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ANNUAL REPORT 07
At BLOM BANK, our mission has always been tospread “Peace of Mind” in the region and all
around the world through our international network.The universal banking services provided by our group
andour concern tomaximize customer satisfaction constitutethe key elements for the success of our mission.
Dr. Naaman AZHARI - Chairman of BLOM BANK GROUPMr. Saad AZHARI - Chairman and General Manager of BLOM BANK S.A.L
CHAIRMAN’S LETTER 09GROUP CHART 11EVOLUTION OF MAIN INDICATORS 12FINANCIAL RATIOS 13BLOM BANK CUSTOMER DEPOSITS EVOLUTION 14STRONG AND CONTINUOUS GROWTH FOR THE LAST 5 YEARS 15BLOM BANK SAL BOARD OF DIRECTORS 18BLOM BANK’S MAJOR SHAREHOLDERS AND GENERAL MANAGEMENT 19BLOM BANK ORGANIZATIONAL CHART 21MANAGEMENT DISCUSSION AND ANALYSIS
1. OPERATING ENVIRONMENT 252. OVERVIEW 303. EVOLUTION OF TOTAL ASSETS 314. SOURCES OF FUNDS 325. USES OF FUNDS 356. LIQUIDITY 467. PROFITABILITY 478. DIVIDEND DISTRIBUTION AND PREFERRED SHARES REVENUES 589. CAPITAL ADEQUACY RATIO 5810. INTEREST RATE RISK 5911. RISK MANAGEMENT AND BASEL II PREPARATIONS 5912. UNIVERSAL BANKING SERVICES 6113. INFORMATION SYSTEMS AND TECHNOLOGY 6414. PEOPLE DEVELOPMENT 6715. BANK’S OPERATIONAL EFFICIENCY 6816. REGIONAL EXPANSION 68
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF BLOM BANK SAL 74CONSOLIDATED INCOME STATEMENT YEAR ENDED 31 DECEMBER 2007 75CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2007 76CONSOLIDATED CASH FLOWS STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 78CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2007 80NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 83BLOM BANK’S WORLDWIDE CORRESPONDENT BANKS 164BLOM BANK GROUP DIRECTORY 166
SUMMARY
08
Mr. Saad AZHARI - Chairman and General Manager of BLOM BANK S.A.L
CHAIRMAN’S LETTER
True to its record, BLOM BANK has remained at the forefront of the Lebanese banking system in 2007.It proved itself once again to be a solid and successful financial institution, earning the highest levelof profits among Lebanese banks at $204.7 million. This was 13.53% higher than the 2006 level, and itwas largely a product of its managerial and financial efficiency as reflected in an effective cost toincome ratio of 34.6% -- the lowest among the leading banks. The banks’ consolidated balance sheetalso saw a significant increase, rising by 17% each for assets and deposits to reach $16,628 millionand $13,737 million respectively. Also significant was the increase in loans -- especially to serviceclients in regional markets -- to $2,772 million that lifted the loans to deposits ratio from 16.9% to20.2%. All this has happened within an operating framework that maintained high levels of liquidityand strong asset quality to better manage risk and to ensure clients’ “peace of mind”. Thus immediatenet liquidity in Lebanese Pounds and foreign currencies stood at a comfortable 105.9% and 63.2%respectively; whereas the ratios of gross non-performing loans and loan loss reserves were arespectable 7.9% and 95.55%. Also, in terms of capital adequacy and its new risk adjustmentsaccording to the standardized approach, BLOM Bank’s ratios reached healthy values of 29.05% and14.6% according to Basel I and Basel II respectively.
These achievements of BLOM BANK did not translate to the highest profitability in absolute measuresonly, but also included relative measures. In terms of returns on average assets and equity, BLOMretained the highest ratios among leading Lebanese banks at 1.33% and 15.65% respectively. Thiswas reflected in financial markets, as the price of BLOM’s GDR (Global Depository Receipts)increased by 50.5% to close the year 2007 at $90.2. In addition, the Bank’s General Assembly ofShareholders on the 9th of April 2008 approved as follows the distribution of dividends for the financialyear 2007: preferred shares 2002 issue received $15 each, and their corresponding 2004 and 2005issues $8.5 and $9.5 respectively; whereas each of the listed common shares and GDRs got theequivalent of $3.65 per share.
This commendable performance under difficult circumstances in the Lebanese economy attractedseveral awards and marks of excellence in 2007 from reputable ranking and rating institutions. TheBank was awarded “Best Bank in Lebanon” from Global Finance; “Highest Financial Strength Ratingat BBB” from Capital Intelligence; “Highest National Rating at Aa1.lb” from Moody’s; “Best TradeFinance”, “Best Foreign Exchange”, and “Best Customer Internet” Bank from Global Finance; “BestUse of Technology in the Middle East” from The Banker Middle East; and “Best Deal of the Year” fromthe Banker.
Despite the climate of political uncertainty, Lebanon’s economy managed to grow by 3% in real termsin 2007. Also noteworthy was a solid fiscal performance that saw net debt – at $39.1 billion – fall asa ratio of Gross Domestic Product to 162% and primary surplus rise as a similar ratio to 3%, an outcomeof improving tax revenues and Paris III donor support.
And, true to its history, the Lebanese banking sector was the backbone of the economy in 2007, continuingundeterred its healthy domestic growth and foreign expansion. All the basic indicators from the financialsof its domestic operations were up: assets increased by 10.6% to $82.2 billion; deposits by 11.4% to $67.5billion; loans by 11.7% to $23.9 billion; and capital by 10.5% to $6.3 billion. And the banking system hascrowned these accomplishments by continuing its sustained profitability, with net profits increasing by11.8% to $850million. But perhaps the current defining feature of the Lebanese banking sector is its foreignexpansion. The result is that there are currently 17 Lebanese banks with presence in 20 foreign countriesencompassing more than 150 banking units and corresponding to around 15% of banks’ total activities. Ofcourse, the banking system’s performance was greatly facilitated by the supervisory oversight of Banquedu Liban (BdL). Regulatory directives fromBdL ensured that banks have remained well capitalized, at morethan 12% according to Basel II; and also ensured that banks have stayed away from the asset classesthat engendered the credit crises in the US and elsewhere in late 2007. In addition, BdL continued itssound monetary management of the economy, preserving the exchange rate peg and amassing morethan $12 billion in foreign reserves, ensuring in the process both liquidity and stability in financial markets.
09
In this context, BLOM BANK’s success rests on a two-pronged strategy of geographical expansionand service diversification, so as to evolve the bank to a regional, universal Bank. BLOM BANKcurrently stands to be the Lebanese bank with the largest overseas activities, where overseasassets and profits represent 36% and 24% of total assets and profits respectively. It is present inten countries: Lebanon (BLOM BANK), Syria (Bank of Syria and Overseas, BSO), Jordan (BLOMBANK), Egypt (BLOM BANK EGYPT), UAE (BLOM BANK FRANCE), France, England, and Romania(BLOM BANK FRANCE), Cyprus (BLOM BANK), and Switzerland (BLOM BANK (SWITZERLAND)).The Bank also obtained a license to open a Representative Office in Abu Dhabi in 2007; and hasbeen granted licenses to operate an investment company in Saudi Arabia, BLOMINVEST SaudiArabia, in mid 2008, and to start a private and corporate bank in Qatar in late 2008. Also, in relation toexpansion in individual countries, BSO opened a new branch in Aleppo in 2007 that increased thenumber of branches to 10, expected to increase to 20 in 2008; two new branches were opened inJordan, and two more are planned to open in 2008, raising the total to 7.In addition, BLOM BANK EGYPT continued with its robust expansion, increasing its number ofbranches to 20 in 2007 and aiming to raise it to 30 in 2008. And not to forget Lebanon, four additionalbranches were inaugurated in 2007, and we look forward to add more new branches in 2008,mainly in the areas of Furn El Cheback, Dekwaneh, Sodeco, Choueifat, and Abbasya.
As important, geographic diversification has been coupled with a process of product and servicesdiversification to support the Bank’s universal banking model. BLOM BANK’s banking services nowinclude retail, corporate, investment, asset management, Islamic, and private banking, in addition toinsurance. This has also led to diversification in the sources of income, where fee income nowconstitutes 24% of operating income, increasing in 2007 by 19.4% compared to an increase by 11.4%in net interest income. In turn, the sources of interest income have undergone diversification andmore balance as well, comprising 42% from inter-bank deposits, 29% from government securities, and29% from customer loans. In this respect also, the activities of BLOMINVEST BANK, the investmentarm of BLOM BANK, have been upgraded and widened as a conduit to increase diversification ofservices and income. One prominent product of such widened specialization by BLOMINVEST hasbeen in the area of asset management, where it established a balanced growth fund, the BLOMCedars Balanced Fund, the first of its kind in Lebanon combining both fixed income assets and equities.
And last but not least, a notable undertaking by the Bank has been the development of a corporategovernance code in 2007, to be applied starting 2008. The Bank is fully aware of the importance ofsuch a code, not only for the healthy functioning of the institution but also for the confidence and trustthat it sheds to all stakeholders. As a result, the code is built to the highest standards, as proposed bythe Basel Committee, and covers all crucial elements that make up an effective governing system.Notable among them are those that relate to the Board of Directors, its role (effective governanceover the Bank for the benefit of shareholders), structure (majority of independent directors), andcommittees (audit, risk management, strategy, and nomination and remuneration). In addition, it coverselements of transparency and stakeholders relations, ranging from the adoption of internationallyrecognized accounting standards, public disclosure rules, code of conduct and banking ethics, tostaff, customers, and suppliers relations.
In conclusion, I would like to pledge that BLOM BANK will continue in its geographical and businessexpansion while remaining true to its core values of safety, outstanding customer service, long-termshareholder value, and responsible corporate citizenship in each of our countries of presence.I would also like to thank the managers and staff for their dedication and hard work.
Saad AzhariChairman and General Manager
10
BLOM BANK GROUP CHART
33.33%
BLOM BANK GROUP CHART
50%
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Free
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BLOM BANK FRANCE S.A.
Head Office: ParisBranches: London • Dubai • Sharjah
Romania (6)
99.99% BLOM BANK (SWITZERLAND) S.A.
Head Office: Geneva
100%
BLOM BANK EGYPT S.A.A.
Head Office: CairoBranches: Egypt (24)
99.37%
BLOMINVEST BANK S.A.L.
Head Office: Beirut
99.88% BLOM DEVELOPMENT BANK S.A.L.
Head Office: Beirut
66.64%
AROPE INSURANCE S.A.L.
Head Office: BeirutBranches Lebanon (9)
AROPE SYRIASyria International Insurance
Head Office: DamascusBranch Aleppo
88.56%
10%
Head Office: DamascusBranches: Syria (12)
39.00%
34%
5%BANK OF SYRIA & OVERSEAS S.A.A.
BLOMINVEST SAUDI ARABIA *10%
Head Office: Riyadh
99% BLOM BANK QATAR L.L.C *
Head Office: Doha
* Under Establishment
BLOM EGYPT SECURITIES
Head Office: Cairo
99.97%
11
EVOLUTION OF MAIN INDICATORSFINANCIAL RATIOS
TOTAL ASSETS
LBPUSD
CUSTOMER DEPOSITS
LBPUSD
TOTAL NET LIQUIDITY
LBPUSD
SHAREHOLDERS’ EQUITY
LBPUSD
CAPITAL FUNDS
LBPUSD
TOTAL LOANS AND ADVANCES
LBPUSD
NET INCOME AFTER TAX
LBPUSD
EVOLUTION OF MAIN INDICATORS (in millions)
25,067.01416,628.202
20,708.51613,736.992
15,839.11110,506.873
2,063.1851,368.614
2,092.4091,387.999
4,179.3072,772.343
308,586204.70
21,424.61114,212.014
17,690.38111,734.913
15,946.89510,578.371
1,880.3871,247.355
1,916.5441,271.339
2,996.6981,987.859
271.804180.301
2007 2006
17.00%17.00%
17.06%17.06%
-0.68%-0.68%
9.72%9.72%
9.18%9.18%
39.46%39.46%
13.53%13.53%
Change06/07
12
LIQUIDITY RATIOSNet liquidity in LBPNet immediate liquidityLiquid assets over total assets
LOANS TO DEPOSITS RATIOSLBPF/CTotal
ASSETS QUALITY - NOT INCLUDING GENERAL PROVISIONNet doubtful loans over total loansProvision over doubtful loansProvision over total loansGross doubtful loans/ Gross total loans
CAPITAL ADEQUACY RATIOSBefore dividend distributionAfter dividend distribution
PROFITABILITY RATIOSReturn on average equityReturn on average assetsEarnings per share USDDividend per common share USDDividend payout ratioRetention RatioNet asset value per common share USD
FINANCIAL RATIOS (in % or USD)
109.8%78.26%74.39%
7.96%18.96%16.94%
2.02%82.35%8.85%
10.25%
39.50%36.35%
16.81%1.38%
7.29 USD3.32 USD
45.98%54.02%
44.41 USD
105.93%63.24%63.19%
9.98%22.11%20.18%
1.68%80.40%8.19%7.92%
31.53%29.05%
15.65%1.33%
8.22 USD3.65 USD44.39%55.61%
48.77 USD
20062007
13
CUSTOMER DEPOSITS EVOLUTIONSTRONG AND CONTINUOUS GROWTH FOR THE LAST 5 YEARS
1995
2001
2002
2003
2004
2005
2006
2007
1996
1997
1998
1999
2000
14000
12000
10000
8000
6000
4000
2000
0
Years
1991
1992
1993
1994
Deposits(inmillionsofUSD)
Customer Deposits Evolution (in USD Millions)
16000
504 595 8711,259
1,605
2,686
3,3333,861
4,330
13,737
11,735
10,161
8,992
7,686
6,215
5,5255,056
14
1400
1200
1000
800
600
400
200
0
Tier I & Tier II capital (in USD Millions)
2003 2004 2005 2006 2007
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
10,835
11,918
14,212
16,628
Total assets (in USD Millions)
100
50
0
Net profits (in USD Millions)
150
16,000
8,786
2003 2004 2005 2006 2007
91.15
136.85
180.30
204.7
88.3
200
790.61
957.8
1,271.34
1,388.00
638.38
2003 2004 2005 2006 2007
18,000
250
1600
15
Strong and Continuous Growth for the Last 5 Years
BLOM BANK S.A.L BOARD OF DIRECTORSBLOM BANK S.A.L MAJOR SHAREHOLDERS AND GENERAL MANAGEMENT
Mr. Saad AZHARI
Chairmanand General Manager
H.E. Sheikh Ghassan SHAKER,Grand Officier de la Légion d’Honneur
Mr. Habib RAHAL
General Manager Mr. Joseph Emile KHARRAT
Mr. Nicolas Nicolas SAADE
Sheikh Salim Boutros EL- KHOURY
H.E Me. Youssef Selim TAKLA
Mr. Samer AZHARI
Group Secretary General
Directors
Dr. Fadi OSSEIRAN
Chairmanof the BLOM BANK GroupDr. Naaman AZHARI
Mr. Marwan JAROUDI18
BLOM BANK S.A.L Board of Directors
BLOM BANK S.A.L Major Common Shareholders
* Total common shares: 21,500,000** Starting 1998, and after the issuance of Global Depositary Receipts (GDR) by BLOMBANK Shareholders, the Bank of NewYork as Depositary, became shareholder on the Bank’s register.*** The major shareholders of Banorabe Holding are the same as in BLOM BANK S.A.L (except Bank of New York and AZAHolding).
Dr. Naaman AZHARI - Chairman of the GroupMr. Samer AZHARI - Group Secretary General
BLOM BANK General Management
Mr. Saad AZHARI - Chairman and General ManagerMr. Habib RAHAL - General ManagerMr. Amr AZHARI - General Manager
Chairman’s Advisors
Mr. Fawaz KAYAL - Sheikh Fahim MOADAD**
Mr. Elias ARACTINGI - Planning & Organization Department, Retail Banking Department
(** Fomerly Vice Governor of the Central Bank of Lebanon)
General Management Consultants
Mr. Georges SAYEGHMr. Adnan SALLAKH
Bank of New York**Banorabe Holding***AZA Holding (Azhari Family over 50%)Azhari FamilyActionnaires Unis (Azhari Family over 50%)Shaker Holdings S.A.L. (Shaker Family)Mrs. Nada AoueiniJaroudy FamilySaade FamilyKhoury FamilyOthers
11.4 %9.33 %2.86 %
34.37 %
5.39 %5 %
4.92 %
1.83 %
2.02 %20.07 %
2.81 %
% of Total Common Shares*
19
BLOM BANK GENERAL MANAGEMENTBLOM BANK’S ORGANIZATINAL CHART
DEPARTMENTS & UNITS *
Accounting
Administration
Anti Money Laundering Unit
Back Office Operations
Communication & Investor Relations
Corporate Unit
Credit
Engineering
Follow Up
Foreign Exchange
Human Resources
Information Systems
Information System Security Unit
Internal Audit
Internal Audit /Group Inspection
International Affairs & Treasury
IT Operations
Legal
Marketing
Marketing Overseas
Marketing Overseas
Recovery & General Management Secretariat Unit
Regional Marketing
Regional Marketing
Retail Credit
Retail Marketing
Risk Management
Strategic Planning & Organization
Trade Finance
* By alphabetical order
20
MANAGEMENT
Mr. Talal BABA - Senior Manager
Mr. Samih ZEINEDDINE - Senior Manager
Mr. Malek COSTA - Head of Unit
Mr. Mekhael KAZZI - Senior Manager
Dr. Gladys YOUNES - Manager
Mr. Samir KASSIS - Senior Manager
Mr.Moustapha GHALAYINI - Senior Manager
Mr. Mohamed BIZRI - Manager
Mr. Riad TABBARAH - Senior Manager
Mr. Wassim KHODR - Manager
Dr Pierre ABOU EZZE - Senior Manager
Mr. Antoine LAWANDOS - Senior Manager
Ms. Aya YAMOUT - Head of Unit
Mr. Ramzi TARABICHI - Senior Manager
Mr. Naoum RAPHAEL - Senior Manager
Mr. Grégoire AZAR - Senior Manager
Mr. Mohamed SOUBRA - Senior Manager
Me. Aimee SAYEGH - Senior Manager
Mr. Michel GHANEM - Manager
Mr. Fouad SAID - Senior Manager
Mr. Marcel ABOU JAOUDE - Manager
Mr. Charles HADDAD - Head of Unit
Mr. Elias MOKHACHEN - Senior Manager
Mr. Georges CHEDID - Senior Manager
Mr. Imad KADI - Manager
Mrs. Jocelyne CHAHWAN - Senior Manager
Mr. Gerard RIZK - Manager
Mr. Rabih HALABI - Manager
Mr. Jacques SABOUNGI - Senior Manager
BLOM BANK S.A.L Central Departments & Units
BLOM BANK’S ORGANIZATIONAL CHART
SHAREHOLDERS
BOARD OF DIRECTORS
BOARD COMMITTEES
Board Audit CommitteeBoard Risk Management Committee
Consulting, Strategy & Corporate Governance CommitteeNomination & Renumeration Committee
EXTERNAL AUDITORS
Ernst&Young-Semaan,Gholam&Co.
SOLICITORS
H.E. ME. Mohamad JAROUDIMe. Georges ABOU ZAMEL
Me. Antoine MERHEB
DEPARTMENTS/ UNITS MANAGEMENT COMMITTEES
Accounting
Administration
Anti-Money Laundering Unit
Back Office Operations
Communication & Investor Relations
Corporate Unit
Credit
Engineering
Follow Up
Foreign Exchange
Human Resources
Information Systems
Information System Security Unit
Internal Audit
Internal Audit /Group Inspection
IT Operations
Legal
Marketing
Executive Committee
Credit Committee 1
Credit Committee 2
Exceptional Credit Committee
Follow-up Credit Risk Committee
Provisions Committee
Retail Credit Committee
Assets & Liabilities Committee
Investment & Treasury Committee
Marketing Committee
Information Technology Committee
Human Resources Committee
Internal Audit Committee
Legal Committee
Operations& Internal Procedures Committee
ForeignBranches&Subsidaries Committee
Compliance Committee
Purchasing & Maintenance Committee
Marketing Overseas (2)
21
Information System Securitiy Committee
Branch Managers
53 in Lebanon,1 in Cyprus
1 in Damascus Free Zone6 in Jordan
1 Chief Representative in AbuDhabi
Recovery & General ManagementSecretariat Unit
Regional Marketing (2)
Retail Credit
Retail Marketing
Risk Management
Strategic Planning & Organization
Trade Finance
International Affairs & Treasury
MANAGEMENT DISCUSSION & ANALYSIS 2007
1. OPERATING ENVIRONMENT
1. OPERATING ENVIRONMENT
Despite the political tensions, the economy recovered slowly in the year 2007 afterthe overwhelming adverse effects of the July 2006 war. This was driven mainly by thestrong external assistance that Lebanon received from the Paris III International DonorConference in January 2007. The Lebanese government presented an ambitious five-year program toParis III, designed to address the country’s fiscal deficit, maintain macroeconomic stability,promote privatization and improve living standards. While the financial assistance was partlymadeavailable, the economic reformsare still on theagenda,waiting for anend to thepolitical impasse.
Backed by the success of the Paris III conference and the financial support received, real GDPgrowth bounced back to the positive rate of 3% after a clear contraction due to the destructiveevents of July 2006. This growth was further promoted by the good performance of the construction,financial and services sectors. Despite the increase in international commodity prices and theweakening of the US dollar, inflation retreated slightly to 6% in 2007, down from the high of 7%caused by the supply shortages during the 2006 conflict.
The trade and current account deficits widened up as exports and especially importswere buoyant in 2007. Total exports increased by 23.4% to $2.8 billion and importswent up 25.7% reaching $11.8 billion. As a result of the higher trade deficit and theparticular drop in foreign direct investment (FDI), the balance of payments declinedto $2 billion from $3 billion in the previous year. The net foreign assets at the centralBank declined by $580M and the foreign debt stood at $21.3 billion, representing89.1% of GDP.
The country’s budget deficit improved by 24.5% to $2.3 billion in 2007, driven by strong VAT revenues,increasing telecom revenues as well as the Paris III grants. Nevertheless, the gaping holes inexpenditures remain increasing interest payments and transfers to EDL. Consequently, theratio of gross public debt to GDP stabilized at 173%.
Management discussion & analysis 2007
25
1. OPERATING ENVIRONMENT
Financial markets showed strong resilience and monetary stability was sustained by theexchange rate peg. The average interbank rate stood at an average of 4.2% in 2007, down from4.6% a year earlier as the impact of the 2006 conflict slowly faded away. Money demandremained robust with broad money increasing by 12.5% in 2007 compared to 8.4% in 2006.Dollarization widened in 2007, registering ratios higher than those prior to the July 2006 conflict. Assuch, deposit dollarization increased from 76% in 2006 to 78.1% while dollarization of loanswent up from 84% to 84.5%. Interest rates on the Lebanese Pound declined slightly in 2007 to7.4% helped by the favourable effects of Paris III and monetary stability that outweighed anyadverse effect from the international global credit crisis. Interest rates in USD widened from4.71% to 4.75% as they were slightly affected by higher political risk. The value of clearedcheck jumped by 19.17% to $38.7 billion in 2007. Lebanese Pound denominated cleared checksaccounted for 23% of total cleared checks’ value while foreign currency denominated cleared checkrepresented 77% of the total value.
In the banking sector, the consolidated balance sheets of the commercial banks mirrored thestrong momentum of the sector. As such, the balance sheet of domestic banks stood at $82.2billion in 2007, with a yearly increase of 10.7%. The sector’s high profitability was reflected ina 12% increase over the previous year to $847M while its capitalisation went up 10.5% to $6.3billion. Customer deposits and loans rose by 11.4% and 11.7% to $67.5 billion and $23.9 billionrespectively.
The stock market recovered in 2007 despite the political impasse and global financial marketsturbulence. In fact, after a 9.5% decline in 2006, the BLOM Stock Index (BSI), Lebanon’sbenchmark index, picked up by 27% in 2007 to close at 1501.7. Market capitalisation increased32.5% to $10.2 B while total market turnover dropped by 51% to $991.8 million. On the otherside, the Eurobond market stayed dormant and witnessed very limited trading throughout theyear.
With the continuing political stalemate, the country’s rating started to slip with Standard &Poor’s downgrading Lebanon’s long term foreign currency sovereign securities from B- to CC+while Moody’s maintained its B3 rating. In the absence of an active parliament, many actionsthat was present on the Paris III reform agenda have been suspended, with the outlook of theeconomy closely depending on a possible solution to the political impasse in the country.
26
Key Indicators
Notes: Data included in “BLOM’s Environment” are based on several sources.- Public finance, public debt, interest payments and cost of debt are based on the Ministry ofFinance’s publications.- Trade balance, FX reserves, cleared checks, balance of payments and banking sector’sperformance are based on Banque du Liban’s publications.- GDP figures are based on IMF estimations.- Stock market data, interbank rate, domestic interest spread and average eurobonds yieldare based on calculations performed by the Economic Research Department at BLOMINVESTBANK s.a.l.
USD Millions or %GDP Growth RateEstimated InflationBalance of PaymentsTrade DeficitBudget DeficitLP/USDExternal DebtGross Public DebtGross FX ReservesBanks’ AssetsBLOM Stock Index
20060.0%7.0%
$2,749.5$7,117$3,040
$1,507.5$20,430$40,466$12,975$74,2931,185
20073.0%6.0%
$2,036.6$9,004$2,294
$1,507.5$21,249$42,060$12,395$82,2551,502
% Change300 b.p.-100 b.p.(25.9%)26.5%(24.5%)0.0%4.0%3.9%
(4.47%)10.72%26.8%
Management discussion & analysis 2007
27
2. OVERVIEW3. EVOLUTION OF TOTAL ASSETS
2. OVERVIEW
BLOM BANK accomplished in 2007 another successful year, marked by a solid financialposition, a diversification of services on offer and an increasing regional presence.
BLOM BANK’s strong stand as the leading banking group in Lebanon was reflected by thenumber of awards accredited to it in the year 2007:
- “Best Bank in Lebanon” from Global Finance-February 2008- “Best Trade Finance in the Middle East” from Banker Middle East-January 2008- “Best Trade Finance Bank in Lebanon” from Global Finance-December 2007- “Best Foreign Exchange Bank in Lebanon” from Global Finance-December 2007- “Best Consumer Internet Bank” from Global Finance- July 2007- “Best Bank in Lebanon” from Global Finance- April 2007- “Deal of the Year in Lebanon” from the Banker-April 2007- “Best use of Technology in the Middle East” from the Banker Middle East- May 2007
BLOM BANK continued to maintain the highest financial ratings in Lebanon. As such, the Bankhas been rated by Capital Intelligence, a Middle East-specialized rating agency, “BBB-” ,which is the highest financial strength rating in Lebanon and has received the highestnational score rating “Aa1.lb” from Moody’s.
In 2007, BLOM BANK confirmed its position as the most profitable bank of Lebanon, with netprofits reaching $204.7m and as one of the largest banks in the country with total assets of$16.6bn and total customer deposits of $13.7bn at year end 2007.
In 2007 also, BLOM BANK continued with its strategy of geographic and business servicesdiversification. Foreign expansion not only spreads the risk of operating mainly in Lebanon,but also takes advantage of the economic and business opportunities opening up in theregional economies and of their liberal financial policies. In this respect, 2007 saw the Bankoperate in ten countries: Lebanon, Syria, Egypt, Jordan, UAE, France, Switzerland, England,Cyprus and Romania. In addition, the Bank has developed further its retail network byopening new branches in Egypt, Jordan and Syria. In Lebanon, the Bank inaugurated in 2007four new branches in the areas of Tabaris (Beirut), Jbeil, Mina El Hosn and Hamra Street(Retail Branch). In addition, BLOM BANK was recently awarded licenses to establish aninvestment bank in Saudi Arabia, BLOMINVEST Saudi Arabia, as well as a representativeoffice in Abu Dhabi (UAE) and a commercial and private bank in Qatar, BLOM BANK Qatar in QFC.
30
Management discussion & analysis 2007
The other component of the strategy is to diversify business activities towards a universal bankingmodel. As a result, the bank has expanded the operations of its investment arm, Blominvest Bank,by enhancing its private and investment banking and capital market activities, in addition to introducingasset andwealthmanagement services. The latter aimat establishing fundsand investment vehicles forretailandhighnet-worth investors thatarediversified in theirassetcompositionandgeography. The firstof such funds is the Cedars Balanced Growth Fund that combines Lebanese fixed income andequity assets. The aim of the services diversification is a diversification in the sources of incomethat gives increasing share for non-interest income
AROPE Insurance, BLOM BANK’s subsidiary, has also witnessed a year of growth andexpansion, marked by the opening of three additional branches in Lebanon as well as onebranch in Aleppo (Syria) through AROPE Syria. In 2008, AROPE is projected to continue itsaggressive policy of expansion and will be the first to penetrate Egypt’s commercial insurancesector through “Arope Egypt for Life Insurances” and “Arope Egypt for Property Insurances”.
3. EVOLUTION OF TOTAL ASSETS
The Bank witnessed a strong growth in assets in 2007. Indeed, total assets increased byUSD2,416 million to reach USD16,628 million in 2007, thus registering a rise of 17% over theyear 2006. A large part of the growth in assets was denominated in foreign currency as aresult of the high rate of dollarization and overseas deposits growth. In addition, BLOM banksuccessfully increased its market share in terms of total assets among Lebanese banks from18.67% in the year 2006 to 20.22% in 2007.
16,000
12,000
8,000
4,000
0
Evolution of Total Assets (in USD Millions)
8,786
16,628
7,146
2002 2003 2004 2005 20072006
10,835 11,91814,212
31
4. SOURCES OF FUNDS
4. SOURCES OF FUNDS
Sources of funding fall into four main categories: customer deposits, capital funds (Tier I &Tier II), banks and financial institutions and other liabilities. The Bank’s main source of fundscame in the form of customer deposits which accounted for 82.61% of total funding in 2007.Tier I and Tier II capital constituted 8.35% of total funds for 2007, while the share of banks andfinancial institutions amounted at 6.21% in 2007.
4.1 Customer Deposits
Customer deposits increased by 17%, up from USD 11,735 million in 2006 to reach USD 13,737million in 2007. This increase is even higher than last year’s 15.49% growth of deposits andmuch larger than the 11.4% growth of the market, once again giving evidence for BLOMBANK’S outgrowth of the market.
As a result of the Bank’s network of expansion locally and regionally, foreign currencies’share of total deposits went up, standing at 84.07% of total deposits for the year 2007, slightlyup from 82.38% in 2006 and much larger than 76.35% in 2005. The increase in the share offoreign currency deposits out of total deposits can then be mainly attributed to the Bank’sregional and international growth.
� Customer Deposits
� Tier I & Tier II Capital
� Banks & FinancialInstitutions
� Other Liabilities
2006
82.53%
8.95%
6.11%2.38%
82.61%
8.35%
6.21% 2.83%
2007
32
Breakdown of sources of funds
Management discussion & analysis 2007
BLOM BANK’s market share in terms of customer deposits in the Lebanese banking sectoraccounted for 20.35% in 2007, up from 19.3% in 2006.
Fiduciary deposits reached USD 2,626.293 million in 2007, increasing 42.7% year-on-year.
16,000
12,000
8,000
4,000
0
Evolution of Customer Deposits (in USD Millions)
7,686
13,737
6,215
2002 2003 2004 2005 20072006
8,99210,161 11,735
33
4. SOURCES OF FUNDS
5. USES OF FUNDS
4.2 Capitalization (Tier I & Tier II Capital)
Tier I Capital increased by 9.72% to USD 1,368.614 million at the end of 2007 compared to anincrease of 39.49% at the end of 2006. Tier I increase can be mainly attributed to retainedprofits of the year 2007 amounting to USD 204.7 million before dividend distribution.
Tier II capital continued its decreasing trend, falling by 19.2% at the end of 2007 to USD 19.385million as a result of a 30% drop in the cumulative change in fair value due to the decline infinancial assets prices.
� Tier I Capital � Tier II Capital
1600
1200
800
400
0
Tier I and Tier II Capital (in USD Millions)
484.85
2002 2003 2004 2005 20072006
84.5
553.73
84.7
696.51
94.1
894.25
63.6
1,247.35
24.0
1,368.61
19.4
34
Management discussion & analysis 2007
5. USES OF FUNDS
BLOM BANK’s strategy stresses the maintenance of high asset quality and a strong portfolioof investments. The risk component, which has always been the Bank’s primary considerationwhile assessing the uses of funds, is reflected in the return on assets ratio, at 1.33% in 2007.
The share of Lebanese Pound Treasury Bills as well as other government debt securities inforeign currencies to total assets stood at 20.27% in 2007, up from 16.22% in 2006.Nevertheless, the share of cash and deposits at the Central Bank to total assets dropped to25.25% in 2007 from 29.16% in 2006, while the share of bonds and financial instruments withfixed income rose to 4.65% in 2007, up from 1.80% in 2006. On the other hand, loans granted tocustomers constituted 16.67% of total assets in 2007, up from ratio of 13.99% in 2006. The Bankplacements with other banks and financial institutions amounted to 30.07% of total assets in2007 compared to 36.19% in 2006
� Lebanese Treasury Billsand other government bonds
� Cash and Central Banks
� Banks and FinancialInstitutions
� Bonds and FinancialInstruments with Fixed Income
� Loans to Customers
� Others
2006
29.16%
1.80%
13.99%2.64%
25.25%
4.65%
16.67% 3.09%
2007
16.22%
36.19%
20.27%
30.07%
35
Breakdown of uses of funds
5. USES OF FUNDS
CashCentral banksCertificates of Deposit
Total
Distribution of Cash and Central Banks
% Amount
852,2721,8424,199
2.0254.1243.86
100.00
621,6822,4004,144
1.4940.6057.91
100.00
Amount %
End of Year 2006End of Year 2007
5.1 Cash and Central Bank
Cash and central banks reserves stood at USD 4,199 million in 2007, up 1.33% from last year.The share of subscription in certificates of deposit amounted to 43.86% of total cash andbalances with central banks, down from 57.91% in 2006. Central Banks reserves accounted forthe largest share in 2007, standing at 54.12% of total cash and balances with central banks ascompared to 40.60% in 2006; while cash represented the remaining 2.02%, slightly up from itscontribution of 1.49% in 2006.
The cash and central banks category includes non-interest bearing balances held by the Bankat the Lebanese Central Bank (Banque Du Liban) in compliance with the obligatory reserverequirements for all banks operating in Lebanon on commitments in Lebanese Pounds (calculatedon the basis of 25% of sight and 15% of term commitments). The requirement also applies to interestbearing placements at the rate of 15% of total deposits in foreign currencies, as well as thecertificates of deposit issued by the Central Bank of Lebanon.
(In USD Millions)
36
Management discussion & analysis 2007
Investments held for tradingTreasury Bills and BondsAccrued Interest
Available for sale InvestmentsTreasury Bills and BondsAccrued InterestUnrealized PremiumsUnrealized Discounts
Total
Distribution of the Treasury Portfolio ( Lebanese Treasury Bills & other Governmental Bills and Bonds )
At December 31, 2006
51.0450.100.937
3,318.9883,291.218
65.8223.744
(41.796)
3,370.032
33.53132.8430.688
2,271.5572,240.045
47.0801.868
(17.436)
2,305.088
At December 31, 2007
�Lebanese Treasury Bills
�Other Governmental Bondsin Foreign Currencies
2007
47.13%
52.87%
57.50%
42.50%
2006
5.2 Lebanese Treasury Bills and Other Governmental Bills and Bonds
TheBank’s portfolio of Lebanese Treasury Bills and other governmental debt securities increasedby USD 46.2% to reach USD 3,370million in 2007 from USD 2,305 million in 2006. Nevertheless, theshare of Lebanese pounds denominated treasury bills dropped to 47.13 % of the total portfolio ascompared to 57.50% in 2006. On the other hand, the foreign currency-denominated governmentbills constituted 52.87% of the total in 2007 as compared to 42.50% in 2006.
The treasury portfolio according to the new IFRS (International Financial Reporting Standards)classification that was adopted starting 1st January 2005 shows the following:
Distribution of the Treasury Bills and other Governmental Bills
(In USD Millions)
37
5. USES OF FUNDS
5.3 Bonds and financial instruments with fixed income
Bonds and financial instruments with fixed income registered a significant 202% growth in2007, up to USD 773 million in 2007 from USD 256 million a year earlier as the Bank opted for adiversification of its investments in high yielding instruments that are rated BBB or above.
This caption includes bonds and certificates of deposit that are classified as follows:- Held for trading- Available for sale- Loans and receivables
TradingBondsAccrued Interest
Available for SaleBondsLess: provision for ImpairmentAccrued Interest
Held To MaturityBondsAccrued Interest
Loans & ReceivablesCertificates of DepositAccrued Interest
Total
Distribution of Bonds and Financial Instruments with Fixed Income
At December 31, 2006
44.25543.7390.516
578.563573.164
05.399
000
150.077145.3864.691
772.895
000
92.53891.450
01.088
000
163.582159.7553.826
256.120
At December 31, 2007(in USD Millions)
38
Management discussion & analysis 2007
5.4 Banks and Financial Institutions
The bank’s deposits at banks and financial institutions decreased by 2.82% in 2007 to USD4.999 billion as compared to USD 5.144 billion 2006. This small decrease resulted from theBank’s investments in fixed income instruments. Nonetheless, those deposits continued torepresent the largest shares of the Bank’s assets, accounting for 30.07% of the total in 2007 ascompared to 36.17% in 2006.
Time deposits constituted 95.65% of total deposits with banks and financial institutions in 2007,slightly down from 96.12% in 2006. Like for previous years, more than 99% of the current andtime deposits are denominated in foreign currencies.
5.5 Loans and Advances to Customers
The Bank is following a conservative loan strategy in order to maintain a high asset quality.This strategy has been reflected by a ratio of net loans and advances to total deposits whichhas been successfully maintained at low levels, standing at 20.2% in 2007. Outstanding loansreached USD 2,772 million at the end of 2007, increasing 39.46% from last year driven by growthin regional loans. In comparison, local loans grew by 11.7% in 2007.
BLOM BANK’s market share in terms of total loans and advances reached 11.6% in 2007, upfrom 9.28% in 2006.
3,000
2,500
2,000
1,500
1,000
500
0
Evolution of Total Loans and Advances (In USD Millions)
1,1641,352 1,670
2,772
996
2002 2003 2004 2005 2007
1,988
2006
39
The Credit risk classification of the Bank’s Loans portfolio is as follows :
The above loan classification is in accordance to the Central Bank of Lebanon’s (Banque DuLiban’s) classification under decree N0 7159 dated November, 10th, 1998 and the decreerelated to bad debt classification dated December 2001. Below is a briefing about the basis ofloan classification defining each category’s characteristics.
- Regular Accounts
A- Unconditional: Covers accounts which display regular movements sufficient to repay theloan in accordance with the repayment schedule. The latest financial statements should beavailable and adequate collateral should be taken to cover the loan.
B- Incomplete file: as in point (A), adequate collateral and repayment on schedule are foreseen.However, the file is considered incomplete because the client is late in submitting his financialstatements.
- Special Attention Accounts
Display signs of irregular movements or exceed the credit limit on a continuous basis. Recentfinancial statements are unavailable and adverse economic conditions may affect the borrower’sability to repay the debt. Collateral has not been evaluated for the last 3 years. Such anaccount may be considered recoverable.
However, it should be closely monitored for a year, at the end of which the account is reclassified if thepreviouslymentioned conditions are not regularized.
5. USES OF FUNDS
Regular AccountsSpecial Attention AccountsNet Non-Performing AccountsNet Doubtful AccountsNet Provisions for Commercial Loans not ClassifiedBad Debt AccountsTotal
Credit Risk Classification of Total Net Loan Portfolio
2006
2,691.2546.1214.6246.56(26.55)0.00
2,772
1,894.9459.9728.5040.16(35.71)0.00
1,987.66
2007(in USD Millions)
40
- Non-performing Accounts
Covers loans which display most or all of the following:- a significant drop in the client’s profitability- a drop in the flow of cash into the account for a period exceeding 2 years, and thus resulting inrepetitive delays in repayment exceeding a period of 3 months.- a noticeable depreciation in the value of the collateral provided and repetitive delays inrepayment for a period not exceeding three months.- credit facilities are not used – partially or in whole – for the purpose specified in the loanagreement.
The credit risk committee will review the repayment schedule with the client and will keep theaccount under close observation. However, interest and commissions will be classified asunrealized until the account is regularized.
- Doubtful Accounts
Represents loans which display all of the conditions of a non-performing account in additionto having a complete lack of credit movement into the account for a period of 6 months and adelay in payments of the rescheduled loan which exceeds 3 months from the date of maturity.The Bank will make a partial provision for the loan and consider interest and commission asunrealized.
- Bad Debt Accounts
Includes all “Doubtful Accounts” which are considered unrecoverable due to the lack of acollateral or the loss of contact with the client. In this case, interest ceases to be accrued anda provision of 100% of the principal amount of the loan is made. The account is under litigationuntil a ruling by the court is made, after which it is written-off.
The improving quality of the loan portfolio was further highlighted by a decrease in the Bank’s ratioof gross doubtful debts to gross total loans to 7.92% in 2007 from 10.25% in 2006. The coverage ofdoubtful accounts dropped to 91.57% in 2007 from 98.04% in 2006
Provisions and unrealized interest for doubtful debts and non-performing accounts decreasedby USD 5.304 million to reach USD 226.984 million at the end of 2007. The amount includesprovisions for commercial loans not classified at the end of 2007 after deducting the amountof USD 9 million of provisions for doubtful loans no more required and transferring provisionswritten-off amounting to USD 34.56 million.
Management discussion & analysis 2007
41
5. USES OF FUNDS
The ratio of foreign currency loans with respect to total loans went up to 92.12% in 2007 from91.72% in 2006 while the ratio of foreign currency loans to foreign currency deposits increasedto 22.11% in 2007, up from 18.86% in 2006.
The breakdown of the loan portfolio by maturities shows that medium and long term loans withmaturities exceeding one year constituted 28.5% of the bank’s outstanding net commercialloans in 2007 as compared to 17.57% in 2006, whereas short term loans, with maturities of lessthan one year, constituted 71.5% of the total net commercial loans, compared to 82.43% in2006.
As for the breakdown of the loan portfolio by economic sectors, it appears that the highestshare of loans was granted to trade and services activities, followed by construction andmanufacturing. Loans to the agriculture sector witnessed a slight increase to 0.71% of thetotal loan portfolio in 2007 from 0.60% in 2006. Loans granted to the manufacturing sectordropped to 10.42% in 2007 down from 13.01% in 2006 while trade loans decreased also from30.37% in 2006 to 24.22% in 2007 with 7.41% of the portfolio granted to retail trade and 16.81%to wholesale trade. Loan portfolio to the services sector slightly improved to 20.69% in 2007,up from 20.21% a year earlier. The construction sector witnessed a strong boom in 2007, drivenmainly by the post-war reconstruction projects, and accounted for 16.73% of the loan portfolio forthe year 2007, up from 7.19% in 2006. Loans given to freelance professions dropped further to8.08% in 2007 from 12.65% in 2006. Finally, consumer loans recorded a significant increase to19.15% in 2007, up from 15.99% in 2006.
� Agriculture and Forestry
Manufacturing
� Trade
� Services
� Construction
� Freelance Professions
� Consumer Loans
2006
20.21%
15.99%
0.60%
13.01%
20.69%
0.71%
10.42%
16.73%
2007
30.37%
12.65%
24.22%
19.15%
7.19%
8.08%
Distribution of Loans by Economic Sector
42
The analysis of the loan portfolio by type of collateral reveals that the commercial loanssecured by mortgages accounted for the largest share of the 2007 portfolio, despite a smalldrop from 29.30% in 2006 to 28.07% in 2007. Similarly, advances against personal guaranteesdecreased, representing 11.96% of the total loans portfolio in 2007, down from 16.60% in 2006.Advances against cash collateral dropped also to 17.09% in 2007 from 19.78% in 2006. On theother hand, the share of LC financing went up to 2.86% in 2007, up from 1.62% in 2006 andsyndicated loans stood at 0.27% in 2007, up from nil a year earlier. Retail loans recorded animportant increase in 2007, with its share in the total loan portfolio going up to 19.15% in 2007from 15.99% in 2006. Loans to members of staff increased to 0.20% from 0.13% while loans todirectors and related parties accounted for 2.44%, up from 0.04%. Overdraft also increased in2007, representing 17.96% of the total loans portfolio in 2007 from 16.36% in 2006.
� Advanced Against PersonalGuaranties
� LC Financing
� Syndicated Loans
� Advanced Against CashCollateral
� Retail Loans
� Loans to Member of Saff
Loans to Directors
� Overdraft
� Commercial LoansSecured by Mortages
2006
1.62%
15.99%
0.04%16.36%
2.86%
0.20%
17.96%
17.09%
2007
29.30%
0.00%
28.07%
19.15%
19.78%
0.27%
Distribution of Loans by Type of Collateral
0.13%
16.60%
2.44%
Management discussion & analysis 2007
43
11.96%
6. LIQUIDITY7. PROFITABILITY
6. LIQUIDITY
BLOM BANK’s ability to maintain high liquidity levels, minimizing risks and ensuring highquality of assets, has been at the centre of liquidity management and core objectives of theGroup. The Bank has successfully maintained ample liquidity in 2007, despite a light drop inits ratio. As such, the Lebanese Pound liquidity ratio (including Lebanese governmentTreasury Bills) stood at 105.93% in 2007 compared to 109.80% in 2006, reflecting high liquiditylevels. Moreover, the immediate liquidity (cash & banks) in foreign currencies accounted for63.24% of foreign currency deposits in 2007 compared to 78.26% in 2006, a small drop mainlydue to the Bank’s regional expansion activities.
Maturity mismatch between assets and liabilities, which characterises the Lebanese bankingsector, was also noticeable in BLOM BANK accounts. In 2007, the gap was negative in thematurities from zero to one month and from 1 to 3 months, amounting to USD 4,530 million andUSD 1,872 million respectively. Afterwards, the maturity gaps turned back positive, reaching amaximum of USD 3,639 for maturities of 2 to 5 years.
Asset-Liabilities Maturity Gap
Total AssetsTotal Liabilities& Shareholder’s Equities2007 Liquidity Gap2007 Cumulative Maturity Gap
From1 to 3
Months
From3 to 6
Months
Up to1 Month
From6 Monthsto 1 Year
From2 to 5Years
Over5 Years
From1 to 2Years
Total(In USD Millions)
6,86111,391
(4,530)(4,530)
1,0152,887
(1,872)(6,402)
833517
316(6,086)
705266
439(5,647)
1,77642
1,734(3,913)
3,68748
3,639(274)
1,7511,477
2740
16,62816,628
00
46
7. PROFITABILITY
BLOM BANK was ranked first by net profits in Lebanon in 2007. In fact, the Bank recorded netprofits of USD 204.7 million for the year 2007, increasing 13.53% compared to the year 2006where net profits reached USD 180.3 million.
Return-on-average equity stood at 15.65% in 2007, down from 16.81% a year earlier.
Return-on-average assets for the year 2007 amounted at 1.33%, slightly less than 1.38% in 2006due to the larger growth in assets of 17% compared to a 13.53% rise in net profits.
Earning per share increased from USD 7.28 in 2006 to USD 8.22 in 2007.
250.00
200.00
150.00
100.00
50.00
0.00
Evolution of Net Income (In USD Millions)
88.30 91.15
136.85
204.7
83.60
2002 2003 2004 2005 2007
180.30
2006
Management discussion & analysis 2007
47
7. PROFITABILITY
7.1 Net Interest Income
Net interest income registered a 12% increase in 2007 to USD 302.56 million. The growthcame as a result of a 17.9% increase in interest and similar income to USD 988.89 million in2007, despite a 20.6% increase in interest charges in 2007 to reach USD 686.326 million.
On the other hand, net interest revenue after provisions and doubtful loans, went up by15.03% to reach USD 310.148 million in 2007 as compared to USD 269.620 million in 2006.
The growth of net interest income will be further elaborated through the breakdown of netinterest income into interest and similar income, interests and similar charges, interest margin aswell as net provisions for doubtful loans.
7.1.1 Interest and Similar Income
Interest and similar income witnessed a 17.9% increase in 2007, after a hike of 35.67% in 2006.
Average interest earning assets increased by 16.1% to reach USD 13,359 million in 2007 fromUSD 11,507 million in 2006.
The below table illustrates the breakdown of average earning assets by currency at the endof 2007:
Breakdown of Average Interest Earning Assets at the End of 2007
Lebanese Treasury Bills and Other Governmental BillsDeposits with Banks and Central BanksBonds and Other Financial Instruments with FixedIncome Including Certificates of DepositLoans and AdvancesTotal
ForeignCurrencies
TotalLBP(In USD Millions)
1,367115585
1902,257
1,2485,7231,996
2,13511,102
2,6155,8382,581
2,32513,359
48
In 2007, the weights of interest and similar income components remained very similar to thoseof the year 2006. Lebanese and other government bills accounted for 19.57% of total averageinterest earning assets in 2007, decreasing modestly from 21.13% in 2006. The averagedeposits with banks and central banks stood at 43.70% of the total in 2007, up from 42.25% in2006. The share of bonds and other financial instruments with fixed income, including certificatesof deposits, accounted for 19.32%, down from 20.57% a year earlier while the weight of loans andadvances increased to 17.40% in 2007, compared to 16.04% in 2006.
The breakdown of Interest and Similar Income is detailed in the following table:
The breakdown of interest and similar income reveals a decrease in the share of LebaneseTreasury Bills and other government bills to 23.30% in 2007 compared to 25.52% in 2006. On theother hand, the portion of income generated from deposits with banks and central banksincreased to 32.79%, up from 29.69%; while the contribution of bonds and other financialinstruments with fixed income (including certificates of deposit) stood at 23.36% in 2007, downfrom 25.67% a year earlier. Finally, interest income generated from loans and advances includingrelated parties represented 20.55% of the total in 2007, increasing from 19.12% in 2006.
Lebanese Treasury Billsand Other Governmental BillsDeposits with Banks and Central BanksBonds and Other Financial Instrumentswith Fixed Income Including Certificates of DepositLoans and Advances Including Related PartiesTotal
Breakdown of Interest and Similar Income
% of Total Amount
230.407
324.262231.026
203.193988.888
23.30%
32.79%23.36%
20.55%100.00%
Amount % of Total
End of 2006End of 2007(In USD Millions)
214.092
249.140215.388
160.401839.021
25.52%
29.69%25.67%
19.12%100.00%
Management discussion & analysis 2007
49
7. PROFITABILITY
� Deposits with Banksand Central Banks
� Bonds and Other FinancialInstruments with FixedIncome IncludingCertificates of Deposit
� Loans and Advances
� Lebanese Treasury Billsand Other GovernmentalBonds
2006
19.12%
32.79%
20.55%
2007
25.52%
25.67%
23.30%
26.69% 23.36%
Breakdown of Interest and Similar Income
7.1.2 Interest and Similar Charges
Interest and similar charges increased 20.6% to USD 686 million in 2007 up from USD 569million in 2006, while average interest bearing liabilities went up by 16.9% to USD 12,870million compared to USD 11,011 million a year earlier.
Deposits from customers including related parties accounted for the largest share of theaverage interest bearing liabilities, amounting to 97.40% in 2007 while deposits from banksand financial institutions represented the remaining 2.59%.
Average Interest Bearing Liabilities at the End of 2007
Deposits and Similar Accounts from Banks and Financial InstitutionsDeposits from Customers Including Related PartiesTotal
ForeignCurrencies
TotalLBP(In USD Millions)
32,1682,171
33110,36810,669
33412,53612,870
50
The breakdown of the interest and similar charges shows a modest increase in the portion ofdeposits and similar accounts from banks and financial institutions to 1.85% in 2007, up from1.56% in 2006 while the share of interest paid on customers’ deposits slightly retreated to98.15% in 2007 compared to 98.44% in 2006. Finally, charges from notes and fixed incomefinancial instruments remained nil for the second year on a row.
Breakdown of Interest and Similar Charges
Deposits & Similar Accountsfrom Banks & Financial InstitutionsNotes & Financial Instrumentswith Fixed IncomeDeposits from CustomersIncluding Related PartiesTotal
(In USD Millions)
% of Total Amount
12.678
0
673.648
686.326
1.85%
0.00%
98.15%
100.00%
Amount % of Total
End of 2006End of 2007
8.851
0
560.017
568.868
1.56%
0.00%
98.44%
100.00%
� Deposits from CustomersIncluding Related Parties
� Deposits and SimilarAccounts from Banks& Financial Institutions
� Notes and FinancialInstruments withFixed Income
2006
98.44%
1.56% 1.85%
2007
0.00%
98.15%
Distribution of Loans by Type of Collateral
0.00%
Management discussion & analysis 2007
51
7. PROFITABILITY
7.1.3 Interest Margin (Before Provisions For Doubtful Loans)
The Bank’s Net Interest Income before provisions for doubtful loans rose by 11.4% in 2007 toUSD 302.56 million, while the net interest margin before provisions on doubtful loans stood at2.03% in 2007, down from 2.13% in 2006.
The ratio of interest charges to interest income increased to 69.4% up from 67.8% in 2006 dueto a larger increase in interest charges as compared to interest income.
250
200
150
100
5
0
Net Interest Income (Before Provisions) (In USD Millions)
153 157181
148
2002 2003 2004 2005 20072006
300
350
271303
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
Net Interest Margin (in percent)
2.13%1.75%
1.77%
2.34%
2002 2003 2004 2005 20072006
2.03%2.13%
52
7.1.4 Net Provisions for Doubtful Loans
The net provisions for doubtful loans increased from USD 0.536 million in 2006 to a positive balanceof USD 7.585 million in 2007.
71.0%
70.0%
69.0%
68.0%
67.0%
66.0%
Net Interest Margin (in percent)
70.91%71.25%
70.66%70.40%
2002 2003 2004 2005 20072006
69.40%
67.81%
72.0%
Management discussion & analysis 2007
53
7. PROFITABILITY
7.2 Non-Interest Income
Non-interest income increased by 21.6% year-on-year, amounting at USD 92.35 million in 2007compared to USD 75.960 million in 2006.
Net commissions maintained the largest share of the total non-interest income, accounting for69.30%, decreasing slightly from 72.23% in 2006. Net income from financial operations represented28.49% of total non-interest income in 2007, registering a rise of 48% compared to 2006 due to theactive private banking and asset management operations. Other net income accounted for 2.21%of the total, decreasing 38.59% year-on-year.
Net commissionNet income fromfinancial operationsOther income
Total
Breakdown of Non-Interest Income
% of Total Amount
63.99826.313
2.04092.351
69.3028.49
2.21100.00
72.2323.40
4.37100.00
Amount % of Totalx
20062007 % Change
� Net Commissions
� Net Income From FinancialOperations
� Other Income
2006
72.23%
23.40%
4.37%
69.30%
28.49%
2.21%
2007
54.86117.775
3.32275.958
16.6548.03
(38.59)21.6
Constituents of Non-Interest Income
(In USD Millions)
54
7.3 Staff and Operating Expenses
Staff and operating expenses reached USD 139.6 million in 2007, registering a 14.85% increaseyear-on-year.
Staff (salaries and related benefits) increased by 14.89% in 2007 to USD 85.66 million whileoperating expenses went up by 14.79% to reach USD 53.94 million. Staff expenses accountedfor the largest share of staff and operating expenses with 61.36% of the total while operatingexpenses stood at 38.64% of the total.
BLOM BANK is successfully maintaining a low cost-to-income ratio, reflecting the Bank’scost-containment policy. In fact, cost-to-income ratio dropped further to 34.63% in 2007compared to 35.31% in 2006.
Staff ExpensesOperating ExpensesTotal
Distribution of Staff and Operating Expenses
% of Total Amount
85.6653.94
139.60
61.3638.64
100.00
74.5646.99
121.55
61.3438.66
100.00
Amount % of Totalx
20062007
14.8914.7914.85
% Change
35%
30%
25%
40%
45%
50%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
55%
Cost to Income Ratio
47.34%
42.56%
38.37%36.80%
38.09% 38.58%39.77%
40.93%
34.11% 35.10%
(In USD Millions)
2007
34.63%
Management discussion & analysis 2007
55
8. DIVIDEND DISTRIBUTION &PREFERRED SHARES REVENUES
9. CAPITAL ADEQUACY RATIOS
10. INTEREST RATE RISK
11. RISK MANAGEMENT & BASEL II PREPARATIONS
8. DIVIDEND DISTRIBUTION &PREFERRED SHARES REVENUES
During BLOM BANK’s Annual General Assembly, on April 9th, 2008, the distribution of dividendsfor the year 2007 was approved. Preferred shares, issue 2002, will yield USD 15, while the preferredshares, issue 2004, will pay USD 8.5 and their corresponding 2005 issue will give USD 9.5. As forthe common stocks and Global Depositary Receipts (GDR), each will pay a dividend of LBP 5,500per share.
9. CAPITAL ADEQUACY RATIOS
The Bank’s capital adequacy ratio reached 31.53% (before dividend distribution) at the end of2007, a ratio which is almost four times the international ratio of 8% required by the BaselCommission. For Tier I capital alone, the capital adequacy ratio stood at 31.07% at the end of2007. After dividend distribution, the capital adequacy ratio reached 29.05% for Tier I &Tier IIand 28.60% for Tier I alone.
25.00%
20.00%
15.00%
30.00%
35.00%
35.00%
2002 2003 2004 2005 2006 2007
40.00%
Capital Adequacy Ratios (After Dividend Distribution )
29.88% 29.76%28.22%
33.23%
36.10%
29.05%
26.06% 28.02% 27.34%
30.71%
35.33%
28.60%
Tier I Capital Tier I + Tier II Capital
58
10. INTEREST RATE RISK
Interest rate risk arises from adverse movements in interest rates, affecting the interest earningassets and liabilities of the bank. Interest rate risk is well managed through the continuousre-pricing of assets and liabilities. Most assets and liabilities are repriced within one year. Withthe major parts of the Bank’s deposits re-priced within the 3 months interval, interest rate riskcontinues to be concentrated within this period, while the biggest part of Bank’s treasury billsand governmental bonds portfolio being re-priced after the 3 months period.
The bank’s interest rate sensitivity position based on contractual re-pricing arrangements asof December 31,2007 is as follows:
11. RISK MANAGEMENT & BASEL II PREPARATIONS
BLOM BANK’s responsibility for establishment of effective risk management practices andculture lies with the Board of Directors as does the setting up of the bank’s risk appetite andtolerance levels. The Board of Directors delegates through its Risk Management Committeethe day-to-day responsibility for establishing and monitoring of risk management processesacross the bank’s group to the Head of Risk Management, who is directly appointed by theBoard of Directors and works closely with the bank’s Executive Senior Management in Beirut.
Total AssetsTotal Liabilitiesand Shareholder’s EquiltyInterest Rate SensitivityGap for 2007Cumulative Interest RateSensitive Gap
Interest-Rate Sensitivity Position at the end of 2007
5,64110,647
(5,006)
(5,006)
8782,634
(1,756)
(6,762)
(In USD Millions)From1 to 3
Months
From3 to 6
Months
Up to1 Month
From6 Monthsto 1 Year
From2 to 5Years
Over5 Years
From1 to 2Years
Non-sensitive tointerest rate risk
753488
265
(6,497)
656184
472
(6,025)
1,77431
1,743
(4,282)
3,77848
3,730
(552)
1,46038
1,422
870
1,6892,559
(870)
0
Management discussion & analysis 2007
59
11. RISK MANAGEMENT & BASEL II PREPARATIONS12. UNIVERSAL BANKING SERVICES
In addition to the Group’s Risk Management in Beirut, risk managers and/or risk officers wereassigned within the Group’s foreign subsidiaries or branches to report to the department andExecutive Senior Management in a manner that ensures:- Standardization of risk management functions and systems across the Group.- Regional consistency of conducted business in line with the Board’s approved riskappetite.
As regards to Basel II capital adequacy ratio calculations, the Risk ManagementDepartment started, since December 2004’s consolidated balances, to issue internalreports to Executive Management and the Board revealing multiple scenarios of capitalcharges’ calculations for credit and market risks under the Standardized approaches andfor operational risk under the Basic Indicator approach. In addition, the bank has submitted to theLebanese Banking Control Commission two Quantitative Impact Studies for the Basel 2capital adequacy calculations for June and December 2007 balances, and is maintaining aratio well above the minimum international requirement of 8%.
In December 2006, the bank acquired, through an enterprise-wide license, the Moody’s KMVRisk Advisor, a state-of-the-art credit analysis and rating system for corporate and commercialborrowers, in order to aid the bank in moving at a later stage to internal ratings-basedmeasurements under Basel II. The credit risk team is responsible for the implementation andadministration of the Moody’s Risk Advisor system along with the generation of internal ratingsfor all analyzed credit files.
In terms of market risk, the department is responsible for generating internal reportsquantifying the Bank’s liquidity risk and earnings at risk due to extreme movements ininterest rates, while daily monitoring the sensitivity of the bank’s trading portfolio of fixedincome securities to changes in market prices and/or market parameters. All abovementionedreports as well as interest rate sensitivity and liquidity gaps are reported to Executive SeniorManagement and to regulatory authorities on a monthly basis. This is done in line with thebank’s Asset & Liability Management (ALM) policy which assigns authority for its formulation,revision and administration to the Asset/Liability Management Committee (ALCO) of BLOMBANK s.a.l. The market risk team is responsible for monitoring compliance with all limitsset in the ALM Policy and is also in the process of implementing the newly acquired(October 2007) Asset & Liability Management system “Focus ALM” by Sungard, whichprovides for ALM analysis from both static and dynamic perspectives including stresstesting and extensive scenario analysis.
60
Management discussion & analysis 2007
As for operational risk, the department conducted a series of operational risk assessments onhead office departments and functions and on local and foreign branches, resulting in aset of amendments on operational procedures and system processes. In addition, a lossincident reporting system has been introduced to record losses across the bank’s operatingactivities, as the bank builds up an operational risk database in line with regulatory andBasel 2 directives. The operational risk team is responsible for continuously introducingmodifications on the bank’s core banking application in relation to specificbranchoperationsand control measures. At the same time, Risk Management has broken down the bank’sinternal accounts according to Basel 2 designated business lines with losses apportionedaccordingly and in preparation for later moving on to the more advanced approaches ofoperational risk measurements.
11.1 Corporate Governance
The Board of Directors of BLOM BANK sal approved a Corporate Governance Code at theend of 2007. The Code applies to BLOM BANK sal and its Lebanese subsidiaries and affiliates.It complies not only with Lebanese laws and regulations, but also with the BaselCommittee directives on Corporate Governance for Banks.The Code covers shareholders rights and key ownership functions as well as their constitution. It alsoclarifies theBoard’sstructureandcomposition, its role,dutiesand functions. Issues related to Boardmeetings, practices and committees are discussed as well as those related to managementcommittees and the internal control system. The Code highlights the importance of stakeholdersrelations with the Bank’s own human resources as well as with customers and suppliers, andalso the prominence of banking ethics in the conduct of business.The Code is designed to enforce transparency and clarity of reporting lines in guiding theBank’s operations, policies and strategies, and in helping deliver the highest quality ofservice to the Bank’s clients and value to its shareholders.
12. UNIVERSAL BANKING SERVICES
In line with its policy of maximizing customers’ satisfaction and increasing shareholders’value, BLOM BANK has sustained the diversification of its products and services. BL0MBANK GROUP provides the following universal banking services that suit all customersneeds:- Commercial corporate banking- Private and investment banking- Retail banking- Islamic banking- Insurance products & services
61
12. UNIVERSAL BANKING SERVICES
12.1 Commercial and Corporate Banking
BLOM BANK continues to apply a conservative lending policy. Throughout 2007, the bankexpanded its credit portfolio to corporate and commercial customers especially in projectsfinance and real estate developments. In addition, the bank has financed several hotelprojects in Beirut Central District (BCD) and other promising touristic areas. BLOM BANK hasalso catered for the commercial sector, in particular trade and working capital financing.Furthermore, the bank’s policy is to expand even further in regional countries to satisfy theneeds of the Lebanese and Arab expatriates in those countries.With the collaboration of IFC, BLOM has extended unique soft loans to customers affected bythe July 2006 war with the objective of helping them overcome the consequences of thiswar and enabling them to recover their prewar financial status.
12.2 Private and investment banking
BLOM BANK provides private banking services such investment consulting and portfoliomanagement through both its investment-banking arm BLOMINVEST Bank Sal and itsGeneva-based affiliate BLOM Bank Switzerland. Some of these services are listed below:- Investment Products: includes a variety of investment funds and structural productsfocusing on Lebanese and foreign instruments. The first, BLOM Cedars Balanced Fund,launched in early 2008 and is considered the first investment vehicle of its kind in Lebanonfor its equity and fixed-income investments.- Project Finance : consists of extending medium and long term financing and in participatingin bank loan syndications.- Treasury & Capital Market Services: includes brokering on the Beirut Stock Exchange(BSE), advising on trades in international equities, trading in debt securities and dealingin the foreign exchange markets.- Investment Banking: participates in the underwriting and distribution of Lebanese andother debt instruments and provides advices on mergers and acquisitions and privatisa-tion.- Asset & Portfolio Management: covers management of portfolios of shares, bonds andterm placements in all currencies.- Research Department : produces weekly and quarterly reports on the Lebanese economy,and analyzes leading Lebanese economic sectors. In addition, it provides country reportson regional economies, especially those where BLOM Bank has a presence. It publishesas well the BLOM Stock Index (BSI), Lebanon’s first financial market index that covers allstocks quoted on the BSE, and conducts equity research on major Lebanese and regionalcompanies.
62
Management discussion & analysis 2007
12.3 Retail Banking
As of December 31, 2007, BLOM BANK offered more than 110 retail products, classified indifferent families:
- Payment cards: BLOM BANK offers a wide range of payment cards that target differentcustomers, provide different methods of payments and meet different purposes. As such,BLOM Visa comes in Classic, Gold and Corporate; also the Bank offers Internet cards dedicated forInternet users, Platinum and Platinum Black cards as well as Mini cards. In addition, the Bank hasbeen the pioneer in launching the first Titanium MasterCard in Lebanon. In 2007, BLOMintroduced the Alfa BLOM Mastercard, a first of its kind in Lebanon and the Middle East,offering to its holders free minutes on the Alfa Active and Alfa Classic lines. Also in 2007,a new card “Watan” was launched for the Lebanese army, internal security and nationalsecurity forces.
- Rewards programs: BLOM Golden Points Loyalty program enables customers to win avariety of gifts -such as airline tickets, free stays at the finest hotels, electronics and muchmore- by accumulating Golden points with every $100 purchases using the card. In addition tothis, BLOM Gifts Loyalty program allows cardholder to win valuable gifts for purchases atcertain merchants over a period of 6 months.
- Consumer loans: BLOM BANK customers can take advantage of a number of consumerloans on offer such as KARDI for personal loans, SAYARATI for car loans, DARATI orHousing CPH for house loans and PC loans.
- Saving plans: BLOM BANK offers DAMANATI, a retirement saving plan denominated inUS Dollar coupled with life insurance. Moreover, WALADI a savings program dedicated tochild’s education, coupled with life insurance is also offered to the Bank’s customers.
- E-banking: BLOM BANK offers to its customers phone banking services such as “AllôBLOM” ( a 24-hour customer service) as well as internet banking services such as e-BLOM.In addition, the Bank provides free of charge SMS ALERT services, enabling customers tobe alerted whenever the balance of accounts changes or whenever a transaction is beingperformed.
63
12. UNIVERSAL BANKING SERVICES13. INFORMATION SYSTEM & TECHNOLOGY
12.4 Islamic banking
Blom Development Bank (BDB), a full fledged Islamic bank , was established in February2006 and started operation in march 2007. BDB carries out all its banking and investmenttransactions in compliance with provision of the Islamic Shari’a and pursuant to theinstructions and regulations issued by Banque Du Liban and the direction of its Shari’aBoard consisting of the three prominent shari’a scholars.BDB business covers all spectrum of banking services including , acceptance of depositsprovision of various Islamic financing solutions in the form of Murabaha, Ijara , Tawaruk ,Forward lease , Wakala and istisna’a.Since its inception, BDB established relationships with major Islamic Banks andInvestment Companies operating in the region and played a major role in developing productswhich suits the requirements of its clientele; On the Retail side “Al Yassir” Restricted InvestmentAccount was introduced aiming at providing depositors with monthly profit distribution resultingfrom Sharia compliant short-term investments concluded with rated Islamic institutions.Furthermore, “Mowasalati”, car Murabaha finance as well as “Manzili” home Murabahafinance, were initiated aiming at providing Islamic wary customers with Islamic solutions tofinance their acquisitions of cars and homes based on Murabaha structure which could belater adjusted to suit an Ijara structure as per customers’ requirements.On the international financing front, BDB participated with other regional Islamic Banksin raising funds in favor of major corporations operating in the Gulf and played a major rolein the issuance of two Islamic Sukuk transactions, namely: the Wakala Sukuk to” BerberCement co “ and the Ijara Sukuk to “Dar Al Arkan”
On the collective investment front , BDB is currently exploring lot of investment opportunitiesin several asset classes and is in the process of developing products carrying acceptablereturns compared to the risks involved and shall, during the course of next year’s launch suchproducts to savvy investors.
12.5 Insurance Products & Services
Life and non-life insurance products and services are offered through our subsidaryArope Insurance in Lebanon. Our second insurance subsidary, Arope Syria, provides aswell insurance services in Syria.
13. INFORMATION SYSTEMS & TECHNOLOGY
In today’s technology-driven world, it is a well-known fact that “if you are standing still, youare falling behind”. That is the reason why we are constantly seeking to grow and evolve our
64
Management discussion & analysis 2007
business by proactively using powerful information technologies.
Thus, we have been putting Information Technology, Finance and Relationship Managementin partnership using leading-edge technology deployments in order to enhance customers’experiences, enrich products and services portfolio, achieve Enterprise ApplicationIntegration (EAI), streamline business processes by transforming them into STP (StraightThrough Processing) mode, address national and international compliance and regulatoryrequirements (such as Basel II and others…) and improve systems availability and reliability.
13.1 Customer Relationship Management
During this year, we kept on developing our eBlom suite, which encompasses advancedelectronic customer relationship management (eCRM) services. Through the eBlom initia-tive, we have been interacting with our customers however, wherever and whenever theydesire.
Our eBlom suite of integrated electronic banking delivery channels consists of:
- eBlom – ALLO BLOM – the Bank’s Interactive Voice Response System
- eBlom – Internet Banking – our online banking service that offers a wide array of serv-ices in a high level of trust and security enabled by a public key infrastructure (PKI) anddigital certificates as a second factor for authentication.
- eBlom – SMS Alerts – a real-time alerting system based on delivering messages to ourcustomers’ mobile phones to inform them, instantly, about events in relation with theiraccounts or cards.
- eBlom – Contact Center – our contact center is available 24 hours a day all year long andis benefiting from continuous enhancements based on CTI and IP telephony to achieveseamless integration with the Bank’s CRM application.
- eBlom – Self Service – using the bank Network of ATMs deployed all over Lebanon andwhere additional services are being constantly planned and added.
- eBlom –Live Information Broadcasting System – a system that enables the bank tobroadcast in real-time over large LCD screens deployed at the branches live and updatesinformation covering stock quotes, foreign exchange quotes, news feeds ect...
65
13. INFORMATION SYSTEM & TECHNOLOGY14. PEOPLE DEVELOPMENT
13.2 Targeted Marketing Systems
In addition, we identified the need to provide customer-facing employees with a powerfultool that would allow them to present new products and services to customers duringtheir presence at the branch. Consequently, we introduced “T.I.P.S.” which stands forTargeted Information Processing System and which includes a teller lead referral systemcoupled with a back-office marketing management system. The aim of this tool is to increaseour marketing campaigns efficiency by improving the hit rate of marketing campaigns byoffering customers new products and services that are tailored to their needs. In addition, thissystem has the ability to send instant SMS messages containing information pertaining to ourmarketing campaigns while the customer is visiting his/her branch.
13.3 Enterprise Application Integration (EAI)
Moreover, as a financial institution that has been around for over 55 years, we have in placewell defined business processes and rules that allow us to deliver banking products andservices to our customers and to manage our internal operations. However, we identified theneed to re-organize these business processes in order to achieve a higher degree of automation.To this end, we decided to adopt the Service Oriented Architecture (SOA) framework toachieve the highest degree of integration between our different applications through the useof web-services and of a powerful and flexible workflow engine thus achieving straight-throughprocessing (STP) throughout our different systems.
This EAI framework was applied to many processes, in particular, our consumer loan processingsystem consisting of a loan origination system, a loan assessment system, and a loan grantingsystem. This high degree of automation has allowed us to drastically reduce the time toprocess a car loan from origination to final approval and to increase the volume of our car loanactivity, and consequently sustain our uncontestable leadership position in the car loan market.The success of the EAI framework implementation has led us to plan the movement of manyof the bank’s business processes into this system during the coming year.
13.4 Advanced Electronic Payment Systems
On the other hand, and based on our recently deployed EFT SWITCHwe have completely in-sourcedour ATM driving, management and monitoring activities. In addition, we became an activeplayer in the POS market thus gaining more and more on POS market share.
On the cards issuing side, we continued to develop our Information Systems infrastructure inorder to keep adding more features to our existing cards products and loyalty programs, inaddition to introducing new types of payment cards including Visa prepaid cards with onlinerefill capability, Visa EURO Cards, Credit cards with grace period, BLOM MasterCard cards,
66
Management discussion & analysis 2007
Co-branded cards; and we also started issuing EMV cards. In addition, we introduced anonline card fraud monitoring system capable of sending real-time alerts to the bank call centeragents, thus enabling for immediate action and insight as well as reporting and trackingshould a fraud pattern be detected. This card fraud monitoring system drastically reducedfraud losses and incidences.
13.5 Basel II Compliance
Regarding the Basel II rules and regulations, we have taken several measures in order tobe compliant with these regulations and, in particular, we have completed the implementationof a system from MOODYS for corporate and commercial credit risk rating, and we startedthe implementation of an Assets and Liabilities management and Funds Transfer Pricingsystem in partnership with SUNGARD.
13.6 Systems High Availability
Finally, it is worth noting that we have constantly in mind our information security andavailability, where we are looking very closely at ensuring the highest possible availability forour systems, raising employees’ awareness through the development of InformationSecurity Policies and Procedures and addressing security threats and systems failureincidents pro-actively through implementing advanced preventive and detective controlsand online monitoring systems and procedures
14. PEOPLE DEVELOPMENT
The Bank has proceeded with its policy of growth through development and training ofemployees by organizing intensive in-house and external training sessions as well as therecruitment of a young and skilled workforce. In 2007, the number of the Bank’s employeesreached 2,759 compared to 2,216 in 2006.
In 2007, BLOM BANK expanded further its range of services, launching the assetmanagement department, responsible for promoting structured products, besides developingother business lines such as investment banking and brokerage.
67
13. INFORMATION SYSTEM & TECHNOLOGY14. PEOPLE DEVELOPMENT
15. BANK’S OPERATIONAL EFFICIENCY
16. REGIONAL EXPANSION
Regarding training activities and development of human resources, BLOM BANK organizedand sponsored the participation of its employees in various seminars and workshops. TheBank has also in place special training programs such as:- Manager Training Program (MTP): a five-year program where the Manager Training Officer(MTO) gets exposed to the different departments and entities within the Bank before beingassigned to a managerial position- Fast Track Program (FTP): a five-year program which promotes a fast career path for theemployees.
In 2007, the Bank conducted 6,444 employees training sessions for a total of 45,785 hours. Trainingsessions involved employees from all BLOM and BLOMINVEST departments and covered varioustopics related to banking techniques, management, marketing, information technology as well aslanguage courses.
15. BANK’S OPERATIONAL EFFICIENCY
In 2007, the net profit by branch decreased by 7.55% to USD 1,898,148 while the net profit peremployee also dropped by 8.87% to USD 74,302 compared to USD 81,538 a year earlier.
16. REGIONAL EXPANSION
BLOM BANK pursued its aggressive expansion policy, inaugurating new branches within theLebanese territory and expanding further regionally.
On the local front, in 2007, BLOM BANK opened four additional branches in the areas of Tabaris(Beirut), Jbeil, Mina El Hosn as well as a retail branch in Hamra Street. The Bank is looking forwardto expanding further its local network and is planning to inaugurate new branches within the yearOn the regional front, two new branches have been inaugurated in Jordan during the year2007 while two others should be opened in the incoming year, rising the total number of BLOMBANK branches in Jordan to six.
Number of EmployeesNumber of BranchesUSD Net Profit per EmployeeUSD Average Assets per EmployeeUSD Average Assets per BranchUSD Net Profit per Branch
Bank’s Operational Efficiency Indicators
20062007
2,759108
74,3025,154,766
131,685,1851,898,148
2,21688
81,5386,416,773
161,586,0092,053,273
68
Management discussion & analysis 2007
BSO (Bank of Syria and Overseas) is also expanding in Syria and opened, in 2007, a newbranch in Aleppo. BSO is focusing on developing its branches network within Syria in 2008 andthe Bank has set the robust objective to increase the number of its branches from 10 to 20 bythe end of the year 2008.
BLOM BANK EGYPT is also expanding its network in Egypt and the number of branches inoperation has increased from 9 branches in 2006 to 20 branches in 2007. On another note, thefive branches located in Romania and previously affiliated to BLOM BANK EGYPT, have beenconsolidated with BLOM BANK FRANCE in December 2007. In 2008, the Bank is looking forwardto bringing the number of its branches in Egypt to 30, in line with BLOM BANK group’s robustexpansion strategy.
On another note, BLOM BANK was awarded license to establish a representative office inAbu Dhabi by the end of 2007 while BLOMINVEST BANK received the approval to launch inJanuary 2008 an investment bank in Saudi Arabia named BLOMINVEST Saudi Arabia. In April2008, the Bank expanded further andwas granted a license to establish a commercial and privatebank in Qatar, financial center, BLOM BANK QATAR. In addition BLOM BANK FRANCE has appliedfor a bank license in Algeria.
All in all, in the incoming years, BLOM BANK is looking forward to penetrating new Arab marketsenhancing its market accessibility and developing further its international network.
69
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF THE BLOM BANK SALCONSOLIDATED INCOME STATEMENT Year ended 31 December 2007
74
Interest and similar incomeLebanese and other governmental treasury bills and bonds – available for saleLebanese and other governmental treasury bills and bonds – tradingDeposits and similar accounts with banks and financial institutionsBonds and other financial assets with fixed income – non tradingBonds and other financial assets with fixed income – tradingBonds and other financial assets with fixed income – fair value through profit or lossLoans and advances to customersLoans and advances to related parties
Interest and similar chargesDeposits and similar accounts from banks and financial institutionsDeposits from customers and other credit balancesDeposits from related parties
Net interest received
Net provisions less recoveries on loans and advancesProvisions for loans and advancesRecovery of provisions for loans and advances
Revenues from shares and financial assets with variable income
Net commissionsCommissions receivedCommissions paid
Profit from financial operationsProfit from trading investmentsProfit from non-trading investmentsProfit from foreign exchange operations
Loss on financial operationsLoss on trading investmentsLoss on non-trading investmentsLoss on foreign exchange operations
Net profit from financial operations
Other operating income
Other operating expenses
General and administrative expensesSalaries and related benefitsGeneral operating expenses
Depreciation and amortization of tangible and intangible assets
Net provisions less recoveries on financial fixed assets
Provision for contingent liabilities
Profit before tax
Income tax
Profit for the year
Basic/ diluted earnings per share attributable to equity holders of the parent for the year (in LL)Attributable to:Equity holders of the parentMinority interest
The accompanying notes 1 to 56 form part of these consolidated financial statements.
NOTES 2007LL million
1,264,824319,4733,271
375,578323,6491,049
-241,703
101
(857,569)(13,342)(838,657)(5,570)
407,255
(808)(19,660)18,852
1,123
76,98981,804(4,815)
45,50510,38110,03725,087
(18,706)(3,796)(514)
(14,396)
26,799
22,394
(11,675)
(183,238)(112,399)(70,839)
(16,143)
395
(1,458)
321,633
(49,829)
271,804
10,969
269,6042,200
271,804
Restated 2006LL million
1,490,749341,6005,738
488,825347,724
303245
305,553761
(1,034,637)(19,112)
(1,010,636)(4,889)
456,112
11,435(20,026)31,461
969
89,38096,007(6,627)
49,3763,84318,46927,064
(9,708)(1,820)
-(7,888)
39,668
24,618
(14,446)
(210,450)(129,133)(81,317)
(18,350)
-
(13,350)
365,586
(57,000)
308,586
12,395
303,4725,114
308,586
4
5
67
67
8
9
1011
12
13
14
CONSOLIDATED INCOME STATEMENT Year ended 31 December 2007
75
CONSOLIDATED BALANCE SHEET At 31 December 2007
ASSETSCash and balances with the Central BanksLebanese and other governmental treasury bills and bondsBonds and financial assets with fixed incomeShares, securities and financial assets with variable incomeBanks and financial institutions-Current accounts-Time depositsLoans and advances to customers (*) (**)-Commercial loans-Other loans to customers-Overdraft accounts-Net debtor accounts against creditor and cash collateral accounts-Advances to related parties-Doubtful debts (net)Bank acceptancesInvestments and loans to related partiesTangible fixed assetsIntangible fixed assetsOther assetsRegularization accounts and other debit accountsGoodwill
TOTAL ASSETS
* Of which substandard loans** After deduction of:Provision for doubtful debts and provision for commercial and
consumer loans not classified at the balance sheet dateUnrealized interest on:
-Substandard loans-Doubtful debts
OFF-BALANCE SHEET ITEMSFinancial assets sold with an option to repurchaseEngagements receivedBad loans fully provided forForeign currencies to deliver against foreign currencies to receive
NOTES 2007LL million
6,246,4063,474,920
386,1008,403
7,754,284300,789
7,453,4952,996,6982,388,501521,2418,19010,8267,40060,540
173,2603,220
219,3722,845
33,71561,40863,980
21,424,611
34,456
264,15687,59313,89973,694
-5,467,773
43,9052,144,6177,656,295
Restated 2006LL million
6,330,0315,080,3231,165,140
11,7257,536,533327,558
7,208,9754,179,3073,228,892848,04311,93214,3085,94070,192
245,35727,208
272,6424,459
34,216119,48760,586
25,067,014
36,285
259,20982,96814,23868,730
143,6477,088,518
28,3122,939,186
10,199,663
1516171819
20
21222324252627
20
2020
422043
The consolidated financial statements were authorized for issue in accordance with a resolution of the board ofdirectors on 18 March 2008.
CONSOLIDATED BALANCE SHEET At 31 December 2007
76
LIABILITIES AND EQUITYLIABILITIESBanks and financial institutions-Current accounts-Time depositsCustomers' deposits-Sight deposits-Time deposits-Saving accounts-Credit accounts and cash margins against debit accounts-Related parties’ accountsEngagements by acceptancesOther liabilitiesRegularization accounts and other credit accountsProvisions for risks and charges
TOTAL LIABILITIES
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF PARENTShare capitalRevaluation reservesReserve for general banking risksReserves and premiumsCumulative changes in fair valuesTreasury sharesRetained earningsProfit for the year
MINORITY INTEREST
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
OFF-BALANCE SHEET ITEMSFinancing commitments given to:-Financial intermediaries-CustomersBank guarantees given to:-Financial intermediaries-CustomersCommitments on term financial instrumentsFinancial assets bought with an option to resellFiduciary deposits, assets under management and custody accountsForeign currencies to receive against foreign currencies to deliver
NOTES 2007LL million
1,308,844159,362
1,149,48217,690,3811,897,7657,874,1967,180,465662,69675,259
173,260141,067129,86964,646
19,508,067
240,00014,72759,324
1,162,79021,430(52,108)121,606269,604
1,837,37379,171
1,916,544
21,424,611
307,18613,051294,135689,52896,098593,43017,659
-2,774,3602,146,7555,935,488
Restated 2006LL million
1,555,914186,913
1,369,00120,708,5162,341,5949,589,7497,862,422812,788101,963245,357194,460189,79280,566
22,974,605
240,00014,72769,503
1,221,80414,497(36,122)176,454303,472
2,004,33588,074
2,092,409
25,067,014
359,37421,043338,331786,996196,378590,61834,142
143,6473,959,1362,942,5498,225,844
28
29
21303132
332334353637
44
44
43
4643
The consolidated financial statements were authorized for issue in accordance with a resolution of the board ofdirectors on 18 March 2008.
The accompanying notes 1 to 56 form part of these consolidated financial statements.
CONSOLIDATED BALANCE SHEET At 31 December 2007
77
CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2007
OPERATING ACTIVITIESProfit before taxAdjustments for:Depreciation and amortization of tangible and intangible fixed assetsProvision for impairment of assets taken in recovery of debtsWrite-back of provision for impairment of assets taken in recovery of debtsProvision for end of service indemnity, netProvision for complementary taxes and contingent liabilities related to a subsidiary bank, net(Write-back of provision) provision for risk and charges, netProvision for outstanding claims and IBNR reserves, net(Write-back of various provisions) provisions for risks and charges, net(Write-back of provision) provision for doubtful loans and advances, netProvision for impairment of investment in a non consolidated subsidiaryUnrealized loss on shares, securities and financial assets with variable income held for tradingProfit from sale of shares, securities and financial assets with variable income not held for tradingUnrealized profit on investments related to unit-linked contractsProfit from sale of certificates of deposit – Central BanksProfit from sale of Lebanese and other governmental treasury bills and bonds not held for tradingUnrealized profit from Lebanese and other governmental treasury bills and bonds held for trading(Profit) loss on disposal of tangible and intangible fixed assetsProvision for doubtful sundry debtorsOther equity transactionsForeign currency translation reserve realized upon sale of branches in Romania
Changes in operating assets and liabilities:Lebanese and other governmental treasury bills and bonds held for tradingShares, securities and financial assets with variable income held for tradingBonds and other financial assets with fixed income held for tradingLoans and advances to customersBanks and financial institutions-debitOther assetsRegularization accounts and other debit accountsBanks and financial institutions-creditCustomers' depositsOther liabilitiesRegularization accounts and other credit accounts
Cash from operationsTaxes paidEnd of service indemnities paidProvision for risks and charges paid
Net cash from operating activities
NOTES 2007LL million
321,633
13,7252,418(3,121)5,4981,370434169
1,3228085
3,010(472)(902)
(9,265)(484)
(9,595)80---
326,633
(23,401)7,138
-(479,524)339,099(9,027)(8,881)(4,224)
2,372,892(12,097)34,998
1,865,408(45,515)
(703)(464)
1,818,726
Restated 2006LL million
365,586
18,350-
(1,044)2,49113,142(240)2,507(607)
(11,435)44129
(3,034)(2,910)(14,558)
(201)(2,152)
(37)189300
(7,169)359,351
(24,249)(1,693)(66,714)
(1,171,174)(409,095)
2,409(58,281)91,021
3,018,13548,93059,923
1,848,563(53,953)(2,694)
(54)
1,791,862
12232332323232
4
67257
6
26
2
303232
CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2007
78
INVESTING ACTIVITIESLebanese and other governmental treasury bills and bonds not held for trading (1)Balances with the Central Banks (term accounts and certificates of deposit) (1)Investments and loans to related partiesPurchase of tangible and intangible fixed assetsShares, securities and financial assets with variable income not held for tradingBonds and other financial assets with fixed income not held for tradingCash proceeds from the disposal of tangible and intangible fixed assetsPurchase of an additional equity interest in a subsidiary
Net cash used in investing activities
FINANCING ACTIVITIESIssuance of common sharesSale (purchase) of treasury shares, netPremium from issuance of common sharesDividends paidMinority interest, netShare in a subsidiary’s equity before consolidation
Net cash (used in) from financing activities
Effect of exchange rate changes
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents as of 1 January
Cash and cash equivalents as of 31 December
NOTES 2007LL million
(815,611)423,178
(144)(49,576)3,47837,98116,293(4,031)
(388,432)
30,000(52,044)374,059(117,002)15,267
219
250,499
22,570
1,703,363
7,221,549
8,924,912
Restated 2006LL million
(457,574)(484,133)(24,032)(84,136)1,694
(714,664)15,367
-
(1,747,478)
-12,818
-(147,245)
(773)-
(135,200)
19,432
(71,384)
8,924,912
8,853,528
3
33
37&38
39
(1) Non cash transactions in the investing activities include a decrease in certificates of deposit-Central Banksin the amount of LL 1,109,280 million (2006: increase in the amount of LL 800,784 million) against an increase inLebanese and other governmental treasury bills and bonds not held for trading for the same amount (2006:decrease in the amount of LL 800,784 million) during 2007.
The accompanying notes 1 to 56 form part of these consolidated financial statements.
79
At 31 December 2005 (as previously reported)
Correction of an error (note 40)At 31 December 2005 (as restated)Net movement in cumulative changes infair values (note 36)Currency translation differenceProfit for the year- 2006 (restated)Total income and expenses for the yearDividends’ distributions (note 38)Appropriation of 2005 profitsIssuance of common shares net of issuancecosts (note 33)Purchase of treasury shares, netGain on sale of treasury sharesDecrease in minority interest due toacquisition by the bankOtherMinority interest in share capital increaseof subsidiariesDividends on treasury shares
At 31 December 2006Net movement in cumulative changes infair values (note 36)Currency translation differenceProfit for the year- 2007Total income and expenses for the yearDividends’ distributions (note 38)Appropriation of 2006 profitsSale of treasury shares, netNet loss on sale of treasury sharesIncrease in minority due to decrease in majority shareMinority interest in dividends distribution in a subsidiaryDividends on treasury sharesForeign currency translation reserve realizedupon sale of branches in Romania (note 2)Other
At 31 December 2007
Share
capital
LL million
Revaluation
reserves
LL million
Reserve for general
banking risks
LL million
Reserves
and premiums
(Note 35)
LL million
Attributable to equity holders of the parent
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2007
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2007
210,000
-210,000
------
30,000--
--
--
240,000
-----------
--
240,000
14,727
-14,727
------
---
--
--
14,727
-----------
--
14,727
50,719
-50,719
-255
-255
-8,350
---
--
--
59,324
-305
-305
-9,874
-----
--
69,503
725,783
-725,783
-19,641
-19,641
-42,636
374,059-
64
-607
--
1,162,790
-10,962
-10,962
-58,020
-(3,168)
---
(7,169)369
1,221,804
80
Retained earnings
LL million
Profit for the year
LL million
Total
LL million
LL million LL millionCumulative
changes
in fair value
LL million
Treasury
shares
LL million
Minorityinterest
Totalequity
81,067
-81,067
(59,637)--
(59,637)--
---
--
--
21,430
(7,006)73-
(6,933)-------
--
14,497
-
--
------
-(52,108)
-
--
--
(52,108)
------
15,986----
--
(36,122)
99,238
(11,844)87,394
-398
-398
-32,979
---
-(386)
-1,221
121,606
-452
-452
-53,319
----
1,146
-(69)
176,454
202,188
-202,188
--
269,604269,604(118,223)(83,965)
---
--
--
269,604
--
303,472303,472(148,391)(121,213)
-----
--
303,472
1,383,722
(11,844)1,371,878
(59,637)20,294269,604230,261(118,223)
-
404,059(52,108)
64
-221
-1,221
1,837,373
(7,006)11,792303,472308,258(148,391)
-15,986(3,168)
--
1,146
(7,169)300
2,004,335
60,163
-60,163
(19)3,8852,2006,066
--
---
(2,334)(2)
15,278-
79,171
(264)4,8265,1149,676
----
2,141(2,871)
-
(45)2
88,074
1,443,885
(11,844)1,432,041
(59,656)24,179271,804236,327(118,223)
-
404,059(52,108)
64
(2,334)219
15,2781,221
1,916,544
(7,270)16,618308,586317,934(148,391)
-15,986(3,168)2,141(2,871)1,146
(7,214)302
2,092,409
The accompanying notes 1 to 56 form part of these consolidated financial statements.
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACTIVITIES2. SIGNIFICANT ACCOUNTING POLICIES
1. ACTIVITIES
BLOM Bank SAL (the "Bank"), a Lebanese joint stock company, was incorporated in 1951 andregistered under No 2464 at the commercial registry of Beirut and under No 14 on the banks’list published by the Bank of Lebanon. The headquarters of the Bank are located in Verdun,Rashid Karameh Street, Beirut, Lebanon.
The Bank, together with its subsidiaries, BLOM INVEST Bank SAL, Arope Insurance SAL, SyriaInternational Insurance (Arope Syria) SA, BLOM Bank France SA, BLOM Bank (Switzerland)SA, Bank of Syria and Overseas SA, BLOM Bank Egypt SAE, BLOM Egypt Securities SAE,BLOM Development Bank SAL and BLOM Invest- Saudi Arabia (under establishment) (theGroup), provide all banking activities (commercial, investing and private), as well as insuranceand brokerage activities.
On 1 January 2006, the Bank’s branch in Cyprus started to be treated as a local branch and notas an international banking unit.
On 14 February 2008, the Central Bank of the United Arab Emirates licensed BLOM Bank SALto open a representative office and operate in the United Arab Emirates. This license is validfor five years.
On 12 July 2007, the Bank’s board of directors approved on the establishment of a bank in thestate of Qatar to be located in Qatar Financial Center with share capital of US$ 10 million,whereby the Bank will subscribe in 99% of its capital. On 18 February 2008, the Bank obtainedthe approval of the Central Bank of Lebanon on the establishment provided that the Bank providesthe Central Bank of Lebanon and the Banking Control Commission with the approval of theregulatory authorities in Qatar.
2. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies adopted in the preparation of the consolidated financialstatements are set out below:
Basis of preparation
The consolidated financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) and general accounting plan for banks in Lebanon andthe regulations of the Bank of Lebanon and the Banking Control Commission.
84
The consolidated financial statements are prepared under the historical cost convention asmodified for the restatement of certain tangible real estate properties in Lebanon accordingto the provisions of law No 282 dated 30 December 1993, and for the measurement at fairvalue of derivatives, Lebanese and other governmental treasury bills and bonds, bonds andfinancial assets with fixed income, and shares, securities and financial assets with variableincome held for trading and available for sale, and investments related to unit-linked contracts(fair value through profit or loss).
Theconsolidated financial statementshavebeenpresented inmillionof LebaneseLira (LLmillion),whichis the functional currency of the Bank. Balances denominated in other currencies have been presentedin thousands.
Changes in accounting policies
The Group has adopted IFRS 7 Financial Instruments: Disclosures and amendments to IAS 1Presentation of Financial Statements effective for the year ended 31 December 2007 whichhas resulted in amended and additional disclosures relating to financial instruments and associatedrisks, capital and capital management.
Other accounting policies are consistent with those used in the previous year.
Future changes in accounting policies
Below is the list of standards issued but not yet effective for the year ended 31 December2007:
IAS 1 (Revised): Presentation of Financial StatementsIAS 23: Borrowing costsIFRS 8: Operating SegmentsIFRIC 9: Reassessment of Embedded DerivativesIFRIC 11: IFRS 2 – Group and Treasury Share TransactionsIFRIC 12: Service Concession ArrangementsIFRIC 13: Customer Loyalty ProgrammesIFRIC 14: IAS 19 – The Limit on a Defined Benefit Asset, Minimum FundingRequirements and their Interaction
Management do not expect the above standards to have a significant impact on the Group’sfinancial statements when implemented in future years.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
85
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation
The consolidated financial statements comprise the financial statements of BLOM Bank SALand its controlled subsidiaries drawn up to 31 December each year. The financial statementsof subsidiaries are prepared for the same reporting year as the Bank, using consistentaccounting policies.
All intra-group balances, transactions, income and expenses and profits and losses resultingfrom intra-group transactions are eliminated in full.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group.Control is achieved where the Bank has the power to govern the financial and operating policiesof an entity so as to obtain benefits from its activities. The results of subsidiaries acquired ordisposed of during the year are included in the consolidated income statement from the dateof acquisition or up to the date of disposal, as appropriate.
Minority interests represent the portion of profit or loss and net assets not owned, directly orindirectly, by the Group and are presented separately in the income statement and withinequity in the consolidated balance sheet, separately from parent shareholders’ equity.Acquisitions of minority interests are accounted for using the parent entity extension method,whereby, the difference between the consideration and the fair value of the share of the netassets acquired is recognized as goodwill. If the cost of acquisition below the fair values of theidentifiable net assets acquired (i.e. a discount on acquisition), the difference is recognized directlyin the income statement in the year of acquisition.
The consolidated financial statements include the financial statements of BLOM Bank SALand the subsidiaries listed in the following table:
BLOM Bank France SA (c)BLOM Bank (Switzerland) SA(100% owned by BLOM Bank France SA)BLOM Invset Bank SALBLOM Development Bank SAL(99.98% owned by BLOM Invest Bank SAL)Bank of Syria and Overseas SA (a)Arope Insurance SALSyria International Insurance (Arope Syria) SA (b)BLOM Bank Egypt SAE (c)BLOM Egypt Securities SAE(99.8% owned by BLOM Bank Egypt SAE)
2007 %
99.998
99.99899.875
99.98039.00088.56042.0699.371
99.371
2006 %
99.998
99.99899.875
99.98039.00088.56042.0699.371
99.371
Activities
Banking activities
Banking activitiesBanking activitiesIslamic bankingactivitiesBanking activitiesInsurance activitiesInsurance activitiesBanking activities
Brokerage activities
Countryof incorporationFrance
SwitzerlandLebanon
LebanonSyriaLebanonSyriaEgypt
Egypt
86
% EQUITY INTEREST
(a) Effective 1 January 2004, theGroupobtainedcontrol, by virtue of agreementwith other investors,over Bank of Syria and Overseas SA, and consequently, the financial statements of Bank of Syriaand Overseas SA have been consolidated with those of the Group.(b) Effective 1 January 2006, theGroupobtainedcontrol, by virtue of agreementwith other investors,over Syria International Insurance (Arope Syria) SA, and consequently, the financial statementshave been consolidated with those of the Group.(c) In November 2007, Blom Bank Egypt SAE sold its branches in Romania to Blom Bank France SA.Consequently, the Group realized foreign currency translation reserve in the amount of LL7,169 million upon the sale of the branches in Romania.
Business combinations and goodwill
Business combinations are accounted for using the purchase method of accounting. This involvesrecognizing identifiable assets (including previously unrecognized intangible assets) and liabilities(including contingent liabilities but excluding future restructuring) of the acquired business at fairvalue. Any excess of the cost of acquisition over the fair values of the identifiable net assetsacquired is recognized as goodwill. If the cost of acquisition is less than the fair values of the identifiablenetassetsacquired, thediscountonacquisition is recognizeddirectly in the incomestatement in theyearof acquisition.
Goodwill acquired in a business combination is initially measured at cost being the excess of thecost of the business combination over the Group’s interest in the net fair value of the identifiableassets, liabilities and contingent liabilities acquired. Following initial recognition, goodwill is meas-ured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annu-ally or more frequently if events or changes in circumstances indicate that the carrying value maybe impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from theacquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-gener-ating units, that are expected to benefit from the synergies of the combination, irrespective ofwhether other assets or liabilities of the acquiree are assigned to those units or groups of units.Each unit or group of units to which the goodwill is allocated:- represents the lowest level within the Group at which the goodwill is monitored for internalmanagement purposes; and- is not larger than a segment based on either the Group’s primary or secondary reporting formatdetermined in accordance with IAS 14 Segment Reporting.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
87
2. SIGNIFICANT ACCOUNTING POLICIES
Where goodwill forms part of a cash-generating unit (or group of cash-generating units) andpart of the operation within that unit is disposed of, the goodwill associated with the opera-tion disposed of is included in the carrying amount of the operation when determining the gainor loss on disposal of the operation. Goodwill disposed of in this circumstance is measuredbased on the relative values of the operation disposed of and the portion of the cash-gener-ating unit retained.
When subsidiaries are sold, the difference between the selling price and the net assets pluscumulative translation differences and unamortized goodwill is recognized in the incomestatement.
Impairment is determined by assessing the recoverable amount of the cash-generating unit(group of cash-generating units), to which the goodwill relates. Where the recoverableamount of the cash-generating unit (group of cash-generating units) is less than the carryingamount, an impairment loss is recognized.
Trading investments
Trading investments include:- Lebanese and other governmental treasury bills and bonds,- Bonds and financial assets with fixed income,- Shares, securities and financial assets with variable income.These are initially recognized at cost (being the fair value given) and subsequently remeasured atfair value. All related realized or unrealized gains or losses are included in the consolidated incomestatement. Interest earned is included in interest and similar income while dividends received areincluded in revenues from shares and financial assets with variable income.
Non-trading investmentsThese are classified as follows:- Available for sale,- Investments carried at fair value through profit or loss,- Investments carried at amortized cost (loans and receivable).
Non-trading investments include:- Certificates of deposit,- Lebanese and other governmental treasury bills and bonds,- Bonds and financial assets with fixed income,- Shares, securities and financial assets with variable income,- Investments and loans to related parties,- Investments related to unit-linked contracts.
88
All investments are initially recognized at cost, being the fair value of the consideration givenincluding acquisition costs.
Premiums and discounts on non-trading investments are amortized using the effective interest ratemethod and are taken to interest income.
Available for sale
Available-for-sale financial investments are those investments which are designated as such or donot qualify to be classified as designated at fair value through profit or loss, held-to-maturity orloans and receivables.
After initial recognition, investments which are classified “available for sale” are normallyremeasured at fair value. If the Group is not able to estimate the fair value, available for saleinvestments are then carried at cost, less provision for impairment in value. Fair value changeswhich are not part of an effective hedging relationship, are reported as a separate component ofequity until the investment is derecognized or the investment is determined to be impaired. Onderecognition or impairment, the cumulative gain or loss previously reported as “cumulativechanges in fair value” within equity, is included in the consolidated income statement for the period.
That portion of any fair value changes relating to an effective hedging relationship is recognizeddirectly in the consolidated income statement.
Investments carried at fair value through profit or loss
Investments are classified as fair value through profit or loss account if the fair value of the invest-ment can be reliably measured and the classification as fair value through profit or loss account isas per the documented strategy of the Group. Investments classified as “Investments at fair valuethrough profit or loss” upon initial recognition are remeasured at fair value with all changes in fairvalue being recorded in the consolidated income statement.
Investments carried at amortised cost
Debt instruments which do not meet the definition of held to maturity and which have fixed ordeterminable payments but are not quoted in an active market are carried at amortised cost,less provision for impairment in value.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
89
2. SIGNIFICANT ACCOUNTING POLICIES
Derecognition of financial assets and financial liabilities
i. Financial assetsA financial asset (or, where applicable a part of a financial asset or part of a group of similarfinancial assets) is derecognised where:- the rights to receive cash flows from the asset have expired; or- the Group has transferred its rights to receive cash flows from the asset or has assumed anobligation to pay the received cash flows in full without material delay to a third party under a‘pass-through’ arrangement; and- either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b)the Group has neither transferred nor retained substantially all the risks and rewards of theasset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered intoa pass-through arrangement, and has neither transferred nor retained substantially all the risksand rewards of the asset nor transferred control of the asset, the asset is recognised to the extentof the Group’s continuing involvement in the asset. Continuing involvement that takes the form ofa guarantee over the transferred asset is measured at the lower of the original carrying amountof the asset and the maximum amount of consideration that the Group could be required to repay.
ii. Financial liabilitiesA financial liability is derecognised when the obligation under the liability is discharged orcancelled or expires. Where an existing financial liability is replaced by another from the samelender on substantially different terms, or the terms of an existing liability are substantially modified,such an exchange or modification is treated as a derecognition of the original liability and therecognition of a new liability, and the difference in the respective carrying amounts is recognisedin profit or loss.
Fair values
For investments and derivatives quoted in an active market, fair value is determined by referenceto quoted market prices. Bid prices are used for assets and offer prices are used for liabilities.
For unquoted financial instruments, fair value is determined by reference to the market value of similarinvestments, or is based on the expected discounted cash flows, or by using other techniques.
The estimated fair value of deposits with no stated maturity, which includes non-interest bearingdeposits, is the amount payable on demand.
90
Due from banks and financial institutions
These are stated at fair value of consideration given less any amountswritten off and allowance forimpairment.
Loans and advances to customers
Loansandadvancesare statedat fair valueof considerationgiven, net of suspended interest, provisionsfor doubtful debts, any amountswritten off, and allowance for impairment.
Renegotiated loans
Where possible, the Group seeks to restructure loans rather than to take possession of collateral.This may involve extending the payment arrangements and the agreement of new loan conditions.Once the terms have been renegotiated, the loan is no longer considered past due. Managementcontinuously reviews renegotiated loans to ensure that all criteria aremet and that future paymentsare likely to occur. The loans continue to be subject to an individual or collective impairmentassessment, calculated using the loan’s original effective interest rate.
Investments in associates
The Group’s investments in associates are accounted for using the equity method of accounting.An associate is an entity inwhich theGrouphas significant influenceandwhich is neither a subsidiarynor a joint venture.
Under the equitymethod, the investment in the associate is carried in the balance sheet at cost pluspost-acquisition changes in the Group’s share of net assets of the associate. Losses in excess ofthe cost of the investment in an associate are recognized when the Group has incurred obligationson its behalf. Goodwill relating to an associate is included in the carrying amount of the investmentand is not amortized. The income statement reflects the Group’s share of the results of operationsof the associate.Where there has been a change recognized directly in the equity of the associate, theGroup recognizes its share of any changes and discloses this, when applicable, in the statement ofchanges in equity. Unrealized profits and losses resulting from transactions between theGroup and theassociate are eliminated to the extent of the interest in the associate.
The reporting dates of the associate and theGroup are identical and the associate’s accounting policiesconform to those used by theGroup for like transactions and events in similar circumstances.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
91
2. SIGNIFICANT ACCOUNTING POLICIES
Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation and any accumulatedimpairment in value. Certain of tangible real estate properties purchased prior to 1 January1994 were restated for the changes in the general purchasing power of the Lebanese Liraaccording to the provisions of law No 282 dated 30 December 1993. The net surplus arising onrevaluation is credited to the account of revaluation reserves recognized in shareholders’equity.
Changes in the expected useful life are accounted for by changing the depreciation period ormethod, as appropriate, and treated as changes in accounting estimates.
Depreciation is calculated on a straight line basis to write down the cost of tangible fixedassets to their residual values over their estimated useful lives. Freehold land is not depreciated.The estimated useful lives are as follows:
The impact of the depreciation expense due to the change in the estimated useful lives isaccounted for prospectively.
An itemof tangible fixed assets is derecognised upon disposal orwhen no future economic benefits areexpected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated asthedifferencebetween thenet disposal proceedsand thecarryingamount of theasset) is recognised in‘Other operating income’ or ‘Other operating expenses’ in the income statement in the year the asset isderecognised.
The carrying values of tangible fixed assets are reviewed for impairment to determine whetherevents for changes in circumstances indicate the carrying value may not be recoverable. If anysuch indication exists and where the carrying values exceed the estimated recoverable amount,the assets are written down to their recoverable amount, being the higher of the fair value lesscosts to sell and their value in use.
Expenditure incurred to replace a component of an item of tangible fixed assets that isaccounted for separately is capitalised and the carrying amount of the component that isreplaced is written off. Other subsequent expenditure is capitalised only when it increasesfuture economic benefits of the related item of tangible fixed assets. All other expenditure isrecognised in the income statement as the expense is incurred.
BuildingsVehiclesFurniture, office installations and computer equipment
2007
50 years6.67 years
2 – 16.67 years
2006
40 years6.67 years
5 – 11.11 years
92
Collateral pending sale
TheGroup occasionally acquires real estate in settlement of certain loans andadvances. Such realestate is stated at the lower of the amount of the related loans and advances and the current fairvalue of such assets based on the instructions of the Control Authorities. Gains or losses on disposal,and revaluation losses, are recognized in the consolidated income statement for the period.
Intangible fixed assets
Intangible assets are initially measured at cost. following initial recognition, intangible assets arecarried at cost less any accumulated amortization and any accumulated impairment losses. Theuseful lives of the intangible assets are assessed to be either finite or indefinite. Intangible assetswith finite lives are amortized over the useful economic life and tested for impairment wheneverthere is an indication that the intangible asset may be impaired. Intangible assets with indefiniteuseful lives are not amortized but tested for impairment annually and whenever there is an indicationthat the intangible asset may be impaired.
If the carrying value of the intangible asset is more than the recoverable amount, the intangibleasset is considered impaired and is written down to its recoverable amount. The excess of carryingvalue over the recoverable amount is recognized in the income statement.
Impairement losses on intangible assets recognized in the income statement in previous periods,are reversed when there is an increase in the recoverable amount.
Amortisation is calculated using the straight-linemethod towrite down the cost of intangible assetsto their residual values over their estimated useful lives as follows:
Customer deposits
All customer deposits are carried at the fair value of the consideration received, less amounts repaid.
Taxation
(i) Current taxTaxation is provided for in accordance with the fiscal regulations of the respective countriesin which the Bank and its branches and subsidiaries operate.
Key money: the lesser of lease period or 5 yearsSoftware development cost: 2-5 years
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
93
2. SIGNIFICANT ACCOUNTING POLICIES
Current tax assets and liabilities for the current and prior years are measured at the amountexpected to be recovered from or paid to the taxation authorities. The tax rates and tax lawsused to compute the amount are those that are enacted or substantively enacted by the bal-ance sheet date.The Bank’s profits from operations in Lebanon are subject to a tax rate of 15% after deductingthe 5% tax on interest received according to Law no. 497/2003 dated 30 January 2003.Dividends are subject to a flat 10% tax, reducible to 5% provided that the Bank is listed on aregulated stock exchange.
(ii) Deferred taxDeferred income tax is providedusing the liabilitymethodon temporary differencesat thebalance sheetdatebetweenthetaxbasesofassetsand liabilitiesandtheircarryingamounts in thefinancialstatements.Deferred income tax assets and liabilities aremeasured at the tax rates that are expected to apply in theyearwhen the asset is realized or the liability is settled, based on tax rates (and tax laws) that have beenenacted or substantively enacted at the balance sheet date.Current tax and deferred tax relating to items recognized directly in equity are also recognizedin equity and not in the income statement.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reducedto the extent that it is no longer probable that sufficient taxable profit will be available to allow allor part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessedat each balance sheet date and are recognized to the extent that it has become probable thatfuture taxable profit will allow the deferred tax asset to be recovered.
Provisions for risks and chargesProvisions are recognizedwhen theGroup has a present obligation (legal or constructive) arising fromapast event and the costs to settle the obligation are both probable and able to be reliablymeasured.
Employees’ end-of-service benefits
The Group provides end of service benefits to its employees. The entitlement of these benefits arebased upon the employees’ final salary, length of services and other local regulations where theGroup operates. The expected costs of these benefits are accrued over the period of employment.
With respect to employees based in Lebanon, the Group makes contribution to the National SocialSecurity Fund calculated as a percentage of the employees’ salaries. The Group’s obligations arelimited to these contributions, which are expensed when due.
94
Treasury shares
Own equity instruments which are acquired (treasury shares) are deducted from equity and areaccounted for at weighted average cost. No gain or loss is recognized in the income statement onthe purchase, sale, issue or cancellation of the Bank’s own equity instruments.
DerivativesDerivatives are stated at fair value.For the purposes of hedge accounting, hedges are classified into three categories:(a) fair value hedges which hedge the exposure to changes in the fair value of a recognized assetor liability;(b) cash flow hedges which hedge exposure to variability in cash flows of a recognized asset or liabilityor a forecasted transaction, and(c) hedges of the net investment in a foreign subsidiary bank.In relation to effective fair value hedges any gain or loss from remeasuring the hedging instrumentto fair value, aswell as related changes in fair value of the itembeing hedged, are recognized imme-diately in the consolidated income statement.
In relation toeffectivecash flowhedges, thegainor losson thehedging instrument is recognized initially inequity and is transferred to the incomestatement in theperiod inwhich thehedged transaction impactsthe income statement, or included as part of the cost of the related asset or liability.
In relation to effective hedges of the net investment in a foreign subsidiary bank, any gain or lossfrom remeasuring the hedging instrument to fair value is recognized immediately in equity and istransferred to the income statement once the investment is sold.
For those hedges which do not qualify for hedge accounting, any gains or losses arising fromchanges in the fair value of the hedging instrument are taken directly to the consolidated incomestatement for the period.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated orexercised, no longer qualifies for hedge accounting or is revoked by the Group. For effective fairvalue hedges of financial instruments with fixed maturities any adjustment arising from hedgeaccounting is amortised over the remaining term to maturity. For effective cash flow hedges, anycumulative gain or loss on the hedging instrument recognized in equity remains in equity until thehedged transactionoccurs. If the hedged transaction is no longer expected to occur, thenet cumulativegain or loss recognized in equity is transferred to the consolidated income statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
95
2. SIGNIFICANT ACCOUNTING POLICIES
Fiduciary assetsAssets held in a fiduciary capacity are not treated as assets of the Group and accordingly arerecorded as off balance sheet items.
Off balance sheet itemsOffbalancesheetbalances includecommitmentswhichmaytakeplace in theGroup’snormaloperationssuchascommitments for loangranting, lettersofguarantees,and lettersofcredit,withoutdeducting themargins collected and related to these commitments.
OffsettingFinancial assets and financial liabilities are only offset and the net amount reported in the balancesheet when there is a legally enforceable right to set off the recognized amounts and the Groupintends to either settle on a net basis, or to realize the asset and settle the liability simultaneously.
Financial guaranteesIn the ordinary course of business, the Group gives financial guarantees, consisting of letters ofcredit, guarantees and acceptances. Financial guarantees are initially recognised in the financialstatements at fair value, in ‘Other liabilities’, being the premium received. Subsequent to initialrecognition, the Group’s liability under each guarantee is measured at the higher of the amortisedpremium and the best estimate of expenditure required to settle any financial obligation arising asa result of the guarantee.
Any increase in the liability relating to financial guarantees is taken to the income statement in‘Provisions for loans and advances’. The premium received is recognised in the income statementin ‘Commission received’ on a straight line basis over the life of the guarantee.
Revenue recognitionInterest income and fees that are considered part of the effective interest is recognized using theeffective yield method unless there is doubt of uncollectibility. The recognition of interest incomeis suspended when loans become impaired, such as when overdue by more than 90 days.
Notional interest is recognized on impaired loans and other financial assets based on the rate usedto discount future cash flows to their net present value. Other fees receivable are recognized asthe services are provided. Dividend income is recognized when the right to receive payment isestablished.
When theGroup enters in interest rate swap contracts to change the interest rate from fixed to variable(or vice-versa), interest incomeor expense is adjusted by the net difference resulting from the swap.
96
Foreign currenciesThe consolidated financial statements are presented in Lebanese Lira which is the Bank’s functionalcurrency. Each entity in the Group determines its own functional currency and items includedin the financial statements of each entity are measured using that functional currency.
Transactions and balancesTransactions in foreign currencies are initially recorded in the functional currency at the rate ofexchange ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated into LebaneseLira or other functional currencies at rates of exchange prevailing at the balance sheet date. Anygains or losses are taken to the consolidated income statement.
Translation gains or losses on non-monetary items carried at fair value are included in equity as partof the fair value adjustment on securities available-for-sale, unless part of an effective hedging strategy.
Translation of financial statements of foreign entitiesThe assets and liabilities of foreign branches and subsidiaries are not deemed an integral part of thehead office’s operations and are translated at rates of exchange ruling at the balance sheet date.Income and expense items are translated at average exchange rates for the period. Any exchangedifferences are taken directly to a foreign currency translation adjustment reserve.
Cash and cash equivalents
Cash and cash equivalents as referred to in the Cash Flow Statement comprise balances with originalmaturities of a period of three months including: cash and balances with the Central Banks, depositswith banks and financial institutions, deposits due to banks and financial institutions, and treasurybills.
Repurchase and resale agreements
Assets sold with a simultaneous commitment to repurchase at a specified future date (repos) continueto be recognized in thebalance sheet. Amounts receivedunder theseagreements are treatedas liabilitiesand the difference between the sale and the repurchase price is treated as interest expense using theeffective yieldmethod. Assets purchasedwithacorrespondingcommitment to resell at a specified futuredate (reverse repos) are not recognized in the balance sheet. Amounts paid under these agreements aretreated as assets and the difference between the purchase and resale price is treated as interest incomeusing the effective yieldmethod.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
97
2. SIGNIFICANT ACCOUNTING POLICIES
Impairment and uncollectibility of financial assets
Anassessment ismadeateachbalancesheetdatetodeterminewhether there isobjectiveevidencethatfinancial assets may be impaired. If such evidence exists, any impairment loss is recognized in theconsolidated income statement.Impairment is determined as follows:(a) for assets carried at amortised cost, impairment is based on estimated cash flows that arediscounted at the original effective interest rate;(b) for assets carried at fair value, impairment is the difference between cost and fair value less anyimpairment loss previously recognized in the consolidated income statement; and(c) for assets carried at cost, impairment is the present value of future cash flows discounted at thecurrent market rate of return for a similar financial asset.For available for sale equity investments, reversal of impairment losses are recorded as increases incumulative changes in fair values through equity.For the purpose of a collective evaluation of impairment, financial assets are groupedon the basis of thebank’s reviewof credit risk characteristics such as asset type, industry, geographical location, collateraltype, past-due status and other relevant factors.
Future cash flows on a group of financial assets that are collectively evaluated for impairment are esti-matedon thebasis of historical lossexperience for assetswithcredit risk characteristics similar to thosein the group. Historical loss experience is adjusted on the basis of current observable data to reflect theeffectsof current conditions that didnotaffect theyearsonwhich thehistorical lossexperience isbasedand to remove the effects of conditions in the historical period that do not exist currently. Estimates ofchanges in futurecash flows reflect, andaredirectionallyconsistentwith, changes in relatedobservabledata from year to year (such as changes in property prices, payment status, or other factors that areindicative of incurred losses in the group and their magnitude). Themethodology and assumptions usedforestimating futurecashflowsarereviewedregularly toreduceanydifferencesbetween lossestimatesand actual loss experience.
Trade and settlement date accounting
All “regular way” purchases and sales of financial assets are recognized on the trade date, i.e. thedate that the Group commits to purchase or sell the asset. Regular way purchases or salesare purchases or sales of financial assets that require delivery of assets within the time framegenerally established by regulations.
Operating leases
Leaseswhere the lessor retains substantially all the risks and benefits of ownership of the asset areclassified as operating leases. Operating lease payments are recognized as an expenses in theincome statement on a straight-line basis over the lease term.
98
Accounting policies of subsidiary-insurance companies
The financial statementsof thesubsidiary insurancecompanieshavebeenprepared inaccordancewithInternational Financial ReportingStandards and the requirements of the regulations related to insuranceand reinsurancecompanieswhere the subsidiaries operate. The key accounting policies are as follows:
Premiums earnedNet premiums and accessories (gross premiums) are taken to income over the terms of the policies towhich they relate using the prorata temporis method for non-marine business and 25% ofgross premiums for marine business. Unearned premiums reserve represent the portion ofthe gross premiums written relating to the unexpired period of coverage.If theunearnedpremiumsreserve isnotconsideredadequate tocover futureclaimsarisingonthesepre-miums a premiumdeficiency reserve is created.
Commissions earned and paidCommissions earned are recognized at the time policies are written.Commissions paid are expensed over the terms of the policies to which they relate using thepro-rata temporis method for non-marine business and 25%of commissions paid formarine business.Deferred acquisition costs represent the portion of commissions paid relating to the unexpired period ofcoverage.
2.a SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES
Judgments
In the process of applying the Group’s accounting policies, management has made the followingjudgements, apart from those involving estimations, which have the most significant effect in theamounts recognised in the financial statements:
Classification of investmentsManagement decides on acquisition of an investment whether it should be classified as held tomaturity, held for trading, carried at fair value through profit or loss account, or available for sale.The Group classifies investments as trading if they are acquired primarily for the purpose of making ashort termprofit by the dealers.
Classification of investments as fair value through profit or loss account depends on how managementmonitors theperformanceof these investments.When theyarenotclassifiedasheld for tradingbuthavereadily available reliable fair values and the changes in fair values are reported as part of profit or lossin the management accounts, they are classified as fair value through profit or loss.All other investments are classified as available for sale.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
99
2. SIGNIFICANT ACCOUNTING POLICIES3. BUSINESS COMBINATION4. NET PROVISIONS LESS RECOVERIES ON LOANS AND ADVANCES
Impairment of investmentsTheGroup treats available for sale equity investments as impairedwhen there has been a significant orprolongeddecline in the fair valuebelow itscost. Inaddition, theGroupevaluatesother factors, includingnormal volatility in share price for quoted equities and the future cash flows and the discount factors forunquoted equities.
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at thebalance sheet date, thathaveasignificant riskofcausingamaterialadjustment to thecarryingamountsof assets and liabilitieswithin the next financial year are discussed below:
Impairment losses on commercial loans and advancesTheGroup reviews its problem commercial loans and advances on a regular basis to assesswhether aprovision for impairment should be recorded in the consolidated income statement. In particular,considerable judgment bymanagement is required in the estimation of the amount and timing of futurecash flowswhendetermining the level of provisions required. Such estimates are necessarily based onassumptions about several factors involving varying degrees of judgment and uncertainty, and actualresultsmay differ resulting in future changes to such provisions.
In addition to specific allowances against individually significant loans and advances, the Group alsomakes a collective impairment allowance against exposures which, although not specifically identifiedas requiring a specific allowance, have a greater risk of default thanwhen originally granted. This takesinto consideration factors such as any deterioration in country risk, industry, and technologicalobsolescence, as well as identified weaknesses or deterioration in cash flows.
Impairment losses on consumer loansAnestimateof thecollectibleamount of consumer loans ismadewhencollectionof the full amount is nolonger probable. This estimation is assessed collectively and a provision applied according to the lengthof time past due, based on historical recovery rates.
Fair value of financial instrumentsWhere the fair values of financial assets and financial liabilities recorded on the balance sheetcannot be derived from active markets, they are determined using a variety of valuation techniquesthat include the use of mathematical models. The input to these models is taken from observablemarkets where possible, but where this is not feasible, a degree of judgment is required in establishingfair values. The judgments include consideration of liquidity andmodel inputs such as correlation andvolatility for longer dated derivatives.
100
3. BUSINESS COMBINATION
BLOM Bank Egypt SAE
In 2006, the Group acquired an additional 2.6% of the voting shares of BLOM Bank Egypt SAE for atotal consideration of LL 4,031 million with effective date 30 November 2005.
In 2006, BLOMBank Egypt SAE increased its ownership in BLOMEgypt Securities SAE from 67.74%to 99.37%. The total cost of acquisition is approximately LL 174 million. Net cash inflow on acquisitionamounted to LL 219 million. The Bank consolidated BLOM Egypt Securities SAE with effect from 1January 2006.
During 2006, BLOM Bank and two of its subsidiaries subscribed in 979,313 shares representing 49%of the voting shares of Syria International Insurance (Arope Syria) SA, a newly established insurancecompany in Syriawith a total investment amount of LL 14,559million.
4. NET PROVISIONS LESS RECOVERIES ON LOANS AND ADVANCES
LL million
Group’s interest (2.6%) 2,323Goodwill arising on acquisition (note 27) 1,708Cost of acquisition (net cash outflow) 4,031
Provision for doubtful loans and advances:Provision for doubtful loans and advancesProvision for doubtful consumer loansProvision for consumer loans not classified at the balance sheet date
Recoveries on loans and advances:Recoveries on doubtful and bad loans and advancesRecoveries on doubtful loans from off balance sheetRecoveries on personal loansRecoveries on commitments by signature
2007LL million
(13,394)-
(6,266)
(19,660)
18,107583
-162
18,852(808)
Restated 2006LL million
(12,661)(3,427)(3,938)
(20,026)
28,8522,590
19-
31,46111,435
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
101
5. NET COMMISSIONS6. NET PROFIT FROM TRADING INVESTMENTS7. NET PROFIT FROM NON-TRADING INVESTMENTS8. OTHER OPERATING INCOME9. OTHER OPERATING EXPENSES10. SALARIES AND RELATED BENEFITS11. GENERAL OPERATING EXPENSES
5. NET COMMISSIONS
6. NET PROFIT FROM TRADING INVESTMENTS
7. NET PROFIT FROM NON-TRADING INVESTMENTS
8. OTHER OPERATING INCOME
Commissions received:Letters of credit, guarantees and acceptancesLoans and advances to customersAsset management and correspondents’ accountsChecking accounts and transfersCustomers’ depositsCredit cardsOther services
Less: commissions paid on correspondents’ accounts
Net commissions received
2007LL million
22,08417,9317,9079,83211,9505,4466,65481,804(4,815)
76,989
2006LL million
25,44822,49410,7666,04113,6858,4319,14296,007(6,627)
89,380
Trading loss from equitiesTrading income from debt securities
2007LL million
(3,010)9,5956,585
2006LL million
(129)2,1522,023
Profit from sale of certificates of depositProfit from sale of equitiesOthers
2007LL million
9,265472(214)9,523
2006LL million
14,5583,034877
18,469
Premiums earned on insurance contractsOther miscellaneous income
2007LL million
16,1816,21322,394
2006LL million
19,7604,85824,618
102
9. OTHER OPERATING EXPENSES
10. SALARIES AND RELATED BENEFITS
11. GENERAL OPERATING EXPENSES
Board of directors’ attendance feesTaxes and feesFee for guarantee of depositsRent and related chargesElectricity and fuelProfessional feesPostage and telecommunicationsMaintenance and repairsTravel expensesInsuranceMarketing and advertisingStationery and printingsFiscal stampsOthers
2007LL million
1,0772,8755,4944,2592,4695,9867,0286,1753,262764
7,9044,6702,12916,74770,839
2006LL million
1,4162,6315,8936,2243,5947,8838,5575,6483,400727
8,1405,3262,08019,79881,317
Claims paid on insurance contractsOthers
2007LL million
11,369306
11,675
2006LL million
14,005441
14,446
Salaries and wagesSocial security contributionsProvisions for end of service indemnities (note 32)Additional indemnities paidOther allowances (including bonuses)
2007LL million
58,66710,6925,49810,62826,914112,399
2006LL million
65,21512,4122,61512,61036,281129,133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
103
12. DEPRECIATION AND AMORTIZATION OF TANGIBLE AND INTANGIBLE ASSETS13. PROVISION FOR CONTINGENT LIABILITIES14. EARNINGS PER SHARE15. CASH AND BALANCES WITH THE CENTRAL BANKS16. LEBANESE AND OTHER GOVERNMENTAL TREASURY BILLS AND BONDS
12. DEPRECIATION AND AMORTIZATION OF TANGIBLE AND INTANGIBLE ASSETS
13. PROVISION FOR CONTINGENT LIABILITIES
14. EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing the net profit for the year attributableto ordinary equity holders of the parent by the weighted average number of ordinary sharesoutstanding during the year.
The following reflects the income and share data used in the basic earnings per sharecomputation:
No figure for diluted earnings per share has been presented as the Bank has not issued anyinstruments which would have an impact on earnings per share when exercised.
Tangible fixed assets (note 23)Intangible fixed assets (note 24)Provision for impairment against real estate acquired in settlement of debts (note 23)
2007LL million
13,328397
2,41816,143
2006LL million
17,717633
-18,350
Provision for complementary taxes and contingent liabilitiesrelated to a subsidiary bank (note 32)Others
2007LL million
1,4553
1,458
2006LL million
13,32723
13,350
Net profit for the yearLess :Proposed dividends on preferred shares (note 38)
Minority interestNet profit attributable to equity holders of the parentWeighted average number of common sharesBasic earnings per share
2007
271,804(40,891)(2,200)228,713
20,850,72110,969
2006
308,586(40,890)(5,114)262,582
21,183,70412,395
LL million
LL million
LL million
LL million
LL
104
15. CASH AND BALANCES WITH THE CENTRAL BANKS
Cash and balances with the Central Banks include non-interest bearing balances held by the Group at theBank of Lebanon in coverage of the obligatory reserve requirements for all banks operating in Lebanon ondeposits in Lebanese Lira as requiredby the Lebanesebanking rules and regulations. This obligatory reserveis calculated on the basis of 25%of sight commitments and 15%of termcommitments.
In addition to the above, all banks operating in Lebanon are required to deposit with the Bank ofLebanon interest- bearing placements at the rate of 15% of total deposits in foreign currenciesregardless of nature.
Foreignsubsidiariesarealsosubject toobligatory reserve requirementswithvaryingpercentages, accordingto the banking rules and regulations of the countries inwhich they are located.
16. LEBANESE AND OTHER GOVERNMENTAL TREASURY BILLS AND BONDS
As of 30 December 2005, the Group reclassified treasury bills and bonds denominated inLebanese Lira and in foreign currencies from investments held to maturity to investmentsavailable for sale. Accordingly, the Group is not allowed to classify investments as held tomaturity before 1 January 2008, according to IAS 39. Consequently, held to maturity investmentswere carried at fair value and reclassified as available for sale as at 31 December 2005. Thisreclassification resulted in an increase in the fair value of the available for sale investmentsas at 31 December 2005 with a corresponding increase in cumulative changes in fair valuesin the consolidated statement of changes in equity.
Available for sale investments include unquoted governmental bonds in the amount of LL132,645 million (2006: LL 243,668 million) that are stated at cost, which approximately equal tofair value.
Trading:-Treasury bills and bonds (quoted)-Accrued interest at 31 December
Available for sale:- Treasury bills and bonds- Accrued interest at 31 December
2007LL million
49,5111,03750,548
3,353,39970,973
3,424,3723,474,920
2006LL million
75,5371,41276,949
4,904,14799,227
5,003,3745,080,323
CashCentral Banks:Current accountsTime depositsAccrued interest at 31 December
Certificates of deposit – loans and receivablesAccrued interest at 31 December
2007LL million
92,767
884,5051,630,300
21,3002,536,1053,534,441
83,0933,617,5346,246,406
2006LL million
128,083
951,9222,429,799
43,9353,425,6562,718,370
57,9222,776,2926,330,031
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
105
17. BONDS AND FINANCIAL ASSETS WITH FIXED INCOME18. SHARES, SECURITIES AND FINANCIAL ASSETS WITH VARIABLE INCOME19. BANKS AND FINANCIAL INSTITUTIONS – DEBIT
17. BONDS AND FINANCIAL ASSETS WITH FIXED INCOME
Included in bonds and financial assets with fixed income, accrued interest up to 31 December 2007amounting to LL 15,990 million (2006: LL 7,408 million).
As of 30 December 2005, the Group reclassified bonds and financial assets with fixed income frominvestments held tomaturity to investments available for sale. Accordingly, theGroup is not allowedto classify investments as held to maturity before 1 January 2008, according to IAS 39.Consequently, held to maturity investments were carried at fair value and reclassified as availablefor sale as at 31 December 2005. This reclassification resulted in an increase in the fair value of theavailable for sale investments as at 31 December 2005with a corresponding increase in cumulativechanges in fair values in the consolidated statement of changes in equity.
Bonds and financial assetswith fixed income include unquoted available for sale investments in theamount of LL 44,331 million (2006: LL 44,213 million) and unquoted certificates of deposit in theamount of LL 16,952 million (2006: LL 38,023 million) that are stated at cost, which approximatelyequal to fair value.
18. SHARES, SECURITIES AND FINANCIAL ASSETS WITH VARIABLE INCOME
Trading investments include unquoted investments in the amount of LL 1,149 million (2006: LL 980 million)and available for sale investments include unquoted investments in the amount of LL 3,842 million (2006:LL 2,198 million) that are stated at cost due to the unpredictable nature of future cash flows and lack ofsuitable othermethods for arriving at a reliable fair value.
Trading:- BondsFair value through profit or loss:- BondsAvailable for sale:- BondsLoans and receivables:- Certificates of deposit
2007LL million
-
-
139,501
246,599386,100
2006LL million
21,244
45,470
872,185
226,2411,165,140
Trading:SharesInvestment fund
Available for sale:Shares
2007LL million
4,073875
4,948
3,4558,403
2006LL million
4,6631,8496,512
5,21311,725
106
19. BANKS AND FINANCIAL INSTITUTIONS – DEBIT
Included in banks and financial institutions - debit, time deposits amounting to US$ 620,000 thousand(2006: US$ 840,000 thousand) being guarantees against short term borrowings in the amount of Euro325,000 thousand (2006: Euro 525,000 thousand) reflected under banks and financial institutions –credit. According to the contracts entered into with these banks, the Bank can withdraw these termdeposits upon the settlement of the short-term borrowings.
Included also in banks and financial institutions - debit, time deposits amounting to US$ 1,600 thousand(2006: nil), being guarantees against two letters of credit maturing in September 2008 and amounting toUS$ 800 thousand each.
Current accounts:- Current accounts- Checks for collection- Accrued interest at 31 December
Time deposits:- Term deposits- Granted financial loans- Accrued interest at 31 December
2007LL million
231,25769,352
180300,789
7,359,69870,33523,462
7,453,4957,754,284
2006LL million
254,96672,458
134327,558
7,094,79185,93328,251
7,208,9757,536,533
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
107
20. LOANS AND ADVANCES TO CUSTOMERS
20. LOANS AND ADVANCES TO CUSTOMERS
Commercial loansasat31December2007 includesubstandard loansamountingtoLL36,285million(2006:LL 34,456million).
Commercial loansOther loans to customers (consumer loans)Overdraft accountsNet debtor accounts against creditor and cash collateral accountsAdvances to related partiesDoubtful debts (including consumer loans)Total loansProvision for doubtful loansProvisions for commercial loans not classified as doubtful debtsat the balance sheet dateProvision for doubtful consumer loansProvision for consumer loans not classified as doubtful debtsat the balance sheet dateTotal provisionsUnrealized interest – substandard loansUnrealized interest – doubtful loansTotal unrealised interest
Commercial loansLess:Provision for doubtful loans and provision for commercial loans notclassified as doubtful debts at the balance sheet dateUnrealized interest-substandard loansUnrealized interest-doubtful loans
Consumer loansLess:Provision for doubtful consumer loans and provision for consumer loansnot classified as doubtful debts at the balance sheet date
2007LL million
2,442,417535,0538,19010,8267,400
344,5613,348,447(210,071)
(40,017)(256)
(13,812)(264,156)(13,899)(73,694)(87,593)
2,996,6982,813,138
(250,088)(13,899)(73,694)
2,475,457535,309
(14,068)521,241
2,996,698
2006LL million
3,265,402865,79311,93214,3085,940
358,1094,521,484(215,626)
(22,272)(3,561)
(17,750)(259,209)(14,238)(68,730)(82,968)
4,179,3073,643,411
(237,898)(14,238)(68,730)
3,322,545878,073
(21,311)856,762
4,179,307
Breakdown by economic sectorAgriculture and forestryManufacturingTrade retailTrade wholesaleServicesConstructionFreelance professionsConsumer loans
2007LL million
20,187435,275161,188855,142677,833240,496423,264535,062
3,348,447
2006LL million
32,226471,274335,005760,096935,475756,436365,179865,793
4,521,484
108
Themovement of provision for doubtful loans and advances by class is as follows:
Balance at 1 JanuaryAdd:Charge for the yearForeign exchange differenceProvision transferredfrom off balance sheetProvision of acquired subsidiary -Blom Egypt Securities SAE
Less:Provisions written-offRecovery of provisionsProvision transferred tooff balance sheetForeign exchange difference
Balance at 31 DecemberIndividual provisionProvision for loansnot classified yet
Gross amount of loans individuallydetermined to be impaired
Provision fordoubtful
commercial loansand provision for
commercial loansnot classified yet
LL million
250,088
12,6615,956
25
-268,730
(6,869)(23,738)
-(225)
(30,832)237,898215,626
22,272237,898
345,829
14,068
7,365-
-
-21,433
(103)(19)
--
(122)21,3113,561
17,75021,311
12,280
Provision fordoubtful
consumer loansand provision forconsumer loans
not classified yetLL million
TotalLL million
264,156
20,0265,956
25
-290,163
(6,972)(23,757)
-(225)
(30,954)259,209219,187
40,022259,209
358,109
256,383
13,3941,566
-
41271,384
(5,885)(7,675)
(7,400)(336)
(21,296)250,088210,071
40,017250,088
344,305
9,009
6,266-
-
-15,275
-(1,207)
--
(1,207)14,068
256
13,81214,068
256
265,392
19,6601,566
-
41286,659
(5,885)(8,882)
(7,400)(336)
(22,503)264,156210,327
53,829264,156
344,561
Provision fordoubtful
commercial loansand provision for
commercial loansnot classified yet
LL million
Provision fordoubtful
consumer loansand provision forconsumer loans
not classified yetLL million
TotalLL million
2007 2006
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
109
20. LOANS AND ADVANCES TO CUSTOMERS21. BANK / ENGAGEMENTS BY ACCEPTANCES
The following is a reconciliation of the individual provision for impairment losses on loans and advancesand provision for loans not classified yet:
The movement of unrealized interest is as follows:
As required by Bank of Lebanon regulations, doubtful loans fulfilling certain conditions have been trans-ferred to off-balance sheet, together with the related provisions and unrealized interest.
Balance at 1 JanuaryAdd:Charge for the yearProvisions transferred fromoff-balance sheetDifference of exchangeProvision of acquired subsidiary-BLOM Egypt Securities SAE
Less:Provisions written offRecovery of provisionsProvisions transferredto off balance sheetForeign exchange difference
Balance at 31 December
210,327
16,088
255,956
-232,396
(6,972)(6,012)
-(225)
(13,209)219,187
53,829
3,938
--
-57,767
-(17,745)
--
(17,745)40,022
264,156
20,026
255,956
-290,163
(6,972)(23,757)
-(225)
(30,954)259,209
213,897
13,092
-1,567
41228,597
(5,885)(4,649)
(7,400)(336)
(18,270)210,327
51,495
6,568
--
-58,063
-(4,234)
--
(4,234)53,829
265,392
19,660
-1,567
41286,660
(5,885)(8,883)
(7,400)(336)
(22,504)264,156
IndividualprovisionLL million
Provision for loansnot classified yet
LL million
TotalLL million
2007 2006
IndividualprovisionLL million
Provision for loansnot classified yet
LL million
TotalLL million
Balance at 1 JanuaryAdd:Unrealized interest for the yearForeign exchange difference
Less:Recoveries of unrealized interestAmounts written-offTransferred to off-balance sheetForeign exchange difference
Balance at 31 December
2007LL million
88,472
14,062-
102,534
(9,224)(1,831)(3,821)
(65)(14,941)87,593
2006LL million
87,593
12,827874
101,294
(5,114)(13,212)
--
(18,326)82,968
110
The movement of provisions against fully provided bad loans included off balance sheet accounts is asfollows:
The movement of unrealized interest included in off balance sheet accounts is summarized asfollows
21. BANK / ENGAGEMENTS BY ACCEPTANCES
Acceptances resulted from letters of credit opened for accounts of customers, with deferredpayments.
Balance at 1 JanuaryAdd:Transferred from balance sheetProvision transferred from balance sheet
Less:Provisions written-backAmounts written-offProvision transferred to balance sheet
Balance at 31 December
2007LL million
13,795
7,400139
21,334
(400)(732)
-(1,132)20,202
2006LL million
20,202
-162
20,364
(2,265)(1,056)
(25)(3,346)17,018
Balance at 1 JanuaryAdd:Unrealized interest for the yearTransferred from balance sheetForeign exchange difference
Less:RecoveriesAmounts written-off
Balance at 31 DecemberTotal provisions and unrealized interest included in offbalance sheet accounts
2007LL million
22,436
1,6973,821161
28,115
(183)(4,229)(4,412)23,703
43,905
2006LL million
23,703
1,484-
18525,372
(325)(13,753)(14,078)11,294
28,312
Acceptances as of 31 December
2007LL million
173,260
2006LL million
245,357
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
111
22. INVESTMENTS AND LOANS TO RELATED PARTIES23. TANGIBLE FIXED ASSETS
22. INVESTMENTS AND LOANS TO RELATED PARTIES
The carrying values of the investments in subsidiaries which were not consolidated because they areimmaterial to the consolidated financial statements as at 31 December are detailed as follows:
Arope Services SAL is a dormant company. Accordingly, the carrying value of this investment was not consolidated
because it is immaterial to the consolidated financial statements as at 31 December 2007 (2006: the same).(*)The partners in their meeting dated 3 May 2005 resolved to liquidate the company and appointed a liquidator.On 29May 2006, the OrdinaryMeeting of Partners approved the completion of the liquidation processwhichwasannounced in the Official Gazette on 8 March 2007.
BLOM Invest – Saudi Arabia (under establishment)The Bank, together with BLOM Invest SAL (a subsidiary), established BLOM Invest – Saudi Arabia and contributedin 10% and 50% respectively to its capital. The regulatory institutions in Lebanon and the Kingdom of SaudiArabia approved on this investment in January 2008. BLOM Invest – Saudi Arabia is under establishment and isnot included in the consolidation of theGroup as of 31December 2007, and no pre – incorporation expenses havebeen incurred for the year then ended. It will be consolidated when established.
Investments in nonconsolidated subsidiariesand associatesBLOM Services SARLSociété de Services d’Assurances et deMarketing SALInternational Payment Network SALArope services SALBLOM Invest – Saudi Arabia (under establishment)
Investments available for saleMisr for Central, Clearing, Depository andCentral RegistryBanque de l’Habitat SALBLOM Real Estate SALSwift
Investment propertyImmobilière Foch 65 SARLLess: Provision for impairment
Lebanon
LebanonLebanonLebanon
Saudi Arabia
EgyptLebanonLebanonFrance
France
-
99.92%23.50%90.00%59.94%
-2.85%7.23%0.01%
100.00%
-
50752
-24,12024,922
-1,43122033
1,684
1,029(427)602
27,208
Country ofincorporation
2007 2007LL million
Ownership percentage
99.70%
99.92%23.50%90.00%
-
0.46%2.85%7.23%0.01%
100.00%
2006
149
50752
--
951
481,43122031
1,730
922(383)539
3,220
2006LL million
BLOM Services SARL (*)Société de Services d’Assurances et de Marketing SAL
2007LL million
212102
2006LL million
-153
Shareholders’ equity
112
23. TANGIBLE FIXED ASSETS
CostAt 1 January 2007AdditionsDisposalsTransfersTranslation differenceAt 31 December 2007DepreciationAt 1 January 2007Charge for the yearRelating to disposalsTransfersTranslation differenceAt 31 December 2007ImpairmentAt 1 January 2007Provided during the yearProvision written back during the yearTranslation differenceAt 31 December 2007Net carrying valueAt 31 December 2007
Freehold land andbuildingsLL million
156,03119,938(115)5,4141,544
182,812
27,3613,604(58)
-291
31,198
-----
151,614
3,4641,200(365)13663
4,498
1,640748(363)1439
2,078
-----
2,420
VehiclesLL million
Furniture, officeinstallations
and computerequipmentLL million
119,35931,418(8,464)1,8261,980
146,119
79,45213,365(5,129)
(32)1,33388,989
-----
57,130
31,04924,270
-(7,516)
78048,583
------
-----
48,583
25,9125,346
(11,936)-
77720,099
------
7,990-
(1,044)258
7,204
12,895
335,81582,172(20,880)
(140)5,144
402,111
108,45317,717(5,550)
(18)1,663
122,265
7,990-
(1,044)258
7,204
272,642
Advances onacquisition
of fixed assets andconstruction
in progressLL million
Fixed assetsacquired in set-tlement of debts
LL million
TotalLL million
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
113
Certain freehold land and buildings purchased prior to 1 January 1999 were restated for the changesin the general purchasing power of the Lebanese Lira giving rise to a net surplus amounting to LL14,727 million, which was credited to equity under “revaluation reserves”.
23. TANGIBLE FIXED ASSETS24. INTANGIBLE FIXED ASSETS
CostAt 1 January 2006Additions from the acquisitionof subsidiariesAdditionsDisposalsTransfersTranslation differenceAt 31 December 2006DepreciationAt 1 January 2006Accumulated depreciation fromthe acquisition of subsidiariesCharge for the yearRelating to disposalsTransfersTranslation differenceAt 31 December 2006ImpairmentAt 1 January 2006Provided during the yearProvision written back during the yearTranslation differenceAt 31 December 2006Net carrying valueAt 31 December 2006
Freehold land andbuildingsLL million
147,457
-6,654(970)1,3651,525
156,031
23,528
-3,652(243)201223
27,361
-----
128,670
2,929
-1,025(499)
-9
3,464
1,483
-605(450)
-2
1,640
-----
1,824
VehiclesLL million
Furniture, officeinstallations
and computerequipmentLL million
97,086
10115,480(1,411)7,106997
119,359
70,887
779,071(1,210)
-627
79,452
-----
39,907
17,560
-22,378(387)
(8,483)(19)
31,049
-
------
-----
31,049
35,843
-2,875
(12,688)12
(130)25,912
-
------
8,7342,418(3,121)
(41)7,990
17,922
300,875
10148,412(15,955)
-2,382
335,815
95,898
7713,328(1,903)
201852
108,453
8,7342,418(3,121)
(41)7,990
219,372
Advances onacquisition
of fixed assets andconstruction
in progressLL million
Fixed assetsacquired in
settlement ofdebts
LL million
TotalLL million
114
24. INTANGIBLE FIXED ASSETS
CostAt 1 January 2007AdditionsTransfersTranslation differenceAt 31 December 2007AmortizationAt 1 January 2007Charge for the yearTransfersTranslation differenceAt 31 December 2007Net carrying valueAt 31 December 2007
Advances onacquisition
of intangiblefixed assets
LL million
12,7481,964140911
15,763
9,90363318750
11,304
4,459
TotalLL million
-887
--
887
-----
887
Softwaredevelopment
LL million
8,305--
5648,869
5,825138
-414
6,377
2,492
Key moneyLL million
4,4431,077140347
6,007
4,07849518336
4,927
1,080
CostAt 1 January 2006AdditionsDisposalsTranslation differenceAt 31 December 2006AmortizationAt 1 January 2006Charge for the yearRelating to disposalsTransfersTranslation differenceAt 31 December 2006Net carrying valueAt 31 December 2006
Advances onacquisition
of intangiblefixed assets
LL million
13,1361,140(2,442)
91412,748
9,184397(121)(201)644
9,903
2,845
TotalLL million
224-
(224)--
------
-
Softwaredevelopment
LL million
8,908886
(2,097)608
8,305
5,488180
-(201)358
5,825
2,480
Key moneyLL million
4,004254(121)306
4,443
3,696217(121)
-286
4,078
365
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
115
25. OTHER ASSETS
(i) Compulsory deposits represent amounts deposited with local authorities based on local regulations ofthe countries in which the subsidiaries are located, and are detailed as follows:
(ii) The unrealized profit on investments related to unit-linked contracts amounted to LL 2,910 million for theyear ended 31 December 2007 (2006: LL 902 million).
26. REGULARIZATION ACCOUNTS AND OTHER DEBIT ACCOUNTS
(i) Sundry debtors
25. OTHER ASSETS26. REGULARIZATION ACCOUNTS AND OTHER DEBIT ACCOUNTS27. GOODWILL
Compulsory deposits (i)Precious metals and stampsInvestments related to unit-linked contracts- fair value throughprofit or loss (ii)Other assets
14,903564
17,6001,14934,216
14,690512
16,7511,76233,715
2007LL million
2006LL million
BLOM Invest SALBank of Syria and Overseas SABLOM Development Bank SAL
1,5008,9034,50014,903
1,5008,6904,50014,690
2007LL million
2006LL million
Customers’ transactions between head office and branchesPrepaid expensesSundry debtors (i)Other revenues to be collectedRevaluation variance on foreign exchange forward contractsrelated to the Group’s customers (note 43) (ii)Reinsurers’ share of technical reservesTaxes paid in advance in a subsidiary bankOther accounts
28,7398,14323,1071,754
8,93512,19019,99716,622119,487
14,5108,3088,4763,557
90110,50114,565
59061,408
2007LL million
2006LL million
Sundry debtorsLess: Provision against sundry debtors
24,573(1,466)23,107
9,740(1,264)8,476
2007LL million
2006LL million
116
The movement of provision against sundry debtors is summarized as flows:
(ii) Revaluation variance on foreign exchange forward contracts“Revaluation variance on foreign exchange forward contracts hedging operations related toGroup’s customers” represents operations in which the Group is engaged to hedge foreignexchange operations for its clients. As at 31 December 2007, the revaluation of these contractsresulted in unrealized losses (2006: same).
27. GOODWILL
Impairment testing of goodwillGoodwill acquired through business combinations with indefinite lives have been allocated totwo individual cash-generating units, which are subsidiaries of the Bank, for impairment testingas follows:- BLOM Bank Egypt SAE- BLOM Bank (Switzerland) SAThe carrying amount of goodwill to each of the subsidiaries is as follows:
Key assumptions used in value in use calculationsThe recoverable amount of BLOM Bank Egypt SAE has been determined based on a value in usecalculation, using cash flow projections based on financial budgets approved by senior manage-ment covering a ten-year period. The following rates are used by the Bank.
Balance at 1 JanuaryProvided during the yearTranslation differenceBalance at 31 December
2007LL million
1,253-
111,264
2006LL million
1,26418913
1,466
Cost:At 1 JanuaryAcquisition of a subsidiaryExchange differenceAt 31 December
2007LL million
61,7581,708514
63,980
2006LL million
63,980-
(3,394)60,586
BLOM Bank Egypt SAEBLOM Bank (Switzerland) SA
2007LL million
62,989991
63,980
2006LL million
59,4801,10660,586
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
117
The calculation of value in use for BLOM Bank Egypt SAE is most sensitive to the following assumptions:- Interest margins;- Discount rates;- Projected growth rates;- Gross domestic product of the country where the subsidiary operates;- Local inflation rates.
Interest marginsInterest margins are based on average values achieved in the 13 months proceeding of the budgetperiod. These are increased over the budget period for anticipated market conditions.
Discount ratesDiscount rates reflect management’s estimate of return on capital employed. Discount rates are cal-culated by using the weighted average cost of capital.
Projected growth rates, GDP and local inflation ratesAssumptions are based on management analysis and published industry research.
Sensitivity to changes in assumptionsManagement believes that reasonable possible changes in key assumptions used to determine therecoverable amount will not result in an impairment of goodwill.
27. GOODWILL28. BANKS AND FINANCIAL INSTITUTIONS - CREDIT29. CUSTOMERS' DEPOSITS30. OTHER LIABILITIES
Discount rateProjected growth rate (average during the first 4 years in 2007 and 5 year in 2006)Projected growth rate beyond the four year period in 2007 and five year period in 2006
9.15300
9.15300
2007 % 2006 %
118
28. BANKS AND FINANCIAL INSTITUTIONS - CREDIT
29. CUSTOMERS' DEPOSITS
Customers' deposits include coded deposit accounts in BLOM Bank SAL and BLOM Invest BankSAL amounting to LL 76,092 million as of 31 December 2007 (2006: LL 73,182 million).
30. OTHER LIABILITIES
(i) Margins on letters of creditMargins on letters of credit represent deposits by the clients on account of documentary creditsopened by the Group on their behalf.
(ii) Income tax payableThe relationship between taxable profit and accounting profit of BLOM Bank SAL and its foreignbranches and subsidiaries is as follows:
Current accountsTerm:TermAccrued interest at 31 December
2007LL million
159,362
1,147,3702,112
1,149,4821,308,844
2006LL million
186,913
1,365,8073,194
1,369,0011,555,914
Sight depositsTime depositsSaving accountsCredit accounts and deposits against debit accountsRelated parties’ accounts
2007LL million
1,897,7657,874,1967,180,465662,69675,259
17,690,381
2006LL million
2,341,5949,589,7497,862,422812,788101,963
20,708,516
Margins on letters of credit (i)Income tax payable (ii)Distribution tax due on subsidiary’s dividends (note 40)Other taxes dueDeposits related to entities under constitutionTransactions pending between consolidated subsidiariesAdvances from customers for acquisition of securitiesSundry creditorsDividends payable
2007LL million
64,04628,07912,4269,3542,9755,8847,86810,251
184141,067
2006LL million
77,30031,98412,9849,58712,87512,78912,17024,483
288194,460
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
119
(*) The insurance company in Lebanon is subject to income tax at the rate of 15% calculated based ongross insurance premiums weighted differently for each class of business.
30. OTHER LIABILITIES
Profit before income taxLess: Results of the subsidiary insurance company located in Lebanon (*)Accounting profit before income taxAdd:Provisions non tax deductibleOther non tax deductible chargesUnrealized loss on difference of exchangeCapital gainOthers
Less:Dividends received and previously subject to income taxProvisions no more required and previously subject to income taxRemunerations already taxed4% of a subsidiary’s capital eligible to be tax deductibleWrite-back of provisions previously subject to income taxNon taxable incomeDifference in depreciation of fixed assetsPermanent deductible chargesOthers
Taxable profit
The effective income tax rate of the Group is approximately 15.27%(2006: 15.31%).
2007LL million
2006LL million
365,586(5,125)360,461
5,00937,1023,3762,751143
408,842
(2,194)-
(8,301)(400)
(20,552)(1,762)(2,433)(71,021)
(855)
301,324
321,633(4,874)316,759
6,29915,054
---
338,112
(329)(6,645)
-(400)
(4,732)(830)
---
325,176
120
Income tax payable is detailed as follows:
(a) Current income tax charge in the consolidated income statement is detailed as follows:
(b) During 2007, the tax authorities reviewed the Bank’s accounts in Lebanon for the years 2003 to2005 (inclusive), and the review resulted in complementary taxes and fines amounted to LL 603million, settled in full during the year ended 31 December 2007.
(c) Movement of distribution tax due recognized in the balance sheet is detailed as follows:
For more information about distribution tax due, refer to note 40.
Current income tax allocation is as follows:
Income statement:Current income tax:Current income tax charge (a)Adjustments in respect of current income tax of previous years (b)Current distribution tax due (c)
2007LL million
49,247-
58249,829
2006LL million
55,839603558
57,000
At 1 JanuaryTax expense for the yearTax paid during the yearExchange difference
At 31 December
2007LL million
23,56126,454(22,722)
786
28,079
2006LL million
28,07933,198(30,709)1,416
31,984
5% tax paid on interest revenue during the yearIncome tax on profit for the year
2007LL million
22,79326,45449,247
2006LL million
22,64133,19855,839
Balance at 1 JanuaryProvided during the year
Balance at 31 December
2007LL million
11,844582
12,426
2006LL million
12,426558
12,984
Income tax-BLOM Bank SALIncome tax-foreign subsidiariesIncome tax-subsidiaries in Lebanon
2007LL million
37,9599,5682,30249,829
2006LL million
41,94013,0112,04957,000
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
121
Income tax paid during 2007 and 2006 reflected in the consolidated cash flow statement is detailed as follows:
31. REGULARIZATION ACCOUNTS AND OTHER CREDIT ACCOUNTS
32. PROVISIONS FOR RISKS AND CHARGES
(i) Provisions for risks and charges
The provision for risks and charges mostly represent a provision against probable taxes on interesttaken by a subsidiary insurance company in the amount of LL 1,638 million not finalized yet with theMinistry of Finance, in addition to a provision taken by a subsidiary bank in the amount of LL 1,237million against contingent liabilities.
30. OTHER LIABILITIES31. REGULARIZATION ACCOUNTS AND OTHER CREDIT ACCOUNTS32. PROVISIONS FOR RISKS AND CHARGES
Income tax paid for the years 2006 and 20055% tax paid on interest revenue during the yearAdjustments in respect of current income tax of previous years
2007LL million
2006LL million
30,70922,641
60353,953
22,72222,793
-45,515
Accrued expensesRevaluation variance on foreign exchange forward contractshedging a net investment in a foreign subsidiary bank (note 43)Transactions pending between branchesUnearned premiums and liability related to unit linked insurance contracts
2006LL million
54,399
8,4726,127
120,794189,792
32,684
3,5661,34292,277129,869
2007LL million
Provision for risks and charges (i)Provision for outstanding claims and IBNR reserves related to subsidiary-insurance companies (ii)Provision for end of service indemnities (iii)Provision for complementary taxes and contingent liabilities relatedto a subsidiary bank (iv)Provision for contingencies of correspondents’ operations related toa subsidiary bankProvision for unusual commitments related to a subsidiary bank (v)Other provision
2006LL million
3,188
9,51226,160
38,512
-2,358836
80,566
3,374
6,90326,432
24,136
8522,268681
64,646
2007LL million
Balance at 1 JanuaryCharge for the yearProvisions paid during the yearProvisions written-back during the yearExchange difference
Balance at 31 December
2006LL million
3,374382(54)(622)108
3,188
3,288759(464)(325)116
3,374
2007LL million
122
(ii) Provisions for outstanding claims and IBNR reserves related to subsidiary-insurance companies
(iii) Provisions for end of service indemnities
(iv) Provision for complementary taxes and contingent liabilities related to a subsidiary bankProvision for complementary taxes and contingent liabilities related to a subsidiary bankrepresents mainly accruals for additional complementary taxes in a subsidiary resultingfrom inspection by tax authorities for the years from 1991 onwards.
Movement in provision for complementary taxes and contingent liabilities related to asubsidiary bank recognized in the balance sheet are as follows:
(v) Provision for unusual commitments related to a subsidiary bank
Balance at 1 JanuaryProvision for outstanding claims and IBNR reserves charged for the yearProvisions used during the yearExchange difference
Balance at 31 December
2007LL million
6,734169
--
6,903
2006LL million
6,9032,857(350)102
9,512
Balance at 1 JanuaryCharge for the yearIndemnities paidProvisions written-backExchange difference
Balance at 31 December
2007LL million
21,6645,498(703)
-(27)
26,432
2006LL million
26,4322,615(2,694)(124)(69)
26,160
Balance at 1 JanuaryCharge for the yearProvision written-back during the yearExchange difference
Balance at 31 December
2007LL million
22,8681,455(85)(102)
24,136
2006LL million
24,13613,327(185)1,234
38,512
Balance at 1 JanuaryCharge for the yearExchange difference
Balance at 31 December
2007LL million
9711,301
(4)
2,268
2006LL million
2,268-
90
2,358
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
123
33. SHARE CAPITAL
a) The Extraordinary General Meeting of Shareholders held on 30 December 2005, resolved to increasethe Bank’s capital from LL 210,000 million to LL 240,000 million by the increase of LL 30,000 millionthrough the issuance of 3,000,000 new common shares, of LL 10,000 per share. The subscription inthese shares is limited to Bank of New York to be fully settled in cash. The issuance and subscriptionin these common shares was based on the following conditions:
On 16 February 2006, the Extraordinary General Assembly of Shareholders approved the subscription ofthese common shares amounting to 3,000,000 shares, which were approved to be issued and fully paid inthe amount of LL 30,000 million plus a premium amounting to US$ 256,033 thousand (equivalent to LL 385,970million) based on US$ 85.34443 per share. The commission and the issuance costs amounted to US$ 7,590thousand (equivalent to LL 11,911 million) which was deducted from the issuance premium.
It is to be noted that the Board of Directors decided on 7 February 2006 to list the GDSs in the Beirutand Luxembourg Stock Exchanges in parallel with the current GDRs of the Bank.
b) According to the provisions of Law no 308 dated 3 April 2001, the Extraordinary General AssemblyMeeting of Shareholders held on 11 October 2002, and then the Extraordinary General AssemblyMeetings of Shareholders held on 4 June 2004 and 17 September 2005, resolved to issue preferredshares at the following conditions:
33. SHARE CAPITAL
21,500,000 common shares of LL 10,000 per share
750,000 preferred shares (2002 issue) of LL 10,000 per share750,000 preferred shares (2004 issue) of LL 10,000 per share1,000,000 preferred shares (2005 issue) of LL 10,000 per share
Total preferred shares
2007LL million
2006LL million
215,000
7,5007,50010,000
25,000240,000
215,000
7,5007,50010,000
25,000240,000
Number of issued sharesPar value of issued shares (LL 10,000 per share)Premium (denominated in US$)
3,000,000LL 30,000 millionUS$ 85.34443 as determined by the Extraordinary GeneralAssembly of Shareholders held on 13 February 2006.
124
These preferred shares (2002, 2004 and 2005 issues) are redeemable 60 days after the annualgeneral assemblies dealing with the accounts for the years 2007, 2009 and 2010 respectively atthe discretion of the Bank at issue price (LL 10,000 per share plus paid premium) in addition to anydividends declared but not paid during the years prior to the redemption year.
In the event of any liquidation, dissolution orwinding-up of theBank, the holders of series 2002, 2004 and2005 preferred shares shall be entitled to be paid out of the assets of the Bank available for distributionto its shareholders on a pro rata basis, before any payment shall be made to common shareholders.
c) On 12 May 2006, the Extraordinary General Assembly of shareholders decided to list 750,000preferred shares (2002 issue), 750,000 preferred shares (2004 issue), and 1,000,000 preferredshares (2005 issue), in addition to 7,166,667 common shares in the regulated markets in Lebanonand / or abroad.
The Beirut Stock Exchange Committee decided on 24 August 2006 to list, trade and value one thirdof the common shares and all the preferred shares (2002, 2004 and 2005 issues) issued by BLOMBank SAL as detailed above in the official market of the Beirut Stock Exchange. These four typesof shares became listed on 25 August 2006.
Number of shares
Par value of issued shares(LL 10,000 per share)
Premium(denominated in USD)Non cumulative benefits
2002 ISSUE 2004 ISSUE
750,000
LL 7,500 million
LL 105,593 million (USD70,045 thousands)An annual amount equal to11.25% of the net consolidatedprofitsoftheBank,withaminimumof USD 10 per share and not inexcess of USD 15 per share,(subject to the approval of theShareholders’ General AssemblyMeeting and the availability of anon-consolidated distributablenet income for the year).
2005 ISSUE
750,000
LL 7,500 million
LL 105,590 million (USD70,043 thousands)An annual amount for eachshare equal to USD 8.5 basedon the exchange rate on thedate of the General AssemblyMeeting, (subject to theapproval of the Shareholders’General Assembly Meetingand the availability of a non-consolidated distributable netincome for the year).
1,000,000
LL 10,000 million
LL 140,720 million (USD93,347 thousands)2005 distributions to be basedon a fixed amount of USD 3.75per share and thereafter at anannual amount equal to 6% ofthe net consolidated profit ofthe Bank, with a minimum of7.5% and a maximum of 9.5%of the issueprice (subject to theapproval of the Shareholder’sGeneral Assembly Meetingand the availability of a non-consolidated distributable netincome for the year).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
125
Accordingly, the shares of the Bank listed on the Beirut and the Luxemburg Stock Exchanges are detailedas follows:
34. RESERVES FOR GENERAL BANKING RISKS
According to the Bank of Lebanon regulations, banks are required to appropriate from their annual netprofit a minimum of 0.2 percent and a maximum of 0.3 percent of total risk weighted assets and off-balance sheet accounts based on rates specified by the Bank of Lebanon to cover general banking risks.The consolidated ratio should not be less than 1.25 percent of these risks at the end of year ten (2007) and2 percent at the end of year twenty (2017). This reserve is part of the Bank’s equity and cannot be distributedas dividends. This reserve is based on the denomination (Lebanese Lira and US Dollars) of the riskweighted assets and off-balance sheet accounts.
35. RESERVES AND PREMIUMS
33. SHARE CAPITAL34. RESERVES FOR GENERAL BANKING RISKS35. RESERVES AND PREMIUMS
GDRCommon sharesPreferred shares (2002 issue)Preferred shares (2004 issue)Preferred shares (2005 issue)
2007Number of shares
2006Number of shares
7,389,6017,166,667750,000750,000
1,000,00017,056,268
7,389,6017,166,667750,000750,000
1,000,00017,056,268
At 31 December 2005Currency translation differenceAppropriation of 2005 profitsIssuance of common sharesnet of issuance costs (note 33)Transfer to non-distributable reservesGain on sale of treasury sharesTransfer to reserve for increasein share capitalOtherAt 31 December 2006Currency translation differenceAppropriation of 2006 profitsNet loss on sale of treasury sharesForeign currency translation reserverealized upon sale of branches inRomania (note 2)OtherAt 31 December 2007
13,03718,718
-
---
--
31,7551,850
--
--
33,605
94,92110
18,323
---
--
113,25431
23,250-
--
136,535
250,012-
20,982
-(44,613)
-
(6)-
226,3752,85625,848
-
(7,169)-
247,910
10,907913
-
-44,613
-
-607
57,0406,225
--
-369
63,634
5,003-
3,331
--
64
6-
8,404-
8,922(3,168)
--
14,158
---
374,059--
--
374,059---
--
374,059
Reservefor translation
differenceLL million
Legalreserve
LL million
Generalreserve
LL million
Non-distributable
reservesLL million
Reserve forincrease
of share capitalLL million
Premium onissuance of
commonshares
LL million
351,903--
---
--
351,903---
--
351,903
Premium onissuance
of preferredshares
LL million
725,78319,64142,636
374,059-
64
-607
1,162,79010,96258,020(3,168)
(7,169)369
1,221,804
TotalLL million
126
Legal reserveAccording to the Lebanese Code of Commerce and to the Money and Credit Act, banks andcompanies operating in Lebanon have to transfer 10% of their annual net profit to a legalreserve. This reserve cannot be distributed as dividends.
General reserveThe Group appropriated general reserves from its retained earnings to strengthen its equity.This reserve amounting to LL 247,910 million as at 31 December 2007 (2006: LL 226,375 million)is available for dividends distribution.
Reserve for increase of share capitalThe balance amounting to LL 14,158 million (2006: LL 8,404 million) represents a regulatoryreserve pursuant to circular no. 167 issued by the Banking Control Commission. This reservecannot be distributed as dividends.
Details of the reserve for increase of share capital are as follows:
Premium on issuance of preferred shares
Non distributable reservesDuring 2006, a subsidiary increased its share capital partially from a transfer of LL 44,613 mil-lion from general reserves.
Recoveries of provisions for doubtful debtsRevaluation reserves for fixed assets soldGain on sale of treasury shares
2007LL million
2006LL million
12,253438
1,46714,158
3,331438
4,6358,404
2002 issue (note 33)2004 issue (note 33)2005 issue (note 33)
2007LL million
2006LL million
105,593105,590140,720351,903
105,593105,590140,720351,903
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
127
36. CUMULATIVE CHANGES IN FAIR VALUES
According to the Bank of Lebanon regulations, banks are required to appropriate from their annual net
37. TREASURY SHARES
Movement of treasury shares recognized in the balance sheet is as follows:
The treasury shares represent Global Depository Receipts (GDR) owned by the Group. The marketvalue of one GDR was US$ 90.20 as of 31 December 2007 (2006: US$ 57.65).
The Bank refunded the distribution of dividends on the treasury shares amounting to LL 1,146 million(2006: LL 1,221 million) resulting from the distribution of dividends for all ordinary shares in 2006.
The Group realized losses of LL 3,168 million on the sale of treasury shares during the year 2007 (2006:nil). This loss is reflected under “Reserve for increase of share capital” in the “Reserves andpremiums” (note 35).
36. CUMULATIVE CHANGES IN FAIR VALUES37. TREASURY SHARES38. PAID AND PROPOSED DIVIDENDS39. CASH AND CASH EQUIVALENTS
Balance at 1 JanuaryRealized during the yearNet changes in fair values during the yearDifference on exchangeBalance at 31 December
2007LL million
2006LL million
21,430-
(7,006)73
14,497
81,067(458)
(59,607)428
21,430
At 1 JanuaryAcquisition of treasury sharesSales of treasury sharesAt 31 December
2007
414,400619,885(728,285)306,000
-52,108
-52,108
No.of common shares
AmountLL million
52,10865,189(81,175)36,122
2006
-414,400
-414,400
AmountLL million
No.of common shares
128
38. PAID AND PROPOSED DIVIDENDS
According to the resolutions of the General Assembly Meetings held during the years 2007and 2006, dividends paid were as follows:
In their meeting held on 18 March 2008, the board of directors proposed the distribution of dividends for2007 as follows:
39. CASH AND CASH EQUIVALENTS
Balances with the Central Banks include term placements with the Bank of Lebanon, which areconsidered as cash equivalent based on a contractual agreement with the Bank of Lebanon.
Preferred shares – 2002 issue: LL 22,612.50 per share(2006: LL 22,612.50 per share)Preferred shares – 2004 issue: LL 12,813.75 per share(2006: LL 12,813.75 per share)Preferred shares – 2005 issue: LL 14,321.25 per share(2006: LL 5,653.125 per share)Common shares: LL 5,000 per share (2006: LL 4,000 per share)
2007LL million
2006LL million
16,959
9,610
14,322107,500148,391
16,959
9,610
5,65486,000118,223
Common shares (LL 5,500 per share)Preferred shares – 2002 issue (LL 22,612.50 per share)Preferred shares – 2004 issue (LL 12,813.75 per share)Preferred shares – 2005 issue (LL 14,321.25 per share)
LL million
118,25016,9599,61014,32140,890159,140
Cash and balances with the Central BanksLebanese and other governmental treasury bills and bonds held not fortrading (whose original maturities are less than three month)Deposits with banks and financial institutions (whose originalmaturities are less than 3 months)
Less:Due to banks and financial institutions (whose originalmaturities are less than 3 months)
2007LL million
2006LL million
3,611,152
17,297
6,674,69110,303,140
(1,449,612)8,853,528
2,916,938
-
7,301,53710,218,475
(1,293,563)8,924,912
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
129
40. CORRECTION OF DEFFERRED TAX LIABILITY
During the previous years, the Bank did not provide for deferred tax liability on its share of dividenddistribution from subsidiary, BLOM INVEST BANK SAL, in accordance with International AccountingStandard No 12 (Income taxes). Accordingly, the Bank corrected comparative financial statements andincreased income tax expense by LL 558 million and LL 582 million for 2007 and 2006, respectively, anddecreased retained earnings as of 31 December 2005 by LL 11,844 million and increased deferred taxliability by LL 558 million and LL 12,426 million as of 31 December 2007 and 2006, respectively.
41. RELATED PARTIES TRANSACTIONS
The Group enters into transactions with major shareholders, directors, senior management, and theirrelated concerns, and entities controlled, jointly controlled or significantly influenced by such partiesin the ordinary course of business at commercial interest and commission rates. All the loans andadvances to related parties are performing advances and are free of any provision for possible creditlosses.
The transactions with related parties are as follows:
The board of directors and senior management remunerations are as follows:
All remunerations paid to board of directors and senior management are short in nature.
40. CORRECTION OF AN ERROR41. RELATED PARTIES TRANSACTIONS42. ENGAGEMENTS RECEIVED43. DERIVATIVES
DepositsLoans and advancesIndirect facilitiesInterest received from loansand advancesInterest paid on depositsAccounting services’ revenuesfrom a non-consolidated subsidiary
2007LL million
2006LL million
101,9635,940
58
7614,889
203
75,2597,400
25
1015,570
217
Otherrelated parties
LL million
4,215-
25
-202
203
28,0721,600
-
2051,346
-
Board of directorsand senior
managementLL million
Major shareholdersLL million
69,6764,340
33
5563,341
-
Board of directors and senior management remunerations
2007LL million
20,729
2006LL million
19,197
130
42. ENGAGEMENTS RECEIVED
43. DERIVATIVES
The following schedule shows the positive and the negative fair values of the derivatives andtheir notional amounts according to maturity. The notional amount is the amount of a derivative’sunderlying asset, reference rate or index and represents the basis for measuring the change inthe derivatives value. The notional amounts show the volume of operations at year end and donot reflect either market or credit risk.
Additionally, theGroupholds or issues currency options for trading purposes that are primarily related totheGroup’s customers operations. The notional amount of these contracts is as follows:
All these contractsmature during 2008 that are primarily related to theGroup’s customers’ operations.
Guarantees receivedPersonal guarantees received from customersMobilization billsMobilization bills (renegotiated loans)Directors’ shares in guarantee of their managementReal estate guarantees receivedCash collateral receivedTreasury bills in pledge
2007LL million
2006LL million
26,5373,379,093
51,7351,736
582,742,486783,423103,450
7,088,518
82,4532,268,645
53,4131,736
582,159,787734,773166,908
5,467,773
31 December 2007Forward contracts on foreigncurrencies for hedging purposesForward contracts on foreigncurrencies for trading purposes
31 December 2006Forward contracts on foreigncurrencies for hedging purposesForward contracts on foreigncurrencies for trading purposes
Less than3 months
LL million
3 to 12months
LL million
89,387
2,651,2922,740,679
210,793
676,561887,354
149,348
52,522201,870
-
1,259,4011,259,401
Total notionalamount
LL million
238,735
2,703,8142,942,549
210,793
1,935,9622,146,755
8,472
157,471165,943
4,397
3,5497,946
Negativefair valueLL million
Positivefair valueLL million
-
166,406166,406
831
4,4505,281
1 to 5Years
LL million
-
--
-
--
Notional amount by maturity
Currency options
2007LL million
2006LL million
34,142 17,659
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
131
Derivative held or issued for hedging purposesAs part of its asset and liability management, the Group uses derivatives for hedging purposes in orderto reduce its exposure to currency risk.
The Group uses forward foreign exchange contracts to hedge against specifically identified currencyrisks.
The Bank uses forward foreign exchange contracts (to sell Euros and buy US Dollars) to hedge its netinvestment in a foreign subsidiary denominated in Euro and amounting to Euro 107,904 thousand (2006:same). The notional amount of these contracts amounted to Euro 107,900 thousand as at 31 December2007 (2006: same). The forward foreign exchange contracts were revalued as of 31 December 2007 andresulted in unrealized losses of LL 8,472 million (2006: LL 3,566 million), refer to note 31. The contractsmature on 30 April 2008 at latest.
44. COMMITMENTS AND CONTINGENT LIABILITIES
Credit – related commitmentsCredit-related commitments include commitments to extend credit, standby letters of credit, guaranteesand acceptances which are designed to meet the requirements of the Group's customers.Letters of credit, guarantees (including standby letters of credit), and acceptances commit the Group tomake payments on behalf of customers contingent upon the failure of the customer to perform under theterms of the contract.Commitments to extend credit represent contractual commitments to make loans and revolving credits.Commitments generally have fixed expiration dates, or other termination clauses. Since commitmentsmay expire without being drawn upon, the total contract amounts do not necessarily represent futurecash requirements.
43. DERIVATIVES44. COMMITMENTS AND CONTINGENT LIABILITIES
132
The Group has the following credit related commitments:
Please refer to note 21 for acceptances outstanding as of 31December 2007 and 2006 respectively.
Capital and operating lease commitmentsThe commitments on capital expenditures and operating lease commitments at the balancesheet date, which were not provided for, were as follows:
Capital commitmentsTangible fixed assets purchases
Operating lease commitmentsMinimum payments for future lease contracts:During one yearMore than 1 year and less than five yearsMore than five years
Total operating lease commitments at the balance sheet date
2007LL million
2006LL million
82,172
3,53113,98013,192
30,703
48,513
2,3629,0158,649
20,026
Commitments on behalf of customers:Letters of creditLetters of guarantees
Authorized but unutilized facilities
2007LL million
2006LL million
359,374786,996
1,146,3701,358,4442,504,814
307,186689,528996,714986,641
1,983,355
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
133
45. SEGMENTAL INFORMATION
The Group operates in two geographic markets based on the location of its markets and customers. Thelocal market represents the Lebanese market and the international market represents markets outsideLebanon. The following table shows the distribution of the Group’s gross income, total assets and capitalexpenditure by geographical segment:
The Group’s major business segment is banking. Insurance activities represent 1.71% of profit beforeincome tax and 1% of total assets.
46. FIDUCIARY DEPOSITS, ASSETS UNDER MANAGEMENT AND CUSTODY ACCOUNTS
Fiduciary accounts include notes, checks, policies, treasury bills/bonds, shares and documents for col-lection held by the Group to the order of third parties.
Net interest receivedNet provisions less recoveries on loansand advancesRevenues from shares and financial assetswith variable incomeNet commissionsNet profit from financial operationsOther operating income
Gross income
Operating expenses and amortizationand depreciationNet provisions less recoveries on financialfixed assetsProvisions for contingent liabilities
Profit before tax
Total assets
Total liabilities
Capital expenditures
2006LL million
2007LL million
150,886
(9,428)
79443,56513,8935,464
205,174
(76,210)
395(1,455)
127,904
10,471,587
8,267,442
31,482
456,112
11,435
96989,38039,66824,618
622,182
(243,246)
-(13,350)
365,586
25,067,014
22,974,605
84,136
2007LL million
167,777
(667)
44544,73017,8568,371
238,512
(86,469)
-(13,327)
138,716
12,229,214
10,563,249
53,065
256,369
8,620
32933,42412,90616,930
328,578
(134,846)
-(3)
193,729
10,953,024
11,240,625
18,094
2006LL million
2007LL million
288,335
12,102
52444,65021,81216,247
383,670
(156,777)
-(23)
226,870
12,837,800
12,411,356
31,071
2006LL million
407,255
(808)
1,12376,98926,79922,394
533,752
(211,056)
395(1,458)
321,633
21,424,611
19,508,067
49,576
45. SEGMENTAL INFORMATION46. FIDUCIARY DEPOSITS, ASSETS UNDER MANAGEMENT AND CUSTODY ACCOUNTS47. CONCENTRATION OF ASSETS, LIABILITIES AND OFF BALANCE SHEET ITEMS
Domestic International Total
Fiduciary deposits
2007LL million
2006LL million
3,959,136 2,774,360
134
47. CONCENTRATION OF ASSETS, LIABILITIES AND OFF BALANCE SHEET ITEMS
Concentrations arisewhen a number of counter parties are engaged in similar business activities oractivities in the same geographic region, or have similar economic features that would cause theirability to meet contractual obligations to be similarly affected by changes in economic, political orother conditions. Concentrations indicate the relative sensitivity of the Group’s performancedevelopments affecting a particular industry or geographic location.
The distribution of assets, liabilities, and off-balance sheet items by geographic region was asfollows:
Geographical LocationLebanonOutside Lebanon
AssetsLL million
LiabilitiesLL million
10,953,02410,471,58721,424,611
11,240,6258,267,44219,508,067
Off-balancesheet
LL million
5,078,7023,147,1428,225,844
12,411,35610,563,24922,974,605
LiabilitiesLL million
AssetsLL million
12,837,80012,229,21425,067,014
Off-balancesheet
LL million
1,719,3224,216,1665,935,488
2007 2006
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
135
48. BALANCE SHEET BY CATEGORY
AssetsCash and balances withthe Central BanksLebanese and other governmentaltreasury bills and bondsBonds and financial assetswith fixed incomeShares, securities and financialassets with variable incomeDeposits with banksand financial institutionsLoans and advances to customersBank acceptancesInvestments and loansto related partiesTangible fixed assetsIntangible fixed assetsOther assetsRegularization accountsand other debit accountsOut of which:Revaluation variance on foreignexchange forward contractshedging operations relatedto the Group’s customersGoodwill
LiabilitiesDue to banks and otherfinancial institutionsCustomers’ depositsEngagements by acceptancesOther liabilitiesRegularization accountsand other credit accountsProvisions for risks and charges
Held fortrading
LL million
Derivativesdesignatedas hedging
instrumentsLL million
-
76,949
21,244
6,512
---
----
-
13,667-
118,372
----
---
-
-
-
-
---
----
-
---
----
8,472-
8,472
Fair valuethrough
profit or lossLL million
-
-
45,470
-
---
---
17,600
-
--
63,070
----
---
-
5,003,374
872,185
5,213
---
1,684---
-
--
5,882,456
----
---
Availablefor sale
LL million
Loansand receivables
LL million
6,330,031
-
226,241
-
7,536,5334,179,307245,357
----
-
--
18,517,469
----
---
Amortized costLL million
-
-
-
-
---
----
-
---
1,555,91420,708,516
245,357-
--
22,509,787
48. BALANCE SHEET BY CATEGORY
31 December 2007
Nonfinancial
assets andliabilities and
othersLL million
-
-
-
-
---
25,524272,6424,45916,616
105,820
-60,586485,647
---
194,460
181,32080,566456,346
TotalLL million
6,330,031
5,080,323
1,165,140
11,725
7,536,5334,179,307245,357
27,208272,6424,45934,216
105,820
13,66760,586
25,067,014
1,555,91420,708,516
245,357194,460
189,79280,566
22,974,605
136
AssetsCash and balances withthe Central BanksLebanese and other governmentaltreasury bills and bondsBonds and financial assetswith fixed incomeShares, securities and financialassets with variable incomeDeposits with banksand financial institutionsLoans and advances to customersBank acceptancesInvestments and loansto related partiesTangible fixed assetsIntangible fixed assetsOther assetsRegularization accountsand other debit accountsOut of which:Revaluation variance on foreignexchange forward contractshedging operations relatedto the Group’s customersGoodwill
LiabilitiesDue to banks and otherfinancial institutionsCustomers’ depositsEngagements by acceptancesOther liabilitiesRegularization accountsand other credit accountsProvisions for risks and charges
Held fortrading
LL million
-
50,548
-
4,948
---
----
-
901-
56,397
----
---
-
-
-
-
---
----
156
--
156
----
3,566-
3,566
Fair valuethrough
profit or lossLL million
-
-
-
-
---
---
16,751
-
--
16,751
----
---
-
3,424,372
139,501
3,455
---
1,730---
-
--
3,569,058
----
---
Availablefor sale
LL million
Loansand receivables
LL million
6,246,406
-
246,599
-
7,754,2842,996,698173,260
----
-
--
17,417,247
----
---
-
-
-
-
---
----
-
---
1,308,84417,690,381
173,260-
--
19,172,485
31 December 2006
-
-
-
-
---
1,490219,3722,84516,964
60,351
-63,980365,002
---
141,067
126,30364,646332,016
6,246,406
3,474,920
386,100
8,403
7,754,2842,996,698173,260
3,220219,3722,84533,715
60,507
90163,980
21,424,611
1,308,84417,690,381
173,260141,067
129,86964,646
19,508,067
Derivativesdesignatedas hedging
instrumentsLL million
Amortized costLL million
Nonfinancial
assets andliabilities and
othersLL million
TotalLL million
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
137
49. FAIR VALUE OF THE FINANCIAL INSTRUMENTS
The following table shows the difference between the carrying values and fair values for the financial assetsand liabilities classified in the balance sheet. This table does not show the fair values of non-financial assetsand liabilities.
The following describes the methodologies and assumptions used to determine fair values for thosefinancial instruments which are not already recorded at fair value in the financial statements:
Assets for which fair value approximates carrying valueFor financial assets and financial liabilities that are liquid or having a short term maturity (less than threemonths) it is assumed that the carrying amounts approximate to their fair value. This assumption is alsoapplied to demand deposits, savings accounts without a specific maturity and variable rate financialinstruments.
Financial assetsCash and balances with the Central BanksLebanese and other government treasurybills and bondsBonds and financial assetswith fixed incomeShares, securities and financialassets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loans to related parties
Financial liabilitiesBanks and financial institutionsCustomers’ depositsEngagements by acceptances
Total unrecognized changein unrealized fair value
Carrying valueLL million
Fairvalue
LL million
6,246,406
3,474,920
386,100
8,4037,754,2842,996,698173,2603,220
1,308,84417,690,381
173,260
6,389,936
3,474,920
384,700
8,4037,755,8273,020,631173,2603,220
1,308,84417,658,161
173,260
Unrecognizedgains (losses)
LL million
88,195
-
(1,420)
-6,6633,448
--
(3)(40,701)
-
56,182
6,418,226
5,080,323
1,163,720
11,7257,543,1964,182,755245,35727,208
1,555,91120,667,815
245,357
Fairvalue
LL million
Carrying valueLL million
6,330,031
5,080,323
1,165,140
11,7257,536,5334,179,307245,35727,208
1,555,91420,708,516
245,357
Unrecognizedgains (losses)
LL million
143,530
-
(1,400)
-1,54323,933
--
-(32,220)
-
135,386
49. FAIR VALUE OF THE FINANCIAL INSTRUMENTS
2007 2006
138
Fixed rate financial instrumentsThe fair value of fixed rate financial assets and liabilities carried at amortized cost are estimatedby comparing market interest rates when they were first recognized with current market ratesoffered for similar financial instruments. The estimated fair value of fixed interest bearing depositsis based on discounted cash flows using prevailing money-market interest rates for debts withsimilar credit risk and maturity. For quoted debt issued the fair values are calculated based onquoted market prices. For those notes issued where quoted market prices are not available, adiscounted cash flow model is used based on a current interest rate yield curve appropriatefor the remaining term to maturity.
Financial instruments recorded at fair valueThe following table shows an analysis of financial instruments recorded at fair value, betweenthose whose fair value is based on quoted market prices and those involving valuation techniqueswhere all the model inputs are observable in the market.
The unquoted financial instruments that are stated at cost approximately equal to fair value.
Financial assetsLebanese and other governmentaltreasury bills and bondsBonds and financial assets withfixed incomeShares, securities and financialassets with variable incomeInvestments and loansto related parties
2,181,751
894,568
6,734
-3,083,053
2,765,927
-
-
-2,765,927
132,645
44,331
4,991
1,684183,651
1,285,169
95,288
5,225
-1,385,682
5,080,323
938,899
11,725
1,6846,032,631
243,668
44,213
3,178
1,730292,789
Quoted marketprices
LL million
Valuationtechniques -
marketobservable
inputsLL million
UnquotedLL million
Quoted marketprices
LL million
TotalLL million
UnquotedLL million
1,946,083
-
-
-1,946,083
Valuationtechniques -
marketobservable
inputsLL million
3,474,920
139,501
8,403
1,7303,624,554
TotalLL million
2007 2006
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
139
50. RISK MANAGEMENT
The Bank manages its business activities within risk management guidelines as set by the Group’s “riskmanagement policy” approved by the board of directors. The Bank recognizes the role of the board ofdirectors and executive management in the risk management process as set out in the Banking ControlCommission circular 242. In particular, it is recognized that ultimate responsibility for establishment ofeffective risk management practices and culture lies with the board of directors as does the setting upof Bank’s risk appetite and tolerance levels. The board of directors delegates through its risk manage-ment committee the day–to–day responsibility for establishment and monitoring of risk managementprocess across the Bank’s group to the head of risk management, who is directly appointed by the boardof directors, in coordination with executive management at BLOM Bank SAL.
The Group is exposed to credit risk, liquidity risk, market risk and operational risk.
The board’s risk management committee has the mission to periodically (1) review and assess the riskmanagement function to the Group, (2) review the adequacy of the Bank’s capital and its allocationwithin the Group, and (3) review risk limits and reports and make recommendations to the Board.
The head of risk management undertakes his responsibilities through the “Risk ManagementDepartment”, with its employees reporting directly to the head of risk management. The risk manager isresponsible for establishing the function of the department and its employees.
BLOM Bank’s risk management department aids executive management in controlling and actively man-aging the Group’s overall risk. The department mainly ensures that:
- Risk policies and methodologies are consistent with the Group’s risk appetite.- Limits and risk across banking activities are monitored throughout the Group.
Through a comprehensive risk management framework, transactions and outstanding risk exposures arequantified and compared against authorized limits, whereas non-quantifiable risks are monitored againstpolicy guidelines as set by the Group’s “Risk Management Policy”. Any discrepancies, breaches or devi-ations are escalated to executive senior management in a timely manner for appropriate action.
50. RISK MANAGEMENT
140
In addition to the Group’s risk management in Lebanon, risk managers and / or risk officerswere assigned within the Group’s foreign subsidiaries or branches to report to the departmentand executive senior management in a manner that ensures:- Standardization of risk management functions and systems developed across the Group.- Regional consistency of conducted business in line with the board’s approved risk appetite.
In respect to Basel 2 capital adequacy ratio calculations, risk management started, sinceDecember 2004 consolidated balances, to issue internal reports to executive managementand the board revealing multiple scenarios of capital adequacy calculations for credit andmarket risks under the standardized approaches and for operational risk under the basic indicatorapproach. In addition, the Bank sent to the Banking Control Commission a quantitative impact studyfor theBasel 2 capital adequacy calculations for June 2007 balances revealing a ratiowell above theminimum international requirement of 8%.
50.1 Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation andcause the other party to incur a financial loss. The Group attempts to control credit risk bymonitoring credit exposures, limiting transactions with specific counter parties, and continuouslyassessing the creditworthiness of counter parties.
TheGroupmanages credit risk by setting limits for individual borrowers and groups of borrowers andfor geographical and industry segments. In addition the Group obtains security where appropriate.
The debt securities included in investments are mainly sovereign risk and standard gradesecurities. Analysis of investments by counterparty is provided in notes 16 and 17. For detailsof the composition of the loans and advances refer to note 20. Information on credit risk relat-ing to derivative instruments is provided in note 43 and for commitments and contingencies innote 44. The information on the Group’s net maximum exposure by economic sectors is givenin note (A) below.
The Group maintains a general credit risk policy that is in compliance with the Group’s general riskmanagement related to the Group’s credit transactions. It consists of the following:- The permissible activities, segments, programs and services that the Group intends to deliverand the acceptable limits;- The mechanism of the approval on credit-facilities;- The mechanism for managing and following up credit-facilities; and- The required actions for analyzing and organizing credit files.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
141
The Group attempts to control credit risk by monitoring credit exposures, limiting transactions withspecific counter parties, and continually assessing the creditworthiness of counter parties. TheGroup’s risk management are designed to identify and to set appropriate risk limits and to monitor therisk adherence to limits. Actual exposures against limits are monitored daily, monthly and periodically. Riskmanagement is responsible for monitoring the risk profile of the Group’s loan portfolio by producinginternal reports highlighting any exposure of concern in corporate, commercial and consumer lending. TheGroup examines the level of concentration whether by credit quality, client groupings or economicsector and collateral coverage. Further, the Group monitors non-performing loans and takes therequired provisions for these loans.
The Group in the ordinary course of lending activities holds collaterals and guarantees as security tomitigate credit risk in the loans and advances. These collaterals mostly include cash collateral, quotedshares and debt securities, real estate mortgages, personal guarantees and others. In addition, the collectionunit in the Group dynamically manages and takes remedial actions for non-performing loans.
The Group uses an internal classification system based on risk ratings for its corporate and middlemarket customers. The risk rating system, which is managed by an independent unit, provides a ratingbased on client and transaction level. The classification system includes six grades, of which threegrades relate to the performing portfolio (regular credit facilities: risk rating “1” and “2” and specialmention – watch list: risk rating “3”), one grade relates to substandard loans (risk rating “4”) and twogrades relate to non-performing loans (risk rating “5” and “6”). Credit cards, personal loans, carloans, housing loans and other loans related to these loans are classified as regular as they areperforming and have timely repayment with no past dues; except for those loans that have unsettledbills due for more than 90 days. Each individual borrower is rated based on an internally developeddebt rating model that evaluates risk based on financial as well as qualitative inputs. The associatedloss estimate norms for each grade have been calculated based on the Group’s historical defaultrates for each rating. These risk ratings are reviewed on a regular basis.
As for credit rating system, the Bank is implementing the Moody’s KMV Risk Advisor for credit analysisand rating systems for corporate and commercial borrowers, in order to aid the Group in moving at a laterstage to internal rating-based measurements under Basel 2. The Bank has obtained a license fromMoody’s KMV to implement this system on the whole Group.
50. RISK MANAGEMENT
142
A- Maximum exposure to credit riskAn analysis of the Group’s financial assets before and after taking into account collateral heldor other credit enhancements, is as follows:
For on-balance sheet financial assets, the exposures set out above are based on net carryingamount as reported in the balance sheet.
Balances with the Central BanksLebanese and other governmental treasury bills and bondsBonds and financial assets with fixed incomeShares, securities and financial assets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loans to related partiesOther assetsRegularization accounts and other debit accounts
Contingent liabilitiesCommitments
Total credit exposure
Gross maximumexposureLL million
Net maximumexposureLL million
6,201,9485,080,3231,165,140
11,7257,536,5334,179,307245,3572,28634,216119,487
24,576,3221,146,3701,358,4442,504,81427,081,136
6,201,9485,080,3231,165,140
11,7257,478,7901,706,143
-2,28634,216119,487
21,800,058990,776603,691
1,594,46723,394,525
2007
Gross maximumexposureLL million
Net maximumexposureLL million
6,153,6393,474,920386,1008,403
7,754,2842,996,698173,2602,26933,71561,408
21,044,696996,714986,641
1,983,35523,028,051
6,153,6393,474,920386,1008,403
7,697,1751,448,185
-2,26933,71561,408
19,265,814802,395517,852
1,320,24720,586,061
2006
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
143
Collateral and other credit enhancementsThe amount, type and valuation of collateral is based on guidelines specified in the risk managementframework. The main types of collateral obtained include real estate, quoted shares, cash collateral andbank guarantees.
The revaluation and custody of collaterals are performed independent of the business units.
B- Risk concentrations of maximum exposure to credit risk
50. RISK MANAGEMENT
Balances with the Central BanksLebanese and other governmental treasury bills and bondsBonds and financial assets with fixed incomeShares, securities and financial assets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loans to related partiesOther assetsRegularization accounts and other debit accounts
Contingent liabilitiesCommitments
Total credit exposure
DomesticLL million
InternationalLL million
4,567,3944,836,164163,8436,990
584,4372,322,535103,9561,65124,01950,380
12,661,369200,998
1,078,2091,279,207
13,940,576
1,634,554244,159
1,001,2974,735
6,952,0961,856,772141,401
63510,19769,107
11,914,953945,372280,235
1,225,60713,140,560
2007
TotalLL million
6,201,9485,080,3231,165,140
11,7257,536,5334,179,307245,3572,28634,216119,487
24,576,3221,146,3701,358,4442,504,814
27,081,136
Balances with the Central BanksLebanese and other governmental treasury bills and bondsBonds and financial assets with fixed incomeShares, securities and financial assets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loans to related partiesOther assetsRegularization accounts and other debit accounts
Contingent liabilitiesCommitments
Total credit exposure
DomesticLL million
InternationalLL million
5,238,0733,240,591209,6635,506
552,7521,396,537
89,4501,65132,64735,424
10,802,294191,242664,879856,121
11,658,415
915,566234,329176,4372,897
7,201,5321,600,161
83,810618
1,06825,984
10,242,402805,472321,762
1,127,23411,369,636
2006
TotalLL million
6,153,6393,474,920386,1008,403
7,754,2842,996,698173,2602,26933,71561,408
21,044,696996,714986,641
1,983,35523,028,051
144
C- Credit quality per class of financial assets
In managing its portfolio, the Group utilizes ratings and other measures and techniques whichseek to take account of all aspects of perceived risk. Credit exposures classified as “High”quality are those where the ultimate risk of financial loss from the obligor’s failure to dischargeits obligation is assessed to be low. These include facilities to corporate entities with financialcondition, risk indicators and capacity to repay which are considered to be good to excellent.Credit exposures classified as “Standard” quality comprise all other facilities whose paymentperformance is fully compliant with contractual conditions and which are not “impaired”. Theultimate risk of possible financial loss on “Standard” quality is assessed to be higher than thatfor the exposures classified within the “High” quality range.
The credit quality of financial assets is managed by the Group using internal credit ratings.The table below shows the credit quality by class of financial asset for balance sheet lines,based on the Group’s credit rating system
Lebanese and other governmental treasury bills and bondsBonds and financial assets with fixed incomeShares, securities and financial assets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loans to related parties
Standardgrade
LL million
Past due butnot impaired
LL million
----
105,078--
105,078
----
35,095--
35,095
2007
Past due andimpaired
LL million
TotalLL million
----
70,192--
70,192
5,080,3231,165,140
11,7257,536,5334,179,307245,3572,286
18,220,671
Highgrade
LL million
5,080,3231,165,140
11,7257,536,5333,968,942245,3572,286
18,010,306
Neither past due nor impaired
Lebanese and other governmental treasury bills and bondsBonds and financial assets with fixed incomeShares, securities and financial assets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loans to related parties
Standardgrade
LL million
Past due butnot impaired
LL million
----
60,864--
60,864
----
34,349--
34,349
2006
Past due andimpaired
LL million
TotalLL million
----
60,540--
60,540
3,474,920386,1008,403
7,754,2842,996,698173,2602,269
14,795,934
Highgrade
LL million
3,474,920386,1008,403
7,754,2842,840,945173,2602,269
14,640,181
Neither past due nor impaired
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
145
D- Aging analysis of past due but not impaired loans
Impairment assessmentThe main considerations for the loan impairment assessment include whether any payments of principalor interest are overdue by more than 90 days or there are any known difficulties in the cash flows ofcounterparties, credit rating downgrades, or infringement of the original terms of the contract. The Groupaddresses impairment assessment in two areas: individually assessed allowances and collectivelyassessed allowances.
Individually assessed allowancesThe Group determines the allowances appropriate for each individually significant loan or advance on anindividual basis. Items considered when determining allowance amounts include the sustainability of thecounterparty’s business plan, its ability to improve performance once a financial difficulty has arisen,projected receipts and the expected dividend payout should bankruptcy ensue, the availability of otherfinancial support and the realisable value of collateral, and the timing of the expected cash flows. Theimpairment losses are evaluated at each reporting date, unless unforeseen circumstances require morecareful attention.
Collectively assessed allowancesAllowances are assessed collectively for losses on loans and advances that are not individually significant(including credit cards, housing loans and unsecured consumer lending) and for individually significant loansand advances where there is not yet objective evidence of individual impairment. Allowances are evaluatedon each reporting date with each portfolio receiving a separate review.
50. RISK MANAGEMENT
Loans and advances to customers
Less than90 days
LL million
More than 90days
LL million
13,048 22,047
2007
TotalLL million
35,095
Loans and advances to customers
Less than90 days
LL million
More than 90days
LL million
13,792 20,557
2006
TotalLL million
34,349
146
The collective assessment takes account of impairment that is likely to be present in the portfolioeven though there is not yet objective evidence of the impairment in an individual assessment.Impairment losses are estimated by taking into consideration of the following information: historicallosses on the portfolio, current economic conditions, the approximate delay between the time a lossis likely to have been incurred and the time it will be identified as requiring an individually assessedimpairment allowance, and expected receipts and recoveries once impaired. Management isresponsible for deciding the length of this period which can extend for as long as one year. Theimpairment allowance is then reviewed by credit management to ensure alignment with the Group’soverall policy.Financial guarantees and letters of credit are assessed and provision made in a similar manner asfor loans.
E- Credit quality using external risk ratings
High gradeRisk rating class 1Risk rating class 2Risk rating class 3Risk rating class 4
Standard gradeRisk rating class 5Risk rating class 6Risk rating class 7
Sub-standard gradeRisk rating class 8Risk rating class 9
ImpairedRisk rating class 10
Unclassified
Moody’sequivalent
grades
AaaAa1 – A3
Baa1 – Baa2Baa3
Ba1Ba2 – Ba3B1 – B2
B3Caa – C
D
2007
S & Pequivalent
grades
Total riskLL million
AAAAA+ to A3
BBB+ to BBBBBB-
BB+BB to BB-B+ to B
B-CCC+ to C
-
247,5537,227,8241,013,378
74,902
-116,13211,922
9,449,028-
274,244
8,666,15327,081,136
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
147
50.2 Liquidity Risk
Liquidity risk is the risk that the Group will be unable to meet its liabilities when they fall due under normal andstress circumstances. Liquidity risk can be caused by market disruptions or credit downgrades which maycause certain sources of funding to dry up immediately. To limit this risk, management has arrangeddiversified funding sources in addition to its core deposit base, manages assets with liquidity in mind,maintaining a healthy balance of cash and cash equivalents and readily marketable securities.
The management of liquidity risk is currently governed by the Group’s Assets and Liabilities Managementpolicy. The main objectives converge around the following:
- Set targets and ranges for key balance sheet or income statement ratios to assure that the needed liquiditycapacity of the Group is maintained at all times, while providing sufficient flexibility to enable the Group toaddress short term fluctuations in liquidity pressures.- Provide general guidance on the sequence to be followed in drawing on the Group’s funding sources tomeet a liquidity drain.- Review the current and prospective liquidity positions and monitor alternative funding sources.- Develop parameters for the pricing and maturity distributions of deposits, loans and investments.- Promulgate a contingency liquidity plan that identifies early indicators of stress conditions and describeactions to be taken in the event of financial difficulties arising from systemic or other crises, while minimizingadverse long-term implications for the Group’s business.
In accordance with Lebanese banking rules and regulations, the Group maintains a non-interest bearingbalances at the Bank of Lebanon calculated on the basis of 25% of sight commitments and 15% of termcommitments in Lebanese Lira. Regarding foreign currencies, the Group maintains interest-bearingplacements at the Bank of Lebanon at the rate of 15% of total deposits in foreign currencies regardlessof nature. Foreign subsidiaries are also subject to obligatory reserve requirements with varying percentages,according to the banking rules and regulations of the countries in which they are locates.
The liquidity position is assessed and managed under a variety of scenarios, giving due consideration tostress factors relating to both the market in general and specifically to the Group. One of these methodsis to maintain limits on the ratio of liquid assets to customers’ deposits, set to reflect market conditions.Net liquid assets consist of cash and balances with the Central Banks, deposits with banks and financialinstitutions, Lebanese and other governmental treasury bills and bonds less deposits due to banks andfinancial institutions due to mature within the next month. The ratio during the year was as follows:
50. RISK MANAGEMENT
148
50.2.1 Analysis of financial liabilities by remaining contractual maturities
The table below summarizes the maturity profile of the Group’s financial liabilities at 31December 2007 and 2006 based on contractual undiscounted repayment obligations. As thespecial commission payments up to contractual maturity are included in the table, totals donot match with the balance sheet. The contractual maturities of liabilities have beendetermined on the basis of the remaining period at the consolidated balance sheet date tothe contractual maturity date and do not take into account the effective expected maturitiesas shown on note 50-2-2 below (maturity analysis of assets and liabilities). Repayments whichare subject to notice are treated as if notice were being given immediately. However, theGroup expects that many customers will not request repayment on the earliest date the Groupcould be required to pay and the table does not reflect the expected cash flows indicated bythe Group’s deposit retention history.
At 31 DecemberAverage during the yearHighestLowest
2007 % 2006 %
33.7933.7935.1532.29
36.4836.8337.8336.19
Due to banks and financial institutionsCustomers’ depositsEngagements by acceptances
Total undiscounted financial liabilities
Over 5years
LL million
TotalLL million
48,05212,635
-
60,687
1,558,83120,820,821
245,357
22,625,009
3 to 12months
LL million
1 to 5years
LL million
8,2951,095,153
50,400
1,153,848
12,924155,6942,254
170,872
Up to 1month
LL million
1 to 3months
LL million
1,487,14615,507,373
72,930
17,067,449
2,4144,049,966119,773
4,172,153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
149
31 December 2007
The table below shows the contractual expiry bymaturity of theGroup’s contingent liabilities and commitments:
50. RISK MANAGEMENT
Due to banks and financial institutionsCustomers’ depositsEngagements by acceptances
Total undiscounted financial liabilities
Over 5years
LL million
TotalLL million
---
-
1,311,41517,768,128
173,260
19,252,803
3 to 12months
LL million
1 to 5years
LL million
12,9081,079,216
-
1,092,124
-21,775
-
21,775
Up to 1month
LL million
1 to 3months
LL million
1,298,28113,267,629
49,543
14,615,453
2263,399,508123,717
3,523,451
Contingent liabilitiesCommitmentsForeign currencies to receive against foreigncurrencies to deliver
Over 5years
LL million
TotalLL million
--
--
1,146,3701,358,444
2,942,5495,447,363
3 to 12months
LL million
1 to 5years
LL million
--
201,870201,870
--
--
Up to 1month
LL million
1 to 3months
LL million
1,146,3701,358,444
-2,504,814
--
2,740,6792,740,679
31 December 2006
2007
Contingent liabilitiesCommitmentsForeign currencies to receive against foreigncurrencies to deliver
Over 5years
LL million
TotalLL million
--
--
996,714986,641
2,146,7554,130,110
3 to 12months
LL million
1 to 5years
LL million
--
1,259,4011,259,401
--
--
1 to 3months
LL million
--
887,354887,354
2006
Up to 1month
LL million
996,714986,641
-1,983,355
150
The Group expects that not all of the contingent liabilities or commitments will be drawnbefore expiry of the commitments.
50.2.2 Maturity analysis of assets and liabilities
The table below shows an analysis of assets and liabilities analyzed according to when theyare expected to be recovered or settled. See note 50-2-1 above for the Group’s contractualundiscounted financial liabilities.
The maturity profile of the Group’s assets and liabilities as at 31 December 2007 is as follows:
ASSETSCash and balances withthe Central BanksLebanese and othergovernmental treasurybills and bondsBonds and financial assetswith fixed incomeShares, securities and financialassets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loansto related partiesTangible fixed assetsIntangible fixed assetsOther assetsRegularization accountsand other debit accountsGoodwillTOTAL ASSETS
LIABILITIESBanks and financial institutionsCustomers’ depositsEngagements by acceptancesOther liabilitiesRegularization accountsand other credit accountsProvisions for risks and chargesTOTAL LIABILITIESNET LIQUIDITY GAP
3,914,291
3,969,844
1,018,332
11,725395,028
1,190,8702,254
27,208272,6424,4597,123
14860,586
10,874,510
45,225143,9162,2541,633
1,13276,612
270,77210,603,738
6,330,031
5,080,323
1,165,140
11,7257,536,5334,179,307245,357
27,208272,6424,45934,216
119,48760,586
25,067,014
1,555,91420,708,516
245,357194,460
189,79280,566
22,974,6052,092,409
2,263,172
2,236,508
272,862
-42,188742,703
-
---
21
15-
5,557,469
-72,794
--
--
72,7945,484,675
772,863
599,449
700,172
11,72543,746139,110
-
27,208272,6424,4597,102
-60,586
2,639,062
45,22511,971
--
24276,612
134,0502,505,012
SubtotalLL million
2,415,740
1,110,479
146,808
-7,141,5052,988,437243,103
---
27,093
119,339-
14,192,504
1,510,68920,564,600
243,103192,827
188,6603,954
22,703,833(8,511,329)
878,256
1,133,887
45,298
-309,094309,0572,254
----
133-
2,677,979
-59,1512,2541,633
890-
63,9282,614,051
1 to 3months
LL million
3 monthsTo 1 Year
LL million
114,458
115,423
30,139
-827,810307,679119,773
---
23
15,368-
1,530,673
22,2044,112,411119,77369,211
28,957-
4,352,556(2,821,883)
303,205
760,030
106,403
-89,451985,52050,400
---
111
23,656-
2,318,776
18,9551,053,796
50,40055,498
2,815-
1,181,4641,137,312
Up to 1month
LL million
1,998,077
235,026
10,266
-6,224,2441,695,238
72,930
---
26,959
80,315-
10,343,055
1,469,53015,398,393
72,93068,118
156,8883,954
17,169,813(6,826,758)
SubtotalLL million
(2-5) yearsLL million
Over 5 yearsLL million
(1-2) yearsLL million
TotalLL million
Less Than one year More Than one year
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
151
The maturity profile of the Group’s assets and liabilities as at 31 December 2006 is as follows:
50.3 Market risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuatedue to changes in market prices. Market risks arise from open positions in interest rate and currencyrate, all of which are exposed to general and specific market movements and changes in the levelof volatility of market rates or prices such as interest rates and foreign exchange rates.
ASSETSCash and balances withthe Central BanksLebanese and othergovernmental treasurybills and bondsBonds and financial assetswith fixed incomeShares, securities and financialassets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loansto related partiesTangible fixed assetsIntangible fixed assetsOther assetsRegularization accountsand other debit accountsGoodwillTOTAL ASSETS
LIABILITIESBanks and financial institutionsCustomers’ depositsEngagements by acceptancesOther liabilitiesRegularization accountsand other credit accountsProvisions for risks and chargesTOTAL LIABILITIESNET LIQUIDITY GAP
4,056,290
3,034,674
303,902
8,403189,462526,649
-
3,220219,3722,8456,029
37463,980
8,415,200
-5,287
--
6,68464,64676,617
8,338,583
6,246,406
3,474,920
386,100
8,4037,754,2842,996,698173,260
3,220219,3722,84533,715
61,40863,980
21,424,611
1,308,84417,690,381
173,260141,067
129,86964,646
19,508,0671,916,544
2,401,613
1,986,939
178,830
--
243,461-
----
16-
4,810,859
----
43-
434,810,816
764,869
429,466
54,132
8,4036,30186,925
-
3,220219,3722,8456,029
20663,980
1,645,748
----
3,67364,64668,319
1,577,429
SubtotalLL million
2,190,116
440,246
82,198
-7,564,8222,470,049173,260
---
27,686
61,034-
13,009,411
1,308,84417,685,094
173,260141,067
123,185-
19,431,450(6,422,039)
889,808
618,269
70,940
-183,161196,263
-
----
152-
1,958,593
-5,287
--
2,968-
8,2551,950,338
1 to 3months
LL million
3 monthsTo 1 Year
LL million
615,949
37,203
1,478
-769,183248,809123,717
---
6,144
7,787-
1,810,270
13,8083,321,788123,71755,213
15,345-
3,529,871(1,719,601)
501,454
361,973
62,400
-191,821653,964
-
----
5,469-
1,777,081
12,3901,051,578
-47,352
8,934-
1,120,254656,827
Up to 1month
LL million
1,072,713
41,070
18,320
-6,603,8181,567,276
49,543
---
21,542
47,778-
9,422,060
1,282,64613,311,728
49,54338,502
98,906-
14,781,325(5,359,265)
SubtotalLL million
TotalLL million
Less Than one year More Than one year
50. RISK MANAGEMENT
152
(2-5) yearsLL million
Over 5 yearsLL million
(1-2) yearsLL million
Risk management is responsible for generating internal reports quantifying the Group’s earningsat risk due to extreme movements in interest rates, while daily monitoring the sensitivity of theGroup’s trading portfolio of fixed income securities to changes in market prices and / or marketparameters. Interest rate sensitivity gaps are reported to executive management and to theBanking Control Commission unconsolidated on amonthly basis and consolidated (Group level) ona semi- annual basis. The Bank’s Asset and Liability Management (ALM) policy assigns authorityfor its formulation, revision and administration to the Asset / Liability Management Committee(ALCO) of BLOM Bank SAL. Risk management will be responsible for monitoring compliance withall limits set in the ALM policy ranging from core foreign currency liquidity to liquidity mismatchlimits to interest sensitivity gap limits. The Bank is also in the process of implementing the newlyacquiredAsset and LiabilityManagement system“FocusALM”aimedat automating themanagementof the Bank’s assets and liabilities from a static and dynamic perspectives including stress testing andextensive scenario analysis.
50-3-1 Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect futureprofitability or the fair values of financial instruments. The Group is exposed to interest rate risk as aresult ofmismatchesof interest rate repricingof assets and liabilities andoff-balance sheet items thatmature or reprice in a given period. The Group manages this risk by matching the repricing of assetsand liabilities through risk management strategies.
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonable possible change in interestrates, with all other variables held constant, of the Group’s income statement or statement ofchanges in equity.
The sensitivity of the income statement is the effect of the assumed changes in interest rateson the net interest income for one year, based on the floating rate non-trading financial assetsand financial liabilities held at the year end, including the effect of hedging instruments. Thesensitivity of equity is calculated by revaluing the available for sale investments, based on theassumption that there are parallel shifts in the yield curve.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
153
Thesensitivityofequity isanalyzedbymaturityof theassetsorcash flowhedgeswaps.All thenon-tradingbookexposuresaremonitoredandanalyzed incurrencyconcentrationsandrelevantsensitivitiesaredisclosed in localcurrency.ThesensitivityanalysisdoesnottakeaccountofactionbytheGroupthatmightbetakentomitigatetheeffectofsuchchanges.
50. RISK MANAGEMENT
2007CurrencyLebanese LiraUnited States DollarEuroOthers
(1 – 5)years
LL million
More than 5years
LL million
(10,681)(22,967)
(73)(582)
-(11,392)
-(214)
0 to 6 monthsLL million
6 months to 1year
LL million
(4,559)(3,225)
(85)(101)
(3,777)(3,873)
(90)(101)
Increasein basis points
Sensitivity ofnet interest
incomeLL million
0.50%0.50%0.25%0.25%
(4,756)2,655735
1,049
Sensitivity of equity
TotalLL million
(19,017)(41,457)
(248)(998)
2007CurrencyLebanese LiraUnited States DollarEuroOthers
(1 – 5)years
LL million
More than 5years
LL million
11,40838,974
114591
-15,099
-218
0 to 6 monthsLL million
6 months to 1year
LL million
4,6949,279169102
3,8997,844140102
Decreasein basis points
Sensitivity ofnet interest
incomeLL million
-0.50%-0.50%-0.25%-0.25%
4,756(2,655)(735)
(1,049)
Sensitivity of equity
TotalLL million
20,00171,196
4231,013
2006CurrencyLebanese LiraUnited States DollarEuroOthers
(1 – 5)years
LL million
More than 5years
LL million
(9,004)(8,567)(198)(305)
-(3,202)
-(115)
0 to 6 monthsLL million
6 months to 1year
LL million
(4,293)(1,554)
(84)(107)
(4,221)(1,554)
(84)(48)
Increasein basis points
Sensitivity ofnet interest
incomeLL million
0.50%0.50%0.25%0.25%
(6,243)7,2611,1441,202
Sensitivity of equity
TotalLL million
(17,518)(14,877)
(366)(575)
2006CurrencyLebanese LiraUnited States DollarEuroOthers
(1 – 5)years
LL million
More than 5years
LL million
9,13315,816
406310
-4,574
-117
0 to 6 monthsLL million
6 months to 1year
LL million
4,3453,21117096
4,2643,21116948
Decreasein basis points
Sensitivity ofnet interest
incomeLL million
-0.50%-0.50%-0.25%-0.25%
6,243(7,261)(1,144)(1,202)
Sensitivity of equity
TotalLL million
17,74226,812
745571
154
Effective interest rates of financial instruments
The effective interest rates by major currencies for each of the monetary financial instru-ments are as follows:
ASSETSCentral banks and other banksLebanese and other governmental treasury bills and bondsBonds and financial assets with fixed incomeLoans and advances to customers
LIABILITIESBanks and financial institutionsCustomers’ deposits
LL%
Other currencies%
4 – 58.25 – 9.2511.5 – 12.5
11 – 12
5 – 67.5 – 8.5
5 – 67.75 – 8.25
7.5 – 88 – 8.5
4.5 – 54.75 – 5.25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
155
Interest rate sensitivity gap
The Group’s interest rate sensitivity position based on contractual repricing arrangements ormaturity as at 31 December 2007 has been shown in the table below.
ASSETSCash and balances withthe Central BanksLebanese and othergovernmental treasurybills and bondsBonds and financial assetswith fixed incomeShares, securities and financialassets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loansto related partiesTangible fixed assetsIntangible fixed assetsOther assetsRegularization accountsand other debit accountsGoodwillTOTAL ASSETS
LIABILITIES AND EQUITY
Banks and financial institutionsCustomers’ depositsEngagements by acceptancesOther liabilitiesRegularization accounts andother credit accountsProvisions for risks and chargesShareholders' equity
TOTAL LIABILITIES AND EQUITY
Total interest rate sensitivity gap
Cumulative interest rate sensitivity gap
1,150,879
97,900
12,829
7,226332,389188,945237,278
27,208272,6424,45934,216
119,48760,586
2,546,044
171,075905,674237,278178,323
189,79280,566
2,092,409
3,855,117
(1,309,073)
-
6,330,031
5,080,323
1,165,140
11,7257,536,5334,179,307245,357
27,208272,6424,45934,216
119,48760,586
25,067,014
1,555,91420,708,516
245,357194,460
189,79280,566
2,092,409
25,067,014
2,176,206
2,236,509
272,199
-42,188967,822
-
----
--
5,694,924
-72,794
--
---
72,794
5,622,130
(834,997)
772,863
599,449
699,866
-43,74684,740
-
----
--
2,200,664
45,22511,369
--
---
56,594
2,144,070
1,309,073
3 monthsto 1 year
LL million
279,400
716,789
100,096
-87,177933,2748,079
----
--
2,124,815
18,475986,6268,079
-
---
1,013,180
1,111,635
(9,084,131)
878,256
1,133,887
43,996
2,729309,094306,435
-
----
--
2,674,397
-47,393
--
---
47,393
2,627,004
(6,457,127)
Up to1 month
LL million
1 to3 months
LL million
984,113
217,525
7,537
1,7705,899,9481,392,262
-
----
--
8,503,155
1,298,95514,752,113
--
---
16,051,068
(7,547,913)
(7,547,913)
88,314
78,264
28,617
-821,991305,829
-
----
--
1,323,015
22,1843,932,547
-16,137
---
3,970,868
(2,647,853)
(10,195,766)
Non interestsensitive
LL million
(2 – 5)years
LL million
More than5 years
LL million
(1 – 2)years
LL million
TotalLL million
50. RISK MANAGEMENT
156
The Group’s interest rate sensitivity position based on contractual repricing arrangements ormaturity as at 31 December 2006 was as follows:
ASSETSCash and balances withthe Central BanksLebanese and othergovernmental treasurybills and bondsBonds and financial assetswith fixed incomeShares, securities and financialassets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loansto related partiesTangible fixed assetsIntangible fixed assetsOther assetsRegularization accountsand other debit accountsGoodwillTOTAL ASSETS
LIABILITIES AND EQUITY
Banks and financial institutionsCustomers’ depositsEngagements by acceptancesOther liabilitiesRegularization accounts andother credit accountsProvisions for risks and chargesShareholders' equity
TOTAL LIABILITIES AND EQUITY
Total interest rate sensitivity gap
Cumulative interest rate sensitivity gap
1,426,090
74,353
5,876
8,403299,760145,403173,260
3,220219,3722,84533,715
61,40863,980
2,517,685
159,3161,958,233173,260141,067
129,86964,646
1,916,544
4,542,935
(2,025,250)
-
6,246,406
3,474,920
386,100
8.4037,754,2842,996,698173,260
3,220219,3722,84533,715
61,40863,980
21,424,611
1,308,84417,690,381
173,260141,067
129,86964,646
1,916,544
21,424,611
2,401,613
1,822,301
152,442
--
243,461-
----
--
4,619,817
----
---
-
4,619,817
831,376
707,941
338,574
54,133
-6,30186,925
-
----
--
1,193,874
----
---
-
1,193,874
2,025,250
3 monthsto 1 year
LL million
467,325
591,076
28,639
-191,821653,964
-
----
--
1,932,825
12,3901,051,578
--
---
1,063,968
868,857
(5,716,240)
888,805
612,917
51,940
-183,161196,263
-
----
--
1,933,086
-5,287
--
---
5,287
1,927,799
(3,788,441)
Up to1 month
LL million
1 to3 months
LL million
53,132
23,526
15,075
-6,304,0581,421,873
-
----
--
7,817,664
1,123,33011,353,495
--
---
12,476,825
(4,659,161)
(4,659,161)
301,500
12,173
77,995
-769,183248,809
-
----
--
1,409,660
13,8083,321,788
--
---
3,335,596
(1,925,936)
(6,585,097)
Non interestsensitive
LL million
(2 – 5)years
LL million
More than5 years
LL million
(1 – 2)years
LL million
TotalLL million
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
157
50.3.2 Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rate. TheBank protects its capital and reserves by holding a foreign currency position in US Dollars representing 60% of its shareholders’equity after adjustment according to specific requirements set by the Bank of Lebanon. The Bank is also allowed to hold anet trading position not to exceed 1 percent of its net shareholders’ equity, as long as the global foreign position does notexceed, at the same time, 40 percent of its net shareholders’ equity, and that the related banks are abiding in a timely andconsistent manner with the required solvency rate (Bank of Lebanon circular number 32).The table below indicates the consolidated balance sheet detailed by currency.The following consolidated balance sheet as of 31 December 2007, is detailed in Lebanese Lira (LL) and foreign currencies,translated into LL.
ASSETSCash and balances with the Central BanksLebanese and other governmental treasury bills and bondsBonds and financial assets with fixed incomeShares, securities and financial assets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loans to related partiesTangible fixed assetsIntangible fixed assetsOther assetsRegularization accounts and other debit accountsGoodwillTOTAL ASSETSOFF-BALANCE SHEET ITEMSFinancial assets sold with an option to repurchaseEngagements receivedBad loans totally provided forForeign currencies to deliver against foreign currencies to receiveTotalLIABILITIESBanks and financial institutionsCustomers’ depositsEngagements by acceptancesOther liabilitiesRegularization accounts and other credit accountsProvisions for risks and chargesTotal liabilitiesNET EXPOSUREOFF-BALANCE SHEET ITEMSFinancing commitments given to-Financial intermediaries-CustomersBank guarantees given to-Financial intermediaries-CustomersCommitments on term financial instrumentsFinancial assets bought with an option to resellFiduciary deposits, assets under management and custody accountsForeign currencies to receive against foreign currencies to deliver
5,222,2242,685,7801,165,140
11,3647,468,3753,849,938245,35724,755129,1983,63427,71695,67760,586
20,989,744
143,6476,423,994
21,8762,939,1869,528,703
1,523,54717,409,713
245,357142,10439,68955,325
19,415,7351,574,009
359,37421,043338,331764,674196,378568,29634,142143,647
3,949,9642,942,5498,194,350
6,330,0315,080,3231,165,140
11,7257,536,5334,179,307245,35727,208272,6424,45934,216119,48760,586
25,067,014
143,6477,088,518
28,3122,939,186
10,199,663
1,555,91420,708,516
245,357194,460189,79280,566
22,974,6052,092,409
359,37421,043338,331786,996196,378590,61834,142143,647
3,959,1362,942,5498,225,844
71,219106,10322,816
911,905,281304,94035,335
8052,68148359
7,497
2,457,310
-80,6263,345
617,397701,368
1,202,9471,296,025
35,33516,2271,698283
2,552,515(95,205)
47,191754
46,437149,86285,63564,22734,142
-89,212537,607858,014
1,528,974244,16062,3484,194
460,0461,398,545
34,0721,292
118,1543,14621,87452,81560,586
3,990,206
-1,325,884
-1,631,8982,957,782
139,5903,040,186
34,07243,63718,59153,193
3,329,269660,937
27,1381,63825,500
217,59616,086201,510
--
522,3551,739,1362,506,225
LL million
1,107,8072,394,543
-361
68,158329,369
-2,453
143,444825
6,50023,810
4,077,270
-664,5246,436
-670,960
32,3673,298,803
-52,356150,10325,241
3,558,870518,400
---
22,322-
22,322--
9,172-
31,494
3,622,0312,335,5171,079,976
7,0795,103,0482,146,453175,95022,6588,363
55,78335,365
__14,542,228
143,6475,017,484
18,531689,891
5,869,553
181,01013,073,502
175,95082,24019,4001,849
13,533,9511,008,277
285,04518,651266,394397,21694,657302,559
-143,647
3,338,397665,806
4,830,111
Total foreigncurrenciesLL million
Euro inLL million
Other foreigncurrenciesLL million
US Dollars inLL million
TotalLL million
50. RISK MANAGEMENT
Foreign currencies in Lebanese Lira
158
The following consolidated balance sheet as of 31 December 2006, is detailed in Lebanese Lira(LL) and foreign currencies, translated into LL.
ASSETSCash and balances with the Central BanksLebanese and other governmental treasury bills and bondsBonds and financial assets with fixed incomeShares, securities and financial assets with variable incomeBanks and financial institutionsLoans and advances to customersBank acceptancesInvestments and loans to related partiesTangible fixed assetsIntangible fixed assetsOther assetsRegularization accounts and other debit accountsGoodwillTOTAL ASSETSOFF-BALANCE SHEET ITEMSEngagements receivedBad loans totally provided forForeign currencies to deliver against foreign currencies to receiveTotalLIABILITIESBanks and financial institutionsCustomers’ depositsEngagements by acceptancesOther liabilitiesRegularization accounts and other credit accountsProvisions for risks and chargesTotal liabilitiesNET EXPOSUREOFF-BALANCE SHEET ITEMSFinancing commitments given to-Financial intermediaries-CustomersBank guarantees given to-Financial intermediaries-CustomersCommitments on term financial instrumentsFiduciary deposits, assets under management and custody accountsForeign currencies to receive against foreign currencies to deliver
4,882,4991,476,980386,1008,042
7,691,4892,748,615173,260
61892,3482,84527,32943,17863,980
17,597,283
4,892,15331,494
2,144,6177,068,264
1,306,73114,573,430
173,260101,92019,71538,636
16,213,6921,383,591
307,18613,051294,135663,70995,651568,05817,659
2,761,9502,146,7555,897,259
6,246,4063,474,920386,1008,403
7,754,2842,996,698173,2603,220
219,3722,84533,71561,40863,980
21,424,611
5,467,77343,905
2,144,6177,656,295
1,308,84417,690,381
173,260141,067129,86964,646
19,508,0671,916,544
307,18613,051294,135689,52896,098593,43017,659
2,774,3602,146,7555,935,488
211,87789,86010,797
821,888,249228,70791,611
569573128273
9,753991
2,533,470
71,7932,99636,257111,046
1,081,544992,99591,6119,6423,5203,560
2,182,872350,598
55,503117
55,386100,53015,91384,61717,659252,313299,536725,541
683,538225,33945,3771,523
455,889872,0948,198
4982,5122,7178,54219,08962,989
2,467,856
296,171-
1,295,4241,591,595
100,0251,841,361
8,19831,8319,74428,525
2,019,684448,172
21,944523
21,421288,25715,110273,147
-1,133,9791,262,5062,706,686
LL million
1,363,9071,997,940
-361
62,795248,083
-2,602
127,024-
6,38618,230
-3,827,328
575,62012,411
-588,031
2,1133,116,951
-39,147110,15426,010
3,294,375532,953
---
25,819447
25,372-
12,410-
38,229
3,987,0841,161,781329,9266,437
5,347,3511,647,814
73,451-
9,263-
18,51414,336
-12,595,957
4,524,18928,498812,936
5,365,623
125,16211,739,074
73,45160,4476,4516,551
12,011,136584,821
229,73912,411217,328274,92264,628210,294
-1,375,658584,713
2,465,032
Total foreigncurrenciesLL million
Euro inLL million
Other foreigncurrenciesLL million
US Dollars inLL million
TotalLL million
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
Foreign currencies in Lebanese Lira
159
50. RISK MANAGEMENT51. OPERATIONAL RISK52. PREPAYMENT RISK53. CAPITAL MANAGEMENT
The table below indicates the extent to which the Group was exposed to currency risk at 31December 2007 on its foreign currency positions. The analysis calculates the effects of a reasonablypossible movement of the currency rate against the Lebanese Lira, with all other variables heldconstant, including the effect of hedging instruments, on the consolidated income statement (dueto the fair value of currency sensitive non-trading monetary assets and liabilities) and equity (dueto the change in fair value of currency swaps and forward foreign exchange contracts used ascash flow hedges). The effect on equity is not significant. A negative amount in the table reflectsa potential net reduction in consolidated income statement or equity, while a positive amountreflects a net potential increase.
51. OPERATIONAL RISK
Operational risk is the risk of loss arising from systems failure, human error, fraud or externalevents. When controls fail to perform, operational risks can cause damage to reputation, havelegal or regulatory implications, or lead to financial loss. The Group cannot expect to eliminateall operational risks, but through a control framework and by monitoring and responding topotential risks, the Group is able to manage the risks. Controls include effective segregationof duties, access, authorization and reconciliation procedures, staff education and assessmentprocesses, including the use of internal audit.
52. PREPAYMENT RISK
Prepayment risk is the risk that the Group will incur a financial loss because its customers andcounterparties repay or request repayment earlier than expected, such as fixed rate housingloans when interest rate falls. The fixed rate assets of the Group are not significant comparedto the total assets. Moreover, other market conditions causing prepayment is not significantin themarkets inwhich the Group operates. Therefore, the Group considers the effect of prepaymentonnet interest income is notmaterial after taking into account the effect of any prepayment penalties.
Currency
USDEUR
Change in currencyrate % 2007
Effect onprofit before tax 2007
LL million
± 1%± 1%
± 10,328± 500
Change in currencyrate % 2006
Effect onprofit before tax 2006
LL million
± 1%± 1%
± 8,126± 693
160
53. CAPITAL MANAGEMENT
The Bank maintains an actively managed capital base to cover risks, inherent in the business.The adequacy of the Bank’s capital is monitored using, among other measures, the rules andratios established by the Bank of Lebanon and the Banking Control commission.
The Bank should maintain a required capital adequacy ratio (not less than 12%) based on thetotal tier one capital over the total risk weighted assets and off-balance sheet items.
The Bank manages its capital structure and makes adjustments to it in the light of changes ineconomic conditions and the risk characteristics of its activities. In order to maintain or adjustthe capital structure, the Bank may adjust the amount of dividend payment to shareholders, returncapital to shareholders or issue capital securities. No changes were made in the objectives, policiesand processes from the previous years.
Regulatory capital consists of Tier 1 capital, which comprises share capital, reserves and premiums,reserves forgeneralbanking risks, treasuryshares, retainedearningsandprofit for theyear lessdividenddistributed, intangibleassetsandgoodwill.Theothercomponentof regulatorycapitalTier2capital,whichincludes revaluation reserves and cumulative changes in fair values.
Regulatory capitalTier 1 capitalTier 2 capitalTotal capitalRisk weighted assetsTier 1 capital ratioTotal capital ratio
2007LL million
2006LL million
1,839,00129,224
1,868,2256,430,81128.60%29.05%
1,665,17036,157
1,701,3274,714,39835.32%36.09%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2007
161
54. COMMITMENTS AND CONTINGENCIES55. COMPARATIVE AMOUNTS56. SUBSEQUENT EVENTS
54. COMMITMENTS AND CONTINGENCIES
a) Due to the nature of its business, the Group is a defendant in various legal proceedings.Management, after discussing with its counselors all such cases and proceedingsagainst the Group, considers that the aggregate liability or loss, if any, resulting from anadverse determination would not have a material effect on the consolidated financialposition of the Group.
b) The Bank’s books in Lebanon have not been reviewed by the tax authorities for the years2006 and 2007. The ultimate outcome of any review that may take place by the tax authoritiescannot be presently determined.
c) The Bank’s books in Lebanon have not been reviewed by the National Social Security Fund(NSSF) since 1998. The ultimate outcome of any review by the NSSF on the Bank’s books from1998 to 2007 cannot be presently determined.
55. COMPARATIVE AMOUNTS
Except for the correction of an error in note 40 to the financial statements, the followingreclassifications were just to enhance the presentation in the current year:
- Provision for real estate taken in recovery of debt was reclassified from “Provisions for risksand charges” caption to “Tangible fixed assets” caption. Comparative amounts totaling to LL11,715 million were classified accordingly.
- Other income was reclassified from “Net commission income” caption to “Other operatingincome” caption. Comparative amounts of LL 5,714 million were reclassified accordingly.
56. SUBSEQUENT EVENTS
- On 26 December 2007, the extraordinary general assembly of the shareholders of AropeInsurance SAL (a subsidiary) resolved to increase the Company’s capital from LL 21,600 million toLL 43,200 million. Accordingly, the Bank has subscribed in its share of the subsidiary’s capitalincrease in full (LL 19,129 million) on 11 February 2008.
- On 5 March 2008, the Bank obtained the preliminary approval of the Bank of Lebanon for theredemption of the 750,000 preferred shares - issue 2002 amounting to LL 7,500 million.
162
COUNTRY
Australia, SydneyBelgium, BrusselsBahrain, ManamaCanada, TorontoCanada, TorontoDenmark, CopenhagenFrance, ParisGermany, Frankfurt am MainGermany, Frankfurt am MainGermany, Frankfurt am MainItaly, MilanItaly, RomeJapan, TokyoJapan, TokyoKSA, JeddahKSA, RiyadhKuwait, KuwaitNetherlands, AmesterdamNorway, OsloQatar, DohaSpain, MadridSweden, StockholmSwitzerland, GenevaSwitzerland, ZurichSwitzerland, ZurichU.A.E, DubaiU.K, LondonU.K, London
U.S.A, New YorkU.S.A, New York
Commonwealth Bank of AustraliaFortis Bank S.A. / N.V.
National Bank of BahrainRoyal Bank of Canada
Imperial Bank of Commerce (The)Danske Bank A/S
BLOM BANK France SACommerzbank AG
Deutsche Bank AGDresdner Bank AG
Banca Intesa San Paolo SPABanca Nazionale Del Lavoro SPA
Bank of Tokyo-Mitsubishi LtdJP Morgan Chase Bank N.A.
The National Commercial BankRiyad Bank
Gulf Bank KSCABN AMRO Bank N.V.
DnB NOR Bank ASACommercial Bank of Qatar (The) (QSC)
Banco Bilbao Vizcaya Argentaria S.A. (BBVA)Skandinaviska Enskilda Banken AB
BLOM BANK Switzerland SACredit Suisse
UBS AGBLOM BANK France SABLOM BANK France SA
National WESTMINSTER BANK PLCBank of New York (The)
JP Morgan Chase Bank N.A.
CORRESPONDENT BANK
WORLDWIDE CORRESPONDENT BANKS
AUDEURBHDCADCADDKKEUREUREUREUREUREURJPYJPYSARSAR
KWDEURNOKQAREUREURCHFEUREURAEDGBPGBPUSDUSD
WORLDWIDE CORRESPONDENT BANKS
164
BLOM BANK GROUP DIRECTORY
167
170
170
170
171
171
173
173
173
BLOM BANK GROUP DIRECTORY
166
DIRECTORY - BLOM BANK GROUP
173
173
173
167
BLOM BANK GROUP DIRECTORY
BLOM BANK GROUP CHAIRMAN:Dr. Naaman AZHARI
LEBANON
Headquarters
Verdun – Rachid Karami St, BLOM BANK bldgP.O. Box: 11-1912 Riad El-Solh, Beirut 1107 2807,LebanonPhone: (961-1) 743300 – 738938Fax: (961-1) 738946Telex: Electronic Telex in London: 94015829Answerback BLOM GReuter: BLOMSwift Code: BLOMLBBXE-mail: blommail@blom.com.lbDomain: http://www.blom.com.lbCall Center: (961-1) 753000
MOHAFAZAT BEIRUT BRANCHES
Main BranchVerdun, Rachid Karami St, BLOM BANK bldgPhone: (961-1) 738938 – 743300Fax: (961-1) 738946Email: blom.mainbranch@blom.com.lbSenior Manager / Branches: Mr. Walid ARISS
AchrafiehSassine SquarePhone: (961-1) 200147/8 – 320949Fax: (961-1) 320949Email: blom.achrafieh@blom.com.lbBranch Manager: Mr. Ara BOGHOSSIAN
Ain El-MreissehIbn Sina StPhone: (961-1) 372780 – 370830 – 373102Fax: (961-1) 370237Email: blom.ainmraisseh@blom.com.lbBranch Manager: Mr. Mahmoud MARRACH
BlissBliss St, opposite Hobeish Police Station –Ras Beirut – Al Rayess BldgPhone: (961-1) 363732/34/42Fax: (961-1) 363732Email: blom.bliss@blom.com.lbBranch Manager: Mr. Ziad SROUJI
Burj Abi HaidarBurj Abi Haidar St, Salam TowerPhone: (961-1) 310687 – 310677/8/9 - 817560Fax: (961-1) 310679Email: blom.bourjabihaidar@blom.com.lbBranch Manager: Mr. Mahmoud BAYDOUN
HamraAbdel Aziz St, Daher bldgPhone: (961-1) 346290/1/2/3 – 341955 - 343503Fax: (961- 1) 744407Email: blom.hamra@blom.com.lbBranch Manager: Mr. Sami FARHAT
Hamra - Retail BranchAbdel Aziz St, Daher bldgPhone: (961-1) 747752 /59 /60Fax: (961-1) 747749Email: retail.hamra@blom.com.lbBranch Manager: Mrs. Zeina KHATTAB
IstiklalIstiklal St, Karakol El-Druze Area, next toKettaneh Palace, Salhab bldgPhone: (961-1) 738050/1 - 749624Fax: (961-1) 748337Email: blom.istiklal@blom.com.lbBranch Manager: Mr. Mouhamad SIDANY
JnahBir Hassan Area, United Nations St, next toBeirut Hospital, Jaber bldgPhone: (961-1) 855903/4/5Fax: (961-1) 855906Email: blom.jnah@blom.com.lbBranch Manager: Mr. Abbas KALOT
MaaradEmir Bechir St, Hibat el Maarad bldg -DowntownPhone: (961-1) 983230/1/2/3/4Fax: (961-1) 983230Email: blom.maarad@blom.com.lbBranch Manager: Mr. Amer KAMAL
Mar EliasCorniche El Mazraa – opposite Helou’s bar-racks, Zantout bldgPhone: (961-1) 818616/7 – 818009 – 818038 -864112Fax: (961-1) 818618Email: blom.marelias@blom.com.lbBranch Manager: Mr. Mohamad Abd el wahabAl TABSH
MazraaCorniche El Mazraa, Barbir SquarePhone: (961-1) 648020/1/2 - 664337Fax: (961-1) 648020Email: blom.mazraa@blom.com.lbBranch Manager: Mr. Mohammad MAWASS
NoueiriAl Noueiri Station – Hamada bldgPhone: (961-1) 630309– 658611 – 658610 - 664487Fax: (961-1) 630319Email: blom.noueiry@blom.com.lbBranch Manager: Mr. Yehia ORFALI
RaouchéRaouche Blvd – Al Rayess & Bou Dagher BldgPhone: (961-1) 812603/4/5/6Fax: (961-1) 801634Email: blom.raouche@blom.com.lbBranch Manager: Mr. Mohamad MARRACHE
RmeilAshrafieh, Orthodox Hospital St, Medica CenterPhone: (961-1) 565252 – 565454 – 567140 –567141Fax: (961-1) 565252Email: blom.rmeil@blom.com.lbBranch Manager: Mrs. Salma ACHKOUTY
SaifiAl Arz Street – Akar bldgPhone: (961-1) 449899 – 581683 – 586340 –566794 - 587196Fax: (961-1) 449899Email: blom.saifi@blom.com.lbBranch Manager: Dr. Ousama CHAHINE
SanayehChamber of Commerce & Industry bldgPhone: (961-1) 346042/3 – 748339 - 749623Fax: (961-1) 346043Email: blom.sanayeh@blom.com.lbBranch Manager: Mrs. Nahida WEHBE
Sodeco – Retail BranchSodeco Square, Damascus RoadPhone: (961-1) 611360/1Fax: (961-1) 611 362Email: retail.sodeco@blom.com.lbBranch Manager: Mrs. Souraya N. Bashouti
TabarisGebran Tueini Square- Sursock TowerPhone: (961-1) 203142//3/4Fax: (961-1) 203145Email: blom.tabaris@blom.com.lbSenior Manager/Branches: Ms. Claire ABOUMRAD
Tariq Al-JedidehAl Malaab Al Baladi Square – Salim bldgPhone: (961-1) 818620/1 – 309959 - 816985Fax: (961-1) 818620Email: blom.tarikjdideh@blom.com.lbBranch Manager: Mr. Khodr MNEIMNEH
VerdunVerdun St, opposite F.S.I. Barracks, Abdo bldgPhone: (961-1) 788412/3 – 800081 - 788411Fax: (961-1) 800032Email: blom.Verdun@blom.com.lbBranch Manager: Mr. Hani BAWAB
Verdun - Retail BranchVerdun, Rachid Karami St, BLOM BANK bldgPhone: (961-1) 750160/1/2/3Email: blom.retail@blom.com.lbBranch Manager: Mr. Marwan PHARAON
MOHAFAZAT MOUNT LEBANON BRANCHES
Ain El-RemanehChiyah District, Lamaa St, Next to KasarjianBarracksPhone: (961-1) 386750/1/2/3Fax: (961-1) 386750Email: blom.ainremmaneh@blom.com.lbBranch Manager: Mr. Jhonny SALIBI
AleyAl Balakine, Property of Faysal Sultane WahabPhone: (961-5) 556612/13Fax: (961-5) 556614Email: blom.aley@blom.com.lbBranch Manager: Mrs. May Bou Alwan
AnteliasNext to the Armenian Patriarchate – KheirallahbldgPhone: (961-4) 411472 – 520210 – 410123 –411418 - 410848Fax: (961-4) 523666Email: blom.antelias@blom.com.lbBranch Manager: Mr. Laurent CHIBLI
Sin El-FilHorsh Tabet, Charles De Gaulle St, Tayar CenterPhone: (961-1) 485270/1/2Fax: (961-1) 485273Email: blom.sinelfil@blom.com.lbBranch Manager: Mr. Fadi EL MIR
ZalkaZalka St, Blom BANK bldg, Interior RoadPhone: (961-4) 713074/5/6Fax: (961-4) 713077Email: blom.zalka@blom.com.lbBranch Manager: Mrs. Denise JALKH
Zouk MousbehZouk Mousbih,Main St, Le Paradis Centre, Jeita’scave junctionPhone: (961-9) 226991/2/3/4/5Fax: (961-9) 226990Email: blom.zoukmosbeh@blom.com.lbBranch Manager: Mr. Joseph KILADJIAN
MOHAFAZAT NORTH LEBANON BRANCHES
Tripoli - Abi SamraAl-Dinnawi Square, Khaled Darwiche bldgPhone: (961-6) 423565/6/7/8/9Fax: (961-6) 423565Email: blom.abisamra@blom.com.lbBranch Manager: Mr. Abdel Rahman HOMSI
Tripoli – AzmiAzmi St, Fattal bldgPhone: (961-6) 433064 – 443550/1/2Fax: (961-6) 443550Email: blom.azmi@blom.com.lbBranch Manager: Mr. Edmond HAMATI
Tripoli – Al TellAbdel Hamid Karameh Square, Ghandour bldgPhone: (961-6) 430153 – 628200/2 - 431624Fax: (961-6) 628200Email: blom.tell@blom.com.lbBranch Manager: Mr. China ASSI
Tripoli - ZahriehAl Tall St, Alam AL Din & Bissar bldgPhone: (961-6) 430150/2 – 423415 - 423414Fax: (961-6) 430151Email: blom.zahrieh@blom.com.lbBranch Manager: Mr. Fouad El HAJJ
MOHAFAZAT BEKAA BRANCHES
ChtauraMain St, Najim El Din bldgPhone: (961-8) 540078 – 542504 – 544329/30 -544914Fax: (961-8) 542504Email: blom.chtaura@blom.com.lbBranch Manager: Mr. Elie FREIJI
AramounChoueifat – Al Koba, Aramoun Road, ZaynabCenterPhone: (961-5) 808591/2/3/4Fax: (961-5) 808594Email: blom.aramoun@blom.com.lbBranch Manager: Mrs. Nawal Merhi ABOUDIAB
BadaroBadaro Main St - Damascus Road intersection– Buick – Khoury bldgPhone: (961-1) 615818/19/20/21 – 615826 - 615952Fax: (961-1) 615825Email: blom.badaro@blom.com.lbBranch Manager: Mr. Raoul CHERFAN
Burj Al-BarajnehAin El Sekka St – Rahal bldgPhone: (961-1) 450381/2/3/4 – 450446/7Fax: (961-1) 450384Email: blom.bourjbarajneh@blom.com.lbBranch Manager: Dr. Hassan JABAK
Burj HammoudHarboyan CenterPhone: (961-1) 262067 – 266337/8 – 243604/5 –242792 - 243139Fax: (961-1) 268939Email: blom.bourjhammoud@blom.com.lbBranch Manager: Mr. Jean HOMSI
ChiyahChiyah Blvd, Round About Mar Mekhayel,Orient Center Bldg.Phone: (961-1) 270172/3/4 - 275783Fax: (961-1) 270174Email: blom.chiyah@blom.com.lbSenior Manager / Branches: Mr. Abbas TLEISS
ChoueifatAL Omaraa, Main Road, Al Tiro’s JunctionPhone: (961-5) 433203/6Fax: (961-5) 433208E-mail: blom.choueifat@blom.com.lbBranch Manager: Mr. Kamal SLIM
DoraBawchrieh, Tripoli Road, Banking Center bldgPhone: (961-1) 256527/28/32/37/38/39/41Fax: (961-1) 256522Email: blom.dora@blom.com.lbSenior Manager/ Branches:Mrs. Marlène DOUMIT
ElissarBeit El Kiko, Antelias - Bickfaya RoadPhone: (961-4) 916111/2/3/4Fax: (961-4) 916115Email: blom.elissar@blom.com.lbBranch Manager: Mr. Joseph GHOUSOUB
Furn el Chebbak - Retail BranchFurn el Chebbak, Abraj Center, Main Str., BeirutPhone: (961-1) 293810 /13Fax: (961-1) 293816Email: retail.furnelchebbak@blom.com.lbBranch Manager: Mrs. Alice AHMARANI
GhobeyriCorniche El Ghobeyri - Chiah Blvd – Tohme &Jaber & Kalot bldgPhone: (961-1) 825509 – 825870 – 821895 – 856219Fax: (961-1) 820153Email: blom.ghobeiry@blom.com.lbBranch Manager: Mrs. Magida MIKATI
Haret HreikAl Abiad Area, Sayyed Hadi Nasrallah Highway,Abou Taam & Hoteit bldgPhone: (961-1) 543662 – 543658 – 543659Fax: (961-1) 543661Email: blom.harathreik@blom.com.lbBranch Manager: Mr. Ali CHRIEF
HazmiehDamascus Road, Joseph Chahine CenterPhone: (961-5) 955240/1/2/3/4Fax: (961-5) 955240Email: blom.hazmieh@blom.com.lbBranch Manager: Mr. Ziad KAREH
JbeilVoie 13 – Near Mar Charbel JunctionPhone: (961-9) 943702 /3 /4Fax: (961-9) 943701Email: blom.jbail@blom.com.lbBranch Manager: Mr. Zakhia SARKIS
JouniehFacing “Palais de Justice” – Next to FouadChehab PlaygroundPhone: (961-9) 638011/12/13/14Fax: (961-9) 638011Email: blom.jounieh@blom.com.lbBranch Manager: Mr. Rachad YAGHI
KaslikKaslik Main St, Debs CenterPhone: (961-9) 640273 – 640095 – 636998/9 –640297Fax: (961-9) 831112Email: blom.kaslik@blom.com.lbBranch Manager: Mr. Charles AOUDE
MansouriehMansourieh el Maten, Dar El Ain Plaza – NewHighwayPhone: (961-4) 532856/7/8Fax: (961-4) 532854Email: blom.mansourieh@blom.com.lbBranch Manager: Mr. Walid LABBAN
BLOM BANK GROUP DIRECTORY
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BLOM BANK GROUP DIRECTORY
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ZahlehManara Center, Fakhoury & Kfoury bldgPhone: (961-8) 807680/1/2/3/4 – 805383 - 820661Fax: (961-8) 807680Email: blom.zahle@blom.com.lbBranch Manager: Mr. Marwan EL SHAKRA
MOHAFAZAT NABATIYEH BRANCH
NabatiyehNabatieh That, Hassan Kamel Al SabbahSt, Office 2000 bldgPhone: (961-7) 767854/5/6Fax: (961-7) 767857Email: blom.nabatieh@blom.com.lbBranch Manager: Mr. Hany HAMOUD
MOHAFAZAT SOUTH LEBANON BRANCHES
SaidaRiad Solh St, Al Zaatari & Fakhoury & Bizri bldgPhone: (961-7) 724866 – 723266 – 722801 – 739276Fax: (961-7) 722801Email: blom.saida@blom.com.lbBranch Manager: Mr. Moufid NAJJAR
TyrMain St, Chehade bldgPhone: (961-7) 740900 – 741649 - 742903Fax: (961-7) 348487Email: blom.tyr@blom.com.lbBranch Manager: Mrs. Mayssa RAHAL
STAND BY BRANCH MANAGERS*
Mr. Ziad CHANOUHAMr. Wassim FAHSMs. Nelly HARFOUCHEMr. Antoine MATARMr. Ahmad Jamal SINNOMr. Ahmad Koussai SINNOMr. Adel THAMINE
* by alphabetical order
BRANCHES UNDER ESTABLISHMENT
Abbasya - TyrDekwanehHadathMina El Hosn branch – BeirutSin el Fil - Retail Branch
BLOM BANKBRANCHES ABROAD & REPRESENTATIVE OFFICE
CYPRUSVictory House205Z Archbishop Makarios Ave3030 LimassolP.O.Box: 53243, 3301 Limassol, CyprusPhone: (357-25) 376433/4/5Fax: (375-25) 376292Swift Code: BLOM CY 21E-mail: blom@blom.com.cyBranch Manager: Mr. Ziad EL MURR
SYRIADamascus Free Zone, Al-BaramkehPhone: (963-11) 2133170/1Fax: (963-11)2133173E-mail: blomdam@scs-net.orgBranch Manager: Mr. Joseph HAYEK
ABU DHABI – U.A.E.Representative OfficeAl Bateen Towers – Tower C 6 – Suite C 907-9th floorAl Bateen – Bainuna Street – Abu Dhabi – U.A.E.P.O. Box: 63040 - Al Bateen – Abu Dhabi – U.A.E.Phone: 00971-2-6676100Fax: 00971-2-6676200E-mail: blombank@blombankad.aeMr. Ramzi AKKARI - Chief Representative
JORDAN
Headquarters - JordanAmman - Al-Charif Abdel Hamid Sharaf StP.O. Box 930321 Shmeisani ,Amman 111 93Phone: (962-6) 5001200Fax: (962-6) 567 71 77Reuter: BLMJSwift Code: BLOMJOaAME-mail: blommail@blom.com.joDomain: http://www.blom.com.lb
Regional Management - JordanDr. Adnan AL AARAJGeneral Manager - JordanMr. Adnan SALLAKHConsultant for General Management in Lebanon
Heads of Departments and Units - JordanDr. Mohamed AMRO - Treasury and InvestmentMr. Mohanad BALBISSI (AL) - Financial ControlMr. Yaccoub ALEM (EL) - CreditMr. Moder KHOURDY (AL) - Client RelationshipMr. Ihab KHALIL - Sales & Retail MarketingMs. Nahla ALLOUSH - IT OperationsMr. Mohamed ALLAN - Central OperationsMr. Said OBEIDALLAH - Internal AuditMr. Nabil OBALI - Risk ManagementMr. Maan ZOABI - ComplianceMr. Hani DIRANI - Legal and CollectionMs. Mona KHOUZAI - Personnel
BRANCHES IN JORDAN
Shmeisani
Amman- Al-Charif Abdel Hamid Sharaf StP.O. Box 930321 Shmeisani- Amman 111 93Phone: (962-6) 5001200Fax: (962-6) 65277177E-mail: shmeisani@blom.com.joBranch Manager: : Mr. Abdeljawad Al- Owaisi
Sweifieh Branch
Abed Al Rahim Al Hajj Mohammad StP.O. Box 852112 Amman 111 85Phone: (962-6) 5864714 -5814935Fax: (962-6) 5865346Email: sweifieh@blom.com.joBranch Manager: Baker Haddadin
Mecca StreetTlaa El Aali - Makka Str.P.O.Box 1191, Amman, 11821 JordanPhone: (962-6) 5503130/1/2/3/4/5Fax: (962-6) 5521347E-mail: mecca@blom.com.joBranch Manager: Mohannad Younes
WihdatAl Amir Hassan St, Oum Heiran -AmmanChange to P.O. Box 110061 Amman 111 10Phone: (962-6) 4750050Fax: (962-6) 4750055Email: wihdat@blom.com.joBranch Manager: Mr. Mahmoud Sadaka
JubeihaMefleh Al-lozi st.,AmmanP.O Box 2435 Amman 11941Phone: (962-6) 5336591Fax: (962-6) 5336657Email: Jubeiha @blom.com.joBranch Manager: Mr. Omar Abu Assaf
IrbidAl-Qubba Circle-IrbidP.O Box 4345 Irbid 21110Phone: (962-2) 7240006Fax: (962-2) 7240057Email: Irbid@blom.com.joBranch Manager: Mr. Ahmad DABAAN
Branch Under Establishment in Jordan
Aakaba
BLOM BANK GROUP DIRECTORY
General Management1, Rue de la Rôtisserie, Geneva, SwitzerlandP.O. Box: 3040 – CH 1211 Geneva 3 – SwitzerlandPhone: (41-22) 81771 00 (General)Fax: (41-22) 8177190SWIFT: BLOMCHGGE-mail: dir.administr@blombank.chWebsite: www.blombank.ch
Board of DirectorsDr. Naaman AZHARI - Honorary Chairman of the BoardMr. Saad AZHARI - ChairmanMr. André CATTIN - Vice Chairman
DirectorsDr. Warner FREYME. Peter De La GANDARAMr. Ahmad G. SHAKER
Management CommitteeMr. Antoine MAZLOUM - General ManagerMr. Thierry OTT - ManagerMrs. Eléonore DAESCHER - Deputy ManagerMr. Salim DIAB - Deputy Manager
General ManagementVerdun , Rachid Karami StBLOM BANK bldgP.O. Box: 11-1912, Riad El Solh, Beirut 11072080 LebanonPhone: (961-1) 738938 – 743300 – 348246Fax: (961-1) 738938E-mail: blominvest@blominvestbank.comWebsite: www.blominvestbank.com
Board of DirectorsMr. Saad AZHARI - Chairman & General Manager
DirectorsMessrs. BLOM BANK SALMr. Joseph KHARRATMr. Samer AZHARIMr. Marwan JAROUDIMr. Habib RAHAL
General ManagementDr. Fadi OSSEIRAN - General Manager
Senior Managers*Mr. Elie CHALHOUB - AdministrationMr. Michel CHIKHANI - Asset Management& Structured ProductsMr. Georges TABET - Private Banking& Wealth Management
Managers*Mr. Walid KADRI - Organization & BusinessDevelopmentMr. Marwan MIKHAEL - Economic ResearchMr. Nicolas PHOTIADES - Investment Banking& Corporate FinanceMr. Ramzi TOHME - Operations
* by alphabetical order
AFFILIATED BANKS & INSURANCE COMPANIES
FRANCE
Headquarters38-40 avenue des Champs-Elysées75008 Paris - FrancePhone: (33-1) 44 95 06 06Fax: (33-1) 44 95 06 00Telex : 644401 F BANOPARReuter : BANOSwift : BLOM FRPPE.mail : blomfrance@blomfrance.frWebsite : www.banorabe.com
Board of DirectorsMr. Samer AZHARIChairman & General ManagerDr. Naaman AZHARI - Honorary President andPermanent Representative of BLOM BANK S.A.L
DirectorsHE Sheikh Ghassan Ibrahim SHAKER(Grand officier de la légion d’Honneur)Mr. Christian DE LONGEVIALLEMr. Jean-Paul DESSERTINEMr. Marwan JAROUDI
General ManagementMr. Michel ADWAN - Deputy General ManagerMr. Gilbert MOINE - Senior ManagerMr. Iskandar ARAMAN - Manager Head OfficeMr. Amr TURK - Senior Manager - LondonMr. Bassem ARISS - Regional Manager - UAEMr. Jean-Pierre BAAKLINI - General Manager - Romania
BLOM BANK FRANCE BRANCHES ABROAD
UNITED ARAB EMIRATES
DubaiDeira, Al Maktoum StSheikh Ahmad Ben Rached al Maktoum bldgP.O. Box 4370 – Dubai – United Arab EmiratesPhone: (971-4) 2284655 – 2278196 General(971-4) 2224812 - ForexFax: (971-4) 2236260Telex : 45801 BANO EM – General48836 BANO FX EM – ForexSwift : BLOM AE ADE.mail : info@blombank.aeBranch Manager: Mr. Samir Hobeika
SharjahKhaled Lagoon, Corniche al BuhairahSheikh Nasser Bin Hamad al Thani bldgP.O. Box 5803 – Sharjah – United Arab EmiratesPhone: (971-6) 5736700 – 5736100Fax: (971-6) 5736080Telex : 68512 BANO EME.mail : info@blombank.aeBranch Manager : Mr. Mokhtar KASSEM
UNITED KINGDOM
London193-195 Brompton RoadLondon SW3 1LZ – EnglandPhone: (44-20) 75907777Fax: (44-20) 78237356Swift : BLOM GB 2LE.mail : blom@blombanklondon.co.ukSenior Manager : Mr. Amr TURK
ROMANIA
Headquarters - Bucharest66 Unirii Boulevard, Bloc K3, Sector 3,BucharestP.O. BOX 1-850 BucharestPhone: (004) 021/302.72.06 – 302.72.01Fax: (004) 021/318.52.14 - 318.52.03Swift : BLOM RO BUE-mail: office@blombank.ro
General ManagementMr. Jean Pierre BAAKLINI - General ManagerMrs. Veronika PETERESCU - Deputy GeneralManager
Branches
Head Office - Bucharest66 Unirii Boulevard, Bloc K3, Sector 3,BucharestP.O. BOX 1-850 BucharestPhone: (004) 021/302.72.06 – 302.72.01Fax: (004) 021/318.52.14 - 318.52.03Swift : BLOM RO BUE-mail: unirii@blombank.roBranch Manager: Mrs. Florentina DELLA
Victoria (Bucharest)72 Buzesti St., BucharestPhone: (004) 021/315.42.05-315.42.06Fax: (004) 021/315.42.08E-mail: victoria@blombank.roBranch Manager: Mr. Marius VOICULET
Bucharest Hotel4 Prel. George Enescu St., Bucharest HotelP.O. Box 1-850Phone: (004) 021/312.27.51- 312.27.52Fax: (004) 021/312.27.53E-mail: hotel@blombank.roBranch Manager: Mrs. Monica FILIP
Constanta25 Bis Mamaia Boulevard, ConstantaP.O. Box 2-89Phone: (004) 0241/510.950Fax: (004) 0241/510.951E-mail: constanta@blombank.roBranch Manager: Mr. Mihai BUTCARU
Brasov23 Mihail Kogalniceanu St., Bloc C7, BrasovPhone: (004) 0268/547.640Fax: (004) 0268/547.641E-mail: brasov@blombank.roBranch Manager: Mr. Hosny HESHAM
Cluj11 T. Cipariu St., ClujPhone: (004) 0364/410.277Fax: (004) 0264/450.594E-mail: cluj@blombank.roRegional Manager: Mr. Mircea CHIOREAN
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HeadquartersDamascus – Al Harika – Bab BaridLawyers’ Syndicate BuildingP.O. Box: 3103 Damascus – SyriaPhone: (963-11) 2460560Fax: (963-11) 2460555Swift: BSOMSYDAE-mail: bsomail@bso.com.sy
Board of DirectorsDr. Rateb AL SHALLAH - ChairmanMr. Amr AZHARI - Vice ChairmanMr. Georges SAYEGH - General Manager
DirectorsDr. Ihsan BAALBAKIMr. Ibrahim SHEIKH DIBMr. Mohamed Ramzi CHABANIMr. Mehran KHWANDAMr. Habib BETINJANEHMr. Samer AZHARIMr. Saad AZHARI
Managers - Central DepartmentsMr. Bashir YAKZAN - CreditMr. Georges HADDAD - Internal AuditMr. Samir ASMAR - AdministrationMs. Inaya SOUBRA - InternationalMs. Rima JAWAD ZEIN - Human ResourcesMr. Mohamad Yehia KHALED - Retail BankingMr. Salem MAHMOUD - InformationTechnologyMr. Michel MANNEH - OperationsMr. Shady DIAR BAKERLY - Accounting
Branches
DAMASCUS
HarikaDamascus – Al Harika, Bab BaridLawyers’ Syndicate BuildingP.O. Box: 3103 Damascus – SyriaPhone: (963-11) 2460560Fax: (963-11) 2460555Mobile: (963) 932 460560Email: bsomail@bso.com.syBranch Manager: Mr. Samir BASSOUS
Damascus (Al Nejmeh Square)Damascus- Nejmeh SquareFacing Dar As Salam SchoolP.O. Box: 3103 Damascus – SyriaPhone: (963-11) 3344001Fax: (963-11) 3344021E-mail: bsodamnejmeh@bso.com.syBranch Manager: Mr. Fadi ISTWANI
Al KassaaDamascus, Kassaa – Brj Al Russ,FacingNational ParkP.O. Box: 3103 Damascus – SyriaPhone: (963-11) 5431350Fax: (963-11) 5431360E-mail: bsokassaa@bso.com.syBranch Manager: Mr. Omar HAMMOUD
MEZZEHDamascus, next to Al Razi HospitalP.O. Box: 3103 Damascus – SyriaPhone: (963-11) 6132411Fax: (963-11) 6132409E-mail: bsomezzeh@bso.com.syBranch Manager: Mr. Tarek CHEHAB
ALEPPO
Al Azizieh AleppoAleppo – Azizia, Saad el Dine Al Jabiri StP.O. Box: 9966 Aleppo – SyriaPhone: (963-21) 9960- 225850- 60-70Fax: (963-21) 2249800E-mail: bsoaleppo@bso.com.syBranch Manager: Mr. Eddy BECHARA
Al Madina -AleppoSabeh Bahrat StP.O. Box: 9966 –Aleppo – SyriaPhone: (963-21) 9961Fax: (963-21) 3335377E-mail: bsoalpmedineh@bso.com.lbBranch Manager: Mr. Amro KAYAL
LATTAKIA
LattakiaLattakia – Al Kamilia, 8th March StP.O. Box: 371 Lattakia , SyriaPhone: (963-41) 3010- 452516/9Fax: (963-41) 452573E-mail: bsollattakia@bso.com.syBranch Manager: Mr. Bassem MERHEJ
HAMA
HamaHama – Kouwatly StP.O. Box: 820 Hama ,SyriaPhone: (963-33) 213834- 5 - 9960Fax: (963- 33) 213833E-mail: bsohama@bso.com.syBranch Manager: Mr. Hussein OBEID
HOMS
HomsHoms, City Center Bldg.P.O. Box: 1377 Homs, SyriaPhone: (963-31) 9960 - 453925Fax: (963-31) 453936E-mail: bsohoms@bso.com.syBranch Manager: Mrs. Anna DIBE
TARTOUS
TartousTartous- Al Sawra StP.O. Box: 824 Tartous – SyriaPhone: (963-43) 9960 - 227474Fax: (963-43) 226869E-mail: bsotartous@bso.com.syBranch Manager: Mr. Chamel MAKARI
SWEIDA
Sweida, Tishreen Str.P.O. Box: 74 SWEIDAA - SyriaPhone: (963 –16) 9960Fax: (963-16) 233478E-mail: bsosweidaa@bso.com.syAssistant Branch Manager: Mr. Abdullah N.KAMALEDDINE
DARAA
DaraaAl Mahata, Al Kouwatli Str.P.O.Box: 555 Daraa – SyriaPhone: (963-15) 9960Fax: (963-15) 233055E-mail: bsodaraa@bso.co.syBranch Manager: Mr. Anwar EL HARESS
BRANCHES UNDER ESTABLISHMENT
Kfarsousa - DamascusAl Midan - DamascusAl Mazraa – DamascusAl Mantaka el horra – DamascusAl Mouhafaza – AleppoAl Sheikh Najjar – AleppoAl Souleimaniya – AleppoAadra
Headquarters54 Lebanon St. – MohandessenTel: (202) 33039825 – 33039824 - 33039805Fax: (202) 33039806P.O Box : 144 Al MohandessenSwift: MRBAEGCXXXWebsite: www.blombankegypt.com
Board of DirectorsMr. Saad AZHARI :ChairmanMr. Alaa El Din Ahmad SAMAHA: ManagingDirector & Chief Executive Officer
DirectorsMr. Elias ARACTINGIDr. Fadi OSSEIRANMr. Shaker ABDULLAHMr. Samir KASSISMr. Hani DANA - Chairman Advisor & SeniorCredit Officer
Assistant Managing DirectorsMrs. Maya EL KADY - RetailMr. Talal IBRAHIM - Total Quality ManagementMr. Tarek METWALLY - Institutional
Ismalia15 Street 144 Teraat Al Ismalia – in front of elRai BridgeTel: (2064) 3921758 – 3921759Fax: (2064) 3921767E-mail: ahmed.abdelaal@blombankegypt.comBranch Manager: Mr. Ahmed ABD EL AAL
Heliopolis31 El Hegaz St. HeliopolisTel: (202) 22592030 – 22583120Fax: (202) 24519730 – 24519710E-mail:mohammed.abdelrahman@blombankegypt.comBranch Manager: Mr. Mohammed ABD ELRAHMAN
Maadi4 Street 269 from Nasr St. – New Maadi –CairoTel: (202) 25198085 – 25197960 – 25197710Fax: (202) 25199293 – 25197232E-mail: mawad.ahmed @blombankegypt.comBranch Manager: Mr. Moawad AHMED
New Maadi17/5 El Laselky - Nasr St. – New MaadiTel: (202) 27550768 – 27550778Fax: (202) 27550740E-mail: hanem.fahmy@blombankegypt.comBranch Manager: Mrs. Hanem FAHMY
Nasr cityEl Akkad Mall – El Nasr Road – Nasr CityTel: (202) 26906801 – 26906802 – 26906804 –26906806Fax: (202) 26906803 – 26906805E-mail:Hossam.abueelsowood@blombankegypt.comBranch Manager: Mr. Hossam ABU ELSOWOOD
Opera4 , 4a , 6 Abdel Haak El Sonbaty – OperaSquareTel: (202) 23927885 – 23923127Fax: (202) 23925265E-mail: ali.khafagy@blombankegypt.comBranch Manager: Mr. Ali Ezzat KHAFAGY
6 th OctoberCentral Axis – El Madiena Commercial Center– Area No.4 – 1st District – 6th October cityTel: (202) 38320537 – 38321024 – 38321098Fax: (202) 38339279E-mail: mamdouh.zayed@blombankegypt.comBranch Manager: Mr. Mamdouh ZAYED
Abbasia109 Abbasia St.Tel: (202) 29222343 – 29222342Fax: (202) 29222350E-mail: hesham.fouad@blombankegypt.comBranch Manager: Mr. Hesham FOUAD
BLOM BANK GROUP DIRECTORY
Al Hurghada7 El Mena St. Saqala Square– HurghadaTel: (2065) 3448516 – 9Fax: (2065) 3447834E-mail: hussain.elswaify@blombankegypt.comBranch Manager: Mr. Hussein EL SWAIFY
Al Mansoura35 Saad Zaghloul St. – Touril – MansouraTel: (2050) 2309120 – 2309123 – 2309124Fax: (2050) 2309122 – 2309125E-mail:mohammed.daader@blombankegypt.comBranch Manager: Mr. Mohammed DAADAR
ALEXANDRIA
Stadium1 Soliman Yousri St. ( Loumomba ) – AlexandriaTel: (203) 4951641 – 45Fax: (203) 4951635 – 4951636E-mail: ayman.talaat@blombankegypt.comBranch Manager: Mr. Ayman TALAAT
El Shatby17 Port Said St. – El Shatby – AlexandriaTel: (203) 5934055 (10 Lines )Fax: (203) 5934058E-mail: ashraf.tahio@blombankegypt.comBranch Manager: Mr. Ashraf TAHIO
Sporting273 El Horria Road – Sporting – AlexandriaTel: (203) 4200098 – 4270211 – 4282050 – 4279680Fax: (203) 4200094E-mail: magda.fayed@blombankegypt.comBranch Manager: Mrs. Magda FAYED
Montaza414 Gamal Abd El Naser – El Mandara -AlexandriaTel: (203) 5488550 – 5488593Fax: (203) 5488713E-mail: ibrahim.abaza@blombankegypt.comBranch Manager: Mr. Ibrahim ABAZA
Sharm El SheikhNaama Bay – El Amir Abdouallah St. – MurrayMall – Sharm El SheikTel: (2069) 3603592 – 3603593 – 3603594 –3603547Fax: (2069) 3603541E-mail: alaa.metwally@blombankegypt.comBranch Manager: Alaa METWALLY
Branches Under Establishment
El Mansheya ( opening soon )6A Ahmed Orabi Square in front of unknownsolider – Manshia squareTel:Fax:E-mail: mohamed.refaat@blombankegypt.comBranch Manager: Mr. Mohamed Refaat
Dokki64 Mohy El Din Abu El Ezz street
Group HeadsMr. Belal FAROUK - ComplianceMr. Talaat ABD EL AAL Al OUMDA - Human ResourcesMr. Mohamed RASHWAN - Internal AuditMr. Maher ANWAR - Legal AffairsMr. Abdel Aziz ALY - General AdministrationMr. Khaled ABDEL HAMID - Branches RegionalManagerMr. Hazem EL GOHARY - Information TechnologyMr. Gamal DIAA - Medium Size FinanceMr. Ayman EL SHALKANI - Retail Sales ManagerMr. Khaled YOUSSRY - Financial InstitutionMr. Yehia RASHED - Risk ManagementMr. Imad EL JUNDY - Central OperationMr. Mohamed EL BENDARY - Financial Control
BRANCHES in Egypt
Mohandessen54 Lebanon St. – MohandessenTel: (202) 33039817 - 33039819Fax: (202) 33039806E-mail: ahmed.sabry@blombankegypt.comBranch Manager: Mr. Ahmed SABRY
Shoubra232 Shoubra St. – EL KhalafawyTel: (202) 2431 1409 – 732 – 485Fax: (202) 24311364 – 24312678E-mail: sherif.taher@blombankegypt.comBranch Manager: Mr. Sherif TAHER
Mohie Eldin Aboul Ezz64 Mohie Eldin Aboul Ezz St. DokkiTel: (202) 37494563 – 696Fax: (202) 37494652 – 79E-mail: wafaa.ezzat@blombankegypt.comBranch Manager: Mrs. Wafaa EZZAT
Cairo15 Abu El Feda St. – Zamalik – CairoTel: (202) 27353292 – 27368045Fax: (202) 27370481 – 27358613E-mail: sherif.seifelnasr@blombankegypt.comBranch Manager: Mr. Sherif SEIF EL NASR
New Cairo101 City Commercial Center – El Tagamoa ElKhames – New CairoTel: (202) 29281193 – 29281200Fax: (202)E-mail: hazem.elkhabeery@blombankegypt.comBranch Deputy Manager: Mr. Hazem El Khabeery
Oroba1 Cleopatra St. El Orouba – Heliopolis – CairoTel: (202) 24144796 – 24144759Fax: (202) 24144793E-mail: mohamed.hussein@blombankegypt.comBranch Manager: Mr. Mohamed HUSSEIN
Khalifa El Maamoun20 Al Khalifa El Maamoun St. – Manshiet El BakryTel: (202) 22575625 – 22575647 – 22575641Fax: (202) 22575651 – 22575665E-mail: heba.saad@blombankegypt.comBranch Manager: Mrs. Heba SAAD172
BLOM BANK GROUP DIRECTORY
173
Headquarters8 Geziat el Arab st. - MohandeseenTel: (202 ) 37621611 – 1764 - 1754Fax: (202) 37617680E-mail: agemei@blomsecurities.com
Board of DirectorsMr. Alaa El DeenSAMAHA - ChairmanMr. AhmedGEMEI - Deputy Chairman&ManagingDirector
DirectorsMr. Belal Farouk TAWFEKMr. Tarek IbrahimMETWALYMrs.Maya TawfekALKADYMr. KhaledMOHAMEDMr.MohamedELBANDARY
General ManagementMr. AhmedGEMEI - Deputy Chairman&ManagingDirectorMr. Tawhed ZAHER - Chief OperatingManagerMr.Mahmoud ELGAMMAL - ComplianceOfficerMr. AhmedA. RAHMAN - Financial ControlMr. EmamWAKED -Head of Institutional Desk
HeadquartersAbdel Aziz St, Daher bldgBeirut, LebanonPhone: (961-1) 751090/1/2/3Fax: (961-1) 751094Email: info@blomdevelopmentbank.com
Board of DirectorsMr. Saad AZHARI: Chairman & General Manager
DirectorsMr. Nicolas SAADEDr. Fadi OSSEIRAN
General ManagementGeneral Manager - Mr. Mouataz NATAFGI
ManagersMr. Tarek HOUSSAMI - Main Branch Manager & Head of
Retail DepartmentMr. Mustapha SIBAI - Financial Control & Investment
*
Board of DirectorsMr. Abdallah Abd Al Latif Ahmad AL FAWZAN - ChairmanMr. Mohamed Abd El Aziz Ibrahim AL AKIL- MemberMr. Wali Abd El Aziz Saleh AL SAGHIR - MemberMr. Saad Naaman AZHARI - MemberMr. Fahim Mohamed MOADAD - MemberDr. Fadi Toufic OSSEIRAN - MemberMr. Marwan Mohamed Toufic AL JAROUDI - Member
Headquarters: Riyad
* Under Establishment
*
Headquarters: Doha
* Under Establishment
HeadquartersVerdun – Rachid Karami St,BLOM BANK bldg, Arope PlazaP.O. Box: 113-5686 Beirut – LebanonPhone: (961-1) 759999Fax: (961-1) 344012Call Center: (961-1) 747555 (01) or ( 03) 1219E-mail: arope@arope.comDomain: http://www.arope.com
Board of DirectorsMr. Habib RAHAL - Chairman & General ManagerMr. Fateh BEKDACHE - Vice Chairman & GeneralManager
DirectorsMr. Samer AZHARISCOR SE (Represented by Mr. Patrick LOISY)Mr. Serge OSOUFMr. Marwan JAROUDIMr. Rami HOURIEMr. Victor PEIGNET
General ManagementMr. Fateh BEKDACHE - General ManagerMs. Faten DOUGLAS - Assistant General Manager
BRANCHES
AleyAl BalakinePhone: (961 – 5) 556 613Fax: (961 – 5) 556 614
AramounChoueifat – Al Koba, Aramoun RoadPhone: (961 – 5) 808 591 / 2/ 3Fax: (961 – 5) 808 594
Bur Al BarajnehAin El Sekka RoadPhone / Fax: (961 – 1) 452 917
DoraMain Road – Cebaco CenterPhone / Fax: (961-1) 262222
JbeilVoie 13, near Saint Charbel Junction,Phone / Fax: (961 – 9) 943 701
SaidaRiad Solh Street – Fakhoury bldgPhone / Fax: (961-7) 725 303
TripoliZehrieh – Al Tall Street – Byssar bldgPhone / Fax: (961-6) 446 877
TyrMain RoadPhone: (961 – 7) 740 900 – 741 649Fax: (961 – 7) 348 487
ZahléZahlé Entrance – Manarah CenterPhone / Fax: (961-8) 818640
HeadquartersDamascus Al Rawda, Zuhair Ben Abi Salma st.Malki Bldg N18P.O. Box: 33015Phone: (963-11) 9279Fax: (963-11) 3348144E-mail: info@aropesyria.com
Board of DirectorsMr. Amr AZHARI - ChairmanMr. Fateh BECKDACHE - Vice Chairman
DirectorsMr. Samer AZHARIMr. Habib BATENJANIMr. Ibrahim EL SHEIKH DIBMr. Marwan JAROUDIMr. Hassan BAALBAKI
General ManagementMiss Faten DOUGLAS - General Manager
BRANCHES
AleppoAleppo- Azizieh- Majed Al Deen Al Jabri StreetTel: (963-21) 9279Fax: (963-21) 2118800P. O. Box: 1293
HomsCity center BuildingTel: (963-31) 9279
LattakiaAl Kamilia - 8 March StreetTel: (963-41) 475213Fax: (963-41) 475223
HamaAl Ashek Building – Al Amin StreetTel: (963-33) 9279
Al KamshliTel: (963-52) 430670Fax: (963-52) 430670
Dair Al ZoorTel : (963-51) 372828
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