Capital Bank of Jordan – Ratings Affirmed

(MENAFN- Capital Intelligence Ltd) Capital Intelligence Ratings (CI Ratings or CI) today announced that it has affirmed the Long-Term Foreign Currency Rating (LT FCR) and Short-Term Foreign Currency Rating (ST FCR) of Capital Bank of Jordan (CAP) at ‘BB-’ and ‘B’, respectively. The LT FCR Outlook remains Stable. At the same time, CI Ratings has affirmed CAP’s Bank Standalone Rating (BSR) of ‘bb-’ with a Stable Outlook, Core Financial Strength (CFS) rating of ‘bb’ and Extraordinary Support Level (ESL) of Moderate.

The BSR is derived from a CFS rating of ‘bb’ and an Operating Environment Risk Anchor (OPERA) of ‘bb-’ (indicating moderate risk). While CAP’s ESL is Moderate, there is no uplift for the BSR as the latter is already at Jordan’s sovereign LT FCR level (‘BB-’/ Stable).

CAP’s CFS is supported by strong consolidated profitability, driven by high levels of fee and commission income at National Bank of Iraq (NBI), its Iraqi subsidiary. Additional strengths include solid consolidated liquidity buffers, near full loan-loss reserve (LLR) cover, as well as a stable funding profile in Jordan. Although the Bank’s capital adequacy ratio stands only moderately above the regulatory minimum (sustained by internal capital generation despite generous cash dividends), the presence of Saudi Arabia’s Public Investment Fund (PIF) as a strategic 23.97% shareholder enhances capital flexibility to some degree and supports the CFS. However, the ratings are constrained by rising NPLs and loan book contraction in the Bank’s Jordanian operations. The ratings are also constrained by the challenging operating environment and elevated geopolitical risks in both Jordan and Iraq. Jordan’s banking sector remains highly competitive and saturated, while Iraq’s banking system is underdeveloped and presents significant structural weaknesses. NBI affords CAP income and asset diversification, though the two banks operate under markedly different regulatory, market and risk conditions, and follow different business models. In addition, concentration risk weighs on the Bank’s credit profile, given significant investments in Jordanian and Iraqi government securities.

The OPERA takes into account both current and projected economic and financial conditions in Jordan, as well as the strengths and weaknesses of the banking sector. The assessment reflects the increase in foreign exchange reserves and moderate coverage of short-term external debt on a remaining maturity basis. It also takes into account Jordan’s track record of navigating persistent external pressures, including elevated geopolitical risks and regional instability. At the same time, the assessment factors in the country’s continued reliance on capital inflows to finance its chronic current account deficit, limited monetary policy flexibility and significant socioeconomic challenges. The banking sector remains well-regulated, supported by strong capital and liquidity buffers, and has shown notable resilience in a difficult operating environment. Despite high exposure to the sovereign, asset quality remains acceptable, with the sector-wide NPL ratio at 5.6% as of December 2024.

The Bank has a well-established franchise in Jordan, where it holds good market shares in both loans and deposits, and is a well-recognised brand. On a consolidated basis, it ranks fourth in Jordan’s fragmented and competitive banking sector and, domestically, it holds meaningful market shares of ca. 9% of deposits and 7% of loans. It operates as a full-service universal bank, offering a comprehensive suite of banking and investment services to both corporate and retail clients. Outside Jordan, CAP holds a 62% ownership stake in NBI and retains full management control. It also has a branch presence in the UAE and Saudi Arabia through NBI.

CAP’s loan asset quality weakened in 2024, as reflected by a significant rise in NPL formation, which exceeded 50% during the year. Consequently, the NPL ratio (net of interest in suspense and write-offs) increased to 7.6%, surpassing the sector average. The deterioration was broad-based across customer segments, indicating widespread credit pressure, and was driven by the Jordanian operations. Nonetheless, the Bank has maintained near-full LLR cover, and its satisfactory provisioning policy supports its CFS. Q1 25 financials indicate a modest improvement in loan asset quality; however, credit risks remain elevated both in Jordan and Iraq.

In 2024, CAP delivered strong consolidated profitability, underpinned by solid fee and commission income generated by its Iraqi subsidiary, which contributed approximately 60% of consolidated operating income and around 80% of net income. Although the Bank’s net interest margin (NIM) remains among the lowest in the sector, reflecting a relatively high allocation to lower-yielding liquid assets, overall operating profitability compared favourably with peers, supported by strong non-interest income (non-II) (mainly from NBI) and disciplined cost management. While loan-loss provisioning did not fully align with the pace of NPL formation, provisions were sufficient to preserve near-complete LLR coverage. This allowed the Bank to maintain one of the highest ROAA in the sector. Although regulatory caps on money transfer commissions may moderate fee and commission income at NBI in the near term, this may be partially offset by the continued expansion of its other business activities.

CAP’s funding structure is stable and primarily deposit-based, with customer deposits financing over 70% of total assets. The Bank holds a solid 7% share of the domestic deposit market, though its retail funds (at around 45% of customer deposits) remain below average, reflecting its corporate focus and relatively modest branch footprint in Jordan. Corporate and SME deposits represent a sizeable portion of the total and may entail some degree of depositor concentration. The deposit base is weighted toward expensive time deposits, a common feature in the local market. CAP’s consolidated liquidity metrics appear very strong, though they are influenced by NBI’s highly liquid balance sheet − around 70% of the latter’s consolidated cash and central bank placements were held with the Central Bank of Iraq (CBI) at end-2024. While CAP’s standalone liquidity metrics are tighter, they remain adequate.

The Bank’s capitalisation is adequate for its current operations and benefits from a high-quality structure, predominantly composed of CET-1. Capital ratios provide a modest buffer above regulatory requirements but are supported by solid internal capital generation and a growing capital-to-assets ratio. The presence of PIF as a strategic shareholder since the capital increase in 2022 further underpins shareholder support capacity. While the Bank maintains a high dividend payout, profitability has so far supported capital formation, though headwinds could test this going forward.

Rating Outlook

The Outlook for the Bank’s LT FCR and BSR is Stable, indicating that the ratings are unlikely to change over the next 12 months. This reflects our view that the Bank is expected to maintain its current risk profile and that the sovereign ratings will remain at current levels.

Rating Dynamics: Upside Scenario

Although unlikely, the LT FCR and BSR could be upgraded if there is a similar action on Jordan’s sovereign rating, as well as a significant improvement in the operating environment.

Rating Dynamics: Downside Scenario

Although not currently anticipated, the Outlook for the LT FCR and BSR could be revised to Negative if a similar action were taken on the Jordanian sovereign. Downward pressure on the ratings could also result from a material deterioration in the Bank’s key credit metrics. A sustained increase in exposure to Iraq via NBI could also result in the OPERA being adjusted downwards. This, in turn, could exert some downward pressure on CAP’s ratings.

Contact

Primary Analyst: Stathis Kyriakides, Senior Credit Analyst; E-mail: ...
Secondary Analyst and Committee Chairperson: Morris Helal, Senior Credit Analyst
 
About the Ratings

The credit ratings have been issued by Capital Intelligence Ratings Ltd, P.O. Box 53585, Limassol 3303, Cyprus.

The following information sources were used to prepare the credit ratings: public information. Financial data and metrics have been derived by CI from the rated entity’s financial statements for FY2020-24. CI may also have relied upon non-public financial information provided by the rated entity and may also have used financial information from credible, independent third-party data providers. CI considers the quality of information available on the rated entity to be satisfactory for the purposes of assigning and maintaining credit ratings. CI does not audit or independently verify information received during the rating process.

The principal methodology used to determine the ratings is the Bank Rating Methodology, dated 3 April 2019 (see Information on rating scales and definitions, the time horizon of rating outlooks, and the definition of default can be found at Historical performance data, including default rates, are available from a central repository established by ESMA (CEREP) at

This rating action follows a scheduled periodic (annual) review of the rated entity. Ratings on the entity were first released in November 2004. The ratings were last updated in July 2024. The ratings and rating outlook were disclosed to the rated entity prior to publication and were not amended following that disclosure.

The ratings have been initiated by CI. The following scheme is therefore applicable in accordance with EU regulatory guidelines.

Unsolicited Credit Rating

With Rated Entity or Related Third Party Participation: No
With Access to Internal Documents : No
With Access to Management: No

Conditions of Use and General Limitations

The information contained in this publication including opinions, views, data, material and ratings may not be copied, distributed, altered or otherwise reproduced, in whole or in part, in any form or manner by any person except with the prior written consent of Capital Intelligence Ratings Ltd (hereinafter “CI”). All information contained herein has been obtained from sources believed to be accurate and reliable. However, because of the possibility of human or mechanical error or other factors by third parties, CI or others, the information is provided “as is” and CI and any third-party providers make no representations, guarantees or warranties whether express or implied regarding the accuracy or completeness of this information.

Without prejudice to the generality of the foregoing, CI and any third-party providers accept no responsibility or liability for any losses, errors or omissions, however caused, or for the results obtained from the use of this information. CI and any third-party providers do not accept any responsibility or liability for any damages, costs, expenses, legal fees or losses or any indirect or consequential loss or damage including, without limitation, loss of business and loss of profits, as a direct or indirect consequence of or in connection with or resulting from any use of this information.

Credit ratings and credit-related analysis issued by CI are current opinions as of the date of publication and not statements of fact. CI’s credit ratings provide a relative ranking of credit risk. They do not indicate a specific probability of default over any given time period. The ratings do not address the risk of loss due to risks other than credit risk, including, but not limited to, market risk and liquidity risk. CI’s ratings are not a recommendation to purchase, sell, or hold any security and do not comment as to market price or suitability of any security for a particular investor.

The information contained in this publication does not constitute investment or financial advice. As the ratings and analysis are opinions of CI they should be relied upon to a limited degree and users of this information should conduct their own risk assessment and due diligence before making any investment or other business decisions.

Copyright © Capital Intelligence Ratings Ltd 2025

MENAFN02072025002960000411ID1109752022