the lebanon briefthe lebanon brief page 3 of 16 issue 885; week of 08 -13 september, 2014 sa l...

Your Investment Reference

THE

LEBANON BRIEF

ISSUE 885

Week of 08-13 September, 2014

ECONOMIC RESEARCH DEPARTMENT

Rashid Karame Street, Verdun Area

P.O.Box 11-1540 Beirut, Lebanon

T (01) 747802 F (+961) 1 737414

[email protected]

www.blom.com.lb

S A L

The Lebanon Brief Table Of Contents of 16

ISSUE 885; Week of 08 -13 September, 2014

S A L

TABLE OF CONTENTS

FINANCIAL MARKETS 3

Equity Market 3

Foreign Exchange Market 5

Money & Treasury Bills Market 5

Eurobond Market 6

ECONOMIC AND FINANCIAL NEWS 7

Lebanon’s Commercial Banks Assets Surged to $169.74B by July 7

Lebanon’s Balance of Payments Records a Surplus of $131.0M by July 8

Port of Beirut Revenues Declined to $141.67M by August 8

Value of Kafalat Guarantees Increased by 42% in August 9

Fiscal Deficit Widened to $840.01M by March 10

Registered New Cars increased by 5.32% by August 11

CORPORATE DEVELOPMENT 12

Bank Audi Calls for an Extraordinary General Assembly 12

Bank of Beirut redeems preferred shares class “F” end of 2014 12

RYMCO Posts Net Income of $$1.53M end of H1 13

HOLCIM’s Net Income reached $9.38M end of H1 13

FOCUS IN BRIEF 14

Top Lebanese Banks in H1 2014: Surviving the Governing Chaos with Confidence 14

This report is published for information purposes only. The information herein has been compiled from, or based upon sources we believe to be

reliable, but we do not guarantee or accept responsibility for its completeness or accuracy. This document should not be construed as a

solicitation to take part in any investment, or as constituting any representation or warranty on our part. The consequences of any action taken

on the basis of information contained herein are solely the responsibility of the recipient.

The Lebanon Brief of 16


S A L

FINANCIAL MARKETS

Equity Market

Stock Market

12/09/2014 05/09/2014 % Change

BLOM Stock Index* 1,178.53 1,187.55 -0.76%

Average Traded Volume 4,236,420 68,923 6046.60%

Average Traded Value 26,471,408 702,638 3667.43%

*22 January 1996 = 1000

.

Banking Sector

Mkt 12/09/2014 05/09/2014 % Change

BLOM (GDR) BSE $9.37 $9.35 0.21%

BLOM Listed BSE $8.75 $8.75 0.00%

BLOM (GDR) LSE $9.40 $9.40 0.00%

Audi (GDR) BSE $6.39 $6.30 1.43%

Audi Listed BSE $6.10 $6.09 0.16%

Audi (GDR) LSE $6.30 $6.50 -3.08%

Byblos (C) BSE $1.65 $1.64 0.61%

Byblos (GDR) LSE $73.00 $73.00 0.00%

Bank of Beirut (C) BSE $18.39 $18.39 0.00%

BLC (C) BSE $1.70 $1.70 0.00%

Fransabank (B) OTC $28.00 $28.00 0.00%

BEMO (C) BSE $1.75 $1.75 0.00%

Mkt

12/09/2014

05/09/2014

% Change

Banks’ Preferred Shares

Index *

104.70 104.56 0.13%

Audi Pref. E BSE $101.50 $100.50 1.00%

Audi Pref. F BSE $100.50 $100.50 0.00%

Audi Pref. G BSE $100.50 $100.50 0.00%

Audi Pref. H BSE $100.00 $100.00 0.00%

Byblos Preferred 08 BSE $100.70 $100.60 0.10%

Byblos Preferred 09 BSE $100.20 $100.10 0.10%

Bank of Beirut Pref. E BSE $25.80 $25.80 0.00%

Bank of Beirut Pref. I BSE $25.70 $25.70 0.00%

Bank of Beirut Pref. H BSE $25.70 $25.70 0.00%

BLOM Preferred 2011 BSE $10.20 $10.20 0.00%

BLC Pref A BSE $101.40 $100.00 1.40%

BLC Pref B BSE $100.00 $100.00 0.00%

BLC Pref C BSE $100.00 $100.00 0.00%

Bemo Preferred 2013 BSE $100.30 $100.30 0.00%

* 25 August 2006 = 100

The BLOM Stock Index (BSI) lost 0.76% to close at

1,178.53 points on Friday.

Average traded volume swelled from 68,923 to

4.24M as did average traded value rising from

$702,638 to $26.47M. The large volume of Audi

Listed shares that were traded during the week

mainly lifted overall volume on the Beirut Stock

Exchange.

As for market capitalization, it slid from $9.52B last

week to $9.45B this Friday.

The BSI outperformed the Morgan Stanley Emerging

index (MSCI) which shed 2.80% to 1,069.43 points.

The S&P Pan Arab Composite Large Midcap Index

and the S&P AFE40 Index fared better than the

Lebanese gauge slipping by 0.40% and 0.72%,

respectively.

Amongst Arab Bourses, the Muscat bourse was the

top performer with a weekly gain of 0.88% followed

by gains of 0.76% for the Abu Dhabi bourse and

0.74% for the Qatari bourse.

The Dubai market was the worst performer with a

weekly drop of 3.12% followed by declines of 1.81%

for the Egyptian stock exchange and 0.85% for the

Tunisian stock market.

Back to the Beirut Stock Exchange, the real estate

sector performed poorly over the past week with

Solidere A and B shares losing 4.38% to $12.01 and

4.68% to $12.02, respectively.

In contrast, the banking sector portrayed a more

upbeat picture. BLOM’s GDR shares added 0.21% to

end the week at $9.37. Bank Audi’s GDR share rose

by 1.43% to $6.39 and the bank’s listed shares

registered a 0.16% uptick to $6.10. As for Byblos’

listed shares they added 0.61% to reach $1.65.

1050

1100

1150

1200

1250

Sep-13 Jan-14 May-14 Sep-14

BLOM Stock Index

HI: 1,234.30

LO: 1124.74



S A L

Real Estate

Mkt 12/09/2014 05/09/2014 % Change

Solidere (A) BSE $12.01 $12.56 -4.38%

Solidere (B) BSE $12.02 $12.61 -4.68%

Solidere (GDR) LSE $11.75 $12.53 -6.23%

Likewise the BLOM Preferred Stock Index (BPSI)

ticked up by 0.13% to 104.70 points. Bank Audi’s

preferred E shares gained 1% to $101.50 and BLC’s

preferred A shares added 1.40% to $101.40. Byblos’

preferred 2008 and 2009 shares increased by 0.10%

each to close at $100.70 and $100.20, respectively.

On the London Stock Exchange (LSE), Solidere GDR

shares and Audi GDRs shed by a weekly 6.23% and

3.08% to settle at $11.75 and $6.30, respectively.

Manufacturing Sector

Mkt 12/09/2014 05/09/2014 % Change

HOLCIM Liban BSE $14.50 $14.50 0.00%

Ciments Blancs (B) BSE $3.50 $3.50 0.00%

Ciments Blancs (N) BSE $2.75 $2.75 0.00%

For the week-ahead, all eyes are on the local and

neighboring security scenes, especially after Barack

Obama authorized air strikes against the Islamic

State group in Syria for the first time.

Funds

Mkt 12/09/2014 05/09/2014 % Change

BLOM Cedars Balanced

Fund Tranche “A” -----

$7,330.61 $7,349.30 -0.25%


Fund Tranche “B”

----- $5,239.91 $5,253.57 -0.26%


Fund Tranche “C”

----- $5,567.69 $5,581.85 -0.25%

BLOM Bond Fund ----- $9,652.13 $9,637.73 0.15%

Retail Sector

Mkt

12/09/2014

05/09/2014

% Change

RYMCO BSE $3.40 $3.40 0.00%

ABC (New) OTC $33.00 $33.00 0.00%

Tourism Sector

Mkt 12/09/2014 05/09/2014 % Change

Casino Du Liban OTC $380.00 $380.00 0.00%

SGHL OTC $7.00 $7.00 0.00%



S A L

Foreign Exchange Market

Lebanese Forex Market

12/09/2014 05/09/2014 % Change

Dollar / LP 1,512.00 1,512.00 0.00%

Euro / LP 1,948.14 1,952.66 -0.23%

Swiss Franc / LP 1,610.75 1,619.12 -0.52%

Yen / LP 14.06 14.33 -1.88%

Sterling / LP 2,448.18 2,459.64 -0.47%

NEER Index** 136.01 134.97 0.77%

*Close of GMT 09:00+2

**Nominal Effective Exchange Rate; Base Year Jan 2006=100

**The unadjusted weighted average value of a country’s currency relative to all major

currencies being traded within a pool of currencies.

The demand for the dollar steadied over the prior week as reflected

by the Lebanese pound’s peg against the dollar that remained at

$/LP 1,510-1,514 with a mid-price of $/LP 1,512, since last week.

Foreign assets (excluding gold) at the Central Bank rose by a

monthly 0.76% from $37.77B by July to $38.05B by end-August.

Meanwhile, the dollarization rate of private sector deposits stood at

66.08% in July compared to 66.13% in December 2013.

Nominal Effective Exchange Rate (NEER)

The Euro remained on its downtrend this week due to the

European Central Bank’s President announcing that the bank plans

to start a form of quantitative easing in addition to a new cut in

interest rates. Thus, the euro lost 0.23% against the dollar, closing

at €/$ 1.2923 on Friday.

Speculations that the Federal Reserves might raise interest rates,

by the middle of next year, strengthened the dollar and reduced the

demand for its substitute gold, triggering a 1.61% weekly decline

in its price from $1,260.84/ounce last week to $1,240.49/ounce on

Thursday.

By Friday September 12th, 2014, 12:30 pm Beirut time, the dollar-

pegged LP appreciated against the euro going from €/LP 1,952.66

to €/LP 1,948.14. The Nominal effective exchange Rate (NEER)

added 0.77% to 136.01 points, with a 5.39% gain since year-start.

Money & Treasury Bills Market

Money Market Rates

Treasury Yields

11/09/2014 04/09/2014 Change bps

3-M TB yield 4.39% 4.39% 0

6-M TB yield 4.87% 4.87% 0

12-M TB yield 5.08% 5.08% 0

24-M TB coupon 5.84% 5.84% 0

36-M TB coupon 6.50% 6.50% 0

60-M TB coupon 6.74% 6.74% 0

12/09/2014 05/09/2014 Change bps

Overnight Interbank 9.00 9.00 0

BDL 45-day CD 3.57 3.57 0

BDL 60-day CD 3.85 3.85 0

During the two weeks ending August 28 2014, broad Money M3

added by LP 230B ($152.42M), to reach LP 174,202B ($115.56B).

M3 growth rate reached 6.81% year-on-year and 3.96% since

year start. Likewise, M1 progressed by LP 75B ($49.71M) due to

the increase in demand deposits by LP 249B ($165.17M), while

money in circulation dropped by LP 174B ($115.42M).

Total deposits (excluding demand deposits) grew by LP 155B

($102.71M), given the rise in term and saving deposits in

domestic currency by LP 184B, however, deposits denominated

in foreign currencies by $19M. Over the above mentioned period,

the broad money dollarization went down from 59.20% to

59.10%. According to the Central Bank, the overnight interbank

rate dropped from 9.00% end of June 2014 to 2.75% end of July.

In the TBs auction held on the 28th of August 2014, the Ministry

of Finance raised LP 325.80B ($216.12M), through the issuance

of bills maturing in 3M and 6M, and 5Y notes. The highest

demand was achieved on the 5Y notes that took a share of

85.30%, while the 3M and 6M bills accounted for 3.38% and

11.32% respectively. The 3M and 6M bills yielded 4.39% and

4.87%, respectively. Meanwhile the average coupon rate for the

5Y notes stood at 6.74%. New subscriptions exceeded Maturing

T-bills by LP 39.06B ($25.91M).

110

115

120

125

130

135

Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14



S A L

Eurobond Market

Eurobonds Index and Yield

11/09/2014 04/09/2014 Change Year to Date

BLOM Bond Index (BBI)* 108.409 108.550 -0.13% 2.62%

Weighted Yield** 5.11% 5.09% 2 9

Weighted Spread*** 339 345 -6 -91

*Base Year 2000 = 100; includes US$ sovereign bonds traded on the OTC market

** The change is in basis points ***Against US Treasuries (in basis points)

Eurobonds Lebanese Government

Maturity - Coupon 11/09/2014

Price*

04/09/2014

Price*

Weekly

%

Change

11/09/2014

Yield

04/09/2014

Yield

Weekly

Change bps

2015, Aug - 8.500% 104.575 104.645 -0.07% 3.31% 3.34% -3

2016, Jan - 8.500% 106.331 106.374 -0.04% 3.66% 3.70% -3

2016, May - 11.625% 112.613 112.628 -0.01% 3.74% 3.81% -7

2017, Mar - 9.000% 111.687 111.876 -0.17% 4.08% 4.04% 4

2018, Jun - 5.150% 101.666 101.607 0.06% 4.66% 4.68% -2

2020, Mar - 6.375% 104.972 105.119 -0.14% 5.32% 5.29% 3

2021, Apr - 8.250% 115.352 115.574 -0.19% 5.44% 5.41% 3

2022, Oct - 6.100% 102.147 102.239 -0.09% 5.76% 5.75% 1

2023, Jan - 6.000% 100.91 101.145 -0.23% 5.86% 5.82% 4

2024, Dec - 7.000% 106.46 106.745 -0.27% 6.14% 6.10% 4

2026, Nov - 6.600% 102.607 102.884 -0.27% 6.29% 6.26% 3

2027, Nov - 6.75% 103.584 103.872 -0.28% 6.34% 6.31% 3

*Bloomberg Data

Demand for Lebanon’s Eurobonds abated this week, dragging the BLOM Bond Index (BBI) down by 0.13% to 108.41 points,

but the index is still up 2.62% since year start. The weakened demand for Eurobonds was mirrored on the 5Y and 10Y

yields, inching up slightly by 1 basis point (bp) and 3 bps to 5.05% and 6.15%, respectively.

Due to the stronger dollar, investors diverted away from emerging market’s bonds. Thus, the JP Morgan emerging

countries’ bond index lost 0.80% over the week to 683.31 points.

Fears that the U.S Central Bank might tighten monetary policy in the second quarter of next year, and forecasts that U.S

reports might reveal improvements in retail sales and consumer confidence, led the U.S Treasuries to experience a drop in

demand for the second week in a row. 5Y and 10Y treasury yields escalated to 1.79% and 2.54%, up by 8 bps and 9 bps

from the prior week’s levels. As a result, the 5Y and 10Y spreads between the Lebanese Eurobonds and their U.S

benchmark narrowed by 7 bps and 6 bps to 326 bps and 361 bps, respectively.

Lebanon’s credit default swap for 5 years (CDS) remained unchanged from last week’s quote at 330-360 bps. In regional

economies, 5Y CDS quotes of Saudi Arabia narrowed by 2 bps to 46-51 bps. Dubai 5Y CDS contracted from 151-161 bps to

148-158 bps. Similarly, the 5Y CDS of Turkey tightened by 4 bps to 176-179 bps. In contrast, Brazil’s 5Y CDS widened from

129-131 bps to 136-138 bps.

5.00%

5.50%

6.00%

6.50%

Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14

Weighted Effective Yield of Eurobonds



S A L

ECONOMIC AND FINANCIAL NEWS

Commercial Banks’ Assets by July

(In $B)

Source: BdL

Lebanon’s Commercial Banks Assets Surged to

$169.74B by July

The consolidated balance sheet of commercial banks revealed

a 2.98% year-to-date (y-t-d) growth in total assets to $169.74B

by July, and a gain of 7.56% year-on-year.

Reserves, grasping a share of 35.00% of total assets, swelled

by 8.53% since the beginning of the year, to reach $59.42B.

Claims on resident private sector followed, (with a share of

25.82% of the total) increasing by 5.61% since year start, to

$43.83B. The dollarization rate of private sector loans went

from 76.54% in December, down to 75.92% by July 2014.

During this period, foreign currency loans grew by 3.37% to

$37.49B, while loans in the local currency rose at a faster pace

of 6.97% to $11.89B.

Moreover, commercial banks’ holdings of government

securities inched up by 0.12%, to settle at $37.71B. Eurobonds

holdings declined by 4.27% to $16.86B, while treasury bills in

local currency increased by 3.92% to $20.76B.

On the Liabilities side, resident private sector deposits edged

up by 4.06% y-t-d to $112.10B. In fact, deposits denominated in

Lebanese pounds augmented by 3.70% to $44.35B, less than

the 4.30% increase in resident foreign currency deposits to

$67.75B.

Similarly, non-resident private sector deposits added 2.57% y-t-

d to reach $29.21B by July, where deposits in Lebanese

Pounds grew by 6.86% to $3.59B, more than the 1.99% rise in

foreign currency deposits to $25.62B. Hence the dollarization

rate of private sector deposits went from 66.13% end of

December 2013, down to 66.08% by July 2014.

59.42

43.83

37.71

24.16

4.13

0.49

RESERVES

CLAIMS ON RESIDENT PRIVATE SECTOR

CLAIMS ON PUBLIC SECTOR

FOREIGN ASSETS

FIXED ASSETS

UNCLASSIFIED ASSETS



S A L

Balance of Payments up to July

(In $M)

Source: BdL

PoB Revenues by August

(In $M)

Source: Port of Beirut

Lebanon’s Balance of Payments Records a Surplus

of $131.0M by July

Lebanon’s Balance of Payments (BoP) recorded a surplus of

$131.0M in the first seven months of 2014, compared to a

deficit of $957.2M in the same period the prior year, despite the

widening trade deficit. Net Foreign Assets (NFAs) of the

Lebanese Central Bank (BdL) swelled by $3.73B by July, while

that of commercial banks plummeted by $3.60B.

Taking the month of July alone, Lebanon’s BoP revealed a

smaller deficit of $84.7M, compared to a deficit of $560.7M in

June. NFAs of BdL grew by $669.5M, subsequent to a rise of

$969.7M the previous month. During the same month, NFAs of

commercial banks declined by $754.2M, following a bigger

plunge of $1.53B in June.

Port of Beirut Revenues Declined to $141.67M by

August

Port of Beirut (PoB) revenues dropped by 2.78% year-on-year (y-

o-y) to settle at $141.67M, by August 2014.

Imported cars decreased by 2.06%, during the stated period, to

59,897 cars. Likewise, the number of vessels that docked at the

country’s main port dropped by 5.86% y-o-y to 1,333 vessels.

However, total container activity including transshipment

jumped by 8.53% from last year, to reach 825,455 twenty-foot

equivalent units (TEU), by August. Container activity excluding

transshipment fell slightly by 0.24% y-o-y to 511,820 TEU.

Transshipment alone surged by 26.73%, compared to the same

period last year, to 313,635 TEU. Total volume of merchandise

(imports and exports) inched up by 1.18% to 5.56M tons.

In addition, CMA CGM’s transshipment volume jumped by

56.16% y-o-y to 130,842 TEU, while that of MSC expanded by

13.94% to 170,260 TEU.

3,347.4

2,307.2

-786.5

-2,253.1

-2,625.0

131.0

2010 2011 2012 2013 2014

111.45

105.25

116.67

145.72 141.67



S A L

Breakdown of Kafalat Guarantees by Sector in

August

Source: Kafalat

Value of Kafalat Guarantees Increased by 42% in

August

Kafalat issued 78 guarantees in August 2014, surging up by

41.82% from 55 guarantees in the same month of 2013.

The value of loans guaranteed by Kafalat totaled $11.05M in

August 2014, up from $6.97M in August 2013. Consequently,

the average value of these loans jumped by an annual 11.76%

to reach $141,701 in August 2014.

On a cumulative basis, Kafalat issued 584 guarantees worth

$76.09M in the first eight months of 2014 compared to 539

guarantees worth $75.05M for the same period in 2013.

In terms of sectors, the three largest beneficiaries of loans

were the agricultural sector with a share of 47.95%, the

industrial sector with a share of 34.76% and the tourism sector

with a share of 11.30%.

The number of issued guarantees for the agricultural and

industrial loans increased from 219 and 183 by August 2013 to

280 and 203 in the same period of 2014.

However, the number of issued guarantees for the tourism

sector continued to fall from 94 up to August 2013 to 66 in

2014, due to the ongoing instability in the country.

By geographical distribution, Mount Lebanon remained the

primary region benefitting from Kafalat guarantees with a share

of 43.84% of the total followed by stakes of 19.01% for the

Bekaa region and 11.30% for the South.

256 guarantees were issued in the region of Mount Lebanon up

to August 2014, up from 210 guarantees by August 2013.

Meanwhile, the number of issued guarantees in the Bekaa and

South regions went from 124 and 65 to 111 and 66 up to

August 2014, respectively.

2011 2012 2013 2014

69

31

20

30

44

34

22

32

1

0

0

3

20

16

8

11

6

2

5

2

Agriculture Industry

Advanced Technology Tourism

Crafts



S A L

Total Fiscal Revenues and Expenditure

(In $B)

Source: MoF

Fiscal Deficit Widened to $840.01M by March

According to the Ministry of Finance, Lebanon’s fiscal deficit

widened by 7.33% year-on-year (y-o-y) to reach $840.01M in the

first quarter (Q1) of 2014. This came as a result of 8.58% y-o-y

growth in total expenditure to reach $3.27B, which exceeded

total revenues of $2.43B, with an increase of 9.01%.

Tax revenues rose by 4.42% to $1.66B by March, compared to

the same period last year. However, customs revenues

declined by 14.82% to $301M and VAT revenues decreased by

1% to $527M.

As for non-tax revenues, they inched up by 3.48% to $526M

due to the 8.51% rise in telecom revenues to $378M in Q1

2014.

Treasury receipts amounted to $204M up to March, a 55.59%

y-o-y surge.

Budget expenditures totaled $2.91B in Q1 2014 compared to

$2.47B in the same period last year where general expenditures

posted a 20.04% y-o-y upturn to $2.03B.

Interest payments also rose by 13.22% to $844M with interest

payments on domestic debt registering a 16.95% annual uptick

to $617M and interest payments on foreign debt climbing by an

annual 4.21% to $227M.

Treasury expenditures were slashed by 33.76% to $356M by

March 2014.

The primary surplus, which excludes the government’s debt

service, stood at $38M in Q1 2014, compared to a primary

deficit of $5M in Q1 2013.

2.05

1.81

2.34

2.23

2.43

2.62

2.91

3.01 3.01

3.27

revenue expenditure



S A L

Total car registration by August

Source: AIA

Registered New Cars increased by 5.32% by

August

According to the Association of Car Importers in Lebanon (AIA),

there was a 5.32% increase in the number of registered new

passenger and commercial cars, reaching 26,901 vehicles by

August, compared to the same period last year.

This was due to the 5.61% year-on-year (y-o-y) surge in the

registration of new passenger vehicles to 25,357 in the first

eight months of the year. Most of this increase came from

small cars with a price tag less than $11,000, and where

competition is fierce among distributors leading to very low

profit margins.

Likewise, the number of registered commercial cars inched up

by 0.65% y-o-y to 1,544.

Looking at the car sales brand breakdown, Kia topped the list

with a 23.11% share of the total, followed by Hyundai (19.62%),

Nissan (12.79%), Toyota (11.88%) and Renault (3.53%).

As for the top five distributors in Lebanon by July, NATCO SAL

had the highest share of 21.78% of the total, followed by

Century Motor Co (18.89%), RYMCO (13.26%), BUMC

(12.22%), and Bassoul Heneine (7.22%).

23,405

24,498

22,786

24,528

25,541

26,901

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

19,000

20,000

21,000

22,000

23,000

24,000

25,000

26,000

27,000

28,000

Cars Number (LA) Cars Growth Rate (RA, In %)



S A L

CORPORATE

DEVELOPMENT

Audi Common Shares Performance

Source: BSE, BLOMINVEST Research Department

BoB Common Shares Performance

Source: BSE, BLOMINVEST Research Department

Bank Audi Calls for an Extraordinary General

Assembly

Bank Audi s.a.l. – Audi Saradar Group invites all common

shareholders to attend an Extraordinary General Meeting to be

held at 10:30 am on Tuesday September 23, 2014 at the Bank’s

Head Office located at Audi Plaza, Bab Idriss, Beirut

Commercial Central District.

The planned agenda will verify the completion of the

procedures related to the increase of the Bank’s capital that

was resolved by the Extraordinary General Meeting held on the

26th of August 2014, discharge the Chairman and the members

of the Board of Directors in respect of activities related to the

capital increase, and increase the nominal value of all shares

constituting the share capital of the bank to become 1,650

LP/share through incorporating an equivalent portion of the

issue premium resulting from the capital Increase.

Moreover, the meeting will amend the bank’s by-laws,

especially article 6, submit its actions to the Central Bank for

approval, and grant the Chairman of the Board, and/or the CEO

of the bank the necessary powers to seek required approvals

and to perform all other procedures and acts in pursuit of all the

forgoing resolutions.

Bank of Beirut redeems preferred shares class “F”

end of 2014

During the ordinary general assembly, Bank of Beirut’s (BoB)

shareholders agreed to redeem BoB preferred shares class “F”

that were issued in 2009 for 5 years, and whose holding period

ends the last working day of 2014.

In parallel, and in order to increase the bank’s capital to fund its

expansion in Lebanon and abroad, the BoB will issue new

preferred shares class “J”.

Moreover, previous holders of preferred shares class “F” will be

able to subscribe to the new issuance of class “J” shares.

$5.80

$6.00

$6.20

$6.40

$6.60

$6.80

$7.00

$7.20

$18.00

$18.10

$18.20

$18.30

$18.40

$18.50

$18.60

$18.70

$18.80

$18.90

$19.00

$19.10



S A L

RYMCO Financials end of H1

(In $M)

H1-14 H1-13 % Change

Net Income 1.53 2.15 -28.77%

Net Sales 78.33 71.91 8.92%

Total Assets 137.56 143.65 -4.24%

Shareholders' Equity 49.88 53.46 -6.70%

Source: Company Data, BLOMINVEST Research Department

HOLCIM Financials end of H1

(In $M)

H1-14 H1-13 % Change

Net Sales 93.21 88.84 4.92%

Net Income 9.38 8.14 15.17%

Total Assets 269.21 279.83 -3.80%

Shareholders' Equity 221.68 214.86 3.17%

Source: Company Data, BLOMINVEST Research Department

RYMCO Posts Net Income of $$1.53M end of H1

During the first half of 2014, RYMCO’s net income plunged by

28.77% year-on-year (y-o-y), to $1.53M. This came as a result of

15.18% surge in cost of goods sold, that exceeded the 8.92%

increase in net sales to $78.33M.

Moving to the balance sheet, total assets declined by 4.24% y-

o-y to reach $137.56M end of H1, due to the drop in the

inventory of cars and spare parts and of property and

equipment (net of depreciation) by 24.66% and 1.08% to

$40.31M and $17.05M, respectively. Notes and accounts

receivable, however, inched up slightly from $47.18M end of

June 2013 to $47.47M end of June 2014.

On the liabilities side, notes payable fell by 16.73% from H1

2013, to reach $42.98M end of H1 2014, while overdrafts grew

by 5.05% to $23.66M.

Shareholders’ equity dropped by 6.70% y-o-y to $49.88M,

caused by the 2.71% decrease in retained earnings to $30.69M.

HOLCIM’s Net Income reached $9.38M end of H1

HOLCIM’s net income rose by 15.17% year-on-year (y-o-y), to

$9.38M end of H1 2014, due to the 4.92% increase in net sales

to $93.21M and the 0.83% drop in production costs to

$37.95M.

On the balance sheet, total assets fell by 3.80% since last year

to $269.21M by June 2014. This was due to the decrease in

inventories and in cash and cash equivalents by 5.12% and

60.60% to $37.95M and $9.49M.

On the liabilities side, accounts payable and accruals plunged

by 43.78% to $22.23M.

Total equity lost 0.83% to $64.57M, although retained earnings

surged by 19.16% to $31.21M.



S A L

Q4 2012 Q2 2013 Q4 2013 Q2 2014

109.41 114.33 121.85

127.86

50.73 52.02

54.51 56.56

Total Assets in FC Total Assets in LL

FOCUS IN BRIEF

Top Lebanese Banks in H1 2014: Surviving the Governing Chaos with Confidence

Total Assets Breakdown in terms of Currency

Source: Alpha Banks Report June-2014

Alpha Banks Ranking by ROAA

Source: Alpha Banks Report June-2014

Recognized for its capacity to defeat tough economic conditions, the Lebanese banking sector witnessed in the first half of

2014 another episode of economic and political challenges. Solvency and reliability that branded the sector turned it into a

backbone of the Lebanese economy, well known for its pledge to combat money laundering and respect all international

banking requirements. In 2013, Lebanon ranked 7th

in the Financial Secrecy Index1

following USA and Singapore and

outpacing Germany, Jersey and Japan.

1 According to Tax Justice Network

Rank Bank Name H1 2013 H1 2014 Change

1 BLOM Bank 1.40% 1.34%

2 SGBL 1.04% 1.20%

3 IBL Bank 1.09% 1.13%

4 Bank of Beirut 1.18% 1.13%

5 Lebanon and Gulf

Bank 0.91% 1.01%

6 Bank Audi 1.16% 1.01%

7 Bank Med 1.06% 1.00%

8 Banque Libano-

Francaise 1.06% 0.95%

9 BBAC 1.06% 0.91%

10 Fransabank 0.91% 0.86%

11 Creditbank 0.70% 0.82%

12 Byblos Bank 0.88% 0.75%

13 First National Bank 0.77% 0.74%

14 Crédit Libanais 0.85% 0.64%



S A L

Lebanese banks are considered the boosters of economic growth in a country characterized by waves of violence, political

deadlocks and a regional turmoil with numerous spillovers. With a 7% direct contribution to GDP2

, total assets at the

banking sector floated around 3.7 times the GDP at end June 2014.

Banks are considered one of the main pillars in financing public debt. With a gross public debt reaching $65.70B in June

2014, local currency debt grasped a 60.3% share of the total and was mainly held by banks (52.7%), Banque du Liban (BdL)

with 29.9% and the remaining 17.4% by the non-banking sector. In this context, and thanks to the high liquidity and support

of the domestic commercial banks, the Lebanese government is capable of meeting its obligations without difficulties.

Constituting more than 93% of total assets at commercial banks3

, Alpha banks are the core barometer of performance

within the sector. According to the latest BANKDATA report, Alpha banks are 14 Lebanese commercial banks with deposits

in excess of $2B. Total assets at the aforementioned banks grew by 10.9% from $166.34B in June 2013 to $184.42B by the

end of June this year. Since the report provides additional data on Lebanon’s top banks, a clearer view on the global

performance of the banking sector could be determined when analyzing those specific banks.

The existing confidence in the banking sector positively impacted 2014’s deposits4

at Alpha banks. This was translated by a

10.0% year-on-year (y-o-y) uptick in total customers’ deposits at Alpha banks to $153.86B. Besides a dollarization rate

touching the 71% in June 2014, total deposits in LL rose by 5.2% from June 2013 to $45.23B and were outpaced by the

12.1% yearly uptick in Foreign Currency (FC) deposits to 108.63B.

Albeit banking suffered instability during the first half of 2014, customers continued to highly depend and rely on the

trustworthy institutions of the sector. This was disclosed by the 16.5% yearly jump in loans and advances at Lebanon’s

Alpha banks to $57.75B by the end of June 2014. In this context, loans to the private sector over GDP ratio hit the 127%

revealing the importance of Lebanon’s banking activity in supporting the economy and domestic consumption.

On another note, loans-to-deposits ratio reached 37.53% in June 2014, up from 36.74% in December 2013 and 35.43% by

the end of June 2013. This could give an indication on the persisting conservative approach adopted by most of Lebanon’s

top banks regarding their credit policies.

Accordingly, high provisions and a low non-performing portfolio continued to brand the Lebanese Alpha banks, yet to a

lesser extent than previous years. 76.33% of doubtful loans were covered by loan loss provisions up to June 2014

compared to 82.31% in parallel period of 2012 and 76.81% as of the end of 2013. Similarly, the average ratio of net doubtful

loans to gross loans inched down to 1.30% in H1 2014 compared to 1.38% at the end of 2013 but remained higher than the

1.04% recorded in H1 2013.

The absence of political stability and the persistence of security uprisings failed to hit the topnotch Lebanese banks in H1

2014. Total net profit at Alpha banks5

in Lebanon saw a 4.8% y-o-y rise by June 2014 to settle at $910.48M. When

comparing to H1 2013, the net operating income edged up by 7.5% in the past six months to $2.39B on higher interests,

fees and commissions income.

Maintaining a positive performance remained the core objective of actors in the Lebanese banking sector revealing tenacity

and perseverance to embrace arising risks and uncertainties. Over the past four quarters, Lebanon’s Alpha banks

maintained a positive profitability as disclosed by the positive Return on Average Assets (ROAA) that averaged 1.01% in Q2

2014, slightly below the 1.02% recorded by the end Q4 2013 and the 1.06% during Q2 2013. BLOM stood first with a

1.34% ROAA and was followed by Société Générale de Banque au Liban (SGBL) at 1.20% and Intercontinental Bank of

Lebanon (IBL) at 1.13%. As for Return on Average Equity (ROAE), the rate of return on shareholders’ equity stood in June

2014 at 11.46% on average. IBL Bank came first at 15.85% and was followed by SGBL and BLOM Bank with respective

14.89% and 14.47%.

Still, total operating expenses increased at faster pace of 10.3% y-o-y to $1.29B in H1 2014. Worth mentioning that the cost-

to-income ratio rose to 50.98% in H1 2014 compared to 47.14% in the same period of 2013. In details, staff costs, that

2

According to 2011’s national accounts

3 According to 2012’s consolidated balance sheet of Alpha group – Bilanbanques 2013

4 Consolidated with their subsidiaries

5 According to the latest Alpha banks (14 banks with deposits in excess of $2B each)



S A L

constitute 57% of total operating expenses, witnessed a 12.8% yearly rise to $732.49M in June 2014. However, the total

number of staff employed (domestic and foreign) saw a 5.1% y-o-y growth to 28,525 alluding to the fact that the rise was

mainly in the salaries of banks’ employees and not in their numbers. IBL bank ranked the first with a cost-to-income ratio of

36.93%, followed by BLOM bank (39.75%) and SGBL (41.67%).

The sturdiness and resiliency of the banking sector to external shocks was once again proved in 2014. Lebanese banks have

high liquidity shield with a net primary liquidity/deposits ratio standing at 32.02% in the first six months of 2014 and a

loans6

-to-deposits ratio hovering around 37.53%. BLOM (47.22%), Byblos (37.90%) and IBL (32.20%) banks were the top

performers in terms of net primary liquidity/deposits ratio, while Credit Bank, Bank Audi and Lebanon and Gulf Bank showed

the highest ratios of loans-to-deposits at 61.71%, 47.26% and 45.21%, respectively.

Lebanese banks also upheld their expansionary strategies on both local and international fronts sending the total numbers

of branches to 1,166 in June 2014 compared to 1,131 in December 2013 and 1,085 in December 2012.

Furthermore, BdL remained the turbine of banking in Lebanon. BdL remained true to the objectives it has set upon itself:

boosting economic growth, preserving exchange rate stability and maintaining the soundness of the financial system. The

Central bank also encouraged consolidation in the banking sector. During the second quarter, Fransabank acquired the

Jordanian Ahli bank, talks of mergers occurred between BIT and NECB banks, and CedrusInvest Bank planned to acquire

Standard Chartered Bank.

Despite the local and regional turbulences that severely impacted Lebanon’s economic sectors, activity within the banking

sector managed to progress during the first half of 2014.The sharp deterioration of tourism, real estate and trade activities

in Lebanon as well as the structural fiscal and external deficits will remain partly offset by the strong performance of the

banking system. However, the ongoing conflict in Syria, the political deadlock and the presidential vacuum painting the

country will keep on weighing over the banking sector in the coming period. On the short to medium term, we expect that

the sovereign creditworthiness and the economy’s history in weathering internal and external shocks will allow banks to

outstrip the challenging conditions, even if it took some time.

6

To the resident private and public sectors combined

The Lebanon Brief

Your Investment Reference

S A L

Research Department:

Lana Saadeh [email protected]

Riwa Daou [email protected]

Mirna Chami [email protected]

Marwan Mikhael [email protected]

mailto:[email protected]

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