U.S. lawsuit payments hit Jordan's Arab Bank 2015 profits

Arab Bank Group said its 2015 net profits fell to $442 million from $577 million a year earlier

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Jordan’s largest lender, Arab Bank Group, said on Saturday its 2015 net profits fell to $442 million, from $577 million a year earlier, after putting aside hundreds of millions to cover a legal settlement in the United States.

Arab Bank agreed last August to settle lawsuits filed a decade ago by about 500 U.S. citizens who sued the lender under the U.S. Anti-Terrorism Act. The act permits U.S. citizens to pursue claims arising from international terrorism.

Chairman Sabih al-Masri said the bank had set aside $349 million in legal provisions in 2015 that were part of $1 billion in provisions the bank had accumulated over the last few years to cover the “expected obligations” under the settlement.

The bank said its total profits before tax and provisions topped $1.1 billion in 2015.

The bank, one of the biggest financial institutions in the Middle East with a balance sheet of $46.4 billion, has not given a figure for how much it had agreed to pay.

The verdict marked the first time a bank was held liable in a U.S. court for violating the U.S. Anti-Terrorism Act.

Based in Amman, but with only a fifth of its assets and a quarter of its deposits in Jordan, the bank has built a reputation for stability amid regional political upheaval.

Masri said the bank’s loans book and customer deposits had continued to grow despite exchange-rate fluctuations.

“The underlying performance of the bank was strong in 2015.We have succeeded in increasing our operating profits by taking advantage of the broad diversification of our business in Jordan and in the region,” Masri said in the statement.

Bankers said while the credit provisions weighed on profit, Arab Bank was cushioned by a healthy capital base and $9 billion of shareholders equity. Total capital adequacy ratio reached 14.2 percent at end of Dec., well above regulatory standards.

Total loans rose 3 percent to $23.8 billion as of the end of December, while deposits also had grown by a similar 3 percent to $35.2 billion compared with the same period last year.

CEO Nemeh Sabbagh said the ratio of non-performing loans to net loans stood at 4.8 percent at the end of December. It’s provisions coverage ratio for non-performing loans stood in excess of 100 percent.

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