Bank of Jordan : Annual Report 2023

Annual Report

2023

bankofjordan.com

Table of Contents

Page Number

Board of Directors	8
Chairman's Letter	9
Board of Directors' Report 2023	11
Consolidated Financial Statements for the Year Ended December 31, 2023	47
Additional Information as Required by the Jordan Securities Commission 2023	209
Corporate Governance	245
Addresses of Bank of Jordan Branches	289

Bank of Jordan

Public Shareholding Limited Company, established in 1960, Commercial Registration No. 13, Paid-up Capital JD 200,000,000

P.O. Box 2140 Amman 11181 Jordan, Tel.: [phone] Fax: [phone]

E-mail: [e-mail]

Website: bankofjordan.com

Contact Center: [phone]

His Majesty King Abdullah II Bin Al Hussein

His Royal Highness Crown Prince Hussein Bin Abdullah II

Our Vision

To be a pioneering bank that excels in providing products and services, offers comprehensive financial solutions and acquires an advanced position in the Arab region.

Our Mission

To build amicable relations with our customers, optimize the returns to shareholders and contribute to social advancement by providing comprehensive financial solutions through high-quality and efficient service channels and a modern business environment that comprises an excelling team of employees.

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Board of Directors

Chairman of the Board/ Dedicated

Mr. Shaker Tawfiq Fakhouri

Vice Chairman

Mr. Walid Tawfiq Fakhouri

Members

Dr. Yanal Mawloud Zakaria/ Representative of Al-Ekbal for General Investment.

Mr. "Shadi Ramzi" Abd Al-SalamAl-Majali/ Representative of Al Tawfiq Investment House - Jordan Mr. Haitham Mohammed Samih Barakat/ Representative of Al Lu'lu'a Trading & Investment Co.

Mr. Husam Rashed Manna'/ Representative of Al Yamama for General Investments Co. Cayman Islands Mr. Walid Mohammad Al-Jamal/ Representative of Al Pharaenah Int'l for Industrial Investments Co. Mr. Walid Rafiq Anabtawi

Mr. "Mohammad Sa-ed" Ishaq Jarallah Mr. Youssef Jan Chamoun

Mr. "Emad Adeen" Jihad Al-Massri

Chief Executive Officer

Mr. Saleh Rajab Hammad

Auditors

Deloitte & Touche (M.E.) - Jordan

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Annual Report

Chairman's Letter

Dear valued shareholders,

This is our sixty-third annual report, and it gives me pleasure to assure you that your bank is still a healthy and growing institution with a solid financial and operational footing.

Though the geopolitical challenges overcasting the region do persist, with the region experiencing the continuing war on Gaza and the logistical challenges in the Red Sea, it is our belief that our approach to risk management has thus far allowed us to continue to grow without being overexposed to such risks.

Our financial strength indicators have been kept at elevated levels. Our legal liquidity stands at 156%, and our Liquidity Coverage Ratio is 347.4%. Our Capital Adequacy is 21.4%, well above the regulatory and Basel II requirements. As such, we maintain high confidence that the bank can withstand fiscal and financial shocks within the region, given the overshadowing regional issues and the regional risks of the war on Gaza and its ramifications.

Further, despite such challenges, our expansion in the region is still on track. Bank of Jordan's branch in Baghdad, Iraq, has been operational for almost a year and is growing, with competent regional management at the helm. The plans to expand into the Kingdom of Saudi Arabia are still on track. Despite the issues affecting our branches in Gaza, our operations in Palestine are still ongoing, with our branches continuing to offer full services to our corporate and retail customers.

Dear Valued Shareholders,

The restructuring of our operating model has witnessed the creation of a CIB division entrusted with managing relationships with the SME, Corporate, Large Corporate, and Financial Institutions sectors and across the different geographies in which we operate. Along this path, our transactional banking offering to CIB customers is now fully functional and has witnessed wide adaptation and appreciation by our corporate clients, as it allowed our clients to achieve high-levelself-service using a fully functional and secure web offering.

The treasury department restructuring is now complete. The division was restructured to accommodate the varied offerings required by our CIB customers and meet the challenges of the evolving investment market.

Our digitization journey has, during the year, witnessed the completion of the upgrade of our technical infrastructure to take advantage of the best of a mixed on-premises/cloudstate-of-the-art combination. It also included upgrading the application connectivity layers to a fully functional and customizable middleware offering.

Most importantly, the bank has taken a deep dive into data analytics by creating a division for data management, which includes specialized units for data analytics, reporting, governance, and quality control. Further, to ensure the institutionalization of data science, we have introduced data partners, analysts, and agents into the operational and business divisions, supported by the centralized data management team. Over time, this structure will ensure proper data utilization in everyday business practices and customer relationship management.

Dear Shareholders,

Bank of Jordan continues to perform well financially. Our net profit grew to 44 million JOD, up 9.7% from the prior year. Return on assets improved to 1.5%, and return on equity rose to 8.4%. Shareholders' equity now stands at 524 million JOD. Additionally, our balance sheet now stands at 3 billion JOD, with customer deposits at 2.2 billion JOD and our loan portfolio reaching 1.4 billion JOD.

Dear Valued Shareholders,

We extend our appreciation and gratitude to you for your continued support. The relentless efforts of our teams in Jordan, Palestine, Syria, Bahrain, and Iraq are greatly appreciated.

In conclusion, our Board of Directors recommends a 0.18 JOD/share dividend distribution, subject to the Central Bank of Jordan's Approval.

Yours truly,

Shaker Tawfiq Fakhouri.

Chairman of the Board

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10

Board of Directors'

Report 2023

Economic Performance 2023 Achievements in 2023

Analysis of Financial Position and Business Results for the Year 2023

Our Goals for 2024

Additional Information as Required by the Jordan Securities Commission 2023

Annual Report

Economic Performance 2023

According to IMF forecasts, the global economy is expected to slow down from 3.5% in 2022 to 3% in 2023 and then to 2.9% in 2024. These rates are still below the historical average of 3.8% (2000-2019). These expectations come considering the continued implementation of tight monetary policies from most countries of the world to curb the inflationary wave. Many countries are still struggling to rein in high inflation. However, more time seems needed before inflation comes under control. In the meantime, there is a growing concern that these tight policies, especially "raising interest rates," will negatively affect economic activity. Global inflation is forecast to decline steadily from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024 due to tighter monetary policies, supported by a decline in international commodity prices compared to last year.

Global Economic Outlook - GDP %

		6.3%
3.6%	2.8%	3.5%	3.0%	2.9%

The year 2023 witnessed the implementation of the initiatives and objectives of the Economic Modernization Vision in accordance with its first executive program, 2023-2025. The program included a large number of priorities that focused on developing the economic legislative environment, adopting structural reforms that enhance the competitiveness of the Jordanian economy, and working to promote a number of major and strategic projects to create added value to economic activity.

Gross Domestic Product (GDP) % - Jordan

3.7%

2.4%

2.6%

2.6%

1.8%

	2019		2020		2021		2022		2023		2024
		-1.1%						Projection		Projection

2018 20192020

-2.8%

Emerging and Developing Economies - GDP %

%4.1	%4.0	%4.0

2021

2022		2023		2024
		Projection		Projection

Middle East and Central Asia Economies - GDP %

%5.6

%3.4

%2.0

Key Indicators of the Jordanian Economy

Foreign Trade Jan - Sep 2023 /2022	Unemployment Rate	Economic Growth Rate - GDP
(Change Percentage)

TOTAL	IMPORTS	٪23.1			٪2.7		٪2.7
EXPORTS		٪22.3
-%2.4
	-%7
	Q3-2022	Q3-2023	H1-2022		H1-2023

2022

2023

2024

2022

2023

2024

Advanced Economies - GDP %

%2.6

%1.5%1.4

	2022		2023		2024

Domestically, most of the Jordanian economy's indicators witnessed a significant improvement in their performance during the year 2023 compared to 2022. Jordan maintained macroeconomic stability in the face of successive external shocks, reduced fiscal and trade imbalances, worked to strengthen social protection networks, and maintained access to global financial markets.

Significant progress has been made in implementing structural reforms to promote inclusive growth and meet all commitments and requirements related to the seventh review of the IMF Agreement. This helped reach an agreement on a new four-year program with the IMF under the IMF's Extended Agreement (EFF) that will enable Jordan to borrow US$1.2 billion. The objectives of the new program are to support Jordan in facing new shocks, continue fiscal consolidation policies, put public debt on a low curve, maintain financial and monetary stability, and accelerate structural reforms to support growth and promote job creation. Jordan's economy is expected to grow by 2.6% in 2023. Fitch Ratings also announced the affirmation of Jordan's rating at -BB with a stable outlook for its ability to meet long-term obligations in foreign currency. This occurred after reaching a financing agreement with the International Monetary Fund amid geopolitical risks due to the ongoing war in the Gaza Strip.

Foreign Worker Remittances	Tourism Income		Inflation Rate
Jan - Nov 2023 /2022		Jan - Nov 2023 /2022
				(Million Jd)
	1,605.5			4,125.8		٪4.22
1,595.6		2,996.9
							٪2.13
JAN - AUG - 2022	JAN - AUG - 2023	JAN - SEP - 2022	JAN - SEP - 2023		JAN - NOV - 2022	JAN - NOV - 2023

Gross Domestic Product:

During the first half of 2023, GDP at constant prices grew by 2.7% compared to the same growth rate recorded in the first half of 2022. According to the IMF, the Jordanian economy is expected to achieve a growth of 2.6% during 2023 and 2024. The growth in real GDP was the result of most economic sectors achieving growth in performance during the first half of 2023. Most notably, agriculture, extractive industries, restaurants and hotels, transportation, storage and communications, financial services, and insurance.

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Annual Report

Economic Sectors' Growth Comparison

7.8%
		6.2%												6.7%
													5.8%
								5.0%				5.0% 4.3%
		3.9%	3.6% 3.5%										4.0% 4.4%
		3.0% 2.8%					2.9%
																				2.3%	2.2%
1.8%							1.4%			2.0%									1.0% 1.4%	1.2%	0.9%
	Agriculture		Extraction		Transformative		Electricity		Construction			Wholesale and			Restaurants		Transport,		Financial		Real Estate		Social		Governmental
			Industries		Industries		and Water							Retail Trade			and Hotels		Storage, and		Services and				and Personal	Service Producers
																				Communications		Insurance				Services
												H1-2023				H2-2022

Regarding the overall price level (inflation rate) until the end of November 2023 at the cumulative level, the index witnessed an increase of 2.13% compared to the same period in 2022.

Public Finance

The total domestic revenues and external grants of the central government increased during the first nine months of 2023 by JD 352.5 million and by 5.7% to reach about JD 6.6 million. External grants during the first nine months of 2023 amounted to JD 38.7 million compared to JD 125.2 million during the same period of the previous year, a decrease of about JD 86.5 million. While domestic revenues during the same comparison period amounted to JD 6.5 billion compared to JD 6.1 billion, an increase of JD 439 million, equivalent to 7%.

Meanwhile, the total expenditure of the central government during the first nine months of 2023 amounted to about JD 8 billion compared to JD 7.6 billion during the same period of the previous year, recording an increase of JD 342.2 million, or 4.5%. This increase in total expenditure was due to an increase in current expenditure by JD 533.6 million or 8.1% and a decrease in capital expenditure by JD 191.4 million or 19.2% during the same comparison period.

Thus, previous developments resulted in recording a fiscal deficit in the public budget of the central government / the budget during the first nine months of 2023, after grants, of about JD 1.39 billion compared to a fiscal deficit of JD 1.4 billion during the same period of the previous year. In terms of the budget deficit before grants, it amounted to about JD 1.4 billion during the first nine months of 2023, compared to a fiscal deficit of about JD 1.5 billion during the same period of the previous year.

Public Financial Indicators

Total Expenditure	Revenue and External
%4.5	%5.7
7,953.7 JD Million	6,556.9 JD Million

Jan - Sep 2023/2022

Financial Deficit after

1,396.8 JD Million

Public Budget Deficit after Grants Percentage to GDP

%7.0
%5.3	%4.5	%5.3
%3.3

2019

2020

2021

2022

SEP - 2023

Following the developments in internal and external indebtedness, the total public debt at the end of September 2023 amounted to about JD 40.7 billion, or 111% of the estimated GDP for the end of September 2023, compared to JD 38.5 billion at the end of 2022, or 109% of the GDP at the end of year 2022. Note that the indebtedness of the National Electric Power Company and the Water Authority amounted to about JD 8.8 billion.

Regarding the total public debt (internal and external), excluding what is held by the Social Security Investment Fund, it amounted to JD 31.8 billion, or 88.7% of the estimated GDP by the end of September 2023, compared to about JD 30.7 billion, or 88.8% of GDP for 2022.

Monetary Banking Sector:

The banking sector is one of the main sectors affecting the economic activity of Jordan, and its contribution to the GDP reaches 8%, due to the size of the sector and its close interdependence with other economic sectors. The banking sector indicators witnessed a significant improvement in operating activities, which was positively reflected in the growth of banks' operating profits and profits after tax in the first nine months of 2023. Deposits grew by 2.9% until the end of October 2023 and credit facilities grew by 2.2%. Credit facilities granted to the private sector (resident and non-resident) constituted 91% of the total credit facilities granted as of the end of September 2023. The Central Bank of Jordan continued to maintain monetary stability, which is a major macroeconomic pillar, achieving economic growth and attracting investments. The announcement by the Financial Action Task Force (FATF) of removing Jordan from the grey list came in recognition of the effectiveness of the National Anti-Money Laundering and Combating the Financing of Terrorism system and as a result of the efforts made by the Central Bank of Jordan and all relevant national institutions.

Key Financial Stability Indicators of Banks Operating in Jordan	First half 2022	First half 2023
Capital adequacy ratio	17.1%	17.4%
The percentage is higher than regulatory bodies' requirements
Legal liquidity ratio	136.7%	135.8%
Central Bank of Jordan requires a minimum of 100%
Non-performing debt ratio to total facilities	4.6%	5.0%
The percentage is low and within safe levels
Coverage ratio for non-public debts indicating lower credit risk	83.4%	78.9%

On the performance of the banking sector indicators, domestic liquidity at the end of October 2023 amounted to JD 42.4 billion, compared to JD 41.7 billion at the end of 2022, an increase of 1.6%. The balance of banking sector deposits increased by about JD 1.2 billion and by 2.9% at the end of October 2023 compared to the end of 2022 to reach JD 43.3 billion, compared to JD 42.1 billion at the end of 2022. Most of the increase was in Jordanian Dinar deposits by 3.8% to reach JD 34.1 billion, while foreign currency deposits decreased by 0.4% to reach JD 9.2 billion.

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