We maintain an “Accumulate” rating on Arab Bank with a target price of JOD 8.00, presenting a 16.6% premium over its recent closing price. The Jordanian Bank posted a net income of USD 484.5 million for the first 9 months of 2012, a 13.0% y-o-y increase in profitability as per our expectations. So far in 2012, provisions taken on impaired loans have equaled USD 132 million, a 23.6% y-o-y decline and an encouraging sign that these levels might be set to normalize.
Despite this improvement, the deterioration of the political climate in the region prompted us to slightly lower our target price as a result of additional risk premium. While we perceive Arab Bank as a well-diversified regional institution rather than a Jordanian Bank, the lack of liquidity and appetite among foreign investors will no doubt continue to affect its share price.
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Arab Bank-2012 Update