Jordan Kuwait Bank: Strategic Analysis And Positioning

3534 words - 14 pages

Introduction
Over the past few years, the global business operating environment has increasingly become challenging. First it was the global financial crisis followed almost immediately by the Europe crisis-which is currently threatening to become a global economic crisis-that presented these challenges. It was argued that economies, such as Jordan which are relatively smaller players in the Global arena would not suffer the adverse effect of the crisis. In fact Jordan and Lebanon were the main Middle East countries expected not to suffer from the adverse effect of the crisis. On the contrary, they were expected to benefit based on the fact they are consuming economies. Large trade deficit that would enable them enjoy cheaper imports as prices of goods fell around the world, the fact they were oil importers, and manageable external debt that does not put them at risk when international bank decide to redeem their credits, were some of the factors considered to efficiently position them. Due to these factors, the International Finance Corporation (IFC) estimated that their economies would continue to grow by 5-6% during the crisis. Unfortunately, this did not fully happen to Jordan. After experiencing commendable 7.8% economic growth in 2008, in 2009 the effect of the crisis took its tall and the growth reduced to 2.3% (Mansur 2011).
Encouragingly Jordan’s banking sector managed to weather the crisis better than other sector of the economy, and other banking sector in different countries. This was mainly supported by rather conservative policies and tight regulations. For instance banks in this country are pure universal. This implies there is no pure investment bank that relies entirely on investment income, a factor that majorly caused the collapsed of US banks such as the Lehman’s brothers. In addition they do not trade on complex financial instruments such as derivatives that complicated the US financial sector (Mansur 2011). Generally the effectiveness of this sector of Jordan’s economy was noted by the IMF 2010 report on Jordan. The IMF authoritatively noted Jordan banks are profitable with favourable liquidity ratios, adequately capitalized, and deposit driven (Jordan Investment Board 2005). Despite the positive sentiments, Banks should not relax. As it was the case in the GDP projections, positive sentiments can at times fail to materialize. It is due to this reason that the specific situation of Jordan Kuwait Bank is going to be analysed and recommendation suggested.
Jordan Kuwait Back
Jordan Kuwait Bank (JKB) is a public listed company founded in 1976 by group of investors from different nationality backgrounds. It is currently the third largest bank in the kingdom with a market capitalization JD 413 million and domestic network of 48 branches. In addition, it has 2 branches in Palestine (in Nablus and Ramallah) and an International Branch Unit (IBU) in Cyprus. The bank also has two subsidiary companies namely, United...

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