285 79,311,691 97,579,976



15. CuSTOMERS’ DEpOSITS

Governmental(JOD) Consumer Corporate sectors Total

2007Current and demand deposits 36,427,837 32,245,602 2,532,261 71,205,700Saving accounts 9,549,320 1,188,844 458,183 11,196,347Time and notice deposits 114,346,865 140,567,016 30,318,121 285,232,002

TOTAl 160,324,022 174,001,462 33,308,565 367,634,049

Governmental(JOD) Consumer Corporate sectors Total

2006Current and demand deposits 31,468,408 26,601,276 8,179,732 66,249,416Saving accounts 9,534,043 1,358,697 - 10,892,740Time and notice deposits 89,328,522 76,024,543 8,993,085 174,346,150

TOTAl 130,330,973 103,984,516 17,172,817 251,488,306

- Governmental institutions’ deposits amounted to JD 33,308,565 as of 31 December 2007 (2006: JD 17,172,817) representing 9.06% (2006: 6.83 %) of total customers’ deposits.- Non-interest bearing deposits amounted to JD 62,644,485 as of 31 December 2007 (2006: 48,888,154) representing 17.04% (2006: 19.44 %) of total deposits.- Restricted deposits amounted to JD 3,113,434 as of 31 December 2007 (2006: JD 5,523,181) representing 0.85% (2006: 2.20 %).- Dormant accounts amounted to JD 2,780,900 as of 31 December 2007(2006: 3,773,938).

16. MARGIN ACCOuNTS (JOD) 2007 2006

Margins on direct credit facilities 23,664,452 19,179,387Margins on indirect credit facilities 12,705,221 8,442,389Deposits against cash margin dealings’ facilities 1,793,465 2,126,383Others 828,493 432,357

TOTAl 38,991,631 30,180,516


17. lOANS AND BORROwINGS

Total no. Outstanding Payable(JOD) Amount of payments payments every Collaterals Inerest rate

2007- Real estate mortgage refinance company 14,993,845 444 290 variable Mortgage 7.858% deeds 14,993,845

2006- Real estate mortgage refinance company 16,230,766 445 329 variable Mortgage 7.778% deeds local banks 11,215,375 - - - 7% -8.15%

Repurchase agreement * 30,000,000 Certificate of 8.5% deposits and treasury bonds

TOTAl 57,446,141

At December 31, 2007, borrowed funds which were re-lent to customers amounted to JD 14,993,845 (2006:16,230,766) at an average interest rate of 9.28% (2006:8.648%).

* This amount represents borrowed funds from Central Bank of Jordan as of December 31, 2006 against repurchase agreement with interest rate of 8.5%.Borrowed funds from Central Bank of Jordan are guaranteed by certificate of deposits (Note 4) and treasury bonds (Note 9).Borrowed funds from Central Bank of Jordan were repaid on January 6, 2007.

18. SuNDRY pROvISIONS

Balance Provided during utilised during Balance (JOD) at January 1 the period the year at December 31

2007End of service indemnity - 80,000 - 80,000lawsuit provision and contingent liabilities 15,500 150,000 - 165,500Others 107,228 100,000 - 207,228

TOTAl 122,728 330,000 - 452,728

Balance Provided during utilised during Balance (JOD) at January 1 the period the year at December 31

2006End of service indemnity 29,264 - (29,264) -lawsuit provision and contingent liabilities 15,500 - - 15,500Others 107,228 - - 107,228

TOTAl 151,992 - (29,264) 122,728



19. INCOME TAx

INCOME TAx lIABIlITIESThe movements on the income tax liability were as follows: (JOD) 2007 2006

At January 1 4,965,214 4,503,342Income tax paid (4,203,910) (4,365,099)Income tax charge for the year 4,646,841 4,846,342Prior year’s income tax - (19,371)

AT DECEMBER 31 5,408,145 4,965,214

Income tax appearing in the statement of income represents the following: (JOD) 2007 2006

Provision for income tax for the year 4,646,841 4,549,913Accrued tax of previous years - 296,429Reversal of deferred tax assets 10,431 114,345

TOTAl 4,657,272 4,960,687

The Bank reached a final settlement with the Income Tax Department for the year ended December 31, 2005.The Income Tax Department reviewed the Bank’s records for year 2006 and did not reach a final settlement yet.The Subsidiary reached a final settlement with the Income Tax Department for the year ended December 31, 2004.The Income Tax Department reviewed the Subsidiary’s records for year 2005 and did not reach a final settlement yet.The Income Tax Department did not review the Subsidiary’s records for year 2006 till the date of financial statements.

DEFERRED TAx ASSETS / lIABIlITIES:Movement in temporary differences giving rise to deferred tax assets and liabilities were as follows:

2007 2006 Amounts released Additions Balance during during Balance at Deferred Deferred(JOD) at January1 the year the year December 31 Tax Tax

a) Deferred tax assets 192,432 (29,802) - 162,630 56,920 67,351b) Deferred tax liabilities - - 1,636,325 1,636,325 365,017 -

Deferred tax liabilities are resulting from gains/losses from the revaluation of financial assets available for sale which are included in the cumulative change in fair value in equity.


The movement on deferred assets/ liabilities account is as follows:

2007 2006 (JOD) Assets liabilities Assets liabilities

At 1 January 67,351 - 181,696 -Additions - 365,017 - -Released (10,431) - (114,345) -

AT 31 DECEMBER 56,920 365,017 67,351 -

A reconciliation between tax expense and the accounting profit is as follows:

(JOD) 2007 2006

Accounting profit 15,215,240 15,951,935Non-taxable profit (4,227,477) ( 2,042,288)Expenses not deductible 816,837 171,618Prior year adjustments (229,902) -

TAxABlE pROFIT 11,574,698 14,081,265

Effective rate of income tax 30,61% 31%Statutory tax rate 35% 35%

The statutory tax rate on banks in Jordan is 35% and the statutory tax rate on subsidiaries is 25%.

20. OTHER lIABIlITIES

(JOD) 2007 2006

Accrued interest expenses 1,345,488 829,075Credit balances 14,329,936 5,487,499Accrued expenses 1,547,422 1,072,120Negative fair value of derivatives (Note 36) 246,599 44,375Certified checks 1,719,914 1,307,903universities fees 115,342 116,900Scientific research and vocational training 80,818 116,900Technical, vocational education and training support fund fees 91,786 95,203Board of directors remuneration 78,167 49,167Incoming transfers 330,517 338,315Others 946,758 632,453

TOTAl 20,832,747 10,089,910



21. pAID IN CApITAl

pAID IN CApITAlThe authorized and paid in capital amounted to JD 56,062,500 divided in to 56,062,500 shares at a par value of JD 1 per share (2006: JD 44,850,000).

pROpOSED STOCK DIvIDENDSThe Board of Directors approved in its meeting held on February 17 , 2008 ,the increase in capital by JD 8,409,375 by distributing stock dividends representing 15% of the authorized and issued capital.The Board of Directors approved in its meeting held on February 21 , 2007 ,the increase in capital by JD 11,212,500 representing 25% of the authorized and issued capital by adding JD 8,970,000 from retained earnings and JD 2,242,500 from voluntary reserve .This increase was distributed as stock dividends.

22. RESERvES

STATuTORY RESERvEAs required by the law, 10% of the profit before tax and fees is transferred to the statutory reserve. The Bank may resolve to discontinue such annual transfers when the reserve equals the paid in capital. This reserve is not available for distribution to shareholders.

vOluNTARY RESERvEThe balance represents 20% of the profit before tax and fees transferred to the voluntary reserve during current and previous years. The reserve shall be used at the discretion of the Board of Directors, and it is distributable to shareholders in part or in full.

GENERAl BANKING RISK RESERvEThis reserve is appropriated from retained earnings in compliance with the regulations of the Central Bank of Jordan.

The use of the following reserves is restricted by law:

Description Amount Restriction law

Statutory reserve 8,562,083 Banking law General banking risk reserve 2,529,960 Central Bank of Jordan regulations


23. CuMulATIvE CHANGE IN FAIR vAluE

Financial assets available for sale (JOD) Stocks Bonds Funds Hedge derivatives Total

2007- Balance at January 1, 759,021 (687,593) - (35,450) 35,978unrealised gains (losses) 1,322,312 369,217 - (189,497) 1,502,032Deferred tax liabilities (586,031) 136,643 - 84,371 (365,017)(Profit) loss transferred to income statement 151,165 (36,737) - (16,113) 98,315

BAlANCE AT DECEMBER 31, 1,646,467 (218,470) - (156,689) 1,271,308

Financial assets available for sale (JOD) Stocks Bonds Funds Hedge derivatives Total

2006- Balance at January 1, (281,776) (1,394,810) (6,431) (150,308) (1,833,325)unrealised gains 1,398,787 716,606 18,371 114,858 2,248,622(Profit) loss transferred to income statement (357,990) (9,389) (11,940) - (379,319)

BAlANCE AT DECEMBER 31, 759,021 (687,593) - (35,450) 35,978

The cumulative change in fair value is presented net of deferred tax liabilities of JD 365,017 as of 31 December 2007.

24. RETAINED EARNINGS (lOSSES)The retained earnings include an amount of JD 56,920 as of December 31, 2007 (2006:67,351) which represents deferred tax assets that are not available for distribution in accordance with Central Bank of Jordan regulations.The Subsidiary (Arab Co-operation for Financial Investments) has adjusted retained earnings with an amount of JD 229,902 as a result of incorrect recording of Investors Guarantee Fund in 2006 and 2005.



25. INTEREST INCOME (JOD) 2007 2006

CONSuMER lENDINGOverdrafts 539,381 486,740loans and bills 4,023,132 3,031,546Credit cards 930,533 650,554Residential mortagages 3,693,416 3,070,868

CORpORATE lENDINGOverdrafts 2,765,211 1,945,947loans and bills 6,698,002 6,252,825

Public and governmental sectors 2,261,121 1,607,585Balances at the Central bank 1,590,760 2,060,440Balances at banks and financial institutions 7,855,058 4,101,657Financial assets held for trading - 10,857Financial assets available for sale 4,712,191 3,419,250Financial assets held to maturity 5,457 114,603Interest received on interest rate swap contracts 503,525 631,158Interest received on margin trading financing forSubsidiary’s customers 3,596,600 3,228,895

TOTAl 39,174,387 30,612,925

26. INTEREST ExpENSE (JOD) 2007 2006

Banks and financial institution deposits 6,553,795 4,542,742

CuSTOMERS’ DEpOSITS -Current accounts and deposits 158,247 167,479Saving accounts 262,592 248,848Time and notice placements 11,385,576 7,585,850Certificates of deposits Margin accounts 1,092,684 917,568loans and borrowings 1,283,547 1,157,756Subordinated loans Deposit guarantee fees 375,132 388,364Interest paid on interest rate swap contracts 466,162 612,850Others 8,687 -

TOTAl 21,586,422 15,621,457


27. NET COMMISSION (JOD) 2007 2006

COMMISSION INCOME -Direct credit facilities 905,479 788,885Indirect credit facilities 1,229,686 1,173,575less: commission expense (19,046) (39,254)

TOTAl 2,116,119 1,923,206

28. NET GAIN FROM FOREIGN CuRRENCIES (JOD) 2007 2006

RESulTING FROM -Trading in foreign currencies 190,296 195,303Revaluation of foreign currencies 1,126,559 481,276 1,316,855 676,579

29. NET GAIN ARISING FROM FINANCIAl ASSETS HElD FOR TRADING

Realised Dividend unrealised gain (loss) income gain (loss) Total

2007Equities 2,189 (97,770) 12,000 (83,581)Managed funds and other 202,751 - - 202,751

TOTAl 204,940 (97,770) 12,000 119,170

2006Treasury bills and debt Securities (21,941) (2,173) - ( 24,114) Managed funds 648,909 (89,213) - 559,696

TOTAl 626,968 (91,386) - 535,582

30. NET GAIN FROM FINANCIAl ASSETS AvAIlABlE FOR SAlE (JOD) 2007 2006

Dividend income 337,599 278,733Gain from sale of financial assets available for sale 827,643 379,319less: impairment losses on investments (942,072) - Gain from selling interest rate swap agreement 16,113 -

TOTAl 239,283 658,052



31. OTHER INCOME (JOD) 2007 2006

Brokerage commission 4,098,258 4,878,123Visa card income 684,105 634,783Management and consulting fees 76,959 37,512Transfers commission 214,114 192,484Recovery of written off debts 46,569 742,234Capital gain 1,847,774 1,018,897Rent revenue 26,768 26,525Returned cheques commission 48,050 28,528Others 509,074 364,733

TOTAl 7,551,671 7,923,819

32. EMplOYEES’ ExpENSES (JOD) 2007 2006

Salaries and benefits 4,774,332 4,110,592Employees’ bonuses 1,060,150 789,921Social security contribution 472,314 427,984Medical expenses 231,228 185,325Training expenses 41,196 37,994Per diem 48,335 55,329Others 367,040 247,361

6,994,595 5,854,506

33. OTHER ExpENSES (JOD) 2007 2006

Duties and licenses 790,294 605,495Computer expenses 371,890 344,786Advertising expenses 625,136 741,856Travel expenses 49,690 74,022Communication 478,396 424,393Head office expenses – Bahrain 124,075 141,800Rent 638,491 512,721Board of Directors’ expenses 320,545 278,149Printing and stationery 274,791 351,049Borrower’s transactions expenses 169,952 257,312Consultation expenses 94,106 179,668Subscription and magazines 8,816 8,035Professional fees 144,834 170,029Board of Directors’ remuneration 70,015 45,000Jordanian universities fees 115,335 116,900Scientific research and vocational training fees 80,818 116,900Technical, vocational education and training support fund fees 90,942 94,359Other expenses 775,546 929,523

5,223,672 5,391,997


34. EARNINGS pER SHARE (JOD) 2007 2006

Profit for the year 10,557,968 10,991,248Weighted average number of shares 56,062,500 56,062,500

BASIC AND DIluTED EARNINGS pER SHARE 0.188 0.196

35. CASH AND CASH EquIvAlENTS

Cash and cash equivalents appearing in the statement of cash flows consist of the following balance sheet items: (JOD) 2007 2006

Cash and balances with Central BanksMaturing within 3 months 41,990,786 34,558,040Add: Balances at banks and financial institutionsmaturing within 3 months 158,863,426 122,563,536less: Banks and financial institutions’ depositsmaturing within 3 months (75,157,123) (97,579,976)

TOTAl 125,697,089 59,541,600

36. DERIvATIvE FINANCIAl INSTRuMENTS

The table below shows the positive and negative fair values of derivative financial instruments together with the notional amounts analyzed by their term to maturity.

Par value maturity Positive Negative Total More fair fair notional Within 3 – 12 1 – 3 than 3(JOD 000) value value amount 3months months years years

2007- Derivatives held for trading - 6 3,276 3,276 - - -Derivatives held as cash flow hedge: interest rate swap contract * - 241 7,799 - - - 7,799 Par value maturity Positive Negative Total More fair fair notional Within 3 – 12 1 – 3 than 3(JOD 000) value value amount 3months months years years

2006- Derivatives held for trading - 9 12,444 12,444 - - -Derivatives held as cash flow hedge: interest rate swap contract - 35 9,926 - - - 9,926

The notional amounts indicate the volume of transactions outstanding at the year end and are neither indicative of the market risk nor the credit risk.* The Bank has entered in interest rate swap contract as hedging instrument against DIJAF bond (which has fixed interest rate) to hedge any increase in interest rates.



37. RElATED pARTY TRANSACTIONS

The accompanying consolidated financial statements of the Bank include the following subsidiaries:

(JOD) Paid in capitalCompany name Ownership 2007 2006

ABC Investments 100% 15,600,000 15,600,000

The Bank entered into transactions with major shareholders, directors, senior management and their related concerns in the ordinary course of business at commercial interest and commission rates. All the loans and advances to related parties are performing advances and are free of any provision for credit losses. The following related party transactions took place during the year:

Related party Total Parent and affiliated Bank's Board of (JOD) companies employees Directors 2007 2006

BAlANCE SHEET ITEMS: Direct credit facilities - 2,968,863 - 2,968,863 2,400,021Deposits at the bank and financial institutions 73,334,064 - - 73,334,064 63,486,904Customer's deposits - 778,137 1,568,754 2,346,891 1,535,817Available for sale investment 3,048,700 - - 3,048,700 2,960,075

OFF BAlANCE SHEET ITEMS: letters of guarantee 18,717,266 - - 18,717,266 11,459,186Interest rate swap contract 7,799,000 - - 7,799,000 9,926,000

INCOME STATEMENT ITEMS: Interest and commission income 4,409,157 104,256 - 4,513,413 2,792,231Interest and commission expense (471,049) (24,855) - (495,904) (782,047)

Compensation of the key management personnel is as follows:

(JOD) 2007 2006

Benefits (Salaries, wages, and bonuses) of senior management 1,002,615 749,798

38. FAIR vAluE OF FINANCIAl INSTRuMENTS

There are no material differences between the carrying values and fair values of the on and off balance sheet financial instruments.


39. RISK MANAGEMENTThe Arab Banking Corporation Bank operates within a conservative frame work towards all types of risks, employing a number of advanced policies to control and maintain such risks at low levels without compromising profitability. Risk management practices at the Bank are characterized by their conservativeness, taking into consideration the continual development resulting from compliance with various banking laws and regulations. The banking risk management bodies at the Bank include the Bank’s Board of Directors, the Executive Chairman, in addition to a number of committees, including the Steering Committee, Assets and liabilities Committees, as well as the Credit Risk Committee which comprises a number of the Bank’s Board members, a member of the Credit Department at the Parent Corporation in Bahrain, the Bank’s Executive Chairman, Head of the Credit Department, and a specialized and independent Risk Management Department. The following represents the main banking risks which the Bank is exposed to and the ways in which they are managed.

39/A. CREDIT RISKSCredit risks are the risks arising from the default or inability of the financial instrument’s counterparty to meet its obligations towards the bank, leading to losses. The Arab Banking Corporation Bank adopts a policy of dividing the credit facilities portfolio into four sections. These are: facilities granted to sovereigns and financial institutions; to corporations which in their turn include large, small and medium-sized corporations; retail facilities, which include personal and housing loans; and other products like credit cards and personal car loans. Whereas the Bank operates within the Arab Banking Corporation (Bahrain) network, the Parent Corporation has undertaken reinforcement of credit control through issuing credit policies specified for each type of the above facilities’ divisions. Such policies include rules and procedures to be complied with when granting or renewing facilities. Policies also include specific assessments for clients according to their credit rating. The Bank is currently adopting the automatic Moody’s Risk Advisor model to rate facilities granted to large companies, and the Credit Scoring model to assess the clients listed under small-sized companies and/or retail facilities. In view of the importance of credit risk, the Credit Department at the Parent Corporation in Bahrain has developed a special system to calculate the Risk Adjusted Return on Capital (RAROC), which takes into consideration the facility type’s credit rating and maturity date in pricing credit facilities, in addition to considering expected losses. The minimum accepted level has been determined as 15%.Controlling and managing of the credit portfolio for the Arab Banking Corporation is undertaken through a number of credit committees comprising three higher committees from the Group Board, and a fourth committee comprising members of the Bank Board in Jordan, and a main facilities committee comprising members of the Bank’s heads of departments in Jordan, as well as the Executive Chairman. Another sub-committee has been formed to examine small-sized facilities having a credit limit of less than 100 thousand Jordanian Dinars. Jurisdictions of each committee have been determined according to the client’s credit rating and the duration of the granted facilities. The bank follows a diversification policy in relation to clients, economic sectors and geographical classifications, which contributes to minimizing the degree of credit risks. For the purpose of controlling lending risks, the Credit Risk Committee originated by the Board holds periodic meetings to discuss all issues relating to credit risks. The Committee is provided with quarterly reports on the allocation of the facilities in respect of the economic distribution, credit rating, geographic classification and facilities’ maturity dates. In addition, the adequacy of the loan loss provision is reviewed periodically.Details of the direct credit facilities portfolio are stated in Note 8. The Bank’s off-balance sheet obligations exposed to credit risks are detailed in Note 43.The bank restricts asset and liability risk concentrations through distributing its activities amongst several sectors and geographical classifications inside and outside the Kingdom. The table below shows the maximum exposure to credit risk for the components of the balance sheet, including derivatives. The maximum exposure is shown gross, before the effect of mitigation through the use of master netting and collateral agreements and after impairment provisions.



(JOD) 2007 2006

BAlANCE SHEET ITEMSCash and balances at Central Banks 40,885,445 44,442,847Balances at banks and financial institutions 158,863,426 122,563,536Deposits at banks and financial institutions 1,169,850 1,169,850Direct credit facilities

Consumer lending 70,247,554 70,544,849Residential mortgages 47,690,647 41,075,155

Corporate lending: 122,107,039 97,954,869lending to governmental sectors 27,062,782 30,954,892

Bonds and treasury bills:Within financial assets held to maturity - 1,994,543Within financial assets available for sale 91,685,877 68,392,320

Other assets 5,227,877 7,606,826

TOTAl 564,940,497 486,699,687

OFF BAlANCE SHEET ITEMSletters of guarantee 65,051,147 49,765,565letters of credit 17,783,634 9,724,375Acceptances 7,566,398 3,694,143Irrevocable commitments to extend credit 47,523,419 35,074,585

TOTAl 137,924,598 98,258,668 GRAND TOTAl 702,865,095 584,958,355

Collaterals against facilities are as follows:• Real estate mortgage.• Financial instrument such as stock.• letter of guarantee.• Cash margins.• Governmental guarantee.The Management monitors the market value for these collaterals on a periodic basis. In case the value of the collateral decreases, the Bank requests additional collaterals to cover the value of the deficit. The Bank also periodically evaluates the collaterals against non-performing credit facilities.


1- Ageing analysis of past due but not impaired loans by class of financial assets:

Residential Governmental Banks(JOD) Consumer mortgages Corporate sectors & Financials Total

2007low risk 21,966,142 16,861,309 19,695,328 149,187,390 - 207,710,169Acceptable risk 48,628,938 29,451,154 104,484,050 - 163,081,976 345,646,118

MATuRING (*): up to 30 days 11,849,734 9,511,892 50,409,159 - - 71,770,785From 31 to 60 days 4,527,908 2,668,328 5,326,141 - - 12,522,377Watchlist 1,470,013 1,356,048 11,961,311 - - 14,787,372

NON pERFORMING: Substandard 195,933 - 450,123 - - 646,056Doubtful 368,549 - 408,066 - - 776,615loss 1,686,050 229,920 7,483,456 - - 9,399,426

Total 74,315,625 47,898,431 144,482,334 149,187,390 163,081,976 578,965,756

less: Suspended interest 860,871 83,486 6,593,249 - - 7,537,606less: provision for impairment losses 2,694,031 97,400 3,696,222 - - 6,487,653

NET 70,760,723 47,717,545 134,192,863 149,187,390 163,081,976 564,940,497

Residential Governmental Banks(JOD) Consumer mortgages Corporate sectors & Financials Total

2006low risk 6,910,423 13,572,787 17,978,230 132,710,382 - 171,171,822Acceptable risk 62,373,728 25,665,345 90,275,510 - 126,693,461 305,008,044

MATuRING (*): up to 30 days 10,617,408 9,562,950 41,143,941 - - 61,324,299From 31 to 60 days 3,299,324 1,978,538 3,604,251 - - 8,882,113Watchlist 1,746,837 1,830,074 7,945,757 - - 11,522,668

NON pERFORMING: Substandard 926,367 - 814,221 - - 1,740,588Doubtful 228,323 62,120 248,129 - - 538,572loss 1,780,792 71,977 8,845,237 - - 10,698,006

Total 73,966,470 41,202,303 126,107,084 132,710,382 126,693,461 500,679,700

less: Suspended interest 829,016 36,795 6,594,069 - - 7,459,880less: provision for impairment losses 2,292,605 66,353 4,161,175 - - 6,520,133

NET 70,844,849 41,099,155 115,351,840 132,710,382 126,693,461 486,699,687

* The entire balance of credit is deemed matured if one of its payments or interest were due. Overdrafts are deemed matured if their limits exceeded the ceiling.



2) distribution of collaterals measured at fair value over credit facilities

Residential Governmental Consumer mortgages Corporate sectors Total 2007- COllATERAlS low risk 5,172,615 8,094,552 30,440,585 - 43,707,752Acceptable risk 31,826,304 33,361,682 62,921,811 - 128,109,797Watchlist 105,579 2,141,164 19,309,740 - 21,556,483

NON pERFORMING: Substandard - - 352,202 - 352,202Doubtful 5,919 - 188,438 - 194,357loss 228,422 129,503 790,266 - 1,148,191

TOTAl 37,338,839 43,726,901 114,003,042 - 195,068,782

Cash margin 4,558,231 73,933 11,815,086 - 16,447,250Real estate 1,619,505 33,732,969 40,154,281 - 75,506,755Traded equities 22,890,400 208,810 14,204,449 - 37,303,659Vehicles and machinery 4,709,009 515,059 - 5,224,068

TOTAl 33,777,145 34,015,712 66,688,875 - 134,481,732

Residential Governmental Consumer mortgages Corporate sectors Total 2006- COllATERAlS low risk 1,554,794 6,218,523 26,732,768 - 34,506,085Acceptable risk 36,632,719 41,084,531 53,440,292 - 131,157,542Watchlist 218,193 2,335,524 17,530,325 - 20,084,042

NON pERFORMING:Substandard 680,745 133,384 829,225 - 1,643,354Doubtful 276,546 22,504 111,418 - 410,468loss 336,506 33,764 2,505,654 - 2,875,924

TOTAl 39,699,503 49,828,230 101,149,682 - 190,677,415 COMpRISING OF: Cash margin 2,563,425 89,582 9,717,213 - 12,370,220Real estate 1,984,024 28,608,532 35,173,522 65,766,078Traded equities 29,791,694 149,520 6,054,107 - 35,995,321Vehicles and machinery 3,735,449 433,000 - 4,168,449

TOTAl 38,074,592 28,847,634 51,377,842 - 118,300,068

RESCHEDulED DEBTS: Rescheduled debts are debts which have been previously classified as non-performing credit facilities, then excluded from the non-performing credit facilities as a result of a rescheduling process, and then classified as watch list. The total of such facilities has reached JD 844,769 as of 31 December, 2007, compared to JD 291,886 as of 31st December, 2006.


RESTRuCTuRED DEBTS:Reconstruction process refers to re-organizing the credit facilities’ standing in respect to adjusting premiums, extending the life of the credit facilities, postponing some premiums or extending the grace period etc, and then classifying such facilities as watch list. Reconstructed debts totalled JD 3,848,186 as of 31 December, 2007, compared to JD 5,231,622 as of 31st December, 2006.

3. Bonds and treasury bills:

The table below shows the classifications of bonds and treasury bills and their gradings according to external rating agencies: External Included in financialRISK RATING ClASS rating agency assets available for sale BBB+ Fitch ratings 3,048,700Non-rated 21,306,050Governmental 67,331,127

TOTAl 91,685,877

4. the Bank’s financial assets, before taking into account any collateral held or other credit enhancements can be analysed by the following geographical regions:

Other Middle Eastern(JOD) Inside Jordan countries Europe Asia* Americas Other Total

2007Cash and balances at Central Banks 40,885,445 - - - - - 40,885,445Balances at banks and financial institutions 5,630,179 44,729,475 79,702,369 563,292 27,835,734 402,377 158,863,426Deposits at banks and financial institutions - 1,169,850 - - - - 1,169,850Direct credit facilities: Consumer 70,247,554 - - - - - 70,247,554Residential mortgages 47,690,647 - - - - - 47,690,647Corporate 122,107,039 - - - - - 122,107,039 lending to governmental sectors 27,062,782 - - - - - 27,062,782Bonds and treasury bills within: Financial assets available for sale 88,637,177 3,048,700 - - - - 91,685,877Other assets 5,058,241 168,585 - 36 1,015 - 5,227,877

TOTAl 2007 407,319,064 49,116,610 79,702,369 563,328 27,836,749 402,377 564,940,497 TOTAl 2006 362,059,303 46,568,216 66,072,499 32,018 11,846,047 121,604 486,699,687

* Excluding Middle Eastern countries



5. A

n in

dust

ry s

ecto

r an

alys

is o

f th

e B

ank’

s fi

nan

cial

ass

ets,

bef

ore

taki

ng

into

acc

ount

col

late

ral h

eld

or o

ther

cre

dit

enh

ance

men

ts, i

s as

fol

low

s:

Publ

ic a

nd

Fina

ncia

l In

dust

rial

Com

mer

cial

Re

al e

stat

e A

gric

ultu

re

Shar

es

Serv

ices

Co

nsum

er g

over

nmen

tal

Oth

er

Tota

l

2007

Cash

and

bal

ance

s at

Cent

ral B

anks

- -

- -

- -

- -

40,8

85,4

45

- 40

,885

,445

Bala

nces

at b

anks

and

finan

cial

inst

itutio

ns 1

58,8

63,4

26

- -

- -

- -

- -

- 15

8,86

3,42

6

Depo

sits

at b

anks

and

finan

cial

inst

itutio

ns

1,16

9,85

0 -

- -

- -

- -

- -

1,16

9,85

0

Dire

ct c

redi

t fac

ilitie

s 14

,419

,174

16

,284

,578

48

,005

,754

57

,132

,880

68

3,06

3 32

,291

,985

13

,762

,177

48

,373

,448

27

,062

,782

9,

092,

181

267,

108,

022

Fina

ncia

l ass

ets

avai

labl

e fo

r sa

le

11,

354,

750

- -

- -

- -

- 80

,331

,127

-

91,

685,

877

Oth

er a

sset

s

3,50

2,48

5 -

- -

- -

- 74

0,25

8 90

8,03

6

77,

098

5

,227

,877

TOTA

l 20

07

189,

309,

685

16,2

84,5

78

48,0

05,7

54

57,1

32,8

80

683,

063

32,2

91,9

85

13,7

62,1

77

49,1

13,7

06

149,

187,

390

9,16

9,27

9 56

4,94

0,49

7

TOTA

l 20

06

143,

884,

099

25,6

64,8

43

28,8

46,2

95

51,0

42,9

37

1,15

0,03

9 35

,918

,154

4

,693

,943

48

,271

,595

13

0,71

5,83

9 16

,511

,943

48

6,69

9,68

7


(39/B) MARKET RISKMarket risks arise from fluctuations in interest and exchange rates and stock prices. Market risks are monitored and managed on more than one level at the Bank, including the Assets and liabilities Department, Risk Management Committee comprising a number of the Bank’s Board members, and the Risk Management Department. Bank activities exposed to market risks include the Bank’s investments in bonds and equity, foreign currency exchange, interest rate swap contracts and certificates of deposit. The Bank utilizes several advanced instruments and techniques to measure market risks; for example, the Value at Risk (VaR) method has been adopted in the year 2007, where such value is calculated on a daily basis for Bank portfolios exposed to risks (interest rate instruments, equity instruments for trading portfolios and foreign exchange positions) using the Historical Simulation method. This technique relies on several assumptions, most importantly: one-day time horizon and a 99% confidence level. Outcomes of the VaR are daily compared with the portfolio’s realized and unrealized profits and losses.The Bank also calculates the sensitivities of change in interest rates for financial instruments the value of which is subject to the fluctuations in interest rates, through using the Basis Point Value (BPV) method which relies on calculating estimated losses for a single Basis Point (Dollar Value of a Basis Point “DVO1”) change in the interest rate on a daily basis. The Bank also calculates on a daily basis the change in financial positions as a result of the change in the exchange rates with a single basis point DVO1, in relation to the currencies with which the Bank mainly deals. As for the subsidiary Company, the activities of which include managing clients’ portfolios and financing the clients’ purchases of shares through margin financing, the bank undertakes periodic monitoring of activities through producing weekly reports containing details on the Company’s activities, managed portfolios, brokerage commissions and margin financing percentage, in addition to insuring that the Company is compliant with the instructions of regulatory authorities.

Below is the market risk exposure according to VAR

Effect of Effect of Currency Interest Effect on Effect of (JOD 000) risk rate risk Equity* overlapping Total

2007 - Average (38,91) - (42,50) 34,25 (47,16)Higher (104,93) - (97,84) 22,69 (180,09)lower (7,09) - (0,71) (1,42) (9,22)

• Trading Portfolio



Below is the financial instruments sensitivity to changes in interest rates:

- By instrument type (BPV = DV01)

(JOD 000)Financial Instrument DV01 value

2007 Bonds (18,22)Bonds maturity gap (0,29)Certificates of deposits and money market (0,46)Interest rate swap / Currency swap 5,99 2006 Bonds (16,12)Bonds maturity gap (0,12)loans and deposits (0,02)Certificates of deposits and money market (0,36)Interest rate swap / Currency swap 6,35

- By currency (BPV = DV01)

(JOD 000)Currency DV01 value 2007 uSD (1,17)EuRO (0,04)JOD (8,14) 2006 uSD (2,20)EuRO (0,05)JOD (5,25)


SENSITIvITY OF INTEREST RATES AS OF 31 DECEMBER 2007:

INTEREST RATES RISKSINTEREST RE-pRICING GApInterest rates risks arise from the possible effect of changes in interest rates on the financial instrument value. The Bank is exposed to interest rate risks as a result of the incompatibility or the occurrence of a gap in the amounts of assets and liabilities according to the different terms, or as a result of reviewing interest rates in a specific duration. The Assets and liabilities Management Committee at the Bank undertakes dealing with the effects of the total change in interest rates on the Bank’s financial standing. In general, the Bank matches the terms of its financial obligations, in addition to dealing with futures contracts or financial derivatives for the purpose of covering counterparty financial positions, so as to have limited final outcome.

INTEREST RATE SENSITIvITY :

less than 1 – 3 3 – 6 6 – 12 1 – 3 3or more Non-interest(JOD) 1 month months months months years years bearing Total

2007-ASSETS Cash and balances at Central Banks 4,299,948 6,999,889 4,999,775 - - - 30,690,949 46,990,561Balances at banks and financial institutions 128,098,910 23,397,000 - - - - 7,367,516 158,863,426Deposits at banks and financial institutions - - - - 1,169,850 - - 1,169,850Financial assets held for trading - - - - - - 359,166 359,166

DERIvATIvE FINANCIAl INSTRuMENTS Direct credit facilities 5,176,528 223,457,839 12,844,207 2,584,069 9,176,194 13,869,185 - 267,108,022Financial assets available for sale - 6,293,384 15,023,054 9,081,620 26,751,240 34,536,579 14,332,716 106,018,593Property and equipment - - - - - - 10,900,789 10,900,789Intangible assets - - - - - - 912,197 912,197Deferred tax assets - - - - - - 56,920 56,920Other assets 28,013 - 5,948 11,434 22,424 34,983 8,697,726 8,800,528

Total Assets 137,603,399 260,148,112 32,872,984 11,677,123 37,119,708 48,440,747 73,317,979 601,180,052 lIABIlITIES Banks and financial institution deposits 72,178,896 2,978,227 - - - - - 75,157,123Customers’ deposits 278,622,046 12,227,514 11,090,785 2,694,393 - 354,826 62,644,485 367,634,049Margin accounts 18,387,921 - 976 22,172 33,833 12,930,163 7,616,566 38,991,631loans and borrowings 62,852 375,704 188,556 627,112 2,008,448 11,731,173 - 14,993,845Sundry provisions - - - - - - 452,728 452,728Income tax liabilities - - - - - - 5,408,145 5,408,145Deferred tax liability - - - - - - 365,017 365,017Other liabilities - - - - - - 20,832,747 20,832,747

Total liabilities 369,251,715 15,581,445 11,280,317 3,343,677 2,042,281 25,016,162 97,319,688 523,835,285

Interest rate sensitivity gap (231,648,316) 244,566,667 21,592,667 8,333,446 35,077,427 23,424,585 (24,001,709) 77,344,767



less than 1 – 3 3 – 6 6 – 12 1 – 3 3or more Non-interest(JOD) 1 month months months months years years bearing Total

2006-Total Assets 117,059,515 218,365,990 27,954,133 14,733,845 40,130,530 39,374,253 60,035,896 517,654,162

Total liabilities 332,649,609 18,327,936 1,051,071 3,770,422 10,516,775 16,555,126 69,001,852 451,872,791

INTEREST RATE SENSITIvITY GAp (215,590,094) 200,038,054 26,903,062 10,963,423 29,613,755 22,819,127 (8,965,956) 65,781,371

CONCENTRATION IN CuRRENCY RISK:

(JOD) uS Dollar Euro British Pound Japanese Yen Other Total

2007 ASSETS Cash and balances at Central Banks 12,616,035 1,281,799 28,437 - 68,498 13,994,769Balances at banks and financial institutions 123,254,257 20,918,029 6,130,530 542,189 7,717,009 158,562,014Deposits at banks and financial institutions 1,169,850 - - - - 1,169,850Financial assets held for trading 5,199 - - - - 5,199Direct credit facilities 15,598,190 28,826 - - - 15,627,016Financial assets available for sale 10,613,730 - - - - 10,613,730Other assets (382,674) 2,566,704 1,990,313 157,773 (2,315,347) 2,016,769

Total Assets 162,874,587 24,795,358 8,149,280 699,962 5,470,160 201,989,347 lIABIlITIES Banks and financial institution deposits 35,399,231 7,364,454 3,346,260 81,850 2,247,905 48,439,700Customers’ deposits 123,611,067 12,753,158 4,485,023 598,072 435,138 141,882,458Margin accounts 14,416,850 4,235,840 93,093 - 1,025,014 19,770,797Other liabilities 3,919,854 181,988 124,938 - 1,270,575 5,497,355

Total liabilities 177,347,002 24,535,440 8,049,314 679,922 4,978,632 215,590,310

NET CONCENTRATION IN THE BAlANCE SHEET (14,472,415) 259,918 99,966 20,040 491,528 (13,600,963) NET CONCENTRATION OFF BAlANCE SHEET 93,517,797 15,732,705 414,401 109,898 1,158,322 110,933,123

(JOD) uS Dollar Euro British Pound Japanese Yen Other Total

2006 Total Assets 152,616,523 11,859,058 5,949,415 269,917 1,409,541 172,104,454

Total liabilities 170,389,533 11,594,681 3,652,902 248,866 425,746 186,311,728

NET CONCENTRATION IN THE BAlANCE SHEET (17,773,010) 264,377 2,296,513 21,051 983,795 (14,207,274) NET CONCENTRATION OFF BAlANCE SHEET 96,215,923 17,805,538 885,558 - 617,042 115,524,061


(39/C) lIquIDITY RISKSliquidity risks represent the possibility of the Bank’s inability to provide necessary financing to fulfil its obligations of their maturity dates. To mitigate such risks, the Bank’s Management undertakes diversifying of financing resources, managing assets and liabilities, adjusting their terms and maintaining adequate balance of cash and any of its equivalents, in addition to exchangeable securities. The Bank, within its general strategy framework, aims at achieving revenue on its investments through reviewing monetary liquidity and managing thereof at the Bank to be carried out at different levels including Treasury Management, Financial Monitoring Department, Risk Management Department, in addition to the Assets and liabilities Committee which is specialized in this issue. The monetary liquidity review process includes full analysis of the extended maturity of assets and liabilities, where fund resources are analyzed. Such resources include clients, correspondent banks, subsidiary and allied establishments and the Bank branches in Jordan. Contractual maturity dates for the assets are determined based on the remaining period beginning with the date of balance sheet till the contractual maturity date, without considering the actual maturities reflected through the historical occurrences of holding deposits and liquidity provision. The Bank finished preparing a new policy for managing liquidity in 2007, expected to be applied during 2008. This policy is based on different scenarios reflecting the natural circumstances as well as the severer ones. The policy is grounded on estimating internal and external cash flows, while being amended according to the different scenarios and the future expectations to the process of employing the Bank’s funds. The table below summarises the maturity profile of the Bank’s financial liabilities at 31 December based on contractual undiscounted repayment obligations:

less than 1 – 3 3 – 6 6 – 12 1 – 3 more than Non-interest(JOD) 1 month months months months years 3 years bearing Total

2007-lIABIlITIES Banks and financial institution deposits 72,454 3,012 - - - - - 75,466Customers’ deposits 342,418 12,351 11,315 2,804 - 398 - 369,286Margin accounts 18,438 - 1 23 37 27,216 - 45,715loans and borrowings 63 383 196 676 2,482 19,106 - 22,906Sundry provisions - - - - - 453 - 453Income tax liabilities 3,837 - - 1,571 - - - 5,408Deferred tax liability - - - - - 365 - 365Other liabilities 16,576 535 - 35 - 3,687 - 20,833Total liabilities 453,786 16,281 11,512 5,109 2,519 51,225 - 540,432

TOTAl ASSETS 224,189 61,223 62,203 54,536 81,070 106,146 11,813 601,180

less than 1 – 3 3 – 6 6 – 12 1 – 3 more than Non-interest(JOD) 1 month months months months years 3 years bearing Total

2006-lIABIlITIES Banks and financial institution deposits 83,681 14,323 - - - - - 98,004Customers’ deposits 243,956 3,759 877 3,214 - 562 - 252,368Margin accounts 13,619 3 - 56 447 21,367 - 35,492loans and borrowings 41,553 425 196 653 12,960 7,216 - 63,003Sundry provisions - - - - - 123 - 123Income tax liabilities 3,979 - - 986 - - - 4,965Deferred tax liability - - - - - - - 0Other liabilities 6,650 1,398 27 1,133 - 882 - 10,090

Total liabilities 393,438 19,908 1,100 6,042 13,407 30,150 - 464,045

TOTAl ASSETS 185,364 53,537 73,459 36,173 68,893 89,397 10,831 517,654



The table below summarises the maturities of financial derivatives as of the date of the financial statements:

A- FINANCIAl ASSETS/lIABIlITIES THAT ARE SETTlED NET:

less than 1 – 3 3 – 6 6 – 12 1 – 3 3or more (JOD) 1 month months months months years 3 years Total

2007-Derivatives held for hedging Interest rate swap - - - - - (241,060) (241,060) TOTAl - - - - - (241,060) (241,060)


2006- Derivatives held for hedging Interest rate swap - - - - - (35,450) (35,450) TOTAl - - - - - (35,450) (35,450)

B) FINANCIAl ASSETS/lIABIlITIES THAT ARE SETTlED GROSS:


2007-Derivatives held for trading: Currency - Cash outflow 3,278,540 - - - - - 3,278,540- Cash inflow 3,275,580 - - - - - 3,275,580

TOTAl CASH OuTFlOw 3,278,540 - - - - - 3,278,540

TOTAl CASH INFlOw 3,275,580 - - - - - 3,275,580 less than 1 – 3 3 – 6 6 – 12 1 – 3 3or more (JOD) 1 month months months months years 3 years Total

2006- Derivatives held for trading: Currency - Cash outflow 12,449,969 - - - - - 12,449,969- Cash inflow 12,443,675 - - - - - 12,443,675

Total Cash outflow 12,449,969 - - - - - 12,449,969

TOTAl CASH INFlOw 12,443,675 - - - - - 12,443,675


OFF BAlANCE SHEET ITEMS

less than 1 – 5 More than(JOD) 1 year years 5 years Total

2007letters of credit & Acceptances 25,350,032 - - 25,350,032Irrevocable commitments to extend credit 47,523,419 - - 47,523,419letters of guarantee 54,247,428 10,803,719 - 65,051,147

TOTAl 127,120,879 10,803,719 - 137,924,598

less than 1 – 5 More than(JOD) 1 year years 5 years Total

2006 letters of credit & Acceptances 9,584,600 3,833,918 - 13,418,518Irrevocable commitments to extend credit 35,074,585 - - 35,074,585letters of guarantee 48,092,652 1,672,913 - 49,765,565

TOTAl 92,751,837 5,506,831 - 98,258,668 OpERATIONAl RISKSSuch risks include the possibility of having losses in the capital or revenues arising from the inadequacy of internal monitoring procedures, information systems, human factor, or as a result of external events comprising a tangible effect on the Bank’s operations. Just like other types of risks the Bank faces, the ABC Bank relies on the construction and various procedures of risk management guaranteeing the effective and continual management of its operational risks. During 2007, the Bank finished identifying a general frame work for operational risk management concerning the following: Setting operational risk management policies and procedures. Initiating collection of data pertinent to losses arising from operational risks according to the above definition. Defining and collecting data on Key Risk Indicators. The Bank is currently in the process of applying a special automated system to remedy operational risks’ losses and indicators along with the Bank’s internal environment in relation to the effectiveness of the internal monitoring system and Risk and Control Self Assessment. In addition, the Bank has finished setting Business Continuity Plans for all its departments and the subsidiary Company. In 2008, the Bank will carry out periodic inspections to ensure the success and effectiveness of such plans in guaranteeing business continuity opportunities in emergencies or outcomes of external events.

40. SEGMENT INFORMATIONpRIMARY SEGMENT INFORMATIONFor management purposes the Bank is organised into three major business segments:

- Retail banking.- Corporate banking: Principally handling loans and other credit facilities and deposit and current accounts for corporate and institutional customers;- Treasury: Principally providing money market, trading and treasury services, as well as the management of the Bank’s funding operations by use of treasury bills, government securities and placements and acceptances with other banks, through treasury and wholesale banking.These segments are the basis on which the Bank reports its primary segment information.



Retail Corporate Total(JOD) Banking Banking Treasury Other 2007 2006 Total profits 10,861,954 14,037,447 25,509,004 109,080 50,517,485 42,330,163Impairment loss on credit facilities (59,569) 464,920 (385,000) - 20,351 1,598,617Impairment loss on financial assets Segmental results 7,807,447 7,614,529 13,420,358 109,080 28,951,414 28,307,323unallocated expenses - - - - (13,736,174) (12,355,388) Profit before tax - - - - 15,215,240 15,951,935Income tax - - - - (4,657,272) (4,960,687)Net profit (loss) - - - - 10,557,968 10,991,248

OTHER INFORMATION Segmental assets 96,064,096 139,159,774 350,683,162 - 585,907,032 500,323,735

unallocated segmental assets - - - 15,273,020 15,273,020 17,330,427

TOTAl ASSETS 96,064,096 139,159,774 350,683,162 15,273,020 601,180,052 517,654,162 Segmental liabilities 324,509,774 95,208,027 92,816,338 - 512,534,139 442,667,245unallocated segmental liabilities - - - 11,301,146 11,301,146 9,205,546

TOTAl lIABIlITIES 324,509,774 95,208,027 92,816,338 11,301,146 523,835,285 451,872,791 Capital expenditure - - - - 4,429,070 4,044,251

Depreciation andamortisation - - - - 1,187,907 1,108,885

2. GEOGRApHICAl INFORMATION The following table shows the distribution of the Bank’s operating income and capital expenditure by geographical segment: Jordan Outside Jordan Total 2007 2006 2007 2006 2007 2006

Total profits 43,047,896 37,549,234 7,469,589 4,780,929 50,517,485 42,330,163 Total assets 443,558,619 393,013,778 157,621,433 124,640,384 601,180,052 517,654,162 Capital expenditure 4,429,070 4,044,251 - - 4,429,070 4,044,251


41. CApITAl MANAGEMENTa. Description of what is considered capital: The basic capital of the Bank comprises the following: Present capital (paid).• Registered provisions: (legal reserve, voluntary reserve)• Retained earnings after deducting any deferred taxations or any other restricted amounts.• Investments in capitals of banks and other financial institutions shall be deducted. The Bank’s paid-in capital comprises the following: • Cumulative change in the fair value of the assets available for sale, which undergoes a 55% discount in case it is positive, and is fully included if negative. • General banking risks reserve. The Bank’s regulatory capital comprises the basic and paid-in capitals. b. Capital Requirements of the Monitoring AuthorityThe Central Bank of Jordan’s instructions require that the regulatory capital minimum limit is an equivalent of (12%) of the assets and credit-weighted off-balance sheet items in addition to market risks. This percentage is considered the minimum limit to capital adequacy, as the Bank is committed in all cases to maintaining an adequacy percentage exceeding the minimum limit with a suitable margin, and conforming to the requirements of BASEl II. c. Methods in Achieving the Capital Management Objectives Capital management involves in the optimal employment of fund resources for the purpose of achieving the highest possible revenue on the capital, while maintaining the minimum limit required in accordance with laws and regulations. The Bank follows a policy based on striving to reduce cost of funds to the minimal possible limit through originating low-cost fund resources, working on increasing the client base, and the optimal employment of such resources in investments with reasonable risks to achieve the highest possible revenue on capital. d. Capital Adequacy RateCapital adequacy rate is calculated in compliance with the instructions issued by the Central Bank of Jordan which are based on Basel Committee decisions. The following represent capital adequacy compared to the previous duration:

(JOD) 2007 2006

Primary capital Paid up capital 56,062 44,850Statutory reserve 8,562 7,005Voluntary reserve 421 2,663Retained earnings 8,441 9,060

Total Primary capital 73,486 63,578 Supplementary capital Cumulative change in fair value 572 16General banking risk reserve 2,530 2,100

Total Supplementary capital 3,102 2,116

- Investments in banks and financial institutions equity (2,507) (3,462) TOTAl AuTHORISED CApITAl 74,081 62,232 Total risk weighted assets 379,560 322,126

CApITAl ADEquACY (%) 19,52% 19,32%

pRIMARY CApITAl (%) 18,70% 18,66%



42. MATuRITY ANAlYSIS OF ASSETS AND lIABIlITIESThe table below shows an analysis of assets and liabilities analysed according to when they are expected to be recovered or settled:

Within More than (JOD) 1 year 1 year Total

2007 ASSETS Cash and balances at Central Banks 46,990,561 - 46,990,561Balances at banks and financial institutions 158,863,426 - 158,863,426Deposits at banks and financial institutions - 1,169,850 1,169,850Financial assets held for trading 359,166 - 359,166 Direct credit facilities 151,030,963 116,077,059 267,108,022Financial assets available for sale 41,682,074 64,336,519 106,018,593Property and equipment 900,000 10,000,789 10,900,789Other intangible assets 300,000 612,197 912,197Deferred tax assets - 56,920 56,920Other assets 3,224,475 5,576,053 8,800,528

TOTAl ASSETS 403,350,665 197,829,387 601,180,052 lIABIlITIES Banks and financial institution deposits 75,157,123 - 75,157,123Customers’ deposits 367,279,219 354,830 367,634,049Margin accounts 18,411,069 20,580,562 38,991,631loans and borrowings 1,254,224 13,739,621 14,993,845Sundry provisions - 452,728 452,728Income tax liabilities 5,408,145 - 5,408,145Deferred tax liabilities - 365,017 365,017Other liabilities 17,145,922 3,686,825 20,832,747

Total liabilities 484,655,702 39,179,583 523,835,285 NET ASSETS (81,305,037) 158,649,804 77,344,767


Within More than (JOD) 1 year 1 year Total

2007 ASSETSCash and balances at Central Banks 49,557,019 - 49,557,019Balances at banks and financial institutions 122,563,536 - 122,563,536Deposits at banks and financial institutions - 1,169,850 1,169,850Financial assets held for trading 139,749 - 139,749Direct credit facilities 136,799,889 103,729,876 240,529,765Financial assets available for sale 30,157,060 47,990,023 78,147,083Financial assets held to maturity 1,994,543 - 1,994,543Property and equipment 888,092 8,870,868 9,758,960Other intangible assets 299,815 772,321 1,072,136Deferred tax assets - 67,351 67,351Other assets 7,320,011 5,334,159 12,654,170

TOTAl ASSETS 349,719,714 167,934,448 517,654,162 lIABIlITIES Banks and financial institution deposits 97,579,976 - 97,579,976Customers’ deposits 250,976,070 512,236 251,488,306Margin accounts 13,641,067 16,539,449 30,180,516loans and borrowings 42,490,079 14,956,062 57,446,141Sundry provisions - 122,728 122,728Income tax liabilities 4,965,214 - 4,965,214Deferred tax liabilities - - -Other liabilities 9,208,335 881,575 10,089,910

Total liabilities 418,860,741 33,012,050 451,872,791 NET ASSETS (69,141,027) 134,922,398 65,781,371



43. CONTINGENT lIABIlITIES AND COMMITMENTSTo meet the financial needs of customers, the Bank enters into various irrevocable commitments and contingent liabilities. Even though these obligations may not be recognised on the balance sheet, they do contain credit risk and are therefore part of the overall risk of the Bank.a. The total outstanding commitments and contingent liabilities are as follows: (JOD) 2007 2006

letters of creditExport lCs 34,698,537 39,612,436Import lCs 17,783,634 9,724,375 Acceptances 7,566,398 3,694,143 letters of guarantee - Payments 30,800,740 25,156,481Performance 15,336,474 10,117,685Other 18,913,933 14,491,399Irrevocable commitments to extend credit 47,523,419 35,074,585Other - 362,706

TOTAl 172,623,135 138,233,810

44. lAwSuITS In the normal course of business the Bank appears as a defendant in a number of lawsuits amounting to approximately JD 1,424,299 as of December 31, 2007 (2006: JD 2,171,069) According to the Bank’s lawyer and Bank’s Management, no material liability will arise as a result of these lawsuits in excess of the amounts already provided for amounting to JD 165,500 as of December 31, 2007 (2006: JD 15,500).

45. NEw ISSuED INTERNATIONAl FINANCIAl REpORTING STANDARDSThe following standards and interpretations have been issued but are not yet effective.

IFRS 8 – Operating SegmentsThe standard requires amendments on the disclosures for operating segments. The standard is effective for years commencing on or after 1 January 2009.IAS 23 – Borrowing CostsIFRIC 11 – Scope of IFRS 2: Group and Treasury Share TransactionsIFRIC 12 – Service Concession ArrangementsIFRIC 13 – Customer loyalty programmesManagement do not expect these interpretations to have a significant impact on the Bank’s financial statements when implemented in 2007.

46. COMpARATIvE FIGuRES:Some of 2006 balances were reclassified to correspond with those of 2007 presentation. The reclassification has no effect on the profit for the year and equity


Branch location

HEAD OFFICE Shmeisani, Queen Nour Street, ABC Building & MAIN BRANCH P.O.Box 926691, Amman (11190), Jordan Tel: 5664183/ 5621801, Fax: 5686291 Email: [email protected] Email: [email protected]

BAYADER wADI Al SEER BRANCH Main Street, Bayader Wadi Al Seer P.O.Box 140590, Amman (11814), Jordan Tel: 5861392/ 5823851, Fax:5826795 Email: [email protected]

wADI SAqRA BRANCH Arar Street, Wadi Saqra P.O.Box 183072, Amman, (11118) Jordan Tel: 4613281/3, Fax:4613282 Email: [email protected]

Al wEHDAT BRANCH Al Muthanna Bin Harithah Str. P.O.Box 621342, Al Wehdat, Amman (11162), Jordan Tel: 4756240, 4788687, 4789397, Fax: 4756241 Email: [email protected]

TlA’A Al AlI BRANCH Wasfi Al Tal Street, Bahjat Gardens Center P.O.Box 766, Amman (11953), Jordan Tel: 5688742, 5688328, Fax: 5696342 Email: [email protected]

Al SwEIFIEH BRANCH Subhi Al Omari Street, P.O.Box 851737, Amman (11185), Jordan Tel: 5858102/4, Fax:5858107 Email: [email protected]

IRBID BRANCH Wasfi Al Tal Street, Irbid P.O.Box3269, Irbid (21110), Jordan Tel:(02)7247815/6, Fax:(02)7248940 Email: [email protected] SHMEISANI BRANCH Matalqa Center Building, 11th August str. P.O.Box926691, Amman (11190), Jordan Tel: 5696084, 5689511, Fax:5688571 Email: [email protected]

ZARqA BRANCH Abdul Munem Riyad Street P.O.Box 3805, Zarqa (13111), Jordan Tel: (05)3987812, 3987832, 3987790, Fax:(05)3987785 Email: [email protected]

BrAnChes of ArAB BAnking CorPorAtion (JordAn) & ArAB Co-oPerAtion finAnCiAl for investments Co.


Branch location

JABAl AMMAN BRANCH Ibn Khaldoun Str, Al Raja’a Medical Center, Bldg (2) P.O.Box 2802, Amman (11181), Jordan Tel: 4610893/5, Fax:4610918 Email: [email protected]

KHAlDA BRANCH New English School circle P.O.Box3811, Amman 11953 Jordan Tel:5542154, Fax: 5542153 Email: [email protected]

CITY MAll BRANCH King Abdalla II Str. P.O.Box 2700, Amman 11821 Jordan Tel:5829318-5853725-5853194 Fax: 5817437 e-mail: [email protected]

Al RAwNAq BRANCH Issa Al Naouri Str. P.O.Box 143840, Amman 11814 Jordan Tel: 5820462-5820976 Fax: 5815947 Email: [email protected]

AqABA BRANCH Al Hammamat Al Tounisieh Street P.O.Box 514, Aqaba, Jordan Tel: (03)2022792/4, Fax: (03)2022796 Email: [email protected]

ARAB CO-OpERATION FINANCIAl Shmeisani, ABC Building, Amman FOR INvESTMENTS CO. P.O.Box 930059, Amman (11193), Jordan(SuBSIDIARY COMpANY) Tel: 5629300, Fax: 5682941

Date post:	10-Mar-2018
Category:	Documents
Upload:	hacong
View:	216 times
Download:	2 times

GROWTH IN EVE RY lAYER - Bank ABC Reports... · 2 ABC Bank Annual Report 2007 Arab Banking...

Documents