annual report 2010 - fransabank
TRANSCRIPT
Annual Report 2010
Annual Report 2010
Fransabank > Annual Report 2010 1
Contents
Consolidated Financial Highlights
Statement of the Deputy Chairman and Chief Executive Officer
Corporate Governance> Corporate Governance Framework
> Main Holders of Common Shares
> Biographies of Board Members
> Group Chart
> Organization Chart - Fransabank SAL
> Committees - Fransabank SAL
> Management - Fransabank SAL
> Local Banking Subsidiaries - Board of Directors and General Managers
> Overseas Banking Subsidiaries and Associate - Board of Directors and General Managers
Historical Milestones
Management Report> Lebanon’s Economic Performance in 2010
> Consolidated Results of Operations
> Core Banking Activities
- Investment and Private Banking - Corporate Banking - Retail Banking, Branch Management and SME
> Local Subsidiaries and Associate
- BLC Bank SAL- Fransa Invest Bank SAL (FIB)- Lebanese Leasing Company SAL (LLC)- Bancassurance SAL- Société Générale Foncière SAL (Sogefon)
> Overseas Subsidiaries and Associate
- Fransabank (France) SA- Fransabank El Djazaïr SPA- Fransabank Syria SA- Fransabank OJSC (Belarus)- United Capital Bank (Sudan)
> Risk Management
> AML Compliance
> Human Resources
> Information and Communication Technology
Consolidated Financial Statements> Independent Auditors’ Report
> Consolidated Statement of Financial Position
> Consolidated Income Statement
> Consolidated Statement of Comprehensive Income
> Consolidated Statement of Changes in Equity
> Consolidated Statement of Cash Flows
> Notes to the Consolidated Financial Statements
Group Network> Lebanon - Mother Company, Subsidiaries and Associates
> Overseas Subsidiaries
> Overseas Associate
> Representative Offices
2
6
10
12
13
16
18
20
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24
25
30
34365050
51
51
5555
55
55
56
56
5757
58
58
59
59
60626366
70727475767880
166171173173
prog.10/09
Consolidated Financial Highlights
Fransabank > Annual Report 20102
31.12.06
4,312.34
856.34
54.51
449.25
5,228.39
25.57%
-
61
1,214
1,507.5
prog.07/06 31.12.07
6,173.21
1,430.32
60.83
517.75
7,228.98
17.89%
-
103
1,777
1,507.5
+16%
+20%
+45%
+46%
+17%
prog.08/07 31.12.08
7,149.64
1,715.55
88.33
756.55
8,454.52
27.93%
10.22%
103
1,957
1,507.5
+26%
+35%
+18%
+42%
+28%
prog.09/08 31.12.09
9,013.02
2,308.95
104.22
1,074.27
10,812.62
-
11.85%
104
2,475
1,507.5
+12%
+36%
+40%
+20%
+13%
+43%
+67%
+12%
+15%
+38%
31.12.10
10,081.95
3,141.85
145.75
1,287.55
12,243.95
-
12.00%
107
2,702
1,507.5
In million of USD
Customers’ Creditor Accounts
Loans and Advances to Customers (Net)
Net Profit for the Financial Year
Shareholders' Equity
Total Assets
Solvency Ratio as per Basel I Requirements
(net profit included after distribution of dividends)
Solvency Ratio as per Basel II Requirements
(net profit excluded)
Number of Local Branches
Staff Number
Exchange Rate USD/LBP
2006
2007
2008
2009
2010
0
3,000
6,000
9,000
12,000
15,000
5,2
28
.39 7
,22
8.9
8
8,4
54
.52 1
0,8
12
.62
12,2
43.9
5
2006
2007
2008
2009
2010
Total Assets(in million of USD)
+23.71%CAGR
Loans & Advances to Customers (Net)(in million of USD)
+38.40%CAGR
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1,4
30
.32
1,7
15
.55
2,3
08
.95
85
6.3
4
3,14
1.85
54
.51
60
.83
88
.33
10
4.2
2
Net Profit for the Financial Year(in million of USD)
+27.87%CAGR
1,29
0
0
30
60
90
120
150
145.
75
2006
2007
2008
2009
2010
0
50
100
150
200
250
300
11
7.8
1
12
8.0
3
19
2.5
0
20
9.6
1
Net Interest Income(in million of USD)
+22.00%CAGR
260.
95
2006
2007
2008
2009
2010
16
.53 2
0.9
0
28
.02
34
.28
(in million of USD)
+29.35%CAGR
0
10
20
30
40
50
46.2
7
2006
2007
2008
2009
2010
0
5
10
15
20
25
30
35
4,3
12
.34 6
,17
3.2
1
7,1
49
.64 9
,01
3.0
2
Customers’ Creditor Accounts(in million of USD)
+23.65%CAGR
0
2,000
4,000
6,000
8,000
10,000
12,000
10,0
81.9
5
44
9.2
5
51
7.7
5
75
6.5
5
1,0
74
.27
Shareholders’ Equity(in million of USD)
+30.11%CAGR
0
300
600
900
1,200
1,500
1,28
7.55
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
19
.86
% 23
.17
%
24
% 25
.62
%
Loans & Advances to Customers to Customers' Creditor Accounts
31.1
6%
2006
2007
2008
2009
2010
Net Fee & Commission Income
Fransabank > Annual Report 2010 3
Look at the solar sideOnly 10% of solar energy is actually used when in just 15 minutes
of full sun, we could capture enough solar energy to provide the
electrical needs of everyone on the whole planet for a full year.
Source: www.brennerbooks.com, “Solar Facts and Figures”, 2010.
Statement of the Deputy Chairman and Chief Executive Officer
Fransabank > Annual Report 20106
The year 2010 carries a very special significance for
Fransabank Group. It is at the eve of its 90th anniversary
and marks at the same time another record
performance year for the Group. In this context,
the year 2010 evidenced a strong profit growth of
39.84%, translated into net profit for USD 145.75
million for the Group, and USD 92.59 million for
the mother company, Fransabank SAL. This growth
is mainly due to the Group’s effective strategy at
home and in selective regional and international
markets, complimented by the Group’s efficient
management of its expenses exposure. Total
assets reached USD 12.24 billion, growing by
13.24% relative to end of 2009; customers’
deposits reached USD 10.08 billion, growing by
11.86% as compared to the same period of 2009 and
loans portfolio reached USD 3.14 billion, growing
by 36.07% as compared to the same period of
2009. The cost-to-income ratio stood at 48.30% in
the year 2010 as compared to 54.70% in the year
2009. Return on Average Common Equity and
Return on Average Assets stood at 13.06% and
1.26% respectively. The capital adequacy ratio
stood at 12% as at December 31, 2010, which is
above the minimum capital adequacy ratio
required by the Central Bank of Lebanon of 8%. The
proceedings evidenced and further accentuated the
Group core strength as built mainly on market
share and profitability.
Fransabank Group is committed: to be one of the
most leading and prominent financial Groups within
the local and regional markets; to provide quality
service to its customers through innovation,
cutting-edge, value-added banking services and
financial solutions; to invest in and empower the
professional career path of its employees; while
aligning responsible business practices and social
investments to create long-term value and sustain-
ability for the Group and for its communities.
Fransabank Group has built up its core strength to
further advance and consolidate its leading
position in the banking sector whether locally,
regionally and internationally on a multi-
dimensional business development strategy. This
was achieved through very selective regional and
international expansion strategy, acquisitions and
mergers, product diversification and local and
regional branch network expansion.
At the international and regional levels, Fransabank
Group is present in eight countries, namely France,
Algeria, Syria, Sudan, Belarus, Libya, Cuba and most
recently in Cyprus, in addition to Lebanon of course.
Another emerging market to Fransabank is Iraq,
whereby the related implementation process has
been initiated to open branches in Iraq. This network
of subsidiaries, associate and representative offices
reflect the expansion strategy adopted by
Fransabank Group over the past few years. The
Group has been targeting promising regional and
international markets, where it can bring added
value where it operates and build up on the
synergies linking its different entities, the Lebanese
business communities established in these
countries, as well as the local operators and the
international investors.
At the local level, the Group’s organic growth has
been driven by the opening of new branches and
expanding the scope of business activities and the
range of services. In this vein, the Group ranks first
with 108 branches spread out all over the country.
The strategic objective is to provide the Lebanese
community with a wide range of traditional and
innovative products and services that are very likely
to satisfy the personal and professional banking
wants and needs. These consequently enable the
Group to fulfill its role in the development of the
Lebanese economy including a balanced and
sustainable growth throughout the Lebanese
communities.
Fransabank Group continues to adopt and
implement prudent and conservative policies to
further develop its management practices, to
consolidate its financial strength and to maintain
high asset quality. These include continuous and
strict compliance to local and international
regulatory requirements, advanced risk management
and corporate governance norms and standards, as
well as the implementation of international
standards on fighting money laundering.
Fransabank, a universal banking Group by all
international norms and standards thrives to further
consolidate its position by tailoring innovative
product-offering and by the continuous enrichment
of the quality of service-delivery. In this regards as
well, Fransabank Group provides an optimal and
Fransabank > Annual Report 2010 7
eco-friendly products and services to its valued
customers. It also adopts eco-friendly banking
technology and holds itself to the local and
international standards of best-practice, which
includes continual enhancement of the Group’s
human capital through the investment in their
future and the continuous introduction of
advanced career development initiatives.
Fransabank Group corporate social responsibility
and sustainability will continue to develop in the
medium to long-term. The integration of corporate
social responsibility and sustainable business
practices is and will increasingly become part of
the Group’s corporate culture. It is an exciting
prospect, with many challenges. Our course is set,
and we will take a steady and incremental approach
towards achieving ongoing improvement -
‘meeting the needs of the future’ is our inspiration
to deliver the best solutions for all of Fransabank
Group shareholders and stakeholders.
As we look back and consider what we have so far
achieved throughout the years that led to our 90th
anniversary at year end 2011; we believe our
potential are endless; we are ready, able and
capable to capture the opportunities that will be
present to us and mitigate the threats that we
might face in our mother market and other markets
we exist and will exist.
We are very proud of the legacy we have established
and confident of the progress of this legacy for the
many years to come. We are very proud of our
leadership, innovation, operational excellence,
transparency, the trust of our clients, the commitment
of our staff, the support of our shareholders and the
pledge to our community. Those long years of
expertise and professionalism are based on a
foundation of sound banking principles, guided by
the Bank’s deep-rooted values.
Adel Kassar
Adnan Kassar • Chairman Adel Kassar • Deputy Chairman
Consider wind powerAn average wind speed of 14 miles per hour is needed to convert
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Source: www.factsaboutwindpower.com, “Wind Power Facts and Trivia 004”, March 2011.
Corporate Governance
> Corporate Governance Framework
Fransabank > Annual Report 201010
Fransabank implements a Corporate Governance Framework,
which is in line with best practices guidelines and takes into
consideration that the Bank’s business and affairs are closely
governed by its Board of Directors and Senior Management.
This framework defines the rights, roles and responsibilities of
the Bank shareholders, directors and managers; guarantees the
availability of timely, accurate and integral information in all
material issues; and assures the accountability of the Board of
Directors to its shareholders.
Fransabank has always been committed to the highest level of
transparency, integrity and ethics, which became the corner-
stone of its culture. It has also developed a Corporate
Governance structure through the creation of Board committees,
which include Corporate Governance Committee, Risk
Management Committee, and Audit Committee.
> GOVERNANCE STRUCTURE
Fransabank’s governance structure is comprised of the
Shareholders’ General Assembly, the Board of Directors, the
Chairman, Deputy Chairman, Senior Management, the
Corporate Governance Committee, the Risk Management
Committee, the Audit Committee, the External Auditors and
support function divisions.
> GOVERNANCE FRAMEWORK
Fransabank is governed by the Board of Directors, which
consists of eleven members elected by the General Assembly
of the shareholders for a term of three years. The responsibilities
of the Board are to ensure the right direction towards the
defined objectives; the supervision of Senior Management; and
the adequate control of the Bank, with the objective of adding
value to all shareholders, investors, clients, and community in
the short, medium, and long terms.
> ELECTION OF THE BOARD OF DIRECTORS
The board members are elected by the Shareholders’ General
Assembly whereby every shareholder has the right to vote.
Shareholders who hold their shares for more than two years
shall have a double voting right according to Article 117 of the
Lebanese Code of Commerce.
> BOARD MEETINGS
During 2010, the Board of Directors has met on four occasions.
Some of the major issues discussed during these meetings
were:
• Measure business performance vis-à-vis budget and business
development
• Approve the budget and identifying the objectives of year
2010
• Reconsider the formation and the prerogatives of specialised
committees
• Participate in increasing the capital of Fransabank OJSC and
Fransabank Syria SA
• Approve the issuance of preferred shares
• Discuss the reports prepared by the Chief Risk Officer and the
Internal Auditor
• Opening of new branches
• Purchase of locations for new branches.
Fransabank > Annual Report 2010 11
> BOARD COMMITTEES
In carrying out its duties, the Board is supported by the
Corporate Governance Committee, the Risk Management
Committee, and the Audit Committee.
Corporate Governance Committee
The Corporate Governance Committee is chaired by a
non-executive director and composed of three other members.
The committee members meet at least quarterly. The
responsibility of the Corporate Governance Committee is to
ensure that Corporate Governance practices are in line with
best practices and Fransabank Corporate Governance
Guidelines as well as to assist the Board in maintaining an
effective governance framework, an optimal Board composition
and an effective Board structure.
During 2010, the Corporate Governance Committee held
several meetings whereby it discussed many issues among
which, the Charter of the Corporate Governance Committee,
the organisation structure of the Risk Management Division and
the formation of a Corporate Governance Unit.
Risk Management Committee
The Risk Management Committee is chaired by a non-executive
director, and comprises two other members. The Committee
meets at least quarterly. The Committee’s responsibilities are to
assist the Board of Directors in fulfilling its oversight responsibilities;
identifying the Bank’s risks profile vis-à-vis its risk appetite and
risk tolerance; monitoring all aspects of the risks inherent in the
Bank’s activities; and assessing the Bank’s risk management and
control practices.
During 2010, the Risk Management Committee held several
meetings whereby it discussed many issues among which, the
charter of the Risk Management Committee and the Chief Risk
Officer roles and responsibilities.
Audit Committee
The Audit Committee is composed of four members; three of
them are non-executive members of the Board of Directors. The
Audit Committee is established to assist the Board of Directors
in its oversight responsibilities with respect to audit and
compliance with Central Bank of Lebanon and Banking Control
Commission and the implementation of accounting standards
related to financial reporting. The Committee meets on a
quarterly basis and when necessary. Moreover, the Committee
assists the Board of Directors in fulfilling its tasks and supervisory
role, particularly in regard to internal control regulations
and procedures, supervision of the Internal Audit’s activities,
appointment of external auditors and follow up on their
activities along with other responsibilities.
During 2010, the Audit Committee held six meetings.
Corporate Governance
> Main Holders of Common Shares
Fransabank > Annual Report 201012
MAIN HOLDERS OF COMMON SHARES AS AT DECEMBER 31, 2010
Adnan Kassar
Adel Kassar
Crédit Agricole SA (2)
Deutsche Investitions Und Entwicklungsgesellschaft mbh (DEG) (3)
Al-Fadl Holdings Limited
The Public Institution for Social Security – Kuwait
Others (4)
TOTAL SHAREHOLDING
36.37
36.21
6.00
5.00
2.70
2.00
11.72
100.00
PERCENT (1)
(1) Percent of total share capital consisting of 21,000,000 Common Shares as at 31.05.2011
(2) Crédit Agricole SA also owned, through its specialized subsidiary, Crédit Agricole Assurances (CAA), 29% of the share capital of Bancassurance SAL,
an associated company of the Bank.
(3) Deutsche Investitions Und Entwicklungsgesellschaft mbh DEG is one of Germany’s top development and investment banks. DEG is owned by
Kreditanstalt für Wiederaufbau KfW, which, in turn, is owned by the German Government.
(4) Each with less than 2%
Corporate Governance
> Biographies of Board Members
H.E. Mr. Adnan KassarChairman of the Board of Directors
Born in 1930 - Lebanon
H.E. Mr. Adnan Kassar is the Chairman
and General Manager of Fransabank
SAL and a member of the Board of
Directors of BLC Bank SAL, Fransabank
(France) SA and Fransabank Syria SA.
He is also Chairman of the
Supervisory Board of Fransabank
OJSC. H.E. Mr. Kassar was Minister of
State in Lebanon from 2009 to 2011
and Minister of Economy and Trade in
Lebanon from 2004 to 2005. He was
the first Arab businessman elected
Chairman of the International
Chamber of Commerce (ICC) and
headed the ICC from 1999 to 2000. He
was also former President of Beirut
Chamber of Commerce, Industry and
Agriculture for over 30 years (from
1972 to 2002). He is the Head of the
Lebanese Economic Organizations
and actual President of the General
Union of Chambers of Commerce,
Industry and Agriculture of the Arab
Countries. He has a law degree from
Saint Joseph University, Beirut.
Mr. Adel KassarDeputy Chairman of the Board of Directors
Born in 1932 - Lebanon
Mr. Adel Kassar is the Deputy
Chairman and Chief Executive
Officer of Fransabank SAL and the
Chairman of the Board of Directors
of Fransabank (France) SA and
Fransabank Syria SA. He is also
Chairman of the Board of Directors
and General Manager of
Bancassurance SAL and Lebanese
Leasing Company SAL. He is member
of the Supervisory Board of
Fransabank OJSC and member of the
Board of Directors of BLC Bank SAL.
He is a former Chairman of the
Association of Banks in Lebanon and
is the Honorary Consul General of
the Republic of Hungary in Lebanon.
He has a degree in Lebanese and
French law from Saint Joseph
University, Beirut.
Mr. Henri Guillemin Director
Born in 1947 – France
Mr. Henri Guillemin began his career
at Crédit Lyonnais from 1973 to
1978. He then joined Indosuez Bank
in 1979 and was appointed at
different management positions in
Singapore, Saudi Arabia (Jeddah and
Riyadh), Bahrain and Paris. In 1998,
he was Director at Crédit Agricole
Indosuez (CALYON), Paris for the
Middle East, and in 2003 he was
promoted Director for the Middle
East and Africa region. Since January
2008 and till today, he is the
Managing Director of Crédit
Agricole Egypt. He has a DES
diploma in Economic Sciences from
Sorbonne University and Master in
Business Administration from
INSEAD Fontainebleau.
Fransabank > Annual Report 2010 13
Mr. Rafic Charafeddine
Director
Born in 1939 - Lebanon
Mr. Rafic Charafeddine is a
businessman, and has partici-
pations in various companies.
He deals into construction
projects and real estate invest-
ments.
Sheikh Fahd Mazyad Al Rajaanrepresenting The Public Institution for Social Security - Kuwait
Director
Born in 1948 - Kuwait
Sheikh Fahd Mazyad Al Rajaan
began his career in 1976 as
manager of New Issues
Department at Kuwait
Investment Company. In 1981,
he served as Chairman and
Managing Director for the
Kuwait Real Estate Investment
Consortium. Sheikh Al Rajaan
is the Chairman of Ahli United
Bank in Bahrain, Egypt, United
Kingdom and Wafra
Investment Advisory Group in
New York. In 1984, he has
been appointed as General
Director of the Public
Institution for the Social
Security in force currently in
Kuwait, and which he maintains
this position till today. He has a
BA in Business Administration
from the American University
of Washington.
Mrs. Magda Rizk
Director
Born in 1957 - Lebanon
Mrs. Magda Rizk is a substantial
property owner in Lebanon.
She is also member of the
Audit Committee of the Bank.
She has a law degree from
Saint Joseph University, Beirut.
H. E. Mr. Nehmé Tohmé
Director
Born in 1939 - Lebanon
H. E. Mr. Nehmé Tohmé is the
Chief Executive Officer for
many contractors companies
operating in Saudi Arabia,
Qatar and Bahrain. Being
pioneer in numerous real
estate and touristic projects in
Lebanon and abroad, H.E. Mr.
Tohmé established several
corporations, and served as
well as shareholder or partner
or member of the Board in
many companies. He was
elected as member of
Lebanese parliament in 2000
and appointed as Minister of
displaced from 2005 to 2008.
He has a BS in Civil
Engineering from the
American University of Beirut.
Fransabank > Annual Report 201014
Corporate Governance
> Biographies of Board Members
Fransabank > Annual Report 2010 15
Corporate Governance
> Biographies of Board Members
H.E. Mr. Walid Daouk , Esq.
Director
Born in 1958 - Lebanon
H. E. Mr. Walid Daouk, Esq. is a
member of the Board of
Directors of various companies,
banks and financial institutions
in Lebanon and abroad including
Fransabank (France) SA,
Fransabank El Djazaïr SPA, BLC
Bank SAL, Bancassurance SAL
and the Lebanese Leasing
Company SAL. He is the
Government Commissioner at
the Beirut Stock Exchange. He
is also the president of the
Audit Committee of the Bank
and member of the Corporate
Governance and Risk
Management Committees.
H.E. Mr. Daouk is currently
Minister of Information in
Lebanon as of June 2011. He
has a degree in Lebanese and
French law from Saint Joseph
University, Beirut.
Mr. Mohamad Al Fadl
Director
Born in 1954 - Saudi Arabia
Mr. Mohamad Al Fadl is a
member of Jeddah Chamber
of Commerce and Industry
since 1996 and a Board
Member of public companies
in Saudi Arabia. He is the
Chairman of Gulf One Bank,
Bahrain and the Honorary
Counsel of Cyprus in Kingdom
of Saudi Arabia. He has a
degree in economic sciences
and marketing from University
of San Francisco.
Dr. Walid Naja
Director
Born in 1941 - Lebanon
Dr. Walid Naja is a former
Chairman of the Central Bank
of Lebanon - Banking Control
Commission, served as Economic
Counselor at the Lebanese
Embassy in Washington DC,
and as General Manager of the
Beirut Chamber of Commerce,
Industry and Agriculture. He is
the President of the Risk
Management and Corporate
Governance Committees and
member of the Audit
Committee. He holds graduate
degrees in economics and
international relations from
the American University of
Beirut and Yale University of
USA.
Mr. Antoine Jeancourt Galignani
Director
Born in 1937 - France
Mr. Antoine Jeancourt Galignani
began his career at the French
Ministry of Finance, and after a
while he joined Chase
Manhattan Bank in New York
and the Crédit Agricole. In
1979 he was appointed as
Managing Director then
Chairman of Bank Indosuez.
He was also member of Board
of Directors of the Saudi AL
Fransi Bank, in Saudi Arabia for
15 years. From 1994 to 2006,
Mr. Galignani was appointed
as Chairman and CEO of AGF,
which was later acquired by
Allianz Group. He also served
in numerous Boards such as
TOTAL, Bouygues and Société
Générale and he occupied the
position of Board member at
the Institute of International
Finance in Washington from
1991 to 1994. Mr. Jeancourt
Galignani is currently the
Chairman of the Board of
Eurodisney France. He holds a
Master degree in Economics
and political Sciences from ENA,
France.
Fransabank > Annual Report 201016
Corporate Governance
> Group Chart
Banks AbroadBanks Abroad Banks in Lebanon
Companies in Lebanon
Representative OfficesRepresentative Offices
68%
Fransabank El DjazaïrSPA - Algeria
• Group CMA-CGM (Franco-Lebanese) 25%
• Maghreb Truck Cie SPA Algeria 7%
48%
Fransabank Syria SASyria
• Other Private Sectors 52%
60%
Fransabank (France) SAFrance
• BPCE International et Outre Mer (IOM) 40%
20%
United Capital BankSudan
• Aref Investment Group & one of its affiliates - Kuwait 40%
• Al Alami Group - Egypt 6.25%
• Boubyan Group & its affiliates - Kuwait 24.60%
• Al Imtiaz Investment Co - Kuwait 5.83%
• Others 3.32%
• Others 0.06%
80%
Fransabank OJSCBelarus
• Fransa Holding SAL - Lebanon 19.94%
*Fransabank Group chart updated for events occurring up to May 2011
USB Bank PLCCyprus
Fransabank
94%
Cuba
Libya
Fransabank > Annual Report 2010 17
BLC Bank SAL Bank of Beirut and theArab Countries SAL
Banks Abroad Banks in LebanonBanks in Lebanon
Companies in LebanonCompanies in Lebanon
Representative Offices40%
• Crédit Agricole Assurances (Groupe Crédit Agricole France) - France 29%
• Banque Libano-Française SAL 31%
68.583%
6.25%
100%
SAL
FransaInvest Bank SAL
37.054%
Bancassurance SAL
87.50%
• DEG Germany 12.50%
Lebanese LeasingCompany SAL
Fransabank Insurance Services Co SAL
99.88%
Sogefon SAL
99.70% 99.60% 96.70%
Express SARLSwitch & ElectronicServices SAL
Fransabank > Annual Report 201018
Corporate Governance
> Organization Chart - Fransabank SAL
Corporate GovernanceCommittee
Support Functions
Administration CentralOperations Legal Organization
CreditAdministration &
InformationHuman
ResourcesFinancialControl &
Accounting
Boardof Directors
Chairman &Deputy Chairman
ManagementGroup
Marketing
Inspection
ExecutiveCommittee
GeneralServices
Engineering
MaintenanceInfrastructure& Security
Procurement
Finance
TradeFinance
Transfers &Payments
TreasuryB.O.
Collection,Clearing& Domiciliation
ProjectManagement
Documentation
FinancialControl
Accounting
SoftwareDevelopment
ICT ProductionEnvironment
Credit AppraisalSMEs
Credit AppraisalCorporate
Marketing &CorporateCommunications
MarketingResearch
ProductsQualityAssurance
Credit Reporting& Documentation
Credit Monitoring& Classification
CreditInformation
Planning,Staffing &EmployeesRelations
Training &Development
Compensation& Benefits
LegalAdvisory
Relations withAuthorities& Audiences
Judicial
Secretariat ofBOD & Shareholders’Meetings
Information &Communication
Technology Credit
Appraisal
19Fransabank > Annual Report 2010
AMLCommittee
Advisors
AML Compliance
Lines of Business
Control Functions
S & D
Retail Banking International CorporateBanking
Treasury &Capital Markets Loan Recovery Real EstatePolicies &
ProceduresInformation
SecurityStrategy &
Development
AuditCommittee
Internal Audit
IT Audit
Risk Management
Risk ManagementCommittee
RegionalManagers
BranchManagement
SMEs
Local & OverseasCredit Cards
RetailRisk
Retail Products& Services
E-Banking
BusinessLines
SupportSection
SpecialCredits
LocalProcedures
OverseasProcedures
CorrespondentBanking &FinancialInstitutions
OverseasAffiliations &RepresentativeOffices
OverseasPrivate Clientele
Bank Credit RiskAnalysis
Treasury
Branch Audit
Internal Control Audit
Compliance Audit
Financial Audit
International Audit
Credit Risk
Operational Risk
Market Risk
Basel Implementation
CapitalMarkets
Fransabank > Annual Report 201020
> Executive Committee
H.E. Mr. Adnan Kassar Chairman & General Manager
& or
Mr. Adel Kassar Deputy Chairman & Chief Executive Officer
Mr. Nadim Kassar General Manager
Mr. Mansour Bteish General Manager
Mr. Nabil Kassar Secretary General
Dr. Joe Sarrouh Executive Advisor to the Chairman
Corporate Governance
> Committees - Fransabank SAL
> Corporate Governance Committee
> Audit Committee
> Risk Management Committee
> Management Committee
> Credit Committees
> Assets & Liabilities Committee
> Banking Technology & IT Security Committee
> Anti-Money Laundering Committee
> Human Resources Committee
> Organization Committee
> Marketing Committee
Fransabank > Annual Report 2010 21
> General Management
Mr. Nadim Kassar General Manager
Mr. Mansour Bteish General Manager
Mr. Nabil Kassar Secretary General
> Advisor to the Chairman
Dr. Joe Sarrouh Executive Advisor to the Chairman
> Management
Mr. Ahmad El Radi Chief Risk Officer, Head of Risk Management
Mr. Nadim Moujaes Deputy General Manager, Head of Strategy & Development
Dr. Nicolas Khairallah Deputy General Manager, Head of Human Resources
Mr. Philippe El Hajj Deputy General Manager, Head of Retail Banking
Dr. Mohamad Daher Deputy General Manager, Head of Corporate Banking
Miss Mona Khoury Deputy General Manager, Head of International
Mr. Nabih Saddy Deputy General Manager, Head of Financial Control & Accounting
Mr. Nabil Tannous Deputy General Manager, Head of Treasury & Capital Markets
Corporate Governance
> Management - Fransabank SAL
Fransabank > Annual Report 201022
Corporate Governance
> Management - Fransabank SAL
> Management
Mr. Wajdi Abi Chacra Advisor, Legal
Mr. Fawzi Moussa Advisor, Corporate Banking
Mr. Antoine Asmar Business Development Consultant, Corporate Banking
Mr. Charbel Aouad Head of Central Operations
Mr. Antoine Younes Head of Credit Appraisal
Mr. Zouheir Chouraiki Head of Internal Audit
Mrs. Samia Abou Ezze Head of Information & Communication Technology
Mr. Khalil Assaf Head of Special Credits
Mr. Zakaria El Khatib Head of Inspection
Mrs. Dania Kassar Head of Marketing
Mr. Pierre Posbic Head of Organization
Mr. Sami Naffah Head of Policies & Procedures
Mr. Antoine Zarifeh Head of Small & Medium Enterprises
Mrs. Magida Kasbani Head of Administration
Mr. Adel Moubarak Head of Information Security
Mrs. Dalal Halabi Head of Credit Reporting & Documentation
Mr. Roger Abboud Head of Credit Information
Mr. Sami Dfouni Head of Credit Monitoring & Classification
Miss Lama Dick Head of Credit Cards
Mr. Wissam Ali Hassan Head of Electronic Banking
Mr. Joseph Saab Head of Anti-Money Laundering
Fransabank > Annual Report 2010 23
> Local Network Management
Mr. Joseph Akiki Head of Branch Management
Mrs. Najwa Sandid Regional Manager, Beirut I
Mr. Antoine Nehmeh Regional Manager, Beirut II
Mr. Francis Abi Nakhoul Regional Manager, Mount Lebanon A
Mr. Georges Saliba Regional Manager, Mount Lebanon B
Mr. Ajwad Al Halabi Regional Manager, Mount Lebanon C
Dr. Khodr Heloui Regional Manager, North
Mr. Talal Hamadeh Regional Manager, South
Mr. Amine Abou Mhaya Regional Manager, Bekaa
Mr. Mounir Daoud Deputy Regional Manager, Bekaa I
Mr. Farouk Chreif Deputy Regional Manager, Bekaa II
Corporate Governance
> Management - Fransabank SAL
Corporate Governance
> Local Banking SubsidiariesBoard of Directors and General Managers
Fransabank > Annual Report 201024
> BLC Bank SAL
Board of Directors
H.E. Mr. Maurice Sehnaoui Chairman & General Manager
Mr. Nadim Kassar Deputy Chairman & General Manager
H.E. Mr. Adnan Kassar Member
Mr. Adel Kassar Member
Mr. Nabil Kassar Member
H.E. Mr. Nazem El Khoury Member
H.E. Mr. Walid Daouk, Esq. Member
Mr. Mansour Bteish Member
Mr. Walid Ziade, Esq. Member
Mr. Raoul Nehme Member
Mr. Charles El-Hajj Member
General Managers
Mr. Raoul Nehme
Mr. Georges Tabet
Lebanon
> Fransa Invest Bank SAL
Board of Directors
Mr. Nadim Kassar Chairman & General Manager
Mr. Nabil Kassar Member
Fransabank SAL Member
H.E. Mr. Walid Daouk, Esq. Member
General Managers
Mr. Mansour Bteish
Dr. Joe Sarrouh
Fransabank > Annual Report 2010 25
Corporate Governance
> Overseas Banking Subsidiaries and AssociateBoard of Directors and General Managers
> Fransabank (France) SA
Board of Directors
Mr. Adel Kassar Chairman & General Manager
Mr. Yvan de La Porte De Theil Vice Chairman
H.E. Mr. Adnan Kassar Member
Mr. Bruno Deletré Member, representing BPCE IOM
Mr. Charles Milhaud Member
Mr. Mansour Bteish Member
Mr. Nabil Kassar Member, representing Fransabank SAL
H.E. Mr. Walid Daouk, Esq. Member
Mr. Dany Makhlouf Member
General Manager
Mr. Henri de Courtivron
France
> Fransabank El Djazaïr SPA
Board of Directors
Mr. Nadim Kassar Chairman
Mr. Nabil Kassar Member, representing Fransabank SAL
Mr. Raja Sarkis Member, representing CMA-CGM SA
Mr. Lazhar Hani Member, representing Merit Corporation SAL
Mr. Abdelrahmane Salhi Member, representing Maghreb Truck SPA
Mr. Mansour Bteish Member
H.E. Mr. Walid Daouk, Esq. Member
General Manager
Mr. Alain Santi
Algeria
Belarus
Corporate Governance
> Overseas Banking Subsidiaries and AssociateBoard of Directors and General Managers
Fransabank > Annual Report 201026
> Fransabank Syria SA
Board of Directors
Mr. Adel Kassar Chairman
H.E. Mr. Adnan Kassar Member, representing Fransabank SAL
Mr. Nabil Kassar Member, representing Fransabank SAL
Mr. Chadi Karam Member, representing Fransabank SAL
Mr. Ahmad Al-Shihabi Member
Mr. Elie Sioufi Member
Mr. Ali Wahib Merhi Member
Mr. Sami Rabbath Member
Mr. Mohammad Sabih Al-Nahas Member
General Manager
Mr. Nadim Moujaes
Syria
> Fransabank OJSC
Supervisory Board
H.E. Mr. Adnan Kassar Chairman, representing Fransabank SAL
Mr. Adel Kassar Member, representing Fransa Holding (Liban) SAL
Mr. Georges Andraos Member, representing Fransabank SAL
Mr. Ghantous Gemayel Member, representing Fransa Holding (Liban) SAL
General Manager
Mr. Ibrahim Koleilat
> USB Bank PLC
Board of Directors
H.E. Mr. Maurice Sehnaoui Chairman Non ExecutiveDependent (BLC Bank)
Mr. Nadim Kassar Non Executive - Dependent (BLC Bank)
Mr. Nabil Kassar Non Executive - Dependent (BLC Bank)
H.E. Mr. Walid Daouk, Esq. Non Executive - Dependent (BLC Bank)
Mr. Raoul Nehme Non Executive - Dependent (BLC Bank)
Fransabank SAL Non Executive - Dependent
represented by Mr. Adel Kassar (shareholder in BLC Bank)
Fransa Invest Bank SAL Non Executive - Dependent
represented by Mr. Mansour Bteish (shareholder in BLC Bank)
BLC Bank SAL Non Executive - Dependent
represented by Mr. Walid Ziade, Esq.
Mr. Andrea Theodorides Executive - Dependent (USB Bank)
Mr. Despo Polycarpou Executive - Dependent (USB Bank)
Mrs. Tania Moussallem Non Executive - Dependent (BLC Bank)
Mr. Georges Galatariotis Non Executive - Dependent
Mr. Georges Stylianou Non Executive - Dependent
Mr. Philippos Philis Non Executive - Dependent
Mr. Agis Taramides Non Executive - Dependent
Deputy Managing Director
Mr. Andrea Theodorides
Cyprus
> United Capital Bank
Board of Directors
Mr. Adel Al Majed Chairmanrepresenting Boubyan Bank
Mr. Mansour Bteish Vice Chairman
Mr. Feras Al Bahar Memberrepresenting Aref Investment Group
Mr. Mohamad Al Adasani Memberrepresenting Aref Investment Group
Mr. Modar Al Razzouki Memberrepresenting Aref Investment Group
Mrs. Amira Al Alami Memberrepresenting Financial Company
for Investment and Development
Mr. Sharif Budur MemberSudanese Independent Director
Mr. El Zubeir Hassan MemberSudanese Independent Director
General Manager
Mr. Kamal El Zubeir
Sudan
Fransabank > Annual Report 2010 27
Corporate Governance
> Overseas Banking Subsidiaries and AssociateBoard of Directors and General Managers
Reduce CO2 emissionsToday, around 73 million tons of CO2 are wasted every year around
the world due to infrastructure inefficiencies.
Source: www.enviro.aero/ facts and figures, “improving Efficiency”, 2011.
Fransabank > Annual Report 201030
Historical Milestones
1921
Fransabank was first established in Beirut as a full branch of one
of the then major French banks, Crédit Foncier d’Algérie et de
Tunisie (C.F.A.T.).
Fransabank is registered n° 1 on the list of banks operating in
Lebanon indicating that it is the oldest Bank in the country.
C.F.A.T. changed its name to become Société Centrale de
Banque.
Société Centrale de Banque in Beirut was acquired by Banque
Française pour le Moyen-Orient SAL (B.F.M.O.), a Lebanese
company whose shares were predominantly owned by Banque
Indosuez Group.
Banque Indosuez (now Crédit Agricole SA, one of the Bank’s
continuing principal shareholders) was also the major
shareholders of Banque Sabbag SAL. Banque Indosuez merged
these two banks under the name of Banque Sabbag et
Française pour le Moyen-Orient SAL.
Banque Indosuez sold its shares in Banque Sabbag et Française
pour le Moyen-Orient SAL to a financial group headed by
Messrs. Adnan & Adel Kassar.
The Bank’s denomination was changed to Fransabank SAL.
Fransabank concluded a cooperation agreement with Crédit
Agricole SA – France aiming at establishing closer business
relations between the two banks. It led at first to the joint
creation in Paris of Fransabank (France) SA, and to the
participation of Crédit Agricole SA - France in the shareholding
of Fransabank SAL.
Fransabank acquired the Assets & Liabilities of Chase
Manhattan Bank’s branches in Beirut.
Fransabank acquired Banque Tohmé SAL.
D.E.G. (German Investment and Development Company), an
organization that is part of the development cooperation
organization of the Federal Republic of Germany, acquired of
5% of the Bank’s share capital.
A private placement of shares took place, pursuant to which 5%
of the Bank’s shares were sold to Lebanese, Arab and foreign
investors.
The Public Institution for Social Security – Kuwait acquired 2%
of the Bank’s share capital.
1984
1985
1993
1995
1997
1963
1971
1978
1980
Fransabank > Annual Report 2010 31
Fransabank acquired Universal Bank SAL.
Fransabank opened its branch in the Damascus free zone in Syria.
Fransa Invest Bank (FIB), investment banking subsidiary of
Fransabank started its operations.
Fransabank acquired United Bank of Saudi & Lebanon SAL.
Fransabank acquired all the shares of Banque de la Békaa SAL.
Subsequently, in 2007, the Bank sold Banque de la Békaa.
Fransabank became one of the major shareholders (37.054%) of
Bank of Beirut & the Arab Countries SAL (BBAC).
Fransabank was the first Lebanese bank to enter the Algerian
market with the opening of its new subsidiary Fransabank El
Djazaïr SPA.
Fransabank launched its operations in Sudan through an
associate bank, United Capital Bank.
Fransabank acquired BLC Bank SAL along with its two
subsidiaries, BLC Services SAL and BLC Finance SAL.
Fransabank concurrently purchased 34% of the share capital of
Fransabank (France) SA held by Crédit Agricole SA (bringing its
participation in the share capital to 100%), and sold 40% of the
share capital of Fransabank (France) SA to Financière Océor, a
subsidiary of Groupe Caisse d’Epargne (France), following
which the Bank’s participation in the share capital of
Fransabank (France) SA is 60%.
Fransabank entered the Libyan market by establishing a
representative office in Tripoli.
Fransabank issued its Series A preferred shares for USD 100 million
in Tier 1 capital.
Fransabank acquired Fransabank OJSC, formerly known as
Golden Taler Bank.
Fransabank became operational in Syria through its subsidiary,
Fransabank Syria SA.
Fransabank issued its Series A preferred shares for USD 85 million
in Tier 1 capital.
BLC Bank SAL acquired 9.9% of USB Bank PLC – Cyprus and
increased this share to become 94% in February 2011. Thus,
Fransabank Group expanded its international network to
include Cyprus besides the seven existing foreign presence.
1998
2001
2002
2003
2005
2006
2007
2008
2009
2010
Dare to innovate50% of the world's energy will come from renewable sources by 2040.
Source: www.conserve-energy-future.com, “Future of Solar Energy”.
Fransabank > Annual Report 201034
Management Report
> Lebanon’s Economic Performance in 2010
The Lebanese economy continued on its growth trail in 2010
albeit at relatively slower pace, amidst a challenging global
environment. Real GDP grew by 7.1% in 2010. This growth has
been mainly driven by construction, tourism, retail trade, high
capital inflows which amounted to USD 8.4 billion in 2010 and
financial services.
Most real sectors’ indicators point to this annual economic
growth: property sales’ transactions increased by 12.7%, value
of property sales by 35.1%, cement deliveries by 6.7%, the
number of tourists by 17.1% and the number of passengers at
the Hariri International Airport by 11.3% among others.
In 2010, both imports and exports, according to the figures
released by the Higher Customs Council show that the foreign
trade increased by 12.6% reaching USD 22.21 billion in 2010,
compared with USD 19.72 billion in 2009. Total exports reached
USD 4.25 billion in 2010, an increase of 22.1%, as compared to
USD 3.48 billion in 2009. Total imports reached USD 17.96 billion
in 2010, increasing by 10.6% compared to USD 16.24 billion in
2009. The growth of exports coupled with the relatively smaller
growth of imports resulted in a decrease in the trade deficit
balance, which stood at USD 13.71 billion in 2010, compared
with USD 12.76 billion in 2009. Furthermore, the export/import
coverage ratio improved from 21.43% in 2009 to 23.66% in
2010. The balance of payments registered a surplus
USD 3.34 billion in 2010 as compared to USD 7.90 billion in
2009.
The year 2010 witnessed an improvement on the fiscal level,
mainly due to a drop in overall Government expenditure, a
lower decrease in total revenues, leading to a contraction in the
overall fiscal deficit that stood at USD 2.92 billion in 2010 as
compared to USD 2.96 billion in 2009 and coupled with an
improvement of the primary surplus that registered
USD 1.20 billion in 2010 as compared to USD 1.02 billion in 2009.
Total public revenues, including budgetary and Treasury
receipts, decreased by 0.2%, reaching USD 8.41 billion in 2010,
compared with USD 8.43 billion in 2009. Total public spending,
including budgetary and Treasury spending, decreased also
by 0.5%, reaching USD 11.33 billion in 2010, compared with
USD 11.39 billion in 2009. This is due to a contraction of 1.1% in
Treasury expenditures and a drop of 0.4% in budget-linked
expenditures. As for the gross public debt, it increased by 2.9%,
reaching USD 52.59 billion at the end of 2010, compared with
USD 51.10 billion at the end of 2009, noting that this growth is
slower than the previous two years, where the growth stood at
8.7% and 11.9% in 2009 and 2008 respectively. The net public
debt increased by 2.0%, reaching USD 45.01 billion in 2010,
compared with USD 44.11 billion in 2009. The gross public
debt/ nominal GDP ratio stood at 133.48% in 2010, as compared
to 147.99% in 2009, thus gradually improving the country’s
overall risk profile.
The money stock (M4) surged by an amount of USD 10.36 billion
in 2010, as LBP-denominated time deposits and foreign currency
deposits increased by USD 4.71 billion and USD 4.98 billion,
respectively, while money stock (M1) and Treasury bills
held by the public both progressed by USD 459 million
and USD 206 million, respectively.
The Consumer Price Index variation (CPI), published by the
Consultation and Research Institute, reached 6.2% in 2010,
compared to 4.2% in 2009. This increase was mainly due to the
rise in prices of: food and beverages by 9.76%, recreation by
17.25%, housing by 7.33%, education by 6.74%, and
miscellaneous goods and services by 6.85%.
The Central Bank of Lebanon successfully build-up its foreign-
currency reserves to a record of USD 28.6 billion in 2010, i.e an
annual increase of USD 2.9 billion. Total foreign currency assets
of the Central Bank of Lebanon increased by 8.1%, reaching
USD 30.60 billion in 2010, compared with USD 28.30 billion in
2009. In this context, gold reserves increased by 29.3%,
amounting to USD 13.01 billion in 2010, compared with
USD 10.06 billion in 2009, and financial sector deposits grew as
well by 12.9%, attaining USD 42.7 billion in 2010, compared
with USD 37.8 billion in 2009.
In 2010, the Lebanese banking sector registered yet another
impressive performance. Total assets grew by 11.4 % reaching
Fransabank > Annual Report 2010 35
USD 134.16 billion at end-December 2010 as compared to
USD 120.38 billion at end-December 2009. Total deposits,
accounting for 83.4% of total balance sheet at end-December
2010, continued to be a major drive for the banking sector
activity, increasing by 11.7% and reaching USD 111.84 billion at
end-December 2010 as compared to USD 100.07 billion at end-
December 2009. On the other hand, total claims on the private
sector grew by 22.5% reaching USD 35.98 billion at end-
December 2010 as compared to USD 29.36 billion at end-
December 2009, while the total claims on the public sector
grew by 0.5% reaching USD 30.33 billion at end-December
2010 as compared to USD 30.16 billion at end-December 2009.
Total capital accounts grew by 15.9% reaching USD 9.94 billion
at end-December 2010 as compared to USD 8.57 billion at end-
December 2009.
Public Finance's Indicators
Public revenues
Public spending
Fiscal deficit
Gross public debt
Net public debt
Primary surplus
Gross public debt / Nominal GDP
Monetary Situation Indicators
Central Bank of Lebanon gross foreign currency assets
Consumer Price Index (CPI)
Central Bank of Lebanon gold reserves
Financial sector deposits
Banking Sector's Indicators
Total assets
Total deposits (Commercial & Investment Banks)
Total claims on the private sector
Total claims on the public sector
Total capital accounts
Foreign Sector's Indicators
Exports
Imports
Trade deficit
Balance of payments
8.43
11.39
(2.96)
51.10
44.11
1.02
147.99%
28.30
4.2%
10.06
37.8
120.38
100.07
29.36
30.16
8.57
3.48
16.24
(12.76)
7.90
(0.2%)
(0.5%)
(1.3%)
2.9%
2.0%
17.6%
(14.5%)
8.1%
2.0%
29.3%
12.9%
11.4%
11.7%
22.5%
0.5%
15.9%
22.1%
10.6%
7.4%
(57.7%)
Variation20092010(in billion of USD)
Sources: Ministry of Finance, Central Bank of Lebanon, Association of Banks in Lebanon and Higher Customs Council.
8.41
11.33
(2.92)
52.59
45.01
1.20
133.48%
30.60
6.2%
13.01
42.7
134.16
111.84
35.98
30.33
9.94
4.25
17.96
(13.71)
3.34
> LEBANON'S MAJOR ECONOMIC INDICATORS
Management Report
> Consolidated Results of Operations
Fransabank > Annual Report 201036
Overview
Fransabank Group has registered in 2010 another yet record
growth. The Group’s net income amounted to LBP 219.71 billion
(USD 145.75 million) in 2010 compared to LBP 157.12 billion
(USD 104.22 million) in 2009, an increase of 39.84%. In 2010, the
Return on Average Assets stood at 1.26% and the Return on
Average Common Equity at 13.06% compared to 1.08% and
11.84% respectively in 2009.
Resolutions of Fransabank SAL Ordinary GeneralAssembly
The Ordinary General Assembly of Fransabank SAL shareholders
held on 18 May 2011:
> Approved the accounts and the Balance Sheet of Fransabank
SAL as at end December 2010
> Acquitted Fransabank SAL Board of Directors for their
management of the business activities of the fiscal year 2010
> Decided to allocate out of Fransabank SAL net profit
(LBP 139,572,356 thousands) as follows:
• 10% to Legal reserve (LBP 13,957,236 thousands),
• LBP 14,840,000 thousands to Reserve for General Banking Risks
• LBP 5,577,932 thousands to reserve for assets acquired in
settlement of bad loans,
• LBP 942,114 thousands to special reserve for non productive
loans,
• LBP 1,246,517 thousands interest on subordinated loan,
• LBP 37.8 billion (LBP 1,800/share) as dividend distribution on
common shares, LBP 12,813,750 thousands on preferred
shares - Series A and LBP 4,484,813 thousands on preferred
shares - Series B, representing respectively 36.70%, 12.44%
and 4.35% of the Bank’s 2010 distributable profits,
• LBP 47,909,994 thousands i.e. the remaining balance, to the
Free Reserves.
1. NET INCOME
Fransabank SAL net income, in 2010, amounted to LBP 139.57 billion
(USD 92.59 million) compared to LBP 94.92 billion (USD 62.97 million)
in 2009, an increase of 47.04%. This has translated in 2010 into a
Return on Average Assets of 1.17% and a Return on Average
Common Equity of 11.25%.
The Group’s net income in 2010 amounted to LBP 219.71 billion
(USD 145.75 million) compared to LBP 157.12 billion
(USD 104.22 million) in 2009, an increase of 39.84%. This has
translated in 2010 into a Return on Average Assets of 1.26%. In
2010, the Group has booked in compliance with IFRS
requirements, unrealized profits on available for sale securities for
LBP 341,818,315 thousands (USD 226,745 thousands) against
LBP 304,396,470 thousands (USD 201,921 thousands) in 2009. This
has reduced the ROACE to 13.06% from 16.49% if unrealized
profits were excluded.
1.1 Net Interest Income
In 2010, the Group’s net interest income amounted to
LBP 393.39 bil l ion (USD 260.95 mil l ion) compared to
LBP 315.99 billion (USD 209.61 million) in 2009, an increase of
24.49%.
In 2010, interest received amounted to LBP 1,009.31 billion
(USD 669.53 mill ion) compared to LBP 887.94 bil l ion
(USD 589.02 million) in 2009, an increase of 13.67%. Interest
received from investment securities, loans and advances to
customers and from loans to banks & placements with banks,
represents of total 2010 interest income 64.67%, 31% and 4.33%
respectively, compared to 67.17%, 26.52% and 6.31% respectively
in 2009.
in thousands of LBP
From loans and advances to customers
From investment securities
From loans to banks and placements with banks
TOTAL
> BREAKDOWN OF INTEREST RECEIVED
20092010
235,451,607
596,472,567
56,017,527
887,941,701
312,867,464
652,701,550
43,743,044
1,009,312,058
Fransabank > Annual Report 2010 37
In 2010, the monthly average Interest-Earning Assets reached
LBP 15,181.01 billion (USD 10,070.32 million) compared to
LBP 12,066.99 billion (USD 8,004.64 million) in 2009 (+ 25.81%).
This growth is due to the increase of:
• investment securities (+ LBP 1,388.32 billion or c/v
USD 920.94 million),
• loans and advances to customers (+ LBP 1,130.97 billion or
c/v USD 750.23 million)
• loans to Banks and financial institutions plus placements
with Banks and financial institutions (+ LBP 594.73 billion or
c/v USD 394.52 million).
In 2010, the interest paid amounted to LBP 615.93 billion
(USD 408.57 million) compared to LBP 571.95 billion
(USD 379.41 million) in 2009 (+ 7.69%). In 2010, the largest
single component of interest paid belongs to customers’
deposits, which represented 95.48% of the total compared to
95.33% in 2009.
The monthly average Interest-Bearing Liabilities reached
LBP 14,673.57 billion (USD 9,733.71 million) in 2010
against LBP 12,119.64 billion (USD 8,039.56 million) in 2009
(+ 21.07%). This growth is largely attributed to the 20.65%
increase in the Customers creditor accounts which amounted
to LBP 2,376.26 billion (USD 1,576.29 million).
in thousands of LBP
Investment securities
Banks and financial institutions
Loans and advances to customers
TOTAL
> AVERAGE INTEREST-EARNING ASSETS
20092010
6,467,260,419
2,778,152,699
2,821,574,347
12,066,987,465
7,855,582,571
3,372,884,252
3,952,546,218
15,181,013,041
in thousands of LBP
On deposits and loans from banks
On deposits from customers at amortized cost
On cash contributions to Share Capital
TOTAL
> BREAKDOWN OF INTEREST PAID
20092010
(25,540,138)
(545,216,479)
(1,197,972)
(571,954,589)
(26,654,061)
(588,074,209)
(1,197,972)
(615,926,242)
in thousands of LBP
Soft loans
Banks and financial institutions
Customers’ deposits at amortized cost
Cash contributions to Share Capital
TOTAL
> AVERAGE INTEREST-BEARING LIABILITIES
20092010
318,811,712
278,092,112
11,505,618,991
17,113,885
12,119,636,700
318,271,193
456,307,952
13,881,875,785
17,113,885
14,673,568,815
Fransabank > Annual Report 201038
Management Report
> Consolidated Results of Operations
1.2 Net Fees and Commissions Income
In 2010, net fees and commissions income reached LBP 69.75
billion (USD 46.27 million), an increase of 34.96% compared to
LBP 51.68 billion (USD 34.28 million) in 2009.
Fees and commissions received reached LBP 94.21 billion
(USD 62.49 million) an increase of 26.02% compared to
LBP 74.75 billion (USD 49.59 million) in 2009.
Fees and commissions received comprise mainly commissions
on documentary LCs and on LGs and fees on customers’
transactions, which represented 29.03% and 70.67% respectively
compared to 22.95% and 73.39% in 2009.
Fees and commissions paid reached LBP 24.46 billion
(USD 16.22 million) an increase of 6.02%, compared to
LBP 23.07 billion (USD 15.31 million) in 2009.
Fees and commissions paid comprise fees on customers’
transactions and commissions on transactions with banks,
which represented 90.68% and 9.32% respectively compared to
88.77% and 11.23% in 2009.
1.3 Income from Trading Portfolio
In 2010, income from trading portfolio reached LBP 8.69 billion
(USD 5.76 million) compared to LBP 17.26 billion (USD 11.45 million)
in 2009. The decline of the trading income in 2010 compared to
the previous year is due to the significant improvement in 2009
of the market value of trading securities after the 2008 global
crisis, which was translated into a positive change in fair value
of LBP 10.89 billion (USD 7.22 million) whereas in 2010 this
change in fair value amounted to LBP 2.12 billion (USD 1.41 million)
which is reasonably normal given the volume of our trading
portfolio.
In 2010, income from trading portfolio comprises interest
received, dividends received, change in fair value and gain on
sale of trading securities, which represented 58.68%, 12.66%,
24.40% and 4.26% compared to 30.81%, 6.09%, 63.07% and
0.03% in 2009 respectively.
in thousands of LBP
Fee and commission received
Commissions on documentary LCs and on LGs
Service fees on customers’ transactions
Commissions on transactions with banks
Asset management fees
Fee and commission paid
Commissions on transactions with banks
Other commissions paid (including those on customers’ transactions)
NET FEE AND COMMISSION INCOME
> BREAKDOWN OF NET FEE AND COMMISSION INCOME
20092010
74,751,952
17,152,758
54,863,946
53,919
2,681,329
(23,072,609)
(2,592,168)
(20,480,441)
51,679,343
94,205,629
27,348,154
66,574,909
268,975
13,591
(24,460,476)
(2,279,320)
(22,181,156)
69,745,153
Fransabank > Annual Report 2010 39
1.5 Foreign Exchange Gain
1.6 Other Operating Income
In 2010, other operating income reached LBP 65.49 billion
(USD 43.44 mil l ion) compared to LBP 36.19 bil l ion
(USD 24.00 million) in 2009 (+ 80.98%).
Other operating income comprises gain on sale of available for
sale securities, dividends received on investment securities,
share in profit of associates, realized income on business
acquisition, gain on sale of assets acquired in satisfaction of
loans and on disposal of properties & equipments and other
income, which represented 43.91%, 8.47%, 13.73%, 11.80%,
15.10% and 6.99% in 2010 compared to 9.47%, 15.78%, 20.94%,
0.04%, 37.45% and 16.32% in 2009 respectively.
The net interest on financial instruments designated at fair
value represents the interest paid on the structured products
issued by Fransabank, namely 3x3 GEM I, 3x3 GEM II, Winners 9
and Easy Times. In 2010, the interest expense (coupons) paid
on those instruments amounted to LBP 7.76 billion (USD
5.15 million), compared to LBP 9.86 billion (USD 6.54 million) in
2009 (- 21.30%). To note that the volume of financial instru-
ments designated at fair value decreased from LBP 162.71 bil-
lion (USD 107.94 million) as at 31 December 2009 to LBP 73.14
bllion (USD 48.52 million) as at 31 December 2010 due to the
fact that 3x3 GEM I and 3x3 GEM II matured in 2009 and 2010
respectively, hence the relevant interest paid in 2010 is less than
that of 2009.
in thousands of LBP
Interest income on trading securities
Dividends received on trading securities
Change in fair value of trading portfolio (net)
Gain on sale of trading assets
INCOME FROM TRADING PORTFOLIO
> BREAKDOWN OF INCOME FROM TRADING PORTFOLIO
20092010
5,318,688
1,050,973
10,889,336
5,691
17,264,688
5,100,039
1,100,029
2,120,565
370,080
8,690,713
1.4 Net Interest on Financial Instruments Designated at Fair Value
in thousands of LBP
Gain on sale of available for sale
Dividends received on sale of available for sale and held to maturity securities
Gain from disposal of part of equity interest in an associate
Share in profit of associates
Realized income on business acquisition
Gain on sale of assets acquired in satisfaction of loans and
on disposal of properties & equipments
Other
OTHER OPERATING INCOME
> BREAKDOWN OF OTHER OPERATING INCOME
20092010
3,425,253
5,710,871
14,100
7,579,190
-
13,550,134
5,905,560
36,185,108
28,755,672
5,549,080
-
8,992,528
7,728,744
9,888,224
4,574,104
65,488,352
In 2010, foreign exchange gain reached LBP 22.32 billion (USD 14.81 million) compared to LBP 10.40 billion (USD 6.90 million) in 2009
(+ 114.74%), resulting from growth in business activities.
Management Report
> Consolidated Results of Operations
In 2010, the Group’s net allocation to provisions for loans and
advances to customers amounted to LBP 6.12 bil l ion
(USD 4.06 million) compared to a recovery of provisions for
LBP 6.86 billion (USD 4.55 million) in 2009, resulting form:
• allowance for impairment of customers’ loans and advances
for LBP 23.53 billion (USD 15.61 million) compared to
LBP 5.03 billion (USD 3.34 million) in 2009,
• bad debts expense for LBP 0.08 billion (USD 0.05 million),
compared to LBP 1.22 billion (USD 0.81 million) in 2009,
• write-back of impairment loss on loans and advances for
LBP 15.80 billion (USD 10.48 million), against LBP 12.36 billion
(USD 8.20 million) in 2009,
• write-back of discount on loan portfolio purchased for
LBP 1.69 billion (USD 1.12 million) against LBP 0.75 billion
(USD 0.50 million) in 2009.
1.7 Net Allocation to Provisions for Loans & Advances to Customers
In 2010, the Group’s general expenses comprising staff costs,
administrative expenses, depreciation, provisions for impairment
of assets and amortization of deferred charges, reached
LBP 273.06 bi l l ion (USD 181.13 mil l ion) compared to
LBP 236.93 billion (USD 157.17 million) in 2009, an increase of
15.25%. This is due to:
the increase of :
• 17.64% in salaries and related charges which amounted to
LBP 160.93 billion (USD 106.75 million) in 2010 compared to
LBP 136.80 billion (USD 90.75 million) in 2009,
• 22.20% in administrative expenses which amounted to
LBP 85.59 billion (USD 56.77 million) in 2010 compared to
LBP 70.04 billion (USD 46.46 million) in 2009,
• 597.51% in provisions for charges which amounted to
LBP 2.39 billion (USD 1.59 million) in 2010 compared to
LBP 0.34 billion (USD 0.23 million) in 2009.
and the decrease of :
• 2.36% in depreciation and amortization of assets which
amounted to LBP 16.21 billion (USD 10.75 million) in 2010
compared to LBP 16.60 billion (USD 11.01 million) in 2009,
• 39.61% in amortization of deferred charges which amounted
to LBP 7.94 billion (USD 5.27 million) in 2010 compared to
LBP 13.15 billion (USD 8.72 million) in 2009. The amortization
of deferred charges is related to the impairment of the losses
resulting from the Bank’s acquisition of Universal Bank SAL in
1999 and United Bank of Saudia & Lebanon SAL in 2002. This
amortization is covered by the net income deriving from
interest on Treasury Bills acquired through the soft loans
granted to the Bank by the Central Bank of Lebanon after the
acquisition of the two aforementioned Banks.
1.8 General Expenses
Fransabank > Annual Report 201040
in thousands of LBP
Allowance for impairment of loans and advances
Write-back of impairment loss on loans and advances
Bad debts expense
Write-back of discount on loan portfolio purchased
TOTAL
> NET ALLOCATION TO PROVISIONS FOR LOANS & ADVANCES TO CUSTOMERS
20092010
(5,029,126)
12,355,562
(1,214,349)
751,765
6,863,852
(23,528,498)
15,793,450
(77,135)
1,692,748
(6,119,435)
Fransabank > Annual Report 2010 41
in thousands of LBP
Staff costs
Administrative expenses
Provisions for charges
Depreciation and amortization of assets
Amortization of deferred charges
GENERAL EXPENSES
> BREAKDOWN OF GENERAL EXPENSES
20092010
(136,801,983)
(70,040,742)
(342,473)
(16,602,965)
(13,145,885)
(236,934,048)
(160,931,818)
(85,586,893)
(2,388,788)
(16,210,455)
(7,938,195)
(273,056,149)
in thousands of LBP
Soft loans from Banque du Liban
Long-term borrowings
Banks and financial institutions
Customers’ creditor accounts
Subordinated loan
Shareholders’ Equity
TOTAL
> BREAKDOWN OF FUNDING SOURCES AS AT 31 DECEMBER
20092010
2.00%
0.59%
2.07%
85.19%
-
10.15%
100%
1.32%
0.70%
2.31%
84.68%
0.18%
10.81%
100%
236,777,936
125,512,349
414,620,408
15,198,534,272
31,874,560
1,940,983,172
17,948,302,697
The Group’s income tax for the financial year 2010 amounted to
LBP 45.35 billion (USD 30.09 million), compared to LBP 28.69 billion
(USD 19.03 million) for the financial year 2009. Deferred tax on
associates and subsidiaries’ profits for the financial year 2010
amounted to LBP 7.64 billion (USD 5.07 million), compared to
LBP 5.79 billion (USD 3.84 million) for the financial year 2009.
1.9 Income Tax and Deferred Taxes
2. TOTAL BALANCE SHEET
2.1 Funding Sources
As at December 31, 2010, funding sources amounted to
LBP 17,948.30 billion (USD 11,906.01 million) compared to
LBP 15,949.96 billion (USD 10,580.40 million) as at 31 December
2009, reflecting a year-on-year increase of 12.53%.
Similar to all other Lebanese commercial banks, the principal
source of funding are customers’ creditor accounts which
represented 84.68% of total funding sources as at 31 December
2010 as compared to 85.19% as at 31 December 2009. Other
funding sources include in addition to the shareholders’ equity,
long-term credit lines provided by international banks and
financial institutions, deposits of banks and financial institutions,
subordinated loan and soft loans from the Central Bank of
Lebanon related to banks acquisitions eligible under the
merger and acquisition Lebanese laws.
319,209,718
93,610,373
330,547,147
13,587,124,218
-
1,619,465,589
15,949,957,045
Amount % %Amount
As at 31 December 2010, the Group’s Total Balance Sheet amounted to LBP 18,457.76 billion (USD 12,243.95 million) compared to
LBP 16,300.03 billion (USD 10,812.62 million) as at year-end 2009, an increase of 13.24%. At year-end 2010, the Group maintained its 4th
ranking within the Lebanese banking sector in terms of Total Balance Sheet, with a market share of 8.47%.
Management Report
> Consolidated Results of Operations
Fransabank > Annual Report 201042
in thousands of LBP
Lebanese Pounds
U.S. Dollars
Euros
Other foreign currencies
TOTAL
> FUNDING SOURCES BY CURRENCY AS AT 31 DECEMBER
20092010
43.42%
46.18%
6.32%
4.08%
100%
42.95%
46.45%
5.47%
5.13%
100%
7,709,506,485
8,336,738,955
981,302,658
920,754,599
17,948,302,697
6,925,056,245
7,365,658,328
1,008,803,822
650,438,650
15,949,957,045
Amount % %Amount
in thousands of LBP
Short-term funding (less than 1 year)
Medium-term funding (between 1 & 3 years)
Long-term funding (more than 3 years)
TOTAL
> FUNDING SOURCES BY MATURITY AS AT 31 DECEMBER
20092010
88.41%
1.16%
10.43%
100%
86.68%
1.13%
12.19%
100%
15,558,046,804
202,704,643
2,187,551,250
17,948,302,697
14,101,190,690
185,826,779
1,662,939,576
15,949,957,045
Amount % %Amount
As at 31 December 2010, 57.05% of the Bank’s major funding sources were denominated in foreign currencies, as compared to 56.58%
as at 31 December 2009.
Customers’ Creditor Accounts :
As at 31 December 2010, the Group’s customers’ creditor accounts
amounted to LBP 15,198.53 billion (USD 10,081.95 million). An
increase of 11.86% over the 31 December 2009 level of
LBP 13,587.12 billion (USD 9,013.02 million).
This increase was mainly due to the growth in time saving
accounts + LBP 837.97 billion (USD 555.87 million) and in term
deposits + LBP 471.44 billion (USD 312.73 million). As at 31
December 2010, customers’ creditor accounts represent
82.34% of the Group’s Total Assets.
As at 31 December 2010, the Group maintained its 4th ranking
within the Lebanese banking sector in terms of customers’
creditor accounts, with a market share of 8.57%.
in thousands of LBP
Customers' creditor accounts at amortized cost
Demand and sight saving accounts
Time saving accounts
Term deposits
Blocked accounts
Margins and collateral accounts
Related Parties accounts
Customers' creditor accounts designated at fair value through profit or loss
Accrued interest
TOTAL CUSTOMERS CREDITOR ACCOUNTS
Lebanese Pounds
Foreign currencies
> BREAKDOWN OF CUSTOMERS CREDITOR ACCOUNTS BY TYPE AS AT 31 DECEMBER
20092010
13,349,904,125
1,203,465,550
8,126,420,412
3,198,314,285
33,412,853
561,833,047
226,457,978
160,192,439
77,027,654
113,587,124,218
39.26%
60.74%
15,042,354,090
1,432,247,516
8,964,393,683
3,669,750,387
41,588,460
677,484,417
256,889,627
72,592,991
83,587,191
15,198,534,272
39.89%
60.11%
Fransabank > Annual Report 2010 43
in thousands of LBP
> BREAKDOWN OF CUSTOMERS CREDITOR ACCOUNTS BY AMOUNT AS AT 31 DECEMBER 2010
Total
Amount % % Cum.
2,129,529,245
1,342,905,244
1,651,221,707
2,196,301,830
2,026,813,482
2,025,221,922
3,826,540,842
15,198,534,272
14.01%
8.84%
10.86%
14.45%
13.34%
13.32%
25.18%
14.01%
22.85%
33.71%
48.16%
61.50%
74.82%
100%
FCs
Amount % % Cum.
956,196,228
619,890,951
742,102,531
1,162,083,169
1,234,802,323
1,363,250,498
3,056,813,377
9,135,139,077
10.47%
6.79%
8.12%
12.72%
13.52%
14.92%
33.46%
10.47%
17.26%
25.38%
38.10%
51.62%
66.54%
100%
LBP
Amount % % Cum.
1,173,333,017
723,014,293
909,119,176
1,034,218,661
792,011,159
661,971,424
769,727,465
6,063,395,195
19.35%
11.92%
14.99%
17.06%
13.06%
10.92%
12.70%
19.35%
31.27%
46.26%
63.32%
76.38%
87.30%
100%
A < 50 million
50 million ≤ A < 100 million
100 million ≤ A < 200 million
200 million ≤ A < 500 million
500 million ≤ A < 1.5 billion
1.5 billion ≤ A < 5 billion
A ≥ 5 billion
TOTAL 100% 100% 100%
in thousands of LBP
> BREAKDOWN OF CUSTOMERS CREDITOR ACCOUNTS BY INITIAL MATURITY AS AT 31 DECEMBER 2010
Total
Amount % % Cum.
5,931,285,085
5,227,360,812
2,900,062,499
683,144,069
297,189,595
75,905,021
83,587,191
15,198,534,272
39.03%
34.39%
19.08%
4.49%
1.96%
0.50%
0.55%
39.03%
73.42%
92.50%
96.99%
98.95%
99.45%
100%
FCs
Amount % % Cum.
3,287,522,428
3,051,848,641
1,918,856,451
532,519,390
241,076,107
60,598,104
42,717,956
9,135,139,077
35.99%
33.41%
21.00%
5.83%
2.64%
0.66%
0.47%
35.99%
69.40%
90.40%
96.23%
98.87%
99.53%
100%
LBP
Amount % % Cum.
2,643,762,657
2,175,512,171
981,206,048
150,624,679
56,113,488
15,306,917
40,869,235
6,063,395,195
43.60%
35.88%
16.18%
2.49%
0.93%
0.25%
0.67%
43.60%
79.48%
95.66%
98.15%
99.08%
99.33%
100%
P ≤ 1 month
1 month < P ≤ 3 months
3 months < P ≤ 12 months
1 year < P ≤ 3 years
3 years < P ≤ 5 years
P > 5 years
Accrued interest
TOTAL
Number of accounts
Average per account
Weighted average period
100% 100% 100%
212,075
28,591
101 days
198,938
45,920
166 days
411,013
36,978
140 days
Shareholders’ Equity :
Shareholders’ equity as at 31 December 2010 stood at
LBP 1,940.98 billion (USD 1,287.55 million), compared to
LBP 1,619.47 billion (USD 1,074.27 million) as at 31 December 2009,
reflecting a year-on-year increase of 19.85%. This year-on-year
increase resulted mainly from the 2010 net income, and the
increase of the positive cumulative change in fair value of
investment securities from LBP 304.40 billion (USD 201.92 million)
as at 31 December 2009 to LBP 341.82 billion (USD 226.75 million)
as at 31 December 2010 as well as the issuance in August 2010 of
Perpetual Non-Cumulative Convertible Redeemable Series B
Preferred shared for the amount of USD 85 million.
Management Report
> Consolidated Results of Operations
Fransabank > Annual Report 201044
in thousands of LBP
Cash
Compulsory reserves and Central Banks
Banks and financial institutions
Securities portfolio
Loans and advances to customers
TOTAL
> BREAKDOWN OF USES OF FUNDS AS AT 31 DECEMBER
20092010
0.52%
16.53%
10.02%
50.56%
22.37%
100%
0.56%
13.96%
11.08%
47.30%
27.10%
100%
97,905,375
2,439,407,579
1,935,553,966
8,265,895,217
4,736,342,603
17,475,104,740
81,336,245
2,571,560,823
1,557,969,522
7,866,941,515
3,480,742,204
15,558,550,309
Amount % %Amount
in thousands of LBP
Lebanese Pounds
U.S. Dollars
Euros
Other foreign currencies
TOTAL
> USES OF FUNDS BY CURRENCY AS AT 31 DECEMBER
20092010
43.10%
44.95%
6.76%
5.19%
100%
42.94%
45.30%
5.81%
5.95%
100%
7,504,387,406
7,916,485,103
1,014,487,037
1,039,745,194
17,475,104,740
6,705,038,855
6,994,057,178
1,051,219,724
808,234,552
15,558,550,309
Amount % %Amount
in thousands of LBP
Short-term (less than 1 year)
Medium-term (between 1 and 3 years)
Long-term (more than 3 years)
TOTAL
> USES OF FUNDS BY MATURITY AS AT 31 DECEMBER
20092010
47.31%
20.60%
32.09%
100%
47.60%
21.99%
30.41%
100%
8,317,714,706
3,842,449,069
5,314,940,965
17,475,104,740
7,361,620,126
3,204,392,816
4,992,537,367
15,558,550,309
Amount % %Amount
Cash, Central Banks, Banks and Financial Institutions :
As at 31 December 2010, Cash, Central Banks and Banks
& financial institutions amounted to LBP 4,472.87 billion
(USD 2,967.08 million) and constituted 24.23% of total
assets compared to LBP 4,210.87 billion (USD 2,793.28 million)
and 25.83% as at 31 December 2009, reflecting a year-on-
year increase of 6.22%. To note that the Blocked deposits
with central Banks are related to the issuance by BLC Bank SAL
of 40,000 Preferred shares.
2.2 Uses of Funds
The Bank uses of its funds to comply with Central Banks regula-
tory reserve requirements, liquid short term placements with
international banks and financial institutions, loans and
advances to Customers and investment in securities portfolio.
Fransabank > Annual Report 2010 45
in thousands of LBP
Cash on hand
Compulsory reserves and Central Banks
Compulsory reserves with Central Banks
Obligatory placements
Current accounts with Central Banks
Free placements with Central Banks
Blocked deposits with Central Banks
Accrued interest
Banks and financial institutions
Current accounts with banks
Term placements with banks
Purchased checks for collection
Loans to banks
Accrued interest
TOTAL
> BREAKDOWN OF CASH, CENTRAL BANKS AND FINANCIAL INSTITUTIONS AS AT 31 DECEMBER
20092010
1.93%
61.07%
13.38%
26.63%
4.45%
16.56%
-
0.05%
37.00%
2.69%
32.55%
0.29%
1.39%
0.08%
100%
2.19%
54.54%
9.58%
26.75%
3.83%
14.32%
0.01%
0.05%
43.27%
5.14%
32.54%
0.24%
5.16%
0.19%
100%
97,905,375
2,439,407,579
428,491,739
1,196,685,870
171,254,780
640,416,745
400,000
2,158,445
1,935,553,966
230,095,048
1,455,316,794
10,706,176
231,047,979
8,387,969
4,472,866,920
81,336,245
2,571,560,823
563,381,680
1,121,457,005
187,390,239
697,151,180
-
2,180,719
1,557,969,522
113,249,966
1,370,492,670
12,458,021
58,492,444
3,276,421
4,210,866,590
Amount % %Amount
Securities Portfolio :
As at 31 December 2010, the Group’s securities portfolio, which
consists of both fixed and variable income securities,
amounted to LBP 8,265.90 billion (USD 5,483.18 million)
compared to LBP 7,866.94 billion (USD 5,218.54 million)
as at 31 December 2009, an increase of 5.07%.
Securities portfolio constituted 44.78% of total assets as
at 31 December 2010 against 48.26% as at 31 December
2009.
in thousands of LBP
Held for trading securities
Available for sale investment securities
Held to maturity investment securities
TOTAL
> BREAKDOWN OF SECURITIES PORTFOLIO BY CLASSIFICATION AS AT 31 DECEMBER
20092010
1.22%
80.84%
17.94%
100%
1.11%
82.34%
16.55%
100%
91,846,442
6,806,047,080
1,368,001,695
8,265,895,217
95,821,389
6,359,346,312
1,411,773,814
7,866,941,515
Amount % %Amount
Management Report
> Consolidated Results of Operations
Fransabank > Annual Report 201046
in thousands of LBP
Equities with variable income
Lebanese Treasury bills
Lebanese Government bonds
Government bonds – Non-resident
Banks, corporate and subordinated Eurobonds
Certificates of deposit issued by Central Bank of Lebanon
Certificates of deposit issued by commercial banks
Alternative funds
Banks and corporate bonds
Asset-backed securities
Accrued interest
TOTAL
Lebanese Pounds
Foreign currencies
> BREAKDOWN OF SECURITIES PORTFOLIO BY TYPE AS AT 31 DECEMBER
20092010
2.46%
22.02%
22.99%
-
0.34%
48.99%
0.97%
-
0.39%
0.03%
1.81%
100%
2.34%
18.03%
21.31%
-
0.62%
54.77%
0.89%
-
0.33%
0.03%
1.68%
100%
193,426,871
1,490,374,210
1,761,219,371
358,785
51,003,332
4,527,497,833
73,230,666
360,113
27,470,750
2,224,392
138,728,894
8,265,895,217
193,403,925
1,732,277,251
1,808,623,056
-
26,826,160
3,853,989,209
76,167,980
365,579
30,564,313
2,224,392
142,499,650
7,866,941,515
Amount % %Amount
66.14%
33.86%
64.03%
35.97%
Loans and Advances to Customers :
As at 31 December 2010, the Group’s loans and advances to
customers, net of provisions and unrealized interest for non-
performing loans and discount on loan book, amounted to
LBP 4,736.34 bi l l ion (USD 3,141.85 mil l ion) against
LBP 3,480.74 billion (USD 2,308.95 million) as at 31 December
2009. An increase of 36.07%.
As at 31 December 2010, the Group maintained its 5th ranking
within the Lebanese banking sector in terms of net loans and
advances to customers, with a market share of 7.16%.
Fransabank > Annual Report 2010 47
in thousands of LBP
Short term (Commercial loans & other current debtor accounts)
Medium & long term
Consumer loans
Housing loans
IFC housing loans
EPH housing loans
Housing loans to army personnel
Education loans
Loans subsidized by the Government
KAFALAT guaranteed loans
Car loan
Loans to enterprises
Other loans
Loans and advances to related parties
Substandard debts
Doubtful and bad debts
Accrued interest
TOTAL
Less :
Unrealized interest for substandard debts
Provisions and unrealized interest for doubtful and bad debts
Discount on loan book
Collective provisions for un-classified debts
NET LOANS AND ADVANCES TO CUSTOMERS
Lebanese Pounds
Foreign currencies
> BREAKDOWN OF LOANS AND ADVANCES TO CUSTOMERS BY TYPE AS AT 31 DECEMBER
23.07%
76.93%
19.06%
80.94%
20092010
1,949,191,171
1,216,382,314
240,891,170
87,177,275
426,478
189,306,332
37,924,821
1,502,459
77,222,349
67,284,651
245,186,488
204,234,091
65,226,200
170,111,276
42,099,182
984,935,097
7,519,379
4,370,238,419
(14,668,362)
(859,567,394)
(10,035,093)
(5,225,366)
3,480,742,204
2,698,676,591
1,778,742,498
336,482,259
153,678,337
316,672
277,562,505
77,742,373
11,877,930
128,248,075
90,476,587
329,480,725
358,169,306
14,707,729
153,837,034
48,222,616
852,130,093
11,169,127
5,542,777,959
(19,413,504)
(761,174,237)
(9,332,427)
(16,515,188)
4,736,342,603
Management Report
> Consolidated Results of Operations
Fransabank > Annual Report 201048
in thousands of LBP
Regular, watch and unclassified accounts
Restructured
Un-restructured
Substandard accounts
Restructured
Un-restructured
Doubtful & bad debts
Restructured
Un-restructured
Purchased loan book
Accrued interest
TOTAL LOANS AND ADVANCES TO CUSTOMERS
Less provisions, discount and unrealized interest for non performing debts :
Provisions for doubtful and bad debts
Provisions for restructured doubtful and bad debts
Provisions for Un-restructured doubtful and bad debts
Discount on loan book
Discount on restructured loan book
Discount on Un-restructured loan book
Collective Provisions
Collective provisions for doubtful and bad debts
Collective provisions for un-classified debts
Unrealized interest for doubtful and bad debts
Unrealized interest for restructured doubtful and bad debts
Unrealized interest for un-restructured doubtful and bad debts
Unrealized interest for substandard accounts
Unrealized interest for restructured substandard accounts
Unrealized interest for un-restructured substandard
NET LOANS AND ADVANCES TO CUSTOMERS
> ASSET QUALITY AS AT 31 DECEMBER
20092010
3,335,684,761
23,013,389
3,312,671,372
42,099,182
8,803,779
33,295,403
981,257,223
15,471,433
965,785,790
3,677,874
7,519,379
4,370,238,419
(889,496,215)
(223,944,541)
(6,472,987)
(217,471,554)
(10,035,093)
(433,807)
(9,601,286)
(10,585,992)
(5,360,626)
(5,225,366)
(630,262,227)
(4,158,503)
(626,103,724)
(14,668,362)
(1,140,534)
(13,527,828)
3,480,742,204
4,631,256,123
27,490,475
4,603,765,648
48,222,616
9,035,181
39,187,435
848,540,188
10,726,901
837,813,287
3,589,905
11,169,127
5,542,777,959
(806,435,356)
(195,410,642)
(1,118,056)
(194,292,586)
(9,332,427)
(121,115)
(9,211,312)
(23,295,693)
(6,780,505)
(16,515,188)
(558,983,090)
(5,438,136)
(553,544,954)
(19,413,504)
(1,655,653)
(17,757,851)
4,736,342,603
As at 31 December 2010, the Group’s doubtful and bad debts,
net of provisions, discount and unrealized interest, amounted
to LBP 81.62 billion (USD 54.14 million) compared to
LBP 115.33 billion (USD 76.51 million) as at 31 December
2009, thus a decrease of 29.23%.
As at 31 December 2010, the provisions, discount and
unrealized interest for doubtful and bad debts amounted to
LBP 770.51 billion (USD 511.12 million) against LBP 869.60 billion
(USD 576.85 million) as at 31 December 2009. This places the
coverage ratio in 2010 at 90.42% compared to 88.29% in 2009.
As at 31 December 2010, the Group’s substandard accounts,
net of unrealized interest, amounted to LBP 28.81 billion
(USD 19.11 mil l ion) compared to LBP 27.43 bi l l ion
(USD 18.20 million) as at 31 December 2009.
Fransabank > Annual Report 2010 49
Doubtful debts and purchased loans (net) to Total loans and advances to customers (net)
Doubtful debts and purchased loans (net) to Shareholders’ equity
Substandard accounts (net) to Total loans and advances to customers (net)
Provisions, discount and unrealized interest to Doubtful debts and purchased loans
Unrealized interest for substandard accounts to Substandard accounts
> ASSET QUALITY RATIOS AS AT 31 DECEMBER
> BREAKDOWN OF LOANS AND ADVANCES TO CUSTOMERS BY ECONOMIC SECTOR
20092010
3.31%
7.12%
0.79%
88.29%
34.84%
1.72%
4.21%
0.61%
90.42%
40.26%
42%
17%
6%
24%
2%
9%
31.12.10
Trade & Services
Industry
Construction
Agriculture
Retail
Miscellaneous
46%
16%
6%
21%
2%
9%
31.12.09
Trade & Services
Industry
Construction
Agriculture
Retail
Miscellaneous
in thousands of LBP
> BREAKDOWN OF GROSS LOANS AND ADVANCES TO CUSTOMERS BY AMOUNT AS AT 31 DECEMBER 2010
Total
Amount % % Cum.
855,671,306
273,171,459
362,167,784
427,031,316
675,991,917
1,352,009,508
1,596,734,669
5,542,777,959
15.44%
4.93%
6.53%
7.70%
12.20%
24.39%
28.81%
15.44%
20.37%
26.90%
34.60%
46.80%
71.19%
100%
FCs
Amount % % Cum.
460,304,504
103,488,304
142,370,780
288,759,708
571,739,693
1,194,714,287
1,305,711,507
4,067,088,783
11.32%
2.54%
3.50%
7.10%
14.06%
29.38%
32.10%
11.32%
13.86%
17.36%
24.46%
38.52%
67.90%
100%
LBP
Amount % % Cum.
395,366,802
169,683,155
219,797,004
138,271,608
104,252,224
157,295,221
291,023,162
1,475,689,176
26.79%
11.50%
14.89%
9.37%
7.07%
10.66%
19.72%
26.79%
38.29%
53.18%
62.55%
69.62%
80.28%
100%
A < 50 million
50 million ≤ A < 100 million
100 million ≤ A < 200 million
200 million ≤ A < 500 million
500 million ≤ A < 1.5 billion
1.5 billion ≤ A < 5 billion
A ≥ 5 billion
TOTAL 100% 100% 100%
3. CAPITAL ADEQUACY RATIO
The Group’s capital adequacy ratio is 12.00% as at 31 December
2010, as compared to 11.85% as at 31 December 2009. The
capital adequacy ratio is calculated according to the Central Bank
of Lebanon guidelines, which are in line with the recommendations
of the Committee on Banking Regulations and Supervisory
Practices of the Bank for International Settlements (the Basel II
Accord). On a stand alone basis, Fransabank’s capital adequacy
ratio is 14.81% as at 31 December 2010, as compared to 13.50% as
at 31 December 2009. The statutory minimum capital adequacy
ratio required by the Central Bank of Lebanon is 8%. Basel III Capital
Framework, which was designed to address the weaknesses of the
recent international financial crisis, was also considered by
Fransabank through an internal quantitative impact study that
was conducted to assess the impact of the proposed ratios and
limits on Fransabank status. Accordingly, Fransabank SAL and
Fransabank Group will be abiding by the proposed limits and
ratios as of 31 December 2010.
Management Report
> Core Banking Activities
Fransabank > Annual Report 201050
INVESTMENT AND PRIVATE BANKING
Investment, private banking and capital markets activities are
provided to Fransabank clients through its wholly-owned
investment banking subsidiary, Fransa Invest Bank (FIB) : refer to page 55.
Fransa Invest Bank investment banking activity was multi-
dimensional covering advisory and equity/debt financing to
diversified projects in both the private and the public sectors.
On the grounds of FIB’s objective to directly support the
Lebanese manufacturing industry with export potential, the
Bank was active in evaluating various proprietary equity
opportunities in the junk food, dairy products, construction
material, and jewelry sectors. FIB’s scope was also extended to
the services sector covering education and tourism. In respect
to the latter, the Bank capitalized on its solid experience and
expertise in project financing to act as the financial advisor of
two new environmental-friendly touristic projects that are
expected to be the first of their kinds outside Greater Beirut. FIB
continued being active in corporate finance through extending
loans to industrial, agriculture, hospitalization, financial, and real
estate companies. It has also acted as the advisor of Fransabank
in relation to a pioneer international trade financing transaction
that will bring, and for the first time, an international insurance
body to the Lebanese market. In addition, FIB represented
Fransabank Group in a selected committee of prime Lebanese
commercial banks for the purpose of discussing the role of the
Lebanese banking sector in the public sector’s projects initiated
under the new Public Private Partnership (PPP) scheme. The
2010 discussions evolved around the electricity distribution
service providers’ project introduced by the Ministry of Energy
& Water.
Fransa Invest Bank Private Banking and Asset Management
department was very active in brokerage trading and
structured products activities. The team of the Private Banking
and Asset Management department was involved in the
issuance of a USD Republic of Lebanon Eurobond and the
Fransabank Series B preferred shares.
6.375% March 2020 Republic of Lebanon Eurobond
Fransa Invest Bank was selected as joint lead manager along
with two other banks to issue a new Republic of Lebanon
Eurobond maturing on March 9, 2020. The objective was to
refinance the maturing March 2010 Republic of Lebanon
Eurobond. The transaction had all the makings of a landmark
deal. The issue was highly successful, and set the bar higher for
future issues. Among the most impressive achievements were:
• The book size: the transaction was three times oversubscribed
• The quality of investors: significant international participation
(international investment managers, banks and financial
institutions)
• The geographic distribution: robust demand, domestically and
internationally, including good demand from the UK,
Switzerland and US offshore
• The pricing: favorable pricing despite extraordinary market
conditions at the time. With the international spotlight on the
Greek debt crisis, investors were wary of the sustainability of
emerging markets and peripheral European finances, driving
yields up
Fransa Invest Bank role was instrumental in placing the
transaction successfully. The Bank was involved in every step
of the transaction, from pre-launching phase, close follow-up
with the Ministry of Finance, close daily follow-up with
potential investors, marketing materials and roadshow for local
investors; to launching book orders, pricing and allocation.
Fransabank Preferred Shares
Fransa Invest Bank was designated as the placement agent and
book runner for Fransabank Series B preferred shares,
successfully closed on August 6, 2010. The shares are Tier I,
non–cumulative, convertible and redeemable. The aim of the
issue was to reinforce Fransabank Group’s expansion and
development in Lebanon and in other promising markets of the
region. The success of the issue was very high in terms of book
size, quality of investors, strong international participation and
cost-effectiveness. Due to high investor demand, the offering
was oversubscribed, resulting in a final issue amount of
USD 85 million. Pricing was also very favorable, resulting in a
final dividend yield of 6.75% p.a. Demand came from both
private and institutional investors both in Lebanon and abroad,
Fransabank > Annual Report 2010 51
whereby the final allocation of the preferred shares reached
64.7% Lebanese investors and 35.3% non-Lebanese.
Brokerage and Structured Products
Fransa Invest Bank’s brokerage services expanded, resulting in
significantly higher activity in 2010 and a rise in the client base.
This was backed by higher risk appetite, favorable financial
markets and an increase in volatility that encouraged investors
to seek opportunities. FIB also continued to come up with
innovative investment solutions tailored for high-value clients
that put it ahead of the competition.
FIB, with hard work and clear vision, has developed the
investment and private banking expertise and knowledge to
benefit from Fransabank Group expansion strategy to grow its
business accordingly at home and abroad.
With Fransabank Group’s ongoing partnership with international
financing institutions (IFC, EIB, ATFP…) and the complete range
of subsidized loans, project financing and trade finance offered
to the Group’s corporate clients, newly established and existing
businesses from different sectors of the economy were able to
finance their various projects, benefiting from personalized
banking services offered at competitive rates. In addition, and in
the scope of Fransabank’s expansion strategy, corporate clients
were able to benefit from a wider market access and a more
effective trade finance activity through the Group's regional
and international subsidiaries and associate.
During 2010, the Group’s corporate loans registered a substantial
growth of 49.37% to reach USD 1.66 billion as at 31 December
2010 compared to USD 1.11 billion as at 31 December 2009.
In its continuing aim to be the supporting arm of the leading
businesses in the Lebanese economy, Fransabank has further
developed its Corporate Banking Department restructuring its
team into concentrated business units and their main task is to
provide a personalized service and an undivided attention to a
definite cluster of customers. Within this structure, the
Corporate Banking Department team has continued to treat
clients as partners offering them financial guidance and
tailoring a broad spectrum of commercial banking services to
their individual business needs.
As for Fransabank SAL, the corporate loan portfolio increased by
16.80% in direct balance sheet utilizations (loans, overdrafts ….)
to reach USD 1,072.75 million in 2010 as compared to the
previous year, distributed over the main sectors of the
Lebanese economy as follows:
The retail banking activity at Fransabank Group covers a wide
range of diversified products and services including consumer
lending products, payment cards, small and medium size
business loans, savings and insurance products, micro credits,
special services, accounts, internet banking, mobile banking,
phone banking among others. This is supported by a local
branch network of 108 branches strategically spread all over the
country and resulting in being the largest branch network in
Lebanon.
CORPORATE BANKING
Wholesale & Retail Trade
Tourism & Services
Manufacturing
Contracting & Construction
Agriculture
Other
34%
10%
13%
20%
20%
3%
RETAIL BANKING, BRANCH MANAGEMENT & SME
Management Report
> Core Banking Activities
Fransabank > Annual Report 201052
During 2010, the Group’s retail and SME loans registered a
significant growth of 28.27% to reach USD 1.42 billion as at 31
December 2010 compared to USD 1.10 billion as at 31
December 2009.
At Fransabank SAL, the Retail Banking Division continued to put
into practice its ever-expanding strategy along with its sustainable
growth approach, by focusing on clients’ specific needs and
relentlessly ensuring their ultimate satisfaction. This strategy has
unfolded exactly as intended and outstanding results were
recorded. Historically and over the past years, the retail team
succeeded in creating value to Fransabank’s clients by
anticipating their banking financial needs, while providing
them with the highest levels of professionalism and expertise.
As a result, the Retail Banking activities at Fransabank
contributed to strengthen its position as a key player in the
retail banking industry.
Local Geographical Expansion
Fransabank’s local expansion strategy comes in line with the
Bank’s overall business strategy which partially aims, on the
local level, at developing and increasing its organic growth,
either by expanding the Bank’s business activities or by enriching
its overall geographic expansion. Accordingly, and within this
geographic expansion strategy framework, three new branches
were inaugurated in 2010 as for:
• Beirut - Moussaitbeh,
• North - Zgharta &
• South – Ghazieh.
On the other hand, five new branches are going to be inaugurated
in 2011 within three different regions.
Within the Beirut region:
• Hamra Sadat
• Focheville
• Blvd. Hadi Nasrallah
Within the Mount Lebanon region:
• Bauchrieh
Within the Bekaa region:
• Daher El Ahmar
Products and Services Launched in 2010
The remarkable results achieved in 2010 were coupled with a
diversification of both the Retail and the SME products range,
be it through the introduction of new products or the amendment
of existing features and conditions, thus adapting to the ever
changing needs and demands of Fransabank’s clients.
In the retail business line, Fransabank was the first Bank to sign
three different housing loan protocols with several ministries
and Government entities. These initiatives fall within
Fransabank’s corporate social responsibility whereby the Bank
continuously seeks to contribute to the effective economic and
social development of Lebanon, as well as to the improvement
of the social conditions of all Lebanese citizens. These housing
loan protocols offer the beneficiaries very special features and
conditions.
• The housing loan for Lebanese Judges, reached following an
agreement with the Judges Cooperation Funds
• The housing loan for the Internal Security Forces, reached fol-
lowing an agreement with the Internal Security Forces
Directory
• The displaced housing loan intended for people affected by
displacement before 1990, to reconstruct, renovate, repair or
improve their homes
In order to promote rural community development, the
agricultural loan protocol was signed with the Ministry of
Agriculture. It is devoted to encourage and develop the sector
of agriculture in Lebanon, by offering a minimized interest rate
loan with personalized amount and tenor.
Engaged in the promotion of environmental sustainability,
Fransabank was the first Bank to launch energy loans for
businesses and individuals, with respect to the agreement
signed between the Ministry of Energy and the Central Bank of
Lebanon. These energy loans also feature minimized interest
rate and very flexible conditions.
The SME activities succeeded in covering and supporting the
requirements relating to non-subsidized sectors and
professionals such as traders, doctors, engineers and others, in
accordance with the new Circulars and Decrees issued by the
Central Bank of Lebanon and targeted for the SME business
Fransabank > Annual Report 2010 53
activities. As a result, and by means of “partnership”, the SME
Department introduced the Commercial Property Loan - that
falls under Decree 185 issued by the Central Bank of Lebanon,
which offers clients the needed resources to acquire/refurbish
their business premises and purchase the necessary
equipment. This mutually beneficial product gave the client an
advantage with very favorable conditions in terms of interest
rates and grace period.
Moreover, two Bancassurance products were launched in 2010:
the FransaPlus insurance product covering risks against
unexpected accidents, and the new FransaVie insurance plan
for the coverage of overdrafts.
Business Growth
In 2010, the Retail Banking Division continued to deliver the
Bank’s clients easy, secure, and pertinent solutions for their
growing financial needs, yielding a notable increase in sales
activities, positively affecting both the deposits and lending
portfolio. As a result, a favorable growth was recorded in all
business lines at the end of 2010.
Clients’ Deposits
For the past two years, the clients’ deposit portfolio growth rate
was on a substantial upward trend. Thus, between end-
December 2009 and end-December 2010, the clients’ deposits
portfolio in branches increased by 12%.
Retail Loans
The past few years witnessed a steady growth of the overall
retail lending portfolio, while retail loans surged by nearly 38%
in 2010.
Accordingly, the consumer loans portfolio increased by almost
38% at the end of 2010, compared with a year earlier, accounting
for 31% of total retail loans portfolio. The housing loans
portfolio also registered an annual increase of nearly 47% at the
end of the year 2010, representing around 44% of total retail
loans portfolio. As for the car loans portfolio, it progressed by a
yearly 25%, accounting for 21% of the total retail loans portfolio.
Payment Cards
The credit cards portfolio increased by 17% at year-end 2010 as
compared to year-end 2009, and the debit cards portfolio
increased by almost 8% at year-end 2010 as compared to year-
end 2009, resulting in an overall increase of 11% in the total
payment cards portfolio in 2010. Year-on-year, total spending
on payment cards expanded by nearly 8%.
Evolution of Retail Loans (in million of LBP)
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
02006 2007 2008 2009 2010
Credit Cards Number / Spending Volume (in million of USD)
100,000
200,000
300,000
400,000
500,000
600,000
700,000
0 0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2007 2008 2009 2010
31%
44%
4%
21%
Breakdown of Retail Loans by Type
Consumer
Housing
Car
Others
Management Report
> Core Banking Activities
Fransabank > Annual Report 201054
Bancassurance Products
At the end of 2010, the overall Bancassurance products
portfolio increased by an annual 16% approximately.
Accordingly, the Bancassurance portfolio was mainly constituted
as follows: Fransavenir (retirement saving plan) with nearly 39%,
Fransajeunesse (education saving plan) with 38%, Fransavie (life
insurance plan) with 14%, Fransaplus (life insurance plan with
accidental coverage) with 8% and Fransafuture (retirement
saving plan with investment and financial markets) with 1%.
SME Loans and Facilities
Between end-December 2009 and end-December 2010,
total SME loans and facilities portfolio significantly increased
as it achieved a remarkable growth of 46%. Accordingly, the
SME portfolio was constituted as follows: regular term loans
with nearly 33%, Kafalat loans with 28%, loans falling within
Regulation 185 issued by the Central Bank of Lebanon with
28%, and Daam loans with 11%.
It is also worth mentioning that the SME lending portfolio
was distributed on a variety of business sectors, mainly
trade with 33%, industries with 18%, agriculture with 10%,
tourism with 9% and various other sectors (e.g. education,
media, health and social services, etc.) representing altogether
30%.
Breakdown of Bancassurance Products by Type
Fransavenir
Fransajeunesse
Fransavie
Fransaplus
Fransafuture
39%
38%
1%
14%
8%
33%
28%
11%
28%
Breakdown of SME Portfolio by Type
Regular Term Loan
Kafalat
Regulation 185
Daam
Breakdown of SME Portfolio by Sector
Agriculture
Industry
Tourism
Trade
Others
18%
33%
9%
30%
10%
Management Report
> Local Subsidiaries and Associate
Fransabank > Annual Report 2010 55
BLC Bank is the local banking subsidiary of Fransabank Group. In
2010, BLC Bank continues to post record financial results
exceeding the average growth ratios of the Lebanese Alpha
Banking Group in line with management’s strategic growth
plans.
BLC Bank consolidated net income reached USD 45.3 million in
2010, registering a strong increase of 32.6% compared to 2009,
while total assets and total customers’ deposits increased
respectively by 19.6% and 14.5%, reaching USD 3.10 billion and
USD 2.60 billion. The Bank's portfolio of performing loans
registered a growth of 50% reaching USD 672 million at year
end 2010, as a result of increased lending activities in the retail
and corporate banking. This confirms BLC Bank’s active role in
the local market underscoring its involvement in financing the
productive economic sectors.
In September 2010, BLC Bank acquired 9.9% of the shares of
USB Bank PLC Cyprus to become a 94% majority shareholder in
February 2011, reflecting the Bank’s expansionary vision in the
region. This acquisition will allow BLC Bank to meet its strategic
growth objectives in a record time increasing its consolidated
balance sheet to USD 3.80 billion in total assets, USD 3.2 billion
in total customers’ deposits and USD 1.1 billion in total net
loans and advances to customers.
The success of the Bank’s strategy asserts the confidence
entrusted to BLC Bank Chairman H.E. Mr. Maurice Sehnaoui by
Fransabank Group. These excellent results in 2010 will be the
stepping stone to successfully benefit from future opportunities
and achieve the Bank’s ambitious development plans in 2011
and further.
Fransa Invest Bank is the fully owned investment and private
banking subsidiary of Fransabank Group. It aims to provide
value-added investment banking services meeting the needs
of its institutional and individual clients through a full range of
dedicated professional financial services, including:
• Corporate finance advisory encompasses mergers and
acquisitions, equity capital markets, private placements, debt
advisory, vertical/horizontal expansion, re-organization and
balance sheet re-structuring.
• Equity and debt financing opportunities for corporate and
project finance.
• Wealth management advice, expertise and solutions on a
non-discretionary basis to optimize returns on client's investments.
• Capital markets activities include full brokerage services,
available for a wide range of financial products including
currencies, bonds, stocks, commodities, futures, and options
with access to local, regional (GCC, Jordan, and Egypt) and
international markets (North America, Europe, and Asia).
FIB also provides in-house economic, market and country
research and analysis, supported by international banks and
asset managers.
Fransa Invest Bank achieved remarkable performance in 2010,
whereby total assets increased by 3.54% to reach USD 348.62 million
at the end of 2010, as compared to USD 336.69 million at the
end of 2009. Customers’ deposits increased by 5.04 % to reach
USD 254.71 million at the end of 2010, as compared to
USD 242.50 million at the end of 2009. Net income increased by
2.40% to reach USD 9.37 million in 2010, as compared to
USD 9.15 million in 2009, Return on Average Equity (ROAE)
reached 15.53% in 2010 and Return on Average Assets (ROAA)
reached 2.70%.
The Lebanese Leasing Company, a subsidiary of Fransabank
Group posted another good year in 2010, with results, excluding
income tax, nearly attaining USD one million, which was a
record since its inception over ten years ago.
The Lebanese Leasing company offers the following services:
• Financial Lease: LLC buys the machinery and equipment for
and on behalf of the clients and rents it back to them for a
period reaching up to seven years, depending on the expected
BLC BANK SAL
FRANSA INVEST BANK SAL (FIB)
LEBANESE LEASING COMPANY SAL (LLC)
Management Report
> Local Subsidiaries and Associate
lifetime of the financed equipment, with an option for its
client to buy back such equipment at a symbolic price at the
end of the lease period.
• Leaseback: LLC gives its clients the option to refinance the
existing equipment to boost their cash flow.
• Cross-border Leasing: LLC finances equipment outside
Lebanon to Lebanese contractors.
In addition, LLC also teamed up with local car rental agencies to
offer operational leases to some of their clients, a turnkey
leasing technique which combines financing and maintenance
of car and van fleets.
Regarding the year 2011, LLC looks forward to reinforcing its
business activity by widening its clientele portfolio.
Bancassurance, an associate company of Fransabank Group,
was established in 1999 by Fransabank SAL and Crédit Agricole
Assurances, the insurance company affiliated to Crédit Agricole
- France.
Bancassurance was, once again, ranked first in the bank-
insurance market based on the volume of its portfolio and third
in the life insurance market in Lebanon, as published by
Al Bayan Magazine, April 2010 issue.
In 2010, Bancassurance registered very impressive financial
results, with net profits increasing by 35.21% to USD 8.18 million,
compared with USD 6.05 million in 2009, reflecting a constant
growth over the past 8 years. Likewise, the collected premiums
increased by 9.71%, reaching USD 37.41 million during the year
2010, compared with USD 34.10 million the year earlier.
Bancassurance Products
Compulsory Life Insurance Products for Loans
The compulsory life insurance products for loans covers the
Bank in case of death or total permanent disability of the
borrower in all types of loans: personal loan, housing loan,
housing loan with the Public Housing Establishment, Kafalat
loans, university loan, among others. In 2010, Bancassurance
launched a life insurance product covering housing loans for
refugees, Judges and Internal Security Forces members, a
tailor-made life insurance product on overdraft.
Term Life Products
The term life products are non-refundable plans intended for
family protection in case of death or permanent disability of the
insured. Bancassurance offers two types of term life products:
the ordinary term life insurance (Fransavie) and the personal
accident insurance (Fransaplus).
Saving and Life Insurance Products
These saving and insurance products allow the insured to
secure a decent and comfortable retirement (Fransavenir) or to
secure his children’s future university education
(Fransajeunesse), while benefiting from a life insurance to
protect his family. The unit link products (Fransafuture) are
intended for the constitution of a capital that meets the
financial plans of the insured, granting him investment
opportunities in international financial markets, while ensuring
his life and protecting his family. In 2010, Bancassurance added
to the educational plan an additional and optional schooling
cover securing the schooling tuitions of the child in case of
death or total permanent disability of the insured.
Sogefon is the real estate service company, subsidiary of
Fransabank Group. Sogefon devoted and qualified team
managed to liquidate a substantial share of Fransabank
properties, at market value and succeeded in maintaining a
remarkable profit margin of 41 % in 2010, the same as achieved
in 2009 despite the slowdown in real estate transactions in the
second half of the year 2010.
With the increase of property acquisitions in 2010, Sogefon now
manages an extensive real estate portfolio, and will devote all
its efforts to market a substantial part of these assets.
Fransabank > Annual Report 201056
BANCASSURANCE SAL
SOCIÉTÉ GÉNÉRALE FONCIÈRE SAL (SOGEFON)
Management Report
> Overseas Subsidiaries and Associate
Fransabank > Annual Report 2010 57
FRANSABANK (FRANCE) SAIn 2010, Fransabank Group continued to dynamically pursue its
expansion strategy, spreading through 8 countries other than
Lebanon, with Cyprus being the latest addition to Fransabank’s
international network consisting of:
5 subsidiaries in France, Algeria, Syria, Belarus and currently
Cyprus
1 associate bank in Sudan
2 representative offices in Cuba and Libya
In September 2010, BLC Bank SAL (74.83% owned by
Fransabank) acquired 9.9% of the Cypriot USB Bank PLC, further
strengthening the Group’s position in Europe. This participation
increased to 93.85% in February 2011. As at end of 2010, total
assets of USB Bank PLC reached USD 721.2 million and its
shareholders’ equity attained USD 35 million, while being
operational through 16 local branches.
Total assets of Fransabank foreign subsidiaries currently
account for 16% of the Group’s total assets. In fact, the Group’s
foreign entities achieved in 2010 a much satisfactory
performance despite the unfavorable economic conditions. In
what concerns Fransabank Syria and Fransabank OJSC, efforts
were deployed during 2010 towards expanding their local
network of branches. Following the inauguration of a branch in
Oran, the second largest city in Algeria at the beginning of 2010,
Fransabank El Djazaïr enlarged its corporate customer base,
which translated into a substantial growth of activity.
Moreover, during the 4th quarter of 2010, Fransabank SAL’s
Board of Directors has approved to open branches in Iraq and
the related implementation process has been initiated. The
Bank is also contemplating to diversify more its international
footprints by entering West & Central Africa.
In conclusion, being a mother company, Fransabank SAL, in its
designated supervisory role, is conducting periodic on-site
missions at its subsidiaries, relating to AML, Risk Management,
Audit, etc..., to ascertain their compliance with the norms and
regulations, and provide, when necessary, the technical support
for that purpose. In addition to that, Fransabank SAL
continuously seeks to increase the synergies amongst the
Group’s entities.
The year 2010 continued to reflect a weakened global
economic climate, though recovery signs started to be felt
around year end. In this difficult and uncertain environment,
Fransabank (France) focused on consolidating its business
relations with corporate customers and succeeded in achieving
a notable growth of activity. On the one hand, its net loans to
customers increased by 11% in 2010 reaching Euro 120 million
as at year end v/s Euro 108 million at end 2009, and the volume
of clients’ documentary credits it dealt recorded a 37% increase,
compared with a 32% decline in 2009. In addition, Fransabank
(France) benefited from the established synergies with the
Group entities whereby, in particular, the number of letters of
credit processed in 2010 on behalf of Fransabank El Djazaïr
increased more than seven folds compared to 2009. As a result,
an annual growth of 29% was recorded in the Bank’s 2010 net
profits, which stood at Euro 1.64 million in 2010 compared to
Euro 1.27 million in 2009.
During 2010, the Bank pursued its development strategy to
expand its client base in West and Central Africa and therefrom
diversify its portfolio. With this end in view, a mission was
organized to the Democratic Republic of Congo, which
prospects promise to be favorable.
Finally, the continuous support of the Bank’s shareholders
allowed Fransabank (France) to cope with the requirements
imposed by the newly set extra restrictive regulations,
particularly with respect to the maximum exposure that a
French bank is allowed to take on financial institutions.
Management Report
> Overseas Subsidiaries and Associate
Fransabank > Annual Report 201058
Fransabank El Djazaïr, which is the only Lebanese Bank
subsidiary in Algeria, operates through two branches, in the
capital Algiers and since January 2010 in Oran, the second
largest Algerian city. The Bank is further planning to open a
branch in Constantine in North-East Algeria and two new
branches in Algiers.
During 2010, Fransabank El Djazaïr successfully developed its
corporate customer base and its loans to customers registered
consequently a notable increase by 169%, standing at USD
144.2 million at end 2010 up from USD 53.7 million at end 2009.
The volume of documentary credits dealt by the Bank on behalf
of its clients grew by 335%, reaching USD 458.5 million during
the whole year of 2010, compared with USD 105.5 million in
2009. This substantial increase was also partly contributed to by
the regulation issued in July 2009 by the Central Bank of Algeria
‘Supplementary Finance Act’, confining all import transactions
to documentary credits. The said law has also prohibited
Algerian banks from conducting retail banking activities, except
for housing loans.
The staff at Fransabank El Djazaïr was timely and adequately
reinforced in order to meet this rapid growth of activity and to
efficiently respond to customers’ needs and expectations. Its
number passed from 82 at end 2009 to 120 at end 2010.
Fransabank El Djazaïr net profits recorded USD 5 million in 2010,
compared with USD 1.1 million in 2009 (+355%).
Fransabank Syria operates through a network of seven branches
covering five major Syrian districts, two of which are in Aleppo,
one in each of Homs, Tartus and Latakia, in addition to two
branches in Damascus.
Through this network, Fransabank Syria offers the full array of
commercial banking services, including retail, corporate and
trade finance. These include a large range of retail products,
including personal and specialized loans, car and housing loans,
along with corporate and SME financing, whether large
syndicated loans, project financing or small startups financing
as well as trade finance and investment schemes. Leasing is
among Fransabank Syria’s target plans. Moreover, the Bank
offers its agents credit card systems - issuing & acquiring - and
shall soon provide internet banking services.
With more than USD 500 million of total assets in a couple of
years since Fransabank Syria started its operations, the Bank
succeeded in reflecting the willingness of Fransabank Group to
have a prominent role in the Syrian market within a relatively
brief span.
Following several regulatory measures taken in 2010 concerning
capital increase schemes and other relevant issues, Fransabank
Syria shall raise its capital to SYP 5.25 billion (+/- USD 115 million)
by mid 2011.
FRANSABANK SYRIA SAFRANSABANK EL DJAZAÏR SPA
Fransabank > Annual Report 2010 59
Belarus recorded a GDP real growth rate of 7.6% in 2010
compared to 0.2% in 2009 . However, its current account
registered a deficit of USD 8 billion in 2010 versus USD 6.4 billion
in 2009 which direct impacts were an increase of its gross
foreign debt to USD 28.5 billion, representing 52% of GDP and
a shrinking of the country’s official foreign exchange reserves by
23% to USD 3.6 billion. The National Bank of the Republic of
Belarus managed to control fluctuations of the national currency
within narrow corridors.
During 2010, Fransabank OJSC expanded its network of
branches so to reach main Belarusian cities: 2 in Brest and 1 in
each of Grodno, Gomel and Lida.
The Bank was able to develop stronger franchise in trade
finance and retail banking, whereby net loans expanded by
147% reaching USD 39.6 million at end 2010 compared with
USD 16 million at end 2009. Total assets doubled to reach
USD 105.5 million at end 2010. As for net profits, they reached
a satisfactory level of USD 3.18 million in 2010. Shareholders’
equity stood at USD 31.2 million at end 2010.
At 31.12.2010, the number of employees at Fransabank OJSC
totaled 313.
The year 2010 was characterized by a continuing difficult
economic and political atmosphere in Sudan. The USD/ SDG
exchange rate depreciated by nearly 17.3% and inflation stood
at roughly 11%. Real GDP grew by 5.2% in 2010.
United Capital Bank realized in 2010 a major progress in the
reorganization of its core installation elements finalizing the
implementation of a new banking application iMAL from Path
Solutions thus improving its management information system.
Also, in September 2010, the Bank relocated its head office and
main branch to a new building it fully owns. The inauguration
ceremony was attended by the Sudanese Finance Minister, the
Central Bank Governor and several Sudanese businessmen.
During 2010, the Bank continued on servicing its prime
corporate clients. It arranged a syndicated facility on behalf of
White Nile Sugar Company for a total amount of Euro 60 million.
This syndication is the first of its kind in Sudan in terms of size
of participation of local and foreign banks, in addition to its
tenor. Furthermore, in December 2010 United Capital
Bank concluded an agreement with the Arab Organization for
Agricultural Development, a Pan Arab organization based in
Khartoum, which focus is the promotion of agricultural
investment in Sudan.
Despite the unfavorable local economic climate, the Bank
realized satisfactory returns in 2010. Its net profits increased by
54% to stand at SDG 32.1 million, compared to SDG 20.8 million
in 2009. As at 31.12.10, total assets amounted to SDG 879 million
v/s SDG 779 million as at 31.12.09, i.e. an increase of 13%.
Finance to customers reached SDG 396 million as at end 2010,
compared to SDG 335 million as at end 2009 (+18%).
FRANSABANK OJSC (BELARUS) UNITED CAPITAL BANK (SUDAN)
Management Report
> Risk Management
Fransabank > Annual Report 201060
Fransabank implements a forward looking corporate strategy
aimed to achieve its ambitious objectives, which targets
selective regional and international promising markets, and
develops new business activities. This strategy is commensurate
with Fransabank’s risk appetite and risk tolerance. Fransabank’s
risk management practice covers all processes by implementing
risk policies and procedures for the identification, measurement,
monitoring and management of all types of risks, mainly credit
risk, operational risk, market risk, liquidity risk, strategic risk, and
other risks arising from the diversity of its business activities in
various geographical locations: locally, regionally and
internationally, in addition to maintaining efficient capital that is
commensurate with those risks.
The Board of Directors (BOD), the Risk Management Committee
(RMC), the Senior Management, the Risk Management Division,
and the Internal Audit Department are key members in the risk
management process. Yet, the BOD is ultimately responsible for
providing overall risk management oversight; for approving the
overall risk tolerance; and for ensuring the adequacy and
effectiveness of controls implemented by Fransabank Group.
The RMC, the Audit Committee, and the Risk Management
Division, support the BOD in managing the Group’s risks.
Fransabank’s Chief Risk Officer (CRO) monitors and controls all
risk exposures and concentrations across the Bank. He has the
responsibility to assist the BOD and the Senior Management in
developing Fransabank Group’s risk policy; to promote risk
management culture; to examine risk management reports
developed by Fransabank’s subsidiaries; to conduct stress tests
on different scenarios in a systematic and continuous manner;
and to provide the BOD and the RMC with comprehensive
periodic reports highlighting the risks faced by the Group.
The risk management function, which is independent of the
business line functions, is organised in accordance with the
different risk types, mainly credit risk, operational risk, market
risk, liquidity risk, strategic risk, and other risks. Those risks are
accurately measured, closely monitored and carefully
controlled. Fransabank has established an appropriate structure
for risk management functions evidenced by its Risk
Management Division (RMD), which includes four departments:
Basel Implementation, Credit Risk, Market Risk and Operational
Risk departments. It defined a sound risk management process
to identify, measure, monitor, and report all types of risks that
Fransabank Group is facing. The RMD assumes its responsibility
by reporting to the RMC through periodic reports describing
Fransabank Group risk profile and the level of the capital
adequacy. The RMD is implementing an action plan to comply
with Basel II, the Central Bank of Lebanon and the Banking
Control Commission (BCC) requirements. The Bank complies
with Basel II Pillar I quantitative requirements, which are related
to the calculation of the Capital Adequacy Ratio (CAR) in
conformity with the BCC methodology. Fransabank has also
advanced in the implementation of the qualitative
requirements of Pillar II and Pillar III of Basel II, which cover the
Risk Management Policy and Procedures, Corporate
Governance Guidelines, Internal Capital Adequacy Assessment
Process (ICAAP) and Market Discipline.
The Credit Risk Management Department (CRMD) implements
a proactive credit risk management process evidenced by the
review it conducts on the credit files to be submitted to
Fransabank SAL Corporate Credit Committee, identification of
credit risk inherent in an individual file, and the assessment of
their impact on the economic sectors to which they belong and
on the CAR levels, should the requested facilities be approved
and used by: the borrowers. In addition, the CRMD prepares
quarterly reports that highlight the concentration by facility
type; type of claim; borrower; geographic areas; economic
sectors; facility tranches; and collateral type. Furthermore, the
CRMD monitors on daily basis all transactions that are exposed
to potential losses due to the failure of a counterparty to meet
its obligation, and closely monitors any excesses over the
authorised credit limits.
Fransabank > Annual Report 2010 61
The Market Risk Management Department (MRMD) promoted a
market risk management culture at Fransabank through the
continuous interaction with the related parties regarding the
major risks that emerge from banking operations. On a parallel
manner, the MRMD addresses several reports to ALCO and
senior management regarding analysis of interest rate risk in
the banking book and the trading book at the portfolio level, in
addition to investment reports tackling the impact of interest
rate and liquidity risks on individual investment opportunities
and their effect on Fransabank’s financial status. Furthermore,
the MRMD prepares quarterly risk reports on the major market
risk exposures.
The Operational Risk Management Department (ORMD) is
promoting a risk culture on a group-wide basis, evidenced by
the risk and control self-assessment project that has been
conducted on several processes at the level of Fransabank SAL
and its subsidiaries through dedicated missions completed by
the ORMD team. Furthermore and in compliance with
supervisory regulations, the ORMD is building up the Bank’s
loss database as a tool for assessing the Bank’s exposure to
operational risk. In parallel, the ORMD is actively participating in
Fransabank’s systems implementation process and in reviewing
newly issued policies and procedures. In addition, the ORMD
has started the development of a methodology for the
identification of Key Risk Indicators and has initiated the
process of mapping Fransabank’s activities to the Basel II
business lines in order to implement the standardized
approach for the operational risk calculation.
The Basel Implementation Department (BID) is monitoring the
Basel action plan and assisting in its implementation. Periodic
reports related to Fransabank SAL and its subsidiaries, including
the capital management process, the allocation of capital
charge to each risk category, and the stress tests conducted for
various scenarios and their effect on CAR, were provided to the
RMC. Moreover, assessment visits were undertaken to
Fransabank subsidiaries in order to follow up on their risk
management process and Basel implementation. Furthermore,
Basel III capital framework, which was designed to address the
weaknesses of the recent international financial crisis, was also
considered by Fransabank through an internal quantitative
impact study that was conducted to assess the impact of the
proposed ratios and limits on Fransabank status. Furthermore,
Fransabank Management is considering enhancing the risk
monitoring systems by acquiring a comprehensive risk
management solution.
Management Report
> AML Compliance
Objectives and Guidelines
The main purpose of Fransabank Group’s Anti-Money
Laundering Policy is to establish, within the Group, the essential
standards fighting money laundering operations and terrorism
financing. Should the applicable anti-money laundering laws
and regulations of any country/jurisdiction require higher
standards, Fransabank Group's overseas subsidiaries and
associate banks must conform to those standards. However, in
case any applicable laws are inconsistent with the Group’s
policy, the relevant subsidiary and associate must refer to the
Group’s Anti-Money Laundering Department to resolve the
conflict.
This Policy also encompasses the following objectives:
• Promoting a “Know Your Customer” standard as a corner-
stone principle for Fransabank Group business ethics and
practices;
• Establishing a controlled environment where no business
with a customer is performed without obtaining all the
required information relating to the customer;
• Consolidating within the Group, the AML efforts deployed by
the Fransabank entities;
• Conducting self-evaluations on the compliance with the AML
policy and procedures.
Consequently, it is essential to adopt this policy in order to
ascertain that all Fransabank Group’s entities, whatever their
geographic location, fully comply with the enacted Anti-Money
Laundering Legislation. The Group is committed to overseeing
its AML strategies, objectives and guidelines on an ongoing
basis and supporting an effective AML Policy within the Group’s
business.
Anti-Money Laundering Policy Statements
Customer’s Due Diligence and Know Your Customer
• Prior to any transaction of any type, Fransabank Group’s
entities gather and document the relevant customer
identification data, along with the background information,
the purpose and the intended nature of the business;
• Fransabank Group’s entities retain and document any
additional customer information, relevant to the assessment
of the money laundering risk by adopting a risk-based
approach.
Additional Due Diligence Measures for Financial Institutions
Fransabank Group’s entities engage to take the following
additional due diligence measures while establishing and
maintaining correspondent relations:
• Gathering sufficient documentary evidence on a respondent
institution, to avoid any relationships with “shell banks”;
• Enquiring about the good reputation of a respondent
institution from public sources of information, including
whether it has been subject to a money laundering or
terrorist financing investigation or other regulatory action;
• Verifying, on a periodic basis, that the respondent institution
is implementing sufficient and effective procedures to fight
money laundering and terrorist financing.
Monitoring and Reporting of Suspicious Transactions/Activity
• Fransabank Group’s entities apply due diligence measures in
case of any unusual or suspicious transaction/activity, taking
into account the legal framework of the concerned institution;
• All suspicious transactions/activity complying with the
laws/regulations of the respective jurisdiction are reported;
• The Group’s AML Department is notified of all suspicious
transactions/activity when doubts arise.
Training
• Training sessions are periodically organized for all Fransabank
Group’s employees to enforce an up-to-date compliance
culture;
• Attendance and training documentation and records are kept
for future reference.
Fransabank > Annual Report 201062
Management Report
> Human Resources
At Fransabank, we have long put our faith in our human capital,
and believed it is the most valuable asset and most solid
foundation. Being a cornerstone in the Bank’s development
and expansion strategy, hiring and retaining individuals of great
merit remained an essential asset reflected in the Bank’s vision
statement and strategies.
Consequently, during the year, Fransabank Group population
expanded by 10.15%, reaching 2702 employees in 2010,
compared with 2453 in 2009.
The Human Resources Division continued to provide an
environment of continuous learning, and ensure the build-up
of a strategically motivated, polyvalent and professional human
capital. The HR policy regarding internal training consists in
decentralizing its training activities, by providing sessions on a
regular basis and independently according to every region’s
needs. Within this context, Training and Development offered
a “Train-the-Trainer” seminar, intended for the capacity building
of selected employees from all regions – Beirut, Mount
Lebanon, North, Bekaa, South, as well as for Fransabank Group
overseas subsidiary and associate. Thus, skilled trainers were
formed out of them, qualified to conduct workshops where
needed, ensuring training customization and continuity. These
“Train-the-Trainer” workshops also allow reducing transportation
costs of Beirut-borne trainers, saving commuting time, reducing
traffic accidents and offering optimal training customization
adapted to the local environment and business needs, among
others benefits.
In order to build the capacities of the human capital, maintain
the Bank’s competitive edge, and break through the daily
routine, Training and Development offered a series of internal
seminars to the Bank’s employees during 2010. These internal
seminars (including Central Bank of Lebanon Decree 103
mandated securities examination training and review sessions)
numbered 108 sessions and totaled 16,850 hours.
As for external training, 78 external seminars were held for a
total of 2,517 hours.
In summary, both internal and external trainings were mainly
about banking and financial techniques representing 75%,
marketing and selling skills 12%, management and behavioral
skills 8%, foreign languages 3%, information technology 2% and
economic and financial education less than 1%.
Fransabank > Annual Report 2010 63
53%47%
Gender Breakdown
MaleFemale
SecuritiesCustomer Relationship ManagementPlastic CardsLoans, Services & SME LoansBranch LaboratoryBancassuranceLegal AspectsRegional Credit Officer
Supervisory SkillsSenior Management Development ProgramPreferred SharesInformation SecurityTrain the Trainer Plastic CardsAnti-Money LaunderingIncome Compensation
21%
13%8%
7%
5%
13%13%
1%1%1%1%
1%2%3%
10%
Internal Seminars by Topic
Banking & Financial TechniquesForeign LanguagesManagement & Behavioral SkillsInformation TechnologyEconomic & Financial EducationMarketing & Selling Skills
46%
2%3%4%
21%
24%
Breakdown of External Training
Management Report
> Human Resources
Fransabank > Annual Report 201064
Talent Management
Talent Management is a practice consisting in selecting new
recruits or recently hired employees (with a total experience
at Fransabank ranging from 1 to 5 years) whose career path
is yet to be determined or ascertained. Talent are high profile
individuals, selected based on a combination of personal
skills, educational background and banking knowledge.
Training and Development seeks to exploit and enhance
their existing capabilities, constantly monitoring their
potential career progress purposes. In 2009, 140 talent were
uncovered, and 16 more were discovered in 2010, thus the
total number of talent reached 156 individuals, divided as
follows:
Total training hours, both internal and external, registered an
increase of 23.07%, reaching 19,367 in 2010, compared with
15,736 in 2009.
Training to Fransabank Group Employees fromOverseas Subsidiaries and Associate
The Training and Development Department at Fransabank also
received employees from Fransabank Group overseas
subsidiaries and associate and offered them specialized
on-the-job training in the various branches and departments,
in order to strengthen their capacities, each in his own field,
share the best practices and mobilize Fransabank Group
population around shared objectives.
Central Bank of Lebanon Decree 103
The Training & Development Department at Fransabank
enrolled 95 employees in the Securities Examination
Certification Program related to Decree 103 issued by the
Central Bank of Lebanon, and 53 out of them passed it,
representing a 56% success rate.
Training to Future Generations
Training and Development provided a summer internship
program to 247 students from various universities, with the
objective of forging strong links with the world of higher
education, enabling students to discover its activities and
values; moreover, it is actively recruiting new talent.
20%
26%
8%
23%
11%
12%
Interns Breakdown by Regions
Head OfficeBeirutMount LebanonNorthBekaaSouth
6%
22%
7%
46%
19%
Interns Breakdown by University
LAUAUBLUUSJOthers
Evolution of Total Training Hours 2008-2010
Year 2010Year 2009Year 2008Internal TrainingExternal Training
2,51
7
6,75
58,14
0
8,98
1
16,1
65
16,8
50
Fransabank > Annual Report 2010 65
Moreover, after evaluating all the departments (excluding HRD),
T&D discovered 76 additional talent.
Potentials Development
High potential individuals are existing employees who
exhibited an exceptional competence in their functions,
and were thus carefully chosen by T&D to occupy higher
positions in the short and medium term. Accordingly,
Training & Development identified and ascertained the
potential of 202 individuals.
Polyvalence Development
Polyvalence is an advanced concept where an employee
assumes, when needed, multiple functions at the same
time, both for contingency purposes and productivity
improvement. In 2010, 190 polyvalent employees were
distributed according to the following graph. Moreover, 50
new polyvalent employees shall be selected in 2011.
31%
29%
10%
18%
12%
Talents Breakdown by Region
BeirutMount LebanonBekaaNorthSouth
27%
38%
8%
18%
9%
Potentials Development by Region
BeirutMount LebanonBekaaNorthSouth
23%
41%
9%
11%
16%
Polyvalence Development by Region
BeirutMount LebanonBekaaNorthSouth
Continuous Education as a Principle
Consistent with Fransabank’s vision of encouraging employees
to further develop their professional skills, the Human
Resources Division committed itself for many years to extend
financial support to all the employees interested in obtaining a
professional certification or a higher Degree. As a matter of fact,
the HRD grants eligible employees financial facilities equivalent
to a value of 40 salaries, to be reimbursed on a period of 10
years with zero interest.
Human Resources Projects Development
Striving, as customary, to improve the Bank’s competitive edge,
The Human Resources Division embarked on a series of key
projects, with the most crucial ones described below:
1. Human Resources Management System: The objective of
the HRMS is to develop, update, and automate human
resources processes and centralize them as part of a unique
system including a single consolidated database.
> Information& Communication Technology
Fransabank > Annual Report 201066
The mission of the Information and Communication
Technology (ICT) Division is to ensure that Fransabank Group’s
entities maintain their competitive edge by providing the latest
technology adopted in the banking sector. Consequently,
equipped with state-of-the-art information technology
systems, the Group’s entities are well-disposed to provide a
diversified portfolio of banking products and high quality
services to their customers.
In 2010, the ICT Division gave a high priority to the improvement
of the security and availability of the overall information
technology systems. Moreover, the continuous enhancement
of the staff productivity, efficiency and collaboration is an
unbroken achievement that started a couple of years ago and
remains one of the main objectives for the coming years.
In order to enable Fransabank Group’s entities to provide
unified and standardized services to their customers, the
following projects were implemented:
• The ICT Division, in collaboration with the E-banking unit,
implemented and is in the process of finalizing the steps to
launch two new and advanced Internet banking solutions for
the investment arm of Fransabank, Fransa Invest Bank and for
Fransabank Group’s subsidiary in Syria, Fransabank Syria.
• The ICT Division is continuously supporting and providing
management, consulting and implementation services to
Fransabank’s subsidiaries in Algeria, Syria and Belarus.
• The ICT Division carried out a major restructuring project for
Fransabank OJSC (Belarus). The main objective of such
project is to give the said Bank competitive advantage and
enable it to offer the latest and most efficient banking
products and services.
• The ICT Division collaborated and worked closely with the IT
Department of Fransabank's Group banking subsidiary in
Lebanon, BLC Bank, to create synergy and cooperation
regarding the acquisition and implementation of new IT
solutions.
2. HRD Policies and Procedures: The entire set of human
resources policies, procedures, structures, formats and work-
flows were thoroughly reviewed in 2010, and subsequently
enhanced and updated to reflect the Bank’s evolving situation.
3. Grading and Competences: The objective of the grading
and competences project, as set forth by the Association of
Banks in Lebanon, is to allocate functions in a two-dimensional
structure, to promote a form of standardization, to simplify
benchmarking processes and to allow career planning for
employees, while offering consistency across functions, in
different job families, through proper scoring methodologies.
4. The Entrance Exam Automation Project: In line with HRD’s
policy of continuous process improvement and productivity
enhancement, Fransabank decided to upgrade its existing
entrance exam in early 2010, and automate it, by acquiring CSP
Solutions’ Exam Manager® Software.
5. The Transportation / Vacation Automation System: The
purpose of this ongoing project is to ensure effective and
accurate management of staff transportation allowance and
vacation requests / balance. Moreover, paperwork is effectively
minimized and responses on requests are faster.
Management Report
> Human Resources
Fransabank > Annual Report 2010 67
On the other hand, several advanced applications were initiated
during the past couple of years and implemented in 2010.
• An advanced Call center/CRM solution was launched and
made available to Fransabank’s customers on March 2010. It
allowed the Bank to better understand its customer’s needs,
while improving its customer services, satisfaction and
retention. This system had an excellent impact in the areas
of unified contact center, marketing and sales, through the
automation of the marketing process and customer services,
thus improving the internal and external customer support.
During the first quarter of 2011, the functions of the CRM
solution were expanded to include the efficiency
enhancement in the bill collection process. Most importantly,
the CRM gave the branches a 360 degree view of their
customer base, allowing to strengthen customers’ relations
and to offer the right products and services to the right
customers at the right time, as well as being able to respond
to their queries in a quick and efficient manner.
• An advanced and integrated credit cards and merchant
management solution was implemented to offer new and
improved credit card products and services. The merchant
management solution is in the final stages of completion and
will be soon initiated.
• A new banking core solution, SAB is in the process of
implementation and integration with the Bank’s existing
infrastructure and applications.
• A comprehensive and integrated enterprise resource
planning application is being finalized with the collaboration
of several business departments from the Bank. The
new system ensures a sound management of the Human
Resources Division, namely payroll, recruitment cycle,
manpower planning, leave management and employees’
self-service and training. This solution is expected to be
launched by the third quarter of 2011. It enables the
Administration and Purchasing Department to fully
automate and better manage the full life cycle of fixed assets,
procurement process, maintenance and the complete
financial aspect from purchase orders, contracts handling, to
payables and receivables.
In order to face the growing security threats in Lebanon and the
region, and to comply with the local regulations and international
recommendations regarding the Business Continuity Planning,
Fransabank Group embarked in a wide-range exercise for the
mother company, local, regional and international subsidiaries
and associate. The ultimate objective of the Business Continuity
Plan is to elaborate and test a well-structured and coherent
plan, which will enable Fransabank Group’s entities to quickly
and efficiently recover in case of an unforeseen disaster or
emergency that interrupts normal business operations. To do
so, it is essential to assess the Group’s exposure in times of dis-
asters or emergency situations and regarding critical business
processes, and to determine the repercussions inherent to the
loss of service or below-the-standard customer service. As a
matter of fact, Fransabank SAL is in the process of finalizing a
disaster site, using one of the existing Fransabank locations,
where a duplicate IT infrastructure will be hosted and from
where a considerable number of key personnel can operate in
case the headquarters is not operational. According to the plan,
this site will be transformed from a cold site status, where data
is daily restored on the backup servers, into a full hot site status
able to successfully handle the bulk of the Bank’s operations in
case of a disaster affecting the headquarters. In addition to that,
and in line with the projected growth of Fransabank Group, the
Board of Directors issued a decision to build a Disaster Recovery
Site representing a replica of each entity’s headquarters.
At the organizational level, the ICT Division was still seeking to
acquire talented and highly skilled individuals and to invest in
the training of its professional staff to strengthen their
capabilities and skills. Thus, the ICT personnel will be well
equipped in technology, and, consequently disposed to fully
support and serve the growing demand of the stakeholders’
community of Fransabank Group.
Save the wastewaterNearly 97% of the world’s water is salty or otherwise undrinkable.
Another 2% is locked in ice caps and glaciers. That leaves us just 1%
for all of humanity’s needs.
Source: www.benefits-of-recycling.com.
Fransabank > Annual Report 201070
Independent Auditors’ Report
> Report on the financial statements
We have audited the accompanying consolidated financial statements
of Fransabank SAL, and its subsidiaries (The “Group”) which comprise
the consolidated statement of financial position as at December 31,
2010, and the consolidated income statement, the consolidated
statement of comprehensive income, consolidated statement of
changes in equity and the consolidated statement of cash flows for the
year then ended, and a summary of significant accounting policies and
other explanatory information.
> Management’s responsibility for the financial statements
Management is responsible for the preparation and fair presentation of
these financial statements in accordance with International Financial
Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
> Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. We conducted our audit in
accordance with International Standards on Auditing. Those standards
require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
To the Shareholders
Fransabank SAL
Beirut, Lebanon
Fransabank > Annual Report 2010 71
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements, within
the framework of local banking laws. The procedures selected depend
on the auditor’s judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
> Opinion
In our opinion, the consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Fransabank SAL
as of December 31, 2010, and of its financial performance and its
consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards.
Beirut, Lebanon
April 8, 2011
B. D. O. Deloitte & Touche
Fransabank > Annual Report 201072
Financial Statements
> Consolidated Statement of Financial Positionas at December 31,
2,652,897,068
1,499,152,008
95,821,389
58,817,514
3,480,742,204
6,359,346,312
1,411,773,814
113,482,239
47,039,352
189,101,540
192,333,734
55,651,275
143,872,028
16,300,030,477
401,435,169
366,326,284
375,876,728
2009Notes 2010
> ASSETS
LBP’000
Cash and Central Banks 5 2,537,312,954
Deposits with banks and financial institutions 6 1,699,576,783
Trading assets 7 91,846,442
Loans to banks 8 235,977,183
Loans and advances to customers 9 4,736,342,603
Available for sale investments 10 6,806,047,080
Held to maturity investments 10 1,368,001,695
Customers' liability under acceptances 11 230,195,669
Investments in associates 12 45,828,336
Assets acquired in satisfaction of loans 13 209,439,064
Property and equipment 14 266,882,161
Intangible assets 15 55,266,864
Other assets 16 175,044,273
TOTAL ASSETS 18,457,761,107
FINANCIAL INSTRUMENTS WITH OFF-FINANCIAL POSITION RISKS
Documentary and commercial letters of credit 40 589,821,848
Guarantees and standby letters of credit 40 371,294,759
Forward contracts 392,262,163
Fransabank > Annual Report 2010 73
330,547,147
162,712,400
13,424,411,818
113,482,239
412,820,091
-
198,618,966
37,972,227
14,680,564,888
420,000,000
10,000,000
140,750,000
17,113,885
123,814,947
2,547,675
304,396,470
242,390,633
144,760,203
1,405,773,813
213,691,776
1,619,465,589
16,300,030,477
2009Notes 2010
> LIABILITIES
LBP’000
Deposits and borrowings from banks 17 414,620,408
Liabilities designated at fair value through profit or loss 18 73,136,366
Customers' accounts at amortized cost 19 15,125,397,906
Customers' acceptance liability 11 230,195,669
Other borrowings 20 362,290,285
Subordinated loan 21 31,874,560
Other liabilities 22 237,105,254
Provisions 23 42,157,487
TOTAL LIABILITIES 16,516,777,935
> EQUITY
Share capital – Ordinary shares 24 420,000,000
Share capital – Preference shares 26 18,500,000
Issue premium on preference shares 26 260,387,500
Shareholders’ cash contribution to capital 25 17,113,885
Reserves 27 155,398,845
Special reserve 28 3,990,675
Cumulative change in fair value of investment securities 29 341,818,315
Retained earnings 303,517,452
Net profit for the year 31 198,868,068
Equity attributable to the owners of the Bank 1,719,594,740
Non-controlling interests 30 221,388,432
TOTAL EQUITY 1,940,983,172
TOTAL LIABILITIES AND EQUITY 18,457,761,107
Fransabank > Annual Report 201074
Financial Statements
> Consolidated Income StatementFor the Financial Year ended December 31,
887,941,701
(571,954,589)
315,987,112
74,751,952
(23,072,609)
51,679,343
17,264,688
(9,855,561)
46,580,904
421,656,486
(5,020,459)
11,747,971
(1,214,349)
751,765
598,924
428,520,338
(136,801,983)
(70,040,742)
(29,748,850)
(342,473)
191,586,290
(28,686,061)
(5,785,026)
157,115,203
144,760,203
12,355,000
157,115,203
2009Notes 2010LBP’000
Interest income
Interest expense
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net interest and other gain/(loss) on trading portfolio
Net interest and other gain/(loss) on financial instruments
designated at fair value through profit or loss
Other operating income
Net financial revenues
Allowance for impairment of loans and advances
Write-back of impairment loss on loans and advances
Bad debts expense
Write-back of discount on loan portfolio purchased
Write-back of impairment loss on loans off financial position
Net financial revenues after impairment of loans and advances
Staff costs
Administrative expenses
Depreciation and amortization
Provisions for charges (net)
Profit before income tax
Income tax expense
Deferred tax on associates and subsidiaries' profits
NET PROFIT FOR THE PERIOD
Attributable to:
Owners of the Bank
Non-controlling interests
1,009,312,058
(615,926,242)
393,385,816
94,205,629
(24,460,476)
69,745,153
8,690,713
(7,756,622)
87,812,349
551,877,409
(23,386,148)
15,432,980
(77,135)
1,692,748
218,120
545,757,974
(160,931,818)
(85,586,893)
(24,148,650)
(2,388,788)
272,701,825
(45,354,969)
(7,635,902)
219,710,954
198,868,068
20,842,886
219,710,954
33
34
35
36
37
38
39
9
9
9
14,15,16
6, 10, 16, 23
22
31
31
31
Fransabank > Annual Report 2010 75
Financial Statements
> Consolidated Statement of Comprehensive IncomeFor the Financial Year ended December 31,
Notes
39
12
157,115,203
336,822,110
(3,425,253)
(48,414,570)
2,624,526
1,800,062
289,406,875
446,522,078
416,612,698
29,909,380
446,522,078
20092010LBP’000
Profit for the year
Other comprehensive income:
Net change in fair value of available for sale investment securities
Change in fair value recycled to profit and loss
Deferred tax
Net change in currency translation adjustment
Unrealized gain of associates reported directly on equity
TOTAL COMPREHENSIVE INCOME
Attributable to:
Owners of the Bank
Non-controlling interests
219,710,954
74,647,293
(28,775,672)
(7,042,680)
(15,346,833)
335,141
23,817,249
243,528,203
222,423,327
21,104,876
243,528,203
Fransabank > Annual Report 201076
Financial Statements
> Consolidated Statement of Changes in EquityFor the Financial Year ended December 31,
Equity Attributable to
LBP’000
ReservesCapital
PreferenceShares
CapitalOrdinary
Shares
Shareholders’ Cash
Contributionto Capital
IssuePremium
PreferenceShares
96,185,040
-
-
391,033
-
3,134
26,025,901
(1,414,687)
2,624,526
123,814,947
-
-
-
5,882
-
-
47,098,275
(1,461,491)
142,959
(14,201,727)
155,398,845
17,113,885
-
-
-
-
-
-
-
-
17,113,885
-
-
-
-
-
-
-
-
-
-
17,113,885
140,750,000
-
-
-
-
-
-
-
-
140,750,000
-
-
119,637,500
-
-
-
-
-
-
-
260,387,500
10,000,000
-
-
-
-
-
-
-
-
10,000,000
-
-
8,500,000
-
-
-
-
-
-
-
18,500,000
420,000,000
-
-
-
-
-
-
-
-
420,000,000
-
-
-
-
-
-
-
-
-
-
420,000,000
Balance as at January 1, 2009
Dividends paid – Ordinary shares
Dividends paid – Preference shares
Effect of acquisition of additional equity interest
Deferred liabilities
Other movement
Allocation of 2008 profit
Reallocation between reserves and retained earnings
Comprehensive income for the year 2009
BALANCE AS AT DECEMBER 31, 2009
Dividends paid - Ordinary shares
Dividends paid - Preference shares
Issuance of preference shares
Effect of acquisition of additional equity interest
Deferred liabilities
Prior years adjustments
Allocation of 2009 profit
Reallocation between reserves and retained earnings
Additional revaluation surplus
Comprehensive income for the year 2010
BALANCE AS AT DECEMBER 31, 2010
Fransabank > Annual Report 2010 77
the Owners of the Parent
Total Equity
CumulativeChange in
Fair Value ofInvestment
Securities
TotalProfit for theYear (Group)
RetainedEarnings
Special Reserve
Non-Controlling
Interests
125,139,638
(3,687,105)
-
61,278,990
911,874
138,999
-
-
29,909,380
213,691,776
(5,937,494)
-
-
(8,094,165)
480,428
50,645
-
-
92,366
21,104,876
221,388,432
1,015,359,380
(21,000,000)
(7,537,500)
142,776
2,275,411
(78,952)
-
-
416,612,698
1,405,773,813
(21,000,000)
(12,813,750)
128,137,500
(4,332,196)
1,546,642
(283,555)
-
-
142,959
222,423,327
1,719,594,740
36,968,563
-
-
-
-
-
-
-
267,427,907
304,396,470
-
-
-
-
-
-
-
-
-
37,421,845
341,818,315
124,892,599
(21,000,000)
(7,537,500)
-
-
-
(96,355,099)
-
144,760,203
144,760,203
(21,000,000)
(12,813,750)
-
-
-
-
(110,946,453)
-
-
198,868,068
198,868,068
169,449,293
-
-
(248,257)
2,275,411
(82,086)
67,781,523
1,414,687
1,800,062
242,390,633
-
-
-
(4,338,078)
1,546,642
(283,555)
62,405,178
1,461,491
-
335,141
303,517,452
-
-
-
-
-
-
2,547,675
-
-
2,547,675
-
-
-
-
-
-
1,443,000
-
-
-
3,990,675
1,140,499,018
(24,687,105)
(7,537,500)
61,421,766
3,187,285
60,047
-
-
446,522,078
1,619,465,589
(26,937,494)
(12,813,750)
128,137,500
(12,426,361)
2,027,070
(232,910)
-
-
235,325
243,528,203
1,940,983,172
Fransabank > Annual Report 201078
Financial Statements
> Consolidated Statement of Cash FlowsFor the Financial Year ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year before tax 272,701,825
Adjustments for:
Unrealized gain on trading assets 37 (2,120,565)
Share in profits of associates 12 (8,992,528)
Depreciation, amortization and write-off 14,15,16 24,148,650
Amortization of deferred charges on business acquisition 16 4,459,364
Impairment / (write back) allowance of loans and advances to customers 9 6,260,420
(Write back) / impairment allowance of banks 6 (76,244)
Impairment allowance of investment in securities 10 29,964
Impairment allowance of property and equipment 14 65,308
Realized income on business acquisition 16 (7,728,744)
Gain on disposal of property and equipment (1,115,609)
Loss on disposal of intangible assets 248,737
Gain on disposal of assets acquired in satisfaction of loans (9,021,352)
Gain on disposal of part of equity interest in an associate -
Gain on increase of equity interest in subsidiary -
Provisions 14, 16, 23 6,708,806
Interest expense 34, 38 623,682,864
Interest income 33, 37 (1,014,412,097)
Dividend income 37, 39 (6,649,109)
(111,810,310)
Net decrease in trading assets 7 6,011,073
Net (increase) / decrease in loans to banks 8 (172,555,535)
Net increase in loans and advances to customers 9 (1,292,435,747)
Net increase in investment securities 10 (360,766,727)
Net increase in other assets 16 (31,944,735)
Net decrease / (increase) in compulsory deposits with Central Banks 5 130,305,371
Net increase in deposits and borrowings from banks 17 81,919,327
Net (decrease) / increase in deposits at FVTPL 18 (87,453,152)
Net increase in deposits at amortized cost 19 1,692,449,965
Net decrease in pledged deposits 6 -
Net increase / (decrease) in other liabilities 22 12,084,776
Proceeds from disposal of foreclosed assets 22,952,705
Settlement of provisions 23 (2,507,182)
(113,750,171)
2009Notes 2010LBP’000
191,586,290
(10,889,336)
(7,579,190)
29,748,850
-
(7,479,277)
131,375
126,269
-
-
(95,832)
22,975
(13,477,277)
(14,100)
(2,002,191)
3,208,779
581,841,712
(893,260,389)
(6,761,844)
(134,893,186)
496,188
24,145,268
(861,086,762)
(1,606,106,657)
(36,239,632)
(139,618,102)
167,196,731
267,757
2,694,763,431
4,045,837
(1,441,221)
33,519,424
(2,896,670)
142,152,406
Fransabank > Annual Report 2010 79
Interest paid (613,983,109)
Interest received 1,010,788,107
Dividends received 14,551,865
Income tax paid 22 (34,150,843)
Net cash provided from operating activities 263,455,849
CASH FLOWS FROM INVESTING ACTIVITIES
Amounts and costs paid in business acquisition 16 (6,065,313)
Proceeds from disposal of property and equipment 3,614,867
Proceeds from disposal of part of equity interest in associate -
Paid-up share in subsidiaries 3A (11,935,272)
Net decrease / (increase) in placements with banks 385,485,040
Acquisition of property, plant and equipment 14 (87,575,123)
Acquisition of intangible assets 15 (3,171,060)
Net cash provided from / (used in) investing activities 280,353,139
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of preferred shares 26 128,137,500
Net (decrease) / increase in other borrowings 20 (51,516,090)
Increase in subordinated loan 31,874,560
Cash invested by minority in subsidiaries -
Dividends paid 32 (39,751,244)
Net cash provided from financing activities 68,744,726
Net increase in cash and cash equivalents 612,553,714
Unrealized translation adjustment in foreign subsidiaries (12,489,746)
Cash received from acquiring of subsidiaries -
Cash and cash equivalents beginning of year 2,417,880,261
CASH AND CASH EQUIVALENTS END OF YEAR 42 3,017,944,229
2009Notes 2010LBP’000
(563,163,116)
1,100,896,246
9,711,098
(32,888,207)
656,708,427
-
1,306,728
250,598
(54,453,342)
(76,785,037)
(40,903,104)
(2,214,510)
(172,798,667)
-
28,282,793
-
46,409,342
(32,224,605)
42,467,530
526,377,290
4,381,232
33,441,529
1,853,680,210
2,417,880,261
Fransabank > Annual Report 201080
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
1. GENERAL INFORMATION
Fransabank SAL (the “Bank”) is a Lebanese joint-stock company
registered in the Trade Register under Number 25699 and in the
Central Bank of Lebanon list of banks under number 1. The
consolidated financial statements of the Bank comprise the
Bank and its subsidiaries (the “Group”). The Group is primarily
involved in investment, corporate and retail banking.
The Bank’s registered address is Fransabank Center, Hamra, P.O.
Box 11-0393 Beirut, Lebanon.
2. ADOPTION OF NEW AND REVISED INTERNATIONALFINANCIAL REPORTING STANDARDS (IFRSs)
2.1 Standards and Interpretations effective for thecurrent period with no effect on the financialstatements
The following new and revised standards, interpretations have
been adopted in the current period with no material impact on
the disclosures and amounts reported for the current and prior
years but may affect the accounting for future transactions or
arrangements:
Amendments to IFRS 2 Share-based Payment – Group Cash-
settled Share-based Payment Transactions.
The amendments clarify the scope of IFRS 2, as well as the
accounting for group cash-settled share-based payment
transactions in the separate (or individual) financial statements
of an entity receiving the goods or services when another
group entity or shareholder has the obligation to settle the award.
IFRS 3 (revised) Business Combinations and consequential
amendments to IAS 27 (revised) Consolidated and Separate
Financial Statements, IAS 28 (revised) Investments in
Associates and IAS 31 (revised) Interests in Joint Ventures.
IFRS 3 (revised) allows a choice on a transaction-by-transaction
basis for the measurement of non-controlling interest either at
fair value or at the non-controlling interests. Share of recognized
identifiable net assets of the acquiree. Contingent consideration is
measured at fair value at the acquisition date; subsequent
adjustments to the consideration are recognized against the
cost of acquisition only to the extent that they arise from new
information obtained within the measurement period about
the fair value at the date of acquisition. All other subsequent
adjustments to contingent consideration classified as an asset
or a liability are recognized in profit or loss. All acquisition-related
costs are expensed. IAS 27 (revised in 2008) requires that
transactions with non-controlling interests to be recognized
within equity, with no impact on goodwill or profit or loss.
Amendments to IAS 39 Financial Instruments: Recognition and
Measurement – Eligible Hedged Items
The amendments provide clarification on two aspects of hedge
accounting: identifying inflation as a hedged risk or portion, and
hedging with options.
IFRIC 17 Distributions of Non-cash Assets to Owners
The Interpretation provides guidance on the appropriate
accounting treatment when an entity distributes assets other
than cash as dividends to its shareholders.
IFRIC 18 Transfers of Assets from Customers
The Interpretation addresses the accounting by recipients for
transfers of property, plant and equipment from customers’ and
concludes that when the item of property, plant and
equipment transferred meets the definition of an asset from
the perspective of the recipient, the recipient should recognize
the asset at its fair value on the date of the transfer, with the
credit being recognized as revenue in accordance with IAS 18
Revenue.
Improvements to IFRSs issued in 2009 (those that are mandatory
for the first time for the financial year beginning January 1,
2010)
• Amendments to IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations – Disclosures of non-current assets
(or disposal groups) classified as held for sale or discontinued
operations.
Fransabank > Annual Report 2010 81
• Amendments to IFRS 8 Operating Segments – Disclosure of
information about segment assets.
• Amendments to IAS 1 Presentation of Financial Statements –
Current/non-current classification of convertible instruments.
• Amendments to IAS 7 Statement of Cash Flows –
Classification of expenditures on unrecognized assets.
• Amendments to IAS 17 Leases – Classification of leases of
land and buildings.
• Amendments to IAS 36 Impairment of Assets – Unit of
accounting for goodwill impairment test.
• Amendments to IAS 38 Intangible Assets – Additional conse-
quential amendments arising from revised IFRS 3. Measuring
the fair value of an intangible asset acquired in a business
combination.
• Amendments to IAS 39 Financial Instruments: Recognition
and Measurement – Treating loan prepayment penalties as
closely related embedded derivatives. Scope exemption
for business combination contracts. Cash flow hedge
accounting.
• IFRIC 9 Reassessment of Embedded Derivatives - Scope of
IFRIC 9 and revised IFRS 3.
• IFRIC 16 Hedges of a Net Investment in a Foreign Operation
– Amendment to the restriction on the entity that can hold
hedging instruments.
2.2 Standards and Interpretations in issue but notyet effective
The Group has not applied the following new standards,
amendments and interpretations that have been issued but not
yet effective:
• Amendments to IFRS 1 Limited Exemption from Comparative
IFRS 7 Disclosures for First-time Adopters.
Effective for annual periods beginning on or after July 1, 2010
• Amendments to IFRS 7 Disclosures – Transfers of Financial
Assets increase the disclosure requirements for transactions
involving transfers of financial assets. These amendments are
intended to provide greater transparency around risk exposures
of transactions when a financial asset is transferred but the
transferor retains some level of continuing exposure in the
asset. The amendments also require disclosures where
transfers of financial assets are not evenly distributed
throughout the period. Currently, the Group has not entered
into such transactions.
Effective for annual periods beginning on or after July 1, 2011
• IFRS 9 Financial Instruments issued in November 2009 and
amended in October 2010 introduces new requirements for
the classification and measurement of financial assets and
financial liabilities and for derecognition. IFRS 9 requires all
recognized financial assets that are within the scope of IAS 39
to be subsequently measured at amortized cost or fair value.
Specifically, debt investments that are held within a business
model whose objective is to collect the contractual cash
flows, and that have contractual cash flows that are solely
payments of principal and interest on the principal outstanding
are generally measured at amortized cost. All other debt
investments and equity investments are measured at their
fair values. At initial recognition, an entity may make an
irrevocable election to present in other comprehensive
income subsequent changes in the fair value of an
investment in an equity instrument that is not held for trading.
The gain or loss that is presented in other comprehensive
income includes any related foreign exchange component.
Dividends on such investments are recognized in profit or
loss in accordance with IAS 18 Revenue unless the dividend
clearly represents a recovery of part of the cost of the
investment. Amounts presented in other comprehensive
income shall not be subsequently transferred to profit or loss.
However, the entity may transfer the cumulative gain or loss
within equity.
The most significant effect of IFRS 9 regarding the classification
and measurement of financial liabilities relates to the
accounting for changes in fair value of a financial liability
(designated as at fair value through profit or loss) attributable
to changes in the credit risk of the issuer. Specifically, under
IFRS 9, for financial liabilities that are designated as at fair
value through profit or loss, the amount of change in the fair
value of the financial liability that is attributable to changes in
the credit risk of the issuer is recognized in other comprehensive
income, unless the recognition of the effects of changes in
the liability’s credit risk in other comprehensive income
would create or enlarge an accounting mismatch in profit or
loss. Changes in fair value attributable to a financial liability’s
credit risk are not subsequently reclassified to profit or loss.
Fransabank > Annual Report 201082
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
The directors anticipate that IFRS 9 will be early adopted in
the Group’s consolidated financial statements for the annual
period beginning January 1, 2011 and that its application will
have an impact on amounts reported in respect of the
Group’s financial assets as summarized under section 2.3
below.
Early adoption decided by the Group effective January 1, 2011
• IAS 24 Related Party Disclosures (as revised in 2009) modifies
the definition of a related party and simplifies disclosures for
government-related entities. The disclosure exemptions
introduced in IAS 24 (as revised in 2009) do not affect the
Group because it is not a government-related entity.
However, disclosures regarding related party transactions
and balances in these financial statements may be affected
when the revised version of the Standard is applied in future
accounting periods because some counterparties that did
not previously meet the definition of a related party may
come within the scope of the Standard.
Effective for annual periods beginning on or after January 1, 2011
• The amendments to IAS 32 titled Classification of Rights
Issues address the classification of certain rights issues
denominated in a foreign currency as either an equity
instrument or as a financial liability. To date, the Group has
not entered into any arrangements that would fall within the
scope of the amendments.
Effective for annual periods beginning on or after February 1, 2010
• Amendment to IFRIC 14 - Prepayments of a Minimum
Funding Requirement. The amendments correct an unintended
consequence of IFRIC 14 IAS 19 – The Limit on a Defined
Benefit Asset, Minimum Funding Requirements and their
Interaction.
Effective for annual periods beginning on or after January 1, 2011
• IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments provides guidance regarding the accounting for
the extinguishment of a financial liability by the issue of equity
instruments. In particular equity instruments issued under
such arrangements will be measured at their fair value, and
any difference between the carrying amount of the financial
liability extinguished and the fair value of equity instruments
issued will be recognized in profit or loss. To date, the Group
has not entered into transactions of this nature.
Effective for annual periods beginning on or after July 1, 2010
• Improvements to IFRSs issued in 2010 - Amendments to: IFRS
3; IFRS 7; IAS1; IAS 27; IAS 34; IFRIC 13.
Most of the amendments are effective for annual periods
beginning on or after January 1, 2011
2.3 Impact of the adoption of IFRS 9 effectiveJanuary 1, 2011 on the amounts reported
As discussed in section 2.2 above, the directors anticipate that
IFRS 9 will be adopted in the Group’s consolidated financial
statements for the annual period beginning January 1, 2011.
Management preliminary assessment of the impact of the
application of IFRS 9 is summarized as follows:
• In accordance with the provisions of IFRS 9, adoption by the
Group in 2011 will be applied retrospectively and comparative
amounts will not be restated as permitted by IFRS 9.
• Effective January 1, 2011 the Group’s available for sale financial
assets under IAS 39 will be classified as financial assets
through profit or loss and as amortized cost. Accordingly it is
expected that the cumulative change in fair value in relation
to these available for sale financial assets amounting to LBP
360.54 billion as of December 31, 2010 will be reclassified to
retained earnings to the extent of approximately LBP 55.04
billion and the remaining amount (along with the cumulative
deferred tax charge of approximately LBP 46.02 billion) will
be offset against those financial assets which will be
reclassified as amortized cost.
• Effective January 1, 2011 part of the Group’s financial assets
classified as amortized cost (held to maturity) under IAS 39
will be classified as financial assets through profit or loss.
Accordingly, the related change in fair value gain estimated
at approximately LBP 3.38 billion will be booked as an
adjustment to retained earnings as at January 1, 2011 net of
tax effect.
Fransabank > Annual Report 2010 83
3. SIGNIFICANT ACCOUNTING POLICIES
Statement of Compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(IFRSs).
Basis of Measurement
The consolidated financial statements have been prepared on
the historical cost basis except for the following:
- Land and buildings acquired in years prior to 1993 are
measured at their revalued amounts based on market prices
prevailing during 1995.
- Financial assets and liabilities designated at fair value through
profit and loss.
- Available for sale financial assets are measured at fair value.
- Derivative financial instruments are measured at fair value.
The principal accounting policies are set out below:
A. Basis of Consolidation:
The consolidated financial statements of Fransabank SAL
incorporate the financial statements of the Bank and enterprises
controlled by the Bank (its subsidiaries). Control is achieved
when, among other things, the Bank has the power to govern
the financial and operating policies of an entity so as to obtain
benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from
the effective date of acquisition or up to the effective date of
disposal, as appropriate.
The consolidated subsidiaries consist of:
During 2010, the Bank increased its share in the equity stake of
Fransabank OJSC by 17.79% through acquisition of shares from
a related party.
Where necessary, adjustments are made to the financial
statements of the subsidiaries to bring their accounting policies
into line with those used by other entities of the Group.
All intra-group transactions balances, income and expenses are
eliminated in full on consolidation.
Non-controlling interests in the net assets (excluding goodwill)
of consolidated subsidiaries are identified separately from the
Group’s equity therein. Non-controlling interests that are present
ownership interests and entitle their holders to a proportionate
share of the entity's net assets in the event of liquidation may be
initially measured either at fair value or at the non-controlling
interests' proportionate share of the recognised amounts of the
acquiree's identifiable net assets. The choice of measurement
Fransa Invest Bank SAL Lebanon 99.99 99.99 SpecializedBank
Fransabank (France) SA France 59.98 59.98 Banking
Lebanese Leasing Lebanon 87.47 87.47 Financial Company SAL Leasing
Switch and Electronics Lebanon 99.60 99.60 Financial Services SAL Services
Sogefon SAL Lebanon 99.88 92.88 Real Estate Company
Fransabank Insurance Lebanon 99.70 99.70 InsuranceServices Co. SAL
Fransabank El Djazaïr SPA Algeria 67.99 67.99 Banking
BLC Bank SAL & its Lebanon 74.83 74.81 BankingSubsidiaries (BLC Services SAL,
BLC Finance SAL & Lati Bank SAL)
Express SARL Lebanon 98.35 98.35 Restaurant
Fransabank Syria Syria 48.00 48.00 Banking
Fransabank OJSC Belarus 80.00 62.21 Banking
Company Country ofIncorporation
% of Ownership2010 2009
BusinessActivity
Fransabank > Annual Report 201084
basis is made on a transaction-by-transaction basis. Other types
of non-controlling interests are measured at fair value or, when
applicable, on the basis specified in another IFRS. Non-
controlling interests consist of the amount of those interests at
the date of the original business combination and their share of
changes in equity since the date of the combination. Total com-
prehensive income/(loss) attributable to the non-controlling
interests are allocated to the non-controlling interests even if
this results in the non-controlling interests having a deficit
balance.
B. Business Combinations:
Business combinations are accounted for using the acquisition
method as at the acquisition date, which is the date on which
control is transferred to the Group. The cost of the business
combination is measured as the aggregate of the fair values (at
the date of exchange) of assets given, liabilities incurred or
assumed, and equity instruments issued by the Group in
exchange for control of the acquiree, plus any costs directly
attributable to the business combination. The acquiree’s
identifiable assets, liabilities and contingent liabilities that meet
the conditions for recognition under IFRS 3 Business
Combinations are recognized at their fair values at the acquisition
date, except for non-current assets that are classified as held for
sale in accordance with IFRS 5 Non-current Assets Held for Sale
and Discontinued Operations, which are recognized and
measured at fair value less costs to sell.
The Group measures goodwill at the acquisition date as:
• The fair value of the consideration transferred; plus
• The recognized amount of any non-controlling interests in
the acquiree; plus if the business combination is achieved in
stages, the fair value of the existing equity interest in the
acquiree; less
• The net recognized amount of the identifiable assets acquired
and liabilities assumed.
When the excess is negative, a bargain purchase gain is
recognized immediately in profit or loss.
C. Foreign Currencies:
The consolidated financial statements are presented in
Lebanese Pound which is the Group’s reporting currency.
However, the primary currency of the economic environment in
which the Group operates (functional currency) is the U S Dollar.
In preparing the financial statements of the individual entities,
transactions in currencies other than the Group’s reporting
currency (foreign currencies) are recorded at the rates of
exchange prevailing at the dates of the transactions. At each
statement of financial position date, monetary items
denominated in foreign currencies are retranslated at the rates
prevailing at that date. Non-monetary items carried at fair value
that are denominated in foreign currencies are retranslated at
the rates prevailing at the date when the fair value was
determined. Non-monetary items that are measured in terms
of historical cost in a foreign currency are not retranslated.
Exchange differences are recognized in profit or loss in the
period in which they arise except for exchange differences on
transactions entered into in order to hedge certain foreign
currency risks, and exchange differences on monetary items
receivable from or payable to a foreign operation for which
settlement is neither planned nor likely to occur, which form
part of the net investment in a foreign operation, and which are
recognized in the foreign currency translation reserve and
recognized in profit or loss on disposal of the net investment.
For the purpose of presenting consolidated financial
statements, the assets and liabilities of the Group’s foreign
operations are expressed in Lebanese Pound using exchange
rates prevailing at the statement of financial position date.
Income and expense items are translated at the average
exchange rates for the period. Exchange differences arising, if
any, are classified as equity and recognized in the Group’s
foreign currency translation reserve. Such exchange differences
are recognized in profit or loss in the period in which the
foreign operation is disposed of.
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 85
D. Financial Assets and Liabilities:
Recognition and Derecognition:
The Group initially recognizes loans and advances, deposits,
debt securities issued and subordinated liabilities on the date
that they are originated. All other financial assets and liabilities
are initially recognized on the trade date at which the Group
becomes a party to the contractual provisions of the
instrument.
The Group derecognizes a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows on the financial
asset in a transaction in which all the risks and rewards of
ownership of the financial asset are transferred.
Debt securities exchanged against securities with longer
maturities with similar risks, and issued by the same issuer, are
not derecognized because they do not meet the conditions for
derecognition. Premiums and discounts derived from the
exchange of said securities are deferred to be amortized as a
yield enhancement on a time proportionate basis, over the
period of the extended maturities.
When the Group enters into transactions whereby it transfers
assets recognized on its statement of financial position and
retains all risks and rewards of the transferred assets, then the
transferred assets are not derecognized, for example, securities
lending and repurchase transactions.
The Group derecognizes a financial liability when its contractual
obligations are discharged, cancelled or expired.
Offsetting:
Financial assets and liabilities are set-off and the net amount is
presented in the statement of financial position when, and only
when, the Group has a legal right to set-off the amounts or
intends either to settle on a net basis or to realize the asset and
settle the liability simultaneously.
Fair Value Measurement:
Fair value is the amount agreed to exchange an asset or to
settle a liability between a willing buyer and a willing seller in
an arm’s length transaction.
When published price quotations exist, the Group measures the
fair value of a financial instrument that is traded in an active
market using quoted prices for that instrument. A financial
instrument is regarded as quoted in active market if quoted
prices are readily and regularly available and those prices
represent actual and regularly occurring market transactions
on an arm’s length basis.
If the market for a financial instrument is not active, the Group
establishes fair value by using valuation techniques. Valuation
techniques include observable market data about the market
conditions and other factors that are likely to affect the
instrument’s fair value. The fair value of a financial instrument
is based on one or more factors such as the time value of
money and the credit risk of the instrument and adjusted for
any other factors such as liquidity risk.
Impairment of Financial Assets:
Financial assets, other than those at fair value through profit or
loss, are assessed for indicators of impairment at the end of
each reporting period. Financial assets are impaired where
there is objective evidence that, as a result of one or more
events that occurred after the initial recognition of the asset, a
loss event has occurred which has an impact on the estimated
future cash flows of the asset.
Objective evidence that an impairment loss related to financial
assets has been incurred can include information about the
debtors’ or issuers’ liquidity, solvency and business and financial
risk exposures and levels of and trends in delinquencies for
similar financial assets, taking into account the fair value of
collateral and guarantees.
For investments in equity securities, a significant or prolonged
decline in fair value below cost is objective evidence of
impairment.
Fransabank > Annual Report 201086
Impairment losses on assets carried at amortized cost are
measured as the difference between the carrying amount of
the financial assets and the present value of estimated future
cash flows discounted at the original effective interest rate.
Losses are recognized in profit or loss and reduce the carrying
amount of the asset to its estimated recoverable amount. If, in a
subsequent period, the amount of the impairment loss decreases,
the previously recognized impairment loss is reversed through
profit or loss to the extent that the carrying amount of the
investment at the date the impairment is reversed does not
exceed what the amortized cost would have been had the
impairment not been recognized.
In respect of available for sale investment securities, the
previously accumulated losses recorded under equity are
recognized in profit or loss in case of objective evidence of
impairment. Any increase in fair value subsequent to an
impairment loss is not recognized in profit or loss for available
for sale equity securities. Any increase in fair value subsequent
to an impairment loss is recognized in profit or loss for available
for sale debt securities.
Designation at Fair Value through Profit or Loss:
The Group has designated financial assets and liabilities at fair
value through profit or loss when either:
• The assets or liabilities are managed, evaluated and reported
internally on a fair value basis;
• The designation eliminates or significantly reduces an
accounting mismatch which would otherwise arise; or
• The asset or liability contains an embedded derivative that
significantly modifies the cash flows that would otherwise be
required under the contract.
Financial assets and liabilities designated at fair value through
profit or loss are initially recognized and subsequently
measured at fair value.
A description of the basis for each designation at fair value
through profit or loss is set out in the note for the relevant asset
or liability class.
E. Investment Securities:
Investment securities are initially measured at fair value plus
incremental direct transaction costs, and subsequently
accounted for depending on their classification as either held to
maturity or available for sale.
Held to Maturity Investment Securities:
Held to maturity investments are non-derivative assets with
fixed or determinable payments and fixed maturity that the
Group has the positive intent and ability to hold to maturity,
and which are not designated at fair value through profit or loss
or available for sale.
Held to maturity investments are carried at amortized cost
using the effective interest method. Any sale or reclassification
of a significant amount of held to maturity investments not
close to their maturity would result in the reclassification of all
held to maturity investments as available for sale, and prevent
the Group from classifying investment securities as held to
maturity for the current and the following two financial years,
unless the amount of held-of held to maturity is insignificant, or
close to maturity, or in case of significant deterioration in the
issuer credit worthiness, or change in statutory or regulatory
requirement or in major business combination.
Available for Sale Investment Securities:
Available for sale investments are non derivative investments
that are not designated as another category of financial assets.
Unquoted equity securities whose fair value cannot be reliably
measured are carried at cost. All other available for sale
investments are carried at fair value and unrealized gains or
losses are included in other comprehensive income and
accumulated under equity.
F. Trading Assets and Liabilities:
Trading assets and liabilities are initially recognized and sub-
sequently measured at fair value. Transaction costs are includ-
ed in the income statement. Subsequent changes in fair value
of these securities are recognized immediately in profit or loss.
Subsequent to their initial recognition, trading assets are not
reclassified, except in rare circumstances.
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 87
G. Loans and Advances:
Loans and advances are non-derivative financial assets with
fixed or determinable payments that are not quoted in an
active market. Loans and advances are disclosed at amortized
cost net of unrealized interest and after provision for credit losses
where applicable. Bad and doubtful debts are carried on a cash
basis because of doubts and the probability of non-collection of
principal and/or interest.
H. Derivative Financial Instruments:
Derivatives are initially recognized at fair value at the date a
derivative contract is entered into and are subsequently
re-measured to their fair value at each statement of financial
position date. The resulting gain or loss is recognized in profit or
loss immediately unless the derivative is designated and
effective as a hedging instrument, in which event the timing of
the recognition in profit or loss depends on the nature of the
hedge relationship. The Group designates certain derivatives as
either hedges of the fair value of recognized assets or liabilities
or firm commitments (fair value hedges), hedges of highly
probable forecast transactions or hedges of foreign currency
risk of firm commitments (cash flow hedges), or hedges of net
investments in foreign operations.
Embedded Derivatives:
Derivatives embedded in other financial instruments or other
host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of the
host contracts and the host contracts are not measured at fair
value with changes in fair value recognized in profit or loss.
Hedge Accounting:
The Group designates certain hedging instruments, which
include derivatives, embedded derivatives and non-derivatives
in respect of foreign currency risk, as either fair value hedges,
cash flow hedges, or hedges of net investments in foreign
operations. Hedges of foreign exchange risk on firm
commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the entity documents
the relationship between the hedging instrument and the
hedged item, along with its risk management objectives and its
strategy for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and on an ongoing
basis, the Group documents whether the hedging instrument
that is used in a hedging relationship is highly effective in off-
setting changes in fair values or cash flows of the hedged item.
Fair Value Hedge:
Changes in the fair value of derivatives that are designated and
qualify as fair value hedges are recorded in profit or loss
immediately, together with any changes in the fair value of the
hedged item that are attributable to the hedged risk. The
change in the fair value of the hedging instrument and the
change in the hedged item attributable to the hedged risk are
recognized in the line of the income statement relating to the
hedged item.
Hedge accounting is discontinued when the Group revokes the
hedging relationship, the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge
accounting. The adjustment to the carrying amount of the
hedged item arising from the hedged risk is amortized to profit
or loss from that date.
Cash Flow Hedge:
The effective portion of changes in the fair value of derivatives
that are designated and qualify as cash flow hedges are included
in other comprehensive income and accumulated under equity.
The gain or loss relating to the ineffective portion is recognized
immediately in profit or loss, and is included in the “other gains
and losses” line of the income statement.
Amounts previously accumulated in equity are recycled in profit
or loss in the periods when the hedged item is recognized in
profit or loss, in the same line of the income statement as the
recognized hedged item. However, when the forecast transaction
that is hedged results in the recognition of a non-financial asset
or a non-financial liability, the gains and losses previously
Fransabank > Annual Report 201088
deferred in equity are transferred from equity and included in
the initial measurement of the cost of the asset or liability.
Hedge accounting is discontinued when the Group revokes the
hedging relationship, the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge
accounting. Any cumulative gain or loss deferred in equity at
that time remains in equity and is recognized when the forecast
transaction is ultimately recognized in profit or loss. When a
forecast transaction is no longer expected to occur, the
cumulative gain or loss that was deferred in equity is
recognized immediately in profit or loss.
I. Investments in Associates:
An associate is an entity over which the Group has significant
influence and that is neither a subsidiary nor an interest in a
joint venture. Significant influence is the power to participate in
the financial and operating policy decisions of the investee but
is not control or joint control over those policies.
Investments in associates over which the Group has significant
influence are accounted for at cost and reflected on the basis of
the equity method of accounting in the consolidated financial
statements.
J. Financial Guarantees:
Financial guarantees contracts are contracts that require the
Group to make specified payments to reimburse the holder for
a loss it incurs because a specified debtor fails to make payment
when due in accordance with the terms of a debt instrument.
These contracts can have various judicial forms (guarantees,
letters of credit, credit-insurance contracts).
Financial guarantee liabilities are initially measured at their fair
value, and subsequently carried at the higher of this amortized
amount and the present value of any expected payment (when
a payment under the guarantee has become probable).
Financial guarantees are included within other liabilities.
K. Property and Equipment
Property and equipment except for buildings acquired prior to
1993 are stated at historical cost, less accumulated depreciation
and impairment loss, if any. Buildings acquired prior to 1993 are
stated at their revalued amounts, based on market prices
prevailing during 1995 less accumulated depreciation and
impairment loss, if any. Resulting revaluation surplus is reflected
under “Reserves” in equity.
Depreciation is recognized so as to write off the cost or
valuation of property and equipment, other than land and
advance payments on capital expenditures less their residual
values, if any, over the estimated useful lives of the related
assets using the straight-line method as follows:
Years
Buildings 50
Office improvements and installations 5 - 17
Furniture, equipment and machines 5 - 12
Computer equipment 3 - 5
Vehicles 5 - 10
The estimate useful life, residual values and depreciation
method is reviewed at each year end, with the effect of any
changes in estimate accounted for on a prospective basis.
The gain or loss arising on the disposal or retirement of an item
of property and equipment is determined as the difference
between the sales proceeds and the carrying amount of the
asset and is recognized in profit or loss.
L. Intangible Assets:
Computer Software:
Intangible assets consisting of computer software are amortized
over a period of 3 to 5 years and are subject to impairment
testing. Subsequent expenditure on software assets is capitalized
only when it increases the future economic benefits embodied
in the specific asset to which it relates. All other expenditure is
expensed as incurred.
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 89
Goodwill:
Goodwill represents the excess of the cost of acquisition over
the Group’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities of the acquiree. When
the excess is negative, it is recognized immediately in profit or
loss.
Goodwill is measured at cost less accumulated impairment
losses.
M. Assets Acquired in Satisfaction of Loans
Real estate property acquired through the enforcement of
security over loans and advances to customers is measured at
cost less any accumulated impairment losses. The acquisition of
such assets is regulated by the local banking authorities which
require the liquidation of these assets within 2 years from
acquisition. In case of default of liquidation the Group’s lead
regulator requires an appropriation from the yearly net income
to a special reserve that is reflected under equity.
N. Impairment of Tangible and Intangible Assets (Except
Goodwill):
At each statement of financial position date, the Group reviews
the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs to sell
and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less
than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. An impairment loss is
recognized immediately in profit or loss, unless the relevant
asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment
loss been recognized for the asset (cash-generating unit) in
prior years. A reversal of an impairment loss is recognized
immediately in profit or loss, unless the relevant asset is carried
at a revalued amount, in which case the reversal of the
impairment loss is treated as a revaluation increase.
O. Impairment of Goodwill:
Goodwill is not amortized but is reviewed for impairment at
least annually. For the purpose of impairment testing, goodwill
is allocated to each of the Group’s cash-generating units that is
expected to benefit from the synergies of the combination.
Cash generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there
is an indication that the unit may be impaired. If the recoverable
amount of the cash-generating unit is less than its carrying
amount, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit and then
to the other assets of the unit on a pro-rata basis on the
carrying amount of each asset in the unit. Any impairment loss
for goodwill is recognized directly in profit or loss in the
consolidated income statement. An impairment loss
recognized for goodwill is not reversed in subsequent periods.
P. Employees' Benefits:
Obligations for contributions to defined employees’ benefits
are recognized as an expense on a current basis.
Employees' End-of-Service Indemnities: (Under the Lebanese
jurisdiction)
The provision for staff termination indemnities is based on the
liability that would arise if the employment of all the staff were
terminated consensually at the statement of financial position
Fransabank > Annual Report 201090
date. This provision is calculated in accordance with the
directives of the Lebanese Social Security Fund and Labor laws
based on the number of years of service multiplied by the
monthly average of the last 12 months remunerations and less
contributions paid to the Lebanese Social Security National
Fund and interest accrued by the Fund.
Defined Benefit Plans: (Under other jurisdictions)
Obligations in respect of defined benefit pension plans is calcu-
lated separately for each plan by estimating the amount of
future benefit that employees have earned in return for their
service in the current and prior periods; that benefit is discount-
ed to determine its present value, and any unrecognized past
service costs and the fair value of any plan assets are deducted.
Q. Provisions:
Provision is recognized if, as a result of a past event, the Group
has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
R. Revenue and Expense Recognition:
Interest income and expense are recognized on an accrual
basis, taking account of the principal outstanding and the rate
applicable, except for non-performing loans and advances for
which interest income is only recognized upon realization.
Interest income and expense include the amortization discount
or premium.
• Interest income and expense presented in the income
statement include:
- Interest on financial assets and liabilities at amortized cost.
- Interest on available for sale investment securities.
- Fair value changes in qualifying derivatives and related
hedged items when interest rate risk is the hedged risk.
• Net trading income presented in the income statement
includes:
- Interest income and expense on the trading portfolio.
- Dividend income on the trading equities.
- Realized and unrealized gains and losses on the trading
portfolio.
• Interest income and expense on financial portfolio designated
at fair value through profit or loss upon initial recognition is
recognized under net income from other financial instruments
carried at fair value.
• Fees and commission income and expense that are integral
to the effective interest rate on a financial asset or liability (i.e.
commissions and fees earned on the loan book) are included
under interest income and expense.
• Other fees and commission income are recognized as the
related services are performed.
• Dividend income is recognized when the right to receive
payment is established.
S. Income Tax:
Income tax expense represents the sum of the tax currently
payable and deferred tax. Income tax is recognized in the
income statement except to the extent that it relates to items
recognized directly in other comprehensive income, in which
case it is recognized in other comprehensive income.
The tax currently payable is based on taxable profit for the year.
Taxable profit differs from profit as reported in the consolidated
income statement because of items that are never taxable or
deductible. The Group’s liability for current tax is calculated
using tax rates and has been enacted is substantively enacted
by the end of the reporting period.
Income tax payable is reflected in the consolidated statement
of financial position net of taxes previously settled in the form
of withholding tax.
Deferred tax is recognized on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax base used in the computation of taxable
profit, and are accounted for using the statement of financial
position liability method. Deferred tax liabilities are generally
recognized for all taxable temporary differences and deferred
tax assets are recognized to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences can be utilized.
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 91
4. CRITICAL ACCOUNTING JUDGMENTS AND KEYSOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are
described in note 3, the directors are required to make judgments,
estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based
on historical experience and other factors that are considered
to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the
revision affects only that period or in the period of the revision
and future periods if the revision affects both current and future
periods.
A. Critical Accounting Judgments in Applying the
Group’s Accounting Policies:
Classification of Financial Assets:
The Group’s accounting policies provide scope for investment
securities to be designated on inception into different categories
in certain circumstances based on specific conditions.
In designating financial assets or liabilities at fair value through
profit or loss, the Group has determined that it has met one of
the criteria for this designation set out in accounting policy 3D.
B. Key Sources of Estimation Uncertainty:
The following are the key assumptions concerning the future,
and other key sources of estimation uncertainty at the statement
of financial position date, that have a significant risk of causing
a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
Allowances for Credit Losses:
Specific impairment for credit losses is determined by assessing
each case individually. This method applies to classified loans
and advances and the factors taken into consideration when
estimating the allowance for credit losses include the
counterparty’s credit limit, the counterparty’s ability to generate
cash flows sufficient to settle his advances and the value of
collateral and potential repossession. Loans collectively
assessed for impairment are determined based on losses
incurred by loans portfolios with similar characteristics.
Determining Fair Values:
The determination of fair value for financial assets for which
there is no observable market price requires the use of valuation
techniques as described in Note 3D. For financial instruments
that trade infrequently and have little price transparency, fair
value is less objective, and requires varying degrees of judgment
depending on liquidity, concentration, uncertainty of market
factors, pricing assumptions and other risks affecting the specific
instrument.
Where available, management has used market indicators in its
mark to model approach for the valuation of the Lebanese
government debt securities and Central Bank Certificates of
Deposits at fair value. The IFRS fair value hierarchy allocates the
highest priority to quoted prices (unadjusted) in active markets
for identical assets or liabilities, and the lowest priority to
unobservable inputs. The fair value hierarchy used in the
determination of fair value consists of three levels of input data
for determining the fair value of an asset or liability.
Level 1 - quoted prices for identical items in active, liquid and
visible markets such as stock exchanges,
Level 2 - observable information for similar items in active or
inactive markets,
Level 3 - unobservable inputs used in situations where
markets either do not exist or are illiquid.
Unobservable inputs are used to measure fair value to the
extent that observable inputs are not available, thereby allowing
for situations in which there is little, if any, market activity for the
asset or liability at the measurement date. However, the fair
value measurement objective should remain the same; that is,
an exit price from the perspective of a market participant that
holds the asset or owes the liability. Unobservable inputs are
developed based on the best information available in the
circumstances, which may include the reporting entity's own
Fransabank > Annual Report 201092
data. Where practical, the discount rate used in the mark to
model approach included observable data collected from
market participants, including risk free interest rates and credit
default swap rates for pricing of credit risk (both own and
counter party), and a liquidity risk factor which is added to the
applied discount rate. Changes in assumptions about any of
these factors could affect the reported fair value of the
Lebanese Government debt Securities and Central Bank
Certificates of Deposits.
Impairment of Available for Sale Equity Investments:
The Group determines that available for sale equity investments
are impaired when there has been a significant or prolonged
decline in the fair value below its cost. This determination
requires judgment. In making this judgment the Group evaluates
among other factors, the history of the Lebanese government
default with respect to government bonds and the normal
volatility in share price.
5. CASH AND CENTRAL BANKS
LBP’000
Cash on hand
Current accounts with Central Bank of Lebanon
Current accounts with Central Bank of France
Current accounts with Central Bank of Algeria
Current accounts with Central Bank of Syria
Current accounts with Central Bank of Belarus
Term placements with Central Bank of Lebanon
Term placements with Central Bank of Algeria
Term placements with Central Bank of Belarus
Blocked deposits with Central Bank of Lebanon
Accrued interest receivable
TOTAL
DECEMBER 31, 2009
of whichCompulsory/Regulatory
Deposits
Total
DECEMBER 31, 2010
of whichCompulsory/Regulatory
Deposits
Total
-
372,129,811
3,970,911
10,392,852
41,882,891
115,274
1,196,685,870
-
-
-
-
1,625,177,609
97,905,375
513,055,872
4,000,641
11,137,337
68,200,664
3,352,005
1,682,673,525
121,264,090
33,165,000
400,000
2,158,445
2,537,312,954
-
521,924,856
3,476,759
15,254,492
22,393,217
332,356
1,121,457,005
-
-
-
-
1,684,838,685
81,336,245
655,879,155
3,858,887
26,512,156
58,359,284
6,162,437
1,558,420,225
260,187,960
-
-
2,180,719
2,652,897,068
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Compulsory deposits with Central Bank of Lebanon are not
available for use in the Group’s day-to-day operations.
Compulsory deposits under current accounts with Central Bank of
Lebanon are in Lebanese Pounds and non-interest earning. These
deposits are computed on the basis of 25% and 15% of the
average weekly sight and term customers’ deposits in Lebanese
Pounds in accordance with the local banking regulations.
Regulatory deposits under term placements with Central Bank of
Lebanon are in foreign currencies and made in accordance with
local banking regulations which require banks to maintain interest
earning placements in foreign currency to the extent of 15% of
customers’ deposits in foreign currencies, certificates of deposits
and loans acquired from non-resident financial institutions.
Fransabank > Annual Report 2010 93
2011
2012
2013
2014
2015
TOTAL
TotalAverageInterest Rate %
AverageInterest Rate %
0.74
1.19
1.19
3.15
1.20
DECEMBER 31, 2010
AmountAmountMaturity
508,969,775
472,601,250
149,242,500
1,507,500
131,152,500
1,263,473,525
3.19419,200,000
-
-
-
-
419,200,000
Term placements with Central Bank of Lebanon bear the following maturities:
928,169,775
472,601,250
149,242,500
1,507,500
131,152,500
1,682,673,525
LBP Base Accounts F/Cy Base Accounts
2010
2011
2012
2013
2014
TOTAL
TotalAverageInterest Rate %
AverageInterest Rate %
0.79
-
1.17
1.17
-
DECEMBER 31, 2009
AmountAmountMaturity
558,200,850
-
472,601,250
149,242,500
-
1,180,044,600
3.02
1.17
1.16
-
1.67
368,200,000
3,391,875
753,750
-
6,030,000
378,375,625
926,400,850
3,391,875
473,355,000
149,242,500
6,030,000
1,558,420,225
LBP Base Accounts F/Cy Base Accounts
Term placement with Central Banks of Algeria and Belarus mature within one year or less.
Interest rates on term placements with Central Bank of Lebanon reprice at each coupon date.
LBP’000
LBP’000
Fransabank > Annual Report 201094
6. DEPOSITS WITH BANKS AND FINANCIAL INSTITUTIONS
20092010LBP’000
Checks in course of collection
Current accounts with banks and financial institutions
Term placements with banks and financial institutions
Term placements with related banks and financial institutions
Accrued interest receivable
Accrued interest receivable - Related parties
Regulatory allowance for country risk
TOTAL
10,706,176
230,152,369
1,455,316,794
-
3,458,765
-
(57,321)
1,699,576,783
12,458,021
113,389,251
1,345,653,245
24,839,425
2,947,817
3,534
(139,285)
1,499,152,008
2011
2012
TOTAL
TotalAverageInterest Rate %
AverageInterest Rate %
1.12
5.50
DECEMBER 31, 2010
AmountAmountMaturity
1,436,823,732
7,493,062
1,444,316,794
4.18
-
11,000,000
-
11,000,000
Term placements bear the following maturities:
1,447,823,732
7,493,062
1,455,316,794
LBP Base Accounts F/Cy Base Accounts
2010
2012
TOTAL
TotalAverageInterest Rate %
AverageInterest Rate %
1.13
5.50
DECEMBER 31, 2009
AmountAmountMaturity
1,324,943,652
11,849,018
1,336,792,670
3.96
-
33,700,000
-
33,700,000
1,358,643,652
11,849,018
1,370,492,670
LBP Base Accounts F/Cy Base Accounts
LBP’000
LBP’000
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 95
7. TRADING ASSETS
20092010LBP’000
Lebanese Treasury bills
Lebanese Government bonds
Certificates of deposit issued by Central Bank of Lebanon
Equities – Quoted
Equities – Unquoted
Accrued interest receivable
TOTAL
2,825,376
60,977,876
2,555,417
24,020,581
361,800
1,105,392
91,846,442
2,875,790
63,584,155
2,344,139
25,465,674
361,800
1,189,831
95,821,389
20092010LBP’000
Lebanese Treasury bills
Lebanese Government bonds
Certificates of deposit issued by Central Bank of Lebanon
TOTAL
84,750
1,010,911
9,731
1,105,392
83,995
1,096,572
9,264
1,189,831
20092010LBP’000
Balance January 1
Additions
Additions from acquired subsidiaries
Write back
Effect of exchange rates changes
BALANCE DECEMBER 31
139,285
-
-
(76,244)
(5,720)
57,321
-
131,375
12,178
-
(4,268)
139,285
The movement of the regulatory allowance for country risk was as follows:
Accrued interest receivable on trading assets consists of the following:
The unrealized gain on trading securities during 2010 amounted to LBP 2.1 billion and is reflected under “Net Interest and Other Gain / Loss
on Trading Portfolio” in the accompanying consolidated income statement (LBP 10.9 billion during 2009) – Note 37.
Fransabank > Annual Report 201096
8. LOANS TO BANKS
20092010LBP’000
Regular performing accounts
Regular performing accounts - Related parties
Accrued interest receivable
Accrued interest receivable - Related parties
TOTAL
152,998,021
78,049,958
231,047,979
1,755,613
3,173,591
235,977,183
56,060,848
2,431,596
58,492,444
249,555
75,515
58,817,514
Loans to banks are reflected at amortized cost and consist of the following as at December 31:
Loans to banks mature as follows:
Up to 1 year
1 to 3 years
3 years to 5 years
Beyond 5 years
TOTAL
Interest Rate %Interest Rate %
6.85
5.82
-
-
DECEMBER 31, 2010
C/V of F/CyLBPLBP’000
141,735,358
7,744,007
-
-
149,479,365
5.46
3.74
3.16
2.69
3,290,818
11,146,000
16,646,000
55,415,000
86,497,818
Up to 1 year
1 to 3 years
3 years to 5 years
Beyond 5 years
TOTAL
Interest Rate %Interest Rate %
12.35
-
13.44
-
DECEMBER 31, 2009
C/V of F/CyLBPLBP’000
16,430,690
-
16,748,105
-
33,178,795
-
-
-
5.45
208,719
-
-
25,430,000
25,638,719
20092010LBP’000
Balance January 1
Additions
Additions due to acquisition of subsidiary
Settlements
Effect of exchange rate changes
BALANCE DECEMBER 31
58,492,444
190,259,916
-
(17,380,288)
(324,093)
231,047,979
68,754,969
2,366,067
13,882,743
(26,690,218)
178,883
58,492,444
The movement of loans to banks was as follows during 2010 and 2009:
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 97
9. LOANS AND ADVANCES TO CUSTOMERS
LBP’000
Loans and advances to customers are reflected at amortized cost and consist of the following:
Regular and Watch ListRetail Customers:
Mortgage loans 509,299,887 - - - 509,299,887 313,290,461 - - - 313,290,461
Personal loans 336,482,259 - - - 336,482,259 240,891,170 - - - 240,891,170
Car loans 329,480,725 - - - 329,480,725 245,186,488 - - - 245,186,488
Credit cards 34,586,198 - - - 34,586,198 31,379,884 - - - 31,379,884
Educational loans 11,877,930 - - - 11,877,930 1,502,459 - - - 1,502,459
Overdrafts 711,326 - - - 711,326 1,242,970 - - - 1,242,970
Other 19,807,821 - - - 19,807,821 25,308,332 - - - 25,308,332
Loans to staff 8,067,341 - - - 8,067,341 8,531,142 - - - 8,531,142
Regular and Watch ListCorporate Customers:
Corporate 2,468,388,893 - - - 2,468,388,893 1,647,965,654 - - - 1,647,965,654
Small and medium enterprises 885,063,268 - - - 885,063,268 797,372,812 - - - 797,372,812
Non-PerformingLoans and Advances:
Purchased loan book 3,589,905 - - - 3,589,905 3,677,874 - - - 3,677,874
Substandard 39,187,435 (17,757,851) - - 21,429,584 33,295,403 (13,527,828) - - 19,767,575
Doubtful 673,129,409 (434,526,126) (7,976,629) (149,862,219) 80,764,435 811,603,939 (518,017,892) (8,059,495) (172,917,326) 112,609,226
Bad 164,683,878 (119,018,828) (1,234,683) (44,430,367) - 154,181,851 (108,085,832) (1,541,791) (44,554,228) -
Restructured Loansand Advances:
Regular 27,490,475 - - - 27,490,475 23,013,389 - - - 23,013,389
Substandard 9,035,181 (1,655,653) - - 7,379,528 8,803,779 (1,140,534) - - 7,663,245
Doubtful and bad 10,726,901 (5,438,136) (121,115) (1,118,056) 4,049,594 15,471,433 (4,158,503) (433,807) (6,472,987) 4,406,136
Allowance for CollectivelyImpaired Loans:
Un-Classified loans - - - (16,515,188) (16,515,188) - - - (5,225,366) (5,225,366)
Doubtful and bad - - - (6,780,505) (6,780,505) - - - (5,360,626) (5,360,626)
Accrued Interest Receivable 11,169,127 - - - 11,169,127 7,519,379 - - - 7,519,379
TOTAL 5,542,777,959 (578,396,594) (9,332,427) (218,706,335) 4,736,342,603 4,370,238,419 (644,930,589) (10,035,093) (234,530,533) 3,480,742,204
GrossAmount
UnrealizedInterest
Discount onLoan Book
ImpairmentAllowance
CarryingAmount
GrossAmount
UnrealizedInterest
Discount onLoan Book
ImpairmentAllowance
CarryingAmount
DECEMBER 31, 2009DECEMBER 31, 2010
Fransabank > Annual Report 201098
The carrying value of loans and advances to customers include
accidentally temporary debtors with carrying value amounting
to LBP 51.6 billion as at December 31, 2010 (LBP 39.1 billion as
at December 31, 2009).
The carrying value of loans and advances to customers include
loans to related parties in the aggregate of LBP 154.03 billion as
at December 31, 2010 (LBP 170.89 billion in 2009) (See Note 41)
Restructured loans represent loans with renegotiated terms
and are categorized within the same loan classification prior to
restructuring.
20092010LBP’000
Balance January 1
Additions
Additions from acquired subsidiaries
Recoveries (Note 33)
Write-off
Transfer to off financial position
Reclassification from unrealized interest to allowance for impairment
Transfer (to) / from allowance for collectively impaired loans
Change in expected contractual write-off
Effect of exchange rates changes
BALANCE DECEMBER 31
644,930,589
115,021,538
-
(7,344,609)
(139,965,956)
(1,990,516)
(35,541)
(5,218)
(32,005,773)
(207,920)
578,396,594
616,826,280
126,031,169
1,846,391
(8,406,228)
(51,805,659)
(38,365,501)
(56,461)
1,223
(1,103,318)
(37,307)
644,930,589
20092010LBP’000
Balance January 1
Additions
(Adjustments)/additions from acquired subsidiaries
Recoveries
Write-off
Transfer to off financial position
Reclassification to allowance for impairment from unrealized interest
Transfer (to) / from allowance for collectively impaired loans
Change in expected contractual write-off
Other movement
Effect of exchange rates changes
BALANCE DECEMBER 31
223,944,541
10,763,218
(740,792)
(15,392,951)
(20,267,306)
(1,215,932)
35,541
(430,546)
(727,144)
(660,365)
102,378
195,410,642
251,774,234
5,020,459
2,929,999
(11,112,717)
(20,756,130)
(5,469,903)
56,461
36,650
1,781,382
-
(315,894)
223,944,541
The movement of allowance for impairment of doubtful and bad loans during 2010 and 2009 is summarized as follows:
The movement of unrealized interest during 2010 and 2009 is summarized as follows:
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 99
20092010LBP’000
Balance January 1
Additions
Additions from acquired subsidiaries
Recoveries
Transfer from / (to) specific allowance for impairment
Transfer from / (to) unrealized interest
Transfer to unrealized interest in off financial position
Write-off
Effect of exchange rates changes
BALANCE DECEMBER 31
10,585,992
12,622,930
115,009
(40,029)
430,546
5,218
(407,025)
-
(16,948)
23,295,693
9,887,949
-
1,411,962
(635,254)
(36,650)
(1,223)
-
(40,792)
-
10,585,992
20092010LBP’000
Balance January 1
Additions
Transfer to off financial position
Recoveries
Write-off
Change in expected contractual write-off
BALANCE DECEMBER 31
10,035,093
1,138,737
(105,392)
(1,692,748)
(98,306)
55,043
9,332,427
10,655,959
-
-
(751,765)
(653,710)
784,609
10,035,093
The movement of the discount on loan book purchased during 2010 and 2009 is summarized as follows:
The movement of the allowance for collectively impaired loans during 2010 and 2009 is as follows:
Fransabank > Annual Report 2010100
10. INVESTMENT SECURITIES
Equities and preferred shares 119,473,487 48,063,503 167,536,990 - 1,507,500 1,507,500
Lebanese Treasury bills 1,251,884,654 - 1,251,884,654 235,664,180 - 235,664,180
Lebanese Government bonds - 1,029,563,990 1,029,563,990 - 670,677,505 670,677,505
Foreign Eurobonds issued by banks - 25,854,857 25,854,857 - - -
Corporate Eurobonds - 22,887,225 22,887,225 - - -
Subordinated Eurobonds - 2,261,250 2,261,250 - - -
Certificates of deposit issued
by Central Bank of Lebanon 3,643,046,951 451,910,650 4,094,957,601 125,000,000 304,984,815 429,984,815
Certificates of deposit issued by banks - 65,764,250 65,764,250 - 7,466,416 7,466,416
Alternative funds - 360,113 360,113 - - -
Corporate bonds - 27,470,750 27,470,750 - - -
Government bonds - Non-residents - - - - 358,785 358,785
Asset-backed securities - 2,224,392 2,224,392 - - -
Accrued interest receivable 84,346,394 30,934,614 115,281,008 2,811,772 19,530,722 22,342,494
TOTAL 5,098,751,486 1,707,295,594 6,806,047,080 363,475,952 1,004,525,743 1,368,001,695
DECEMBER 31, 2010
LBPLBP’000 C/V of F/Cy Total LBP C/V of F/Cy Total
Available for Sale Held to Maturity
Equities and preferred shares 119,618,195 46,450,756 166,068,951 - 1,507,500 1,507,500
Lebanese Treasury bills 1,376,741,737 - 1,376,741,737 352,659,724 - 352,659,724
Lebanese Government bonds - 1,042,048,268 1,042,048,268 - 702,990,633 702,990,633
Foreign Eurobonds issued by banks - 26,577,372 26,577,372 - 248,788 248,788
Certificates of deposit issued
by Central Bank of Lebanon 3,094,793,820 447,270,665 3,542,064,485 - 309,580,585 309,580,585
Certificates of deposit issued by banks - 68,733,790 68,733,790 - 7,434,190 7,434,190
Alternative funds - 365,579 365,579 - - -
Banks and corporate bonds - 27,701,737 27,701,737 - 2,862,576 2,862,576
Asset-backed securities - 2,224,392 2,224,392 - - -
Accrued interest receivable 74,520,672 32,299,329 106,820,001 13,705,056 20,784,762 34,489,818
TOTAL 4,665,674,424 1,693,671,888 6,359,346,312 366,364,780 1,045,409,034 1,411,773,814
DECEMBER 31, 2009
LBPLBP’000 C/V of F/Cy Total LBP C/V of F/Cy Total
Available for Sale Held to Maturity
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 101
A. Available for Sale Investments:
Quoted equities - - - - 8,330,608 - 11,544,173 3,213,565
Quoted preference shares - - - - 8,213,424 (125,712) 8,087,712 -
Unquoted equities 87,847,029 - 119,473,487 31,626,458 24,913,926 (8,813,419) 16,159,060 58,553
Unquoted preference shares - - - - 12,272,558 - 12,272,558 -
Lebanese Treasury bills 1,207,621,841 - 1,251,884,654 44,262,813 - - - -
Lebanese Government bonds - - - - 969,799,331 - 1,029,563,990 59,764,659
Foreign Eurobonds issued by banks - - - - 25,584,337 (519,555) 25,854,857 790,075
Corporate Eurobonds - - - - 22,887,225 - 22,887,225 -
Subordinated Eurobonds - - - - 2,261,250 - 2,261,250 -
Certificates of deposit issued
by Central Bank of Lebanon 3,399,656,988 - 3,643,046,951 243,389,963 429,451,303 - 451,910,650 22,459,347
Certificates of deposit
issued by banks - - - - 64,677,359 - 65,764,250 1,086,891
Alternative funds - - - - 541,133 (181,020) 360,113 -
Capital funds - - - - 390,443 (390,443) - -
Corporate bonds - - - - 26,989,459 (270,240) 27,470,750 751,531
Asset-backed securities - - - - 2,236,819 - 2,224,392 (12,427)
Accrued interest receivable 84,346,394 - 84,346,394 - 30,934,614 - 30,934,614 -
TOTAL 4,779,472,252 - 5,098,751,486 319,279,234 1,629,483,789 (10,300,389) 1,707,295,594 88,112,194
DECEMBER 31, 2010
AmortizedCost
Allowancefor
Impairment
CarryingFair
Value
CumulativeChange in Fair
ValueLBP’000Amortized
Cost
Allowancefor
Impairment
CarryingFair
Value
CumulativeChange in Fair
Value
Balances in LBP Balances in F/Cy
DECEMBER 31, 2009
AmortizedCost
Allowancefor
Impairment
CarryingFair
Value
CumulativeChange in Fair
ValueLBP’000Amortized
Cost
Allowancefor
Impairment
CarryingFair
Value
CumulativeChange in Fair
Value
Balances in LBP Balances in F/Cy
Quoted equities - - - - 20,674,017 - 24,705,188 4,031,171
Unquoted equities 87,987,868 ( 170,000) 119,618,195 31,800,327 30,500,434 (8,813,418) 21,745,568 58,552
Lebanese Treasury bills 1,313,864,364 - 1,376,741,737 62,877,373 - - - -
Lebanese Government bonds - - - - 1,005,574,965 - 1,042,048,268 36,473,303
Foreign Eurobonds issued by banks - - - - 26,827,440 (140,985) 26,577,372 (109,083)
Certificates of deposit issued
by Central Bank of Lebanon 2,890,118,984 - 3,094,793,820 204,674,836 427,100,687 - 447,270,665 20,169,978
Certificates of deposit
issued by banks - - - - 67,062,230 - 68,733,790 1,671,560
Alternative funds - - - - 541,133 - 365,579 (175,554)
Banks and corporate bonds - - - - 27,828,238 - 27,701,737 (126,501)
Asset-backed securities - - - - 2,226,102 - 2,224,392 (1,710)
Accrued interest receivable 74,520,672 - 74,520,672 - 32,299,329 - 32,299,329 -
TOTAL 4,366,491,888 (170,000) 4,665,674,424 299,352,536 1,640,634,575 (8,954,403) 1,693,671,888 61,991,716
Fransabank > Annual Report 2010102
Available for sale fixed income investments are segregated over remaining periods to maturity as follows:
Lebanese Treasury bills:Up to one year 506,176,800 505,972,285 518,185,195 8.68
1 year to 3 years 519,871,250 518,992,097 551,286,738 9.40
3 years to 5 years 135,310,000 136,407,459 137,453,199 7.10
5 years to 10 years 46,250,000 46,250,000 44,959,522 7.90
1,207,608,050 1,207,621,841 1,251,884,654Lebanese Government bonds:Up to one year 138,989,993 138,970,372 139,712,382 7.78
1 year to 3 years 175,515,271 175,606,188 177,604,524 6.36
3 years to 5 years 97,318,265 97,107,261 101,127,487 7.80
5 years to 10 years 258,877,699 268,271,983 285,010,706 8.69
Beyond 10 years 290,694,241 289,843,527 326,108,891 8.15
961,395,469 969,799,331 1,029,563,990Foreign Eurobonds issued by banks:Up to one year 15,118,969 14,907,479 14,907,479 16.97
1 year to 3 years 1,507,500 1,492,425 1,492,425 7.24
5 years to 10 years 7,537,500 7,616,581 8,403,123 7.50
Beyond 10 years 1,329,615 1,048,297 1,051,830 9.22
25,493,584 25,064,782 25,854,857Corporate Eurobonds:5 years to 10 years 15,075,000 15,729,135 15,729,135 6.25
Beyond 10 years 7,537,500 7,158,090 7,158,090 4.75
22,612,500 22,887,225 22,887,225 Subordinated Eurobonds:5 years to 10 years 2,261,250 2,261,250 2,261,250 6.75
2,261,250 2,261,250 2,261,250 Certificates of deposit issued by Central Bank of Lebanon:1 year to 3 years 1,261,727,040 1,266,427,381 1,383,228,576 10.48
3 years to 5 years 1,560,134,625 1,569,746,820 1,704,871,825 9.57
5 years to 10 years 990,000,000 992,934,090 1,006,857,200 8.07
3,811,861,665 3,829,108,291 4,094,957,601Certificates of deposit issued by banks:Up to one year 3,017,916 3,017,916 3,017,916 4.75
1 year to 3 years 61,674,902 61,659,443 62,746,334 6.85
64,692,818 64,677,359 65,764,250Corporate bonds:1 year to 3 years 299,616 29,376 29,376 7.25
3 years to 5 years 14,929,936 14,867,811 15,603,077 4.81
5 years to 10 years 4,899,739 4,864,346 5,440,027 7.40
Beyond 10 years 6,911,028 6,957,686 6,398,270 4.91
27,040,319 26,719,219 27,470,750Asset-backed securities:5 years to 10 years 2,261,250 2,236,819 2,224,392 7.25
2,261,250 2,236,819 2,224,392Capital funds:Beyond 10 years 390,443 - - 5.75
390,443 - -
DECEMBER 31, 2010
Redemption ValueAmortized Cost
(Net of Allowance for Impairment)
Net CarryingFair Value
AverageInterest Rate
%
LBP’000
Remaining period to maturity
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 103
DECEMBER 31, 2009
Available for sale fixed income investments are segregated over remaining periods to maturity as follows:
Lebanese Treasury bills:Up to one year 264,163,260 261,425,508 263,951,540 8.18
1 year to 3 years 1,028,199,250 1,026,691,270 1,086,489,011 9.34
3 years to 5 years 25,750,000 25,747,586 26,301,186 8.23
1,318,112,510 1,313,864,364 1,376,741,737Lebanese Government bonds:Up to one year 56,385,909 56,264,212 56,316,916 7.06
1 year to 3 years 352,455,706 351,607,791 353,106,462 6.96
3 years to 5 years 95,081,859 94,926,575 96,574,690 7.79
5 years to 10 years 271,590,446 281,806,667 298,894,937 9.05
Beyond 10 years 221,724,608 220,969,720 237,155,263 8.25
997,238,528 1,005,574,965 1,042,048,268Foreign Eurobonds issued by banks:Up to one year 12,555,242 12,555,242 12,555,242 15.43
1 year to 3 years 1,402,244 1,402,244 1,402,244 15.50
3 years to 5 years 3,768,750 3,748,655 3,692,979 5.00
5 years to 10 years 7,537,500 7,476,506 7,404,405 7.50
Beyond 10 years 1,507,500 1,503,808 1,522,502 5.25
26,771,236 26,686,455 26,577,372Certificates of deposit issued by Central Bank of Lebanon:Up to one year 96,000,000 95,880,248 97,572,654 11.30
1 year to 3 years 169,045,020 168,944,371 176,830,485 8.61
3 years to 5 years 2,635,698,000 2,643,440,458 2,859,092,807 10.01
5 years to 10 years 406,426,250 408,954,594 408,568,539 8.47
3,307,169,270 3,317,219,671 3,542,064,485Certificates of deposit issued by banks:Up to one year 14,924,250 14,927,474 14,946,711 7.63
1 year to 3 years 52,158,657 52,134,756 53,787,079 7.63
67,082,907 67,062,230 68,733,790Banks and corporate bonds:3 years to 5 years 20,116,581 19,977,805 19,941,172 5.23
5 years to 10 years 7,914,067 7,850,433 7,760,565 7.44
28,030,648 27,828,238 27,701,737Asset-backed securities:3 years to 5 years 2,261,250 2,226,102 2,224,392 7.25
2,261,250 2,226,102 2,224,392
Redemption ValueAmortized Cost
(Net of Allowance for Impairment)
Net CarryingFair Value
AverageInterest Rate
%
LBP’000
Remaining period to maturity
Fransabank > Annual Report 2010104
20092010LBP’000
Balance January 1
Additions
Additions from acquired subsidiaries
Write off
Effect of exchange rates changes
BALANCE DECEMBER 31
9,124,403
29,964
1,322,703
(170,000)
(6,681)
10,300,389
7,702,044
126,269
1,296,090
-
-
9,124,403
The movement of the allowance for impairment of available for sale investments was as follows:
20092010LBP’000
Lebanese Treasury bills
Lebanese Government bonds
Foreign Eurobonds issued by banks
Corporate Eurobonds
Subordinated Eurobonds
Certificates of deposit issued by Central bank of Lebanon
Certificates of deposit issued by banks
Alternative funds
Corporate bonds
Asset-backed securities
TOTAL
22,881,387
21,863,867
542,100
354,482
21,240
68,934,723
271,282
8,465
367,081
36,381
115,281,008
25,193,345
23,495,580
268,503
-
-
56,704,549
763,082
-
368,891
26,051
106,820,001
Accrued interest receivable on available for sale investments is broken down as follows as at December 31:
Certificates of deposit issued by Central Bank of Lebanon
include certificates of deposit with carrying value of LBP 47.6 billion
and nominal value of LBP 42.13 billion maturing in 2015 with a
put option exercisable at a redemption value of 91.63% of par
in year 2012. The Group follows the policy of providing annually
for the difference of 8.37% between the nominal value and the
early redemption value in 2012. Provisions booked up to 2010
year-end is reflected under “Other Liabilities” (Note 22) and
amounted to LBP 1.55 billion (LBP 1.38 billion up to 2009 year-end).
Available for sale equities comprise as at December 31, 2010 an
equity participation of 9.89% in USB Bank PLC (Cyprus) in the
amount of LBP 6.75 billion (counter-value of Euro 3,382,150)
reflected at cost and included under unquoted equity
securities. The Group concluded an agreement for the
acquisition of an additional 62.95%. In order to be able to
acquire these shares, the Bank had to proceed with a Public
Offer for acquiring up to 100% of USB Bank share capital. Upon
the approbation of regulatory authorities and the completion
of the Public Offer the total acceptance level reached the
62.95% already agreed on and an additional 21.01% of minority
shares. Hence, the Bank became a 93.85% majority shareholder
of the said bank.
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 105
B. Held to Maturity Investments:
Unquoted equities
Lebanese Treasury bills
Lebanese Government bonds
Certificates of deposit issued by Central Bank of Lebanon
Certificates of deposit issued by banks
Government bonds - Non-resident
Accrued interest receivable
TOTAL
Fair ValueFair Value
1,507,500
-
705,840,106
324,389,389
7,690,367
358,785
19,530,722
1,059,316,869
DECEMBER 31, 2010
Carrying ValueCarrying ValueLBP’000
1,507,500
-
670,677,505
304,984,815
7,466,416
358,785
19,530,722
1,004,525,743
-
245,379,705
-
125,000,000
-
-
2,811,772
373,191,477
-
235,664,180
-
125,000,000
-
-
2,811,772
363,475,952
Balances in LBP Balances in F/Cy
Unquoted equities
Lebanese Treasury bills
Lebanese Government bonds
Foreign Eurobonds issued by banks
Certificates of deposit issued by Central Bank of Lebanon
Certificates of deposit issued by banks
Corporate bonds
Accrued interest receivable
TOTAL
Fair ValueFair Value
1,507,500
-
727,557,145
234,114
325,277,707
7,594,868
3,096,554
20,784,762
1,086,052,650
DECEMBER 31, 2009
Carrying ValueCarrying ValueLBP’000
1,507,500
-
702,990,633
248,788
309,580,585
7,434,190
2,862,576
20,784,762
1,045,409,034
-
357,725,309
-
-
-
-
-
13,705,056
371,430,365
-
352,659,724
-
-
-
-
-
13,705,056
366,364,780
Balances in LBP Balances in F/Cy
At December 31, 2010 the Group had held to maturity Treasury
bills with carrying value of LBP 236 billion (LBP 319 billion as at
December 31, 2009) that are pledged against soft loans
granted by Central Bank of Lebanon in connection with the
acquisition by the Group of problematic banks – (Notes 20(f)
and 43) and provide liquidity to cover 60% of the replacement
value of buildings and equipment pertaining to its directly
damaged clients from the effect of July war on Lebanon.
Fransabank > Annual Report 2010106
DECEMBER 31, 2010
Held to maturity investments are segregated over the remaining period to maturity as follows:
Lebanese Treasury bills:Up to one year 22,223,740 22,200,930 22,732,699 7.92
1 year to 3 years 15,677,250 15,677,250 16,067,007 7.24
3 years to 5 years 197,786,000 197,786,000 206,579,999 7.88
235,686,990 235,664,180 245,379,705Lebanese Government bonds:Up to one year 110,047,500 109,928,044 110,621,779 7.78
1 year to 3 years 202,683,440 201,416,881 205,941,736 7.27
3 years to 5 years 62,259,750 62,259,750 66,848,689 9.00
5 years to 10 years 253,733,355 253,275,033 272,814,499 8.07
Beyond 10 years 43,925,535 43,797,797 49,613,403 8.25
672,649,580 670,677,505 705,840,106Certificates of deposit issued by Central Bank of Lebanon:Up to one year 125,000,000 125,000,000 125,000,000 3.73
1 year to 3 years 196,532,775 196,420,354 205,177,741 8.95
3 years to 5 years 105,525,000 108,564,461 119,211,648 10.00
427,057,775 429,984,815 449,389,389Certificates of deposit issued by banks:1 year to 3 years 7,537,500 7,466,416 7,690,367 7.63
7,537,500 7,466,416 7,690,367Government bonds - Non-resident:Beyond 10 years 358,785 358,785 358,785 4.75
358,785 358,785 358,785
Redemption Value Amortized Cost Fair ValueAverage
Interest Rate%
LBP’000
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 107
DECEMBER 31, 2009
Lebanese Treasury bills:Up to one year 319,405,020 319,371,063 323,184,211 8.42
1 year to 3 years 30,711,720 30,703,691 31,814,635 9.10
3 years to 5 years 2,560,000 2,584,970 2,726,463 8.54
352,676,740 352,659,724 357,725,309Lebanese Government bonds:Up to one year 98,289,000 98,281,900 98,239,891 7.13
1 year to 3 years 325,965,865 323,297,243 324,966,094 7.44
3 years to 5 years 67,762,125 67,756,576 71,824,633 8.99
5 years to 10 years 164,338,605 163,840,719 179,095,048 9.01
Beyond 10 years 49,955,535 49,814,195 53,431,479 8.25
706,311,130 702,990,633 727,557,145Foreign Eurobonds issued by banks:Up to one year 226,125 248,788 234,114 12.00
226,125 248,788 234,114Certificates of deposit issued by Central Bank of Lebanon:1 year to 3 years 273,415,275 277,756,522 292,141,496 9.09
3 years to 5 years 23,119,020 23,177,854 23,970,436 8.54
5 years to 10 years 8,215,875 8,646,209 9,165,775 10.00
304,750,170 309,580,585 325,277,707Certificates of deposit issued by banks:1 year to 3 years 7,537,500 7,434,190 7,594,868 7.63
7,537,500 7,434,190 7,594,868Corporate bonds:1 year to 3 years 148,628 148,628 217,345 6.00
3 years to 5 years 770,382 783,882 849,587 7.50
5 years to 10 years 1,940,190 1,930,066 2,029,622 9.34
2,859,200 2,862,576 3,096,554
Redemption Value Amortized Cost Fair ValueAverage
Interest Rate%
LBP’000
Held to maturity certificates of deposit issued by Central Bank of
Lebanon include certificates of deposit with carrying value of
LBP 108 billion and nominal value of LBP 105 billion maturing in
2015 which carry a put option exercised at a redemption value
of 91.63% of par in year 2012. The Group follows the policy of
providing annually for the difference of 8.37% between the
nominal value and the early redemption value in 2012.
Provisions booked up to 2010 year-end is reflected under
“Other Liabilities” (Note 22) and amounted to LBP 6.66 billion
(LBP 5.49 billion up to 2009 year-end).
Fransabank > Annual Report 2010108
20092010LBP’000
Lebanese Treasury bills
Lebanese Government bonds
Foreign Eurobonds issued by banks
Certificates of deposit issued by Central bank of Lebanon
Certificates of deposit issued by banks
Corporate bonds
Government bonds - Non-resident
TOTAL
2,745,513
15,729,300
-
3,793,680
28,343
-
45,658
22,342,494
13,705,056
16,823,533
6,391
3,814,631
28,343
111,864
-
34,489,818
Accrued interest receivable on held to maturity investments is segregated as follows:
20092010LBP’000
Balance January 1 47,039,352
Unrealized gain through other comprehensive income 335,141
Dividends received (7,902,756)
Share in net profit (Note 39) 8,992,528
Investment incorporated in consolidation -
Partial disposal of equity interest -
Currency translation adjustment (2,316,706)
Prior year's adjustment (booked to retained earnings) (319,223)
BALANCE DECEMBER 31 45,828,336
48,674,046
1,800,062
(2,949,254)
7,579,190
(6,021,194)
(236,498)
(1,807,000)
-
47,039,352
The movement of investments in associates is as follows:
11. CUSTOMERS’ LIABILITY UNDER ACCEPTANCES
Acceptances represent documentary credits which the Group
has committed to settle on behalf of its customers against
commitments by those customers (acceptances). The
commitments resulting from these acceptances are stated as a
liability in the statement of financial position for the same
amount.
12. INVESTMENTS IN ASSOCIATES
Investments in the associates, which are unlisted, are as follows:
Bancassurance SAL
United Capital Bank
International payment Network
TOTAL
20092009 %
9,211,328
36,702,558
1,125,466
47,039,352
Interest Held
20102010 %Country of
IncorporationLBP’000
8,637,134
35,985,405
1,205,797
45,828,336
39.99
20.00
18.80
39.99
20.00
18.80
Lebanon
Sudan
Lebanon
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 109
13. ASSETS ACQUIRED IN SATISFACTION OF LOANS
The major asset component of entities in which the Group has
acquired an equity interest in satisfaction of debts consists of
real estate properties.
The acquisition of assets in settlement of loans requires the
approval of the banking regulatory authorities and these should
be liquidated within 2 years. In case of default of liquidation, a
regulatory reserve should be appropriated from the yearly net
profits over a period of 5 years. However, the intermediary
circular No.41 has allowed banks to extend yearly appropriation
over a period of 20 years with respect to those assets acquired
through loans’ restructurings approved by Central Bank of
Lebanon or with respect to the entirety of those assets acquired
in settlement of loans provided that the Banks restructure
before 2007 year end, at least 50% of the balance of non-
performing loans outstanding at June 30, 2003. This condition
was satisfied by the Group during year 2006.
Assets acquired in satisfaction of loans have been acquired through enforcement of security over loans and advances to customers.
The movement of assets acquired in satisfaction of loans during 2010 and 2009 was as follows:
Cost:
Balance January 1, 2009 218,663,042 1,507,500 220,170,542
Additions 5,111,411 - 5,111,411
Disposals (19,335,873) (1,507,500) (20,843,373)
Transfer to property and equipment (Note 14) (1,285,314) - (1,285,314)
Balance December 31, 2009 203,153,266 - 203,153,266
Additions 34,224,676 - 34,224,676
Disposals (14,059,449) - (14,059,449)
Balance December 31, 2010 223,318,493 - 223,318,493
Impairment allowance:
Balance January 1, 2009 (14,852,952) - (14,852,952)
Retirement upon disposal 800,999 - 800,999
Write-off against unrecorded registration fees 227 - 227
Balance December 31, 2009 (14,051,726) - (14,051,726)
Retirement upon disposal 172,297 - 172,297
Balance December 31, 2010 (13,879,429) - (13,879,429)
Carrying amount:
DECEMBER 31, 2010 209,439,064 - 209,439,064
DECEMBER 31, 2009 189,101,540 - 189,101,540
LBP’000 TotalEquity InterestReal Estate
Fransabank > Annual Report 2010110
14. PROPERTY AND EQUIPMENT
Cost/Revaluation:
Land
Building
Furniture, equipment
and computer
Vehicles
Office improvements
and installations
Key money
TOTAL
Accumulated depreciation:
Building
Furniture, equipment
and computer
Vehicles
Office improvements
and installations
Key money
TOTAL
Provision for impairment:
Advance payments:
NET BOOK VALUE
Balance as at December 31,
2010
CurrencyTranslationAdjustment
Transfer toIntangible
Assets
Transfer toOther
Liabilities
Adjustmentmade toRetainedEarnings
RevaluationAdjustment
Retirements
Additionsand Transfer
fromAdvance
Payments
Balance atJanuary 1,
2010LBP’000
(66,385)
(340,305)
(265,319)
(34,727)
(140,130)
-
(846,866)
14,650
132,337
16,548
37,833
-
201,368
-
-
-
-
-
-
(133,687)
(133,687)
-
-
-
-
133,653
133,653
-
-
-
-
-
-
-
-
175,890
-
-
-
-
175,890
-
-
-
-
-
-
-
-
-
(1,448)
-
(20,517)
-
(21,965)
-
-
111,047
227,752
40,580
25,412
-
404,791
(40,562)
(107,217)
(16,062)
(5,625)
-
(169,466)
-
-
(2,570,019)
(2,253,108)
(158,481)
(5,161,627)
-
(10,143,235)
309,913
2,112,680
98,097
5,144,392
-
7,665,082
(21,105)
-
31,935,119
8,447,288
257,343
5,996,640
-
46,636,390
(2,816,881)
(5,405,266)
(346,405)
(4,372,481)
-
(12,941,033)
(65,308)
16,968,444
146,024,824
60,585,262
3,531,476
50,451,719
133,687
277,695,412
(24,456,763)
(37,659,424)
(1,426,383)
(35,531,449)
(133,653)
(99,207,672)
(3,253,236)
17,099,230
192,333,734
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
16,902,059
175,160,666
66,741,875
3,636,191
51,172,014
-
313,612,805
(26,813,753)
(40,928,338)
(1,674,205)
(34,747,847)
-
(104,164,143)
(3,339,649)
60,773,148
266,882,161
Fransabank > Annual Report 2010 111
Balance at December 31,
2009
CurrencyTranslationAdjustment
Transfer fromAssets
Acquiredagainst Debts
Additions dueto Acquisitionof Subsidiaries
RetirementsAdditions andTransfer from
AdvancePayments
Balance atJanuary 1,
2009LBP’000
During 2010, the Group has adjusted the fair value of the
property acquired through the merger with Lati Bank SAL by an
amount of LBP 2.28 billion with offset to deferred charges on
business acquisition (see Note 16 (g)). The property has not yet
been registered in the name of the Bank.
Cost/Revaluation:
Land 1,809,242 15,175,962 - - - (16,760) 16,968,444
Building 134,827,384 5,778,614 (1,042,531) 5,121,584 1,285,314 54,459 146,024,824
Furniture, equipment
and computer 54,866,400 4,934,935 (1,410,849) 2,168,588 - 26,188 60,585,262
Vehicles 2,993,296 326,200 (191,210) 403,720 - (530) 3,531,476
Office improvements
and installations 46,117,481 4,537,506 (345,111) 123,899 - 17,944 50,451,719
Key money 133,687 - - - - - 133,687
TOTAL 240,747,490 30,753,217 (2,989,701) 7,817,791 1,285,314 81,301 277,695,412
Accumulated depreciation:
Building (21,507,289) (2,896,336) 126,198 (176,974) - (2,362) (24,456,763)
Furniture, equipment
and computer (32,560,061) (5,284,443) 1,122,894 (928,430) - (9,384) (37,659,424)
Vehicles (1,132,582) (310,074) 188,171 (170,743) - (1,155) (1,426,383)
Office improvements
and installations (31,075,564) (4,764,313) 341,542 (24,102) - (9,012) (35,531,449)
Key money (133,653) - - - - - (133,653)
TOTAL (86,409,149) (13,255,166) 1,778,805 (1,300,249) - (21,913) (99,207,672)
Provision for impairment: (3,253,236) - - - - - (3,253,236)
Advance payments: 4,915,522 17,099,230
NET BOOK VALUE 156,000,627 192,333,734
Fransabank > Annual Report 2010112
15. INTANGIBLE ASSETS
Balance at December 31,
2010
CurrencyTranslationAdjustment
Transfer fromProperty and
Equipment
Additions dueto Merger of
Lati Bank SALRetirements
Additions andTransfer from
AdvancePayments
Balance atJanuary 1,
2010LBP’000
Balance at December 31,
2009
CurrencyTranslationAdjustment
Additions dueto Acquisitionof Subsidiary
Retirements
Additions andTransfer from
AdvancePayments
Balance atJanuary 1,
2009LBP’000
The additional goodwill recognized during 2009 is derived from 2 subsidiaries as follows:
- Goodwill in the amount of LBP 721 million being original goodwill upon initial acquisition of Fransabank OJSC
- Goodwill in the amount of LBP 901 million derived from the additional equity interest in BLC Bank SAL
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Cost:
Purchase software 21,405,576 3,666,960 (248,737) - - (132,638) 24,691,161
Goodwill 44,816,144 - - - - - 44,816,144
Licenses 20,577 - - - - (940) 19,637
Key money - 60,300 - 2,030 133,687 - 196,017
TOTAL 66,242,297 3,727,260 (248,737) 2,030 133,687 (133,578) 69,722,959
Accumulated depreciation:
Purchase software (13,398,732) (3,266,364) - - - 96,118 (16,568,978)
Licenses (2,129) (2,019) - - - 114 (4,034)
Key money - (1,039) - (2,030) (133,653) - (136,722)
TOTAL (13,400,861) (3,269,422) - (2,030) (133,653) 96,232 (16,709,734)
Advance payments: 2,809,839 2,253,639
NET BOOK VALUE 55,651,275 55,266,864
Cost:
Purchase software 20,253,963 1,228,882 (88,365) - 11,096 21,405,576
Goodwill 43,194,326 - - 1,621,818 - 44,816,144
Licenses - - - 20,577 - 20,577
TOTAL 63,448,289 1,228,882 (88,365) 1,642,395 11,096 66,242,297
Accumulated depreciation:
Purchase software (10,102,074) (3,347,257) 65,390 - (14,791) (13,398,732)
Licenses - (542) - (1,587) - (2,129)
TOTAL (10,102,074) (3,347,799) 65,390 (1,587) (14,791) (13,400,861)
Advance payments: 1,824,211 2,809,839
NET BOOK VALUE 55,170,426 55,651,275
Fransabank > Annual Report 2010 113
16. OTHER ASSETS
20092010LBP’000
Deferred charges on acquired problematic banks (a)
Derivative assets held for risk management (b)
Deferred tax asset (c)
Regulatory blocked deposit (d)
Assets in process of acquisition in settlement of loans (e)
Deferred charges (f)
Deferred receivables (g)
Sundry accounts receivable (h)
Advance payment for subscription in preference shares
Prepayments
Foreign exchange operations
Accrued income
Allowance for doubtful accounts receivable (i)
TOTAL
9,772,748
1,170,480
1,943,450
7,854,950
1,011,272
4,036,120
30,588,391
64,801,862
-
23,432,493
2,026,965
724,386
(3,491,089)
143,872,028
1,834,553
1,011,624
2,183,457
7,802,494
1,011,272
1,587,221
37,648,050
78,145,152
4,531,527
41,100,865
1,106,870
512,719
(3,431,531)
175,044,273
(a) Deferred charges on acquired problematic banks represent
losses related to problematic banks acquired in previous years
and compensated by Central Bank of Lebanon in the form of
future cash flows and benefits originated from the soft loans
granted to the Group (refer to Note 20 f).
The Group is amortizing these charges against the reduction of
future economic benefits derived from the soft loans and thus
the carrying value of these deferred charges corresponds to the
present value of future cash flows expected to be derived from
the soft loans.
The movement of “deferred charges on acquired problematic banks” was as follows:
TotalUniversal BankSAL
160,008,712
(33,804,414)
126,204,298
(137,090,079)
(13,145,885)
(150,235,964)
33,804,414
(7,938,195)
(124,369,745)
1,834,553
9,772,748
United Bank ofSaudi and
Lebanon SALLBP’000
123,426,043
-
123,426,043
(102,235,024)
(12,798,841)
(115,033,865)
-
(7,591,151)
(122,625,016)
801,027
8,392,178
Gross:
As at December 31, 2009 and 2008
Write off
As at December 31, 2010
Accumulated amortization:
Balance, December 31, 2008
2009 amortization
Balance December 31, 2009
Write off
2010 amortization
Balance December 31, 2010
Carrying value:
DECEMBER 31, 2010
DECEMBER 31, 2009
36,582,669
(33,804,414)
2,778,255
(34,855,055)
(347,044)
(35,202,099)
33,804,414
(347,044)
(1,744,729)
1,033,526
1,380,570
Fransabank > Annual Report 2010114
(b) The derivative assets held for risk management consist of the following:
20092010LBP’000
Over-the counter (OTC) Structured derivative
Forward contracts SWAP
TOTAL
1,011,624
-
1,011,624
1,157,920
12,560
1,170,480
20092010LBP’000
Unamortized costs related to deposits with embedded derivatives
Other deferred charges
TOTAL
1,557,385
29,836
1,587,221
4,006,284
29,836
4,036,120
The OTC structured derivative is designated as fair value hedge.
The OTC structured derivative represents an embedded derivative
in 3 structured deposit products which guarantee a minimum
redemption value of 100% during 2010 and 2009 (Note 18).
The forward contract swap derivative is designated as cash
flows hedge.
The Group used forward contract swaps to manage its
exposure to exchange rate movements on forward contracts
with National Bank of the Republic of Belarus by purchasing
foreign currencies against buying Belarussian Ruble. At
December 31, 2009 currencies with notional principal
amounts of BYR 12.5 billion were designated as hedges of
future cash flows against USD 5 million.
(c) Deferred tax asset as at December 31, 2010 and 2009
represent deferred tax on loss of a subsidiary.
(d) The regulatory blocked deposits represent non-interest
earning compulsory deposits placed with the Lebanese
Treasury and Central Bank of Syria upon the inception of banks
according to Article 132 of the Lebanese Code of Money and
Credit and article 19 of the Syrian Law No.28 respectively and
are refundable in case of cease of operations.
(e) Assets in process of acquisition in settlement of debts
represent the value of loans written-off against enforcement of
real estate security held and will be reallocated to “Assets
Acquired in Settlement of Loans”. The registration in the name
of the Group is not yet finalized due to incidents on these
properties.
(f) Deferred charges consist of the following at December 31:
(g) Deferred receivables represent excess of consideration and
acquisition costs over fair value of net assets of Bank Lati SAL.
On September 8, 2009, the Bank acquired the shares of Lati Bank
SAL for a total consideration of USD 20,037,192. The merger was
completed in 2010 and was accompanied by a soft loan of LBP
185 billion (Note 20) from Central Bank of Lebanon for a period
of 4.5 years bearing interest at a fixed rate of 2.6% per annum,
to compensate for the excess consideration paid over the fair
value of the net assets acquired, with the possibility of increasing
the loan amount to cover acquisition costs and additional
consequent charges which were incurred or will be incurred as
determined within a period of six months from the date of the
final approval of the merger transaction. Such additional
consequent charges include, but are not limited to, termination
indemnities paid to the acquired bank’s employees.
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 115
The soft loan proceeds were invested during 2010 in Lebanese
treasury bills, pledged in favor of the Central Bank of Lebanon as
collateral against the soft loan obtained.
The excess consideration paid over the fair value of the net
assets acquired and the related acquisition costs discussed
above, amounted to LBP 42 billion up to 2010 year end. These
costs were booked as deferred charges, to be amortized
effective 2010, over the term of the soft loan. Amortization
charge is treated as a yield adjustment to the interest income
on the pledged Lebanese treasury bills acquired from the soft
loan proceeds. The amortization charge booked in 2010
amounted to LBP 4.46 billion.
In addition, the Bank has realized in 2010 income in the amount
of LBP 7.7 billion representing the difference between the total
amount booked as deferred charges, and the net present value
of the future contractual cash flows of the pledged treasury bills
and the soft loan, discounted at the effective interest rate of one
year treasury bills in Lebanese Pound.
The condensed classes of assets and liabilities of Lati Bank SAL that were acquired and assumed as at December 31, 2009 are as follows:
December 31, 2009LBP’000
ASSETS
Cash and banks 27,912,538
Loans and advances to customers 6,739,031
Investment securities 48,701,667
Customers’ liability under acceptances 2,491,769
Property, equipment and other assets 4,953,629
TOTAL ASSETS 90,798,634
LIABILITIES
Deposits and borrowings from banks 2,279,562
Customers’ accounts at amortized cost 85,033,147
Liability under acceptances 2,491,769
Provisions and other liabilities 739,241
TOTAL LIABILITIES 90,543,719
FAIR VALUE OF NET ASSETS 254,915
Consideration paid 30,206,067
Additional acquisition costs 637,239
TOTAL 30,843,306
EXCESS OF CONSIDERATION AND ACQUISITION COSTS OVER FAIR VALUE OF NET ASSETS 30,588,391
Fransabank > Annual Report 2010116
17. DEPOSITS AND BORROWINGS FROM BANKS
The movement of deferred charges on business acquisition during the year 2010 was as follows:
LBP’000 2010
Balance as at January 1, 30,588,391
Income realized on acquisition 7,728,744
Fair value adjustment of investment securities acquired 102,935
Fair value adjustment of building acquired (Note 14) ( 2,275,034)
Additional acquisition costs 1,449,222
Deferred charges covered by soft loan 37,594,258
Additional acquisition incidental costs incurred above the approved amount 4,513,156
42,107,414
Amortization for the year (4,459,364)
BALANCE AS AT DECEMBER 31, 37,648,050
(h) Sundry account receivable include an amount of LBP 36.5
billion (USD 24,228,000) representing the amount paid by the
Group on behalf of one of the shareholders in Fransabank El
Djazaïr for the increase of the capital of this subsidiary. This
payment was deferred against pledging of the shareholder’s
shares and possible subsequent acquisition of the shares.
(i) The majority of the allowance for doubtful accounts
receivable relate to old advances made in previous years
against purchases of property and equipment.
20092010LBP’000
Current deposits of banks and financial institutions 65,567,981
Current deposits - Related parties 133,569
Money market deposits - Central Bank of Belarus 33,279,570
Money market deposits 312,104,859
Money market deposits - Related parties -
Other short term borrowings 399,247
Accrued interest payable 3,135,182
Accrued interest payable - Related parties -
TOTAL 414,620,408
85,023,119
110,751
-
183,675,025
30,736,482
30,020,522
970,647
10,601
330,547,147
Deposits and borrowings from banks are reflected at amortized cost and consist of the following:
Money market deposits and other short term borrowings have maturities of one year or less.
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 117
(a) Certain deposits from customers have been designated at
fair value through profit or loss as they are matched with an
embedded derivative. An accounting mismatch would arise if
customers’ deposits were accounted for at amortized cost,
because the related derivative is measured at fair value with
movements in the fair value taken through the income statement.
By designating those deposits from customers at fair value, the
movements in the fair value of these deposits are recorded in
the income statement. These instruments provide notional
amounts protection for customers of LBP 69 billion equivalent to
100% of the initially invested amount (LBP 157 billion in 2009).
(b) Represents deposits denominated in Lebanese pounds
with option to redeem in US Dollar at fixed rate of exchange. An
accounting mismatch would arise if customers’ deposits were
accounted for at amortized cost, because the related derivative
is measured at fair value with movements in the fair value taken
through the profit or loss. By designating those deposits from
customers at fair value, the movements in the fair value of these
deposits are recorded in the income statement.
18. LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
This section consists of the following:
20092010LBP’000
Customers’ deposits with guaranteed capital at fair value through profit or loss (a)
Customers’ deposits at fair value through profit or loss (b)
Accrued interest payable
TOTAL
70,211,905
2,381,086
543,375
73,136,366
157,942,443
2,249,996
2,519,961
162,712,400
20092010LBP’000
Customers’ deposits at fair value through profit or loss
Related derivative contracts - Note 16
72,592,991
1,011,624
160,192,439
1,157,920
The fair value recognized on these deposits and the related derivatives is as follows:
Fransabank > Annual Report 2010118
19. CUSTOMERS’ ACCOUNTS AT AMORTIZED COST
DECEMBER 31, 2010
LBP’000Non-Interest
BearingInterestBearing Total Total
F/Cy Base Accounts
Non-InterestBearing
InterestBearing Total
LBP Base Accounts
DECEMBER 31, 2009
LBP’000Non-Interest
BearingInterestBearing Total Total
F/Cy Base Accounts
Non-InterestBearing
InterestBearing Total
LBP Base Accounts
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Deposits from customers:
Current / demand deposits 83,758,433 193,890,971 277,649,404 265,884,005 900,844,786 1,166,728,791 1,444,378,195
Term deposits 5,370,535,901 38,442,648 5,408,978,549 7,196,342,047 104,614,882 7,300,956,929 12,709,935,478
Collateral against loans
and advances 275,933,494 4,568,428 280,501,922 357,297,292 13,797,926 371,095,218 651,597,140
Margins and other collateral:
Margins for irrevocable import
letters of credit 44,414 662,488 706,902 53,785,654 55,830,855 109,616,509 110,323,411
Margins on letters of guarantee 28,219,417 2,911,785 31,131,202 29,513,739 9,506,880 39,020,619 70,151,821
Other margins 7,793,018 568 7,793,586 239,724 3,941,958 4,181,682 11,975,268
Blocked accounts 8,518,140 4,865,169 13,383,309 21,608,073 7,784,445 29,392,518 42,775,827
Credit versus debit - - - 215 1,216,735 1,216,950 1,216,950
Accrued interest payable: 40,861,390 - 40,861,390 42,182,426 - 42,182,426 83,043,816
TOTAL 5,815,664,207 245,342,057 6,061,006,264 7,966,853,175 1,097,538,467 9,064,391,642 15,125,397,906
Deposits from customers:
Current / demand deposits 80,148,588 146,952,587 227,101,175 272,120,144 717,458,235 989,578,379 1,216,679,554
Term deposits 4,750,984,543 43,203,791 4,794,188,334 6,526,471,525 70,689,266 6,597,160,791 11,391,349,125
Collateral against loans
and advances 224,829,980 8,807,193 233,637,173 289,776,591 18,184,700 307,961,291 541,598,464
Margins and other collateral:
Margins for irrevocable import
letters of credit 208,294 27 208,321 35,930,579 43,886,870 79,817,449 80,025,770
Margins on letters of guarantee 27,906,172 2,273,613 30,179,785 36,282,683 8,077,046 44,359,729 74,539,514
Other margins 1,360,549 9,111 1,369,660 5,895,944 2,288,747 8,184,691 9,554,351
Blocked accounts 2,074,254 1,983,421 4,057,675 23,105,758 7,399,828 30,505,586 34,563,261
Credit versus debit - - - 211 1,593,875 1,594,086 1,594,086
Accrued interest payable: 40,800,995 - 40,800,995 33,706,698 - 33,706,698 74,507,693
TOTAL 5,128,313,375 203,229,743 5,331,543,118 7,223,290,133 869,578,567 8,092,868,700 13,424,411,818
Fransabank > Annual Report 2010 119
DECEMBER 31, 2010
LBP’000Non-Interest
BearingInterestBearing Total Total
F/Cy Base Accounts
Non-InterestBearing
InterestBearing Total
LBP Base Accounts
DECEMBER 31, 2009
LBP’000Non-Interest
BearingInterestBearing Total Total
F/Cy Base Accounts
Non-InterestBearing
InterestBearing Total
LBP Base Accounts
Customers’ deposits include related parties deposits detailed as follows:
Deposits from related:
Current / demand deposits 635,882 621,457 1,257,339 3,183,160 7,690,180 10,873,340 12,130,679
Term deposits 14,396,496 1,019 14,397,515 61,392,952 941 61,393,893 75,791,408
Collateral against loans
and advances 164,945,301 - 164,945,301 2,355,015 - 2,355,015 167,300,316
Margins and other collateral:
Margins for irrevocable import
letters of credit - - - - 317,424 317,424 317,424
Margins on letters of guarantee - - - 2,261 9,422 11,683 11,683
Other margins - - - - 150,750 150,750 150,750
Blocked accounts - - - 1,114,721 72,646 1,187,367 1,187,367
Accrued interest payable: 54,265 - 54,265 1,458,001 - 1,458,001 1,512,266
TOTAL 180,031,944 622,476 180,654,420 69,506,110 8,241,363 77,747,473 258,401,893
Deposits from related:
Current / demand deposits 549,695 598,443 1,148,138 2,045,359 10,020,507 12,065,866 13,214,004
Term deposits 5,982,533 3,050,046 9,032,579 54,018,881 3,562,968 57,581,849 66,614,428
Collateral against loans
and advances 144,171,740 - 144,171,740 551,092 361,800 912,892 145,084,632
Margins and other collateral:
Margins for irrevocable import letters of credit - - - - 381,466 381,466 381,466
Margins on letters of guarantee - - - 2,261 10,779 13,040 13,040
Blocked accounts - - - 1,077,763 72,645 1,150,408 1,150,408
Accrued interest payable: 15,670 - 15,670 1,480,733 - 1,480,733 1,496,403
TOTAL 150,719,638 3,648,489 154,368,127 59,176,089 14,410,165 73,586,254 227,954,381
Fransabank > Annual Report 2010120
Less than LBP 200 million
From LBP 200 million to LBP 1.5 billion
Above LBP 1.5 billion
TOTAL
DECEMBER 31, 2010
LBP’000Total Deposits% to Total
Deposits% to TotalDeposits Total
F/Cy Base Accounts
Nº of Accounts Total Deposits
LBP Base Accounts
Less than LBP 200 million
From LBP 200 million to LBP 1.5 billion
Above LBP 1.5 billion
TOTAL
DECEMBER 31, 2009
LBP’000Total Deposits% to Total
Deposits% to TotalDeposits Total
F/Cy Base Accounts
Nº of Accounts Total Deposits
LBP Base Accounts
Deposits at amortized cost are allocated by brackets of deposits as follows:
Term deposits from customers at December 31, 2010 include a
total amount of LBP 60.3 billion assigned to an offering of Tier I
non-cumulative perpetual redeemable “Series A” preferred
shares that are expected to be issued by one of the Bank’s
subsidiaries in 2011. Issuance of the preferred shares was
approved by the Bank’s assembly of shareholders on July 30,
2010.
Deposits from customers at amortized cost include at
December 31, 2010 coded deposit accounts totaling LBP 248.14
billion (LBP 228.73 billion in 2009). These accounts are subject
to the provisions of Article 3 of the Lebanese Banking Secrecy
Law dated September 3, 1956 which provides that the Bank’s
management, in the normal course of business, cannot reveal
the identities of these depositors to third parties, including its
independent public accountants.
Deposits from customers include fiduciary deposits received
from resident and non-resident banks for a total amount of LBP
44.3 billion and LBP 304.4 billion respectively (LBP 16.6 billion
and LBP 408.9 billion respectively in 2009).
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
398,925 2,805,466,486 46 2,259,179,762 25 5,064,646,248
9,174 1,823,840,889 30 2,385,148,005 26 4,208,988,894
977 1,431,698,889 24 4,420,063,875 49 5,851,762,764
409,076 6,061,006,264 100 9,064,391,642 100 15,125,397,906
376,301 2,558,373,541 48 2,130,989,338 26 4,689,362,879
8,147 1,576,210,592 30 2,119,725,752 26 3,695,936,344
778 1,196,958,985 22 3,842,153,610 48 5,039,112,595
385,226 5,331,543,118 100 8,092,868,700 100 13,424,411,818
Fransabank > Annual Report 2010 121
(a) Borrowings from European Investment Bank:
Borrowings from European Investment Bank represent term
borrowings obtained by the Group to finance loans extended
to customers. These borrowings are divided into 2 types, a 12
years line of credit for touristic loans for a limit of Euro 30 million
(LBP 60 billion) or its equivalent in U S Dollar and a 10 years line
of credit for industrial loans for a limit of Euro 30 million (LBP 60
billion). These loans mature during 2012, 2013, 2015, 2019 and
2020.
(b) Borrowing from Agence Française de Développement:
Borrowing from Agence Française de Développement
represents a 10 years line of credit for a limit of Euro 15 million
(LBP 30 billion) and is granted to help the small and medium
enterprises that were affected by the July and August 2006
Lebanon war. This loan matures during 2017.
(c) Borrowing from International Finance Corporation:
The borrowing from International Finance Corporation
represents a 6 years line of credit for a limit of USD 25 million
(LBP 38 billion) and is granted to help the Group’s customers
that were affected directly and indirectly by the July and August
2006 Lebanon war. This loan matures during 2013.
(d) Borrowing from EFSD-CDR:
ESFD loan is funded by European Union through the Lebanese
Council for Development and Reconstruction for the purpose
of lending to small size enterprises. Loan duration is for six years
with a grace period of 12 months starting the date of
disbursement of the first tranche from the fund. Repayments
of principal will be in quarterly installments in the remaining
five years. The cost of funds is linked to the benchmark of the
two-year certificates of deposits as issued by Central Bank of
Lebanon.
(e) Borrowing from Arab Trade Financing Program:
The borrowing from Arab Trade Financing Program represents
a revolving line of credit for USD 15 million (LBP 23 billion)
granted in year 2000 to support inter-Arab Trade exchanges.
This loan matures during 2011.
DECEMBER 31, 2010 DECEMBER 31, 2009
LBP’000 TotalC/V of F/CyLBPTotalC/V of F/CyLBP
Borrowings from European Investment Bank (a) - 51,997,661 51,997,661 - 39,979,646 39,979,646
Borrowings from Agence
Française de Développement (b) - 25,006,960 25,006,960 - 27,041,505 27,041,505
Borrowings from International Finance Corporation (c) - 8,342,203 8,342,203 - 11,122,938 11,122,938
ESFD-CDR loan funded by the European Union (d) 10,627,012 - 10,627,012 11,456,600 - 11,456,600
Borrowings from Arab Trade Financing Program (e) - 13,935,299 13,935,299 - 3,621,015 3,621,015
Soft loans from Central Bank of Lebanon (f) 235,533,232 - 235,533,232 318,811,712 - 318,811,712
Borrowings from related parties (g) - 15,074,959 15,074,959 - - -
Accrued interest payable 1,245,410 527,549 1,772,959 399,381 387,294 786,675
TOTAL 247,405,654 114,884,631 362,290,285 330,667,693 82,152,398 412,820,091
20. OTHER BORROWINGS
Borrowings are reflected at amortized cost and consist of the following:
Fransabank > Annual Report 2010122
(f) Soft Loans from Central Bank of Lebanon:
This caption represents soft loans granted by the Central Bank of Lebanon in connection with the acquisition in previous years of
problematic banks as detailed below:
Additional soft loan
against merger
with Universal Bank SAL
Soft loan against merger
with United Bank of Saudi
and Lebanon SAL
Additional soft loan
against merger with
United Bank of Saudi
and Lebanon SAL
Additional soft loan
against merger with
United Bank of Saudi
and Lebanon SAL
Soft loan against merger
with Bank Lati SAL
(Note 16 (g))
4 Soft loans against providing liquidity to
cover 60% of the replacement value of buildings
and equipment pertaining to four of the bank's
clients who were directly damaged from the
July 2006 Lebanon war:
- Loan 1
- Loan 2
- Loan 3
- Loan 4
TOTAL
InterestExpense
During theYear
CarryingValue of
Loan
InterestRate
%
InterestExpense
During theYear
CarryingValue of
Loan
InterestRate
%Maturity DateDate Granted
LBP’000
435,774
17,979,161
488,216
513,129
-
-
-
-
-
19,416,280
8,843,712
289,000,000
10,468,000
10,500,000
-
-
-
-
-
318,811,712
4.86
6.24
4.60
4.82
-
-
-
-
-
435,774
9,242,325
488,216
473,229
3,113,139
36,982
359,266
128,485
8,304
14,285,720
8,843,712
-
10,468,000
10,500,000
185,000,000
2,758,270
12,012,000
5,177,250
774,000
235,533,232
4.86
6.24
4.60
2.92
2.60
1.56
3.40
2.88
2.18
June 28, 2013
August 6, 2010
December 20, 2013
October 25, 2012
November 6, 2014
February 24, 2011
February 12, 2015
February 21, 2012
July 2, 2015
June 30, 2005
August 8, 2002
December 22, 2005
October 25, 2007
May 13, 2010
February 25, 2010
February 18, 2010
February 25, 2010
July 8, 2010
20092010
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 123
Soft loans are secured against pledged Lebanese Treasury bills detailed as follows:
Pledged Treasury Bills Against:Additional soft loan
against merger
with Universal Bank SAL
Soft loan against merger
with United Bank of Saudi
and Lebanon SAL
Additional soft loan
against merger with
United Bank of Saudi
and Lebanon SAL
Additional soft loan
against merger with
United Bank of Saudi
and Lebanon SAL
Soft loan against merger
with Bank Lati SAL
4 Soft loans against providing liquidity to
cover 60% of the replacement value of buildings
and equipment pertaining to four of the bank's
clients who were directly damaged from the
July 2006 Lebanon war:
- Loan 1
- Loan 2
- Loan 3
- Loan 4
TOTAL
InterestIncome
During theYear
InterestRate
%
AmortizedCost
RedemptionValue
InterestIncome
During theYear
InterestRate
%
AmortizedCost
RedemptionValueLBP’000
821,178
27,008,797
944,708
981,289
-
-
-
-
-
29,755,972
9.26
9.32
9.00
9.32
-
-
-
-
-
8,843,720
289,000,000
10,468,000
10,500,000
-
-
-
-
-
318,811,720
8,843,720
289,000,000
10,468,000
10,500,000
-
-
-
-
-
318,811,720
821,178
14,429,357
944,708
941,827
4,919,526
130,945
772,022
302,471
23,185
23,285,219
8,843,720
-
10,468,000
10,500,000
185,000,000
2,889,210
12,012,000
5,177,250
774,000
235,664,180
8,843,720
-
10,468,000
10,500,000
185,000,000
2,912,020
12,012,000
5,177,250
774,000
235,686,990
9.26
9.32
9.00
7.42
7.92
5.29
7.38
6.86
6.16
20092010
(g) Borrowings from Related Parties:
Borrowings from related parties represent a 10 year loan amounting to LBP 15.1 billion (USD 10 million) granted during 2010 by an
associated company of the Bank to a group subsidiary with a fixed interest rate of 11%.
Fransabank > Annual Report 2010124
The remaining contractual maturities of all above borrowings are as follows:
The Group has not had any defaults of principal, interest or other breaches with respect to these borrowings.
Accrued interest payable is segregated as follows as at December 31:
20092010LBP’000
Less than one year
From 1 to 3 years
From 3 to 5 years
From 5 to 10 years
More than 10 years
TOTAL
301,819,941
33,712,413
45,362,430
31,732,298
193,009
412,820,091
28,602,126
64,157,575
222,707,902
46,822,682
-
362,290,285
20092010LBP’000
European Investment Bank
Agence Française de Développement
International Finance Corporation
ESFD-CDR loan funded by the European Union
Arab Trade Financing Program
Soft loans from Central Bank of Lebanon
Related parties
TOTAL
141,346
161,188
64,973
1,375
19,787
398,006
-
786,675
219,512
170,378
46,199
706
41,713
1,244,704
49,747
1,772,959
This caption represents loan according to a contract signed
between the Bank and “Proparco” on January 19, 2010 for an
amount of USD 21,144,000 and is to be settled over a period of
10 years including a 6 year grace period. The loan matures on
July 15 of each year starting year 2011 for the interest and year
2016 for the principal. The applicable interest rate is 7.61%.
The computation of the interest on this loan starts from June 30,
2010 and the accrued interest for each year is paid from the
year’s net income after the meeting of the yearly ordinary
general assembly that approves the previous year’s financials.
This is according to Central Bank of Lebanon Decree No.35. The
due interest expense on this loan for the year 2010 amounts to
USD 827,000 approximately.
21. SUBORDINATED LOAN
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 125
20092010LBP’000
8,151,696
51,978,018
1,236,303
13,395,289
5,513,614
1,468,330
28,580,450
29,788,630
3,282
42,954
1,380,268
5,488,017
1,627,290
2,493,015
47,471,810
198,618,966
19,434,113
59,020,698
1,617,135
17,803,767
7,468,690
1,650,630
32,922,520
39,124,250
3,282
-
1,553,710
6,658,751
2,595,196
519,149
46,733,363
237,105,254
22. OTHER LIABILITIES
Current tax liability (a)
Deferred tax liability on change in fair value of investment securities (Note 29)
Deferred tax liability on interest
Deferred tax liability on share in profits of associates
Withholding and other taxes payable
Due to the Social Security National Fund
Checks and incoming payment orders in course of settlement
Accrued expenses
Accrued interest payable - Cash contribution to capital
Derivative liabilities held for risk management (b)
Provision for early redemption of available for sale investments (Note 10)
Provision for early redemption of held to maturity investments (Note 10)
Financial guarantee contracts issued
Effect of exchange rates changes on structural position
Sundry accounts payable
TOTAL
(a) Current tax liability is computed as follows:
20092010LBP’000
191,586,290
29,607,327
(921,266)
28,686,061
(21,881,049)
1,322,648
24,036
8,151,696
272,655,695
42,603,548
2,751,421
45,354,969
(25,999,147)
141,911
(63,620)
19,434,113
Profit before tax
Income tax based on national applicable rates
Effect of non-deductible expense and non taxable income
Income tax expense
Less: Tax paid in advance
Net effect of deferred tax assets (Note 16 (c))
Effect of exchange rates changes
CURRENT TAX PAYABLE
(b) The derivative liabilities held for risk management as at December 31, 2009 represent forward contract swapdesignated as cash flow hedge.
The Group used forward contract swaps to manage its
exposure to exchange rate movements on forward contracts
with National bank of the Republic of Belarus by purchasing
foreign currencies against buying Belarussian Ruble. At
December 31, 2009 currencies with notional principal amounts
of BYR 6.8 billion were designated as hedges of future cash
flows against EUR 1.5 million.
Fransabank > Annual Report 2010126
23. PROVISIONS
Provisions consist of the following:
The movement of provision for staff termination indemnities is as follows:
20092010LBP’000
Provision for staff termination indemnities
Provision for contingencies
Provision for loss on foreign currency position
TOTAL
17,804,543
20,080,252
87,432
37,972,227
20,436,930
21,640,964
79,593
42,157,487
20092010LBP’000
Balance January 1
Additions - Employees
Additions - Lawyers
Additions in business combination (Lati Bank SAL)
Additions - Legal expenses
Transfer from other liabilities
Settlements
BALANCE DECEMBER 31
15,561,131
3,229,089
60,362
185,481
76,122
-
(1,307,642)
17,804,543
17,804,543
4,146,385
43,617
-
79,506
-
(1,637,121)
20,436,930
The movement of the provision for contingencies was as follows:
20092010LBP’000
Balance January 1
Additions recorded within provisions for charges
Additions recorded within staff costs
Additions in business combination (Fransabank OJSC)
Settlements
Write-back
Effect of exchange rates changes
BALANCE DECEMBER 31
21,567,707
1,950,434
-
71,643
(1,665,150)
(1,865,605)
21,223
20,080,252
20,080,252
2,518,621
56,270
-
(870,061)
(21,435)
(122,683)
21,640,964
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 127
24. SHARE CAPITAL
At December 31, 2010 and 2009, the authorized ordinary
share capital of the Bank was LBP 420 billion consisting of
21,000,000 fully paid shares of LBP 20,000 each.
Up to 2010 year-end, the Bank has established a fixed
exchange position in the amount of USD 48,888,889 authorized
by Central Bank of Lebanon to hedge its equity against
exchange fluctuations within the limit of 60% of equity
denominated in Lebanese Pounds.
25. SHAREHOLDERS’ CASH CONTRIBUTION TO CAPITAL
The shareholders’ cash contribution to capital is for a total
amount of LBP 17.1 billion (USD 11,352,494) as at December
31, 2010 and 2009 and it is subject to a yearly interest of 7%
payable from unrestricted profits after securing the
approval of Central Bank of Lebanon.
This sort of financial instrument is accounted for in foreign
currency and therefore allows hedging against national
currency exchange fluctuation.
26. PREFERENCE SHARES
27. RESERVES
On June 30, 2008 and upon the decision taken in the share-
holders’ General Assembly meeting held on March 28, 2008
and the approval of the Central Bank of Lebanon dated
March 15, 2008, the Bank issued 500,000 non-cumulative
convertible redeemable series “A” preference shares with
nominal value of LBP 20,000 each at an issue price of USD
200 per share.
On September 30, 2010 and upon the decision as taken in
the Shareholders’ General Assembly meeting held on April
30, 2010 and are approved of the Central Bank of Lebanon
dated July 21, 2010, the Bank issued 425,000 non-cumulative
convertible redeemed Series “B” preference shares with
nominal value of LBP 20,000 each at an issue price of USD
200 per share.
Reserves consist of the following:
20092010LBP’000
Legal reserve
Reserve for general banking risks
Reserve for assets acquired in satisfaction of loans - Note 13
Owned buildings revaluation reserve
Foreign currency translation reserve
TOTAL
28,406,857
43,573,937
22,286,706
26,140,614
3,406,833
123,814,947
43,641,836
68,704,886
27,563,444
26,283,573
(10,794,894)
155,398,845
Fransabank > Annual Report 2010128
The legal reserve is constituted in conformity with the
requirements of the Lebanese Money and Credit Code on
the basis of 10% of net profit. This reserve is not available for
distribution.
The reserve for general banking risks is constituted according to
local banking regulations, from net profit, on the basis of a
minimum of 2 per mil and a maximum of 3 per mil of the
total risk weighted assets, off-financial position risk and
global exchange position as defined for the computation of
the solvency ratio at year-end. This reserve is constituted in
Lebanese Pound and in foreign currencies in proportion to
the composition of the Group’s total risk weighted assets
and off-financial position items. This reserve is not available
for distribution.
28. SPECIAL RESERVE
29. CUMULATIVE CHANGE IN FAIR VALUE OF INVESTMENT SECURITIES
Based on item “4” paragraph “f” of article 1 of the intermediary
circular 41, the Bank has allocated during 2010 an amount of
LBP 1.4 billion to special reserve for the uncovered portion of
the doubtful debts outstanding as at June 30, 2003. This
reserve was appropriated from 2009 net income (LBP 2.5 billion
during 2009 appropriated from 2008 net income).
20092010LBP’000
49,337,049
62,915,013
(109,083)
229,377,467
2,614,561
(126,501)
33,471,316
(1,710)
(471,264)
(51,978,018)
325,028,830
(20,632,360)
304,396,470
30,722,488
86,206,364
790,075
270,381,964
2,029,892
751,531
32,479,846
(12,427)
(471,264)
(59,020,698)
363,857,771
(22,039,456)
341,818,315
Unrealized gain on Lebanese Treasury bills
Unrealized gain on Lebanese Government bonds
Unrealized gain/(loss) on foreign Eurobonds issued by banks
Unrealized gain on certificates of deposit issued by BDL
Unrealized gain on certificates of deposit issued by banks
Unrealized gain/(loss) on corporate bonds
Unrealized gain on equity securities
Unrealized loss on asset-backed securities
Other
Less: Deferred tax
Total
Non-controlling interests share
OWNERS OF THE BANK'S SHARE
The cumulative change in fair value of available for sale investment securities consists of the following:
The cumulative change in fair value as reflected above was adjusted for the effect of fair value adjustment of investment securities
acquired through the business combination with BLC Bank SAL during 2007.
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 129
30. NON – CONTROLLING INTERESTS
Non-controlling interests represent the minority share in the subsidiaries’ equities as follows:
31. PROFIT FOR THE YEAR
The consolidated income is allocated as follows between the Bank and its subsidiaries:
20092010LBP’000
Capital
Change in fair value of available for sale investment securities
Reserves and retained earnings
Effect of acquisition of Fransabank OJSC
Profit for the year
TOTAL
163,054,006
20,632,360
14,923,666
2,726,744
12,355,000
213,691,776
156,444,686
22,039,456
22,061,404
-
20,842,886
221,388,432
TotalOwners
of the Bank ShareNon-ControllingInterests Share
YEAR ENDED DECEMBER 31, 2010
Income of the Bank 127,183,152 - 127,183,152
Income of subsidiaries:
Fransa Invest Bank SAL 12,852,832 377 12,853,209
Fransabank France SA 2,000,921 1,304,384 3,305,305
Lebanese Leasing Company SAL 1,112,415 159,352 1,271,767
Switch and Electronics Services SAL 275,426 1,106 276,532
Sogefon SAL (242,916) 121 (242,795)
Fransabank El Djazaïr SPA 5,237,614 2,464,760 7,702,374
Fransabank Insurance Services SAL 1,696,901 5,106 1,702,007
BLC Bank SAL and subsidiaries 51,087,100 17,200,058 68,287,158
Express SARL (7,490) (126) (7,616)
Fransabank Syria 81,330 88,107 169,437
Fransabank OJSC 3,877,061 969,265 4,846,326
Deferred tax on profit from associates and subsidiaries (6,286,278) (1,349,624) (7,635,902)
TOTAL 198,868,068 20,842,886 219,710,954
Fransabank > Annual Report 2010130
TotalOwners
of the Bank ShareNon-ControllingInterests Share
YEAR ENDED DECEMBER 31, 2009
32. DIVIDENDS PAID
The following dividends were declared and paid by the Group:
20092010LBP’000
LBP 1,000 per ordinary share paid by the Bank from 2009
net income (LBP 1,000 during 2009 paid from 2008 net income)
USD 17 (LBP 25,627.50) per preference share during 2010
(USD 10 (LBP 15,075) per Preference share during 2009)
Dividends paid by subsidiaries to its non-controlling interests
21,000,000
7,537,500
3,687,105
21,000,000
12,813,750
5,937,494
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Income of the Bank 90,323,298 - 90,323,298
Income of subsidiaries:
Fransa Invest Bank SAL 13,844,356 368 13,844,724
Fransabank France SA 1,599,548 1,067,339 2,666,887
Lebanese Leasing Company SAL 708,113 101,437 809,550
Switch and Electronics Services SAL 270,093 1,085 271,178
Sogefon SAL (192,675) (6) (192,681)
Fransabank El Djazaïr SPA 1,499,234 703,907 2,203,141
Fransabank Insurance Services SAL 1,565,614 4,711 1,570,325
BLC Bank SAL and subsidiaries 38,527,364 13,089,003 51,616,367
Express SARL 5,138 86 5,224
Fransabank Syria (2,016,689) (2,184,746) (4,201,435)
Fransabank OJSC 3,529,932 453,719 3,983,651
Deferred tax on profit from associates and subsidiaries (4,903,123) (881,903) (5,785,026)
TOTAL 144,760,203 12,355,000 157,115,203
Fransabank > Annual Report 2010 131
33. INTEREST INCOME
34. INTEREST EXPENSE
20092010LBP’000
38,620,368
13,482,205
102,888
464,769,001
101,947,594
29,755,972
2,906,973
905,093
215,776,364
10,394,087
8,406,228
747,018
127,910
887,941,701
17,360,577
17,448,595
3,177,400
549,007,945
80,408,386
23,285,219
5,631,293
125,179
296,075,155
8,099,381
7,344,609
1,208,236
140,083
1,009,312,058
Deposits with Central Banks
Deposits with banks and financial institutions
Deposits with related party banks and financial institutions
Available for sale investment securities
Held to maturity investment securities
Held to maturity investment securities against soft loan (Note 20)
Loans to banks
Loans to related party banks
Loans and advances to customers
Loans and advances to related parties
Interest recognized on impaired loans and advances to customers (Note 9)
Interest recognized on impaired loans transferred to off financial position
Other interest
TOTAL
Interest income realized on impaired loans and advances to customers represent recoveries of interest. Accrued interest on impaired
loans and advances is not recognized until recovery / rescheduling agreements are signed with customers.
Interest income on trading portfolio is included under net interest and gain on trading portfolio (Note 37).
Interest expense on customers’ accounts designated at fair value through profit or loss is included under net interest and gain
on financial instruments designated at fair value through profit or loss (Note 38).
20092010LBP’000
Deposits and borrowings from Central Bank of Belarus
Deposits and borrowings from banks and financial institutions
Customers’ deposits at amortized cost
Related parties’ deposits at amortized cost
Other borrowings (Note 20)
Borrowings from related party (Note 20)
Shareholders’ cash contribution to capital (Note 25)
TOTAL
-
3,231,147
528,619,010
16,597,469
22,308,991
-
1,197,972
571,954,589
265,502
8,401,781
572,813,616
15,260,593
17,287,526
699,252
1,197,972
615,926,242
Fransabank > Annual Report 2010132
35. FEE AND COMMISSION INCOME
20092010LBP’000
Commission on documentary credits
Commission on letters of guarantee
Service fees on customers’ transactions
Commission on transactions with banks
Asset management fees
TOTAL
12,192,641
4,960,117
54,863,946
53,919
2,681,329
74,751,952
18,938,304
8,409,850
66,574,909
268,975
13,591
94,205,629
This caption consists of the following:
Fee and commission income include fee and commission to related parties with immaterial amounts.
37. NET INTEREST AND OTHER GAIN / LOSS ON TRADING PORTFOLIO
20092010LBP’000
Interest income
Dividends income
Net unrealized gain
Net realized gain
TOTAL
5,318,688
1,050,973
10,889,336
5,691
17,264,688
5,100,039
1,100,029
2,120,565
370,080
8,690,713
This caption consists of the following:
36. FEE AND COMMISSION EXPENSE
20092010LBP’000
Commission on transactions with banks and financial institutions
Other (including commissions on customers' transactions)
TOTAL
2,592,168
20,480,441
23,072,609
2,279,320
22,181,156
24,460,476
This caption consists of the following:
Fee and commission expenses include fee and commission to related parties with immaterial amounts.
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 133
38. NET INTEREST AND OTHER GAIN / LOSS ON FINANCIAL INSTRUMENTS DESIGNATED ATFAIR VALUE THROUGH PROFIT OR LOSS
20092010LBP’000
Interest expense on customers’ accounts designated at fair value through profit or loss
Fee income on customers’ accounts designated at fair value through profit or loss
TOTAL
(9,887,123)
31,562
(9,855,561)
(7,756,622)
-
(7,756,622)
This caption consists of the following:
39. OTHER OPERATING INCOME
40. FINANCIAL INSTRUMENTS WITH OFF-FINANCIAL POSITION RISKS
Other operating income for the year 2009 includes an amount of LBP 2.9 billion representing income recognized from the increase of
investment in “Fransabank OJSC”.
20092010LBP’000
Gain on sale of available for sale securities
Dividends income on investment securities
Gain from disposal of part of equity interest in an associate (Note 12)
Share in profits of associates (Note 12)
Realized income on business acquisition (Note 16 g)
Foreign exchange gain
Other operating income – Net
TOTAL
3,425,253
5,710,871
14,100
7,579,190
-
10,395,796
19,455,694
46,580,904
28,755,672
5,549,080
-
8,992,528
7,728,744
22,323,997
14,462,328
87,812,349
This caption consists of the following:
The guarantees and standby letters of credit and the documentary
and commercial letters of credit represent financial instruments
with contractual amounts representing credit risk. The guarantees
and standby letters of credit represent irrevocable assurances
that the Group will make payments in the event that a
customer cannot meet its obligations to third parties and are
not different from loans and advances on the statement of
financial position. However, documentary and commercial
letters of credit, which represent written undertakings by the
Group on behalf of a customer authorizing a third party to draw
drafts on the Group up to a stipulated amount under specific
terms and conditions, are collateralized by the underlying
shipments documents of goods to which they relate and,
therefore, have significantly less risks.
Fransabank > Annual Report 2010134
41. BALANCES / TRANSACTIONS WITH RELATED PARTIES
In the ordinary course of its activities, the Group conducts
transactions with related parties including shareholders,
directors, subsidiaries and associates. Also, the Group conducts
sale and purchase transactions of investment securities with
subsidiary banks and these transactions are made at net book
value of the financial instruments. Balances with related parties
as at year-end consist of the following:
Shareholders, directors and other key management personnel & close family members:Direct facilities & credit balances
Secured loans and advances 134,636,538
Unsecured loans and advances 554,898
Deposits at amortized cost 209,870,409
Indirect facilities
Letters of guarantees 767,394
Associated companies:Term placement with banks -
Loans to banks 78,049,958
Deposits from banks 133,569
Money market deposits from banks -
Borrowings 15,074,959
Direct facilities & credit balances
Secured loans and advances 2,562,750
Unsecured loans and advances 16,082,848
Deposits at amortized cost 47,019,218
Indirect facilities
Letters of credit 1,912,651
Letters of guarantee 48,668
Accrued interest receivable:Term placement with banks -
Loans to banks 3,173,591
Loans and advances 190,577
Accrued interest payable:Money market deposits from banks -
Deposits at amortized cost 1,512,266
Borrowings 49,747
Cash contribution to capital 3,282
Income statement accounts:Interest income from deposits with banks 3,177,400
Interest income from loans to banks 125,179
Interest income from loans and advances 8,099,381
Interest expense on deposits at amortized cost 15,260,593
Interest expense on borrowings from related parties 699,252
Interest expense on cash contribution to capital 1,197,972
20092010LBP’000
135,982,095
1,774,356
179,829,978
1,521,113
24,839,425
2,431,596
110,751
30,736,482
-
13,560,952
18,793,873
46,628,000
2,543,108
625,543
3,534
75,515
777,414
10,601
1,496,403
-
3,282
102,888
905,093
10,394,087
16,597,469
-
1,197,972
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 135
Interest rates charged on balances outstanding are the same
rates that would be charged in an arm’s transaction. Secured
loans and advances are covered by real estate mortgage to the
extent of LBP 1.6 billion (LBP 24.7 billion in 2009) and by
pledged deposits of the respective borrowers to the extent of
LBP 167.9 billion (LBP 144.6 billion in 2009) and by car mortgage
to the extent of LBP 145 million (shares pledged to the extent of
LBP 10.4 billion during 2009).
The remunerations of executive management amounted to
LBP 29.2 billion during 2010 (LBP 22.1 billion during 2009). This
includes accrued remuneration payable to the chairman and
vice chairman calculated on the basis of 8% of profit before tax.
42. CASH AND CASH EQUIVALENTS
20092010LBP’000
Cash
Current accounts with Central Banks
Time deposits with Central Banks
Purchased checks
Current accounts with banks and financial institutions
Time deposits with banks and financial institutions
TOTAL
81,336,245
206,453,846
752,221,310
12,458,021
113,249,966
1,252,160,873
2,417,880,261
97,905,375
185,733,817
1,080,737,615
10,706,176
230,095,048
1,412,766,198
3,017,944,229
Cash and cash equivalents for the purpose of the cash flows statement consist of the following:
Time deposits with Central Banks and banks and financial
institutions represent inter-bank placements and borrowings
with an original term of 90 day or less.
The following non-cash transactions were excluded from the
statement of cash flows:
(a) Positive change in fair value of available for sale securities of
LBP 45.87 billion and related deferred tax liability of LBP 7.04
billion during 2010 (Positive change of LBP 333.4 billion and
deferred tax liability of LBP 48.4 billion during 2009).
(b) Assets acquired in satisfaction of loans in the amount of
LBP 34.2 billion during 2010 (LBP 5.1 billion during 2009).
(c) Increase in the value of the acquired property from Lati Bank
SAL with an amount of LBP 2.28 billion against deferred
charges on business acquisition during 2010.
(d) Transfer of provision of LBP 175 million from property and
equipment to other liabilities during 2010.
(e) Reclassification of held to maturity securities with an amount
of LBP 44.9 billion to available for sale securities as a result of
the merger with Lati Bank SAL.
(f) Transfer from assets acquired in satisfaction of loans in the amount
of LBP 1.3 billion to property and equipment during 2009.
(g) Change in derivative assets held for risk management in the
amount of LBP 146 million during 2010 (LBP 1.7 billion during
2009).
(h) Assets for the amount of LBP 60.39 billion and liabilities for
the amount of LBP 85.77 billion acquired from “Lati Bank
SAL” excluded for the year ended 2009.
(i) Assets for the amount of LBP 42.14 billion and liabilities for
the amount of LBP 13.17 billion acquired from increasing the
interest held in “Fransabank OJSC” and achieving control
over this entity (previously classified as associate) excluded
for the year ended 2009.
(j) Plant and property for an amount of LBP 13.02 billion were
purchased during 2010 from which an amount of LBP 460
million is still unpaid and is recorded under “Other liabilities”.
Fransabank > Annual Report 2010136
43. COLLATERAL GIVEN
44. RISK MANAGEMENT OF FINANCIAL INSTRUMENTS
Financial assets given as collateral are as follows at December 31:
Treasury bills held to maturity 8,843,720 Soft loan 8,843,712 June 28, 2013
Treasury bills held to maturity 10,468,000 Soft loan 10,468,000 December 20, 2013
Treasury bills held to maturity 10,500,000 Soft loan 10,500,000 October 25, 2012
Treasury bills held to maturity 185,000,000 Soft loan 185,000,000 November 6, 2014
Treasury bills held to maturity 12,012,000 Soft loan 12,012,000 February 12, 2015
Treasury bills held to maturity 5,177,250 Soft loan 5,177,250 February 21, 2012
Treasury bills held to maturity 774,000 Soft loan 774,000 July 2, 2015
Treasury bills held to maturity 2,889,210 Soft loan 2,758,270 February 24, 2011
TOTAL 235,664,180 235,533,232
DECEMBER 31, 2010
LBP’000
Corresponding FacilitiesRedemption Value
of Pledged Assets Nature of Facility Amount of Facility Maturity Date
Treasury bills held to maturity 8,843,720 Soft loan 8,843,712 June 28, 2013
Treasury bills held to maturity 10,468,000 Soft loan 10,468,000 December 20, 2013
Treasury bills held to maturity 289,000,000 Soft loan 289,000,000 August 6, 2010
Treasury bills held to maturity 10,500,000 Soft loan 10,500,000 October 25, 2012
TOTAL 318,811,720 318,811,712
DECEMBER 31, 2009
LBP’000
Corresponding FacilitiesRedemption Value
of Pledged Assets Nature of Facility Amount of Facility Maturity Date
Risk Management Framework
The Group is exposed to different types of risk mainly credit risk,
liquidity risk, market risk and operational risk. These risks are
inherent in the Group’s activities but are managed through an
ongoing process of identification, measurement and monitoring,
subject to risk limits.
The responsibility for risk management of the Group resides
within the Board of Directors, the Risk Management Committee
and the Risk Management Division. In addition, the Internal
Audit Department has the responsibility to review the risk
management process as described below.
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 137
Board of Directors
The Board of Directors has overall responsibility for the
establishment of the Group's risk management framework and
overseeing the bank’s risks. It is ultimately responsible for
defining the strategic objectives, identifying and setting the
level of tolerable risk to which Fransabank Group is exposed,
and approving the Risk Management policies and procedures.
Risk Management Committee
The Risk Management Committee assists the Board of Directors
in fulfilling its oversight responsibilities; identifying the Bank’s
risks profile vis-à-vis its risk appetite and risk tolerance; monitoring
all aspects of the risks inherent in the Bank’s activities; and
assessing the Bank’s risk management and control practices.
Risk Management Division
The Risk Management Division, which is headed by the Chief
Risk Officer, is independent of the bank’s business lines. It works
closely with the Risk Management Committee and Senior
Management to assist them in managing the Group's risks and
ensuring that proper controls procedures are set up in order to
highlight risks and mitigate them.
In addition to the above, the Risk Management Division ensures
that the capital is adequate to cover all types of risks that the
bank is exposed to and monitors compliance with risk
management policies, procedures and risk limits and
accordingly, reports to the Risk Management Committee with
appropriate recommendations.
Internal Audit Department
Risk management processes are independently reviewed by
the Internal Audit Department, at least annually. This review
includes examination of both adequacy and effectiveness of
risk control procedures.
Credit Risk
Credit risk is most simply defined as the potential that a bank’s
borrower or counterparties fail to meet their obligations in
accordance with agreed terms. One of the primary goals of
credit risk management is to maximize Group’s risk-adjusted
rate of return by maintaining credit risk exposure within
acceptable parameters.
Oversight of credit risk starts at the level of the Executive
Committee, which is responsible for: (i) deciding on strategies
and credit policies within the guidance provided by the Group’s
main regulator (Central Bank of Lebanon), (ii) evaluating the
quality of the credit portfolio based on applicable policies and
procedures and (iii) evaluating expansion projects.
Management of credit risk mainly includes:
a) Implementing credit policies and procedures with respect
to the credit file origination, analysis, approval and review in
addition to lines of authority in granting loans at each
administrative level and the policies for the eligible credit
risk mitigation.
b) Providing guidance for compliance with regulatory
requirements while assessing credit risk at the borrower’s
level.
c) Assessing credit risk for new and existing facilities through
conducting a credit review that tackles among other things
following up the accounts’ performance, recurring
over-limits and counterparty’s financial situation.
d) Providing adequate controls over risk by ensuring that credit
exposures are within levels consistent with prudential
threshold limits stipulated by Central Bank of Lebanon, as
well as internal limits.
Retail Lending:
Different retail credit applications are used for each product
type which are submitted by sales channels and analyzed
centrally based on the set policies and procedures. These
comprise the following:
• Borrower’s eligibility criteria (i.e., age, nationality, years of
experience, monthly income / salary, etc…)
• Required documents (i.e., income declaration, proof of
residence, etc…)
Fransabank > Annual Report 2010138
• General conditions (i.e., monthly installment over monthly
income ratio, financing ratio)
• Collateral
Loan applications are approved by the Retail & Housing
Committee which is composed of the Head of Product and
Credit Manager. The Head of the Retail Risk Department
approves or rejects the request in case of un-unanimous
agreement and/or deviations from standard credit policies and
procedures.
The Retail & Housing Committee meets on a daily basis to cater
for prompt feedback to clients. Different authority levels are
specified for approving each product types depending on loan
amount.
The Collection Unit handles delinquency issues. The main
purpose of creating this unit in 2004 is to centralize the follow-
up of delinquent retail loans. Clients in default are contacted
within 7 days after the maturity becomes due. Rescheduling,
extension of payment, warning letters, salary domiciliation and
other means of payment arrangements are frequently considered
by the collection staff to prevent downgrading a loan, and
eventually becomes subject to a legal suit.
Corporate Lending:
The Corporate Banking Department processes credit applications
with total combined facilities above the equivalent of USD 2
million and/or turnover above USD 5 million. These applications
are fully prepared by the Relationship Manager and his
assistant. Applications are then reviewed by the Team Leader
and sent to the Head of Corporate Banking Division for comments
and thereafter to the Credit Appraisal Unit for an independent
opinion and the Risk Management Division for assessing credit
risk inherent in individual credit requests as well as the entire
portfolio prior to their discussion and approval by the Credit
Committee.
SME Lending:
A company is classified Small and Medium enterprise (SME) as
long as its annual sales turnover does not exceed USD 5 million
and/or its total exposure is within USD 2 million.
Measurement of Credit Risk
Loans and advances to customers:
In measuring credit risk of loans and advances, the Bank considers
the following:
• Ability of the counterparty to honor its contractual obligations
based on the account’s performance, recurring overdues and
related reasons, the counterparty’s financial position and
effect thereto of the economic environment and market
conditions;
• Exposure levels of the counterparty and unutilized credit
limits granted;
• Exposure levels of the counterparty with other banks;
• Purpose of the credit facilities granted to the counterparty
and conformity of utilization by the counterparty.
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 139
In accordance with Central Bank of Lebanon circular No.58 the Group’s customers are categorized into five classifications as
described below:
CLASSIFICATION DESCRIPTION
Standard monitoring
Special monitoring
(Watch list)
Substandard
Doubtful
Bad
Indicates that borrowers are able to honor their commitments
and there is no reason to doubt their ability to repay principal and
interest in full and in a timely manner. Some of the indicators
related to this category are: continuous cash inflows, timely
submission of financial statements and / or sufficient collateral.
Indicates that borrowers are able to honor their current
commitments, although repayment may be adversely affected
by specific factors. Such borrowers are subject to special
monitoring. Major characteristics of this category are: inadequate
loan information such as annual financial statements availability,
condition of and control over collateral held is questionable and
/ or declining profitability.
Indicates that borrowers' ability to serve their commitments is in
question. In this context, borrowers cannot depend on their
normal business revenues to pay back principal and interest, i.e.
losses may occur. The main characteristics of this category are
severe decline in profitability and in cash inflows. In this case, the
Group considers interests and commissions as unrealized but
does not establish an allowance for impairment.
Indicates that borrowers cannot honor their commitments in full
and on time. Significant losses will be incurred even collateral
held is invoked due to payment overdues. The net realizable
value of collateral held is insufficient to cover payment of
principal and interest. In this case, the Group considers interests
and commissions as unrealized and established an allowance for
impairment accordingly.
Indicates that commitments cannot be covered even after taking
all possible measures and resorting to necessary legal
procedures. Some signals of this category would be inexistence
of collateral, low value of collateral and / or, losing contact with
the borrower. In this case, the bank considers interests and
commissions as unrealized, ceases their accumulation,
and provides the whole amount of the exposure’s balance.
12
3
4
5
>
>
>
>
>
Fransabank > Annual Report 2010140
Loans’ classifications are assessed and updated regularly.
Note 9 discloses the distribution of loans and advances to customers by classification.
Most of customers’ exposures represent credit facilities granted to corporations which do not have external credit rating.
Loans classified as standard and special monitoring include overdue accounts as follows:
20092010LBP’000
Less than 30 days
Between 30-60 days
Between 60-90 days
Between 90-180 days
Beyond 180 days
TOTAL
5,128,746
9,577,363
1,010,026
1,667,481
7,988,203
25,371,819
32,407,181
6,079,316
1,592,014
5,610,844
15,169,840
60,859,195
Debt investment securities and other bills:
The risk of the debt instruments included in the investment
portfolio relates mainly to sovereign risk (including Central Bank
of Lebanon) to the extent of 96% in 2010 and 2009.
Limiting of Credit Risk
The Bank structures the levels of credit risk undertaken by
placing limits on the amount of risk accepted in relation to one
borrower, and/or groups of related borrowers. Such risks are
monitored on a revolving basis and subject to an annual or
more frequent review, when considered necessary.
Exposures to any one borrower including banks are further
restricted by sub-limits covering on and off-financial position
exposures. Actual exposures against limits are monitored on a
regular basis.
In addition to the above, the Group’s lead regulator (Central
Bank of Lebanon – BDL) and the Banking Control Commission
(BCC) have set up the following regulations with respect to
limits of credit risks:
• With respect to loans and advances to customers, BDL basic
circular No.81 provides the following:
- The Board of Directors should be periodically informed
about single borrowers (or group of related borrowers)
with total facilities in excess of USD 1 million or equivalent.
- Facilities granted to related parties should not exceed 5%
of the Bank’s capital base. This percentage falls to 2% in
case the Bank does not abide with article 152 of the
Lebanese Code of Money and Credit.
- Allowed temporary and accidental over-limits should not
exceed 10% of authorized overdraft limit.
• BDL circular No.48 and BCC circular No.258 (issued during
December 2007) specify the ceiling for the credit facilities
and regulations related to country limits and exposures per
customer or group of customers.
• BDL circular No.51 states that facilities granted against the
pledge of shares, in case the purpose is acquiring said shares,
should not exceed 50% of value of listed shares.
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 141
Concentration of credit risk by geographical location:
2010
LBP’000GulfEurope Other TotalMiddle East &
AfricaLebanon North America
Financial and trading assets:
Cash and Central Banks 2,274,886,172 213,545,226 - 48,881,556 - - 2,537,312,954
Deposits with banks and
financial institutions 36,649,985 320,283,707 103,494,606 1,061,011,500 167,578,365 10,558,620 1,699,576,783
Trading assets 90,262,522 - 280,244 1,077,027 226,649 - 91,846,442
Loans to banks 87,170,965 135,874,379 - (659,623) - 13,591,462 235,977,183
Loans and advances
to customers 3,737,473,562 705,254,560 1,400,328 112,587,676 109,572,029 70,054,448 4,736,342,603
Available for sale investments 6,721,740,670 7,559,466 7,853,888 40,345,276 28,547,780 - 6,806,047,080
Held to maturity investments 1,367,597,252 - - 404,443 - - 1,368,001,695
Derivative assets held for
risk management 983,976 9,282 4,700 8,571 4,305 790 1,011,624
TOTAL 14,316,765,104 1,382,526,620 113,033,766 1,263,656,426 305,929,128 94,205,320 17,476,116,364
Financial liabilities:
Deposits and borrowings
from banks 26,581,427 244,182,047 8,831,129 93,187,675 41,836,358 1,772 414,620,408
Liabilities designated at
fair value through
profit or loss 69,697,242 1,353,973 251,931 1,210,049 547,006 76,165 73,136,366
Customers' accounts
at amortized cost 12,465,726,245 982,088,219 48,332,200 575,687,441 958,388,820 95,174,981 15,125,397,906
Other borrowings 262,530,360 - 8,342,203 77,440,710 13,977,012 - 362,290,285
Subordinated loan - - - 31,874,560 - - 31,874,560
Financial guarantee
contracts issued 2,595,196 - - - - - 2,595,196
TOTAL 12,827,130,470 1,227,624,239 65,757,463 779,400,435 1,014,749,196 95,252,918 16,009,914,721
Fransabank > Annual Report 2010142
2009
LBP’000GulfEurope Other TotalMiddle East &
AfricaLebanon North America
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Financial and trading assets:
Cash and Central Banks 2,287,568,583 349,978,650 - 15,349,835 - - 2,652,897,068
Deposits with banks and
financial institutions 63,416,987 316,827,727 42,100,261 999,674,070 71,141,248 5,991,715 1,499,152,008
Trading assets 92,206,753 - - 3,445,677 168,959 - 95,821,389
Loans to banks 25,638,716 2,507,113 - 13,882,743 - 16,788,942 58,817,514
Loans and advances
to customers 2,893,187,614 357,003,230 512,569 90,528,504 89,228,059 50,282,228 3,480,742,204
Available for sale investments 6,315,600,764 335,288 3,367,154 25,773,125 14,269,981 - 6,359,346,312
Held to maturity investments 1,408,193,258 - - 3,580,556 - - 1,411,773,814
Derivative assets held for
risk management 1,125,787 10,344 5,238 22,112 6,119 880 1,170,480
TOTAL 13,086,938,462 1,026,662,352 45,985,222 1,152,256,622 174,814,366 73,063,765 15,559,720,789
Financial liabilities:
Deposits and borrowings
from banks 50,957,787 142,218,363 7,593,433 94,520,525 34,535,735 721,304 330,547,147
Liabilities designated at
fair value through
profit or loss 155,861,816 2,019,430 362,028 1,689,132 2,670,658 109,336 162,712,400
Customers' accounts
at amortized cost 11,098,049,241 699,254,622 34,080,708 562,003,120 942,020,273 89,003,854 13,424,411,818
Other borrowings 330,667,693 - 11,187,911 67,323,685 3,640,802 - 412,820,091
Derivative liabilities held
for risk management - - - 42,954 - - 42,954
Financial guarantee
contracts issued 1,627,290 - - - - - 1,627,290
TOTAL 11,637,163,827 843,492,415 53,224,080 725,579,416 982,867,468 89,834,494 14,332,161,700
Fransabank > Annual Report 2010 143
a) Collateral:
The principal collateral types for loans and advances consist of
mortgages over real estate properties and bank guarantees.
The Group will seek additional collateral from the counterparty
as soon as impairment indicators are noticed for the relevant
individual loans and advances.
b) Netting arrangements:
The Group enters into netting arrangements when with
counterparties having a significant volume of transactions in
order to restrict its exposure to credit losses. These
arrangements do not generally result in an offset of assets and
liabilities balances in the statement of financial position.
Other specific control and mitigation measures are outlined below:
Fransabank > Annual Report 2010144
DECEMBER 31, 2010
LBP’000
GrossExposure Netof UnrealizedInterest and
Discount
Allowancefor
ImpairmentNet
Exposure Pledge Funds
DECEMBER 31, 2009
LBP’000
GrossExposure Netof UnrealizedInterest and
Discount
Allowancefor
ImpairmentNet
Exposure Pledge Funds
Collateral Held against Loans and Advances to Customers:
Market Risks
Market risk is defined as the risk of losses in on and off-financial
position, arising from adverse movements in market prices. The
risks subject to Market Risk include: Interest Rate Risk and Equity
Risk in the trading book, Foreign Exchange Risk and
Commodities Risk.
The overall authority for market risk is vested in ALCO.
Management of Market Risks
Trading Portfolio
A Trading Book consists of positions in financial instruments
held either with trading intent or in order to hedge other
elements of the trading book. The market risk for trading book
is managed and monitored using the Standardized
Measurement Method.
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Standard and special monitoring 4,642,425,250 - 4,642,425,250 685,615,717
Sub-standard (including restructured debts) 28,809,112 - 28,809,112 3,842,254
Doubtful (including restructured debts) 235,771,227 (150,957,198) 84,814,029 2,389,198
Loss (including restructured debts) 44,453,444 (44,453,444) - 2,348,069
Loan portfolio purchased 3,589,905 - 3,589,905 -
Allowance for collectively impaired loans - (23,295,693) (23,295,693) -
TOTAL 4,955,048,938 (218,706,335) 4,736,342,603 694,195,238
Standard and special monitoring 3,343,204,140 - 3,343,204,140 576,665,636
Sub-standard (including restructured debts) 27,430,820 - 27,430,820 3,488,732
Doubtful (including restructured debts) 295,669,337 (178,653,975) 117,015,362 2,379,493
Loss (including restructured debts) 45,290,566 (45,290,566) - 2,349,577
Loan portfolio purchased 3,677,874 - 3,677,874 -
Allowance for collectively impaired loans - (10,585,992) (10,585,992) -
TOTAL 3,715,272,737 (234,530,533) 3,480,742,204 584,883,438
Fransabank > Annual Report 2010 145
BankGuarantees
& KafalatMortgage
on PropertiesEquity
SecuritiesDebt
Securities Others
TotalCollateral
Held
Lesser ofIndividualExposureor Total
Collateral
FAIR VALUE OF COLLATERAL HELD
BankGuarantees
& KafalatMortgage
on PropertiesEquity
SecuritiesDebt
Securities Others
TotalCollateral
Held
Lesser ofIndividualExposureor Total
Collateral
FAIR VALUE OF COLLATERAL HELD
Foreign Exchange Risk
Foreign exchange risk arises from the exposure on banking
assets and liabilities, denominated in foreign currencies.
The capital charge for foreign exchange risk applies to foreign
exchange risk of the entire business. Two processes are used to
calculate the capital charge for foreign exchange risk. The first is
to measure the bank’s net open position in each currency. The
second is to measure the risks inherent in the bank’s mix of long
and short positions in different currencies. The capital charge is
8% of the higher of either the net long currency position or the
net short currency position.
150,107,272 2,214,105,131 41,734,033 1,892,089 798,200,973 3,891,655,215 2,699,821,014
606,919 53,839,747 167,357 - 6,791,673 65,247,950 24,864,706
90,320 254,615,013 5,224 - 3,671,938 260,771,693 161,980,218
70,769 12,436,106 13,500 - 1,509,861 16,378,305 9,868,133
- - - - - - -
- - - - - - -
150,875,280 2,534,995,997 41,920,114 1,892,089 810,174,445 4,234,053,163 2,896,534,071
125,526,453 1,454,582,130 106,771,923 3,204,977 646,397,750 2,913,148,869 1,882,695,047
388,628 55,309,509 183,789 - 726,971 60,097,629 24,422,169
128,008 257,997,395 5,224 - 1,297,908 261,808,028 166,306,045
70,769 12,265,815 13,500 - 1,655,410 16,355,071 10,027,687
- - - - - - -
- - - - - - -
126,113,858 1,780,154,849 106,974,436 3,204,977 650,078,039 3,251,409,597 2,083,450,948
Assets and liabilities are segregated as follows by major currencies:
Fransabank > Annual Report 2010146
DECEMBER 31, 2010
LBP’000USD Euro Other TotalLBP
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
ASSETS
Cash and Central Banks 846,022,452 1,396,298,543 92,701,452 202,290,507 2,537,312,954
Deposits with banks and
financial institutions 11,608,823 995,061,878 388,696,749 304,209,333 1,699,576,783
Trading assets 5,129,140 74,259,278 12,303,783 154,241 91,846,442
Loans to banks 86,497,818 18,128,956 131,350,409 - 235,977,183
Loans and advances to customers 1,092,901,735 2,942,023,490 183,796,072 517,621,306 4,736,342,603
Available for sale investments 5,098,751,486 1,539,180,566 152,645,221 15,469,807 6,806,047,080
Held to maturity investments 363,475,952 951,532,392 52,993,351 - 1,368,001,695
Customers' liability under acceptances 150,000 215,448,119 1,354,459 13,243,091 230,195,669
Investments in associates 9,842,931 35,985,405 - - 45,828,336
Assets acquired in satisfaction of loans 63,236,128 146,202,936 - - 209,439,064
Property and equipment 209,649,503 (1,049,974) 157,766 58,124,866 266,882,161
Intangible assets 54,438,075 - 52,874 775,915 55,266,864
Other assets 64,303,918 68,501,792 3,064,339 39,174,224 175,044,273
TOTAL ASSETS 7,906,007,961 8,381,573,381 1,019,116,475 1,151,063,290 18,457,761,107
LIABILITIES
Deposits and borrowings from banks 23,847,902 107,931,861 29,715,424 253,125,221 414,620,408
Liabilities designated at fair value
through profit or loss 2,388,931 70,747,435 - - 73,136,366
Customers' accounts at amortized cost 6,061,006,264 7,600,908,546 900,155,371 563,327,725 15,125,397,906
Customers' acceptance liability 150,000 215,448,119 1,354,459 13,243,091 230,195,669
Other borrowings 247,405,654 88,609,940 26,274,691 - 362,290,285
Subordinated loan - 31,874,560 - - 31,874,560
Other liabilities 132,667,404 82,945,564 (743,133) 22,235,419 237,105,254
Provisions 31,050,847 5,733,533 449,424 4,923,683 42,157,487
TOTAL LIABILITIES 6,498,517,002 8,204,199,558 957,206,236 856,855,139 16,516,777,935
Currencies to be received 1,510,275 354,766,561 22,468,327 14,089,533 392,834,696
Currencies to be delivered (300,200,000) (34,602,054) (23,375,753) (33,554,048) (391,731,855)
(298,689,725) 320,164,507 (907,426) (19,464,515) 1,102,841
NET ON-BALANCE SHEET FINANCIAL POSITION 1,108,801,234 497,538,330 61,002,813 274,743,636 1,942,086,013
Fransabank > Annual Report 2010 147
ASSETS
Cash and Central Banks 944,046,626 1,266,250,293 93,044,195 349,555,954 2,652,897,068
Deposits with banks and
financial institutions 35,005,613 672,127,139 531,449,451 260,569,805 1,499,152,008
Trading assets 4,971,306 75,301,284 13,996,447 1,552,352 95,821,389
Loans to banks 25,638,719 8,386,361 16,788,941 8,003,493 58,817,514
Loans and advances to customers 663,337,387 2,456,056,613 183,099,937 178,248,267 3,480,742,204
Available for sale investments 4,665,674,424 1,527,327,486 156,039,721 10,304,681 6,359,346,312
Held to maturity investments 366,364,780 988,608,002 56,801,032 - 1,411,773,814
Customers' liability under acceptances 299,999 90,243,948 12,328,252 10,610,040 113,482,239
Investments in associates 10,336,794 36,702,558 - - 47,039,352
Assets acquired in satisfaction of loans 63,752,591 125,348,949 - - 189,101,540
Property and equipment 169,460,072 (1,028,869) 151,282 23,751,249 192,333,734
Intangible assets 53,614,177 57,458 37,633 1,942,007 55,651,275
Other assets 59,161,708 62,200,356 2,608,228 19,901,736 143,872,028
TOTAL ASSETS 7,061,664,196 7,307,581,578 1,066,345,119 864,439,584 16,300,030,477
LIABILITIES
Deposits and borrowings from banks 34,007,884 149,961,870 16,257,663 130,319,730 330,547,147
Liabilities designated at fair value
through profit or loss 2,256,269 160,456,131 - - 162,712,400
Customers' accounts at amortized cost 5,331,543,118 6,750,772,945 939,684,726 402,411,029 13,424,411,818
Customers' acceptance liability 299,999 90,243,948 12,328,252 10,610,040 113,482,239
Other borrowings 330,667,693 53,331,447 28,820,951 - 412,820,091
Other liabilities 105,003,808 65,584,396 15,167,542 12,863,220 198,618,966
Provisions 20,021,753 14,945,224 485,988 2,519,262 37,972,227
TOTAL LIABILITIES 5,823,800,524 7,285,295,961 1,012,745,122 558,723,281 14,680,564,888
Currencies to be received 1,454,868 347,242,057 20,874,489 5,942,326 375,513,740
Currencies to be delivered (300,890,480) (26,608,332) (20,331,022) (25,652,805) (373,482,639)
(299,435,612) 320,633,725 543,467 (19,710,479) 2,031,101
NET ON-BALANCE SHEET FINANCIAL POSITION 938,428,060 342,919,342 54,143,464 286,005,824 1,621,496,690
DECEMBER 31, 2009
LBP’000USD Euro Other TotalLBP
Non-Trading Portfolio – Interest Rate Risk
Fransabank Group is also exposed to Interest Rate Risk in the Banking Book (IRRBB) which includes financial instruments not subject to
the above definition of Market Risk in the trading book. IRRBB arises from core banking activities such as lending, deposit taking, etc…
The IRRBB is measured by using a maturity / repricing schedule which is referred to as “gap analysis”.
Interest rate risk is managed principally through monitoring interest rate gaps.
Fransabank > Annual Report 2010148
A summary of the Group’s interest rate gap position is as follows at December 31, 2010:
Interest sensitivity analysis for accounts in Lebanese pounds as at December 31, 2010
INTEREST RATE SENSITIVITY STATEMENT OF FINANCIAL POSITION
LBP’000
Non-InterestBearing Up to
3 months3 monthsto 1 year
1 to 3years
3 to 5years
Floating
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
ASSETS
Cash and Central Banks 426,421,498 419,600,954 - - -
Deposits with banks and financial institutions 69,660 11,539,163 - - -
Trading assets - 1,799,158 - - -
Loans to banks 467,818 - - - -
Loans and advances to customers 4,484,632 290,692,387 70,077,952 144,063,863 101,335,287
Available for sale investments 203,819,881 157,239,186 - - -
Held to maturity investments 2,811,772 127,889,210 - - -
Customers' liability under acceptances 150,000 - - - -
Investments in associates 9,842,931 - - - -
Assets acquired in satisfaction of loans 63,236,128 - - - -
Property and equipment 209,649,503 - - - -
Intangible assets 54,438,075 - - - -
Other assets 64,303,918 - - - -
TOTAL ASSETS 1,039,695,816 1,008,760,058 70,077,952 144,063,863 101,335,287
LIABILITIES
Deposits and borrowings from banks 11,528,691 12,071,059 - - -
Liabilities designated at fair value
through profit or loss 7,845 - - - -
Customers' accounts at amortized cost 245,342,057 5,283,483,255 173,171,980 27,187,071 -
Customers' acceptance liability 150,000 - - - -
Other borrowings 1,274,571 3,448,401 2,063,628 41,195,135 14,423,919
Other liabilities 132,667,404 - - - -
Provisions 31,050,847 - - - -
TOTAL LIABILITIES 422,021,415 5,299,002,715 175,235,608 68,382,206 14,423,919
INTEREST RATE GAP POSITION 617,674,401 (4,290,242,657) (105,157,656) 75,681,657 86,911,368
Fransabank > Annual Report 2010 149
INTEREST RATE SENSITIVITY STATEMENT OF FINANCIAL POSITION
Over5 years
Total Over 3 monthsless than 1 year
1 to 3years
3 to 5years
Over5 years
Total
GrandTotal
Floating Fixed
- 419,600,954 - - - - - 846,022,452
- 11,539,163 - - - - - 11,608,823
- 1,799,158 - 1,115,170 - 2,214,812 3,329,982 5,129,140
7,000,000 7,000,000 2,823,000 11,146,000 16,646,000 48,415,000 79,030,000 86,497,818
198,225,632 804,395,121 65,618,238 134,583,174 65,881,825 17,938,745 284,021,982 1,092,901,735
- 157,239,186 360,946,009 1,530,217,260 1,794,712,428 1,051,816,722 4,737,692,419 5,098,751,486
- 127,889,210 19,311,720 15,677,250 197,786,000 - 232,774,970 363,475,952
- - - - - - - 150,000
- - - - - - - 9,842,931
- - - - - - - 63,236,128
- - - - - - - 209,649,503
- - - - - - - 54,438,075
- - - - - - - 64,303,918
205,225,632 1,529,462,792 448,698,967 1,692,738,854 2,075,026,253 1,120,385,279 5,336,849,353 7,906,007,961
- 12,071,059 248,152 - - - 248,152 23,847,902
- - 2,381,086 - - - 2,381,086 2,388,931
- 5,483,842,306 330,334,118 - - - 331,821,901 6,061,006,264
- - - - - - - 150,000
- 61,131,083 - 1,487,783 185,000,000 - 185,000,000 247,405,654
- - - - - - - 132,667,404
- - - - - - - 31,050,847
- 5,557,044,448 332,963,356 1,487,783 185,000,000 - 519,451,139 6,498,517,002
205,225,632 (4,027,581,656) 115,735,611 1,691,251,071 1,890,026,253 1,120,385,279 4,817,398,214 1,407,490,959
Fransabank > Annual Report 2010150
Interest sensitivity analysis for accounts in foreign currency as at December 31, 2010
INTEREST RATE SENSITIVITY STATEMENT OF FINANCIAL POSITION
LBP’000
Non-InterestBearing Up to
3 months3 monthsto 1 year
1 to 3years
3 to 5years
Floating
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
ASSETS
Cash and Central Banks 261,391,555 675,395,197 - 621,843,750 131,152,500
Deposits with banks and financial institutions 185,506,523 1,446,064,090 - - -
Trading assets 25,301,395 97,426 - - -
Loans to banks 4,461,386 14,678,835 14,424,503 7,744,007 -
Loans and advances to customers 110,727,941 2,475,336,856 373,353,201 205,596,705 110,077,431
Available for sale investments 74,835,730 - - 7,544,790 -
Held to maturity investments 21,038,222 - - - -
Customers' liability under acceptances 230,045,669 - - - -
Investments in associates 35,985,405 - - - -
Assets acquired in satisfaction of loans 146,202,936 - - - -
Property and equipment 57,232,658 - - - -
Intangible assets 828,789 - - - -
Other assets 110,740,355 - - - -
TOTAL ASSETS 1,264,298,564 4,611,572,404 387,777,704 842,729,252 241,229,931
LIABILITIES
Deposits and borrowings from banks 16,023,503 283,548,091 73,262,520 - -
Liabilities designated at fair value
through profit or loss 1,547,154 - 30,588,683 38,611,598 -
Customers' accounts at amortized cost 1,097,538,467 6,811,177,424 845,804,772 54,673,894 -
Customers' acceptance liability 230,045,669 - - - -
Other borrowings 527,549 12,876,567 5,352,243 12,813,047 10,184,947
Subordinated loan - - - - -
Other liabilities 104,437,850 - - - -
Provisions 11,106,640 - - - -
TOTAL LIABILITIES 1,461,226,832 7,107,602,082 955,008,218 106,098,539 10,184,947
INTEREST RATE GAP POSITION (196,928,268) (2,496,029,678) (567,230,514) 736,630,713 231,044,984
Fransabank > Annual Report 2010 151
INTEREST RATE SENSITIVITY STATEMENT OF FINANCIAL POSITION
Over5 years
Total Over 3 monthsless than 1 year
1 to 3years
3 to 5years
Over5 years
Total
GrandTotal
Floating Fixed
- 1,428,391,447 - - 1,507,500 - 1,507,500 1,691,290,502
- 1,446,064,090 48,904,285 7,493,062 - - 56,397,347 1,687,967,960
- 97,426 - 32,835,450 8,759,492 19,723,539 61,318,481 86,717,302
- 36,847,345 108,170,634 - - - 108,170,634 149,479,365
99,254,391 3,263,618,584 41,967,736 77,770,688 122,357,387 26,998,532 269,094,343 3,643,440,868
- 7,544,790 162,160,277 638,625,923 164,343,160 659,785,714 1,624,915,074 1,707,295,594
- - 109,928,044 405,303,651 170,824,211 297,431,615 983,487,521 1,004,525,743
- - - - - - - 230,045,669
- - - - - - - 35,985,405
- - - - - - - 146,202,936
- - - - - - - 57,232,658
- - - - - - - 828,789
- - - - - - - 110,740,355
99,254,391 6,182,563,682 471,130,976 1,162,028,774 467,791,750 1,003,939,400 3,104,890,900 10,551,753,146
- 356,810,611 17,938,392 - - - 17,938,392 390,772,506
- 69,200,281 - - - - - 70,747,435
- 7,711,656,090 239,823,524 13,866,061 1,507,500 - 255,197,085 9,064,391,642
- - - - - - - 230,045,669
13,672,460 54,899,264 3,059,167 10,149,393 13,099,036 33,150,222 59,457,818 114,884,631
- - - - - 31,874,560 31,874,560 31,874,560
- - - - - - - 104,437,850
- - - - - - - 11,106,640
13,672,460 8,192,566,246 260,821,083 24,015,454 14,606,536 65,024,782 364,467,855 10,018,260,933
85,581,931 (2,010,002,564) 210,309,893 1,138,013,320 453,185,214 938,914,618 2,740,423,045 533,492,213
Fransabank > Annual Report 2010152
Interest sensitivity analysis for accounts in Lebanese pounds as at December 31, 2009
ASSETS
Cash and Central Banks 575,349,039 368,697,587 - - -
Deposits with banks and financial institutions 903,318 34,102,295 - - -
Trading assets 87,730 - - - -
Loans to banks 208,719 - - - -
Loans and advances to customers 22,386,465 175,358,389 34,622,262 81,769,083 55,701,862
Available for sale investments 194,138,867 157,518,607 - - -
Held to maturity investments 13,705,056 99,982 - - -
Customers' liability under acceptances 299,999 - - - -
Investments in associates 10,336,794 - - - -
Assets acquired in satisfaction of loans 63,752,591 - - - -
Property and equipment 169,460,072 - - - -
Intangible assets 53,614,177 - - - -
Other assets 59,161,708 - - - -
TOTAL ASSETS 1,163,404,535 735,776,860 34,622,262 81,769,083 55,701,862
LIABILITIES
Deposits and borrowings from banks 12,231,063 19,497,927 2,278,894 - -
Liabilities designated at fair value
through profit or loss 6,272 - - - -
Customers' accounts at amortized cost 216,086,509 4,627,106,374 177,430,455 41,407,613 -
Customers' acceptance liability 299,999 - - - -
Other borrowings 398,006 - 292,221,173 15,643,825 22,404,689
Other liabilities 105,003,808 - - - -
Provisions 20,021,753 - - - -
TOTAL LIABILITIES 354,047,410 4,646,604,301 471,930,522 57,051,438 22,404,689
INTEREST RATE GAP POSITION 809,357,125 (3,910,827,441) (437,308,260) 24,717,645 33,297,173
INTEREST RATE SENSITIVITY STATEMENT OF FINANCIAL POSITION
LBP’000
Non-InterestBearing Up to
3 months3 monthsto 1 year
1 to 3years
3 to 5years
Floating
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 153
- 368,697,587 - - - - - 944,046,626
- 34,102,295 - - - - - 35,005,613
- - - 2,875,790 - 2,007,786 4,883,576 4,971,306
- - 1,400,000 5,646,000 5,646,000 12,738,000 25,430,000 25,638,719
87,096,305 434,547,901 43,813,776 109,947,221 44,872,054 7,769,970 206,403,021 663,337,387
- 157,518,607 204,005,587 1,086,489,011 2,654,488,447 369,033,905 4,314,016,950 4,665,674,424
- 99,982 319,271,082 30,703,691 2,584,969 - 352,559,742 366,364,780
- - - - - - - 299,999
- - - - - - - 10,336,794
- - - - - - - 63,752,591
- - - - - - - 169,460,072
- - - - - - - 53,614,177
- - - - - - - 59,161,708
87,096,305 994,966,372 568,490,445 1,235,661,713 2,707,591,470 391,549,661 4,903,293,289 7,061,664,196
- 21,776,821 - - - - - 34,007,884
- - - 2,249,997 - - 2,249,997 2,256,269
- 4,845,944,442 269,509,746 2,421 - - 269,512,167 5,331,543,118
- - - - - - - 299,999
- 330,269,687 - - - - - 330,667,693
- - - - - - - 105,003,808
- - - - - - - 20,021,753
- 5,197,990,950 269,509,746 2,252,418 - - 271,762,164 5,823,800,524
87,096,305 (4,203,024,578) 298,980,699 1,233,409,295 2,707,591,470 391,549,661 4,631,531,125 1,237,863,672
INTEREST RATE SENSITIVITY STATEMENT OF FINANCIAL POSITION
Over5 years
Total Over 3 monthsless than 1 year
1 to 3years
3 to 5years
Over5 years
Total
GrandTotal
Floating Fixed
Fransabank > Annual Report 2010154
Interest sensitivity analysis for accounts in foreign currency as at December 31, 2009
ASSETS
Cash and Central Banks 235,785,903 691,781,636 130,398,750 472,601,250 149,242,500
Deposits with banks and financial institutions 88,391,703 470,543,521 875,109,646 - -
Trading assets 26,929,575 - - - -
Loans to banks 116,350 10,406,999 7,662,770 8,374,053 4,187,026
Loans and advances to customers 117,817,986 2,031,302,922 131,004,085 129,326,877 77,455,277
Available for sale investments 74,593,165 54,787,614 - - -
Held to maturity investments 22,292,262 98,281,900 - - -
Customers' liability under acceptances 113,182,240 - - - -
Investments in associates 36,702,558 - - - -
Assets acquired in satisfaction of loans 125,348,949 - - - -
Property and equipment 22,873,662 - - - -
Intangible assets 2,037,098 - - - -
Other assets 84,710,320 - - - -
TOTAL ASSETS 950,781,771 3,357,104,592 1,144,175,251 610,302,180 230,884,803
LIABILITIES
Deposits and borrowings from banks 8,277,207 241,068,215 47,193,841 - -
Liabilities designated at fair value
through profit or loss 3,671,609 - 85,414,950 71,369,572 -
Customers' accounts at amortized cost 957,149,721 6,185,591,870 681,428,120 32,037,734 -
Customers' acceptance liability 113,182,240 - - - -
Other borrowings 387,294 2,776,394 5,201,026 9,233,349 12,965,680
Other liabilities 93,615,158 - - - -
Provisions 17,950,474 - - - -
TOTAL LIABILITIES 1,194,233,703 6,429,436,479 819,237,937 112,640,655 12,965,680
INTEREST RATE GAP POSITION (243,451,932) (3,072,331,887) 324,937,314 497,661,525 217,919,123
INTEREST RATE SENSITIVITY STATEMENT OF FINANCIAL POSITION
LBP’000
Non-InterestBearing Up to
3 months3 monthsto 1 year
1 to 3years
3 to 5years
Floating
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 155
- 1,444,024,136 18,843,750 4,144,690 6,051,963 - 29,040,403 1,708,850,442
- 1,345,653,167 24,839,425 - 5,262,100 - 30,101,525 1,464,146,395
- - 1,752,974 950,186 39,283,873 21,933,475 63,920,508 90,850,083
- 30,630,848 2,431,597 - - - 2,431,597 33,178,795
45,844,053 2,414,933,214 97,574,056 60,152,950 101,971,857 24,954,754 284,653,617 2,817,404,817
- 54,787,614 29,031,236 589,648,768 351,114,392 594,496,713 1,564,291,109 1,693,671,888
- 98,281,900 248,787 608,636,588 91,718,310 224,231,187 924,834,872 1,045,409,034
- - - - - - - 113,182,240
- - - - - - - 36,702,558
- - - - - - - 125,348,949
- - - - - - - 22,873,662
- - - - - - - 2,037,098
- - - - - - - 84,710,320
45,844,053 5,388,310,879 174,721,825 1,263,533,182 595,402,495 865,616,129 2,899,273,631 9,238,366,281
- 288,262,056 - - - - - 296,539,263
- 156,784,522 - - - - - 160,456,131
- 6,899,057,724 229,575,776 7,085,479 - - 236,661,255 8,092,868,700
- - - - - - - 113,182,240
18,764,933 48,941,382 836,048 8,835,239 9,992,061 13,160,374 32,823,722 82,152,398
- - - - - - - 93,615,158
- - - - - - - 17,950,474
18,764,933 7,393,045,684 230,411,824 15,920,718 9,992,061 13,160,374 269,484,977 8,856,764,364
27,079,120 (2,004,734,805) (55,689,999) 1,247,612,464 585,410,434 852,455,755 2,629,788,654 381,601,917
INTEREST RATE SENSITIVITY STATEMENT OF FINANCIAL POSITION
Over5 years
Total Over 3 monthsless than 1 year
1 to 3years
3 to 5years
Over5 years
TotalGrandTotal
Floating Fixed
Accounts withno Maturity
Up to3 months
Fransabank > Annual Report 2010156
Liquidity Risk
Liquidity risk is the risk that the Group is unable to meet its obliga-
tions when they fall due and the incapability to fund increases in
assets. The table below summarizes the maturity profile of the
Group's assets compared to its financial liabilities based on
contractual undiscounted repayment obligations. The Group
maintains a portfolio of highly marketable and diverse assets readily
liquefiable in the event of an unforeseen interruption to cash flow.
The Group maintains obligatory reserves with Central Bank of
Lebanon and other Central Banks. Liquidity is assessed and managed
using a variety of stressed scenarios applicable to the Group.
DECEMBER 31, 2010
3 monthsto 1 year
1 to 3years
3 to 5years
Over5 years Total
Lebanese Pounds Base Accounts
LBP’000
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
ASSETS
Cash and Central Banks 425,557,548 420,464,904 - - - - 846,022,452
Deposits with banks and
financial institutions 608,823 11,000,000 - - - - 11,608,823
Trading assets - 1,799,158 - 1,115,170 - 2,214,812 5,129,140
Loans to banks 58,586 - 3,232,232 11,146,000 16,646,000 55,415,000 86,497,818
Loans and advances
to customers 171,269,894 59,471,363 199,539,316 279,047,609 167,225,446 216,348,107 1,092,901,735
Available for sale investments 119,473,488 219,285,015 383,246,573 1,530,217,260 1,794,712,428 1,051,816,722 5,098,751,486
Held to maturity investments - 130,485,212 19,527,490 15,677,250 197,786,000 - 363,475,952
Customers' liability
under acceptances 150,000 - - - - - 150,000
Investments in associates 9,842,931 - - - - - 9,842,931
Assets acquired in
satisfaction of loans 63,236,128 - - - - - 63,236,128
Property and equipment 209,649,503 - - - - - 209,649,503
Intangible assets 54,438,075 - - - - - 54,438,075
Other assets 64,303,918 - - - - - 64,303,918
TOTAL ASSETS 1,118,588,894 842,505,652 605,545,611 1,837,203,289 2,176,369,874 1,325,794,641 7,906,007,961
LIABILITIES
Deposits and borrowings
from banks 11,574,278 12,025,472 248,152 - - - 23,847,902
Liabilities designated at fair
value through profit or loss 7,845 - 2,381,086 - - - 2,388,931
Customers' accounts
at amortized cost 334,177,676 5,193,519,354 504,616,583 28,692,228 423 - 6,061,006,264
Customers' acceptance liability 150,000 - - - - - 150,000
Other borrowings - 4,411,022 2,375,578 41,195,135 199,423,919 - 247,405,654
Other liabilities 132,667,404 - - - - - 132,667,404
Provisions 31,050,847 - - - - - 31,050,847
TOTAL LIABILITIES 509,628,050 5,209,955,848 509,621,399 69,887,363 199,424,342 - 6,498,517,002
MATURITY GAP 608,960,844 (4,367,450,196) 95,924,212 1,767,315,926 1,976,945,532 1,325,794,641 1,407,490,959
Fransabank > Annual Report 2010 157
Accounts withno Maturity
Up to3 months
ASSETS
Cash and Central Banks 260,376,124 676,410,628 - 621,843,750 132,660,000 - 1,691,290,502
Deposits with banks and
financial institutions 219,305,287 1,412,265,326 48,904,285 7,493,062 - - 1,687,967,960
Trading assets 24,382,383 97,426 919,012 32,835,450 8,759,492 19,723,539 86,717,302
Loans to banks - 14,298,074 127,437,284 7,744,007 - - 149,479,365
Loans and advances
to customers 1,637,175,726 682,202,477 680,958,799 283,855,147 232,973,951 126,274,768 3,643,440,868
Available for sale investments 44,344,144 19,598,831 173,053,033 646,170,712 164,343,160 659,785,714 1,707,295,594
Held to maturity investments 1,507,501 13,574,255 115,884,509 405,303,652 170,824,211 297,431,615 1,004,525,743
Customers' liability
under acceptances 230,045,669 - - - - - 230,045,669
Investments in associates 35,985,405 - - - - - 35,985,405
Assets acquired in
satisfaction of loans 146,202,936 - - - - - 146,202,936
Property and equipment 57,232,658 - - - - - 57,232,658
Intangible assets 828,789 - - - - - 828,789
Other assets 110,740,355 - - - - - 110,740,355
TOTAL ASSETS 2,768,126,977 2,818,447,017 1,147,156,922 2,005,245,780 709,560,814 1,103,215,636 10,551,753,146
LIABILITIES
Deposits and borrowings
from banks 52,669,203 246,901,035 91,202,268 - - - 390,772,506
Liabilities designated at fair
value through profit or loss 1,547,154 - 30,588,683 38,611,598 - - 70,747,435
Customers' accounts
at amortized cost 1,250,688,936 6,647,315,754 1,093,636,119 71,243,242 1,507,500 91 9,064,391,642
Customers' acceptance liability 230,045,669 - - - - - 230,045,669
Other borrowings - 13,239,791 8,575,735 22,962,440 23,283,983 46,822,682 114,884,631
Subordinated loan - - - - - 31,874,560 31,874,560
Other liabilities 104,437,850 - - - - - 104,437,850
Provisions 11,106,640 - - - - - 11,106,640
TOTAL LIABILITIES 1,650,495,452 6,907,456,580 1,224,002,805 132,817,280 24,791,483 78,697,333 10,018,260,933
MATURITY GAP 1,117,631,525 (4,089,009,563) (76,845,883) 1,872,428,500 684,769,331 1,024,518,303 533,492,213
DECEMBER 31, 2010
3 monthsto 1 year
1 to 3years
3 to 5years
Over5 years Total
Foreign Currencies Base Accounts
LBP’000
Fransabank > Annual Report 2010158
Accounts withno Maturity
Up to3 months
ASSETS
Cash and Central Banks 575,427,168 368,619,458 - - - - 944,046,626
Deposits with banks and
financial institutions 1,305,613 33,700,000 - - - - 35,005,613
Trading assets (2) - - 2,959,786 - 2,011,522 4,971,306
Loans to banks - - 1,608,719 5,646,000 5,646,000 12,738,000 25,638,719
Loans and advances
to customers 82,088,446 51,163,359 142,426,338 191,951,295 100,657,890 95,050,059 663,337,387
Available for sale investments 119,714,446 208,163,553 227,785,062 1,086,489,011 2,654,488,447 369,033,905 4,665,674,424
Held to maturity investments - 13,557,335 319,518,785 30,703,691 2,584,969 - 366,364,780
Customers' liability
under acceptances 299,999 - - - - - 299,999
Investments in associates 10,336,794 - - - - - 10,336,794
Assets acquired in
satisfaction of loans 63,752,591 - - - - - 63,752,591
Property and equipment 169,460,072 - - - - - 169,460,072
Intangible assets 53,614,177 - - - - - 53,614,177
Other assets 59,161,708 - - - - - 59,161,708
TOTAL ASSETS 1,135,161,012 675,203,705 691,338,904 1,317,749,783 2,763,377,306 478,833,486 7,061,664,196
LIABILITIES
Deposits and borrowings
from banks 13,424,686 20,583,198 - - - - 34,007,884
Liabilities designated at fair
value through profit or loss 6,272 - - 2,249,997 - - 2,256,269
Customers' accounts
at amortized cost 277,452,653 4,583,478,887 431,288,579 39,322,999 - - 5,331,543,118
Customers' acceptance liability 299,999 - - - - - 299,999
Other borrowings - - 292,619,179 15,643,825 22,404,689 - 330,667,693
Other liabilities 105,003,808 - - - - - 105,003,808
Provisions 20,021,753 - - - - - 20,021,753
TOTAL LIABILITIES 416,209,171 4,604,062,085 723,907,758 57,216,821 22,404,689 - 5,823,800,524
MATURITY GAP 718,951,841 (3,928,858,380) (32,568,854) 1,260,532,962 2,740,972,617 478,833,486 1,237,863,672
DECEMBER 31, 2009
3 monthsto 1 year
1 to 3years
3 to 5years
Over5 years Total
Lebanese Pounds Base Accounts
LBP’000
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 159
Accounts withno Maturity
Up to3 months
ASSETS
Cash and Central Banks 517,148,436 410,419,086 149,242,500 476,746,085 155,294,335 - 1,708,850,442
Deposits with banks and
financial institutions 123,057,695 1,217,178,912 118,647,692 - 5,262,096 - 1,464,146,395
Trading assets 25,827,474 - 2,757,647 965,796 40,348,216 20,950,950 90,850,083
Loans to banks - 10,523,347 10,094,369 8,374,053 4,187,026 - 33,178,795
Loans and advances
to customers 1,513,654,272 383,829,579 454,929,873 202,271,741 187,157,853 75,561,499 2,817,404,817
Available for sale investments 43,558,735 75,130,363 39,718,917 589,648,768 351,114,392 594,500,713 1,693,671,888
Held to maturity investments 1,507,500 112,925,200 6,390,249 608,636,590 91,718,312 224,231,183 1,045,409,034
Customers' liability
under acceptances 113,182,240 - - - - - 113,182,240
Investments in associates 36,702,558 - - - - - 36,702,558
Assets acquired in
satisfaction of loans 125,348,949 - - - - - 125,348,949
Property and equipment 22,873,662 - - - - - 22,873,662
Intangible assets 2,037,098 - - - - - 2,037,098
Other assets 84,710,320 - - - - - 84,710,320
TOTAL ASSETS 2,609,608,939 2,210,006,487 781,781,247 1,886,643,033 835,082,230 915,244,345 9,238,366,281
LIABILITIES
Deposits and borrowings
from banks 70,382,162 178,963,260 47,193,841 - - - 296,539,263
Liabilities designated at fair
value through profit or loss 3,671,608 - 85,414,950 71,369,573 - - 160,456,131
Customers' accounts
at amortized cost 972,130,739 6,160,285,875 921,280,289 39,171,797 - - 8,092,868,700
Customers' acceptance liability 113,182,240 - - - - - 113,182,240
Other borrowings - 2,925,107 6,275,655 18,068,588 22,957,741 31,925,307 82,152,398
Other liabilities 93,615,158 - - - - - 93,615,158
Provisions 17,950,474 - - - - - 17,950,474
TOTAL LIABILITIES 1,270,932,381 6,342,174,242 1,060,164,735 128,609,958 22,957,741 31,925,307 8,856,764,364
MATURITY GAP 1,338,676,558 (4,132,167,755) (278,383,488) 1,758,033,075 812,124,489 883,319,038 381,601,917
DECEMBER 31, 2009
3 monthsto 1 year
1 to 3years
3 to 5years
Over5 years Total
Foreign Currencies Base Accounts
LBP’000
Fransabank > Annual Report 2010160
45. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The fair value of financial assets and liabilities as at December 31, 2010 and 2009 was as follows:
TradingAssets
Assets at FairValue throughProfit or Loss
Available for Sale
Held to Maturity
Loans andReceivables
Other atAmortized
Cost
TotalCarrying
Value
Total FairValueLBP’000
DECEMBER 31, 2010
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Financial and trading assets:
Cash and Central Banks - - - - - 2,537,312,954 2,537,312,954 2,536,907,362
Deposits with banks and
financial institutions - - - - - 1,699,576,783 1,699,576,783 1,699,576,783
Trading assets 91,846,442 - - - - - 91,846,442 91,846,442
Loans to banks - - - - 235,977,183 - 235,977,183 225,065,198
Loans and advances to customers - - - - 4,736,342,603 - 4,736,342,603 4,749,717,797
Available for sale investments - - 6,806,047,080 - - - 6,806,047,080 6,806,047,080
Held to maturity investments - - - 1,368,001,695 - - 1,368,001,695 1,426,263,183
Derivative assets held
for risk management - 1,011,624 - - - - 1,011,624 1,011,624
TOTAL 91,846,442 1,011,624 6,806,047,080 1,368,001,695 4,972,319,786 4,236,889,737 17,476,116,364 17,536,435,469
Financial liabilities:
Deposits and borrowings from banks - - - - - 414,620,408 414,620,408 414,527,445
Customers' accounts - 73,136,366 - - - 15,125,397,906 15,198,534,272 15,198,534,272
Other borrowings - - - - - 362,290,285 362,290,285 369,154,675
Subordinated loan - - - - - 31,874,560 31,874,560 41,592,311
Financial guarantee contracts issued - 2,595,196 - - - - 2,595,196 2,595,196
TOTAL - 75,731,562 - - - 15,934,183,159 16,009,914,721 16,026,403,899
Fransabank > Annual Report 2010 161
Financial and trading assets:
Cash and Central Banks - - - - - 2,652,897,068 2,652,897,068 2,656,717,187
Deposits with banks and
financial institutions - - - - - 1,499,152,008 1,499,152,008 1,499,152,008
Trading assets 95,821,389 - - - - - 95,821,389 95,821,389
Loans to banks - - - - 58,817,514 - 58,817,514 52,245,962
Loans and advances to customers - - - - 3,480,742,204 - 3,480,742,204 3,508,202,170
Available for sale investments - - 6,359,346,312 - - - 6,359,346,312 6,359,346,312
Held to maturity investments - - - 1,411,773,814 - - 1,411,773,814 1,438,329,535
Derivative assets held
for risk management - 1,170,480 - - - - 1,170,480 1,170,480
TOTAL 95,821,389 1,170,480 6,359,346,312 1,411,773,814 3,539,559,718 4,152,049,076 15,559,720,789 15,610,985,043
Financial liabilities:
Deposits and borrowings from banks - - - - - 330,547,147 330,547,147 330,547,144
Customers' accounts - 162,712,400 - - - 13,424,411,818 13,587,124,218 13,587,124,218
Other borrowings - - - - - 412,820,091 412,820,091 387,142,100
Derivative liabilities held for risk
management - 42,954 - - - - 42,954 42,954
Financial guarantee contracts issued - 1,627,290 - - - - 1,627,290 1,627,290
TOTAL - 164,382,644 - - - 14,167,779,056 14,332,161,700 14,306,483,706
TradingAssets
Assets at FairValue throughProfit or Loss
Availablefor Sale
Held toMaturity
Loans andReceivables
Other atAmortized
Cost
TotalCarrying
Value
Total FairValueLBP’000
DECEMBER 31, 2009
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value,
grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
TotalLevel 3Level 1LBP’000
Assets at Fair Value:
Trading securities
Available for sale investment securities
Liabilities at Fair Value:
Customers’ deposits at fair value through profit or loss
67,825,861
6,786,415,195
6,854,241,056
-
91,846,442
6,806,047,080
6,897,893,522
73,136,366
24,020,581
19,631,885
43,652,466
73,136,366
DECEMBER 31, 2010
Fransabank > Annual Report 2010162
TotalLevel 3Level 1LBP’000
Assets at Fair Value:
Trading securities
Available for sale investment securities
Liabilities at Fair Value:
Customers’ deposits at fair value through profit or loss
70,355,715
6,334,641,124
6,404,996,839
-
95,821,389
6,359,346,312
6,455,167,701
162,712,400
25,465,674
24,705,188
50,170,862
162,712,400
DECEMBER 31, 2009
46. CAPITAL MANAGEMENT
The Group manages its capital to comply with the capital
adequacy requirements set by the Central Bank of Lebanon, the
Group’s lead regulator. The Group’s foreign entities are also required
to respect particular ratios according to the competent authorities
of supervisions.
The Group’s capital is split as follows:
Tier I Capital: Comprises share capital after deduction of treasury
shares, Shareholders’ cash contribution to capital, certain reserves
from appropriation of profits, retained earnings (exclusive of
current year’s net profit) and non-controlling interests. Goodwill
is deducted from Tier I Capital.
Tier II Capital: Comprises qualifying subordinated liabilities,
collective impairment allowance and cumulative change in fair
value of available for sale securities.
Investments in associates are deducted from Tier I and Tier II capital.
Also, various limits are applied to the elements of capital base:
Qualifying Tier II capital cannot exceed Tier I capital and qualifying
short term subordinated loan capital may not exceed 50% of
Tier I capital.
The Group has complied with the imposed capital
requirements throughout the period.
47. APPROVAL OF THE FINANCIAL STATEMENTS
The consolidated financial statements were approved by the Bank’s Board of Directors in its meeting held on April 8, 2011.
The Group is calculating its capital adequacy according to pillar I of Basel II Accord. The Group’s capital adequacy ratio was as
follows (without taking into consideration the net profit for the year):
Total regulatory capital
Credit risk
Market risk
Operational risk
RISK-WEIGHTED ASSETS OF CREDIT, MARKET AND OPERATIONAL RISKS
CAPITAL ADEQUACY RATIO
20092010LBP’000
1,139,584,000
8,880,428,000
142,247,000
595,119,000
9,617,794,000
11.85%
1,397,398,000
10,758,711,000
132,592,000
752,353,000
11,643,656,000
12.00%
> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010
Fransabank > Annual Report 2010 163
1.08%
11.84%
65.14%
2.14%
12.26%
54.70%
26.14%
1.83%
4.56
0.66
51.00%
24.90%
98.04%
34.14%
9.94%
45.06%
11.85%
3.31%
7.12%
88.29%
0.79%
34.84%
20.35%
1.26%
13.06%
61.48%
2.25%
12.64%
48.30%
29.20%
1.83%
6.39
1.19
53.49%
28.55%
97.48%
39.88%
10.52%
39.08%
12.00%
1.72%
4.21%
90.42%
0.61%
40.26%
14.55%
Main Ratios
A. PROFITABILITY
ROAA (Return on Average Assets)
ROACE (Return on Average Common Equity)
Total interest paid to Total interest received
Net interest income to Average assets
Net commissions to Net financial revenues (before allocation to provisions)
Operating expenses to Net financial revenues (Cost-to-income ratio)
Non-interest income to Net financial revenues (before allocation to provisions)
Operating expenses to Average customers’ creditor accounts
EPS in USD (Earnings per Common Share in US Dollar)
DPS in USD (Dividend per Common Share in US Dollar)*
Dividend payout ratio*
(Dividends on Common and Preferred Shares / Distributable profits)
B. LIQUIDITY
Average net customers’ loans to Average customers’ creditor accounts
Average customers’ creditor accounts to Average total deposits
Foreign currency customers’ loans to Foreign currency customers’ creditor accounts
C. CAPITAL ADEQUACY
Shareholders’ equity to Total assets
Shareholders’ equity to Loans and acceptances
Capital Adequacy Ratio as per Basel II requirements
D. ASSET QUALITY RATIOS
Doubtful debts (net) to Total customers’ loans (net)
Doubtful debts (net) to Shareholders’ equity
Provisions for doubtful debts to Doubtful debts
Substandard accounts (net) to Total customers’ loans (net)
Unrealized interest for substandard accounts to Substandard accounts
Total provisions and unrealized interest to Total customers’ loans
(*) On an unconsolidated basis.
20092010
Adopt sustainable cultureCurrently, global resource use by humans is growing at about
5.5% each year; at that rate, human demand on the earth's
resources doubles every 13 years.
Source: Operation Fresh Start, Changing Direction toward Sustainable Culture, Northwest Report.
Fransabank > Annual Report 2010166
Group Network
> Lebanon - Mother Company, Subsidiaries and Associates
Mother Company
• Fransabank SAL
64 branches
• 34 branches in Beirut & Suburbs
• 9 branches in Northern Lebanon
• 2 branches in Aley & Chouf
• 7 branches in the Bekaa Region
• 10 branches in Southern Lebanon
• 2 branches temporarily closed
Subsidiaries
• BLC Bank SAL (with BLC Services & BLC Finance)
43 branches
• 24 branches in Beirut & Suburbs
• 6 branches in Northern Lebanon
• 2 branches in the Bekaa Region
• 3 branches in Southern Lebanon
• 8 branches temporarily closed
• Fransa Invest Bank SAL (FIB)
• Société Générale Foncière SAL (Sogefon)
• Lebanese Leasing Company SAL (LLC)
• Fransabank Insurance Services Company SAL
• Switch & Electronic Services SAL
• Société Express SARL
Associated Companies
• Bancassurance SAL
• International Payment Network SAL
108 branches subdivided as follows:
• 64 Fransabank branches
• 43 BLC Bank branches
• 1 branch for Fransa Invest Bank
Fransabank > Annual Report 2010 167
Group Network
> Lebanon - Mother Company
• ChoueifatMahmoud El Kheshen Bldg.,
Haret Al Oumara, Saida Main Road
(Saida Old Road)
Tel (961) 5 431169
(961) 5 431178
Fax (961) 5 431183
• Elyssar (Mazraat Yachouch)Fransabank Bldg.,
Mazraat Yachouh, Bikfaya Main Road
Tel (961) 4 914802/3/4
Fax (961) 4 914805
• Furn El ChebbakSaadeh Center,
Opposite Planete Abraj, Damas Str.
Tel (961) 1 293025/6
Fax (961) 1 293027
• HadathBechara Beik Karam Str., Al Saha,
Near Al Saydeh Church, Main Road
Tel (961) 5 463974/5/6/7
Fax (961) 5 463980
• HamraFransabank Center, Hamra Str.,
1st Floor
Tel (961) 1 340180/1/8
(961) 1 750125
Fax (961) 1 341413
• Hamra (Sadat)Itani Bldg., Sadat Str.
Tel (961) 1 743135/6
(961) 1 748370
Fax (961) 1 743138
• HazmiehUnigroup Bldg., Sayyad Square
Tel (961) 5 459602
(961) 5 450350
Fax (961) 5 457312
• Jal El DibLe Baron Center, Jal El Dib Highway,
1st floor
Tel (961) 1 889884/5
Fax (961) 1 902959
Fransabank SAL
> Headquarters
Fransabank Headquarters, Hamra Str.,
P.O.Box 11-0393
Riad El Solh Beirut 1107 2803
Lebanon
Tel (961) 1 340180/8
(961) 1 745761/4
(961) 3 650700
Fax (961) 1 354572
Cable FRANSABANK
Swift FSAB LB BX
Email [email protected]
Website www.fransabank.com
Call Center (961) 1 734000
1552
Forex Tel (961) 1 343706
(961) 1 344216
Reuters FRBK
> Beirut & Suburbs
• Ashrafieh (Sassine)Notre Dame Center, Sassine Square
Tel (961) 1 203466/7
Fax (961) 1 200651
• Ashrafieh (Saydeh)Debs Bldg., Saydeh Str.
Tel (961) 1 200842/3
(961) 1 215940
Fax (961) 1 215422
• Ashrafieh (Sodeco)Dakota Bldg., Ground Floor, Sodeco
Tel (961) 1 423573/4
Fax (961) 1 423577
• Ain El MreissehNawrass Bldg.,
Opposite Ain El Mreisseh Mosque
Tel (961) 1 373240/1/2/4
Fax (961) 1 373243
• Allenby(temporarily closed)
• AnteliasOrder Antonin Maronite Bldg.,
Catholicossat Armenien Str.
Tel (961) 4 417240 /1
Fax (961) 4 412990
• Bab EdrissSabbagh Bldg., Patriarch Hoayek Str.
(temporarily closed)
• BadaroKhatoun Bldg., Badaro Str.
Tel (961) 1 387024
(961) 1 386900
Fax (961) 1 390409
• BastaFransabank Bldg., Cross Roads
of Saleh Ben Yehia, Basta Str.
Tel (961) 1 663116/8
Fax (961) 1 663117
• BauchriehChaer Center, Sin El Fil Blvd.
Tel (961) 1 897490/1/2
Fax (961) 1 897029
• BikfayaAdel Dagher Bldg., Bikfaya Place,
Main Road
Tel (961) 4 986901/2
Fax (961) 4 986903
• Bourj El BrajnehAhmad Nabbouh Bldg.,
Ain El Sekkeh, Dr Hosni Jalloul Str.
Tel (961) 1 453200/1/2
(961) 3 740410
Fax (961) 1 453203
• Bourj HammoudHarboyan Center, Near St. Vartan Str., Bourj
Hammoud entrance, 2nd floor
Tel (961) 1 258100/1/2
Fax (961) 1 264446
• ChiyahTayyar Bldg., facing Moawad junctions,
Ghobeiri Blvd., Chiyah
Next to the Ministry of Labor
Tel (961) 1 279671/3
Fax (961) 1 279680
Fransabank > Annual Report 2010168
• JbeilCordahi Center, Jbeil
Tel (961) 9 547178/9
(961) 9 945108/9
Fax (961) 9 540967
• JnahAssaf Bldg., Adnan El Hakim Str.
Tel (961) 1 857973/4
(961) 1 857833
Fax (961) 1 857972
• JouniehSaint Paul Center, P.T.T. Str.
Tel (961) 9 830190/1
Fax (961) 9 830192
• MansouriehMaalouf Center, Opposite P.T.T.,
Main Road
Tel (961) 4 409840/1
(961) 3 740420
Fax (961) 4 409840
• Mar EliasMetco Center, Moussaitbeh,
Mar Elias Str.
Tel (961) 1 818529/30
(961) 1 817770
Fax (961) 1 300617
• Moussaitbeh Al Lou’loua Bldg., Selim Salam Str.
Tel (961) 1 308791/2/3/4
Fax (961) 1 305189
• SaifiAndraos Bldg., El-Arz Str.
Tel (961) 1 442418
(961) 1 585699
(961) 3 650703
Fax (961) 1 442417
• SarbaAntoine & Youssef Kallas Bldg.,
Sarba Highway
Tel (961) 9 640293
(961) 9 640060
Fax (961) 9 640543
• Sin El FilKibinian & Kazangian Bldg.,
Delta Center, Horch Tabet
Tel (961) 1 510571/2/3
(961) 3 650708
Fax (961) 1 481680
• StarcoStarco Center, Bloc C,
Omar Daouk Str.
Tel (961) 1 367346/7/8
Fax (961) 1 367350
• TabarisSNA Bldg., Tabaris Roundabout
Tel (961) 1 203422
(961) 1 328600
Fax (961) 1 201141
• Tarik JdideKassar Bldg., Loubos Str.
Tel (961) 1 702930/1/2
(961) 3 650705
Fax (961) 1 309090
• VerdunVerdun 730 Center,
Rachid Karame Str., 1st floor
Tel (961) 1 788690/1/2/3/4
(961) 3 650709
Fax (961) 1 788691
• ZoukChrist le Roi Center, Zouk Highway
Tel (961) 9 217271/2/3
Fax (961) 9 217271/2/3
> North
• Chekka Faddous Bldg., Main Road
Tel (961) 6 545035
(961) 6 540642/3
Fax (961) 6 545035
• HalbaMarwan Ibrahim Bldg., Main Road
Tel (961) 6 693331/2
(961) 6 692000
Fax (961) 6 692001
• KalamounEzzedine Al Mir Bldg., Main Road
Tel (961) 6 400102/3
Fax (961) 6 400096
• MeryataAyoush Bldg., Ardeh Road
Tel (961) 6 255560/1/2/3
Fax (961) 6 255564
• Tripoli (Abou Samra)Sayadi Bldg., Saadoun Square
Tel (961) 6 424617/9
Fax (961) 6 424611
• Tripoli (Al Mina)Hassan & Hassane Abbas Bldg.,
Bawabet Al Mina Str.
Tel (961) 6 611524
(961) 6 611249/50
Fax (961) 6 611250
• Tripoli (Gemmayzat)Fattal Bldg., Gemmayzat Str.
Tel (961) 6 430011/2/3
Fax (961) 6 625735
• Tripoli (Tell)Gaston Habib Bldg., Kayal Square
Tel (961) 6 442815
(961) 6 441881/2
Fax (961) 6 441881/2
• ZghartaZgharta El-Abbeh, El-Kasr roundabout,
Road 1, El-Kareh & Zakhia Center
Tel (961) 6 667951/2/3/4/6
Fax (961) 6 667956
> Aley & Chouf
• AleySaid Chehayeb Bldg. (DANA),
Next to Telephone Central, Main Road
Tel (961) 5 557042/3/4
Fax (961) 5 557046
• BaaklineAkram El Eid Center, El Marj
Tel (961) 5 303005
(961) 5 301267
Fax (961) 5 303006
Fransabank SAL
Fransabank > Annual Report 2010 169
> Off-Premises ATM,s
- UFA Insurance, Down Town
- Verdun 730 Center, Verdun
- Verdun 732 Center, Verdun
- Hamra Street
- Caserne El Helou, Mar Elias
- Biel Convention Center,
Down Town
- US Embassy, Aoukar
- United Nations Center,
Nakoura
- Mema Gas Station, Faraya
- Caliprix Supermarket,
Jounieh
- Obeid Supermarket,
Kabrechmoun
- Club La Marina, Dbayeh
• ChehimWehbe Center, Main Road
Tel (961) 7 241916/7
Fax (961) 7 241921
• GhaziehKhalifeh Center, Ghazieh, Main Road
Tel (961) 7 224430/50/60
Fax (961) 7 224480
• JezzineSt. Therese Center, Jezzine Highway
Tel (961) 7 780941 - 780052
Fax (961) 7 780941
• MarjeyounRaef Abla Bldg., Main Road
Tel (961) 7 830139 - 830140
Fax (961) 7 830139
• NabatiehKodeih Center, Sabbagh Str.
Tel (961) 7 760258 - 764264
Fax (961) 7 761750
• NakouraHamzeh Bldg., Near UNIFIL,
Main Road, 1st Floor
Tel (961) 7 460235/6/7
(961) 3 067702
Fax (961) 7 460236
• SaidaFransabank Bldg., Riad El Solh Str.
Tel (961) 7 722180/1/2
(961) 3 650701
Fax (961) 7 721194
• TyrAbou Saleh Bldg., Senegal Str.,
Tyr Main Entrance, 1st Floor
Tel (961) 7 345278 - 345315
Fax (961) 7 345308
• Tyr (Abbasieh)Khalaf Bldg., Jal El Bahr, Main Road
Tel (961) 7 740388
(961) 7 740486
Fax (961) 7 740084
> Bekaa
• BaalbeckMohammad Said El Lakiss Bldg.,
Ras Al-Ayn, Main Road
Tel (961) 8 373150/1
(961) 8 371800/1
Fax (961) 8 370379
• BednayelAli Fouad Sleiman Bldg., Main Road
Tel (961) 8 911124/5
(961) 8 912021
Fax (961) 8 911125
• ChtauraHaddad Bldg., Main Road
Tel (961) 8 541988
(961) 8 542498
Fax (961) 8 543843
• LaboueNear Laboue Square, Main Road
Tel (961) 8 230801/2/3/4/5
Fax (961) 8 230805
• RiyakHosch Hala, Main Road
Tel (961) 8 900333
(961) 8 900444
Fax (961) 8 900107
• Zahle (Barbara)Ghossain Bldg., St. Barbe Str.
Tel (961) 8 811061
(961) 8 803715
Fax (961) 8 822335
• Zahle (Warde)Warde Center, Main Road
Tel (961) 8 800340
(961) 8 821411
Fax (961) 8 810187
> South
• Bint JbeilFransabank Bldg., Saf El-Hawa,
Main Road
Tel (961) 7 450700/1/2/3/4
(961) 3 239092
Fax (961) 7 450701
Fransabank > Annual Report 2010170
Group Network
> Lebanon - Subsidiaries & Associate
BLC Bank SAL
BLC Bank Bldg., Adlieh squareP.O.Box 2064-5809 Beirut, LebanonTel (961) 1 387000
(961) 1 429000Fax (961) 1 616984Email [email protected] www.blcbank.com
Fransa Invest Bank SAL (FIB)
Fransabank Headquarters, Hamra Str., 2nd FloorP.O.Box 11-0393 Riad El Solh Beirut
1107 2803, LebanonTel (961) 1 745978/9Fax (961) 1 351030Email [email protected]
Lebanese Leasing Company SAL (LLC)
Fransabank Headquarters, Hamra Str., 9th Floor P.O.Box 11-0144 Beirut, LebanonTel (961) 1 738610/1/2/3
(961) 1 750310/1Fax (961) 1 738614Email [email protected]
Bancassurance SAL
Géfinor Center, Clémenceau Str.,Bloc A, 2nd FloorP.O.Box 11-0393 Beirut, LebanonTel & Fax (961) 1 744403Email [email protected] www.ebancassurance.com
Société Générale Foncière SAL (Sogefon)
Fransabank Headquarters, Hamra Str., 6th Floor P.O.Box 11-0393 Riad El Solh Beirut
1107 280, LebanonTel (961) 1 749418Fax (961) 1 340180
Fransabank > Annual Report 2010 171
FRANCE SYRIA
ALGERIA
> Fransabank Syria SA
Headquarters & Main Branch Abou Remmaneh Al Mahdi Ben Barakeh Str.
Al Otaki Bldg., Damascus, Syria
Tel (963) 11 33 53 030
Fax (963) 11 33 53 039
Swift FSBS SY DA
Email [email protected]
Website www.fransabank.sy
Baghdad Str.Baghdad Str., facing Al Horria Institute, Damascus, Syria
Tel (963) 11 23 26 890/1
Fax (963) 11 23 26 892
Al AziziyehAl Aziziyah Str., Shallal Roundabout, Facing Public Garden, Kurdi
Bldg., Aleppo, Syria
Tel (963) 21 22 42 601/2
Fax (963) 21 22 42 603
FaisalFaisal Str., facing Georges Salem Institute, Aleppo, Syria
Tel (963) 21 22 18 265/8
Fax (963) 21 22 18 270
Homs Hachem Al Atasi Str., Plaza Bldg., Homs, Syria
Tel (963) 31 24 56 030/1
Fax (963) 31 24 56 033
Tartous Thawra Avenue, Ali Abdel Latif Ismail Bldg., Tartous, Syria
Tel (963) 43 32 90 60
Fax (963) 43 32 90 64
Latakia West Kornish, Latakia, Syria
Tel (963) 41 45 98 29/30/31
Fax (963) 41 45 99 07
Group Network
> Overseas Subsidiaries
> Fransabank El Djazaïr SPA
Headquarters & Main Branch 45B, Lot Petite Provence, Boulevard Ben Youssef Ben Khedda
(Sidi Yehya), Hydra, Algiers, Algeria
Tel (213) 21 48 12 96 / (213) 21 48 27 09
Fax (213) 21 48 12 43
Swift FSBK DZ AL
Email [email protected]
Oran 1 El-Zouhour Cooperative, no. 12 Cité Dar El Beida, Oran, Algeria
Tel (213) 41 46 09 06
Fax (213) 41 46 09 07
Oran 2 5, ANP Avenue, Hai En-Nakhil, Oran, Algeria
(Opening soon)
Constantine Cité Ali Besbes, Lot G no 23, Sidi Mabrouk, Constantine, Algeria
(Opening soon)
> Fransabank (France) SA
Headquarters & Main Branch 104, Avenue des Champs-Elysées, 75008 Paris, France
Tel (33) 1 53 76 84 00
Fax (33) 1 45 63 57 00
Swift FRAF FR PP
Email [email protected]
Fransabank > Annual Report 2010172
BELARUS CYPRUS
> Fransabank OJSC
Headquarters & Main Branch 95A, Nezavisimosty Avenue,
220012 Minsk, Republic of Belarus
Tel (375) 17 389 36 36
Fax (375) 17 389 36 37
Swift GTBN BY 22
Email [email protected]
Website www.fransabank.by
Corporate Clients Office 4 Kalvariyskaya Str., 220004 Minsk, Republic of Belarus
Tel (375) 17 211 07 16
Fax (375) 17 210 58 10
Gomel 1 22 Krestianskaya Str., 246050 Gomel, Republic of Belarus
Tel (375) 23 274 91 84
Fax (375) 23 274 53 80
Gomel 25A Krasnaarmeiskaya Str., 246017 Gomel, Republic of Belarus
Telefax (375) 23 275 03 40
Grodno 10, Dominikanskaya Str., 230023 Grodno, Republic of Belarus
Tel (375) 152 77 35 30
Fax (375) 152 77 04 06
Brest 1105/2 Suvorova Str., 224022 Brest, Republic of Belarus
Tel (375) 162 48 56 56
Fax (375) 162 43 30 43
Brest 246 Sovetskaya Str., 224005 Brest, Republic of Belarus
Tel/Fax (375) 162 23 56 05
Lida10 Sovetskaya Str., 231291 Lida, Republic of Belarus
Tel (375) 154 52 88 58
Fax (375) 154 52 54 70
Group Network
> Overseas Subsidiaries
> USB Bank PLC subsidiary of BLC Bank
Headquarters 83 Digeni Akrita Avenue, 1070 Nicosia, CyprusTel (357) 22 88 33 26
Fax (357) 22 45 87 53
Website www.usb.com.cy
16 branches subdivided into 5 branches in Nicosia
3 branches in Limassol
3 branches in Paphos
3 branches in Famagusta
2 branches in Larnaca
Group Network
> Overseas Associate > Representative Offices
LIBYA
> Fransabank SAL
Bourj El Fateh, Tower 1, 17th floor, Office nº 174,
P.O.Box 81963 Tripoli, Libya
Tel (218) 21 335 1250
Fax (218) 21 335 1251
Email [email protected]
CUBA
> Fransabank SAL
Calle 72 no 505 e/ 5ta - Ave. y 5ta, A Miramar Playa
La Habana, Cuba
Tel (537) 204 92 72 - 204 93 05/6
Fax (537) 204 92 73
Email [email protected]
SUDAN
> United Capital Bank
Headquarters & Main Branch Plot 411, Square 65, Mamoun Beheiry Str., South Green Square
P.O.Box 8210 Al Amarat, Khartoum, Sudan
Tel (249) 183 24 77 00
Fax (249) 183 24 84 90
Swift CBSKSDKH
Email [email protected]
Website www.bankalmal.com
Khartoum North Plot 130, Square 8, Al Sinaat Str., P.O.Box 1173 Khartoum North,
Sudan
Tel (249) 185 32 44 80
Fax (249) 185 32 40 01
Rabak Plot 390, Square 3, P.O.Box 203 Rabak, Sudan
Tel (249) 572 82 94 80
Fax (249) 572 82 94 81
Nyala Plot 48, Square 7D, Nyala, Sudan
Tel (249) 711 82 34 14/82 38 99
Fax (249) 711 82 39 99
Fransabank > Annual Report 2010 173
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