Capital Intelligence, the international emerging market rating agency, today announced that it had upgraded Jordan Kuwait Bank’s (JKB) financial strength rating to BBB+ reflecting the noticeably improved asset quality and performance indicators in the recent years. The outlook is stable.
The new rating positions JKB at the top of Jordanian banks ranking table shoulder to shoulder with the Arab Bank.
The rating report, which praised the Bank’s performance and strengthening leading position during the past few years, highlighted some of the positive factors that constitute the foundations of its success. These factors are: sound asset quality, one of the highest ROAA ratios in the market, strong institutional shareholders and superior technological infrastructure.
CI rating report also noted that JKB has successfully evolved into one of the leading medium sized players in the fragmented Jordanian banking system over the past few years. JKB’s sound financial profile is testimony to its well regarded Management and the clear business strategy in place. Against Jordan’s buoyant economy, JKB has built a strong balance sheet over the years and substantially improved the quality of its credit portfolio. The Bank continues to boast the lowest NPL ratio and strongest coverage in Jordan’s banking sector underscoring a prudent credit policy. The capital base is sound and has been steadily reinforced from retained earnings, while the liquidity position remains comfortable assisted by steady expansion in customer deposit base. Profitability is robust and continues to improve aided by further increase in net interest and non-interest earnings, producing one of the highest returns in the domestic market.
Detailed analysis in the report highlighted the marked improvement in the Bank’s asset quality over the last four years as evidenced by the significant reduction in NPLs and bolstered provision coverage. Total assets grew by 24% in 2004 to reach JOD 888million (US$1,252mn). The report also praised the high quality of the Bank’s credit portfolio and its improvement being witnessed over the past years, “the Bank’s credit portfolio is well diversified by economic sector with no undue concentrations. Adopting a prudent credit policy, and against a background of sustained economic growth, net lending expanded by higher than sector average 40% in 2004 to reach JOD447million US$630mn). Most of the credit expansion was recorded in Jordan’s key economic sectors, namely general trade and manufacturing and mining” the report said.
On the Bank’s profitability, the report noted that JKB has performed robustly again in 2004 with further increases in operating and net profits maintaining its earnings upward trend in recent years. Net profit grew by 32% in 2004, to reach JOD 18.8 million (US$26.6mn.) on the back of higher net interest income and fees and commissions. This produced a ROAA ratio of 2.35% compared to 2.13% in 2003, one of the highest returns recorded among Jordanian banks. The ROAE ratio also climbed to 24.34% from 21.83% in 2003. Despite higher administrative costs associated with branch expansion and investment in technology, JKB continued to enjoy one of the best efficiency ratios. The cost-to-income ratio stood at 39% (40% in 2003). The ratio of operating profit to average total assets was a solid 3.19% compared to 3.1 in 2003.
The rating report also highlighted some of the key figures in JKB’s H1 2005 results, where total assets grew by 15% over end 2004 to reach JOD1,019million (US$1,437mn.) In the same time NPLs declined further to mark a new record low of 1% only of gross loans, due to additional recoveries. Loan-loss provisions also improved providing very sold 232% cover for NPLs. On the back of higher net interest and non-interest earnings, net profit after tax grew by 51% to reach JOD 13.6 million (US$19.3mn.) in the first half of 2005 over the same period in 2004.
