Jan 11 2012 |
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BLOM, Audi GDRs campaign attracts major investor interest
11 January 2012
BEIRUT: The usually dormant Beirut Stock Exchange saw a significant rise in the volume and value of trading Tuesday as investors snapped large amounts of BLOM and Bank Audi’s GDRs. Bank Audi’s GDRs climbed to $5.714 million while BLOM’s rose to $5.456 million in value, boosting the total value of BSI to $11.619 million.
A BLOM official told The Daily Star that the sudden interest in the GDRs of both BLOM and Audi was mainly due to the “aggressive campaign” launched by the two banks following the recommendations of Deutsche Bank to buy the stocks of Lebanon’s largest banks.
He added that this campaign to promote the GDRs is finally paying off.
Brokers said the identity of investors who bought the GDRs is not known.
“We expect a further slowdown in volume growth in Q4 11; we also anticipate an increase in provision charges. The deepening Syrian crisis, along with tighter sanctions on Syria and Iran, will likely further depress Lebanon’s trade and tourism sectors and potentially affect political stability,” Deutsche Bank said in its report.
It added that Bank Audi’s Q3 11 net income was in line with its forecast; BLOM’s earnings were below expectations due to trading losses.
“Volume growth at both BLOM and Audi remains relatively subdued due to the difficult operating conditions in key markets Lebanon, Egypt and Syria. We believe that both Audi and BLOM’s international operations will continue to act as a key drag on overall growth in the near term. This is further compounded by other factors such as tighter margins and a likely rise in impairment charges,” Deutsche Bank said.
Most Lebanese banks in the third quarter of 2011 declined in terms of profits and deposits because of the tense political situation in Syria.
Both Bank Audi and BLOM have a strong presence in Syria and naturally the turmoil in the country has affected the performance of these banks.
However, most analysts believe that Bank Audi and BLOM are capable of weathering any crisis due to their large assets and portfolios.
Analysts predict that both banks’ profits will remain high in 2012, even if their net income falls slightly.
Deutsche Bank said in its report that Lebanon and other Arab countries enforced economic sanctions on Syria on Nov. 11, which included a ban on transactions with Syria’s central bank, and on financial and commercial transactions with the Syrian government.
“The Lebanese banking sector is directly affected by these sanctions as seven Lebanese banks operate in Syria. Indirect effects could also be significant as trade between the two countries will most likely slow further. In addition, trade between Lebanon and other Arab countries is affected, as Syria is the sole land gateway for Lebanese goods to reach the Arab region,” the report said.
It predicted that Lebanese banks would increase their provisions.
“We anticipate an increase in provision charges in Q4 11 on the back of the difficult economic and operating conditions prevailing in Lebanon as well as in the key markets of Egypt and Syria. However, the bulk of the assets consist of local government paper or interbank assets, with customer loans accounting for 27 percent of assets. Provided Lebanon sovereign risk does not rise, this balance sheet structure should serve to mitigate any adverse impact from the difficult operating environment,” Deutsche Bank said.
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