the lebanon weekly monitor - mofcomimages.mofcom.gov.cn/lb/201309/20130916043639296.pdf ·...

1Week 36 September 02 - September 08, 2013

SEPTEMBER 02 - SEPTEMBER 08, 2013

WEEK 36

Bank Audi sal - Audi Saradar Group - Group Research Department - Bank Audi Plaza - Bab Idriss - PO Box 11-2560 - Lebanon - Tel: 961 1 994 000 - email: [email protected]

CONTACTS

RESEARCH

Treasury & Capital Markets

Micky Chebli(961-1) [email protected]

Nadine Akkawi(961-1) [email protected]

Bechara Serhal(961-1) [email protected]

Private Banking

Toufic Aouad(961-1) [email protected]

Corporate Banking

Khalil Debs(961-1) [email protected]

Marwan Barakat(961-1) [email protected]

Jamil Naayem(961-1) [email protected]

Salma Saad Baba(961-1) [email protected]

Fadi Kanso(961-1) [email protected]

Nathalie Ghorayeb(961-1) [email protected]

Sarah Borgi(961-1) [email protected]

Nivine Turyaki(961-1) [email protected]

LEBANON MARKETS: WEEK OF SEPTEMBER 02 - SEPTEMBER 08, 2013

The LEBANON WEEKLY MONITOR

Economy___________________________________________________________________________p.2 LEBANON’S TRADE SHORTFALL SLIGHTLY TIGHTER IN THE FIRST SEVEN MONTHS OF 2013According to the latest data released by Lebanon’s Customs Authority, the trade deficit posted a small contraction during the first seven months of 2013. Also in this issuep.3 Budget deficit sinks deeper into the negative territory p.4 Cleared checks up by 1.8% in the first seven months of 2013

Surveys___________________________________________________________________________p.5 EIGHT LEBANESE BANKS AMONGST THE BANKER’S TOP 1,000 BANKS In its 2013 annual survey of the world’s top 1,000 commercial banks, the Banker Magazine included eight Lebanese banks with Bank Audi topping the list in assets and pre-tax profits.

Also in this issuep.6 Lebanon retains its creditworthiness rank regionally, as per Institutional Investor

Corporate News___________________________________________________________________________p.7 MINISTRY OF ENERGY AND WATER EXTENDS OIL LICENSING DEADLINE TO COMPANIESThe Ministry of Energy and Water has extended the deadline of bidding for oil and gas from November 4 to December 10.

Also in this issuep.7 BLC Bank increases capital p.7 FFA Private Bank appointed as advisor on W Motors growth p.8 HSBC to end wealth management services in Lebanon, Jordan and Bahrainp.8 Emirates Lebanon Bank’s net profits at US$ 8.8 million in 2012

Markets In Brief___________________________________________________________________________p.9 PRICE DROPS IN EQUITY AND BOND MARKETS ON SYRIA CONCERNSConcerns about regional political and security conditions left their imprints on Lebanon's Eurobond market activity during this week with some foreign investors still offering their papers at relatively lower prices, while the equity market pursued its downward trajectory, and the FX market maintained its balanced activity. In details, foreign market players continued to offer their medium-term to long-term bonds at relatively modest volumes, triggering some price drops, while the average spread remained stable at 343 bps due to a rise in international benchmark yields after fewer Americans than forecast filed applications for jobless benefits last week, boosting speculation the US Federal Reserve will cut bond purchases. Lebanon’s five-year CDS spreads contracted by 25 bps to 400-435 bps. At the level of the equity market, the total trading value amounted to US$ 4.2 million during this four-day week, with no change relative to the previous week, yet compared to an average weekly trading value of US$ 4.9 million since the beginning of the year 2013. On the FX market, demand and supply forces remained balanced and the LP/US$ interbank rate hovered between LP 1,513.50 and LP 1,514.25, while the BDL remained on the sidelines.



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ECONOMY______________________________________________________________________________LEBANON’S TRADE SHORTFALL SLIGHTLY TIGHTER IN THE FIRST SEVEN MONTHS OF 2013

According to the latest data released by Lebanon’s Customs Authority, the trade deficit posted a small contraction during the first seven months of 2013 on account of a slight increase in exports coupled with almost constant imports. In fact, Lebanon’s trade deficit tightened by 2.1% year-on-year to reach a total of US$ 9.9 billion in the first seven months of 2013, as per the same source.

Imports amounted to US$ 12.5 billion in the first seven months of 2013, slightly down by 0.9% from the corresponding period of 2012. At this level, it is worth noting that imports of mineral products extended their tightening streak, moving down by 18.1% year-on-year to account for 24% of the total, compared with a share of 29% a year earlier. As to imports of non-mineral products, accounting for 76% of the total, they were higher by 6.3% year-on-year in the first seven months of 2013.

As to exports, they were slightly higher by 4.3% year-on-year and reached a total of US$ 2.6 billion in the first seven months of 2013. A look by office shows that exports through the disturbed Syrian routes, namely Masnaa, Aboudieh, Arida and Kaa were down by 27.3% year-on-year during the first seven months of 2013. Those through the Airport were also on the same path, moving down by 29.1% year-on-year during the aforementioned period of 2013. As to exports through the Port of Beirut, they were up by 65.7% year-on-year during the first seven months of 2013 with the facility solely processing nearly 44% of the value of merchandise meant for Lebanon’s external markets. Indeed, the Port is witnessing a thriving

Sources: Higher Customs Council, Bank Audi's Group Research Department

LEBANON'S TRADE ACTIVITY (US$ MILLION, FIRST SEVEN MONTHS OF THE YEAR)



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activity though this is not a reflection of a better trade momentum. As a matter of fact, the aggregate value of exports and imports, which amounted to US$ 15,104 million in the first seven months of 2013, was almost unchanged from that seen in the same period of 2012. _____________________________________________________________________________BUDGET DEFICIT SINKS DEEPER INTO THE NEGATIVE TERRITORY

The Ministry of Finance issued its latest data on Lebanon’s fiscal accounts according to which the shortfall increased during the first five months of 2013 as expenditures rose at a higher pace than revenues. In fact, the fiscal deficit amounted to US$ 1.6 billion in the first five months of 2013, up by 42.2% from the same period of 2012. The primary balance, which excludes the debt service, recorded a surplus of US$ 39.7 million over the first five months of 2013, down by nearly 90% from the same period of 2012.

During the first five months of 2013, Lebanon’s fiscal revenues amounted to US$ 4.2 billion, a total slightly higher by 2.3% from the corresponding period of 2012. Such an increase was attributed to a rise of 41.5% year-on-year in those classified under treasury transactions which totaled US$ 239.6 million (6% of total revenues) in the first five months of 2013. The rise in revenues was also to a lesser extent tied to a slight 1.0% year-on-year increase in those classified under budget transactions which amounted to US$ 3.9 billion (94% of the total) in the first five months of 2013.

Total expenditures moved up by 11.0% year-on-year to US$ 5.8 billion in the first five months of 2013. Expenditures under budget transactions (79% of total expenditures) increased by 4.6% year-on-year mainly due to a rise of 6.2% in general expenditures and another one of 2.7% in interest payments which offset the decline of 14.0% in foreign debt principal repayments. With regards to public expenditures under treasury transactions (21% of total expenditures), they were higher by 43.4% year-on-year during the aforesaid period of 2013.

Sources: Ministry of Finance, Bank Audi's Group Research Department

LEBANON'S FISCAL ACCOUNTS (US$ MILLION, FIRST FIVE MONTHS OF THE YEAR)



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______________________________________________________________________________CLEARED CHECKS UP BY 1.8% IN THE FIRST SEVEN MONTHS OF 2013

The latest data issued by the Association of Banks in Lebanon revealed that clearing activity, a composite indicator of consumption patterns, showed a slight increase during the first seven months of 2013. Yet, such a rise stems from a low base seen in the corresponding period of 2012 and is not an indicator of a rise in consumption.

In details, the amount of cleared checks posted a slight increase of 1.8% year-on-year to reach US$ 41,994 million in the first seven months of 2013. This weak rise could be linked to a comparatively contained economic growth as locals are not keen on enhancing their expenditures within such an unstable environment.

A breakdown by currency shows that the amount of cleared checks in Lebanese pounds progressed by 13.5% year-on-year to LP 14,607 billion in the first seven months of 2013 while that of cleared checks in US Dollars decreased by 1.3% over the same period to US$ 32,298 million.

Sources: Association of Banks in Lebanon, Bank Audi's Group Research Department

CLEARED CHECKS (FIRST SEVEN MONTHS OF THE YEAR)



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SURVEYS____________________________________________________________________________EIGHT LEBANESE BANKS AMONGST THE BANKER’S TOP 1,000 BANKS

In its 2013 annual survey of the world’s top 1,000 commercial banks, the Banker Magazine included eight Lebanese banks with Bank Audi topping the list in assets and pre-tax profits.

Regarding the assets’ size, those of Bank Audi were valued at US$ 31,306 million at end-2012, rising by 8.9% from the previous year. Blom Bank came second with an assets value of US$ 25,051 million at end-2012, up by 8.1% from 2011. It was followed by Byblos Bank with assets at US$ 17,015 million, up by 2.5% from 2011. Fransabank and BankMed followed, with corresponding assets value of US$ 15,586 million (+10.4%) and US$ 12,507 million (+6.1%). Bank of Beirut, Banque Libano-Française and Credit Libanais were at the lower end of the local scale with total of assets of US$ 11,307 million (+16.2%), US$ 10,451 million (+2.5%) and US$ 7,948 million (+10.6%).

Total assets of the eight Lebanese banks were at US$ 131,171 million, up by a yearly 7.9%, a slower increase when compared to the 12.8% recorded by the MENA region which posted total assets of US$ 1,907 billion. When it comes to ranking MENA countries that made the Banker’s top 1,000 list by total assets, Lebanon was outperformed by Saudi Arabia (US$ 457,465 million), the UAE (US$ 419,922 million), Qatar (US$ 213,521 million), Kuwait (US$ 195,834 million), and Egypt (US$ 144,008 million).

In terms of pre-tax profits, those of Bank Audi amounted to US$ 487 million in 2012 (+6.2%). It was followed by BLOM Bank which posted pre-tax profits of US$ 406 million in 2012 (-1.2%). At the lower end of the local scale were Banque Libano-Française (US$ 102 million, up by 34.9%) and Credit Libanais (US$ 72 million, down by 4.7%).

Sources: The Banker, Bank Audi's Group Research Department

TOP LEBANESE BANKS IN TERMS OF TIER 1 CAPITAL AT END-2012



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In terms of Tier 1 capital, BLOM Bank topped local peers with a total of US$ 1,912 million at end-2012 followed by Bank Audi with a total of US$ 1,807 million at end-2012. At the lower end of the local scale were Banque Libano-Française and Credit Libanais with US$ 753 million and US$ 460 million worth of Tier 1 Capital. _____________________________________________________________________________LEBANON RETAINS ITS CREDITWORTHINESS RANK REGIONALLY, AS PER INSTITUTIONAL INVESTOR

Lebanon ranked 116th globally in Institutional Investor’s semi annual survey on the creditworthiness of 179 countries. The country’s creditworthiness ranking fell down from the survey conducted in September of last year, as its global ranking retreated by 9 notches, while regionally it maintained the same rank of 13th out of 18 covered countries in the MENA region. Lebanon’s set-back comes within the context of sporadic developments that have occurred locally and the impact of the Syrian turmoil on domestic economic activity.

The survey rates the creditworthiness of countries on a scale of 0 to 100, with 100 representing countries with the least chance of debt default. Lebanon received a score of 29.6 points, a total lower by 2.1 points from that reported in September 2012. The country’s score remains below the MENA average of 44.7 points as well as the global average of 44.6 points.

Noteworthy is that movements across the MENA region were distributed in a way that 10 countries out of a total of 18 reported an increase in their scores, whereas eight countries registered a decrease. According to Institutional Investor, Egypt and Syria suffered the most significant declines of 3.9 points and 3.4 points, respectively. The region’s most significant increase was seen in Yemen which reported a rise of 4.0 points with the country coming back a little from its lows. It is worth noting that the MENA region posted an average score of 44.7 points in September 2013, versus 44.6 points in September 2012.

Sources: Institutional Investor, Bank Audi's Group Research Department

RANKING OF MENA COUNTRIES IN TERMS OF CREDITWORTHINESS



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CORPORATE NEWS______________________________________________________________________________MINISTRY OF ENERGY AND WATER EXTENDS OIL LICENSING DEADLINE TO COMPANIES

The Ministry of Energy and Water has extended the deadline of bidding for oil and gas from November 4 to December 10.

The reason behind this extension is that two decrees still need to be ratified: The first decree concerns the delineation of maritime blocks, and the second concerns bidding, and exploration and production agreements.

If, however, the decrees are approved before the deadline, the Petroleum Administration and the Ministry could proceed according to the previous set schedule. In this case, contracts would be signed by end-March 2014.

The Ministry said on September 4 that blocks 1, 4, 5, 6, and 9 will be open for the first round of bidding. The Ministry pointed to the possibility of opening all blocks for bidding especially if a Council of Ministers holds a session to ratify the two oil decrees left.

In parallel, Karadeniz Powership Holding announced that the works to connect their second power barge, Orhan Bey, to the Jiyyeh power plant were finalized. The vessel is now ready to generate more than 82 megawatts of electricity.

The company said it conducted successful tests on generators and connections, and made sure they would be able to generate power with high efficiency.

The first vessel, Fatmagûl Sultan, is currently linked to the Zouk power plant, and has resumed production of 170 MW.

The two ships combined should eventually generate some 270 MW. They will provide a partial alternative source of electricity while the two plants are rehabilitated over the next three years.______________________________________________________________________________BLC BANK INCREASES CAPITAL

BLC Bank announced that it listed 350,000 new preferred Class C shares. The subscription price was set at US$ 100 per share in the aim to achieve a capital increase of US$ 35 million.

Trading of the preferred shares Class C on the BSE started on September 2. Price margins should not rise or fall by more than 10% of the trading day value, as per the rules from the local stock exchange.

The Bank already has over 51 million listed common shares. Its preferred shares are divided into 400,000 Class A shares and 550,000 Class B ones. Its non listed shares total over 100 million.

Dividends for the new Class C shares in 2013 will be calculated based on profits of 6.75%, starting from the date of issuance to the end of the year. ______________________________________________________________________________FFA PRIVATE BANK APPOINTED AS ADVISOR ON W MOTORS GROWTH

W Motors, a Lebanese developer of luxury sports cars, has mandated FFA Private Bank’s Investment Banking Division as advisors for financing the company’s growth. The company is seeking to raise US$ 6 million from new investors, as per newswires.



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The cash injection will be structured as a combination of a capital increase and a secured loan with priority return, in equal amounts (US$ 3 million each). Each investor will participate in both the shares and secured debt on a 50-50 basis. Minimum investment is US$100,000.

W Motors, headquartered in Dubai, produces the Lykan Hypersport luxury sports car line. A Lebanese entrepreneur founded the company and partnered with international suppliers in the automotive industry and design sector such as Magna Steyr and RUF Automobile. Only seven cars will be produced per model and will be sold at US$ 3.5 million, as per newswires.______________________________________________________________________________HSBC TO END WEALTH MANAGEMENT SERVICES IN LEBANON, JORDAN AND BAHRAIN

HSBC Holdings decided to discontinue sales of Wealth Investment or Wealth Insurance products in Lebanon, Jordan, and Bahrain starting October 7.

This measure is in line with the bank’s global strategy to end small or insufficiently profitable operations. The growing number of wealth management and private banking firms servicing the region has created tough competition and led to lower fees, as per newswires.

The bank will mainly stop products such as mutual funds, structured deposits, and bonds, as well as insurance products.

Existing wealth management customers will continue to receive basic services and their wealth investments will be maintained until maturity. ______________________________________________________________________________EMIRATES LEBANON BANK’S NET PROFITS AT US$ 8.8 MILLION IN 2012

Emirates Lebanon Bank’s net profits during 2012 amounted to US$ 8.8 million, compared with US$ 14.0 million in 2011.

Net interest income amounted to US$ 29.5 million in 2012, up from US$ 28.2 million in 2011. Net fees and commissions income increased from US$ 7.0 million in 2011 to US$ 8.4 million in 2012.

Net operating income increased from US$ 37.0 million in 2011 to attain US$ 39.0 million in 2012. Total operating expenses went up by 9.3% year-on-year to US$ 22.3 million in 2012, of which staff expenses reaching US$ 14.4 million, 15.5% higher than those reported in 2011, and other operating expenses reaching US$ 5.7 million, 0.2% lower than those of 2011.

Emirates Lebanon Bank’s assets totaled US$ 1.5 billion at end-2012, up from US$ 1.3 billion at end-2011. Net loans and advances were almost at the same level as those of end-2011, totaling US$ 0.6 billion at end-2012.

Customers’ deposits amounted to US$ 1.1 billion at end-2012, up from US$ 1.0 billion at end-2011. Shareholders’ equity totaled US$ 0.3 billion at end-2012, up from US$ 0.2 billion at end-2011.



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CAPITAL MARKETS_____________________________________________________________________________MONEY MARKET: MONEY SUPPLY (M4) EXPANDS BY LP 441 BILLION

The local currency liquidity remained quite abundant on the money market during this week, which kept the overnight rate stable at its low official level of 2.75% set by the Central Bank of Lebanon. As to Certificates of Deposits, still no subscriptions were made during this week. Interest rates on the 45-day and 60-day CDs categories remained stable at 3.57% and 3.85% respectively.

At the monetary aggregates level, figures for the week ending 22nd of August 2013 released this week showed a decrease in local currency deposits of LP 10 billion, as a result of a rise of LP 53 billion in LP time deposits and a drop of LP 63 billion in LP demand deposits week-on-week. Deposits in foreign currencies grew by US$ 399 million. These weekly variations compare to an average weekly rise of LP 17 billion for LP deposits, and an average weekly increase of US$ 80 million for foreign currency deposits since the beginning of the year 2013. Total money supply in its large sense (M4) expanded by LP 441 billion week-on-week. This compared to an average weekly growth of LP 179 billion since the beginning of the year.

On a cumulative basis, money supply in its large sense (M4) grew by LP 7,478 billion since the beginning of the year 2013. This is the result of a rise in local currency denominated time deposits of LP 1,892 billion, an increase in foreign currency deposits of LP 4,684 billion (the equivalent of US$ 3,107 million), a contraction in money supply (M1) of LP 254 billion, and a growth in Treasury bills held by the public of LP 1,156 billion.

_____________________________________________________________________________TREASURY BILLS MARKET: NOMINAL SURPLUS OF LP 25 BILLION

The secondary Treasury bills market saw a shy local activity on long-term papers, while foreign investors remained almost absent. At the level of the primary market, the auction results for value date 29th of August 2013 released by the Central Bank of Lebanon showed that total subscriptions amounted to LP 80 billion and were distributed as follows: LP 9 billion in the three-month category, LP 27 billion in the six-month category and LP 44 billion in the five-year category. These compare to maturities of LP 55 billion, resulting in a nominal surplus of LP 25 billion. In parallel, the latest auction’s results (September 05, 2013) showed stability in the average yields on the one-year, two-year and three-year categories at 5.35%, 5.84% and 6.50% respectively.

On a cumulative basis, total subscriptions amounted to LP 10,617 billion during the first 8 months of 2013 and were distributed as follows: LP 579 billion in the three-month category, LP 920 billion in the six-month category, LP 713 billion in the one-year category, LP 321 billion in the two-year category, LP 5,947 billion in the three-year category, LP 946 billion in the five-year category, LP 67 billion in the 8-year category and LP 1,124 billion in the 10-year category. These compare to maturities of LP 7,699 billion, resulting in a nominal surplus of LP 2,918 billion during the first 8 months of 2013.

The latest monthly report released by the Association of Banks in Lebanon showed that the weighted yield on subscriptions reached 5.90% in July 2013 versus 7.51% in June as the high-yielding 8-year and 10-year categories were issued in June, while the outstanding Tbs portfolio reached LP 50,419 billion at end-July 2013 versus LP 50,200 billion at end-June 2013 and LP 49,334 billion at end-December 2012.

INTEREST RATES

Source: Bloomberg



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TREASURY BILLS

Sources: Central Bank of Lebanon, Bloomberg_____________________________________________________________________________FOREIGN EXCHANGE MARKET: BALANCED DEMAND AND SUPPLY FORCES

The commercial demand for the US Dollar persisted during this week. In parallel, some market players opted to convert their LP savings into foreign currencies at maturity. This was met by adequate offer for the green currency. Commercial banks traded the US Dollar at a rate hovering between LP 1,513.50 and LP 1,514.50, while the Central Bank of Lebanon remained on the sidelines throughout the week.

The Central Bank of Lebanon’s latest bi-monthly balance sheet ending 31st of August 2013 showed that foreign assets declined by US$ 465 million during the second half of August to reach US$ 36.15 billion at end-August. Accordingly, the Central Bank’s foreign assets covered 81.8% of LP money supply, with this coverage ratio rising to 111.0% when accounting for gold reserves estimated at US$ 12.9 billion. In addition, the BDL’s foreign assets covered 20.2 months of imports. These ratios show that the Central Bank’s foreign assets represent an important weapon to maintain local currency stability within a tightly managed exchange rate system.

EXCHANGE RATES

Source: Bank Audi’s Group Research Department_____________________________________________________________________________STOCK MARKET: 0.6% DECLINE IN BSE PRICE INDEX

The Beirut Stock Exchange continued to pursue a downward trajectory during this week, with the price index falling by 0.6% to close at 103.67, while the trading volume index rose by 26.5% to reach 45.73 due to a rise in the average daily trading value from US$ 840 thousand last week to US$ 1,063 thousand this week. The total trading value amounted to US$ 4.2 million during this four-day week, with no change relative to the previous week, yet compared to an average weekly trading value of US$ 4.9 million since the beginning of the year 2013.



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EUROBONDS INDICATORS

Source: Bank Audi’s Group Research Department

AUDI INDICES FOR BSE

Sources: Beirut Stock Exchange, Bank Audi’s Group Research Department

Banking shares captured 77.51% of the total trading value. Bank Audi’s “listed” share price fell by 2.4% to close at US$ 6.10. BLOM’s “listed” share price retreated by 0.1% to US$ 8.26. BLOM’s GDR price stood unchanged at US$ 8.50. Byblos Bank’s “listed” share price shed 1.3% to US$ 1.47. Bank of Beirut’s “listed” share price remained stable at US$ 19.00. Solidere shares accounted for 22.49% of activity. Solidere “A” share price dropped by 1.0% to US$ 10.90, while Solidere “B” share price rose by 1.9% to US$ 10.82.

The Beirut Stock Exchange’s weekly performance compared to a fall of 2.2% in broader Arabian markets’ share prices (as per S&P Pan-Arab Composite Index) and a rise of 2.6% in broader emerging markets’ share prices (as per S&P Emerging Market Composite Index).

_____________________________________________________________________________BOND MARKET: FOREIGN OFFER DRIVES AVERAGE YIELD HIGHER

The Eurobond market continued to see some foreign offer in relatively small volumes for medium-term to long-term papers maturing in 2019, 2021, 2023, 2026 and 2027, noting that foreigners were not aggressive in selling their papers mainly because they underweight Lebanon in their portfolios. The foreign offer was adequately absorbed by a local demand at relatively lower prices. Within this context, the average yield rose by 17 bps to 5.51% while the average spread contracted slightly by 1 basis point to 343 bps due to a rise in Lebanese and international benchmark yields. For instance, the five-year US Treasuries yields increased from 1.62% to 1.83% as fewer Americans than forecast filed applications for jobless benefits last week, boosting speculation the US Federal Reserve will cut bond purchases this month. As to the cost of insuring debt, Lebanon’s five-year CDS spreads decreased from 425-460 bps last week to 400-435 bps this week due to relatively reduced concerns about a US-led strike on Syria.



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INTERNATIONAL MARKET INDICATORS

Sources: Bloomberg, Bank Audi's Group Research Department

___________________________________________________________________________DISCLAIMER

The content of this publication is provided as general information only and should not be taken as an advice to invest or engage in any form of financial or commercial activity. Any action that you may take as a result of information in this publication remains your sole responsibility. None of the materials herein constitute offers or solicitations to purchase or sell securities, your investment decisions should not be made based upon the information herein.

Although Bank Audi Sal Audi Saradar Group considers the content of this publication reliable, it shall have no liability for its content and makes no warranty, representation or guarantee as to its accuracy or completeness.

the lebanon weekly monitor - mofcomimages.mofcom.gov.cn/lb/201309/20130916043639296.pdf ·...

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