• Global : Banking sector assets grew by 9.5% in 1Q08 to a new landmark of JD27.5bn
• Global : Banking sector deposits grew by 11.8% reaching JD16.6bn during 1Q08
Global Investment House – Jordan – Banking Sector- The combined assets of the licensed banks in Jordan grew at CAGR of 12.1% during the period 2002-07. On a Y-o-Y basis, consolidated assets of the banking system grew by 10.6%, reaching a new landmark of JD26.8bn at the end of 2007. Domestic assets constituted 75.7% of the total assets in 2007, while foreign assets accounted for the remaining 24.3%. On a Y-o-Y basis, domestic assets grew by 12.6%, while foreign assets grew by 5%.
Consolidated Assets of Licensed Banks in Jordan
(JD mn) 2002 2003 2004 2005 2006 2007 `Mar 08
Foreign Assets 4,492.7 4,381.8 5,002.1 5,361.8 6,203.4 6,516.5 6,548.8
Cash in Vaults ( in Foreign Currencies) 57.0 67.1 76.2 80.7 67.2 96.1 98.2
Balances with Foreign Banks 3,437.5 3,224.7 3,699.7 4,108.5 4,716.6 5,295.7 5,278.4
Portfolio (Non-Resident) 427.9 512.3 666.3 615.0 684.4 372.6 370.0
Credit Facilities to the Private Sector (Non-Resident) 263.4 290.0 254.2 229.6 312.9 309.7 314.3
Other Foreign Assets 287.7 305.7 328.0 422.3 442.4 487.9
Domestic Assets 10,626.6 11,319.7 12,819.0 15,724.7 18,034.2 20,299.1 20,988.7
Claims on Public Sector 1,349.2 1,165.7 1,574.4 1,865.4 2,312.4 3,077.4 3,240.3
Claims on Central Government 1,087.9 887.7 1,091.2 1,337.3 1,791.7 2,451.7 2,571.2
Claims on Public Entities 261.3 278.0 483.2 528.1 520.7 625.7 669.1
Claims on Private Sector (Resident) 4,833.3 5,000.4 5,866.7 7,650.5 9,528.8 10,985.5 11,583.4
Claims on Financial Institutions 48.5 46.1 63.4 73.3 117.6 176.6 223.7
Reserves 2,494.6 3,280.6 3,469.2 3,848.9 3,572.2 3,630.7 3,319.1
Currency 80.3 91.6 93.1 125.7 173.7 177.8 176.4
Deposits with CBJ in Jordan Dinar 2,414.3 3,189.0 3,376.1 3,723.2 3,398.5 3,452.9 3,142.7
Deposits with CBJ in Foreign Currencies 331.9 306.2 314.9 337.7 436.5 472.2 486.3
Unclassified Assets 1,569.1 1,520.7 1,530.4 1,948.9 2,066.7 1,956.7 2,135.9
Total Assets 15,119.3 15,701.5 17,821.1 21,086.5 24,237.6 26,815.6 27,537.5
Source: Central Bank of Jordan
The growth in foreign assets was significantly lower than last year’s reported growth of 15.7%. The growth in total assets in 2007 stemmed mainly from the 15.3% y-o-y growth in claims on private sector, which stood at almost JD11bn in 2007, forming 41% of total assets of the banking industry. The growth in claims on private sector was the outcome of the buoying economic activity in the Kingdom. As for foreign assets, it was concentrated in balances with foreign banks which constituted 81.3% of foreign assets, and 19.7% of total assets in 2007, and grew by 12.3% on a Y-o-Y basis. Entering the year 2008, total assets of the banking system stood at another record level of JD27.5bn at the end of 1Q08, increasing by 9.5% over the same period last year.
Credit Facilties extended by Lisenced banks according to econimic activity
JD mn 2002 2003 2004 2005 2006 2007 `Mar 08
Agriculture 102.9 98.8 113.6 110.9 140.9 156.2 165.5
Mining 95.3 78.0 77.7 56.5 42.8 65.7 32.3
Industry 789.8 801.4 895.3 981.6 1,093.1 1,348.1 1,473.4
General Trade 1,250.9 1,327.3 1,472.9 1,585.0 1,916.6 2,434.7 2,577.4
Construction 764.9 804.5 953.2 1,162.1 1,560.8 1,942.1 2,077.7
Transportation Services 163.6 166.6 174.1 219.6 291.0 352.3 373.4
Tourism, Hotels and Restaurants 173.5 172.8 154.9 181.2 195.1 255.8 311.4
Public Services and Utilities 349.7 349.0 494.3 554.1 637.3 733.7 797.3
Financial Services 139.7 133.1 97.2 176.1 242.1 390.1 398.8
Other of which 1,299.7 1,330.9 1,756.0 2,717.2 3,642.2 3,616.9 3,703.0
buying shares 43.8 22.5 83.9 220.1 359.0 427.8 464.4
Total 5,130.0 5,262.4 6,189.2 7,744.3 9,761.9 11,295.6 11,910.2
of which in Foreign Currencies 818.1 929.4 961.3 856.9 1,000.1 1,095.9 1,213.0
Source: Central Bank of Jordan
Total credit facilities extended by licensed banks grew at a CAGR of 17.1% during the period 2002-07. Annually, total credit facilities continued to grow rapidly for the fourth year in a row by the end if 2007. Thus, credit facilities reported 15.7% of growth to stand at a new record level of JD11.3bn during 2007. Such growth rate came on top of the highest growth level of 26.1% reported by the end of 2006.
In terms the distribution of credit facilities across sectors, general trade had the highest share of credit facilities accounting for 21.6% of total credit extended in 2007, followed by construction activities at 17.2%, and industrial activities at 11.9%, thus reflecting the importance of these sectors in the economic expansion experienced in the Kingdom. On a Y-o-Y basis, credit extended to financial services reported the highest growth rate of 61.1% standing at JD390.1mn up from JD242.1mn reported at the end of 2006.
As for 1Q08, total credit facilities continued to grow by 15.9% as compared to 1Q07 reaching JD11.9bn. Similar to 2007, credit to financial services continued to register the highest growth rate during 1Q08, increasing by 52%.
In terms of funding sources, private sector time and saving deposits were the main source of financing, accounting for 37.3% of total liabilities of the banking sector in 2007, and growing by 13.1% on a Y-o-Y basis to reach JD10bn in 2007. Foreign liabilities and capital accounts and allowances which accounted for 17.9% and 13.1% of total liabilities respectively also contributed to the growth in liabilities of the banking sector. Foreign liabilities grew by 13.7% to reach JD4.8bn in 2007, whereas capital accounts and allowances grew by 10.7% reaching JD3.5bn. Such increase came after banks were required to increase their capital in line with CBJ regulation that requires banks to raise their paid-up capital to a minimum of JD40mn before December 2007.
Total deposits at the banking system grew at a CAGR of 11.3% during the period 2002-07. On a Y-o-Y basis, total deposits grew by 9.6% to reach JD16bn in 2007 in line with increasing deposit rates in the banking system. In terms of depositors, private sector (Resident) deposits had the highest share of total deposits at the banking system, standing at 78.2% of total deposits in 2007, and growing 11% on a Y-o-Y basis. In terms of type of deposits, time deposits had the highest share standing at 62.5% of total deposits in 2007.
By the end of 1Q08 total deposits grew by 11.8% over the same period last year, reaching a new high of JD16.6bn. Share of time deposit almost stood at the same level of 62.4%, as well deposits by private sector resident continued to account for the largest share of 77.7%.
Going forward, we believe that the banking industry in Jordan is set for another growth stage in line with the Kingdom's reform program on the macro level and the increased activity in other sectors such as real estate, construction and tourism on another level leading to increased lending opportunities. The government commitment to switch to domestic credit instead of external credit is also another plus factor for the industry. The competitive nature of the industry with the presence of foreign banks will also lead to the improvement and diversification in services provided by various banks. In addition, with only two Islamic banks in the Kingdom, Islamic Banking in Jordan is a less visited territory which might hold a potential for further growth in the industry.
