We maintain an “Accumulate” rating on Arab Bank with a target price of JOD 7.84, presenting a 10.9% premium over its recent closing price. The Jordanian Bank reported a favorable 15% gain in profits amounting to $352 million for 2012, in line with our growth expectations but below our estimates of $374 million. This performance resulted from several factors, starting with a $55 million increase in Net Interest Income. The decline in Impairment provisions to $347 million, from $435 million a year before further contributed to higher gains.
In the absence of political and economic stability in the MENA, government spending is forecasted to be the main and sole driver of regional growth for bank assets. As for 2013, we anticipate relatively flat growth in interest revenues at Arab Bank, estimated at $1,754 million, with potential growth in earnings registered as a result of lower provisions.
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Arab Bank FY 2012 Update