Tuesday, March 20, 2007

Arab Bank in trouble ?

Today I read the newspaper which I don't do very often nowadays (mainly cause the substance of the daily newspaper here is ads) , and was surprised at this ;

(translation : the social security has acquired two million shares of the Arab Bank stock at the sum of 53 million Jordanian Dinars)
نفذ الضمان الاجتماعي أمس شراء مليوني سهم من أسهم خزينة البنك العربي بحجم بلغ 53 مليون دينار

on a different note that one deal compromised more than 50% of the total trading on that day, what a pitiful market !

Move a couple more pages and you see that their prize is now up to 10000 stock shares, up from a 1000 and up from the initial 100 shares.

move some more pages, HUH ?! , is that an ARM's I see, for two weeks they offer up to 90% financing on a million JD loan with no commission. certainly looks like one.

that people in Jordan are dropping the myth about the Arab Bank being the "only" reliable and trustworthy bank in Jordan, having a customer service that whips customers doesn't help really.
Plus the generally high foreclosure rates in Jordan (i wish i can get my hands on some numbers for this)

looking at all those in relation to each other and its not that far fetched that the great Arab Bank is either faced with a liquidity problem that is forcing him to drop his rigid regulations in loans and stocks, OR they need the liquidity and brace themselves for a shock that is inevitably coming.

The fact is that the Arab Bank has built its reputation on being archaic, as rigid as a mountain. never really bothers to give out reasonable loans, they have been plagued with bad upper management in their recent history, and they sure as hell never offered prizes.
Plus them limited offers for two weeks is a bit out of character.

I think its a combination of those two factors, is that the beginning of the end for the greatest financial establishment in the region ?

I wanna dig in deeper and look more into it. cause it smells like trouble already
ps. logo is from bayt.com

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  • I'm not sure I share your pessimism here. I think they're trying to move forward and catch up with the world financial institutions.
    AB has been plagued more with negative PR and targeted in the west for being the bank that finances terrorism. Which is not true as you know.
    Anyway, I think they're continuously pumping new blood, and that's a positive. How much experience does this new blood have is a concern and needs to be the concern of every shareholder.

    Now regarding Adjustable Rate Mortgages (ARM) I think these are the type of loans where the financial institutions make their money the most. Because the consumer is unaware at signing time of the impending hidden cost. True, it's alright if you pay nothing at signing, but you will pay a lot in interest, and the minute you decide to refinance (which you will want to do on the long run) they will get their money, and folds. So that does sound like a good deal
    Besides, it's 90% of the estimated value which is less than the actual value in other words. If anything happens, your house ends up theirs and they're free to sell it! And even make a profit on it.
    Of course there is risk with everything, but mortgages have proved to be the most profitable and most safe bets

    By Anonymous Qwaider قويدر, At 20/3/07 21:08  

  • Hmm -ve PR died out a while back, and it didn't effect things locally at all.
    granted that they were unable to transfer money that easily to the US anymore they had to jump it to Geneva or Frankfort.
    the problem is exactly that, internally they lack new blood, the upper management been quarreling for about 4-5 years now. the retention rate of their employees is crappy plus shitty wages.
    They bring in an American team to restructure that screws things even more, never mind their extravagant over spending (think .dot com style)

    The trick about ARM's is that it creates a speculative market. they are definitely not the sort of mortgage that you take for the long run you, more like a hit and sell kinda loan. With the stagnant and over inflated real estate market in jordan thats not really much of an option.

    So the bases of rigid risk analysis that they belt on went the way of the dodo it seems.
    The reason its profittable in the USAian sense is that they bundle them and trade them on the stock market, so any damage will spread out (Atleast from my limited understanding of banking systems)
    so i doubt there is a similar thing going on here.

    It will be alot more profitable for the bank if no foreclosure occurs thats for sure. In general its a new game here in the region, and am not sure what the outcome of this whole thing will be.

    Anyways I hope that i am wrong, and i hope they change to the better. After all no matter how much i hate dealing with them i can still respect them as an institution, and a(if not the) pillar of the country.

    By Blogger No_Angel, At 21/3/07 02:40  

  • i agree with qwaider, i noticed a lot of changes have occured, and thats only to catch up with the mad competition out there.

    Arab bank isnt a retail bank thats for sure, its always been a stronger commercial bank and even the earnings percentile prove it.. now the focus shifted to retail banking, which is a hard market i admit, AB is still new at it (less than a decade as opposed to 70 years of commercial banking) and true, client servicing isnt at its best there, but they're working on it, true they shud be working on it before working on their image, but they need products to throw into market.

    and i also agree with Q on another point, mortgages ARE the most profitable products anywhere in the world, fa ma balek a country where property is in bloom. i actually think its a wise move on their part..

    By Blogger PŕōuđPāŀĩ, At 10/4/07 10:43  

  • hey thanks for dropping by !
    oh well i'll leave u with this quote regarding capitilism since mortage is part of it :)
    Consumerism needs this infantilist ethos because it favors laxity and leisure over discipline and denial, values childish impetuosity and juvenile narcissism over adult order and enlightened self-interest, and prefers consumption-directed play to spontaneous recreation.

    By Blogger No_Angel, At 10/4/07 13:40  

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