Prudent margin management and tight cost control returned Arab Bank’s local subsidiary to profit in 2021.

Accounts lodged with regulators show that the Jordanian-owned Arab Bank Australia Limited (ABAL) posted net earnings of A$664,000 in the 12 months to the end of December – a big turnaround on the $4.7 million loss recorded in 2020.

The bottom line improvement was largely attributable to a margin recovery. In the last decade ABAL has tended to be a price leader in the retail deposits market but that reputation was shelved last year as the bank moved to slash its interest expense line by 41 per cent.

Interest income also fell, but by only 7 per cent.

This helped to drive up net interest income by $2.5 million or 13 per cent to $21.5 million.

In the last two years ABAL has refocused its lending strategy away from the local small business market.

The company’s loan book expanded by more than $55 million to $795 million.

The growth was mostly due to increased mortgage and other retail lending which rose more than $70 million to $530 million.

Lending to corporate and SME borrowers contracted by $15 million. 

ABAL’s margin was enhanced by the bank’s decision to tap the RBA’s Term Funding Facility which has delivered at least $42 million of cheap funding priced at between 0.1 per cent to 0.25 per cent.

Despite the earnings recovery, ABAL did not declare or pay its Jordanian parent a dividend last year.