BoB keen to boost revenues from abroad

Bank of Beirut is seeking to raise the percentage of revenues from its operations abroad to up to 50% in the medium term, bank chairman Salim Sfeir said.

Woman walks past images of Lebanon's old currency in Beirut. Image used for illustrative purpose.

Woman walks past images of Lebanon's old currency in Beirut. Image used for illustrative purpose.

REUTERS/Jamal Saidi

30 September 2016

BEIRUT: Bank of Beirut is seeking to raise the percentage of revenues from its operations abroad to up to 50 percent in the medium term, bank chairman Salim Sfeir said. “The successful strategy in expanding abroad into investment-grade countries enjoying political, economic and social stability has remarkably contributed to higher asset quality and more diversified income stream as compared to peer group banks. In fact, our revenue from ‘foreign-related operations’ stands now at approximately 37 percent of the total sum, however, our medium-term objective is to reach 50 percent,” Sfeir told The Daily Star.

Bank of Beirut operates in nine countries and four continents. There are wholly owned subsidiaries in the United Kingdom, Germany and Australia, branches in Cyprus and the Sultanate of Oman, and representative offices in the United Arab Emirates, Nigeria and Ghana.

Bank of Beirut is the only Lebanese bank that has expand to Australia, which has proved to be a successful and profitable investment.

“Bank of Beirut adopted since the year 2000 a long-term strategy to diversify its business activities toward a universal banking model and to expand regionally and internationally in profitable and relatively low-risk countries,” Sfeir said.

Sfeir also emphasized that Bank of Beirut had achieved good results despite the difficult situation in Lebanon. “Bank of Beirut delivered strong financial results during the first semester of 2016 amid a challenging operating environment. The good results have been underpinned by good performance of our international business and sustained growth within the Lebanese market,” the chairman explained.

He added that the performance was characterized by remarkable growth in all main financial indicators: “On consolidated basis, the Bank’s total assets reached, as at 30 June 2016, $16.2 billion, growing by 5 percent year-on-year. The growth in size was mainly funded by the growth in deposits and equity. Total shareholders’ equity reached around $2.1 billion, while profits amounted to $91 million for the first semester, a 2.2 percent year-on-year growth,” Sfeir said.

He noted that the main challenges the bank faced at the group level were mainly related to the local operating environment.

“As we all know, we have geo-political tensions in the region, negative spillover from the Syria conflict and a domestic political standstill. Economically, we are facing low real economic growth, structural fiscal deficit, persistent current account deficit and high public debt. As for the banking sector, we are challenged by thinner interest margins due to the high cost of funding and strong competitive local market,” Sfeir said.

He acknowledged that banking sector profits would be affected by the events in general, but reassured that banks were highly liquid.

“For the banking sector, I believe profits from the local operations will be affected. However, it shall be at an acceptable level for this year. However, the challenge will be higher next year as the crisis has lasted too long. In fact, the banking sector is currently the main driver of the economy and we are still reflecting consistent resilience against all odds. The sector is highly liquid, adequately capitalized, and enjoys competent management and a strong regulator,” Sfeir said.

He believed that Bank of Beirut was seeking to achieve a positive increase in profits this year.

“As for Bank of Beirut, we are targeting a positive increase in profitability, mainly due to the strong performance of our international business and our local sustained growth,” Sfeir said.

He dismissed the possibility of acquiring a local bank in the foreseeable future but said the bank would seek further expansion in the international markets.

“Currently, we are not planning to acquire any local bank. Internationally, yes, we are looking for further expansion as this will contribute to more diversification of our sources of income in a saturated local market. The expansion will be into countries enjoying high political and economic stability, with large Lebanese diaspora. We are now finalizing an acquisition that serves this objective,” Sfeir said.

He also commented on efforts by his bank to reduce dependency on income generated from interest revenues. “Of course we are moving along these lines. In fact, Bank of Beirut has the first ranking among peer group banks in two fee generating income businesses, the trade finance business with a market share of around 25 percent, and we are the leading bank in ‘funds management,’” Sfeir said.

He added that one of the challenges facing the banks in general was the delicate political situation in Lebanon. “We are facing serious challenges, mainly due to the political situation. Our presidency has been vacant since May 2014, our government is not fully operational; critical law projects are to be approved without any delay by parliament,” he said.

“Economically, we all know that we have weaknesses in budget deficit and high public debt, but we should also praise the strength of our financial system, namely the resilient and successful banking sector, the strong central bank international reserves, the perfect track record of public debt repayment, and the consistent positive growth in deposits in the banking sector, driven mainly by the inflow of remittances from the Lebanese Diaspora,” he argued.

Sfeir took part in a diaspora business conference in New York last week, and was honored by both the U.S. Congress and Senate.

A Certificate of Merit and a Certificate of Special Congressional Recognition were bestowed upon him for his leadership and for the role Bank of Beirut is playing in connecting the Lebanese diaspora with the motherland.

“It was a very positive visit to New York where Bank of Beirut has strongly participated in the Lebanese Diaspora Energy Conference. These conferences have significant payback value through making contact with successful Lebanese diaspora in different perspectives,” he added.

Sfeir said that members of the Lebanese diaspora were still attached to their homeland.

“We have felt the sense of belonging of the expats and their indisputable attachment to their homeland. We have shared with them Lebanon’s enormous potential for greater prosperity which has been held back, and tried to convince them why they should invest in, mentor and partner with Lebanese people, companies and startups,” Sfeir added.

During his discussions with the expats, Sfeir raised several key incentives to attract investments to Lebanon. “We have many positive drivers for investing in Lebanon, a competitive corporate tax rate, the project financing is available at low cost through the incentive schemes and subsidized loans orchestrated by the Central Bank of Lebanon; the full support from CBL to finance the ‘startups’ with very low risk/cost,” he said.

“Investing in the Lebanese banks’ equities is also a promising market as we currently have very attractive valuation metrics for listed banks’ common shares,” he added.

Sfeir underlined the need to put more pressure on policymakers to rebuild the “state” by electing a president and reactivating the constitutional institutions as soon as possible. “We are in need of political stability in order to promote expat confidence in our economy,” he added.

© Copyright The Daily Star 2016.

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