US lawsuit payments hit Arab Bank 2015 profits
Venezuela’s fortunes rise and fall with oil price
AMMAN: Jordan’s largest lender, Arab Bank Group, said yesterday 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 US citizens who sued the lender under the US 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 US court for violating the US 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. Arab Bank is one of the Arab world’s largest privately owned banks and operates in 30 countries. It owns 40 percent of Saudi Arabia’s Arab National Bank ANB. —Reuters CARACAS: You can fill up your car with gasoline for less than a dollar in Venezuela, but that’s where the good news ends for the country’s economy. Though it practically gives away petrol at the pump, the country with the biggest known crude reserves in the world is in an oil-fueled mess which risks bankrupting it, analysts warn. At an official price of $0.015 per liter, citizens can get a full tank of petrol for next to nothing. But many would trade that for a bag of rice, a bottle of cooking oil or a roll of toilet paper-basic goods that are in short supply in shops.
Socialist President Nicolas Maduro and his late predecessor Hugo Chavez for years used Venezuela’s big oil revenues to fund social spending programs. But over the past year and a half, oil prices have tumbled by two-thirds. The fall has devastated this Latin American nation of 30 million people, which gets 96 percent of its foreign revenues from oil.
“The economic crisis in Venezuela will deepen,” analysts from research group Capital Economics wrote in a note. “In the absence of a renewed rebound in oil prices a government debt default looks increasingly likely.”
‘Cash flow catastrophe’
The oil supply is high and demand low as the world economy slows, but major crude producers’ alliance OPEC is refusing to cut its output.
Analysts say that strategy is led by Saudi Arabia to try to squeeze US producers of shale oil out of the market. Oil prices dipped under $30 a barrel this month. In mid-2014 they were over $100. Economist Asdrubal Oliveros at Venezuelan consultancy Ecoanalitica estimated that at that price level, the country would suffer a cash shortfall of $27 billion this year.
The government does not publish figures for its sovereign debt, but the Venezuelan Industry Confederation estimates the country’s commercial debts to suppliers at $12 billion.
“The crisis is severe. Revenues are plunging and the country risk rating is soaring,” said Luis Vicente Leon, an economist and head of pollster Datanalisis. “The fall of the oil price is a cash flow catastrophe, but defaulting would be suicide and the government knows it.”
Oil ‘war’
Voters last month punished Maduro for the economic crisis by handing the opposition a majority in the legislative assembly for the first time since Chavez came to power 17 years ago. Maduro’s center-right rivals now want to force a change in what they call his and Chavez’s “failed” economic policies.
Maduro faces pressure to scrap petrol subsidies, which Oliveros estimates have cost the state $29 billion in the past three years. “Given the international context and the internal imbalances, there is a golden opportunity to do so,” Oliveros said.
One man filling his car’s tank at a petrol station in eastern Caracas told AFP it costs him the equivalent of just $0.60 — four of Venezuela’s Bolivar currency at the official exchange rate.
“I pay for it with a 20-Bolivar note: four for the gasoline and the rest as a tip,” he said.
Venezuela produces some 2.65 million barrels of crude a day, according to OPEC. But to balance its books the country needs to sell them for about $80 a barrel.
Maduro is lobbying other major oilproducing states to cut production to shore up prices-so far without success. He regularly blames Venezuela’s woes on an economic “war” by capitalists.
He said recently he also sees the oil crisis as a strategic conflict. “There is a geopolitical war against oil, which will seriously affect the whole world economy this year and next.” —AFP