58th annual report 2019 - arab bank · member of the board of directors chairman of the board audit...

58TH ANNUAL REPORT 2019

58TH ANNUAL REPORT 2019ARAB BANK (SWITZERLAND) LTD.

SUMMARY

Digital Assets 4Board of Directors 8 CEO Message 12Executive Committee 1 4

CONSOLIDATED FINANCIAL STATEMENTS 2019 Consolidated Financial Highlights 20Comments on Consolidated Income Statement and Balance Sheet 2 1Consolidated Balance sheet and Off-Balance sheet Transactions 22Consolidated Income Statement 25Consolidated Cash Flow Statement 26Consolidated Statement of Changes in Equity 27

Notes to the Consolidated Financial statements 1 - Business Activities and Personnel 282 - Accounting Policies and Valuation Principles 303 - Information on the Consolidated Balance Sheet 344 - Information on Consolidated Off-Balance Sheet Transactions 495 - Information on the Consolidated Income Statement 506 - Consolidated Capital Adequacy and Liquidity Disclosure 52

Report of the Statutory Auditor on the Consolidated Financial Statements 53

FINANCIAL STATEMENTS 2019

Balance Sheet and Off-Balance sheet Transactions 56Income Statement 57Allocation of Earnings 58Statement of Changes in Equity 6 1

Notes to the Financial statements 1 - Business Activities and Personnel 622 - Accounting Policies and Valuation Principles 643 - Information on the Balance Sheet 684 - Information on Off-Balance Sheet Transactions 765 - Information on the Income Statement 796 - Capital Adequacy and Liquidity Disclosure 8 1

Report of the Statutory Auditor on the Financial Statements 83

4 | ARAB BANK (SWITZERLAND) LTD. ANNUAL REPORT 2019

PIONEERING THE TOKENISATION REVOLUTION

Arab Bank (Switzerland) Ltd. has launched its new range of digital assets services in September 2019, establishing itself as a pioneer in the blockchain sphere.

The new offering responds to the growing clients’s demand to include this uncorrelated asset class in their diversified portfolios.

At present, our new storage and trading execution services concentrate on the most liquid crypto-currencies. This is only the first step. In the near future, our services will be extended to additional digital assets.

Arab Bank Switzerland has traditionally distinguished itself in the private banking ecosystem by its commitment to innova-tion. Our vision is that blockchain technology has the potential to radically transform the financial industry, by metamorpho-sing the way assets are stored, represented, and exchanged. We intend to offer our clients the opportunity to be at the forefront of this major shift by granting them an efficient ac-cess to digital assets in a secure and regulated environment.

The tokenisation of an asset involves the issuing of digital tokens on a blockchain, whereby that token represents an underlying tangible or intangible asset. Hence, the economic value of the asset is conferred to the token. The tokens can

then be bought, sold and stored on the distributed ledger they are issued on, the blockchain. Ownership of the under-lying asset is represented by the ownership of the token on the blockchain.

This technology provides a number of advantages including greater accessibility, reduced paperwork, transparency, fractional ownership or increased transferability.

There is virtually no limit to which assets can be tokenised. Financial instruments such as stocks and bonds are obvious options. The fact that any illiquid assets like commodities, real estate, fine art or wine can also be converted into liquid marketable securities through the process is another very distinctive characteristic of tokenisation.

We have therefore decided that the theme of this year’s Annual Report should highlight the tokenisation revolution. The artwork displayed in the following pages illustrate some of the assets that could be tokenised : real estate, art, yachts, race horses, classic cars, diamonds and currencies.The graphic design is largely inspired by the early 1980s, with black computer screens and yellow/orange pixels.

4 | ARAB BANK (SWITZERLAND) LTD. ANNUAL REPORT 2019 5 | ARAB BANK (SWITZERLAND) LTD. ANNUAL REPORT 2019

ARAB BANK ANNUAL REPORT 2019

Arab Bank (Switzerland) Ltd. is an independent company founded in 1962 according to Swiss law, specialized in wealth management for a sophisticated clientele, in trade finance activities and in treasury activities.

The Bank operates also via its subsidiary Arab Bank (Swit-zerland) Lebanon S.A.L., Lebanon and cooperates with its associate company Ubhar Capital SAOC, Oman.

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 centres.

Board of DirectorsWahbe A. Tamari Chairman Jean-Pierre Roth Vice-Chairman*Alessandro Bizzozero Member* Omar M. Kamal Member* Gérard Lohier Member*Claude Suchet Member* (since 1st July 2019)

*Reference of independent board member according to FINMA circular 2017/1

Executive ManagementSerge Robin CEO Jean-Pierre Daccache Head Wealth Management Deputy CEO Patrick Culliford Head of Commodity and Trade Finance Mark de Snaijer COO Rani Jabban Head of Treasury Rachid Jami Head of CreditImed Khammari CROPatrick Pillon Head of Legal & ComplianceRichard Rochat CFO

Internal AuditMarie-Françoise Assar

AuditorsErnst & Young SA

Head Office Geneva10-12 Place de LongemalleP.O. Box 3575CH–1211 Geneva 3Phone : +41 22 715 12 11Fax : +41 22 715 13 11Swift : ARBSCHZZ

Branch ZurichNüschelerstrasse 1 P.O. Box 1065CH–8001 ZurichPhone : +41 44 265 71 11Fax : +41 44 265 73 30Swift : ARBSCHZZ

Subsidiary - LebanonArab Bank (Switzerland) Lebanon S.A.L.Allenby Street, Block 25Beirut, LebanonPhone : +961 1 999 366

Associate - OmanUbhar Capital SAOCP.O. Box 1137111 MuscatSultanate of OmanPhone : +968 24754 672

www.arabbank.ch


BOARD OF DIRECTORS

MESSAGE OF ARAB BANK (SWITZERLAND) LTD. CHAIRMAN

Dear Shareholders, Clients and Business Partners,

In many respects, Arab Bank (Switzerland) Ltd. is unique. It bridges Switzerland with Orient being culturally at home in both regions. It crafts financial solutions with the time-honored tra-ditions of integrity, discretion, and excellence of Swiss private banking and provides its clients belonging to the Levantine dias-pora or established in MENA region with compelling, secure, and unique investment opportunities.

Over years, Arab Bank (Switzerland) Ltd. has perfected the art of customized banking solutions and exceptional services to meet the needs of its depositors and business partners. Rela-tionships are at the heart of our organization and our history. We invest time with our clients, seeking to understand their evolving goals and desired legacy. We faithfully curate their wealth as if it were our own.

Our business is built on a proven tripartite foundation com-prising Wealth Management, Treasury, and Commodity Trade Finance. Our unrivalled instinct for strategic wealth allocation

and new high-performance investments enable us to connect our customers to the safe deployment of equity, and long-term prosperity. The pioneering mindset for which we are recognized, drives us to do things differently but always with the touch of traditional Swiss excellence. We embrace fintech in the way we do banking and as an emerging investment opportunity in the Middle East and Europe. We appreciate the subtleties of wealth manage-ment as we match risk to individual profile, which enables us to become the bridge between client and cutting-edge innovation.

Our strength is to be both Swiss and Arab in equal measure. Our multicultural staff speaks fluently Arabic/English/French and is deeply entrenched in the Swiss tradition of banking. With this unique feature, we see opportunities where others do not. This extends beyond the world of wealth management and banking: we are proud supporters of art and culture which shares our vision for a sophisticated fusion of East and West heritage.

On behalf of our Board of Directors, I want to thank our sharehol-ders for their confidence and our clients and partners for years of trustful business relations.

Wahbe A. TamariChairman of the Board of Directors


Wahbe A. Tamari Chairman of the Board of DirectorsChairman of the Remuneration CommitteeMember of the Board Credit Committee

Wahbe A. Tamari is a graduate of Webster University Geneva, with a bachelor’s Degree in Management and is a Harvard Business School Owner/President Management (OPM43) Program Alumni.

Mr Tamari started his career at Sucafina S.A., where he held several positions from trader to CEO and now sits on its board. He is also the founder and Vice-Chairman of W&P S.A. Geneva, a Swiss based asset management firm.

Mr Tamari has a large experience in conducting business in the Middle East. He is a Board member of National Company for Real Estate Projects (NCREP) SAL and Solidere International Ltd. He is also Chairman and Executive General Manager of ATFO SAL, a real estate management and investment com-pany based in Beirut. Currently, he is Chairman of Arab Bank (Switzerland) Ltd., member of the Board of Arab Bank Plc, Vice Chairman of Oman Arab Bank, and Chairman of Arabia Insurance Company SAL and serves on various committees related to his Boards positions.

Mr Tamari sits on the board of the Tamari Foundation and is a member of the Advisory Committee of the Hassib J. Sabbagh Foundation. He belongs to the Board of LIFE (Lebanese Interna-tional Finance Executives) and is a member of the Welfare As-sociation and YPO Gold (Young President Organization Gold).

Jean-Pierre RothVice-Chairman of the Board of Directors Vice-Chairman of the Remuneration CommitteeMember of the Board Credit Committee

Jean-Pierre Roth, completed his doctorate in economics in Geneva at the Graduate Institute of International Studies. In 2009, the University of Neuchâtel awarded him an honorary PhD in economics. He joined the Swiss National Bank in 1979. On 1 May 1996, the Federal Council appointed him Vice-Chair-man of the Governing Board and Chairman (Governor) on 1 January 2001.

Mr Roth represented Switzerland as Governor of the Was-hington-based International Monetary Fund (IMF). From 1 March 2006 to the end of February 2009, he was Chairman of the Board of Directors of the Bank for International Settle-ments in Basel. At the end of March 2007, he was designated Switzerland’s representative in the Financial Stability Forum. He retired from the SNB on 31 December 2009.

Mr Roth is now member of the Board of Directors of impor-tant Swiss companies (Swatch Group, MKS Switzerland) and member of the Board of various Swiss Foundations. He is Vice-chairman of Arab Bank (Switzerland) Ltd. and was designated Chairman of the Board of Directors of Arab Bank Switzerland (Lebanon) S.A.L. in 2019.

THE BOARD OF DIRECTORS IS COMPOSED OF SIX NON-EXECUTIVE MEMBERS, CHAIRED BY MR WAHBE A. TAMARI.


Alessandro BizzozeroMember of the Board of Directors Chairman of the Board Audit & Risk CommitteeMember of the Board FinTech Committee

Alessandro Bizzozero obtained his Doctorate in Law at the University of Fribourg.

Mr Bizzozero has more than 30 years of experience in the banking and regulatory field. He started his career at the Swiss Federal Banking Commission (today FINMA) where he was deputy Director of the Department of banking au-thorizations and mutual funds. He then joined one of the big four audit companies as Director in charge of the Regulatory Department. He was also Chief Group Compliance Officer of an important Banking Group in Geneva. Finally, he set up BRP Bizzozero & Partners S.A., one of the worldwide leaders in cross-border financial regulation.

Former Director of the CAS in Compliance Management and lecturer at the University of Geneva, Mr Bizzozero also teaches at the HEG ARC of Neuchâtel and at the Centro Studi Ban-cari of Lugano. He is also the author of several publications, including « Financial cross-border activities into and out of Switzerland ».

Mr Bizzozero is member of the Board of Directors of two other Swiss banks.

Gérard LohierMember of the Board of Directors Chairman of the Board Credit CommitteeMember of the Board Audit & Risk CommitteeMember of the Board FinTech Committee

Gérard Lohier joined in 1960 a French Banking Group which became through successive mergers BNP Paribas. He was gi-ven Commercial assignments in France and French Overseas Territories before being nominated Inspector and then Chief Inspector at Group level (1976).In this position, Mr Lohier acquired the International exposure and banking expertise that lead to further overseas assign-ments:Deputy General Manager, International Division UBA Lagos (1980),Deputy General Manager BNP Switzerland Basel (1982),Managing Director BNP International Financial Services Sin-gapore (1985),General Manager BICI de Côte d’Ivoire Abidjan (1988),Head of Territory BNP Paribas Switzerland Geneva (2000).

In the midst of his International career, Mr Lohier was nomi-nated in Paris, Deputy General Manager of BNP Intercontinental (1992), Secretary General of BNP Investment Banking (1994) and, as Group Head of Corporate Banking (1997), member of the Bank’s Group Executive Committee.Mr Lohier was thus involved operationally and through his various Board positions, in almost all aspects of banking. Currently, he is also member of W&P S.A. Geneva, a Swiss based asset management firm.


Dr. Omar KamalMember of the Board of DirectorsChairman of the Board FinTech Committee Member of the Board Credit Committee

Omar Kamal has more than 20 years' experience in the field of financial services. He was first a partner with Ernst & Young on the advisory and consulting side and then one of the initial founders and the CIO of a regional bank in the Middle East. Until August 2015, he was the co-Group CEO of a business group owned by a prominent family with global reach based in Geneva, Switzerland. For the last several years, Mr Kamal has been active in the space Venture Capital; his key focus has been FinTech ventures based in London.

Dr. Kamal serves now on the board of a number of listed and unlisted companies amongst others, Tharisa mining (FTSE listed), Cambridge Scientific Innovation (CSI), Cybsafe and Crowdemtion. In his various positions, he brings always a strategic contribution towards digital innovation and trans-formation.

Dr. Kamal is a member of the Young President Organisation (YPO) and a Board member of YPO London Star.

Claude SuchetMember of the Board of Directors Member of the Board Audit & Risk Committee

Claude Suchet is Swiss-certified Banking Expert and Swiss-Certified chartered accountant. He was active by se-veral Swiss banks from 1974 until the middle of the year 1991. At this date, he joined the supervision division of the Swiss Federal Banking Commission. Mr Suchet became in 2009 member of the Swiss Financial Market Supervisory Authority FINMA, in the context of the merge of the Authority in charge of the supervision of insurances and the Banking Commission.

In this new authority, the main task of Mr Suchet was the global monitoring of the banking prudential audit made by the external recognized audit firms. He was also regularly en-gaged in regulatory projects and initiatives. He was member of the special unit in charge notably of the Swiss accounting rules for banks. In this context, Mr Suchet was the observer of the FINMA by the Swiss GAAP FER. Finally, Mr Suchet was engaged by different international working groups created by the Basel Committee on banking supervision.

Mr Suchet retired from the FINMA on 30 June 2019. He his member since July 2019 of the Board of Arab Bank (Switzer-land) Ltd. and its audit and risk committee. He collaborates with the University of Lausanne in the context of seminars dedicated to the international prudential standards for banks.


CEO MESSAGE

Following a year of market volatility, particularly the risk-off event in Q4 2018, the narrative throughout 2019 in financial markets was largely pessimistic. Uncertainties around trade issues, Brexit and recession fears have dominated. It was meant to be the year where central banks would pursue the path of the monetary normalization; instead it has been a glo-bal pivot towards renewed accommodative monetary policy. While global growth recorded its weakest pace since the Great Financial crisis of 2008, the performances of the various asset classes, meaning stocks, bonds, credit market and commodi-ties depict a quite different picture. It has been a good year. For 2020, some of the narrative of last year will remain, with renewed tension in the Middle East on top. Markets have grown in complexity coupled with ever changing regimes environment. They will require a constant attention and professional assessment in order to be able to capture the opportunities that will definitely arise during the year.

Our bank demonstrated its capability to deliver strong and balanced growth across in its three clusters : Wealth Manage-ment, Commodity Trade Finance and Treasury. Total Operating Income reached CHF 87.5 million, which translates to an in-crease of 12% over 2018. Wealth Management, CTF and Trea-sury posted a growth of 24%, 8% and 9% respectively. Bottom-line, our net profit stood at CHF 20.2 million represen-ting an increase of 18%.

Innovation has always been in the genes of our organization. In this respect, we made a major breakthrough in 2019 with the setup of our Digital Asset Services Offering. Indeed, Arab Bank (Switzerland) Ltd. is one of the first banks to offer secure storage and trading of digital assets in Europe. Initially, the offer is limited to Bitcoin and Ethereum, but we are looking at extending our offering to include investment tokens. With this initiative, Arab Bank (Switzerland) Ltd. has clearly embarked on the digitalization journey.

Our Wealth Management business has exceeded the annual projections that we had set for 2019. A sustained enhancement of the Advisory and Discretionary platforms has contributed to an increase in signed mandates, which de facto lead to a better return on assets. Further, our front office efforts and processes put in place in 2018 resulted in a significant inflow of net new funds of CHF 480 million driving our Assets under Management above the four billion mark. Moreover, the de-ployment of our Strategic Wealth Allocation (SWA) Center of Competence has allowed us to unlock access to an even more demanding and sophisticated type of clientele. Last, but not least, our Private Market team offering coupled with our SWA efforts cemented our ability to broaden our reach with HNW and UHNW families and entrepreneurs allowing us to conti-nuously raise the bar from a service and offering viewpoint.

Throughout 2019 the Commodity Trade Finance (CTF) teams focused on diversifying and increasing the trade flows generated by Energy, Metals and Agricultural products. After almost ten years, our Bank has become a recognized brand name among all major players. In the face of challenging mar-kets, CTF strives to distinguish itself by offering quality ser-vices to its clients thanks to its diversified products offer in order to optimally address their commercial needs in a timely basis. Such positive developments have been achieved retai-ning the MENA strategic focus of its activities and the recruit-ment of new relationships managers.

For Treasury, the second half of 2019 has been particularly challenging with lower interest rates, low volatility in curren-cies and strong appreciation of precious metals. Overall, we nevertheless managed to navigate safely through these dire straits.

As part of the digitalization strategy, the Bank continuously invested in its IT infrastructure and technological platform to


be able to optimize its structure, to preserve its high IT secu-rity standards, to improve service quality and to offer new solutions. Our IT and operations department contributed mas-sively to the implementation of our digital asset offering and secure storage setup. The Bank embarked on variety of pro-jects on one hand to meet upcoming regulatory requirement and on the other hand to improve constantly our client satis-faction and diminish our operational risk with a very high qua-lity standard and secured Customer Relationship Management tool. Our clients will always remain in the center of our orga-nization. Therefore, any new initiative is always set to improve their satisfaction and level of comfort.

On behalf of our Executive Committee and myself, I would like to thank all of our customers for their longstanding trust and business. I can only say that it is an honor and a privilege for me to have the opportunity to lead this Bank in my CEO’s ca-pacity. I have never been more confident in our capabilities to put together all the required resources, capabilities to innovate and quality of service to satisfy our clients, even in the challen-ging environment we are operating in. I would like also to thank our shareholders and our Board of Directors for their strong and continuous support, as well as all our colleagues for their professionalism, dedication and commitment to de-livering high quality results.

Serge Robin


EXECUTIVE COMMITTEE

Serge Robin Chief Executive Officer (CEO)

Graduate in Economics and Quantitative analysis, Serge has 35 years’ experience in Asset Management & Research, as well as client facing roles, and 25 years in the management of sizeable teams, including at CEO level.

After having spent a year as an auditor, Serge joined Lombard, Odier as a research analyst on the Japanese market. He became Head of Research in 1994 and Head of Asset Management & Research in 1999. He was in charge of more than 200 staffs located in Geneva, Zürich, Amsterdam, London, Montreal and Hong-Kong. His team was managing both institutional and pri-vate money across all type of mandates and asset classes, in-cluding sectorial specialized funds, notably in the life science and technology domains. He also opened the Tokyo office, a marketing hub to develop Private Clients.

Serge then joined UBS in 2001 as Managing Director within a team whose mission statement was to build the « Family Bu-siness Group », a center of competence taking care of UHNW clients worldwide, which was renamed key clients later on.

In 2005, he was appointed CEO of Merrill Lynch Bank (Suisse) S.A. His mandate was to design and implement a growth strate-gy for Institutional and Private Clients with a focus on the Swiss onshore market. He revamped the whole management func-tions, structure and organization to support the growth plans.

In 2010, he joined Gonet, a Swiss Private Bank, as a Managing Partner.

Jean-Pierre Daccache Head of Wealth Management (Deputy CEO)

Prior to joining Arab Bank (Switzerland) Ltd., Jean-Pierre was a Managing Director and Global Sector Head at HSBC Private Bank where he managed the Upper-Gulf, Levant and North Afri-ca region. He served on various regional and local executive committees.

Prior to HSBC, he was a Principal at Capital E advisors in New York, a boutique private equity firm. Prior to Capital E, he ser-ved as co-head of the MENA and Western European wealth management division at The Bank of New York in New York.

Jean-Pierre is the holder of a Juris Doctor degree as well as an active member of the Bar of the State of Texas since 1991. He is currently an active member of LIFE and was previously elected for two terms on its Board of Directors. Jean-Pierre is also in-volved with SEAL, a charitable organization registered as a 501 (C3) in the State of New York.

THE EXECUTIVE COMMITTEE IS COMPOSED OF NINE MEMBERS, CHAIRED BY MR SERGE ROBIN.


Rani Jabban Head of Treasury and Financial Institutions

Rani is the holder of a Msc. in Economics and a graduate from Magistère Banque Finance from University Paris 2 Pantheon-Assas (1994).

In 1995, Rani worked as a Forex and Treasury dealer at BFO London (Credit Agricole group) and joined Credit Agricole (Suisse) S.A as senior manager FX advisory in 2000.

Since 2009, he is the Head of Treasury at Arab Bank (Swit-zerland) Ltd. Appointed to the Executive Committee in 2014, he is now in charge of Treasury, Trading, Financial Institutions and Marketing.

Richard Rochat Chief Financial Officer

Richard holds an economic degree from the University of Geneva and from Swiss Certified Accountant institute. In 1994, Richard started his career as auditor at Ernst & Young. In 2009, he took the role of Head of Finance and Risks, member of the Executive Committee, in a newly implemented foreign bank branch in Switzerland. From 2009 to 2012, he was an auditor at KPMG and was an authorized banking auditor by the Swiss Financial Market Supervisory Authority FINMA. Richard has been Chief Finan-cial Officer and a member of the Arab Bank (Switzerland) Ltd. Executive Committee since 1 August 2012. Since 2014, he also chairs the Pension Fund of Arab Bank (Switzerland) Ltd.


Patrick Culliford Head of Commodity Trade Finance

Patrick is the holder of a Bachelor of Science in Political Eco-nomy degree from the University of Geneva.

After starting his career in auditing with renowned audit firm PricewaterhouseCoopers in 1992, he moved in 1995 to Banque Indosuez (subsequently Credit Agricole Indosuez) as a member of the Credit and Risk department.

In 1998, he moved to United European Bank which subse-quently became BNP Paribas (Suisse) SA, initially as a member of the Credit and Risk department, he then joined the front office in 2001 as a Senior Relationship Manager. His area of focus was on soft commodities in the Black Sea and Middle East areas.

End of 2009, he joined Arab Bank (Switzerland) Ltd. to start the Commodity Trade Finance division which has successfully developed into a core business of the Bank.

Rachid Jami Head of Credit

Rachid joined Arab Bank (Switzerland) Ltd. in May 2011 as Head of Credit. He was appointed to the Executive Committee in May 2018. Additionally, he serves as Deputy Chairman of the Bank’s Credit Committees and acts as Secretary of the Board of Directors Credit Committee. He was Board Member of Arab Bank Pension Fund from 2014 to 2017 representing the Bank’s employees.

Prior to joining Arab Bank (Switzerland) Ltd., he began his financial career in 2000 in Switzerland at American Express Geneva, followed by Banque Migros SA. He then joined Société Générale Suisse SA and BNP Paribas Suisse SA where he worked as a Senior Credit Analyst.

Rachid is holder of a MSc. in economics from the Hassan II University of Casablanca.

Imed Khammari Chief Risk Officer

Imed holds a Master’s Degree in Banking and Finance from the University of Lausanne. Since June 2012, he occupies the position of Chief Risk Officer of Arab Bank (Switzerland) Ltd. and was appointed to the Executive Committee in April 2018. From 2006 to 2012, he occupied the position of deputy Chief Risk Officer at Tradition Group. Before that, he worked for EFG group as senior risk auditor from 2003 to 2006. From 1998 to 2003, he was risk manager at Ernst & Young.


Patrick Pillon Head Legal & Compliance

Patrick holds a law degree from the University of Geneva and was admitted to the Geneva bar in 1997. After working several years as a partner in a law firm in Geneva (Woodtli & Associés), he joined an international financial institution based in Switzerland (BNP Paribas Suisse SA) in 2000 as member of the Management and senior legal counsel specialized in commodity trade finance activities. In 2009, he joined Arab Bank (Switzerland) Ltd. where he was appointed to the Executive Committee in May 2012, as responsible for the Legal & Compliance function. In addition, he acts as Secretary of the Board Audit & Risk Committee.

Mark de Snaijer Chief Operating Officer

Mark is the holder of a doctorate in economics, thesis in indus-trial economics from the University of Berne.

In 1992, he worked at the Credit department of Swiss Bank Corporation in Basel.

From 1993 until 2000, he worked as a researcher, first at the University of Berne at the newly founded Department of Eco-nomics, and finalized his doctoral thesis later at Credit Suisse Group in Zurich.

The year after, he worked at the Cantonal Bank of Basel Land in Liestal as Chief of Staff, and joined in 2001 its subsidiary ATAG Asset Management in Berne as Head Business Development for four years.

From 2006 until 2009, he worked for Bank CIC (Suisse) in Basel, first as Head of Operations and Deputy COO and from 2007 as COO and member of the Executive Committee. In 2010, he joined Arab Bank (Switzerland) Ltd., first as deputy COO and Head Client Services & Logistics, and in 2012 as COO and member of the Executive Committee. He is also the QI responsible officer of the Bank.

CONSOLIDATED FINANCIAL STATEMENTS 2019

20 | ARAB BANK (SWITZERLAND) LTD. ANNUAL REPORT 2019 / CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL HIGHLIGHTS

CHF MILLION2019 2018 VARIANCE VARIANCE

%

Balance SheetBalance sheet total 3 557 3 857 - 300 - 8

Amounts due from customers 1 256 1 291 - 35 - 3

Trading portfolio and financial investments 478 451 27 6

Shareholders’ equity (before profit distribution) 571 560 1 1 2

Income StatementResults from interest operations 25 1 7 8 47

Results from commissions from business and services 34 29 5 1 7

Net income from trading operations 31 33 - 2 - 6

Other results from ordinary activities - 2 0 - 2 - 567

Operating expenses - 53 - 47 - 6 13

Gross Profit 35 32 3 9

Depreciation, provisions, value adjustments and losses - 5 - 4 - 1 25

Operating result 30 28 2 7

Net extraordinary results, and change in reserves for general banking risks - 2 2 - 4 - 200

Taxes - 8 - 13 5 - 38

Consolidated profit for the period 20 17 3 18

20 | ARAB BANK (SWITZERLAND) LTD. ANNUAL REPORT 2019 / CONSOLIDATED FINANCIAL STATEMENTS 21 | ARAB BANK (SWITZERLAND) LTD. ANNUAL REPORT 2019 / CONSOLIDATED FINANCIAL STATEMENTS

COMMENTS ON CONSOLIDATED INCOME STATEMENT AND BALANCE SHEET

Consolidated Income StatementThe consolidated net income increased from CHF 17.1 million in 2018 to CHF 20.2 million in 2019 (+18%). Despite the fact that the Bank is facing a challenging global environment and increasing competition for MENA clients, the three business lines, Commodity Trade Finance, Wealth Manage-ment and Treasury have strongly increased their activity volumes and their profitability over 2019.

The negative interest rates applied by the SNB on deposits held with them had a major impact on our net interest income which ended at CHF 24.7 million in 2019 (CHF 17.4 million in 2018).

The result from commissions and service fees increased by 16% to reach CHF 34.0 million, mostly attributable to the trade finance and private banking activities.

The results from trading operations decreased by 7%.

The heavy extra costs incurred due to new requirements and regulations have been mitigated by very strong cost controls which led to an operating expense total of CHF 52.6 million.

The cost/income ratio stayed stable at 60%.

Consolidated Balance Sheet and Off-Balance SheetThe total consolidated Balance Sheet amounted to CHF 3.6 billion at the end of 2019. The consolidated balance sheet is very liquid as the Bank has maintained an average deposit with the Swiss National Bank of around CHF 0.7 billion over the course of the year.

Loans to customers were at CHF 1’256 million and mortgages at CHF 193 million.

Assets under Management amounted to CHF 4.2 billion as of 31st December, 2019.


CONSOLIDATED BALANCE SHEET AND OFF-BALANCE SHEETTRANSACTIONSAT DECEMBER 31, 2019

CHF 2019 2018 VARIANCE

AssetsLiquid assets 372 933 655 1 045 382 898 - 672 449 243

Amounts due from banks 1 1 54 409 958 827 781 846 326 628 1 1 2

Amounts due from customers 1 255 577 735 1 290 923 804 - 35 346 069

Mortgage loans 1 92 688 801 81 433 21 3 1 1 1 255 588

Trading portfolio 22 934 968 22 364 155 570 81 3

Positive replacement values of derivatives 1 6 647 561 20 158 437 - 3 510 876

Financial investments 454 698 066 428 203 328 26 494 738

Accrued income and prepaid expenses 40 21 8 01 8 53 809 330 - 1 3 591 31 2

Participations 8 339 527 50 006 184 - 41 666 657

Tangible fixed assets 32 823 291 32 097 586 725 705

Other assets 5 746 534 5 309 1 1 3 437 421

Total assets 3 557 018 114 3 857 469 894 - 300 451 780

Total subordinated claimsOf which with conversion obligation and / or debt waiver

121 933 309 0

123 6 13 774 0

- 1 680 466 0

LiabilitiesAmounts due to banks 1 678 51 8 252 2 139 575 735 - 461 057 483

Amounts due to customers 1 222 706 638 1 072 306 983 1 50 399 655

Negative replacement values of derivatives 26 244 539 22 553 144 3 691 395

Accrued expenses and deferred income 51 499 256 55 033 707 - 3 534 451

Other liabilities 2 1 63 1 1 6 1 226 063 937 053

Provisions 4 775 31 8 6 754 224 - 1 978 906

Reserves for general banking risks 100 982 566 98 613 361 2 369 205

Share capital 26 700 000 26 700 000 0

Retained earnings 422 61 2 497 41 6 772 125 5 840 372

Reserves for currency translation 577 502 814 939 - 237 437

Consolidated profit for the period 20 238 430 1 7 1 19 6 1 3 3 1 1 8 81 7

Total liabilities 3 557 01 8 1 14 3 857 469 894 - 300 451 780

Off-balance sheet transactions Contingent liabilities 462 430 1 50 395 855 453 66 574 697

Irrevocable commitments 49 254 1 50 73 41 9 744 - 24 165 594

Credit commitments 39 051 642 4 727 624 34 324 01 8


CONSOLIDATEDINCOME STATEMENTAT DECEMBER 31, 2019


Results from interest operations :Interest and discount income 54 1 89 855 43 589 934 1 0 599 921

Interest and dividend income from trading portfolio 25 1 323 355 455 - 104 1 32

Interest and dividend income from financial investments 7 847 594 8 469 787 - 622 1 93

Interest expense - 36 983 829 - 34 342 689 - 2 641 140

Gross results from interest operations 25 304 943 18 072 487 7 232 456

Change in value adjustments due to default risk as well as lossesfrom interest operations - 568 91 6 - 703 969 1 35 053

Subtotal net results from interest operations 24 736 027 17 368 51 8 7 367 509

Results from commissions from business and services :Commission income from securities trading and investment activities 1 8 47 1 01 3 14 523 240 3 947 773

Commission income from lending activities 1 6 1 32 776 15 567 8 1 7 564 959

Commission income from other services 1 229 103 952 335 276 768

Commission expense - 1 856 438 - 1 7 1 1 409 - 145 029

Subtotal results from commissions from business and services 33 976 454 29 331 983 4 644 471

Net income from trading operations 30 848 208 33 229 595 - 2 381 387

Other results from ordinary activities :

Income from participations - 1 978 026 - 872 999 - 1 105 027

of which participations valued according to the equity method - 1 978 026 - 872 999 - 1 105 027

Results from real estate 41 2 760 483 830 - 71 070

Other ordinary income 1 61 60 088 - 59 927

Other ordinary expenses - 107 - 7 681 7 574

Subtotal other results from ordinary activities - 1 565 21 2 - 336 762 - 1 228 450

Total income 87 995 477 79 593 334 8 402 143

Operating expenses : Personnel expenses - 37 443 378 - 31 610 1 33 - 5 833 245

General and administrative expenses - 1 5 143 5 1 3 - 1 5 704 5 1 7 561 004

Subtotal operating expenses - 52 586 891 - 47 3 14 650 - 5 272 241

Gross profit 35 408 586 32 278 684 3 129 902

Value adjustments on participations as well as depreciation on tangible fixed assets - 1 839 37 1 - 16 936 574 1 5 097 203

Changes in provisions and other value adjustments as well as losses - 3 221 480 12 91 1 440 - 1 6 1 32 920

Operating result 30 347 735 28 253 550 2 094 1 85

Extraordinary income 58 047 15 870 369 - 1 5 81 2 322

Extraordinary expenses - 247 - 60 000 59 753

Change in reserves for general banking risks - 2 369 205 - 14 1 67 3 1 3 1 1 798 108

Taxes - 7 797 900 - 12 776 993 4 979 093

Consolidated profit for the period 20 238 430 1 7 1 1 9 61 3 3 1 1 8 81 7


CONSOLIDATED CASH FLOWSTATEMENT

2019 2018

CHF 1 000SOURCE OF

FUNDSAPPLICATION

OF FUNDSSOURCE OF

FUNDSAPPLICATION

OF FUNDS

Cash flow from operating businessProfit for the period 20 238 1 7 120

Reserves for general banking risks 2 369 14 1 67

Value adjustments on participations as well as depreciation on tangible fixed assets 1 839 16 937

Provisions and other value adjustments 1 979 24 579

Accrued income and prepaid expenses 1 3 591 5 423

Accrued expenses and deferred income 3 534 4 599

Previous year dividend 1 1 246 7 310

Balance 21 278 15 5 1 1

Cash flow from shareholder's equity transactionsRecognised in reserves 34

Balance 34

Cash flow from transactions in participations and tangible fixed assetsParticipations 41 667 928

Reserves for currency translation 237 208

Real estate 1 303 584

Other tangible fixed assets 1 262 335

Balance 38 865 887

Cash flow from the banking businessMedium to long-term business (>1 year)Other liabilities 937 454

Amounts due from customers 2 896 3 033

Mortgages loans 1 1 1 256 5 148

Financial investments 28 400 30 131

Other receivables 437 3 013

Short-term businessAmounts due to banks 461 057 479 798

Amounts due to customers 1 50 400 87 61 1

Negative replacement values of derivatives 3 691 7 01 2

Amounts due from banks 326 628 78 536

Amounts due from customers 32 45 1 229 1 61

Amounts due arising from trading transactions 571 5 356

Positive replacement values of derivatives 3 51 1 10 4 1 1

Financial investments 1 905 10 209

LiquidityLiquid assets 672 449 239 551

Balance 60 109 16 398

Total source of funds 60 143 16 398

Total application of funds 60 143 16 398


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CHF 1 000 SHA

RE

CA

PITA

L

RES

ERV

ES F

OR

GEN

ERA

L BA

NKI

NG

RIS

KS

RET

AIN

ED E

AR

NIN

GS

RES

ERV

ES F

OR

CUR

REN

CY

TR

AN

SLAT

ION

CON

SOLI

DAT

ED P

ROFI

TFO

R TH

E PE

RIO

D

TOTA

L

Shareholders’ equity as at December 31, 2018 26 700 98 61 3 41 6 772 81 5 1 7 120 560 020Dividends and other distributions 0 0 0 0 - 1 1 246 - 1 1 246

Allocation to the reserves for general banking risks 0 2 370 0 0 0 2 370

Other allocations to (transfers from) other reserves 0 0 5 874 0 - 5 874 0

Translation differences 0 0 - 34 - 237 0 - 271

Consolidated profit for the period 0 0 0 0 20 238 20 238

Shareholders’ equity as at December 31, 2019 26 700 100 983 422 61 2 578 20 238 571 1 1 1


Arab Bank (Switzerland) Ltd. (“Bank”) is the main and parent company of Arab Bank (Switzerland) Group (“ABS Group”). 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 afterwards. It opened a branch in Geneva in June 1964. The Bank head-quarters were located in Zurich until their transfer to Geneva in 2012. The Bank has a branch in Zurich.

The focus of ABS Group services is on providing asset mana-gement and investment advisory as well as financial planning services for private and institutional clients, in addition to Commodity Trade Finance and other credit-related products and services for commercial and corporate clients.

ABS Group operates also via its subsidiary Arab Bank (Swit-zerland) Lebanon S.A.L., Lebanon and cooperates with its associate company Ubhar Capital SAOC, Oman.

ABS Group employed 139 people, of which 15 people abroad, on a full-time equivalent basis at the end of 2019 (previous year: 120 people, of which 14 people abroad).

FINMA’s regime for banks of category 4 and 5 In 2018, the Swiss Financial Market Supervisory Authority (FINMA) has defined a new regime for banks of category 4 and 5 that have high levels of capital and liquidity. Participa-ting institutions will be subject to a substantially less complex regulatory regime. The regulatory requirements regarding the risk-weighted assets, the net stable funding ratio and disclosure are reduced to a minimum. FINMA, in its July 12th, 2018 letter, has accepted Arab Bank (Switzerland) Ltd. in the pilot program.

BUSINESS ACTIVITIES

Wealth Management Wealth Management caters and responds to the private banking needs of its predominantly Middle-Eastern clientele, providing it with tailor-made solutions and access to an open platform covering the full range of wealth management products, mainly investment management, such as advisory services and discre-tionary portfolio management as well as market research and digital assets services.

Commodity Trade FinanceThe Commodities Trade Finance division ABS Group created at the end of 2009 has become a reference name in the com-modities trade finance sector. ABS Group offers tailored made solutions to finance predominantly Commodities Trading com-panies active in the Soft Commodities, Ferrous and non-Fer-rous Metals and Energy fields with a particular focus on flows going to or originating from the MENA region.

Credit / Financing products and servicesABS Group provides a comprehensive range of credit instruments (various types of loans such as Lombard loans, mortgages and guarantees) to its private banking clients enabling them to fund their commercial business or leverage their private portfolios. ABS Group also offers credit solutions including a comprehensive range of commercial loans and documentary products to its Commodity Trade Finance client’s base of commodities trading companies, local expor-ters and large corporates.

Treasury and Foreign ExchangeABS Group provides its clients with a wide range of products and services in Money Market, Foreign Exchange, Precious Metals and Securities Trading and starting 2019 Digital Assets.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 - BUSINESS ACTIVITIESAND PERSONNEL


RISK MANAGEMENT & CONTROL

GeneralABS Group has established and implemented a comprehen-sive set of internal policies and procedures in order to manage and monitor the key risks to which it is exposed, and to ensure that Swiss laws and all the relevant guidelines and regulations issued by FINMA and Swiss Bankers Association, as well as the internal rules of ABS Group, are adhered to. Whenever risks are taken, they are identified, measured, monitored and mitigated accordingly.

In conformity with 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, regula-tions and competencies approved by the Board of Directors. Lending ratios for all categories of collateral have been de-fined. Credit risks are mitigated by strict monitoring of limits (counterparty, group, country) and quality collaterals are as-sessed and reviewed on a regular basis.

Market risksABS Group defines various limits regarding 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, ABS Group’s Asset & Liability Committee monitors these risks and adherence to the limits on a conti-nuous basis.

As a rule, interest rate risk is minimized by funding loans with matching maturities. ABS Group optimizes asset and liability management in accordance with the anticipated interest rate variation and the limits granted. ABS Group defines limits for refinancing gaps, for the Net Economic Value and monitors adherence to these limits on a regular basis.

Liquidity RisksABS Group monitors its liquidity in a way to ensure adequate levels at all times, in line with the regulatory requirements per-taining to the liquidity ratios.

Operational RisksABS Group has clear policies, regulations and procedures in place, and maintains an overall control infrastructure that is re-gularly amended to factor-in changes occurring in ABS Group. The assessment of the control framework is reviewed and va-lidated on a regular basis by the Board of Directors upon the Audit and Risk Committee recommendation.

Legal & Compliance RisksABS Group implements comprehensive measures to ensure compliance with laws and regulations in order to mitigate legal and reputational risks. The Legal & Compliance department is responsible for supervising these aspects. AML-related risk is subject to Compliance’s continuous focus. Regulatory changes are followed-up upon and are duly and regularly reflected in the Group’s policies.

Compliance ensures appropriate training of the Group’s employees on all relevant subjects.


General PrinciplesAccounting and valuation principles are governed by the Swiss Code of Obligations, the Federal Law on banks and savings banks, its ordinance and its execution by the Articles of Asso-ciation and the directives issued by the Swiss Financial Markets Supervisory Authority (FINMA).

The consolidated financial statements are presented in confor-mity with the FINMA circular 2015/1 – Accounting - Banks.

The consolidated financial statements are prepared in accor-dance with the rules applicable in Switzerland to consolidated financial statements, using the true and fair view principle.

Consolidation methodThe entities directly or indirectly controlled by ABS Group are consolidated using the global integration method. The share capital is consolidated using the purchase method. The entities held between 20% and 50% are accounted for un-der the equity method. The net assets and net profit of those entities are reflecting in the consolidated financial statements in proportion to the Group’s percentage stake.

ABS Group’s internal transactions, as well as the intercompany profits, are reported as elimination entries when establishing the consolidated financial statements.

Holdings less than 20% are recognized in non-consolidated participations and are reported in the balance sheet at acqui-sition value, after deduction of any impairment required by the circumstances.

Scope of Consolidation The scope of the consolidation includes, as of 31 December 2019, the following entities :• Arab Bank (Switzerland) Ltd., the parent company,• Arab Bank (Switzerland) Lebanon S.A.L., Lebanon, wholly owned by Arab Bank (Switzerland) Ltd., which activity is Private Banking. Share Capital is LBP 15’000 million (global integration method).• Ubhar Capital SAOC, Oman, 34% owned by Arab Bank (Switzerland) Ltd., which provides investment services. Share Capital is OMR 14 million (equity method).

Recording of transactionsAll operations executed at the date of the balance sheet were accounted for and evaluated according to recognized prin-ciples. The results of all operations executed are included in the income statement. Recording in the balance sheet of spot transactions, concluded but not yet settled, is done following the trade date accounting principles.

Timeliness of recognitionIncome and expenses are booked as soon as they are acquired or accrued, or as they are incurred, and booked in the related year, and not on the date they are received or paid.

The most important valuation principles 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, except the participations which are translated at the historical rate. Income and expenses are converted at the exchange rate in force on the transaction 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.

Translation of foreign currencies in ABS Group financial statementsFor consolidation purposes, in order to convert into CHF the annual financial statements denominated in foreign curren-cies, the following methods have been applied.

For the balance sheet, the closing rate has been used, except for equity which has been converted using historical rates.

For the income statement, the average rate has been applied.

The resulting foreign exchange differences have been ac-counted for in the reserves for currency translation (equity), without impacting the income statement.

2- ACCOUNTING POLICIES AND VALUATION PRINCIPLES


The rates applied for the conversion of the main currencies into Swiss francs are the following :

CLOSING AVERAGE 31.12.2019 2019USD 0.9678 0.9926EUR 1. 0859 1 . 1 1 22GBP 1. 281 0 1 .2705

Liquid assets and amounts due to / from banks These balances are shown on the balance sheet at the nominal value after deduction of individual bad debt provisions, if any are required.

Claims and liabilities in respect of customers and mortgage loansThese amounts are recorded 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.

Impaired customer loans are subject to individual valuation and, should the case arise, to an individual value adjustment, directly deducted from this caption, equivalent to the part of the amount which is not secured by collateral, as soon as the loan is reported impaired.

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 generally valued at market prices on the balance sheet date.

Profits and losses on prices are booked to result from trading operations.

Replacement values of derivative financial instrumentsReplacement values of derivative financial instruments are calculated and accounted for in order to take into account the cost or the gain resulting from a potential counterparty delivery failure.

The positive replacement values are accounted for in the ba-lance sheet on the asset side, and the negative replacement values on the liability side, for all the derivative financial ins-truments outstanding at balance sheet date which would re-sult from own account or customer transactions, irrespective of the accounting treatment in the income statement.

Financial investmentsFinancial investments include debt instruments and equity securities

Debt investments, acquired with the intent to be held until maturity, are carried in the balance sheet under “financial in-vestments”. The difference between the nominal value and the acquisition cost is spread over the period remaining to maturity (accrual method) and booked to the “interest and dividend income on financial investments”.

Equity securities are valued using the lower of cost or mar-ket value principle. Adjustments to value are recorded under “Other ordinary expenses” or “Other ordinary income”.

Tangible Fixed AssetsFixed assets are stated in the balance sheet at their cost price and depreciated 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• Software : maximum 5 years• IT hardware : maximum 3 years


Intangible assetsAny goodwill or acquisition difference resulting from the pur-chase of activities or firms is reported in the balance sheet under intangible assets. ABS Group depreciates any goodwill over its estimated useful life using the straight line method.

Valuation Adjustments and ProvisionsValuation adjustments and specific provisions are made for all identifiable risks existing at the balance sheet date.

Reserves for general banking risksReserves for general banking risks are reserves constituted out of prudence with the objective to cover additionnal banking risks. The underlying tax charge is posted to deferred tax provisions and is determined on the basis of tax rates in force. CHF 80,381,634 are net of tax.

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

The caption taxes in the consolidated income statement includes current income taxes of ABS Group companies as well as deferred taxes. Deferred taxes are recorded in accordance with requirements. The tax effects arising from temporary differences between the carrying value and tax value of assets and liabilities are recorded as deferred taxes.

Current taxes are accrued for in the liability side of the balance sheet under accrued expenses, and deferred tax liabilities are reported under provisions. Deferred taxes are calculated based on the expected tax rates.

Policy applicable in respect of derivative financial instrumentsThe derivative financial instruments are mainly used in opera-tions for the account of customers. To avoid any exposure, ABS Group concludes back-to-back transactions on the financial markets.

ABS Group uses financial derivative instruments when dee-med adequate in order to hedge the foreign currency exposure on its revenues, an important proportion of which derives from underlying assets denominated in foreign currencies, particu-larly in USD and EUR.

Premiums paid or received in relation to these operations are recognized in the balance sheet within the lines positive and negative replacement values. They are reported prorata temporis in the income statement item which is subject to the hedge transaction until maturity.

The positive or negative replacement values are recognized in the balance sheet. Should a hedge transaction exceed the underlying amount to be covered (inefficiency), the amount resulting from the excess of hedge would be accounted for in the trading results. Definition Client Assets & Net Increase / (Decrease) of Client AssetsClient assets are asset values of clients, for which ABS Group renders investment and advisory services. 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 deposits and payments as well as security incoming and outgoing deliveries, whereby new loans and loan repayments 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.


Since 2019, ABS Group offers Digital Assets Services, inclu-ding storage and trading. ABS Group stores all Digital Assets completely segregated from the bank’s holdings and also se-gregated by client. These digital assets are included in the Client Assets.

Pension PlanABS Group only operates pension plan for its employees in Switzerland.

Arab Bank (Switzerland) Ltd. maintains legally separated wel-fare schemes for its 124 active insured parties at the date of the balance sheet (2018 : 104) and 49 retired (2018 : 50). The pen-sion plan is based on the Swiss defined contribution system (defined contribution plans). The Bank carries approximately two thirds of the pension cost. The cost carried by the bank is shown under the information on the balance sheet (note “Information on payables to own employee pension fund”).

The pension fund liabilities as well as the plan assets are le-gally separated from the Bank in fully funded independent foundations. Organization, management and financing of the pension plan are subject to Swiss Federal regulations and to the constitution of the foundations (trust deed) as well as the currently valid regulations of the pension plan.

Subsequent eventsNone.


3 - INFORMATION ON THECONSOLIDATED BALANCE SHEETAT DECEMBER 31, 2019

TYPE OF COLLATERALCOLLATERAL FOR LOANSAND OFF-BALANCE SHEETTRANSACTIONS, AS WELL ASDOUBTFUL RECEIVABLESCHF 1 000

MORTGAGE

2019

OTHER

2019

UNSECURED

2019

TOTAL

2019

Loans (before offsetting any value adjustments)

Amounts due from customers 5 628 51 6 048 748 943 1 270 61 9Mortgage loans

- Residential property 1 55 974 0 0 1 55 974

- Commercial property 31 800 0 0 31 800 - Commercial and industrial real estate 4 91 5 0 0 4 91 5

Total loans (before offsetting any value adjustments) 198 31 7 51 6 048 748 943 1 463 308

Previous year 86 805 593 158 707 278 1 387 241

Total loans (after offsetting any value adjustments) 1 98 31 7 501 007 748 943 1 448 267

Previous year 86 805 578 274 707 278 1 372 357

Off-balance sheet transactionsContingent liabilities 0 57 294 405 1 36 462 430Irrevocable commitments 0 1 1 1 84 38 070 49 254Credit commitments 0 0 39 052 39 052

Total off-balance sheet transactions 0 68 478 482 258 550 736

Previous year 0 160 868 3 1 3 1 35 474 003

Gross amount due

Estimated liquidation proceeds

of the collateral Net amount dueIndividual value

adjustments

CHF 1 000 2019 2019 2019 2019

Doubtful receivables 1 6 491 1 450 1 5 041 15 041

Previous year 1 5 232 348 14 884 1 4 884


TRADING PORTFOLIOCHF 1 000 2019 2018

Assets - Trading portfolio

Debt instruments, money-market instruments, money-market transactions 0 0

- of which listed 0 0

Equity securities, funds 22 935 22 364

Total assets - Trading portfolio 22 935 22 364

- of which securities allowed for repos as per liquidity provisions 0 0

- of which determined using a valuation model 0 0


TRADING INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS (ASSETS AND LIABILITIES) PO

SITI

VE

REP

LACE

MEN

T VA

LUE

NEG

ATIV

E R

EPLA

CEM

ENT

VALU

E

CON

TRA

CT

VOLU

ME

CHF 1 000 2019 2019 2019

Interest rate instruments

- Swaps 0 0 0

Foreign exchange / precious metal

- Forward contracts 7 228 1 7 531 1 791 256

- Options (OTC) 2 386 1 545 336 682

Participations / indices

- Options (exchange-traded) 7 034 7 034 349 330

Total before netting agreements 16 648 26 1 10 2 477 268

Previous year 20 158 22 421 2 841 882

CHF 1 000

Positive replacement

value(cumulative)

2019

Negative replacement

value (cumulative)

2019

Total after netting agreements 16 648 26 245

Previous year 20 158 22 553

HEDGING INSTRUMENTS

POSI

TIV

E R

EPLA

CEM

ENT

VALU

E

NEG

ATIV

E R

EPLA

CEM

ENT

VALU

E

CON

TRA

CT

VOLU

ME

2019 2019 2019

0 135 3 843

0 0 0

0 0 0

0 0 0

0 135 3 843

0 132 3 764

BREAKDOWN ACCORDING TO COUNTERPARTIES CE

NTR

AL

CLEA

RIN

G P

ART

IES

BAN

KS A

ND

SE

CURI

TIES

DEA

LERS

OTH

ER C

LIEN

TS

TOTA

L

CHF 1 000 2019 2019 2019 2019

Positive replacement values (after netting agreements) 0 6 094 10 554 16 648

Previous year 0 10 550 9 608 20 158


BOOK VALUE FAIR VALUEFINANCIAL INVESTMENTSCHF 1 000 2019 2018 2019 2018

Debt instruments 454 664 428 168 460 409 426 898

- of which held until maturity 454 664 428 168 460 409 426 898

Participations 34 35 42 40

Total 454 698 428 203 460 451 426 938

- of which securities allowed for repos as per liquidity provisions 314 585 264 1 53 320 91 8 262 246

2019

BREAKDOWN OF THE COUNTERPARTY ACCORDING TO RATING CHF 1 000

AAA TO AA-

A+ TO A-

BBB+ TOBBB-

BB+ TO B-

LOWER THAN

B- UNRATED TOTAL

Debt instruments : book value 1 89 61 5 97 580 38 432 0 0 1 29 037 454 664

The above mentioned ratings have been issued by Standard & Poor's.


2019

PARTICIPATIONSCHF 1 000 A

CQU

ISIT

ION

VA

LUE

ACC

UM

ULA

TED

VA

LUE

AD

JUST

MEN

TS

BOO

K VA

LUE

AS

AT D

ECEM

BER

31,

2018

REC

LASS

IFIC

ATIO

NS

INV

ESTM

ENTS

DIS

INV

ESTM

ENTS

VALU

E A

DJU

STM

ENTS

BOO

K VA

LUE

AS

AT D

ECEM

BER

31, 2

019

Participations valued according to the equity method - with a market value 0 0 0 0 0 0 0 0 - with no market value 1 2 692 - 2 367 10 325 0 0 0 - 1 985 8 340

Other participations - with a market value 0 0 0 0 0 0 0 0 - with no market value 54 681 - 1 5 000 39 681 0 0 - 39 681 0 0

Total participations 67 373 - 1 7 367 50 006 0 0 - 39 681 - 1 985 8 340

COMPANIES IN WHICH ABS GROUP PERMANENTLY HOLDS DIRECT OR INDIRECT SIGNIFICANT PARTICIPATION DOMICILE

BUSINESS ACTIVITY

COMPANY CAPITAL

SHARE OF CAPITAL

IN%

DIRECT SHARE OF

VOTING RIGHTS

IN %CONSOLIDATION

METHOD

Arab Bank (Switzerland) Lebanon S.A.L. Lebanon Bank LBP 15 000 000 000 100.00 100.00

Global integration method

Ubhar Capital SAOC Oman Investment OMR 14 000 000 34.00 34.00 Equity method

The participation Turkland Bank A.S. has been sold at the beginning of 2019. No gain or loss raised from this transaction.


2019

TANGIBLE FIXED ASSETSCHF 1 000 A

CQU

ISIT

ION

VA

LUE

ACC

UM

ULA

TED

D

EPR

ECIA

TIO

N

BOO

K VA

LUE

AS

AT D

ECEM

BER

31,

2018

REC

LASS

IFIC

ATIO

NS

INV

ESTM

ENTS

DIS

INV

ESTM

ENTS

WRI

TE-O

FFS

/ D

EPR

ECIA

TIO

N

BOO

K VA

LUE

AS

AT D

ECEM

BER

31, 2

019

Real estate (group building) 43 567 1 2 108 31 459 0 1 303 0 1 263 31 499Other real estate 1 4 491 1 4 263 228 0 0 0 228 0Software 639 463 1 76 0 983 0 1 93 966Other tangible fixed assets 1 967 1 732 235 0 305 0 1 82 358

Total tangible fixed assets 60 664 28 566 32 098 0 2 591 0 1 866 32 823

OTHER ASSETS OTHER LIABILITIESOTHER ASSETS AND OTHER LIABILITIESCHF 1 000 2019 2018 2019 2018

Compensation account 39 52 0 0

Indirect tax 462 432 484 420

Escrow account 2 703 2 749 0 0

Not paid dividends 0 0 138 144

Other 2 543 2 076 1 541 662

Total 5 747 5 309 2 163 1 226

INFORMATION ON PAYABLES TO OWN EMPLOYEE PENSION FUNDCHF 1 000 2019 2018

Due to own pension plan 5 963 6 804

ECONOMIC SITUATION OF OWN EMPLOYEE PENSION FUND

ABS Group only operates pension plan for its employees in Switzerland. Please refer to the section “Pension Plan” in the notes of the consolidated financial statements. As at December 31st 2019, there was no economic obligation to be booked in ABS Group's balance sheet or income statement.

PRESENTATION OF THE ECONOMIC BENEFIT / OBLIGATION AND THE PRENSION EXPENSES O

VER

FUN

DIN

G/

UN

DER

FUN

DIN

G

ESTI

MAT

E

ECO

NO

MIC

IN

TER

EST

OF

THE

BAN

K

CON

TRIB

UTI

ON

PA

ID

CHA

NG

E FR

OM

TH

E PR

EVIO

US

YEA

R

PEN

SIO

N P

LAN

EX

PEN

SES

IN

PERS

ON

NEL

EX

PEN

SES

31.12.19 2019 2018 2019 2018 2019 2018

Pension Plans without overfunding/underfunding 0 0 0 0 0 3 540 3 202


2019

VALUE ADJUSTMENTS AND PROVISIONS AS WELL AS RESERVES FOR GENERAL BANKING RISKSCHF 1 000 BA

LAN

CE A

S AT

DEC

EMB

ER 3

1, 20

18

USE

IN C

ON

FOR

MIT

Y

WIT

H D

ESIG

NAT

ED

PUR

POSE

REC

LASS

IFIC

ATIO

NS

FOR

EIG

N E

XCH

AN

GE

DIF

FER

ENCE

S

OV

ERD

UE

INTE

RES

T,R

ECO

VER

IES

NEW

AD

JUST

MEN

TS

DEB

ITED

TO

INCO

ME

REL

EASE

S CR

EDIT

ED

TO IN

COM

E

BALA

NCE

AS

AT D

ECEM

BER

31, 2

019

Provisions for deferred taxes 6 332 0 0 0 0 - 1 921 0 4 41 1

Provisions for other business risks 10 0 0 0 0 0 0 10

Other provisions 41 2 0 0 - 1 0 0 - 57 354

Total provisions 6 754 0 0 - 1 0 - 1 921 - 57 4 775

Reserves for general banking risks 98 61 3 0 0 0 0 2 370 0 100 983

Value adjustments for default risks and country risks 14 884 0 0 - 255 - 302 71 4 0 15 041

- of which value adjustments for default risks due to doubtful receivables 14 884 0 0 - 255 - 302 7 1 4 0 15 041

The amount of KCHF 100'983 of reserves for general banking risks as of December 31, 2019 (2018: KCHF 98'613) include an amount of KCHF 80'382 which has been subject to corporate taxes.

AMOUNTS DUE FROM AMOUNTS DUE TO

AMOUNTS DUE FROM AND DUE TO RELATED PARTIESCHF 1 000 2019 2018 2019 2018

Associated companies 190 81 8 353 279 1 320 362 1 791 341

Transactions with members of governing bodies 90 246 81 767 1 3 971 1 9 838

The "Amounts due from" and "Amounts due to" associated companies represent the interbanks business concluded with Arab Bank PLC, Amman and its subsidiaries.The "Transactions with members of governing bodies" includes mortgages and contingent liabilities granted at market conditions.


2019

MATURITY STRUCTURE OF FINANCIAL INSTRUMENTSCHF 1 000 AT

SIG

HT

RED

EEM

AB

LE B

YN

OTI

CE

DU

E W

ITH

IN3

MO

NTH

S

DU

E W

ITH

IN

3 TO

12 M

ON

THS

DU

E W

ITH

IN

12 M

ON

THS

TO

5 Y

EARS

DU

E A

FTER

5 YE

ARS

TOTA

L

Asset / financial instrumentsLiquid assets 372 934 0 0 0 0 0 372 934Amounts due from banks 640 099 0 428 898 85 41 4 0 0 1 154 410Amounts due from customers 0 633 300 540 385 81 1 34 758 0 1 255 578Mortgages loans 0 1 58 353 260 5 843 4 1 67 24 066 1 92 689Trading portfolio 22 935 0 0 0 0 0 22 935Positive replacement values of derivatives 0 0 8 231 6 1 22 2 294 0 16 648Financial investments 0 0 34 374 23 560 275 790 120 975 454 698

Total reporting year 1 035 967 791 654 1 012 147 202 073 283 009 145 041 3 469 891

Previous year 1 393 23 1 635 645 989 726 291 95 1 1 37 891 267 803 3 71 6 247

Liabilities / financial instruments

Amounts due to banks 31 2 145 1 103 326 1 70 904 92 144 0 0 1 678 51 8Amounts due to customers 1 085 013 59 476 76 249 1 969 0 0 1 222 707

Negative replacement values of derivatives 0 0 1 7 954 5 996 2 294 0 26 245

Total reporting year 1 397 1 58 1 162 802 265 107 100 109 2 294 0 2 927 469

Previous year 1 329 741 1 390 99 1 504 446 9 065 1 93 0 3 234 436


2019 2018ASSETS AND LIABILITIES BY DOMESTIC AND FOREIGN ORIGINCHF 1 000 DOMESTIC FOREIGN DOMESTIC FOREIGN

AssetsLiquid assets 37 1 299 1 635 1 043 765 1 61 8

Amounts due from banks 404 576 749 834 228 453 599 329

Amounts due from customers 370 895 884 683 342 626 948 298

Mortgages loans 66 736 1 25 953 49 1 5 1 32 282

Trading portfolio 4 222 1 8 7 1 2 4 1 5 1 18 2 1 3

Positive replacement values of derivatives 2 390 1 4 258 5 759 14 399

Financial investments 1 1 7 665 337 033 76 343 351 861

Accrued income and prepaid expenses 36 1 63 4 055 48 067 5 742

Participations 0 8 340 0 50 006

Tangible fixed assets 32 559 264 31 773 325

Other assets 3 402 2 344 3 351 1 958

Total assets 1 409 907 2 147 1 1 1 1 833 439 2 024 031

Liabilities Amounts due to banks 140 2 1 5 1 538 303 90 102 2 049 474

Amounts due to customers 64 299 1 1 58 408 76 208 996 099

Negative replacement values of derivatives 1 5 575 10 669 10 955 1 1 598

Accrued expenses and deferred income 49 994 1 505 53 224 1 810

Other liabilities 1 564 599 1 123 103

Provisions 4 721 54 6 642 1 1 2

Reserves for general banking risks 100 983 0 98 6 13 0

Share capital 26 700 0 26 700 0

Retained earnings 422 61 3 0 416 772 0

Reserves for currency translation 578 0 8 1 5 0

Consolidated profit for the period 20 238 0 17 120 0

Total liabilities 847 480 2 709 538 798 274 3 059 196


2019 2018

ASSETS BY COUNTRIES / REGIONS CHF 1 000 % CHF 1 000 %

EuropeSwitzerland 1 409 907 39.6 1 833 439 47.5

United Kingdom 477 597 13.4 258 1 83 6.7

Turkey 1 7 773 0.5 67 676 1.8

Germany 67 468 2.0 64 985 1.7

Netherlands 6 1 691 1 .7 63 924 1 .7

France 35 500 1 .0 35 902 0.9

Luxembourg 25 21 7 0.7 23 882 0.6

Austria 2 032 0. 1 22 362 0.6

Norway 1 091 0.0 6 1 34 0.2

Sweden 0 0.0 4 528 0.1

Other 2 1 1 43 0.6 67 1 98 1 .8

Middle EastLebanon 247 1 58 7.0 31 9 262 8.3

United Arab Emirates 201 071 5.6 140 089 3.6

Jordan 133 61 2 3.8 140 067 3.6

Qatar 5 170 0.1 23 791 0.6

Other 57 744 1 .7 1 59 523 4.1

America

USA / Canada 484 803 13.6 1 36 205 3.5

Other American countries 1 58 074 4.4 1 89 322 4.9

Far East 51 523 1 .4 1 20 424 3.1

Other countries 98 444 2.8 1 80 574 4.7

Total assets 3 557 01 8 100.0 3 857 470 100.0

NET EXPOSURE ABROAD2019


BREAKDOWN OF TOTAL ASSETS ABROADACCORDING TO THE CREDIT RATING OF REGIONS(RISK DOMICILE PRINCIPLE) CHF 1 000 % CHF 1 000 %

AAA 222 961 10 31 1 466 1 5

AA+ - AA- 1 236 209 58 487 409 24

A+ - A 23 700 1 30 242 1

BBB+ - BBB- 60 902 3 135 193 7

BB+ - BB- 31 255 1 1 8 043 1

B+ - B- 225 209 1 0 759 837 38

CCC+ - D 248 21 9 1 2 0 0

Unrated 98 656 5 281 841 14

Total 2 147 1 1 1 100 2 024 03 1 100

The ratings used are the Standard & Poors (S&P) ratings for country risks.


2019ASSETS AND LIABILITIES BY CURRENCIESCHF 1 000 CHF USD EUR OTHER

AssetsLiquid assets 370 940 685 1 231 77

Amounts due from banks 290 61 9 602 585 1 5 1 546 109 660

Amounts due from customers 229 792 896 524 90 842 38 420

Mortgages loans 1 56 336 0 0 36 353

Trading portfolio 0 1 5 778 6 643 51 4

Positive replacement values of derivatives 7 693 8 696 0 258

Financial investments 238 479 208 985 3 235 3 999

Accrued income and prepaid expenses 37 1 89 2 673 1 1 6 241

Participations 8 340 0 0 0

Tangible fixed assets 32 559 264 0 0

Other assets 1 047 2 978 232 1 489

Total on-balance sheet assets 1 372 994 1 739 1 68 253 845 1 91 01 1

Delivery claims from spot exchange deals, forward exchange deals and currency options transactions 21 7 279 1 439 199 1 89 598 631 338

Total assets 1 590 273 3 178 367 443 443 822 349

LiabilitiesAmounts due to banks 90 637 1 481 552 40 498 65 832


Negative replacement values of derivatives 1 7 531 8 329 0 384

Accrued expenses and deferred income 49 650 1 730 - 1 6 1 35

Other liabilities 1 541 524 20 78

Provisions 4 721 0 0 54

Reserves for general banking risks 100 983 0 0 0

Share capital 26 700 0 0 0

Reserves from capital contribution 0 0 0 0

Retained earnings 422 61 2 0 0 0

Reserves for currency translation 0 0 0 578

Consolidated profit for the period 20 238 0 0 0

Total on-balance sheet liabilities 795 929 2 288 831 289 608 1 82 650

Delivery claims from spot exchange deals, forward exchange deals and currency options transactions 788 280 91 1 022 1 52 1 58 625 954

Total liabilities 1 584 209 3 199 853 441 766 808 604

Net positions 6 064 - 21 486 1 677 1 3 745


4 - INFORMATION ON CONSOLIDATED OFF-BALANCE SHEET TRANSACTIONS

CONTINGENT LIABILITIESCHF 1 000 2019 2018

Credit guarantees and similar 39 453 41 440

Performance-related guarantees and similar 67 035 36 908

Irrevocable commitments due to documentary credits 355 942 3 17 507

Total contingent liabilities 462 430 395 855

FIDUCIARY TRANSACTIONSCHF 1 000 2019 2018

Fiduciary placements with third party companies 1 302 7 1 7 998 972

Fiduciary placements with Arab Bank Plc. Amman and its subsidiaries as well as affiliated companies 74 933 186 8 1 7

Total fiduciary transactions 1 377 650 1 185 789

ASSETS UNDER MANAGEMENTCHF 1 000 2019 2018

Type of assets under managementAssets in collective investment schemes managed by ABS Group 1 59 993 136 554

Assets with administrations' mandate 1 63 01 3 168 914

Other client assets (including digital assets) 3 926 619 3 5 1 9 959

Total assets under management (including double-counting) 1) 4 249 625 3 825 427

- of which double counts 1 59 993 136 554

Total assets under management (excluding double-counting) 1) 4 089 632 3 688 873

Development of assets under managementTotal assets under management (including double-counting) at the beginning 3 825 427 3 452 464

+ / - Net new money inflows or outflows 2) 480 680 250 446

+ / - Market price trend, dividends and currency development 1 33 358 1 22 5 1 7

+ / - Other effects 3) - 189 840 0

Total assets under management (including double-counting) at the end 4 249 625 3 825 427

1) Client Assets are asset values of clients, for which ABS Group 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.3) The inclusion of the assets under management of some assets has been reassessed. These assets do not comply totally with the above definition 1 and, therefore, they have been excluded.

CREDIT COMMITMENTSCHF 1 000 2019 2018

Commitments arising from deferred payments 39 052 4 728

Total credit commitments 39 052 4 728


5 - INFORMATION ON THE CONSOLIDATED INCOME STATEMENT

RESULTS FROM TRADING OPERATIONSCHF 1 000 2019 2018

Equities shares (including funds) 1 074 -483

Foreign exchange 29 774 33 713

Total trading results 30 848 33 230

INFORMATION ON SIGNIFICANT NEGATIVE INTERESTS

In 2015, the Swiss National Bank (SNB) introduced negative interest rates of -0.75% on sight deposit account balances with SNB. The paid and accrued SNB negative interests for the year of 2019 amounted to CHF 5.4 million (2018: CHF 7.3 million).

PERSONNEL EXPENSESCHF 1 000 2019 2018

Salaries 31 1 1 2 25 883

Social insurance obligations 1 920 1 822

Pension fund 3 540 3 202

Other personnel expenses 87 1 703

Total personnel expenses 37 443 31 610

GENERAL AND ADMINISTRATIVE EXPENSESCHF 1 000 2019 2018

Office space expenses 697 1 086

Expenses for information technology and telecommunications 2 967 3 059

Outsourcing expenses 3 951 3 546

Expenses for furniture and other equipment 238 300

Audit fees 375 542

- of which for financial and regulatory audits 345 492

- of which for other services 30 49

Other operating expenses 6 91 6 7 1 72

Total general and administrative expenses 1 5 144 1 5 705


OPERATING RESULTS, BROKEN DOWN ACCORDING TO DOMESTIC AND FOREIGN ORIGIN, ACCORDING TO THE PRINCIPLE OF PERMANENT ESTABLISHMENT CHF 1 000

2019 2018

DOMESTIC FOREIGN TOTAL DOMESTIC FOREIGN TOTAL

Net results from interest operations 23 509 1 227 24 736 1 6 1 58 1 2 1 1 1 7 369 Results from commissions from business and services 32 772 1 204 33 976 28 592 740 29 332 Net income from trading 30 808 40 30 848 33 043 1 87 33 230 Other results from ordinary activities 41 3 - 1 978 - 1 565 560 - 897 - 337 Operating expenses - 50 059 - 2 528 - 52 587 - 45 100 - 2 21 5 - 47 31 5 Value adjustments on participations as well as depreciation on tangible fixed assets - 1 742 - 97 - 1 839 - 1 6 81 5 - 1 22 - 16 937

Changes in provisions and other value adjustments as well as losses - 3 1 55 - 66 -3 221 1 2 953 - 4 1 1 2 91 2

Operating result 32 546 - 2 198 30 348 29 391 - 1 1 37 28 254

CURRENT AND DEFERRED TAXESCHF 1 000 2019 2018

Current taxes 9 7 1 9 8 314

Total current taxes 9 71 9 8 314

The average tax rate was 32.0% of the results for the period before taxes in the current year (previous year: 32.7%).

Deferred taxes - 1 921* 4 463

Total deferred taxes - 1 921 4 463

Deferred taxes were calculated using actual expected tax rates.*Of which credit of CHF 2'323 million in relation with the adjustement of previous years' deferred taxes following the new tax rates applicable starting 2020.

MATERIAL LOSSES, EXTRAORDINARY INCOME AND EXPENSES AS WELL AS RELEASE OF SIGNIFICANT HIDDEN RESERVES, RESERVES FOR GENERAL BANKING RISKS AND VALUE ADJUSTMENTS AND PROVISIONS NO LONGER NECESSARYCHF 1 000 2019 2018

Extraordinary incomeRelease of provisions 0 1 5 545

Other extraordinary income 58 325

Total extraordinary income 58 15 870

Extraordinary expensesOther extraordinary expenses 0 60

Total extraordinary expenses 0 60


6 - CONSOLIDATED CAPITAL ADEQUACY AND LIQUIDITY DISCLOSURE

CHF 1 000 2019 2018

Eligible capitalCommon Equity Tier 1 Capital (CET1) 558 899 538 282

Total eligible capital 558 899 538 282

Required capitalCredit risks 130 140 1 22 654

Non-counterparty-related risks 2 549 2 554

Market risks 1 4 208 1 4 792

Operational risks 10 842 9 873

Other capital requirement * 0 7 936

Participations in financial sector entities to be consolidated 2 668 0

Total required capital 160 407 1 57 809

Solvency ratio 28 % 27 %

Leverage ratioLeverage ratio exposure 3 778 010 4 022 176

Leverage ratio 15 % 13 %

CHF 1 000 31.12.2019 30.09.2019 30.06.2019 31.03.2019 31.12.2018

Liquidity ratioTotal High Quality Liquid Assets 546 402 956 440 772 91 6 1 027 207 1 21 5 682

Total Net Cash Outflows 21 5 934 172 927 201 291 288 495 358 675

Liquidity coverage ratio 253% 553% 384% 356% 339%

* (including National Countercyclical Buffer and items not deducted in application of threshold 3, but risk-weighted with 250%)


REPORT OF THE STATUTORY AUDITOR ON THE CONSOLIDATED FINANCIAL STATEMENTS

As statutory auditor, we have audited the consolidated financial statements of Arab Bank (Switzerland) Ltd., which comprise the balance sheet, income statement, cash flow statement, sta-tement of changes in equity and notes (pages 22 to 51), for the year ended 31 December 2019.

Board of Directors’ responsibilityThe Board of Directors is responsible for the preparation of the consolidated financial statements in accordance with the requirements of Swiss law and the consolidation and valuation principles as set out in the notes. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further res-ponsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our au-dit 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 consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evi-dence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of ma-terial misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the ac-counting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation

of the consolidated 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 consolidated financial statements for the year ended 31 December 2019 comply with Swiss law and the consolidation and valuation principles as set out in the notes.

REPORT ON OTHER LEGAL REQUIREMENTS

We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and indepen-dence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.

We recommend that the consolidated financial statements sub-mitted to you be approved.

Ernst & Young Ltd

Stéphane MullerLicensed audit expert

(Auditor in charge)

Khaled ElfeshaweyLicensed audit expert

Lancy, 19 February 2020

REPORT OF THESTATUTORY AUDITORTO THE GENERAL MEETING OF ARAB BANK (SWITZERLAND) LTD., GENEVA

Ernst & Young LtdRoute de Chancy 59P.O. BoxCH-1213 Lancy

Phone: +41 58 286 56 56Fax: +41 58 286 56 57www.ey.com/ch

54 | ARAB BANK (SWITZERLAND) LTD. ANNUAL REPORT 2019 / FINANCIAL STATEMENTS

54 | ARAB BANK (SWITZERLAND) LTD. ANNUAL REPORT 2019 / FINANCIAL STATEMENTS 55 | ARAB BANK (SWITZERLAND) LTD. ANNUAL REPORT 2019 / FINANCIAL STATEMENTS

FINANCIAL STATEMENTS2019


BALANCE SHEET AND OFF-BALANCE SHEETTRANSACTIONSAT DECEMBER 31, 2019


AssetsLiquid assets 372 374 283 1 044 845 003 - 672 470 720

Amounts due from banks 1 1 47 234 755 819 223 199 328 01 1 556

Amounts due from customers 1 254 996 776 1 290 259 104 - 35 262 328

Mortgage loans 1 92 688 801 81 433 2 13 1 1 1 255 588

Trading portfolio 22 420 496 2 1 871 080 549 41 6

Positive replacement values of derivatives 16 647 561 20 158 437 - 3 510 876

Financial investments 454 698 066 428 203 329 26 494 737

Accrued income and prepaid expenses 40 1 95 061 54 015 1 85 - 1 3 820 1 24

Participations 25 180 398 64 860 545 - 39 680 1 47

Tangible fixed assets 32 559 347 3 1 773 030 786 3 1 7

Other assets 3 436 894 3 385 058 51 836

Total assets 3 562 432 438 3 860 027 183 - 297 594 745

Total subordinated claimsof which with conversion obligation and / or debt waiver

1 2 1 933 309 0

123 6 13 774 0

- 1 680 465 0

LiabilitiesAmounts due to banks 1 678 5 1 8 252 2 139 575 735 - 461 057 483


Negative replacement values of derivatives 26 244 539 22 553 143 3 691 396

Accrued expenses and deferred income 50 930 394 53 923 385 - 2 992 991

Other liabilities 1 810 476 1 1 57 1 67 653 309

Provisions 30 727 377 27 955 988 2 77 1 389

Reserves for general banking risks 80 381 634 80 381 634 0

Share capital 26 700 000 26 700 000 0

Legal retained earnings 22 735 500 22 735 500 0

Voluntary retained earnings 401 000 000 395 500 000 5 500 000

Profit brought forward 491 251 1 1 8 034 373 21 7

Profit for the period 20 186 377 17 1 1 9 6 13 3 066 764

Total liabilities 3 562 432 438 3 860 027 1 83 - 297 594 745

Off-balance sheet transactionsContingent liabilities 462 430 150 395 854 469 66 575 681

Irrevocable commitments 49 254 150 73 41 9 744 - 24 165 594

Credit commitments 39 051 642 4 727 624 34 324 01 9


INCOME STATEMENTAT DECEMBER 31, 2019


Results from interest operations :Interest and discount income 52 962 390 42 379 018 10 583 372

Interest and dividend income from trading portfolio 25 1 323 355 455 - 1 04 1 32

Interest and dividend income from financial investments 7 847 594 8 469 787 - 622 1 93

Interest expense - 36 983 829 - 34 342 690 - 2 641 1 39

Gross results from interest operations 24 077 478 16 861 570 7 215 908

Change in value adjustments due to default risk as well as losses from interest operations - 568 91 6 - 703 968 135 052

Subtotal net results from interest operations 23 508 562 16 157 602 7 350 960

Results from commissions from business and services :Commission income from securities trading and investment activities 1 8 471 01 3 14 523 240 3 947 773

Commission income from lending activities 1 6 1 32 776 15 567 8 1 8 564 958

Commission income from other services 1 325 570 935 642 389 928

Commission expense - 3 1 56 970 - 2 434 291 - 722 679

Subtotal results from commissions from business and services 32 772 389 28 592 409 4 179 980

Net income from trading operations 30 807 681 33 042 708 - 2 235 027

Other results from ordinary activities :

Results from participations 0 68 484 - 68 484

Results from real estate 41 2 760 483 830 - 7 1 070

Other ordinary income 1 61 14 93 1 - 1 4 770

Other ordinary expenses - 1 07 - 7 682 7 575

Subtotal other results from ordinary activities 41 2 81 4 559 563 - 146 749

Total income 87 501 446 78 352 282 9 149 164

Operating expenses :Personnel expenses - 35 576 81 0 - 30 1 1 3 8 1 1 - 5 462 999

General and administrative expenses - 1 4 482 006 - 14 985 986 503 980

Subtotal operating expenses - 50 058 81 6 - 45 099 797 - 4 959 01 9

Gross profit 37 442 630 33 252 485 4 190 145

Value adjustments on participations as well as depreciation on tangible fixed assets - 1 742 1 66 - 16 81 5 487 1 5 073 321

Changes in provisions and other value adjustments as well as losses - 8 526 1 47 - 6 893 014 - 1 633 1 33

Operating result 27 1 74 31 7 9 543 984 1 7 630 333

Extraordinary income 2 658 047 15 870 369 - 1 3 2 1 2 322

Extraordinary expenses - 247 - 60 000 59 753

Taxes - 9 645 740 - 8 234 740 - 1 41 1 000





Profit brought forward 491 251 1 1 8 034 373 21 7

Profit brought forward at the end of the period 20 677 628 17 237 647 3 439 981

The Board of Directors proposes :Distribution of dividends 1 1 246 396 1 1 246 396 0

Allocation to voluntary retained earnings 9 000 000 5 500 000 3 500 000

Surplus allocated to profit brought forward 431 232 491 251 - 60 01 9

As stated above 20 677 628 17 237 647 3 439 981

Upon acceptance of this proposal, the dividendwill be paid as follows :To the shareholders registered in the share book at the date of the Ordinary Shareholder’s Meeting 2020, per share of CHF 0.75 0.3 1 591 0.3 1 591 0.00000

Less 35% Swiss withholding tax - 0. 1 1057 - 0.1 1 057 0.00000

Net per share 0.20534 0.20534 0.00000

PROPOSEDALLOCATION OF EARNINGS


STATEMENT OFCHANGES IN EQUITY

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Shareholders’ equity as at December 31, 2018 26 700 22 736 80 382 395 61 8 1 7 1 20 542 555Dividends and other distributions 0 0 0 0 - 1 1 246 - 1 1 246

Other allocations to (transfers from) other reserves 0 0 0 5 874 - 5 874 0

Profit for the period 0 0 0 0 20 1 86 20 1 86

Shareholders’ equity as at December 31, 2019 26 700 22 736 80 382 401 492 20 1 86 551 495


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 afterwards. It opened a branch in Geneva in June 1964. The Bank head-quarters were located in Zurich until their transfer to Geneva in 2012. The Bank has a branch in Zurich.

The Bank is a public company with 18’835 shareholders (who are also the shareholders of Arab Bank PLC in Amman, Jordan) at the end of 2019.

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 institutio-nal clients, in addition to Commodity Trade Finance and other credit-related products and services for commercial and cor-porate clients.

The Bank operates also via its subsidiary Arab Bank (Switzerland) Lebanon S.A.L., Lebanon and cooperates with its associate company Ubhar Capital SAOC, Oman. Arab Bank (Switzerland) Ltd. employed 124 people on a full-time equiva-lent basis at the end of 2019 (previous year : 106).

FINMA’s regime for banks of category 4 and 5 In 2018, the Swiss Financial Market Supervisory Authority FINMA has defined a new regime for banks of category 4 and 5 that have high levels of capital and liquidity. Participating institutions will be subject to a substantially less complex re-gulatory regime. The regulatory requirements regarding the risk-weighted assets, the net stable funding ratio and disclo-sure are reduced to a minimum. FINMA, in its July 12th, 2018 letter, has accepted Arab Bank (Switzerland) Ltd. in the pilot program.

BUSINESS ACTIVITIES

Wealth Management Wealth Management caters and responds to the private banking needs of its predominantly Middle-Eastern clientele, providing it with tailor-made solutions and access to an open platform covering the full range of wealth management products, Digi-tal Assets, services, mainly investment management, such as advisory services and discretionary portfolio management as well as market research.

Commodity Trade FinanceThe Commodity Trade Finance division of Arab Bank (Switzerland) Ltd. created at the end of 2009 has become a reference name in the commodities trade finance sector. Arab Bank (Switzerland) Ltd. offers tailored made solutions to finance predominantly Commodities Trading companies active in the Soft Commodities, Ferrous and non-Ferrous Me-tals and Energy fields with a particular focus on flows going to or originating from the MENA region.

Credit / Financing products and servicesArab Bank (Switzerland) Ltd. provides a comprehensive range of credit instruments (various types of loans such as Lom-bard loans, mortgages and guarantees) to its private banking clients enabling them to fund their commercial business or leverage their private portfolios. Arab Bank (Switzerland) Ltd. also offers credit solutions including a comprehensive range of commercial loans and documentary products to its Com-modity Trade Finance client’s base of commodities trading companies, local exporters and large corporates.

Treasury and Foreign ExchangeThe Bank provides its clients with a wide range of products and services in Money Market, Foreign Exchange, Precious Metals, Securities Trading and starting 2019 Digital Assets.

NOTES TO THE FINANCIAL STATEMENTS

1 - BUSINESS ACTIVITIESAND PERSONNEL


RISK MANAGEMENT & CONTROL

GeneralThe Bank has established and implemented a comprehensive set of internal policies and procedures in order to manage and monitor the key risks to which it is exposed, and to ensure that all Swiss laws and 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 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, regu-lations and competencies. 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 regarding 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 maturities. The Bank optimizes asset and liability management in accordance with the anticipated interest rate variation and the limits granted. The Bank defines limits for refinancing gaps for the Net Economic Value 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 on a regular basis by the Board of Directors upon the recommendation of Audit Committee.

Legal & Compliance RisksThe Bank implements comprehensive measures to ensure compliance with laws and regulations in order to mitigate legal and reputational risks. The Legal & Compliance department is responsible for supervising these aspects. AML-related risk is subject to Compliance’s continuous focus. Regulatory changes are follow-up upon and are duly and regularly reflected in the Bank’s policies.

Compliance ensures appropriate training of the Bank’s em-ployees on all relevant subjects.

2 - ACCOUNTING POLICIES AND VALUATION PRINCIPLES

General PrinciplesAccounting and valuation principles are governed by the Swiss Code of Obligations, the Federal Law on banks and savings banks, its ordinance and its execution by the Articles of Association and the directives issued by the Swiss Finan-cial Markets Supervisory Authority (FINMA).

The statutory financial statements are presented with reliable presentation in conformity with the FINMA circular 2015/1 – Accounting - Banks.

Recording of transactionsAll operations executed at the date of the balance sheet were accounted for and evaluated according to recognized principles. The results of all operations executed are included in the income statement. Recording in the balance sheet of spot transactions, concluded but not yet settled, is done following the trade date accounting principles.

Timeliness of recognitionIncome and expenses are booked as soon as they are acquired or accrued, or as they are incurred, and booked in the related year, and not on the date they are received or paid.

The most important valuation principles 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 ba-lance sheet closing date, except the participations which are translated at the historical rate. Income and expenses are converted at the exchange rate in force on the transaction 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 :

31.12.2019 31.12.2018USD 0.9678 0.9843EUR 1 .0859 1 . 1 266

Liquid assets and amounts due to / from banks These balances are shown on the balance sheet at the nominal value after deduction of individual bad debt allowances, if any are required.



Claims and liabilities in respect of customers and mortgage loans These 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.

Impaired customer loans are subject to individual valuation and, should the case arise, to an individual value adjustment, directly deducted from this caption, equivalent to the part of the amount which is not secured by collateral, as soon as the loan is reported impaired.

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 generally valued at market prices on the balance sheet date.

Profits and losses on prices are booked to result from trading operations.

Replacement values of derivative financial instrumentsReplacement values of derivative financial instruments are calculated and accounted for in order to take into account the cost or the gain resulting from a potential counterparty delivery failure.

The positive replacement values are accounted for in the balance sheet on the asset side, and the negative replace-ment values on the liability side, for all the derivative financial instruments outstanding at balance sheet date which would result from own account or customer transactions, irrespec-tive of the accounting treatment in the income statement.

Financial investmentsFinancial investments include debt instruments and equity securities.

Debt investments, acquired with the intent to be held until maturity, are carried in the balance sheet under “financial in-vestments”. The difference between the nominal value and the acquisition cost is spread over the period remaining to maturity (accrual method) and booked to the “interest and dividend income on financial investments”.

Equity securities are valued using the lower of cost or market value principle. Adjustments to value are recorded under “Other ordinary expenses” or “Other ordinary income”.


ParticipationsParticipations, held as permanent investments, are recorded at acquisition cost, less appropriate depreciation where necessary.

Tangible Fixed AssetsFixed assets are stated in the balance sheet at their cost price and depreciated 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• Software : 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 exis-ting at the balance sheet date.

Additional general value adjustment could be recorded under “other provision”. Nevertheless, given the lack of precise sta-tistics on the losses history the Bank considers these provi-sions to be hidden reserves.

Reserves for general banking risksReserves for general banking risks are reserves constituted out of prudence with the objective of covering additional banking risks. They are net of tax.

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

Policy applicable in respect of derivative financial instrumentsThe derivative financial instruments are mainly used in opera-tions for the account of customers. To avoid any exposure, the Bank concludes back-to-back transactions on the financial markets.

The Bank uses financial derivative instruments when deemed adequate in order to hedge the foreign currency exposure on its revenues, an important proportion of which derives from underlying assets denominated in foreign currencies, particu-larly in USD and EUR.

Premiums paid or received in relation to these operations are recognized in the balance sheet within the lines positive and negative replacement values.

They are reported prorata temporis in the income statement item which is subject to the hedge transaction until maturity.

The positive or negative replacement values are recognized in the balance sheet. Should a hedge transaction exceed the un-derlying amount to be covered (inefficiency), the amount re-sulting from the excess of hedge would be accounted for in the trading results.


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 services. 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 deposits and payments as well as security incoming and outgoing deliveries, whereby new loans and loan repayments are accounted for. Interests and dividends credited to clients as well as debit interests, commis-sions 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 secu-rity prices.Since 2019, ABS Group offers Digital Assets Services, inclu-ding storage and trading. ABS Group stores all Digital Assets completely segregated from the bank’s holdings and also segregated by client. These digital assets are included in the Client Assets.

Pension PlanArab Bank (Switzerland) Ltd. maintains legally separated welfare schemes for its 124 active insured parties at the date of the balance sheet (2018 : 104) and 49 retired (2018 : 50). The pension plan is based on the Swiss defined contribution system (defined contribution plans). The Bank carries approxi-mately two thirds of the pension cost. The cost carried by the bank is shown under the information on the balance sheet (note “Information on payables to own employee pension fund”).

The pension fund liabilities as well as the plan assets are legally separated from the Bank in fully funded independent foundations. Organization, management and financing of the pension plan are subject to Swiss Federal regulations and to the constitution of the foundations (trust deed) as well as the currently valid regulations of the pension plan.

Subsequent eventsNone.


3 - INFORMATION ON THE BALANCE SHEETAT DECEMBER 31, 2019

TYPE OF COLLATERAL

COLLATERAL FOR LOANS AND OFF-BALANCE SHEETTRANSACTIONS, AS WELL ASDOUBTFUL RECEIVABLESCHF 1 000

MORTGAGE

2019

OTHER

2019

UNSECURED

2019

TOTAL

2019

Loans (before offsetting any value adjustments)Amounts due from customers 5 628 51 5 462 748 942 1 270 032Mortgage loans

- Residential property 1 55 974 0 0 155 974

- Commercial property 31 800 0 0 31 800 - Commercial and industrial real estate 4 91 5 0 0 4 91 5

Total loans (before offsetting any value adjustments) 198 31 7 51 5 462 748 942 1 462 721

Previous year 86 805 592 487 707 278 1 386 570

Total loans (after offsetting any value adjustments) 198 31 7 500 427 748 942 1 447 686

Previous year 86 805 577 609 707 278 1 371 692

Off-balance sheet transactionsContingent liabilities 0 57 294 405 1 36 462 430

Irrevocable commitments 0 1 1 1 84 38 070 49 254Credit commitments 0 0 39 052 39 052

Total off-balance sheet transactions 0 68 478 482 258 550 736

Previous year 0 160 868 3 1 3 1 34 474 002

Gross amount due

Estimated liquidation proceeds

of the collateral Net amount dueIndividual value

adjustments

CHF 1 000 2019 2019 2019 2019

Doubtful receivables 1 6 491 1 456 1 5 035 15 035

Previous year 1 5 232 354 14 878 1 4 878


TRADING PORTFOLIOCHF 1 000 2019 2018

Assets - Trading portfolioDebt instruments, money-market instruments, money-market transactions 0 0

- of which listed 0 0

Equity securities, funds 22 420 21 871

Total assets - Trading portfolio 22 420 21 871

- of which securities allowed for repos as per liquidity provisions 0 0

- of which determined using a valuation model 0 0


TRADING INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS (ASSETS AND LIABILITIES) PO

SITI

VE

REP

LAC

EMEN

T VA

LUE

NEG

ATI

VE

REP

LAC

EMEN

T VA

LUE

CO

NTR

AC

T V

OLU

ME

CHF 1 000 2019 2019 2019

Interest rate instruments

- Swaps 0 0 0

Foreign exchange / precious metal

- Forward contracts 7 228 1 7 531 1 791 256

- Options (OTC) 2 386 1 545 336 682

Participations / indices

- Options (exchange-traded) 7 034 7 034 349 330

Total before netting agreements 16 648 26 1 10 2 477 268

Previous year 20 158 22 421 2 841 882

CHF 1 000

Positive replacement

value(cumulative)

2019

Negative replacement

value (cumulative)

2019

Total after netting agreements 16 648 26 245

Previous year 20 1 58 22 553

HEDGING INSTRUMENTS

POSI

TIV

E R

EPLA

CEM

ENT

VALU

E

NEG

ATI

VE

REP

LAC

EMEN

T VA

LUE

CO

NTR

AC

T V

OLU

ME

2019 2019 2019

0 135 3 843

0 0 0

0 0 0

0 0 0

0 135 3 843

0 132 3 764

BREAKDOWN ACCORDING TO COUNTERPARTIES C

ENTR

AL

CLE

AR

ING

PA

RTI

ES

BA

NK

S A

ND

SE

CU

RIT

IES

DEA

LER

S

OTH

ER C

LIEN

TS

TOTA

L

CHF 1 000 2019 2019 2019 2019

Positive replacement values (after netting agreements) 0 6094 10 554 16 648

Previous year 0 10 550 9 608 20 158


BOOK VALUE FAIR VALUEFINANCIAL INVESTMENTSCHF 1 000 2019 2018 2019 2018

Debt instruments 454 664 428 168 460 409 426 898

- of which held until maturity 454 664 428 168 460 409 426 898

Participations 34 35 42 40

Total 454 698 428 203 460 451 426 938

- of which securities allowed for repos as per liquidity provisions 3 14 585 264 1 53 320 918 262 246

2019

BREAKDOWN OF THE COUNTERPARTY ACCORDING TO RATING CHF 1 000

AAA TO

AA-

A+ TO A-

BBB+ TO

BBB-

BB+ TO B-

LOWER THAN

B- UNRATED TOTAL

Debt instruments : book value 189 615 97 580 38 432 0 0 1 29 037 454 664

The above mentioned ratings have been issued by Standard & Poor’s.

OTHER ASSETS OTHER LIABILITIESOTHER ASSETS AND OTHER LIABILITIESCHF 1 000 2019 2018 2019 2018

Compensation account 39 52 0 0

Indirect tax 462 432 484 420

Escrow account 2 703 2 749 0 0

Not paid dividends 0 0 1 38 144

Other 233 1 52 1 1 88 593

Total 3 437 3 385 1 810 1 1 57

ECONOMIC SITUATION OF OWN EMPLOYEE PENSION FUNDAll members of the Bank's staff are covered by defined contribution pension arrangements provided through pension institution in Switzerland. As at December 31st 2019, there was no economic obligation to be booked in the Bank's balance sheet or income statement. As at December 31st 2018, the coverage of the liabilities for the pension plans was 117.2%.

INFORMATION ON PAYABLES TO OWN EMPLOYEE PENSION FUNDCHF 1 000 2019 2018

Due to own pension plan 5 963 6 804


2019

VALUE ADJUSTMENTS AND PROVISIONS AS WELL AS RESERVES FOR GENERAL BANKING RISKSCHF 1 000 B

ALA

NC

E A

S A

T D

ECEM

BER

31,

2018

USE

IN C

ON

FOR

MIT

YW

ITH

DES

IGN

ATE

D

PUR

POSE

REC

LASS

IFIC

ATI

ON

S

FOR

EIG

N E

XCH

AN

GE

DIF

FER

ENC

ES

OV

ERD

UE

INTE

RES

T,R

ECO

VER

IES

NEW

AD

JUST

MEN

TS

DEB

ITED

TO

INC

OM

E

REL

EASE

S C

RED

ITED

TO

INC

OM

E

BA

LAN

CE

AS

AT

DEC

EMB

ER 3

1, 2

019

Provisions for other business risks 10 0 0 0 0 0 0 1 0Other provisions 27 946 0 0 0 0 5 371 - 2 600 30 717

Total provisions 27 956 0 0 0 0 5 371 - 2 600 30 727

Reserves for general banking risks 80 382 0 0 0 0 0 0 80 382

Value adjustments for default risks and country risks 14 878 0 0 - 255 - 302 71 4 0 15 035

- of which value adjustments for default risks due to doubtful receivables 14 878 0 0 - 255 - 302 7 1 4 0 15 035

The amount of KCHF 80'382 of reserves for general banking risks has been subject to corporate taxes.

2019 2018

SHARE CAPITAL

NOMINALVALUE

CHF 1 000

QUANTITY

CHF 0.75

CAPITAL ELIGIBLE

FOR DIVIDEND

CHF 1 000

NOMINALVALUE

CHF 1 000

QUANTITY

CHF 0.75

CAPITAL ELIGIBLE

FOR DIVIDEND

CHF 1 000

Share capital 26 700 35 600 000 26 700 26 700 35 600 000 26 700

- of which paid up 26 700 35 600 000 26 700 26 700 35 600 000 26 700

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

PRESENTATION OF THE ECONOMIC BENEFIT / OBLIGATION AND THE PRENSION EXPENSES O

VER

FUN

DIN

G/

UN

DER

FUN

DIN

G

ESTI

MAT

E

ECO

NO

MIC

IN

TER

EST

OF

THE

BAN

K

CON

TRIB

UTI

ON

PA

ID

CHA

NG

E FR

OM

TH

E PR

EVIO

US

YEA

R

PEN

SIO

N P

LAN

EX

PEN

SES

IN

PERS

ON

NEL

EX

PEN

SES

31.12.19 2019 2018 2019 2018 2019 2018

Pension Plans without overfunding/underfunding 0 0 0 0 0 3 540 3 202


AMOUNTS DUE FROM AMOUNTS DUE TOAMOUNTS DUE FROM AND DUETO RELATED PARTIESCHF 1 000 2019 2018 2019 2018

ABS Group companies 3 304 2 953 0 0

Associated companies 1 80 360 345 076 1 320 362 1 791 34 1

Transactions with members of governing bodies 90 246 81 767 1 3 97 1 19 838

The “Amounts due from” and “Amounts due to” associated companies represent the interbanks business concluded with Arab Bank Plc., Amman and its subsidiaries.

The “Transactions with members of governing bodies” includes mortgages and contingent liabilities granted at market conditions.

2019 2018

SIGNIFICANT SHAREHOLDERS

NOMINAL VALUE

CHF 1 000

PERCENTAGE

%

NOMINAL VALUE

CHF 1 000

PERCENTAGE

%

With voting shares

Social Security Corporation, Amman (Jordan) 6 049 508 1 7.0 5 696 000 1 6.0



BREAKDOWN OF TOTAL ASSETS ABROADACCORDING TO THE CREDIT RATING OF REGIONS(RISK DOMICILE PRINCIPLE) CHF 1 000 % CHF 1 000 %

AAA 222 961 1 0 3 1 1 466 15

AA+ - AA- 1 236 209 57 487 409 24

A+ - A 23 700 1 30 242 1

BBB+ - BBB- 60 902 3 1 35 1 93 7

BB+ - BB- 35 608 2 20 410 1

B+ - B- 226 270 1 1 760 027 38

CCC+ - D 248 21 9 1 1 0 0

Unrated 98 656 5 281 841 14

Total 2 1 52 525 100 2 026 588 100

The ratings used are the Standard & Poor’s (S&P) ratings for country risks.


FIDUCIARY TRANSACTIONSCHF 1 000 2019 2018

Fiduciary placements with third party companies 1 302 7 1 7 998 972

Fiduciary placements with Arab Bank PLC Amman and its subsidiariesas well as affiliated companies 74 933 186 81 7

Total fiduciary transactions 1 377 650 1 185 789

4 - INFORMATION ON OFF-BALANCE SHEET TRANSACTIONS

ASSETS UNDER MANAGEMENTCHF 1 000 2019 2018

Type of assets under management :Assets in collective investment schemes managed by the Bank 1 59 993 136 554

Assets with administrations’ mandate 1 63 01 3 168 914

Other client assets 3 926 61 9 3 5 1 9 959

Total assets under management (including double-counting) 1) 4 249 625 3 825 427

- of which double counts 159 993 136 554

Total assets under management (excluding double-counting) 1) 4 089 632 3 688 873

Development of assets under management :Total assets under management (including double-counting) at the beginning 3 825 427 3 452 464

+ / - Net new money inflows or outflows 2) 480 680 250 446

+ / - Market price trend, dividends and currency development 133 358 1 22 5 1 7

+ / - Other effects 3) - 189 840 0

Total assets under management (including double-counting) at the end 4 249 625 3 825 427

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.3) The inclusion of the assets under management of some assets has been reassessed. These assets do not comply totally with the above definition 1 and, therefore, they have been excluded.


RESULTS FROM TRADING OPERATIONSCHF 1 000 2019 2018

Participations (including funds) 1 042 - 507

Foreign exchange 29 766 33 550

Total trading results 30 808 33 043

PERSONNEL EXPENSESCHF 1 000 2019 2018

Salaries 29 857 24 765

Social insurance obligations 1 556 1 622

Pension fund 3 540 3 202

Other personnel expenses 624 525

Total personnel expenses 35 577 30 1 14

GENERAL AND ADMINISTRATIVE EXPENSESCHF 1 000 2019 2018

Office space expenses 599 982

Expenses for information technology and telecommunications 2 967 3 059

Outsourcing expenses 3 951 3 546

Expenses for furniture and other equipment 200 247

Audit fees 375 542

- of which for financial and regulatory audits 345 493

- of which for other services 30 49

Other operating expenses 6 390 6 610

Total general and administrative expenses 14 482 14 986

5 - INFORMATION ON THE INCOME STATEMENT

INFORMATION ON SIGNIFICANT NEGATIVE INTERESTS

In 2015, the Swiss National Bank (SNB) introduced negative interest rates of -0.75% on sight deposit account balances with SNB. The paid and accrued SNB negative interests for the year of 2019 amounted to CHF 5.4 million (2018: CHF 7.3 million).


MATERIAL LOSSES, EXTRAORDINARY INCOME AND EXPENSESAS WELL AS RELEASE OF SIGNIFICANT HIDDEN RESERVES,RESERVES FOR GENERAL BANKING RISKS AND VALUEADJUSTMENTS AND PROVISIONS NO LONGER NECESSARYCHF 1 000 2019 2018

Extraordinary incomeRelease of provisions 2 600 15 545

Other extraordinary income 58 325

Total extraordinary income 2 658 15 870

Extraordinary expensesOther extraordinary expenses 0 60

Total extraordinary expenses 0 60

CURRENT AND DEFERRED TAXESCHF 1 000 2019 2018

Current taxes 9 646 8 235

Total taxes 9 646 8 235

The average tax rate was 32.3% of the results for the period before taxes in the current year (previous year: 32.5%).


CHF 1 000 2019 2018

Eligible capitalCommon Equity Tier 1 Capital (CET1) 539 283 505 961

Eligible core capital 539 283 505 961

Required capitalCredit risks 1 29 046 1 2 1 437

Non-counterparty-related risks 2 528 2 528

Market risks 1 4 1 26 1 4 7 1 3

Operational risks 10 606 9 743

Other capital requirement * 0 7 936

Participations in financial sector entities to be consolidated 8 056 0

Total required capital 164 362 156 357

Solvency ratio 26% 26%

Leverage ratioLeverage ratio exposure 3 783 424 4 009 879

Leverage ratio 14% 13%

6 - CAPITAL ADEQUACY AND LIQUIDITY DISCLOSURE

CHF 1 000 31.12.2019 30.09.2019 30.06.2019 31.03.2019 31.12.2018

Liquidity ratioTotal High Quality Liquid Assets 545 843 955 890 772 379 1 026 681 1 21 5 144

Total Net Cash Outflows 2 1 5 934 1 72 91 3 201 291 288 495 365 646

Liquidity coverage ratio 253% 553% 384% 356% 332%

* (including National Countercyclical Buffer and items not deducted in application of threshold 3, but risk-weighted with 250%)


REPORT OF THE STATUTORY AUDITOR ON THE FINANCIAL STATEMENTS

As statutory auditor, we have audited the financial statements of Arab Bank (Switzerland) Ltd., which comprise the balance sheet, income statement, statement of changes in equity and notes (pages 56 to 80), for the year ended 31 December 2019.

Board of Directors’ responsibilityThe Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintai-ning 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 accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in ac-cordance 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 procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, 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 opinion on the effectiveness of the entity’s internal control system. An audit also includes eva-luating the appropriateness 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 suffi-cient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements for the year ended 31 December 2019 comply with Swiss law and the company’s articles of incorporation.

REPORT ON OTHER LEGAL REQUIREMENTS

We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and indepen-dence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the pre-paration of financial statements according to the instructions of the Board of Directors.

We further confirm that the proposed appropriation of avai-lable earnings complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.

Ernst & Young Ltd

Stéphane MullerLicensed audit expert

(Auditor in charge)

Khaled ElfeshaweyLicensed audit expert

Lancy, 19 February 2020

REPORT OF THESTATUTORY AUDITORTO THE GENERAL MEETING OF ARAB BANK (SWITZERLAND) LTD., GENEVA

Ernst & Young LtdRoute de Chancy 59P.O. BoxCH-1213 Lancy

Phone: +41 58 286 56 56Fax: +41 58 286 56 57www.ey.com/ch

58TH ANNUAL REPORT 2019

58th annual report 2019 - arab bank · member of the board of directors chairman of the board audit...

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