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French Version

Arab Bank to decimate shares

Last week’s decision by the Arab Bank to split their share at the Amman Stock Exchange (ASE) was received with mixed reactions, although the majority praised the move. The Arab Bank’s board of directors decided on December 8 to split each of its shares, which carry a JD 10 nominal value, to ten shares at JD 1 nominal value each.

Prior to the decision, the Arab Bank was the Kingdom’s sole shareholding company whose share is nominally valued over JD 1. Abdel Hamid Shoman, vice-chairman and director-general of the bank, indicated the share’s splitting is in line with the ASE’s demand that all shares in the Kingdom should carry a nominal value of JD 1 only. He anticipated that the base of shareholders would be enlarged due to more shares being available at a lower value. The bank’s share leads the blue chips at the ASE, and plays a vital role in balancing the circulated shares and the price index. Hence, Shoman said, “the Bank’s share will attain further standing by having a bigger portion of the overall shares in circulation at the ASE.”

The Arab Bank’s market share price at the ASE stands currently at around JD 240. Theoretically the new share price after the splitting would be around JD24. This, said economist Mohammad Saleh Jaber, would help shareholders to deal more easily with the bank’s share. “The daily trading at the ASE has been prompted by the Arab Bank’s share price, and the share split would enhance the bank’s performance at ASE,” Jaber said. He told The Star, “the bank used to pay JD 4 in profit commission on every share. After the split, this commission would decline to 400 fils, something that would be discouraging for both the bank and the shareholders.”

Hence, Jaber predicts the Arab Bank would raise its profit commission by 50 percent to 700 fils. And this move would be possible within the first half of 2005. The economist denied the bank’s move would affect the ASE’s overall performance, but maintained that brokers at the stock market would shift their attention to other promising banking shares rather than relying on the Arab Bank’s alone. Shoman maintained that the bank’s international network of branches promote the share split as all the financial statements guarantee better results from the splitting, especially at this time of the year. “

The statements indicated that by splitting the share’s nominal value, local investors would be encouraged to seek profitable projects, besides holding shares of financial and other companies,” he said. The latest financial statements of the bank predict a landmark profits at the end of 2004, following the bank’s record profits during the first nine months of this year, of JD 124.3 million, a 15 percent increase over the same period of last year. Not to forget the Arab Bank Group’s profits for the same period totaled $267.7 million with 25.8 percent growth over last year. The Arab Bank is currently owned by more than 4000 shareholders, mostly Arabs.

It has assets of more than $23 billion and 380 branches worldwide. A year ago, the Saudi Oger Ltd, a company owned by former Lebanese Prime Minister Rafiq Hariri, acquired 11 percent of the Arab Bank for about $375 million, in a deal that was considered “substantial” for Hariri. Jaber agreed with brokers’ suggestions that the Arab Bank management wants to make sure that “interests of the restricted shareholders” would not affect its financial functioning. Jaber said that by widening the bank’s shareholding base, better results for the bank and its long-term policies would come about. Meanwhile, the bank enhanced its influence on the ASE.

This week the bank’s share price led the trading sessions through a fluctuation, as many share prices declined unexpectedly following the news regarding the bank’s splitting of its share. This week’s earlier sessions witnessed constant decrease in the price index—ending Monday’s session with two percent decline over the previous week. It stood at less than 4000 points—the level it beat a week earlier. Trade volumes have also witnessed fluctuating trends since the beginning of December.

As the overall trading volumes for December’s first week worth JD 167.5 million, the figure declined to JD 144 million in the following week and is expected to reach around JD 130 million by the end of December 16’s session. Although the price index maintained its fluctuation, brokers believe the share prices will soon turn up towards the end of this year as they predict the ASE would continue to witness moderate trading sessions. According to brokers, the reason behind the fluctuations is shareholders’ concern over the steps that the Arab Bank would pursue in splitting its share and dealing it through the daily trading. “

The ASE is enduring an adjustment period where share prices are expected to return to their normalcy by the end of this year,” said Ahmad Tantash, chairman of the IMCAN Brokerage and Trading. He predicts “no serious alterations in the share prices before the New Year”, and reassured investors that the share prices will keep their levels following the Eid Al Adha holiday in January.

Ghassan Joha
The Star

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