As we reflect on the close of this challenging year, our thoughts are with the resilient Bank of Palestine family, especially those affected by the war in Gaza. Despite the adversity, our dedicated staff persevered, displaying unwavering commitment to our clients and the community.
In Gaza, our employees demonstrated exceptional courage, ensuring essential services continued amid perilous conditions. We honor their sacrifice and extend support to those enduring the aftermath. In the West Bank, our teams seamlessly transitioned, upholding operational excellence and assisting clients affected by the conflict.
The milestones achieved in 2023 underscore our strategic growth initiatives. A robust 5-year plan focusing on digital transformation, SME and retail segments, fintech innovation targeting unbanked and micro businesses, and regional expansion in GCC and the levant positions us for sustained success. Our emphasis on employee talent development and sustainability commitments aligns with international standards.
Engagements with development banks fortified our financial standing, with significant investments and partnerships supporting SMEs and digital inclusion. The strategy was also guided by focus on enhancing our Sustainability Commitments and ESG plans, adopting international standards and achieving milestones at home. Bank of Palestine participated in COP 28 in the UAE and was able to engage partners, showcasing our work on entrepreneurship and financial inclusion.
Amidst the tragic events, our crisis management prioritized employee safety, client service, and community support. The bank provided shelter, food and financial assistance to the 500 staff in Gaza. We continued to operate ATMS in Southern Gaza and converted the network of POS machines into cash machines, and supported humanitarian agencies by providing cash and e voucher solutions through our subsidiary PalPay. Finally, the bank donated USD$1 million to international humanitarian organizations and local NGOs, benefiting over 250,000 persons in Gaza. Our contributions to humanitarian efforts, innovative fintech solutions, and partnerships with Ibtikar Fund and Intersect Innovation Hub reflect our commitment to rebuilding Palestine's entrepreneurial ecosystem. Key initiatives are two vehicles being developed for release in 2024: SAFE Palestine and RISE Palestine.
2023 was a year of engagements with development banks to enhance the bank's capital adequacy, liquidity and its technical needs. Some achievements to report include:
- Japan International Cooperation Agency JICA- Investment of USD$30 million Additional Tier 1 Equity.
- Proparco the Investment arm of the French Development Agency AFD - Renewal of USD$20 million ARIZ Portfolio Guarantee Program for SMEs as well as finalization of Technical Assistance package for digital and financial inclusion.
- Arab Fund in Kuwait -Investment of USD$30 million Tier 2 capital subordinated loan to support SMEs.
Financially, the bank remains resilient. Proactive measures, increased credit provisions, and collaboration with international partners ensure our ability to weather the challenges ahead. In reference to our contingency planning, we conducted stress testing with worst-case scenario:
- Bank entered the crisis with resounding financial results with net profits increasing by 35% before the extraordinary credit provisions in Q3 2023.
- Bank can withstand the shocks of war and will remain liquid as it successfully passed several stress testing scenarios conducted since the beginning of this war. Our Liquidity Coverage Ratio in Q3 was 373% and our Capital Adequacy Ratio reached 16.10%.
- Bank took precautionary measures and increased its credit impairments provisions by 240% in Q3 to absorb any losses resulting from the war and aims to have high provision coverage ratio.
As we engage with the international community, our focus remains on economic recovery, fostering resilience, and preparing for the post-war era. We acknowledge the collective pain but stand firm in our commitment to creating value for shareholders and serving our community during these unprecedented times.
In closing, I express sincere gratitude for your unwavering support and confidence. Together, we navigate challenges, achieve milestones, and look forward to a future of healing, recovery, and reconstruction.
Thank you for your trust.
Hashim Shawa
Chairman
Bank of Palestine Group