The Housing Bank for Trade and Finance is building on its solid reputation to expand its retail and corporate business.
Jordan’s banks are known for their resilience. The sector has been one of the main pillars that support the economy and one of the main drivers of the Amman Stock Exchange. Their prudence has helped them weather the economic storms that sank some of their counterparts in developed markets around the world.
The Housing Bank for Trade and Finance (HBTF) has been a market leader in corporate and private banking since its establishment in 1973. With a portfolio that comprises the financing of big infrastructure projects, such as Aqaba’s LNG project, the bank has also been a major lender to the government and its entities, like debt-ridden NEPCO.
With total assets worth JD7.5 billion, and a huge new headquarters in Amman, the Housing Bank’s General Manager Ihab Saadi explains how his institution is capitalizing on its strengths to maintain a strong foothold in Jordan’s increasingly competitive financial sector.
HBTF made record revenue and profits last year. How did you manage to achieve this, even in light of the difficult economic circumstances facing Jordan and the region?
The Housing Bank, which is the recipient of the Banker Middle East’s Best Bank in Jordan 2016, has always capitalized on one of its strengths, which is the reach of its branch network. We have 129 locations across the Kingdom, and these are due to reach 140 by end of this year. The bank is also able to be aggressive in financing and arranging all types of transactions, no matter how big or small, including highly competitive offerings in the retail sector. Those key strengths coupled with our large ability to avail necessary funding from deposits and savings accounts at reasonable costs mean we are well positioned to lead and be competitive in the market. Also adding to this formula are our skilled staff and management, a strong and involved board of directors, and the well-recognized brand name that we have.
You are also quite big on savings accounts, with a market share of close to 40 percent. Why do you think people seek the Housing Bank in particular?
It’s quite a big part of our business. The Housing Bank has been a leader in this area and that reflects depositors’ confidence. Also, over the years, we have become extremely proactive and innovative in terms of offering prizes. The types of prizes have become quite substantial in their value and they have incentivized our large customer base. This year we have restructured our JD7 million prize scheme, making them two grand prizes instead of one. In addition, we also have daily, weekly, and monthly prizes.
We are big on retail, but we cannot ignore that we have grown so much on the commercial and corporate side as well as project financing and investment. Yet retail banking is a very important part of the bank.
What are some of the biggest infrastructure projects that you have financed?
Over 2003 and 2004, we led the $160 million debt syndication to finance the gas pipeline project for the Jordanian Egyptian Fajr Company. It remains one of the largest syndications in Jordan. It was a project that was important for the Kingdom at the time when natural gas was about to start flowing in to replace the more expensive heavy fuel. In 2014, 10 years later we did a similar financing for the same company for $120 million involving investment activities related to the LNG project in Aqaba, the purpose of which was to diversify our country’s energy resources. We were also involved before the financing to make sure the deal put together was bankable. When the deal concluded and the transaction was structured, that was when we approached other banks to participate and the appetite was strong. In the first transaction, we put in $60 million out of $160 million. While in the second, we took a position of $40 million. We would love to have taken the whole amount but to build and maintain the right relationship with other banks you cannot be too greedy.
What is the type of risks associated with financing these infrastructure projects?
Operational risks are very much controlled and properly structured. Where I see risk is more in a force majeure type of situation, or the government not wanting that gas anymore. I have to make sure then that our client settles with the government so the financing banks are paid, this however is least likely to happen because such product is strategic to the country and force majeure mitigates and remedies are taken care of in the relevant agreements.
You have also lent to NEPCO and the government. How has the experience been, and do you think the government should stop borrowing from the local market?
We are a commercial bank and we are here to make money. But at the end of the day we are also a Jordanian bank; we are not only a part of this economy but we are also an important pillar of this economy. So yes, we lend to NEPCO and it has been a successful relationship. On the other hand, the financing of the natural gas and the LNG projects have helped NEPCO achieve considerable cost savings and that in turn reflects positively on the economy. Yes, we are for such lending, we also have to keep an eye on the overall risk. We are a large investor in government treasury bonds and that goes through our treasury and investment function that actively invests in such bonds. We like to be ready when public sector projects kick in so we can be involved in the financing.
You are also a major financier of some major private sector projects like Ayla in Aqaba. How big a part is that of your portfolio?
Our lending portfolio is partially in the government sector and substantially in the private sector. As I said, we are a commercial bank and we spot opportunities in large commercial and corporate type projects. We have been working with Ayla for two years now, where we’ve created a new financing concept to finance Ayla on a structured project finance basis. But what is unique is that we have extended that to the retail customer and made the individual buyers bankable and financeable before the residential unit is completed and therefore without having a deed or having to put any collateral. All you have to put in is 10 percent and the bank will finance the rest. Your money and the money you’re borrowing to finance the residential unit will not be touched by Ayla because we provided for the construction loan. This is a new and safe approach for customers who are buying off plan residential units.
What about lending to smaller companies that make up the bigger part of the business market in Jordan?
With SMEs we definitely have a good portfolio and we are restructuring internally to further develop this segment. The SMEs problem, which the market is currently finding solutions for, is that they might not have the complete financial data or collateral, so we have to be careful how we lend. However, on the collateral side, there are organizations like the Jordan Loan Guarantee Corporation whose guarantees we rely on to make the transaction more bankable. While the credit information is an integral part of lending and to help us with that, CRIF Jordan, a credit bureau, has been recently established to help in making financial data on SMEs more available. CRIF falls under the umbrella of the Central Bank of Jordan and is owned by most banks in Jordan where each holds small percentages, with the bigger percentage belonging to an Italian company that specializes in credit information. It gets its input, the data from all the banks and it filters it, then SMEs are rated and scored. What that does is it helps the banks make more informative credit decisions; and now that we will have the credit information, I believe with the completion of that circle SMEs should grow and financing them should become more efficient.
After having served for many years as the head of the Housing Bank’s corporate finance department, you served as Chief Banking Officer and then as the interim General Manager until April, when you were officially appointed to the position. Considering your extensive background in corporate finance, do you think this is where you will steer the bank in the coming period?
I know it is built in, and there could be some bias involved but the answer is no. Not that I am not focusing on it, but I will also focus on all other areas. Wherever there are the right opportunities, whether it is in corporate investment banking, retail or any other service, I have to look at all business drivers rather than focus on one. Maybe the difference will be in terms of the larger types of transactions that have to do with structuring, project financing, and syndication where my involvement is going to be more because such types of transactions require contribution at various levels of the organization.
You also have investments elsewhere, including the International Bank for Trade and Finance in Syria where a number of your branches have been closed due to the ongoing turmoil. How has that affected your work in general?
We own 49 percent of the International Bank for Trade and Finance. The situation in Syria is so unfortunate and we hope things will go back to normal soon. Naturally, the lending is not at its best but we are still operational. Because of the current situation we do not expect to be profitable for the time being, however, we are being prudent in taking the necessary financial provisions.
What are your other investments abroad and what other markets are you currently eyeing?
As far as branches are concerned, we have branches in Palestine and one in Bahrain. In Algeria and the UK, we have subsidiary banks, separate entities but in which we are the major shareholders. In the UK we own 75 percent, and in Algeria 85 percent. Those two investments are doing well and are positively contributing to the bank at the consolidated level. Such investments have their own management but we sit on the board of these banks and we try to strategize alongside with the Housing Bank Jordan in order to grow these subsidiaries. Each one has its own business strategy; you don’t go to London to compete with large international banks, you have your little niche which is more on property type of financing and complementing trade finance and private banking activities. In Algeria we are more-focused there on the corporate side of business.
In Iraq we have a rep office, likewise in Abu Dhabi and Tripoli. The only difference in Iraq is that it’s a big market for all Jordanian banks and we have been affected negatively by the recent closure and political turmoil. We are not planning to open a branch there but we are more interested in trade finance activities.
Most of your shareholders are financial and investment institutions from Jordan, the Gulf, and Libya. How satisfied are they with their investment?
I would say very satisfied, otherwise you would see considerable active trading of our shares on the stock market. Housing bank shares are very much closely held whereby about 90 percent of the shares are owned by five or six major shareholders and if you really want to buy a strategic number of shares you won’t find much. And why wouldn’t they be satisfied when we’ve distributed 32 percent in cash dividends for 2015 compared to other banks which had distributed 10 to 20 percent, 32 percent in these challenging year or two is a good figure.
You are currently constructing a mammoth new building for your headquarters. When will it be complete?
It’s a big investment. We’ve grown so much and we are currently so widely spread with several complexes in several locations across the capital. The new building will initially house 800 to 900 employees, but the build can take up to 1,200. It’s a high-tech, high-end design, with 78,000 square-meters of built-up area and accommodates a flagship branch. Having all non-branch staff and management in one building would help us make better use of our time instead of commuting to attend meetings. I hope that we will be able to move into the new building by end of this year.