THE LEBANON BRIEFimages.mofcom.gov.cn/lb/201612/20161206050731709.pdf · Exchange Rate (NEER) of the LBP, it rose by 0.87% to reach Demand for the dollar on the Lebanese forex market

Your Investment Reference

THE

LEBANON BRIEF

ISSUE 992

November 14 -18, 2016

ECONOMIC RESEARCH DEPARTMENT

BLOMINVEST Bank Headquarters

Bab Idriss, Beirut, Lebanon

T (01) 991 784/2 F (+961) 1 991 732

[email protected]

www.blominvestbank.com

S A L

The Lebanon Brief ISSUE 992 November 14 - 18, 2016

S A L

TABLE OF CONTENT

FINANCIAL MARKETS 1

Equity Market 1

Foreign Exchange Market 3

Money & Treasury Bills Markets 3

Eurobond Market 4

ECONOMIC NEWS 5

Lebanese Commercial Banks’ Total Assets Rose by 6.50% y-t-d by September 2016 5

Airport Arrivals Increased by 8.21% by October 2016 6

Total Number of Registered New Cars Fall by October 2016 6

Beirut’s Hotel Occupancy Rate Steadied by October 2016 7

EDL Bleeding Clogged by Drowning Oil Prices 8

Stable Operations at the Port of Beirut by Oct.2016 9

CORPORATE DEVELOPMENTS 10

BLOM Bank Acquires HSBC Bank Lebanon 10

ODEA Bank’s Net Profits Reached $3.02M in Q3 2016 10

IBL Bank Issued Preferred Series “3” shares 11

BEMO Establishes a Securitization Investment Fund for T. Gargour & Fils 11

FOCUS IN BRIEF 12

Details of the Loans Granted in Lebanon during 2016 12

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.

1


S A L

FINANCIAL MARKETS

Equity Market

Stock Market

18/11/2016 11/11/2016 % Change

BLOM Stock Index* 1,218.97 1,217.12 0.15%

Average Traded Volume 548,733 181,622 202.13%

Average Traded Value 3,229,310 2,272,028 42.13%

*22 January 1996 = 1000

The Lebanese Bourse registered a rise this week, where

the BLOM Stock Index (BSI) increased by a weekly

0.15% to 1,218.97 points. Accordingly, market

capitalization on the Beirut Stock Exchange (BSE) rose

from $10.24M to $10.25 this week.

Moreover, the average traded volume and value on the

Lebanese bourse respectively escalated from last

week’s 181,622 shares worth $2.72M to 548,733 shares

worth $3.23M this week.

When compared to regional indices, the BSI lagged

behind the S&P Pan Arab Composite Large Midcap

Index which recorded a 0.99% weekly rise. However,

the S&P AFE40 and the Morgan Stanley (MSCI)

Emerging Markets index observed respective falls of

0.39% and 3.25%.

In the Arab world, the Egyptian bourse remained in the

lead with a weekly gain of 5%, which can be linked to

the approval of the $12B IMF loan. Moreover, the

Kuwaiti and Bahraini Indices followed with respective

rises of 1.89% and 1.66%. However, Qatar’s stock

index continued to observe a loss, where it registered a

1.87% fall during this week

The banking sector grasped the largest share this week

of 80.32% out of the total value traded on the Lebanese

Bourse, where most stocks observed rises in their

value. In details, BLOM listed shares gained 0.10% to

close at $10.11. Moreover, Audi common shares and

Audi GDRs increased by 0.30% and 1.56% to reach

$6.60 and $6.50, respectively.

As for the BLOM Preferred Shares Index (BPSI), it

increased by 0.06% to 104.92 points. This rise can be

attributed to the 0.10% and 0.96% rise in Audi

Preferred class “H” and BoB Preferred “I” that reached

$101.10 and $26.25, respectively. Moreover, BoB

Preferred “K” shares grew 1% to $25.25. However,

Byblos preferred 2009 and Audi Preferred “G” dropped

by 0.59% and 0.10% to $101.5 and $101.90,

respectively.

As for the real estate sector, it constituted 17% of the

total weekly traded value with Solidere A and B shares

increasing from $11.35 and $11.38 last week, to $11.45

and $11.40 at the end of this week.

Banking Sector

Mkt 18/11/2016 11/11/2016 % Change

BLOM (GDR) BSE $10.60 $10.60 0.00%

BLOM Listed BSE $10.11 $10.10 0.10%

BLOM (GDR) LSE $10.60 $10.50 0.95%

Audi (GDR) BSE $6.60 $6.58 0.30%

Audi Listed BSE $6.50 $6.40 1.56%

Audi (GDR) LSE $6.65 $6.55 1.53%

Byblos (C) BSE $1.67 $1.67 0.00%

Byblos (GDR) LSE $79.00 $80.00 -1.25%

Bank of Beirut (C) BSE $18.80 $18.80 0.00%

BLC (C) BSE $1.68 $1.68 0.00%

BEMO (C) BSE $1.60 $1.60 0.00%

Mkt

18/11/2016 11/11/2016

% Change

Banks’ Preferred

Shares Index *

104.92 104.86 0.06%

Audi Pref. F BSE $101.00 $101.00 0.00%

Audi Pref. G BSE $101.90 $102.00 -0.10%

Audi Pref. H BSE $101.10 $101.00 0.10%

Byblos Preferred 08 BSE $101.20 $101.20 0.00%

Byblos Preferred 09 BSE $101.50 $102.10 -0.59%

Bank of Beirut Pref. I BSE $26.25 $26.00 0.96%

Bank of Beirut Pref. H BSE $26.25 $26.25 0.00%

Bank of Beirut Pref. J BSE $26.25 $26.25 0.00%

BoB Pref. K BSE $25.25 $25.00 1.00%

BLC Pref B BSE $100.00 $100.00 0.00%

BLOM Preferred 2011 BSE $10.00 $10.00 0.00%

* 25 August 2006 = 100

1100

1120

1140

1160

1180

1200

1220

Nov-15 Feb-16 May-16 Aug-16 Nov-16

LO: 1,121.97

HI:

1,226.62

BLOM Stock Index

2


S A L

Real Estate

Mkt 18/11/2016 11/11/2016 %Change

Solidere (A) BSE $11.45 $11.35 0.88%

Solidere (B BSE $11.40 $11.38 0.18%

Solidere (GDR) LSE $11.10 $11.10 0.00%

Manufacturing Sector

Mkt

18/11/2016

11/11/2016

%Change

HOLCIM Liban BSE $13.87 $15.33 -9.52%

Ciments Blancs (B) BSE $2.72 $2.72 0.00%

Ciments Blancs (N) BSE $1.57 $1.57 0.00%

Retail Sector

Mkt 18/11/2016 11/11/2016 %Change

RYMCO BSE $3.25 $3.25 0.00%

ABC (New) OTC $27.00 $27.00 0.00%

The manufacturing sector contributed to the remaining

2.68%, with HOLCIM shares plunging 9.52% to $13.87.

On the London Stock Exchange, Byblos GDRs fell

1.25% to reach $79, while Audi GDRs and BLOM GDRs

witnessed respective inclines of 1.53% and 0.95% to

$6.65 and $10.60.

As hopes rise for the cabinet formation before

Lebanon’s Independence Day on November 22, the BSI

was positively affected. As such, if this were to happen,

Lebanon’s index will further improve in the upcoming

weeks.

3


S A L

Foreign Exchange Market

Lebanese Forex Market

18/11/2016 11/11/2016 % Change

Euro / Dollar 1.0602 1.0870 -2.47%

Sterling / Dollar 1.2402 1.2653 -1.98%

Dollar / Swiss Franc 1.0092 0.9867 2.28%

Dollar / Yen 110.60 106.46 3.89%

NEER Index* 118.28 117.26 0.87%

*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 NEER represents the approximate relative price a

consumer will pay for an imported good.

Nominal Effective Exchange Rate (NEER)

Demand for the dollar on the Lebanese forex market declined

over the past week, where the value of the Lebanese pound

against the dollar stood at a mid-price of $/LP 1,514 within the

range $/LP 1,513.75-1,514.25 on Friday, compared to a mid-

price of $/LP 1,514.25 within the range of $/LP 1,514 -1,514.50,

last week.

Foreign assets (excluding gold) at the Central Bank increased

9.36% since the beginning of the year to $40.56B by October

2016, boosted by the recent swap executed by BDL with the

MoF and Lebanese banks. The dollarization ratio of private

sector deposits increased from 64.88% in December 2015 to

64.98% in September 2016.

By Friday the 18th

of November 2016, the euro depreciated

against the dollar-pegged LP over the last week, going from

€/LBP 1,638.65 to €/LBP 1,598.25. As for the Nominal Effective

Exchange Rate (NEER) of the LBP, it rose by 0.87% to reach

118.28 points. Worth noting that BLOMINVEST Research

department has recalculated the NEER, taking 2015 as the

base year and the updated weights of Lebanon’s major trading

partners.

The US dollar strengthened this week, due to traders’

reinforced view that the Federal Reserve will raise interest

rates in December and speculations that the new

administration will boost spending. Hence the Euro/Dollar

exchange rate went from €/$ 1.0870, last week, to €/$1.0602

this week.

Over the past week, gold prices decreased from

$$1,255.89/ounce to $1,212.86/ounce this week.

Money & Treasury Bills Markets

Money Market Rates

Treasury Yields

17/11/2016 10/11/2016 Change bps

3-M TB yield 3.00% 3.00% 0

6-M TB yield 4.87% 4.87% 0

12-M TB yield 6.74% 6.74% 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

17/11/2016 10/11/2016 Change bps

Overnight Interbank 3.00% 3.00% 0

BDL 45-day CD 3.57% 3.57% 0

BDL 60-day CD 3.85% 3.85% 0

During the week ending November 3, Broad Money M3 rose

by a weekly LBP 993B ($659M) to reach LP 194,260B ($129B).

As such, M3 recorded a 5.55% annual increase and a 4.11%

rise since the start of the year.

Moreover, M1 progressed by LBP 344B ($228M) over the

same period to LBP 9,327B ($6B). This rise can be attributed to

the respective growths of LP 343B ($228M) and LBP 1B in

money in circulation and demand deposits.

Total deposits (excluding demand deposits) increased by LBP

649B ($431M) during the week, as deposits denominated in

foreign currencies went up by $480M, while term and savings

deposits denominated in local currency registered a fall of LBP

74B.

Over the above mentioned period, the broad money

dollarization rate slightly rose from 58.23% on October 27th to

58.31% on November 3rd. According to the Central Bank, the

overnight interbank rate remained stable at 3% between July

and August 2016.

In the Treasury Bills’ auction held on November 10, 2016, the

Ministry of Finance (MoF) raised LBP 756B ($501M), through

the issuance of bills maturing in 6M and notes maturing in

36M and 84M. The highest demand was achieved on the 36M

notes, which held a 57.11% share of total subscriptions, while

the 6M bills and 84M notes accounted for the remaining

shares of 8.07% and 34.82%, respectively. The discount rate

on the 6M bills stood at 4.87%, and the coupon rates on the

36M and 84M notes recorded 6.50% and 7.08%, respectively.

New subscriptions exceeded existing maturities by LBP 588B

($390M).

100

102

104

106

108

110

112

114

116

118

120

18-Nov-15 18-Feb-16 18-May-16 18-Aug-16 18-Nov-16

4


S A L

Eurobond Market

Eurobonds Index and Yield

17/11/2016 10/11/2016 Change Year to Date

BLOM Bond Index (BBI)* 100.89 102.44 -1.51% -3.09%

Weighted Yield** 6.88% 6.59% 4.40% 12%

Weighted Spread*** 557 538 3.53% 30%

*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)

Lebanese Government Eurobonds

Prices Weekly Yields Weekly

Maturity Date Coupon in % 17/11/2016 10/11/2016 Change 17/11/2016 10/11/2016 Change bps

12/06/2018 5.15 98.5 98.88 -0.38% 6.16% 5.90% 27

12/11/2018 5.15 98 98.50 -0.51% 6.23% 5.95% 28

23/04/2019 5.5 98.13 98.63 -0.51% 6.34% 6.11% 23

20/05/2019 6 99.13 99.5 -0.37% 6.38% 6.22% 16

28/11/2019 5.45 97.38 98.13 -0.76% 6.41% 6.13% 28

09/03/2020 6.375 99.63 100.38 -0.75% 6.50% 6.24% 25

14/04/2020 5.8 97.88 98.63 -0.76% 6.50% 6.25% 25

19/06/2020 6.15 98.75 99.63 -0.88% 6.54% 6.26% 28

12/04/2021 8.25 105.75 107 -1.17% 6.72% 6.41% 31

04/10/2022 6.1 96.25 97.75 -1.53% 6.88% 6.56% 32

27/01/2023 6 95.38 96.88 -1.55% 6.93% 6.62% 31

22/04/2024 6.65 97.38 98.88 -1.52% 7.11% 6.84% 27

40/11/2024 6.52 94.63 96.13 -1.56% 7.15% 6.89% 26

03/12/2024 7.00 99 100.6 -1.59% 7.16% 6.90% 26

26/02/2025 6.20 93.75 95.5 -1.83% 7.21% 6.92% 29

12/06/2025 6.25 93.75 95.5 -1.83% 7.24% 6.95% 29

28/11/2026 6.60 94.75 97 -2.32% 7.35% 7.02% 33

29/11/2027 6.75 95.25 97.75 -2.56% 7.39% 7.05% 34

03/11/2028 6.65 94 96.75 -2.84% 7.41% 7.06% 36

26/02/2030 6.65 93.5 96.13 -2.74% 7.43% 7.10% 32

22/04/2031 7.00 96 99 -3.03% 7.46% 7.11% 35

02/11/2035 7.05 95.63 99 -3.40% 7.48% 7.15% 34

During the week ending November 17, activity of the Lebanese Eurobonds followed that of US and Emerging Markets. The BLOM Bond

Index (BBI) declined 1.25% over the week to reach 144.89 points. Similarly, the JP Morgan Emerging Markets’ Bond Index lost a weekly

1.31% to reach 732.41 points. Hence, the yields of the Lebanese Eurobonds maturing in 5Y and 10Y grew from 6.43% and 7% last week, to

6.74% and 7.32%, respectively. In the U.S., Treasuries declined, reflecting investors’ conviction that the U.S. will be moving into higher

growth, higher inflation and tighter monetary policy driven by the prospect of large fiscal stimulus next year. Hence, the yields on the US

treasuries maturing in 5 and 10 years rose from 1.56% and 2.15% last week to 1.73% and 2.29% this week. As for the spread between the

yields on the 5 Year and 10 Year Lebanese Eurobonds and their US comparable, they broadened from 487 bps and 485 bps last week to 501

bps and 503 bps this week, respectively.

5 Year Credit Default Swaps, Mid-Prices (in basis points)

17/11/2016 10/11/2016

Lebanon 517 525

KSA 137 137

Dubai 160 154

Brazil 309 305

Turkey 295 288

5.75%

5.95%

6.15%

6.35%

6.55%

Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16

Weighted Effective Yield of Eurobonds

5


S A L

ECONOMIC NEWS

Commercial Banks’ Total assets by September (in

Billions $)

Source: BDL

Lebanese Commercial Banks’ Total Assets Rose by

6.50% y-t-d by September 2016

According to Lebanon’s commercial banks’ balance sheet, total

assets increased 6.50% year-to-date (y-t-d) and 9.23% annually to

$198.07B by September 2016.

On a year-to-date basis, reserves increased by 20.44% to $85.50B

due to a growth of 20.54% in deposits with central bank. Moreover,

claims on resident private sector rose 4.47% to $50.19B due to the

9.57% incline in claims in Lebanese Pounds to $14.95B.

Nevertheless, both claims on public sector and foreign assets

observed respective drops of 6.56% and 9.12% by September

2016. The main component behind the decline in foreign assets

was claims on non-resident financial sector that dropped 21.26% y-

t-d to $9.10B, while the decrease in claims on public sector, it is

mainly attributed to the lower subscription to treasury bills in LBP

that dropped by 9.74% since year-start to $18.11B.

As for the liabilities, the rise was caused by the 4.51% rise in

resident private sector deposits, which makes up two-thirds of total

liabilities to reach $125.12B by September 2016.

Moreover, the dollarization ratio for private sector loans decreased

from 74.83% in December 2015 to 73.61% in September 2016, and

the dollarization ratio for private sector deposits slightly rose from

64.88% in December 2015 to 64.98% in September 2016.

148.36 159.26

171.34 181.34

198.07

2012 2013 2014 2015 2016

6


S A L

Total Number of Passengers by October (in M)

Source: Rafic Hariri International Airport

Breakdown of Passenger and Commercial Cars by

October

Source: AIA

Airport Arrivals Increased by 8.21% by October 2016

The Rafic Hariri International Airport activity rose during the first 10

months of 2016, where the total number of passengers increased

by a yearly 7.15% to 6.56M.

The number of arrivals to Lebanon went up by 8.21% y-o-y to

3.22M by October 2016. Also, this period witnessed a 6.70% yearly

increase in departures, which reached 3.33M by October 2016,

compared to 3.12M by October 2015. As for the number of transit

passengers, was slashed by half as the number fell from 28,102

passengers by October 2015 to 12,755 passengers during the same

period in 2016.

As for the month of October alone, the total number of airport

passengers decreased 3.74% yearly to reach 554,122. Arrivals fell

by 2.62% y-o-y to 257,980, and departures declined 2.66% y-o-y

amounting to 295,592. Transit travelers tremendously fell from

7,041 last year to 341 in October 2016.

Total Number of Registered New Cars Fall by October

2016

According to the Association of Lebanese Car Importers, the total

number of newly registered commercial and passenger cars fell

4.10% year- on- year (y-o-y) to 33,311 cars by October 2016. In

details, the number of registered commercial cars increased by

12.79% y-o-y to 2,170, while the number of registered passenger

vehicles dropped 5.09% to reach 31,141 cars during the first ten

months of the year.

Japanese model cars grasped the largest market share in total

passenger cars, with a share of 37.20% by October 2016, followed

by Korean cars, with a market share of 36.45%, and European cars

with 20.49% of the total market share. Moreover, only American

cars observed an increase in their sales with a rise of 12.09% y-o-y,

while European, Japanese, and Korean cars’ sales slid 4.35% and

8.66%, and 4.60%, respectively.

In terms of car brands, Kia maintained its top rank, with the largest

share of 19.76% of newly registered passenger cars, followed by

Hyundai, Toyota and Nissan with respective shares of 14.84%,

13.49%, and 9.57%.

As for sales per importer, Natco acquired the largest stake of newly

registered cars with 18.40% of the total, followed by Century Motor

Co. with 14.07%, BUMC and RYMCO with 13.81% and 11.82%,

respectively.

5.05 5.35

5.57

6.12 6.56

2012 2013 2014 2015 2016

29,198 29,722

32,084 32,811

31,141

1,905 1,894

1,918

1,924

1,973

2012 2013 2014 2015 2016

Passenger Cars Commercial Cars

7


S A L

Monthly Hotel Occupancy Rates in Lebanon

Source: E&Y Middle East Hotel Benchmark Survey

EDL and MoF Contributions of the total oil bill by

Beirut’s Hotel Occupancy Rate Steadied by October

2016

According to Ernest and Young’s Hotel Benchmark Survey, Beirut

hotel occupancy rate steadied 58% by October 2016, when

compared to the same period last year. However, this was

accompanied with hotels decreasing their room rates as revealed

by both the average rate per room and the revenue per room that

each dropped by a similar 16.5% y-o-y to reach $138 and $80,

respectively.

The best performer in the region was Cairo, where its hotel

occupancy rates increased by 15 p.p to 63% by October 2016. This

rise was accompanied by annual upturns of 13.7% and 48.8% in

the average rate per room and revenue per room, which reached

$128 and $80, respectively. As such, this progress can be partly

attributed to the improving economic and political statuses in

Egypt.

However, both Madina and Kuwait witnessed the largest losses in

hotel occupancy rates of 4 and 5 star hotels. In details, Madina’s

hotel occupancy rate and revenue per room slid 14 p.p to 61%, and

14.1% to $147, respectively, while average rate per room inclined

by a yearly 5.7% to $238. Similarly, Kuwait observed a fall across

hotel occupancy rate and revenue per room, where the former fell 9

p.p to 38%, and revenue per room plunged 16.4% to $102.

Nonetheless, average rate per room rose to $266.

As for the month of October alone, most of countries’ hotels

witnessed a downturn in occupancy rates as this is considered a

low season for tourism. As such, Beirut’s hotel occupancy dropped

by a marginal 1 p.p to stand at 54%.

54%

56% 56%

53%

55%

53%

55%

66%

44%

63%

63%

70%

54%

8


S A L

June

Source: MoF

EDL Bleeding Clogged by Drowning Oil Prices

By June 2016, records of Lebanon’s Ministry of Finance indicated

treasury transfers to EDL amounted to $334.40M compared to

$627.54M in H1 2015.

The decline may seem economically revitalizing vis-à-vis the

notorious barometer of EDL’s productivity; nonetheless, the

tightened Transfers Account surrenders mainly to the oil market

price-effect. The downward trend of EDL Transfers was driven by

the 31.47% decline in Average Prices per Barrel of crude oil, which

dropped from $57.47 in 2015 to $39.39 in 2016.

On the counter part, the volumes of imported fuel and gas

witnessed yearly spikes of 1.09% and 10.48% respectively in the

first six months of 2016.

Moreover, EDL’s contribution to the total oil bill shot up from 2.4%

to 9.1% by June 2016. This is mostly linked to the contracting oil

bill during the first half of 2016.

Effectively, payments made to oil suppliers KPC and SPC witnessed

a 47% compression originating from 2015’s US$618.7M bill and

2016’s US$327.7M.

In its turn, the recessive Debt Service trait of the Transfers Bill

declined by 25% in 2016.

Last but not least, drowning oil prices on EDL’s operations

decreased the share of Transfers from the government’s primary

expenditures as it dropped from 13.9% to 6.9% by June 2016.

96.6

98.2

97.6

90.9

3.4

1.8

2.4

9.1

0

1

2

3

4

5

6

7

8

9

10

86

88

90

92

94

96

98

100

2013 2014 2015 2016

MoF Contribution of total oil bill (%)

EDL contribution of total oil bill (%)(secondary axis)

9


S A L

Beirut Port Revenues (in $M for October y-o-y)

Source: PoB

Stable Operations at the Port of Beirut by Oct.2016

The annual cumulative revenues of the Port of Beirut recorded an

incremental yearly decline of 0.12%, totaling $199.11M by

Oct.2016. The minimal change in the Port’s revenues is mainly

attributed to the slow variation in the Port’s Total Container Activity

including Transshipment (TEU+TS). By Oct.2016, (TEU+TS) rose

annually by 0.55%, to 954,619 twenty-foot-equivalent unit (TEU).

The breakdown of (TEU+TS) follows:

Container Activity alone recorded a 7.98% year-on-year (y-o-y)

growth to 709,463 TEU, while Transshipment Activity plunged by

16.11% y-o-y.

The drop in Transshipment is partly attributed to the activity of

Beirut’s key shipping players: CMA and MSC. By Oct.2016, the

latter’s contribution was larger.

In details, CMA’s shipments hit 94,167 TEU, a 7.54% contraction by

Oct.2016, improved from a 35.72% the previous y-o-y decline. By

Oct.2016, MSC’s shipments were more dramatically compressed

by 20.64% to 133,016 TEU. In its turn, the volume of Imported and

Exported Merchandise rose 7.95% y-o-y to 7,343.2 tons during the

first 10 months of 2016. Further to the activity at the Port of Beirut,

1,712 ships docked by Oct. 2016, recording an annual increase of

15.91% , while 88,492 cars were imported, compared to 88,555 by

Oct.2015.

143.28

183.23 179.47

199.34 199.11

2012 2013 2014 2015 2016

10


S A L

CORPORATE

DEVELOPMENTS

BLOM Bank Financials by Q3 2016

($M) Sep-16 Dec-15 % Change

Net Profits 344.07 289.77* 18.74%

Total Assets 30,130.93 29,099.15 3.55%

Customers'

Deposits 25,447.17 24,957.73 1.96%

Total Equity 2,817.04 2,721.60 3.51%

*Value for September 2015

Source: BSE News

Odea Bank’s Financial Results (in $M)

Sep-16 Dec-15 YTD

Total Assets 9,942.35 9,625 3.30%

Loans and Receivables

7,056.79 6,542 7.87%

Total Deposits 7,664.74 7,600 0.85%

Total Shareholders' Equity

1,014.22 404.14 150.96%

Profit for the Year 3.02 (3.18)* 195.11% *Value for September 2015

Source: BSE News

BLOM Bank Acquires HSBC Bank Lebanon

On November 16, BLOM Bank announced it has signed an

agreement, which is expected to be completed during the first half

of 2017, to acquire HSBC Bank’s assets and liabilities. HSBC had 3

branches in Lebanon and total assets worth $953M.

Moreover, this acquisition will allow BLOM Bank to diversify its

portfolio and expand its customer base as well as its retail and

corporate activities. Also, the bank assured employment continuity

to all HSBC employees and a “smooth transition for all clients.”

ODEA Bank’s Net Profits Reached $3.02M in Q3 2016

Bank Audi’s Turkish subsidiary, ODEA Bank, announced its results

for the third quarter of 2016. As a result, the Bank’s financial

statements revealed an increase in its net profits to $3.02M

compared to a $3.18M loss during the same period in 2015. This

was mainly driven by the growth in net interests’ income and net

fees and commissions’ income, which increased from $213.99M

and $22.16M end of September 2015 to $239.16M and $24.40M

end of September 2016, respectively.

On the balance sheet, total assets witnessed a year-to-date (y-t-d)

rise of 3.30% to $9.94B by September 2016, while loans and

receivables increased by 7.87% to $7.06B. On the liabilities’ side,

total deposits dropped 0.85% y-t-d to $7.66B.

As for shareholders’ equity, it witnessed an upsurge to $1.01B by

Q3 2016, compared to $404.14M end of 2015.

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Characteristics of IBL Preferred Series “3” shares

Number of shares issued 750,000

Nominal Value per share LBP 7,500

Issue Price $100

Dividend Yield 7.5%

Type of Share

perpetual, non-cumulative,

redeemable

Execution Date 18/11/2016

Source: Midclear

Details of the Notes

Class Maturity ISIN Number

A 30/11/2026 LB0000011694

B 30/11/2026 LB0000011702

Source: Midclear

IBL Bank Issued Preferred Series “3” shares

Based on the general assembly meeting held on the 28th of

September, the Intercontinental Bank of Lebanon’s (IBL) decided on

increasing its capital from LBP 150B to LBP 155.625B through the

issuance of 750,000 Preferred Series “3” shares , at a nominal price

of LBP 7,500, each. These preferred shares will be traded over-the-

counter (OTC), noting that dividends are not cumulative and the

annual dividend equals 7.5% per year (subjext to adjustment).

BEMO Establishes a Securitization Investment Fund for

T. Gargour & Fils

Following the approval of the capital markets’ authority in

September 26,2016, BEMO securitization established a

securitization investment fund for T. Gargour & Fils, called TGF Star

II SIF. As such, Midclear issued notes on TGF Star II SIF for the

fund’s subscribers on 17 November 2016.

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FOCUS IN BRIEF

Details of the Loans Granted in Lebanon during 2016

In his book “The Great Divide”, Nobel Prize winner Joseph Stiglitz highlights the idea that in the period leading up to the

2008 financial crisis, large banks lost sight of their main function of financial intermediation: connecting lenders and

borrowers. In Lebanon, commercial banks have managed to remain true to that goal all while navigating the good times

and the bad times the country has been through.

Seeking bank loans is the most attractive financing vehicle for individuals and companies alike in Lebanon. With the

absence of developed capital markets in Lebanon, businesses, which are mostly family businesses, borrow from banks

instead of issuing stocks or bonds. Businesses also favor bank financing because it would protect them from the risks of

capital dilution as it would unshackle them from the mandatory publishing of financial statements at regular intervals. As for

individuals, bank financing is their only option for accessing additional funds especially in times when the economy is

sluggish. It is then no wonder that Central Bank figures show that the total value of loans granted in the financial sector grew

by 2.4% since year-start to $59.32B by July 2016 and represented 114% of 5416’ estimated GDP.

The sectorial composition of all the loans granted in Lebanon has been assuming the same structure since at least 2013.

Up to July 2016, the value of individual loans was the highest with a share of 32.4% in total loans and a share of 37% of

5416’s estimated GDP and that is what compelled the Central Bank of Lebanon to issue tighter regulations regarding retail

loans in circular #369 back in 2014. Contracting and construction loans come in second with a share of 19% for contracting

and construction followed by 14.9% for wholesale trade, 9.6% for processing industries, 5.7% for real estate, rent and

employment services, 6.1% for retail trade, 2.9% for transport, warehouses and communication and 2.7% for Hotels,

furnished apartments and restaurants.

http://blog.blominvestbank.com/the-central-bank-of-lebanon-new-regulations-for-granting-retail-loans/

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Sectorial Composition of Loans Granted in the Financial Sector – Up to July 2016

Source: Banque du Liban

32.40%

19.00% 14.90%

9.60%

5.70%

6.10%

2.90% 2.70%

1.60% 1.30%

1.30%

1.10% 1.00%

0.30%

0.10% 0.01%

0.01%

R - INDIVIDUALS Total

E - CONTRACTING AND CONSTRUCTION Total

F - WHOLESALE TRADE Total

C - PROCESSING INDUSTRIES Total

K - REAL ESTATE, RENT AND EMPLOYMENT SERVICES Total

G - RETAIL TRADE Total

I - TRANSPORT, WAREHOUSES AND COMMUNICATION Total

H - HOTELS, FURNISHED APARTMENTS AND RESTAURANTS Total

M - EDUCATIONAL, INFORMATION, ADVERTISING, LEGAL, ACCOUNTING, CONSULTATIVE AND ADMINISTRATIVE SERVICESTotal

N - HEALTH AND SOCIAL SERVICES Total

A - AGRICULTURE, FISHERIES AND FORESTRY Total

O - OTHER ASSOCIATIONS, OTHER SERVICES, PERSONAL SERVICES, CULTURAL, TOURIST SERVICE AND LEISURE SERVICESTotal

D - ELECTRICITY, GAS, WATER AND OIL Total

L - PUBLIC ADMINISTRATIONS, DEFENSE AND MANDATORY SOCIAL SECURITY Total

B - EXTRACTION INDUSTRIES Total

P - HOUSEHOLDS EMPLOYING SERVANTS Total

Q - REGIONAL ORGANIZATIONS AND BODIES Total

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Individual Loans

Total individual loans grew by 7% year-to-date to $19.21B. The value of housing loans constitutes more than half the value

of total individual loans and grew by 5.7% year-to-date to $11.54B by July 2016. As for consumption loans, they represent

the second biggest share in total individual loans of 28.9% and they grew by 14.1% to $5.56B by July 2016. Car loans come

in next with a stake of 6.7% in total individual loans but were the only category of individual loans to have dropped by 4.5%

since year-start to $1.29B up to July 2016. With the Central Bank of Lebanon imposing a 25% down-payment on all car loans

and with demand for cars already slumping due to the overall poor economic conditions, the activity in the car sector has

been subdued. Credit card loans accounted for 3.3% of total individual loans and grew by 0.6% year-to-date to reach a total

of $633M up to July 2016. As for loans to pursue studies in educational institutions, they accounted for 0.8% of total

individual loans and also grew by 4.7% since year start to reach $157M.

Composition of Individual Loans – Up to July 2016


60.1%

28.9%

6.7% 3.3% 0.8%

0.2%

HOUSING

CONSUMPTION

CARS

CREDIT CARDS

PURSUE STUDIES IN EDUCATION INSTITUTIONS

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Contracting and Construction Loans

In 2016, construction activity recovered from a low base in previous years and that was mirrored by the loans granted to

that sector. It is worth mentioning that what the construction sector is witnessing is more of an adjustment than a recovery.

In the residential segment specifically, newly constructed projects have adjusted to the fact that market demand is now

directed towards smaller unit. The Construction Area Authorized by Permits therefore fell from 8.22M sqm by August 2015

to 7.93M sqm by August 2016. According to the Central Bank, contracting and construction loans represented the second

largest bulk of loans in total loans granted in the sector with a share of 18.7% up to July 2016. The value of contracting and

construction loans grew by 3.9% since year-start and reached $11.26B up to July 2016. Loans for residential and commercial

contractors, with respective shares of 3.8% and 5.9% in total contracting and construction loans grew by 12.1% and 4.9%

year-to-date to reach $2.48B and $3.56B up to July 2016. In addition, loans for building materials saw a 0.5% year-to-date

uptick to $309M in the first seven months of 2016.

Number of Issued Construction Permits by August

Source: Orders of Engineers in Beirut & Tripoli

However, the breakdown of construction loans by type shows that loans for large construction projects, which require

substantial investments, actually dropped since the beginning of the year. It’s normal to witness such a trend in a context

where real GDP has been growing at rates between 1% and 2% for the past six years. In more details, loans for the

construction of stadiums, sport centers and tourism complexes fell by 1% to $90M, loans for the construction of factories

and laboratories declined by 1.6% since year start to $46M and loans for the construction of slaughterhouses, mills and

plants slid by 9.8% year-to-date to $16M up to July 2016.

12,120 11,388 11,315

9,814

11,289

2012 2013 2014 2015 2016

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Wholesale Trade Loans

Wholesale trade loans represent the third largest value in overall loans with a share of 14.9%. In total wholesale trade

loans, food and beverages account for 18.7% but they however dropped by 3.8% since year start to reach $1.66B by July

2016. This drop is also aligned with the 1.6% year-to-date drop in loans granted to food stores and that totaled $265M up to

July 2016. Due to the drop in oil prices, the value of loans related to oil and oil products, accounting for 8% of total

wholesale trade loans, dropped by 12.1% since year start to reach $705M by July 2016.

Composition of Wholesale Trade Loans – Up to July 2016


Every sector in the Lebanese economy, regardless of its contribution to GDP, benefits from bank financing within a secure

and well-built structure. Based on Bank Data figures, the banking sector is highly liquid with a net primary liquidity as a

percentage of deposits at 30.69% at end December 2015. The ratio of doubtful loans to gross loans dropped from 6.55% in

2014 to 6.3% in 2015, the lowest level in the past ten years.

18.7%

8.7%

8.6%

8.0%

7.2% 7.0%

6.9%

6.0%

5.9%

5.2%

17.68%

FOODSTUFFS AND BEVERAGES CARS AND SPARE PARTS

VARIOUS SUSTAINABLE PRODUCTS OIL AND OIL PRODUCTS

ELECTRICAL AND ELECTRONIC EQUIPMENT FARM AND ANIMAL PRODUCTS

WOOD AND BUILDING MATERIALS PHARMACEUTICALS AND MEDICINES

FERROUS AND NONFERROUS METALS CLOTHING, AND TEXTILE AND LEATHER PRODUCTS

OTHERS

Your Investment Reference

S A L

Research Department:

Dina Antonios [email protected]

Lana Saadeh [email protected]

Riwa Daou [email protected]

Myrna Chami [email protected]

Maya Mantach [email protected]

Marwan Mikhael [email protected]

mailto:[email protected]

mailto:[email protected]

THE LEBANON BRIEFimages.mofcom.gov.cn/lb/201612/20161206050731709.pdf · Exchange Rate (NEER) of the LBP, it rose by 0.87% to reach Demand for the dollar on the Lebanese forex market

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