A New Bank is Born

Jordan's Bank Al Etihad's acquisition of INVESTBANK creates a serious regional player

News started proliferating last Thursday after the close of trading on the Amman Stock Exchange that Bank Al Etihad acquired INVESTBANK in an all shares transaction. Zawya reported that “Following the completion of the transaction, Bank al Etihad’s capital will increase to JOD 325.2 million, with total equity reaching approximately JOD 1 billion. Combined total assets will rise to nearly JOD 11 billion, positioning Bank al Etihad among the largest national banking institutions.”

This is good news for Jordan’s banking sector. The country had 15, now 14 commercial banks and by some measures it is still over banked. The Central Bank of Jordan has been encouraging mergers and acquisitions within the sector, with several taking place over the past years: Arab Jordan Investment Bank and Capital Bank of Jordan were active in acquisitions, as well as Bank Al Etihad itself.

The history of the development of the financial sector in Jordan and in the MENA region has yet to be documented in any meaningful way. One of the few commendable efforts in this regard is a book entitled The Self-Made: The Biography of Abdul Hameed Shoman, 1890–1974 detailing the life, trials and tribulations of the founder of Arab Bank, the regional and global banking behemoth. It is not quite a la William Cohan’s The Last Tycoons: The Secret History of Lazard Frères & Co. but is a good start in this path. With social media and publishing it is what it is these days, we will be seeing all sorts of efforts to document the history of this region’s economic development - an important effort for more than one reason.

Since the early 1980s, I have known several members of the Salfiti family who established Bank Al Etihad, some have passed and some still with us. Theirs is a self-made business and finance family that deserves a lot of credit for its economic successes in Jordan and for what they have achieved over the years. The late Halim Salfiti was a visionary and his son, Isam, no less so.

Likewise, the Jardaneh family, with the three brothers who were the core shareholders in setting up INVESTBANK, is a self made family with its members active in both the public and private sectors in Jordan. Basel Jardaneh, a former Minister of Finance, and his brother the late Nizar, a successful businessman with considerable business interests in Jordan, Kuwait and Saudi Arabia, were instrumental in launching the Bank.

INVESTBANK’s current CEO will become the CEO of the new Bank Al Etihad. Muntaser Dawwas is a self made financier with formidable banking experience. He cut his teeth at several banks in Jordan including Citi, and was the driving force behind INVESTBANK’s growth and success.

Jordan’s banking sector has ample room to grow. Financial inclusion is yet to reach high levels, Jordan’s infrastructure funding needs are multiplying, off balance sheet revenue streams are set to be fully developed by banks, and the region offers immediate opportunities. Indeed, Jordanian banks are currently present in Palestine, Syria, Iraq, Saudi Arabia, Cyprus, England, and Switzerland.

Given the financing needs of the Levant, a traditionally under serviced region in terms of banking and capital market services, and given Jordan’s central location and banking sector maturity, Jordanian banks are well positioned to be of benefit to the Levant’s economies, and, as a result, to their shareholders - expect ROEs to go up and share prices to move towards book value in the not too distant future.

I wish the new Bank Al Etihad well in its expansion plans, domestically and regionally. It is in good hands and I have every hope for their success.