rd annual report 2014 arab ban k (switzerland ) ltd · 53rd annual report 2014 arab bank ......

53rd annual report 2014araB BanK (SWItZerland) ltd.

Summary

Board of Directors 6CEO Message 8

COMMEnts On prOfit anD lOss statEMEnt anD BalanCE shEEtBalance sheet 14profit and loss statement 16allocation of Earnings 17statement of Cash flows 19

nOtEs tO thE finanCial statEMEnts 1 - Business activities and personnel 202 - accounting policies and Valuation principles 223 - information on the Balance sheet 244 - information on Off-Balance sheet transactions 345 - information on the income statement 366 - Eligible Capital and required Capital 37

report of the statutory auditor 39

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53rD annUal rEpOrt 2014

araB Bank (switzErlanD) ltD sOft COMMODitiEs

COal

araB BanK53rd annual report 2014

arab Bank (switzerland) ltd. is an in-dependent company founded in 1962 according to swiss law, specialized in asset management and investment counselling for a sophisticated clientele, in addition to trade finance activities.

arab Bank (switzerland) ltd. is a sister company of arab Bank plc., amman /Jordan, a leading financial institution, which has a wide network in the arab world and major financial centers.

Head OfficeGeneva10-12 Place de LongemalleP.O. Box 3575CH-1211 Geneva 3

www.arabbank.ch

Phone : +41 22 715 12 11Fax : +41 22 715 13 11Swift : ARBSCHZZ

Board of DirectorsWahbe A. Tamari ChairmanJean Zwahlen Vice-Chairman*Alessandro Bizzozero Member*Adel A. Jabre Member*Omar M. Kamal Member*Gérard Lohier Member*Abbas F. Zuaiter Member*Until 2 april 2014

* Reference of independent board member according to FINMA circular 2008 / 24 margin number 19

BranchZurichBahnhofstrasse 46P.O. Box 2023CH–8022 Zurich

www.arabbank.ch

Phone : +41 44 265 71 11Fax : +41 44 265 73 30Swift : ARBSCHZZ

Executive ManagementNasri Victor Malhamé CEO/General Manageras from 1 December 2014Antoine Raphael CEO/General ManagerUntil 30 november 2014Richard Rochat CfO/Managing Director Patrick Pillon head of legal & Compliance/Managing Director Mark de Snaijer COO/Managing DirectorChristian Bless head of Ctf & fi/Managing Director (as from 3 July 2014)Rani Jabban head of treasury/Managing Director (as from 3 July 2014)

Internal AuditDung Nguyen-Manh

AuditorsDeloitte SA

at the Ordinary General Meeting of shareholders held on 2nd april 2014, Mr Jean zwahlen was re-elected as mem-ber of the Board for a term of four years.

Mr abbas zuaiter resigned from his position as Board Member. the Board of Directors thanks him for his valuable contribution during his tenure.

Deloitte sa was appointed as the Bank's auditors.

Mr antoine raphael resigned from his position as CEO/General Manager with eff ect on 30th november 2014. Mr nasri Victor Malhamé was appointed as CEO/General Manager as from 1st December 2014.

we would like to thank Mr raphael for his outstanding contribution to the Bank over the past years and welcome Mr Malhamé wishing him all the suc-cess in his future endeavors.

special thanks go to our shareholders and clients for their continued trust in arab Bank (switzerland) ltd. we also thank the Bank's management and staff for their excellent work and commitment in 2014.

the Board of Directors

Board ofdIreCtorS

6 | 7 • araB Bank (switzErlanD) ltD. annUal rEpOrt 2014



whEat

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Ceo meSSage

2014 was yet another year marked by regulatory and legislative changes in switzerland amidst a wary and timid local market environment. the mar-ket had cooled down in anticipation of fallbacks from various initiatives such as switzerland’s treaty with the Us Department of Justice and the slowing down of activity on the banking consolidation front. the market has been witnessing an increasing outsourcing of support functions in line with the need for banks to focus on their revenue-generating activities as well as on reducing, to the extent possible, their investments in non-core or differentiating areas.

the changes in the regulatory environ-ment that started after the onset of the financial crisis of 2008/2009, continued to affect the financial services industry during the course of 2014. a number of global banks faced substantial fines and charges as a result of past misdeeds related to the forex markets, libor and in some cases, sanctions against cer-tain countries. the increasing cost of regulatory compliance has continued to put pressure on Banks' revenues and cost bases.

Despite these hurdles and a stronger Chf/UsD exchange rate which has positively impacted the Bank as most of its assets are denominated in UsD, the Bank’s three business segments performed better than the previous

year as a result of its strong focus on improving the quality of and the return on its assets. the Bank increased its operating revenue by 14% achieving a net income result of Chf 11.9 million versus Chf 10.1 million in 2013, an in-crease of 17.2% . the Bank’s cost to in-come ratio continued to improve from 68% in 2013 and to 62% in 2014. Capital adequacy as at end 2014 remained high at 30%, maintaining the Bank’s position as one of the best capitalized banks in the country.

the private Bank was successful in completing a number of large and interesting transactions in 2014, that helped sustain the revenue line and resulted in the first positive net inflow of client funds, attesting the positive perception in the market of the new platform and improved capabilities re-sulting from the restructuring of the past few years. at the same time the control over costs was maintained and resulted in a further small reduction in head count to help better align costs with revenues.

On the investment side, the Bank successfully on-boarded a number of funds previously managed externally and significantly improved their per-formance and secured revenues that helped counter those lost as a result of various regulatory restrictions that came into effect during the year. as for the investment/asset management activity,

the year witnessed a steady increase in the number of client mandates awarded to the investment management team, reflecting the renewed confidence by our clients in the Bank’s know how and capabilities as a result of the recently completed restructuring and the con-tinuously expanding suite of products and services.

the Bank further strengthened the Commodities and trade finance busi-ness by enlarging and diversifying its customer base and hiring a number of experienced relationship managers. after expanding the clients portfolios active in trading soft and energy- related commodities, the Bank established a desk specifically dedicated to ferrous and non-ferrous traders. the Bank is thus constantly making sure that the development of its business is accompanied by a systematic effort to diversify its risks and revenues avoi- ding concentration on clients, products, transaction profiles and country coun-terparties. in parallel to its constant efforts to grow its presence in the market, the Bank is strengthening its risk monitoring and controls capabilities.

in 2015, the Bank intends to further expand its teams to take advantage of the promising opportunities offered by the market.

On the treasury side, the “ decoupling bet ” paid off well, albeit quite late into

the year. the strength of the UsD, the weakness of precious metals, the pres-sure on some emerging markets assets, and the increase in volatility contribu- ted strongly to the Bank’s bottom line. Concurrently the Bank has maintained its conservative long term strategy regarding interest rates exposure.

in 2014, the Bank focused on three key areas. the first one was to continue to ensure full compliance with swiss regulatory requirements as well as with fatCa. the second one was a review of all its policies and procedures with the aim of simplifying its operations in order to improve turnaround time to the customers while enhancing risk management and controls. the last area was to complete the groundwork for a geographical expansion into other markets in the Middle-East and in Europe that are deemed key to the ambitious growth of the Bank in line with its new 3 year business plan.

the Bank is confident that it will achieve its planned growth and is ready to face and successfully address all challenges resulting from market developments as well as ever changing regulatory envi-ronments in the coming years thanks to the ongoing loyalty, resilience and trust of its esteemed clients, to the vision and support of its board of di-rectors and last but not least, to the efforts, commitment and dedication of its capable staff.

antoine raphael, CEO


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COttOn


finanCial hiGhliGhtsChf MilliOn

2014 2013 VarianCEChf

VarianCE%

Balance SheetBalance sheet total 3 01 6 2 732 284 10Due from customers 977 474 503 106securities and financial investments 552 447 106 24shareholders’ equity (before profit distribution) 505 498 7 1

Profit and Loss Statementnet interest income 22 17 5 28results from commission and service fee activities 24 23 1 4results from trading operations 7 7 0 6Other ordinary results 3 2 1 30Operating expenses - 34 - 33 - 1 4

Gross Profit 21 16 5 34Depreciation, valuation adjustments/provisions - 2 - 3 1 - 35

Profit before Extraordinary Items and Taxes 19 13 6 51Extraordinary income, net - 2 2 - 3 - 200tax expenses - 6 -4 - 1 31

Net Income 12 10 2 18


CommentS on profIt and loSS Statement and BalanCe Sheet

Profi t and Loss Statementthe Bank’s net income increased from Chf 10.1 million in 2013 to Chf 11.9 mil-lion in 2014 (+17%). this improvement in the fi nancial results of the Bank took place amongst a global challenging envi-ronment and increasing competition for MEna based private Banking business. all of the three business lines (Commodity and trade finance, private Banking and treasury) increased their volume ac-tivity and their profi tability in 2014.

the results from commissions and ser-vice fees increased by Chf 0.9 million (+4%). this increase is mostly attri-butable to higher trade fi nance and private banking activity.

thanks to the weakening of the Chf against the UsD which positively im-pacted our profi tability as most of our assets are denominated in UsD (UsD/Chf 2014 : 0.99, 2013 : 0.89) the results from trading operations increased by Chf 0.5 million.

Despite the low level of interest rates, our net interest income increased from Chf 17.2 million in 2013 to Chf 22.0 million in 2014 (+28%) refl ecting the growth in our lending activity.

the heavy extra costs incurred by new requirements and regulations have been mitigated by very strong cost controls which led to a net increase in operating expenses of Chf 1.3 million.

Estimated tax expenses increased by Chf 1.3 million mainly as a result of higher revenues.

the cost/income ratio declined from 68% to 62%.

Balance Sheet and Off -Balance Sheetthe Balance sheet increased from Chf 2.7 billion in 2013 to Chf 3 billion in 2014 (+10.4%) mainly due to the weakening of the Chf against the UsD. the Bank’s balance sheet is very liquid as the Bank has maintained an average deposit with the swiss national Bank of around Chf 0.62 billion.

loans to customers were higher than in the previous year by Chf 503 mil-lion and mortgages increased by Chf 122 million. the Bank’s own investments increased by about Chf 106 million to Chf 607 million of which 5% represents trading activities, 86% fi nancial invest-ment activities and 9% participations.

as a result of the increase in the lending activities, the contingent liabilities and the irrevocable commitments increased in the reporting period.

assets under Management increased by Chf 383.7 million and amounted to Chf 3.0 billion as at 31st December, 2014.


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BalanCe Sheetat DECEMBEr 31, 2014

2014Chf

2013Chf

VarianCEChf

Assetsliquid assets 585 147 429 1 073 56 1 057 - 488 413 628Due from banks 557 463 729 533 606 806 23 856 923Due from customers 976 458 826 473 753 065 502 705 76 1Mortgages 203 024 303 8 1 040 298 1 2 1 984 005securities and precious metal trading portfolios 33 150 05 1 30 444 587 2 705 464financial investments 519 240 340 41 6 237 037 103 003 303participations 54 68 1 488 54 68 1 515 - 27fixed assets 50 454 077 52 257 1 16 - 1 803 039accrued income and prepaid expenses 1 5 887 950 9 41 7 967 6 469 983Other assets 20 918 909 6 974 459 13 944 450

Total Assets 3 016 427 102 2 731 973 907 284 453 195

total subordinated claims 153 422 200 138 593 200 14 829 000

Liabilities and shareholders’ equityDue to banks 1 281 356 497 1 136 632 085 144 724 41 2Due to customers 1 177 469 618 1 044 428 430 133 04 1 188accrued expenses and deferred income 23 1 5 1 824 14 673 935 8 477 889Other liabilities 9 015 444 1 9 06 1 683 - 10 046 239Valuation adjustments and provisions 20 501 8 1 7 1 8 768 299 1 733 518reserves for general banking risks 80 38 1 634 80 38 1 634 0share capital 26 700 000 26 700 000 0General legal reserve 22 735 500 22 735 500 0legal reserves from capital contribution 14 850 000 14 850 000 0Other reserves 348 000 000 343 500 000 4 500 000retained earnings brought forward 402 34 1 1 1 9 166 283 175net income 1 1 862 427 10 123 175 1 739 252

Total liabilities and shareholders’ equity 3 016 427 102 2 731 973 907 284 453 195


2014Chf

2013Chf

VarianCEChf

Off-balance sheet transactionsContingent liabilities 170 442 930 143 237 849 27 205 08 1irrevocable commitments 147 079 756 65 499 1 5 1 81 580 605Confirmed credits 4 107 387 6 77 1 988 - 2 664 60 1

Derivative instruments :- Contract volume 913 094 368 1 618 34 1 432 - 705 247 064- positive replacement value 19 852 52 1 6 553 016 13 299 505- negative replacement value 8 070 988 17 927 754 - 9 856 766fiduciary transactions 582 63 1 899 537 698 039 44 933 860


profIt and loSSStatementat DECEMBEr 31, 2014

rEVEnUEs anD ExpEnsEs frOM OrDinary BankinG aCtiVitiEs

2014Chf

2013Chf

VarianCEChf

Results from interest activities :interest and discount income 19 469 025 19 164 929 304 096interest and dividend income on trading portfolio 126 882 176 8 1 1 - 49 929interest and dividend income on financial investments 6 101 854 5 674 629 427 225interest expenses - 3 710 026 - 7 80 1 897 4 091 87 1

Total net interest income 21 987 735 17 214 472 4 773 263

Results from commissionand service fee activities :Commission income on lending activities 8 424 829 6 842 302 1 582 527Commission income on securities and investment transactions 14 926 889 15 340 047 - 413 158Commission income on other services 785 723 75 1 35 1 34 372Commission expenses - 565 223 - 236 928 - 328 295

Total result from commission and service fee activities 23 572 218 22 696 772 875 446

Result from trading operations 7 241 752 6 760 755 480 997

financial investments - 44 064 236 784 - 280 848real estate income 2 630 256 1 834 066 796 190Other ordinary results 6 226 3 870 2 356

Total other ordinary results 2 592 418 2 074 720 517 698

Operating expenses :personnel expenses - 23 646 335 - 22 167 908 - 1 478 427Other operating expenses - 10 689 753 - 10 859 747 169 994

Total operating expenses - 34 336 088 - 33 027 655 - 1 308 433

Gross profit 21 058 035 15 719 064 5 338 971Depreciations and write-offs on non-current assets - 2 098 056 - 1 858 828 - 239 228Valuation adjustments, provisions and losses 52 810 - 1 220 841 1 273 65 1

Profit before extraordinary items and taxes 19 012 789 12 639 395 6 373 394Extraordinary income 709 497 1 663 1 20 - 953 623Extraordinary expenses - 2 400 859 0 - 2 400 859taxes - 5 459 000 - 4 179 340 - 1 279 660

Net income 1 1 862 427 10 123 175 1 739 252

alloCatIon of earnIngS

2014Chf

2013Chf

VarianCEChf

net income 1 1 862 427 10 123 175 1 739 252retained earnings brought forward 402 34 1 119 166 283 175

Retained earnings at the end of period 12 264 768 10 242 341 2 022 427

The Board of Directors proposes :Distribution of a dividend of 20 % on the share capital (2013 : 20 %) 5 340 000 5 340 000 0Dissolution of legal reserves from capital contribution 0 0 0Dissolution of other reserves 0 0 0allocation to general legal reserve 0 0 0allocation to other reserves 6 500 000 4 500 000 2 000 000 surplus to be carried forward to retained earnings 424 768 402 34 1 22 427

As stated above 12 264 768 10 242 341 2 022 427

Upon acceptance of this proposal, the dividend will be paid as follows :

to the shareholders registered in the share bookat March 27, 2015, per share of Chf 0.75 less 35% swiss withholding tax

0,15000- 0,05250

0, 1 5000- 0,05250

00

Net per share 0,09750 0,09750 0


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COrn


2014 2013sOUrCE

Of fUnDsChf 1000

appliCatiOnOf fUnDsChf 1000

sOUrCE Of fUnDsChf 1000

appliCatiOnOf fUnDsChf 1000

Cash-flow from operating resultsnet income 1 1 862 10 123Depreciation and write-offs on non-current assets 2 098 1 858 Valuation adjustments and provisions 1 734 1 696allocation to reserves for general banking risksaccrued income and prepaid expenses 6 470 4 03 1accrued expenses and deferred income 8 478 6 375Dividend of preceding year 5 340 5 340

Balance 12 362 7 289

Cash-flow from investment activitiesparticipations 0 22 680real estate 205 2 021fixed assets 90 532

Balance 295 25 233

Cash flow from banking operationsMedium and long term operations (>1 year)Due to banksDue to customersDue to customers savings and investment accountsOther liabilities 1 0 046 8 726Due from banksDue from customers Mortgages 1 2 1 984 17 435financial investments 103 003 55 700Other assets 13 944 2 866

Short term operationsDue to banks 144 724 169 49 1Due to customers 133 041 137 270Money market instruments Due from banks 23 857 617 197Due from customers 502 706 39 068securities and precious metal trading portfolios 2 706 6 41 4

LiquidityCash 488 414 573 013

Balance 12 067 17 944

Total source of funds 12 362 25 233

Total application of funds 12 362 25 233

Statement of CaSh floWS


arab Bank (switzerland) ltd. is constituted according to swiss law as an independent company. it started operations in 1962 in zug, then moved its operations to zurich soon after-wards. it opened a branch in Geneva in June 1964. the Bank headquarters were located in zurich until their trans-fer to Geneva on the 22nd May 2012.

the Bank is a public company with 19’623 shareholders (who are also the shareholders of arab Bank plc in amman, Jordan) at the end of 2014.the focus of the services of arab Bank (switzerland) ltd. is on providing asset management and investment advisory as well as financial planning services for private and institutional clients, in addition to trade finance and other credit-related products and services for commercial and corporate clients.arab Bank (switzerland) ltd. employed 95 people on a full-time equivalent basis at the end of 2014 (previous year : 91).

BUsinEss aCtiVitiEs

Wealth Managementwealth Management caters and res-ponds to the private banking needs of its predominantly Middle-Eastern clientele, providing them with tailor-made solutions and access to an open platform covering the full range of wealth management products, services,

mainly investment management, such as advisory services and discretionary portfolio management as well as market research. these services complement those offered by relationship Managers by providing product screening, due diligence reviews, creation of various products in each asset class and port-folio analysis.

Treasury and Foreign Exchangethe Bank provides its clients with a wide range of products and services in Money Market, foreign Exchange, precious Metals and securities trading.

Credit / Financing products and servicesarab Bank (switzerland) ltd. provides a comprehensive range of credit in-struments (various types of loans such as lombard loans, mortgages and guarantees) to its private banking clients enabling them to fund their commer-cial business or leverage their private portfolios. the Bank also offers credit solutions directly to commercial enti-ties and has become an established commodities trade finance player, offering tailor-made solutions, including the full suite of financing services, to commodities trading compa-nies and local exporters with a particular focus on those dealing with the MEna region, making use of all possible synergies available within the arab Bank plc group of companies.

nOtEs tO thE finanCial statEMEnts

1- BuSIneSS aCtIvItIeS and perSonnel

Out-tasking activitiesthe Bank has out-tasked part of its it operations to iBM at the end of 2012. this out-tasking is not considered as outsourcing of essential it services to third parties as defined in finMa circular 2008/7.

risk ManaGEMEnt & COntrOl

Generalthe Bank has established and imple-mented a comprehensive set of inter-nal policies and procedures in order to manage and monitor the key risks to which it is exposed, and to ensure that all the relevant guidelines and regulations issued by finMa and swiss Bankers association, as well as the internal rules of the Bank, are adhered to. whenever risks are taken, they are identified, measured, monitored and mitigated accordingly.

in conformity with article 663b ch. 12 of the swiss Code of Obligations, the Board of Directors formally reviews annually the bank’s key risks and, whenever deemed necessary, takes appropriate measures.

Credit RisksCredits and loans are granted according to clear rules, regulations and compe-tencies. lending ratios for all categories of collateral have been defined. Credit

risks are mitigated by strict monitoring of limits (counterparty, group, country) and quality collaterals are assessed and reviewed on a regular basis.

Market risksthe Bank defines various limits re-garding the nature, quality, currency and duration of investments for the Banking and the trading Book. Beside the daily management of the market risks by treasury, the Bank’s asset & liability Committee monitors these risks and adherence to the limits on a continuous basis.

as a rule, interest rate risk is minimized by funding loans with matching ma- turities. the Bank optimizes asset and liability management in accordance with the anticipated interest rate varia-tion and the limits granted. it transacts for this purpose in derivative financial instruments such as interest rate swaps and options. the Bank defines limits for refinancing gaps and monitors adherence to these limits on a regular basis.

Liquidity Risksthe Bank monitors its liquidity in a way to ensure adequate levels at all times, in line with the regulatory requirements pertaining to the liquidity ratios.

Operational Risksthe Bank has clear policies, regulations and procedures in place, and maintains

an overall control infrastructure that is regularly amended to factor-in changes occurring in the Bank. the assessment of the control framework is reviewed and validated by the Board of Directors on a yearly basis as a minimum.

Legal & Compliance Risksthe Bank uses standardized contracts and agreements to mitigate the legal and Compliance risks. Compliance department is responsible for the on-going review of requirements and the update of all documentation to account for new developments from the regu-latory authorities. it also ensures that these rules are met and adhered to. furthermore, the Bank has the mecha-nisms in place to regularly check Client databases and monitor transactions.

General Principlesaccounting and valuation principles are governed by the swiss Code of Obligations, the federal law on banks and savings banks, and its execution by the articles of association and the directives issued by the swiss financial Markets supervisory authority (finMa). the annual accounts are presented in conformity with the finMa circular 2008/2 - accounting-banks.

Booking of positionstransactions are entered in the balance sheet following the trade date accounting principles.

The most important valuation princi-ples can be summarized as follows:

Foreign currency translationsassets and liabilities denominated in foreign currencies are translated into swiss francs at the exchange rates on the balance sheet closing date. income and expenses are converted at the exchange rate in force on the transac-tion date. Exchange gains and losses resulting from conversion into swiss francs of positions and operations denominated in foreign currencies are booked to income from trading.

the main exchange rates applied at closing date were as follows : 31.12.2014 31.12.2013UsD 0.98957 0.89071EUr 1.20251 1.22638

Liquid assets, money marketinstrumentsthese items are capitalized at nominal value. the unearned discount income on money market instruments is ac-crued over the term of such instruments.

Claims and liabilities in respect of banks and customers, mortgage loansthese amounts are valued at their nominal value. Valuation adjustments are made for identifiable risks. General provisions exist for contingent risks. lending against collateral is made within the generally accepted lending principles. these are stipulated in the internal rules and regulations. the valuation of real estate is based on market value, which is determined according to generally accepted valuation methods. interest and commission income, which is overdue for more than 90 days, will only be booked after payment. Trading positions in securities and precious metalstrading positions are valued at mar-ket prices on the balance sheet date. profits and losses on prices are booked to result from trading operations. Financial investmentsfinancial investments, acquired with the intent to be held until maturity, are carried in the balance sheet under w financial investments ”. the difference between the nominal value and the acquisition cost is spread over the

period remaining to maturity and booked to the “ interest and dividend income on financial investments ”.

Participationsparticipations, held as permanent in-vestments, are recorded at acquisition cost, less appropriate depreciation where necessary.

Fixed Assetsfixed assets are stated in the balance sheet at their cost price and depre-ciated using the straight-line method over a period corresponding to the useful economic life of the different types of assets. the depreciation rates used are as follows:• Bank Building : maximum 50 years• Building improvement costs :

maximum 10 years• Furniture and fixtures : maximum 5 years• Vehicles : maximum 5 years • IT hardware : maximum 3 years

Valuation Adjustments and Provisionsaccording to the principle of prudence, valuation adjustments and specific provisions are made for all identifiable risks. amounts due at risk, that means amounts due where there is a probability that the customer cannot cover its outstanding liabilities, will be valued on an individual basis. the de-crease in value will be covered by an individual value adjustment.

2 - aCCountIngpolICIeS andvaluatIon prInCIpleS


Reserves for general banking risksreserves for general banking risks are reserves constituted out of prudence with the objective of covering latent banking risks. they are net of tax.

Taxestaxes are calculated in accordance with relevant tax laws and are either paid or provisioned for.

Derivative instrumentsthe gross replacement values of de-rivative financial instruments (for the Bank’s and clients’ accounts) reflect the market value of all open positions at closing date. the positive and ne-gative replacement values are respec-tively recorded in Other assets and Other liabilities.

the Bank uses derivatives instruments for its own account for the purpose of assets and liabilities management. Derivatives financial instruments transactions are traded mainly on behalf of clients.

Definition Client Assets & Net Increase /(Decrease) of Client AssetsClient assets are asset values of clients, for which arab Bank (switzerland) ltd. renders investment and advisory ser-vices. Custody portfolios and asset values, which are held exclusively for transaction and custodian purposes, are not included in the client assets. the same applies for loans and purely

commercial clients. the net increase/(decrease) of client assets consists of the sum of all individual money de-posits and payments as well as secu-rity incoming and outgoing deliveries, whereby new loans and loan repay-ments are accounted for. interest and dividends credited to clients as well as debit interest, commissions and charges debited for bank services, are excluded from the calculation of the net increase/(decrease) of client assets, as they form part of the client performance – the same is valid for variations in client assets due to market currency and security prices.

Pension Plansarab Bank (switzerland) ltd. maintains legally separated welfare schemes for its 97 active insured parties at the date of the balance sheet (2013 : 89) and 35 retired (2013 : 34). the pension plans are based on the swiss defined con-tribution system (defined contribution plans in accordance with “ swiss Gaap fEr 26 ”). the Bank carries approxi-mately two thirds of the pension cost. the cost carried by the Bank is shown under item 5.2 (social benefits).

the pension fund liabilities as well as the plan assets are legally separated from the Bank in fully funded inde-pendent foundations. Organization, management and financing of the pen-sion plans are subject to swiss federal regulations and to the constitutions of

the foundations (trust deed) as well as the currently valid regulations of the pension plans.


3.1 - sChEDUlE Of COllatEral fOr lOans anD Off-BalanCE shEEt transaCtiOns

MOrtGaGE COllatEral

Chf 1 000

OthErCOllatEral

Chf 1 000

withOUtCOllatEral

Chf 1 000

tOtalChf 1 000

LoansDue from customers 15 549 460 426 984 976 459Mortgages- residential commercial real estate- residential private real estate

75 340 127 684

75 340 127 684

Total current year 203 039 549 460 426 984 1 179 483

Total preceding year 81 078 237 362 236 353 554 793

Off-balance sheet transactionsContingent liabilities 38 827 131 616 170 443irrevocable commitments 20 000 9 549 117 531 147 080Confirmed credits 4 107 4 107

Total current year 20 000 48 376 253 254 321 630

Total preceding year 42 296 173 213 215 509

total debt Estimated liquidation value

net debt individual value adjustment

Impaired loans / ReceivablesCurrent year 7 886 0 7 886 7 886

Preceding year 7 299 0 7 299 7 299

3 - InformatIon on the BalanCe Sheetat DECEMBEr 31, 2014

3.3 - DEtails Of partiCipatiOns DOMiCilE sharE Capital intErEst hElD in %turkland Bank turkey tri 650 000 000 16.67

3.2 - sECUritiEs anD prECiOUs MEtal traDinG pOrtfOliOs, finanCial inVEstMEnts anD partiCipatiOns

2014Chf 1 000

2013Chf 1 000

Securities and preciousmetal trading portfoliosinterest bearing securities and rights- Exchange listed- Unlistedshares and similar securities and rights

0 0

33 150

00

30 445

Total 33 150 30 445

of which securities eligible for repo transactions in accordancewith liquidity regulations

0 0

partiCipatiOns intErEsts2014

Chf 1 0002013

Chf 1 000

with listed valuewithout listed value 54 68 1 54 682

Total participating interest 54 681 54 682

BOOk ValUE fair ValUE

finanCial inVEstMEnts2014

Chf 1 0002013

Chf 1 0002014

Chf 1 0002013

Chf 1 000

interest bearing securities and rights valued according to “ accrual Method ” 519 240 416 237 521 591 417 973interest bearing securities and rights valued according to “ the lower of cost or market ” 0 0 0 0shares and similar securities and rights 0 0 0 0

Total 519 240 416 237 521 591 417 973

of which securities eligible for repo transactions in accordance with liquidity regulations 123 012 97 138 125 229 97 895

2013 2014

3.4 - sChEDUlE Of fixED assEts

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real estate (bank building) 42 408 5 236 37 172 0 196 1 3 14 36 054Other real estate 14 335 582 13 753 0 7 302 13 458Other fixed assets 2 782 1 450 1 332 0 160 68 482 942

Total 59 525 7 268 52 257 0 363 68 2 098 50 454

fire insurance value of real estate 55 036

fire insurance value of other fixed assets 10 000

3.5 - OthEr assEts anD liaBilitiEs

2014Chf 1 000

2013Chf 1 000

Other assets Other liabilities Other assets Other liabilitiesreplacement value 19 853 8 071 6 553 17 928Compensation account 870 136not paid dividends 477 592indirect tax 170 467 182 542Other assets and liabilities 26 103

Total 20 919 9 015 6 974 19 062


3.6 - DisClOsUrE Of assEts plEDGED Or CEDED tO sECUrE Own liaBilitiEs, anD assEts sUBJECt tO OwnErship rEsErVatiOn

2014Chf 1 000

2013Chf 1 000

securities pledged (credit line withswiss national Bank, not utilized) 0 0

3.7 - DisClOsUrE Of liaBilitiEs tO pEnsiOn plans

2014 2013

Due to own pension plan 3 296 2 492

Expenses for own welfare schemes 2 648 2 262

there is a half autonomous welfare schemes (defined contribution) plan in accordance with “ swiss Gaap fEr 26 ” for the staff members of arab Bank (switzerland) ltd.

as in previous year, the application of Gaap fEr 16 does still not lead to a capitalization of economic benefits. for that reason, we refrain from further disclosures.

as at 31.12.2013, the coverage of the liabilities for the pension plans was 127.4% (preceding year : 125.7%).

3.8 - sChEDUlE Of OUtstanDinG BOnD issUEs anD MOrtGaGE BOnDs

the bank did not have any transactions relating to such bonds in the current or previous year.


3.9 - ValUatiOn aDJUstMEnts anD prOVisiOns / rEsErVEs fOr GEnEral BankinG risks

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Valuation adjustments and provisions for :- loan loss (credit

and country risks)- Other business risksOther provisions

7 299 10 1 1 459 - 925

590

2 400

- 3

- 328

7 886 10 12 606

Total valuation adjustments and provisions 18 768 - 925 0 590 2 400 - 331 20 502

Reserves for general banking risks 80 382 80 382

2014 2013

3.10 - Capital strUCtUrE tO

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Total share capital 26 700 35 600 000 26 700 26 700 35 600 000 26 700

Significant shareholders Nominal in % Nominal in %Oger Middle East holding sal,Beirut (lebanon) 7 060 905 19,8 % 7 060 905 19,8 %social security Corporation, amman (Jordan) 5 652 184 15,9 % 5 51 8 000 15,5 %

3.11 - statEMEnt Of ChanGEs in sharEhOlDErs’ EqUity Chf 1 000

Shareholders’ equity at beginning of current yearshare capital 26 700General legal reserve 22 736legal reserves from capital contribution 14 850Other reserves 343 500reserves for general banking risks 80 382Distributable profit 10 242

Total shareholders’ equity at beginning of current year (before profit distribution) 498 410

- Dividend 2013 : - 5 340+ net income current year 1 1 862

Total shareholders’ equity at end of current year (before profit distribution) 504 932

thereof :share capitalGeneral legal reservelegal reserves from capital contributionOther reservesreserves for general banking risksDisposable profit

26 700 22 736 14 850 348 000 80 382 12 264

3.12 - MatUrity strUCtUrE Of CUrrEnt assEts anD BOrrOwED fUnDs

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Current assetsCash 585 147 585 147Due from banks 195 664 308 9 1 1 52 889 557 464Due from customers 230 002 458 208 254 99 1 28 633 4 625 976 459Mortgages 180 160 14 182 5 1 3 1 3 55 1 203 024securities and precious metal trading portfolios 33 150 33 150financial investments 7 007 46 246 265 657 200 330 519 240

Total current year 813 961 230 002 954 286 315 419 352 310 208 506 2 874 484

Total preceding year 1 279 601 98 10 5 669 478 172 303 233 762 1 55 393 2 608 642

Borrowed fundsDue to banks 265 465 926 830 89 061 1 281 356

Due to customers, other 1 174 585 2 885 1 177 470

Total current year 1 440 050 0 929 715 89 061 0 0 2 458 826

Total preceding year 1 132 095 0 1 048 966 0 0 0 2 1 8 1 061

3.13 - DisClOsUrE Of aMOUnts DUE frOM anD DUE tO assOCiatED COMpaniEs as wEll as lOans anD ExpOsUrEs tO thE MEMBErs Of thE Bank´s GOVErninG BODiEs

2014Chf 1 000

2013Chf 1 000

Due from associated companies 252 859 204 289Due to associated companies 1 237 304 1 085 059Due from members of the bank's governing bodies 37 642 33 136amounts “ due from and due to associated companies ” represent the interbank business concluded with the arab Bank plC Group. the position “ members of the bank’s governing bodies ” includes mortgages and contingent liabili-ties granted at usual banking conditions.


3.14 - assEts anD liaBilitiEs By DOMEstiC anD fOrEiGn OriGin

2014 2013

DOMEstiCChf 1 000

fOrEiGnChf 1 000

DOMEstiCChf 1 000

fOrEiGnChf 1 000

AssetsCash 585 147 1 073 56 1Due from banks 105 961 451 503 157 535 376 072Due from customers 184 219 792 240 77 799 395 954Mortgages 87 638 115 386 8 1 040securities and precious metal trading portfolios 18 392 14 759 2 1 7 1 1 8 734financial investments 48 465 470 775 38 922 377 3 15participations 54 681 54 682fixed assets 50 454 52 257accrued income and prepaid expenses 1 5 888 9 41 8Other assets 20 919 6 974

Total assets 1 117 083 1 899 344 1 519 217 1 212 757

Liabilities and shareholders’ equityDue to banks 28 51 8 1 252 839 46 048 1 090 584Due to customers, other 55 564 1 12 1 905 66 455 977 973accrued expenses and deferred income 23 152 14 674Other liabilities 9 015 19 062Valuation adjustments and provisions 20 502 1 8 768reserves for general banking risks 80 382 80 382share capital 26 700 26 700General legal reserve 22 736 22 736legal reserves from capital contribution 14 850 14 850Other reserves 348 000 343 500retained earnings brought forward 402 1 1 9net income 1 1 862 10 123

Total liabilities and shareholders’ equity 641 683 2 374 744 663 417 2 068 557


3.15 - assEts By COUntriEs /COUntry GrOUps

2014 2013

Chf 1 000 % Chf 1 000 %

Europeswitzerland 1 1 17 083 37,0 1 5 19 21 7 55, 6United kingdom 31 1 499 10, 3 249 159 9, 1Germany 12 1 235 4,0 94 207 3,4turkey 93 030 3, 1 87 075 3, 2netherlands 68 393 2, 3 72 323 2, 6luxembourg 48 048 1 , 6 28 339 1 ,0austria 32 956 1 , 1 0 0,0france 20 362 0, 7 35 399 1 , 3Other 1 7 249 0, 6 4 1 501 1 , 5norway 14 1 26 0, 5 3 621 0, 1sweden 1 3 051 0, 4 10 019 0,4spain 6 013 0, 2 0 0,0

Middle EastUnited arab Emirates 165 245 5, 5 134 891 4, 9qatar 129 1 1 3 4, 3 37 896 1 ,4Jordan 98 369 3, 3 52 952 1 , 9lebanon 75 074 2, 5 26 076 1 ,0Bahrain 49 482 1 , 6 1 6 726 0, 6yemen 38 939 1 , 3 7 058 0, 3Other 26 486 0, 9 23 342 0, 9

USA / Canada 1 98 395 6, 6 58 901 2, 2Other american countries 236 030 7, 8 15 1 1 1 2 5, 5

Far East 89 062 3,0 67 146 2, 5

Other countries 47 187 1 , 4 15 1 1 3 0, 6

Total assets 3 016 427 100,0 2 731 974 100,0

3.16 - BalanCE shEEt By CUrrEnCiEs

ChfChf 1 000

UsDChf 1 000

EUrChf 1 000

OthErChf 1 000

AssetsCash 584 81 9 144 120 65Due from banks 96 130 319 567 70 237 7 1 530Due from customers 22 394 905 441 37 773 10 850Mortgages 87 638 4 750 10 426 100 2 1 0securities and precious metal trading portfolios 2 01 8 23 862 7 270financial investments 179 329 321 794 6 01 3 12 105participations 54 680 1fixed assets 50 454accrued income and prepaid expenses 1 1 602 3 271 127 888Other assets 20 764 120 16 19

Total balance sheet assets 1 109 828 1 578 949 131 983 195 667

Delivery claims from spot exchange deals, forward exchange deals and currency options transactions 25 643 628 094 64 468 84 386

Total assets 1 135 471 2 207 043 196 451 280 053

Liabilities and shareholders’ equityDue to banks 57 1 36 1 204 029 3 278 16 9 1 3Due to customers, other 69 580 851 456 147 086 109 349accrued expenses and deferred income 20 769 2 029 353Other liabilities 9 01 5 Valuation adjustments and provisions 1 2 61 6 6 909 977reserves for general banking risks 80 382share capital 26 700General legal reserve 22 736legal reserves from capital contribution 14 850Other reserves 348 000retained earnings brought forward 402net income current year 1 1 862

Total liabilities and shareholders’ equity 674 048 2 064 423 151 341 126 615

Delivery claims from spot exchange deals, forward exchange deals and currency options transactions 472 01 1 131 891 46 383 152 306

Total liabilities 1 146 059 2 196 314 19 724 278 921

Net positions in currencies - 10 588 10 729 - 1 273 1 132

4.1 - analysis Of COntinGEnt liaBilitiEs

2014Chf 1 000

2013Chf 1 000

VarianCEChf 1 000

Credit guarantees 17 464 7 699 9 765

Back-up guarantees 27 21 8 38 789 - 1 1 571

irrevocable commitments 125 76 1 96 750 29 01 1

Total contingent liabilities 170 443 143 238 27 205

4.2 - analysis Of CrEDit COMMitMEnts

liabilities under deferred payments 4 107 6 772 - 2 665

Total credit commitments 4 107 6 772 - 2 665

4.3 - analysis Of OUtstanDinG DEriVatiVE instrUMEnts

pOsitiVE rEplaCEMEnt

ValUEChf 1 000

nEGatiVE rEplaCEMEnt

ValUEChf 1 000

COntraCt VOlUME

Chf 1 000

Trading instrumentsInterest rate instrumentsswaps, Options (OtC)Foreign exchangeforward contractsOptions (OtC)

15 929 252

3 529 802 59 1 36 333

Shares/IndicesOptions (traded) 3 672 3 672 64 920

Total current year 19 853 7 201 903 844

Total preceding year 6 449 17 306 1 591 686

Hedging instrumentsInterest rate instrumentsswapsOptions (OtC)

870 9 250

Foreign exchange forward contractsOptions (OtC)Shares/IndicesOptions (traded)

Total current year 0 870 9 250

Total preceding year 104 622 26 655

4 - InformatIon on off-BalanCe Sheet tranSaCtIonS


4.4 - analysis Of fiDUCiary transaCtiOns

2014Chf 1 000

2013Chf 1 000

VarianCE Chf 1 000

fiduciary placements with third party banks 337 986 416 553 - 78 567fiduciary placements with banks of the arab Bank plC Group and affiliated banks 244 646 12 1 145 123 501

Total fiduciary transactions 582 632 537 698 44 934

4.5 - CliEnt assEts2014

Chf 1 0002013

Chf 1 000VarianCEChf 1 000

assets in own administrated funds 0 19 689 - 19 689

assets with administrations’ mandate 285 842 236 787 49 055

Other client assets 2 707 462 2 372 843 334 619

Total client assets (incl. double counts) 1) 2 993 304 2 629 319 363 985

thereof double counts 0 19 689 - 1 9 689

Net change of client assets 2) 163 398 - 271 130 434 528

1) Client assets are asset values of clients, for which arab Bank (switzerland) ltd. renders investment and consulting services, but without loans.

2) sum of all individual money deposits and payments as well as security incoming and outgoing deliveries, whereby new loans and loan repayments are accounted for.


5.1 - analysis Of rEsUlts frOM traDinG OpEratiOns By BUsinEss sEGMEnts

2014Chf 1 000

2013Chf 1 000

VarianCEChf 1 000

foreign exchange, precious metal and banknote trading 5 737 5 24 1 496

securities trading 1 505 1 520 - 1 5

Total income from trading 7 242 6 761 481

5.2 - analysis Of pErsOnnEl ExpEnsEs

salaries 18 814 18 324 490

social benefits 1 738 1 365 373

pension plan 2 648 2 262 386

Other 446 21 7 229

Total personnel expenses 23 646 22 168 1 478

5.3 - analysis Of OthEr OpEratinG ExpEnsEs

premises expenses 1 1 1 6 1 243 - 127i.t., machinery, furnishings and other equipment 2 876 2 647 229

Other operating expenses 6 698 6 970 - 272

Total other operating expenses 10 690 10 860 - 170

5.4 - analysis Of ExtraOrDinary inCOME anD ExpEnsEs

Extraordinary incomerelease of other provisions 328 1 41 2 - 1 084

Other extraordinary income 38 1 25 1 130

Total extraordinary income 709 1 663 - 954

Extraordinary expensesConstitution of provisions for general banking risks 2 400 0 2 400Other extraordinary expenses 1 0 1

Total extraordinary expenses 2 401 0 2 401

5 - InformatIon onthe InCome Statement

6.1 - EliGiBlE Capital31.12.2014 *Chf 1 000

31.12.2013 *Chf 1 000

Gross core capital (after deducted own shares) 499 591 499 369Other components to be deducted from core capital - 4 720 0

Eligible core capital 494 871 499 369

6.2 - rEqUirED Capital31.12.2014 *Chf 1 000

31.12.2013 *Chf 1 000

Credit risks 101 813 63 896

Non-counterparty-related risks 4 036 4 18 1

Market risks 9 045 8 468

Operational risks 6 806 6 721

Other capital requirement ** 10 094 10 936

Reductions in capital requirement 0 0

Required capital 131 794 94 202

Ratio of eligible capital to required capital under Swiss law 375 % 530 %

Solvency ratio 30,0 % 42,3 %

* Basle 3 requirements** (including national Countercyclical Buffer and items not deducted in application of threshold 3, but risk-weighted

with 250%)

6 - elIgIBle CapItal and reQuIred CapItal


46.7046.7046.70

46.6546.6546.65

46.6046.6046.60

46.5546.5546.55

46.5046.5046.50

46.4546.4546.45


Oil


tO thE GEnEral MEEtinG Of araB Bank (switzErlanD) ltD., GEnEVa

Report of the Statutory Auditor on the financial statementsas statutory auditor, we have audit-ed the accompanying financial state-ments of arab Bank (switzerland) ltd., which comprise the balance sheet as at December 31, 2014, profit and loss state-ment, cash flow statement and notes (pages 14 to 36) for the year ended.

Board of Directors’ Responsibilitythe Board of Directors is responsible for the preparation of the financial state-ments in accordance with the require-ments of swiss law and the company’s articles of incorporation. this respon-sibility includes designing, implement-ing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. the Board of Directors is further responsible for selecting and applying appropriate account-ing policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opin-ion on these financial statements based on our audit. we conducted our audit in accordance with swiss law and swiss

auditing standards. those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

an audit involves performing proce-dures to obtain audit evidence about the amounts and disclosures in the financial statements. the procedures selected depend on the auditor’s judg-ment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. in making those risk assess-ments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opin-ion on the effectiveness of the entity’s internal control system. an audit also includes evaluating the appropriate-ness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinionin our opinion, the financial statements for the year ended December 31, 2014 comply with swiss law and the com-pany’s articles of incorporation.

Report on Other Legal Requirementswe confirm that we meet the legal requirements on licensing according to the auditor Oversight act (aOa) and independence (article 728 CO and article 11 aOa) and that there are no circumstances incompatible with our independence.

in accordance with article 728a para-graph 1 item 3 CO and swiss auditing standard 890, we confirm that an in-ternal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.

we further confirm that the proposed appropriation of available earnings com-plies with swiss law and the company’s articles of incorporation. we recom-mend that the financial statements sub-mitted to you be approved.

Deloitte SA

thierry aubertinlicensed audit Expert

auditor in charge

fayçal Gacemlicensed audit Expert

Geneva, february 18, 2015

report of the Statutory audItor

rd annual report 2014 arab ban k (switzerland ) ltd · 53rd annual report 2014 arab bank ......

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