Project Finance in Jordan

Interview with Simona Sabella, General Manager of Arab Banking Corporation

The Ministry of Finance would like to adopt new methodologies to prepare the budget and cut spending. The country is also likely to undergo tax increases. Also, Jordan is discussing the issuance of its first ever Euro Capital bond in capital markets to help it cover part of the budget deficit. How confident are you that these initiatives will help boost the economy and the financial sector in particular? 

I am very confident about the measures that the Ministry of Finance is taking. It’s going to help the country in terms of reducing the deficit and increasing the income for the budget. In terms of the financial sector, it is already doing very well in Jordan. In comparison to the rest of the world, we didn’t really feel the global problems. The financial sectors were all profitable during 2009 and I believe they will continue to be during 2010. The Central Bank was very keen from the beginning to have full supervision of the banks, and to adopt Basel I and Basel II, and to make sure that he has full supervision of the banks. This has protected the financial sector in Jordan. We owe it to the Central Bank.

It is difficult to strike a balance between growth and cutting the deficit. What is the right way to go forward?

I believe we must reduce our deficit, but at the same time there was an article in the paper yesterday saying that the government will continue to focus on spending capital investments that they believe are necessary for the country. That means that this capital expenditure will focus on what’s necessary to grow. Jordan is not different from the rest of the world but it’s much better than what we’ve seen in Europe and everywhere else.

Since you own the brokerage, what is your assessment of the capital markets in Jordan?

We have a company called ABCI and they are the brokerage arm of the bank. We have seen a drop in the volumes since last year, more than 30 or 40%, and the volumes in the market are just getting lower every year. I believe the investment sentiment is not there in the market. I don’t think the government should step in; this is a free market and I believe that if there were more players, there would be more volume and more confidence in the market for people to go in.

It’s at the bottom line now and some very good companies are really running below their book value. I believe there is a lot of opportunity; companies are undervalued and once investments start coming in and banks go in, people will start having more confidence in the market and volumes will go back up.

How critical are the financial reforms, like setting up a credit bureau, that Jordan has received a loan to implement, and what is their application? Does this indicate any sort of weakness in the Jordan banking sector?

First of all there is no weakness in the banking sector. The banks in Jordan have sustained profitability since 2009, and I believe they will continue to do so this year. The Central Bank of Jordan governor was appointed as the governor for the whole MENA area and this is something to be very proud of. There is no weakness, really. Everyone has challenges in the day to day business and the challenges in Jordan are how to make more money, to expand, and to have a larger market share. I’m very confident that I will work hard towards increasing my market share, opening more branches, and towards having a major role in the banking sector.

How do you intend to accomplish this? What is your strategy?

We have a focused team and well focused strategy; we know what we want and we know hot o get there. Last year we ventured on retail banking, we did very well. We were growing vis-a-vis the shrinking market. We focused on a particular sector in the market, opening four new branches. This year we will open six new branches. That will put us on a good step to towards increasing our portion in the retail market. We should not forget the importance of corporate banking and we will have to work very had to get a higher market share there because at the time being everyone is looking for the best prime customer.

So how do you stand out; what makes you outperform the competition?

First of all, we are 87% owned by ABC Group in Bahrain which is a large Arab bank with a capital of 3 billion dollars and we have 23 subsidiaries and branches all over the world. This makes us much more connected and able to capture the clients here as well as their existence somewhere in those 23 countries. This is an asset to ABC Jordan and this is how we are different; we have a good brand and we are proud of it. In my previous experience I was running the retail area in that bank and I have enough experience to be able to carry this forward. Second, our bank already has the culture necessary for retail banking and has embarked on this 1 to 2 years ago. I believe this combination made us achieve excellent results last year vis a vis the market that shrank.

Based on your experience in the corporate segment, what positive development lead you to believe that the slump is ending in Jordan and growth is on track?

We’re witnessing a lot of demand for credit from the corporate, that means that their initiatives and plans to grow whether in terms of growing their plants or demands from the market is increasing, we’ve already seen that. Everyone wants to grab good clients but it’s a good sign and we’re enthusiastic that things will pick up quickly.

In your opinion how long will it take until the full revival of the economy?

That’s a million dollar question! I believe towards the end of the year well start seeing diff signs of growth whether in Jordan or elsewhere.

What about corporate social responsibility? What initiatives do you have in Jordan as part of the ABC Corporation here?

Corporate social responsibility is very high on our agenda; we believe we are part of the society and we believe we should help whoever needs our help. We have embarked on a Madrasati project which is a project carried out by her majesty the Queen, and it’s a renovation of the government schools in Jordan. Last year we did one school, and this year we took over another. The transformation has been really amazing. We also help towards other schools in different areas in Jordan because we believe this is important to our being here in Jordan.

How do you see the bank in five years and what is your long term vision?

I have a dream, and I would like to see ABC as one of the five largest banks in Jordan. It’s going to be a challenge but I cannot live without challenges, and I usually reach a goal whenever I set one.