annual report 09 - blom bank...annual report 09 introduction a lot can be achieved in a year. at...
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ANNUAL REPORT 09
IntroductionA lot can be achieved in a year. At BLOM BANK, we know this more than anyone.Constantly developing and maintaining the highest levels of customer satisfactionhas earned us awards in 5 different categories over the past year: Best Bank in theMiddle East, Best Bank in Lebanon, Best Investment Banking, Best Website and BestTrade Finance. A bank that cares knows what matters most is providing its clientscomplete satisfaction and peace of mind, always.
Dr. Naaman AZHARI - Chairman of BLOM BANK GROUPMr. Saad AZHARI - Chairman and General Manager of BLOM BANK S.A.L
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Table of ContentsCHAIRMAN’S LETTER 9CUSTOMERS’ DEPOSITS EVOLUTION 11EVOLUTION OF MAIN INDICATORS 12CONSOLIDATED FINANCIAL RATIOS 12STRONG AND CONTINUOUS GROWTH FOR THE LAST 5 YEARS 13BLOM BANK’S GROUP CHART 14BLOM BANK’S ORGANIZATIONAL CHART 15CORPORATE GOVERNANCE 191. BLOM BANK S.A.L. CODE OF CORPORATE GOVERNANCE 202. BLOM BANK S.A.L. MAJOR COMMON SHAREHOLDERS 203. BLOM BANK S.A.L. BOARD OF DIRECTORS 21
3.1 List of Board Members 213.2 Information About Board of Directors 223.3 Number and Date of Board Meetings held in 2008 27
4. INFORMATION ON KEY MEMBERS OF BLOM BANK S.A.L. MANAGEMENT 275. BLOM BANK S.A.L COMMERCIAL ARRANGEMENTS 296. GENERAL MANAGEMENT OF BLOM BANK S.A.L. 29MANAGEMENT DISCUSSION & ANALYSIS 2008 351. OPERATING ENVIRONMENT 362. OVERVIEW 393. EVOLUTION OF TOTAL ASSETS 404. SOURCES OF FUNDS 40
4.1 Customers’ Deposits 414.2 Capitalization (Tier I & Tier II Capital) 424.3 Banks & Financial Institutions 42
5. USES OF FUNDS 425.1 Cash and Balances With the Central Banks 425.2 Lebanese Treasury Bills and Other Governmental Bills and Bonds 435.3 Bonds and Financial Instruments with Fixed Income 445.4 Banks and Financial Institutions 455.5 Loans and Advances to Customers 45
6. LIQUIDITY 487. PROFITABILTY 48
7.1 Net interest income 497.2 Non-Interest Income 527.3 Staff and Operating Expenses 53
8. DIVIDEND DISTRIBUTION AND PREFERRED SHARES REVENUES 549. CAPITAL ADEQUACY RATIOS 5410. INTEREST RATE RISK 5411. RISK MANAGEMENT AND BASEL II PREPARATIONS 5512. UNIVERSAL BANKING SERVICES 57
12.1 Private and Investment Banking 5712.2 Commercial and Corporate Banking 5712.3 Retail Banking 5712.4 Islamic banking 5912.5 Insurance Products & Services 59
13. INFORMATION SYSTEMS AND TECHNOLOGY 5913.1 Customer Relationship Management 6013.2 Advanced Electronic Payment Systems 6013.3 Enterprise Application Integration (EAI) 6013.4 Basel II & Regulatory Compliance 6013.5 Systems Security & High Availability 6013.6 Financial Reporting & Consolidation 61
14. PEOPLE DEVELOPMENT 6114.1 General Overview 6114.2 Policies and Procedures 62
15. BANK’S OPERATIONAL EFFICIENCY 6316. REGIONAL EXPANSION 63BLOM BANK S.A.L CONSOLIDATED FINANCIAL STATEMENTS 67
1. Auditors’ Report 692. Consolidated Income statement Year Ended 31 December 2009 703. Consolidated Statement of comprehensive Income year ended 31 December 2009 714. Consolidated Statement of Financial Position at 31 December 2009 725. Consolidated Cash Flow Statement Year Ended 31 December 2008 746. Consolidated statement of changes in equity for year ended 31 December 2009 76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 81BLOM BANK WORLDWIDE CORREPONDENT BANKS 144BLOM BANK GROUP MANAGEMENT AND DIRECTORY 145
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Mr. Saad AZHARI - Chairman and General Manager of BLOM BANK S.A.L
8
The past two years have been very difficult on the global financial system, especially its banking sector. Perhapsunique among its counterparts, the Lebanese banking system managed however to stay largely intact and evenprosper in the midst of the financial crisis. And prime among its banks has been the performance of BLOM Bank, whichattained the highest level of profits at $293.2 million in 2009, increasing by 16.6% on its level of 2008. This alsoimplied the highest returns on relative profitability among the listed banks, with the rates of return on average equityand assets registering 20.34% and 1.52% respectively. This notable and consistent performance did not go unnoticed,for BLOM Bank was awarded “The Best Bank in the Middle East for 2009” by the internationally renowned institutionThe Banker – Financial Times Group, the first time an award of its prestigious kind given to a Lebanese bank. Thisaward actually caps several other awards that the Bank had also won, which include: “Best Bank in the Middle Eastfor 2009” from The Banker Middle East; and “Best Bank in Lebanon for 2009” from The Banker, Global Finance, WorldFinance, and Emea Finance.
What adds to this significant performance is that it was achieved with BLOM Bank’s traditional and successfulconcern for strong control over risk and expenses. As a result, the Bank’s ratio of net non-performing loans stood atless than 1%, its loan-loss reserves ratio at a healthy 101.8%, and its capital adequacy (Basel 2) ratio at a sound 14%-- not to mention the lowest cost to income ratio of 35.47%. BLOM Bank also continued to efficiently manage itsbalance sheet, which saw its diversified assets increase by 15.8% to $20.8 billion. These assets were mainlycomprised of 31.6% in cash and balances with the central bank, 27.4% in financial securities, 26% in inter-bankinvestments, and 19.4% in loans – an allocation that yielded an impressive overall liquidity ratio of 72.3%.
But BLOM Bank’s success goes also beyond Lebanon’s border. The Bank’s strategy is to maintain a durable, long-term,and organic growth so as to become the leading regional bank, capitalizing on its brand name and diversifying itsassets, customer base, and sources of income. To this end, the Bank opened in 2009 a corporate bank in Qatar, BLOMBank Qatar, and in early 2010 an investment bank in Saudi Arabia, BLOMINVEST S.A, to complement its presence inten more countries: Lebanon, Syria, Egypt, Jordan, UAE, France, Switzerland, England, Cyprus, and Romania. It is theneighboring Arab and Middle Eastern region that represents the “natural” orbit for the Bank's expansion, besidesbeing an area of strong banking and savings potential of more than 340 million people (more than 50% of which arebelow 24 years old) and a market that is worth close to $3 trillion in project activities. Also, despite a relatively weakgrowth performance of 2.4% in 2009, the region is expected to grow by a healthy 4.8% annually up to 2015. In thisrespect, the Bank is expanding vigorously its network of branches in the Arab market, having for instance a total of26 branches in Egypt, 24 in Syria, and 7 in Jordan, out of an aggregate presence of about 150 banking and financialunits to serve its client base.
In consequence, the Bank has proven its caliber in the Arab banking market, as it was selected by The Asian Bankeras "The Strongest Bank in Lebanon for 2009". It is also among the largest 20 Arab banks in terms of assets and profits,and measures up very well in comparison to the major Arab banks in terms of return on equity, non-performing loans,and capital adequacy; and ranks even better in measures such as liquidity and deposits to assets ratios at 72.3% and86.7% respectively, compared to corresponding ratios of 28% and 65 % for the Arab banks. BLOM Bank also generates20% of its profits, 28% of its deposits, and 43% of its lending from its foreign operations, and aims towardsincreasing these contributions to 50% in the medium term by adopting a measured and selective approach to newforeign expansions depending on market conditions and growth opportunities.
The other component of the Bank's strategy is to expand and consolidate its universal banking services – ranging fromcommercial, investment, private, and Islamic banking services to services in asset management, brokerage, andinsurance. Accordingly, in addition to the corporate bank in Qatar and the investment bank in Saudi Arabia alluded toearlier, the Bank established in 2009 a financial company in Syria, Bank of Syria and Overseas for Financial Services,and two insurance companies in Egypt, Arope Egypt Insurance and Arope Egypt Life Insurance. Also, the sources ofthe Bank’s operating income mirror the diversified spectrum of its services, where 48.6% is attributed to liquidity,23.5% to corporate and commercial banking, 12.5% to retail banking, 12.3% to investment and private banking, and3.1% to insurance.
CHAIRMAN’S LETTER
9
The Bank has also been keen to strengthen its fee income so as to underpin its strategy of services and incomediversification. Fee income has grown by CAGR of 21% since 2002 to constitute 25.2% of operating income by the endof 2009. This was backed by a strong growth in assets under management which increased by a CAGR of 35.1% toreach $4.2 billion. Additionally, the Bank has become a renowned leader in Lebanon in asset management, havingbeen the first to develop a series of mutual funds consisting of financial instruments from Lebanon and other Arabcountries, the latest of which is the balanced growth fund, BLOM Pyramid Fund. As to lending activity, the Bankcontinues to be very active in meticulously expanding its lending portfolio along all business lines to the extent thattotal loans increased by 15.8% in 2009 to $4.1 billion – capturing, as a result, the highest market share for car andhousing loans in Lebanon at 28.2% and 13.6% respectively, in addition to becoming a leader in car loans in Jordanand among the top three leaders in car loans in each of Syria and Egypt.
The Bank’s commitment to better shareholders value remains as strong as ever. Its earnings yield at 14.4% (based onDecember 31st, 2009 stock values) is the highest among Lebanese listed banks; whereas its earnings per share, at$12.93, has grown at a high rate of 21% in 2009 and at a decent average increase of 17% since 2002. And the Bank’sGeneral Assembly of Shareholders held on April 9th, 2010, agreed to distribute dividends equal to $4 per share toholders of common and GDR shares, and $8.5 to holders of preferred shares Series 2004 and $9.5 to holders ofpreferred shares Series 2005 – amounting in all to a dividend pay-out ratio of 31%.
In addition, BLOM Bank’s commitment to “Peace of Mind” has gone beyond the confined realm of customers toencompass that of the “whole community” by pursuing an active and fruitful social corporate responsibility agenda.Since 2005, it has sponsored the widely successful BLOM-Beirut Marathon, a live event that showcases the countryand its image at its unified best. And over the last ten years, the Bank has supported the activities of many NGOs infields such as health, environment, culture, education, and various humanitarian causes for the underprivileged andthe needy. In 2010, we launched the BLOM-MaterCard “Giving” credit card, the first of its kind in the Middle East, thatwill donate to the Lebanese Mining Action Center, a unit of the Lebanese army in charge of de-mining 425000 minesin the country, so as to support it in this crucial task. The Bank also started the “Guide” program, designed to empowerthe youth and help them make the right decisions when it comes to their education and choice of a career path.
Lastly, the Bank’s leading success reflects the success of the Lebanese banking system and economy. Buoyed by itssafe haven status – made possible by the much-admired-and emulated Banque du Liban’s (central bank) regulatorydirectives and the strong supervision by its Banking Control Commission -- and rewarding returns, the banking systemwitnessed a 22.3% increase in its assets to $115.3 billion; and, just as important, a hefty 44% rise in non-residentprivate sector deposits to $16.6 billion and a decline in the rate of deposit dollarisation from 70% to 64%. Thisfavorable state of the banking system, in an environment of increasing monetary and political stability, was mutuallysupportive of a vibrant economy that grew at a repeat rate of 9% as in 2008. It also managed to cut the public debtto GDP ratio – the economy’s Achilles heel – since early 2008 by 16% to settle at 152% by the end of 2009, becauseGDP grew at more than 1.5 times the growth of debt; in addition to an increase during the same period of its foreignreserves by $16 billion to $ 25.7 billion, covering more than 20 months of goods imports and 75% of the money stockin Lebanese pounds
In closing, I am confident that BLOM Bank’s business model, strategy, and human capital -- to whose staff I expressmy heartfelt thanks -- will continue to yield the best returns to our valued shareholders and loyal customers, helpingin the process to develop BLOM Bank into the leading Arab regional bank.
Saad AZHARIChairman and Genaral Manager
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1995
2001
2002
2003
2004
2005
2006
2007
1996
1997
1998
1999
2000
14000
12000
10000
8000
6000
4000
2000
0
Years1991
1992
1993
1994
BLOM BANK'S CONSOLIDATED CUSTOMERS’ DEPOSITS EVOLUTION (in USD Millions)
16000
17000
504 595 8711,259
1,605
2,686
3,3333,861
4,330
13,737
11,735
10,161
8,992
7,686
6,215
5,5255,056
2008
2009
15,109
17,970
11
LIQUIDITY RATIOSNet liquidity in LBPNet immediate liquidity in Foreign CurrencyLiquid assets over total assets
LOANS TO DEPOSITS RATIOSLBPF/CTotal
ASSETS QUALITY - NOT INCLUDING GENERAL PROVISIONNet doubtful loans over total loansProvision over doubtful loansProvision over total loans Gross doubtful loans/ Gross total loans
CAPITAL ADEQUACY RATIOSBefore dividend distribution After dividend distribution
PROFITABILITY RATIOSReturn on average equityReturn on average assetsEarnings per share USD Dividend per common share USD Dividend payout ratioRetention Ratio Net asset value per common share USD
TOTAL ASSETSLBPUSD
CUSTOMERS’ DEPOSITSLBPUSD
TOTAL NET LIQUIDITYLBPUSD
SHAREHOLDERS’ EQUITYLBPUSD
CAPITAL FUNDSLBPUSD
TOTAL LOANS AND ADVANCES LBPUSD
NET INCOME AFTER TAX LBPUSD
2008
26,980.8117,897.72
22,776.3715,108.71
16,436.9610,903.43
2,180.691,446.56
2,199.321,458.92
5,237.373,474.21
379.25251.58
Change09/08
15.67%15.67%
18.94%18.94%
14.92%14.92%
12.56%12.56%
17.11%17.11%
15.67%15.67%
16.47%16.47%
EVOLUTION OF MAIN INDICATORS (in USD MIllions or LBP Billions)
CONSOLIDATED FINANCIAL RATIOS (in % or USD)2008
104.38%55.83%60.92%
7.76%27.96%22.99%
0.87%78.69%4.16%3.92%
29.84%27.85%
17.87%1.46%
10.69 USD3.65 USD34.13%65.87%
55.03 USD
2009
31,208.8420,702.38
27,089.6117,969.89
18,889.7212,530.49
2,454.641,628.28
2,575.551,708.49
6,058.124,018.66
441.73293.02
2009
103.82%56.34%62.58%
7.63%28.39%22.36%
0.83%76.24%3.58%3.44%
26.33%13.96%
19.06%1.52%
USD 12.88USD 3.98
30.93%69.07%
USD 64.55 12
2004 2005 2006 2007 2008
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
11,918
16,639 17,898
16,000
10,835
18,000
20,000
STRONG AND CONTINUOUS GROWTH FOR THE LAST 5 YEARS
Total Assets (in USD Millions)
Net Profits (in USD Millions)
2004 2005 2006 2007 2008
300
250
200
150
100
50
0
136.85180.30
204.70
251.58
91.15
Tier I & Tier II Capital (in USD Millions)
2004 2005 2006 2007 2008
1400
1200
1000
800
600
400
200
0
1600
1700
957.80 1,271.34
1,388.00
1,458.92
790.61
2009
20,702
2009
293.02
2009
1,708.49
13
14,212
BLOM BANK GROUP CHART
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BLOM BANK S.A.L ORGANIZATIONAL CHART
Board Audit CommitteeBoard Risk Management Committee
Consulting, Strategy & Corporate Governance CommitteeNomination & Renumeration Committee
EXTERNAL AUDITORS
Ernst & Young-Semaan, Gholam & Co.
SOLICITORS
Me. Georges ABOU ZAMEL
Me. Antoine MERHEB
DEPARTMENTS/ UNITS* MANAGEMENT COMMITTEES
Accounting
Administration
Compliance Unit
Back Office Operations
Communication & Investor Relations
Corporate Unit
Credit
Engineering
Human Resources
Information Systems
Information System Security Unit
Internal Audit/Group Inspection
Legal
Marketing
Executive Committee
Credit Committee 1
Credit Committee 2
Exceptional Credit Committee
Follow-up Credit Risk Committee
Provisions Committee
Retail Credit Committee
Assets & Liabilities Committee
Investment & Treasury Committee
Marketing Committee
Information Technology Committee
Human Resources Committee
Internal Audit Committee
Legal Committee
Operations & Internal Procedures Committee
Foreign Branches & Subsidaries Committee
Compliance Committee
Purchasing & Maintenance Committee
Information System Securitiy Committee
Succession Planning Committee
Branch Managers
58 in Lebanon - 1 in Cyprus1 in Damascus Free Zone - 7 in Jordan1 Representative office in Abu Dhabi
Recovery & General Management Secretariat Unit Retail Banking
Risk Management
Strategic Planning & Organization
Trade Finance
International Affairs & Treasury
BOARD COMMITTEES
BOARD OF DIRECTORS
SHAREHOLDERS
* By alphabetical order
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CORPORATE GOVERNANCE
1. BLOM BANK S.A.L CODE OF CORPORATE GOVERNANCE
The Code of Corporate Governance was approved at the end of 2007 by the Board of Directors at BLOM BANK. It sets outthe structure that identifies the rights and responsibilities of each of the Board members, general management, employeesand external stakeholders. It complies with all local laws and regulations to which the Bank is subject, as well as the BaselCommittee’s principles on Corporate Governance and outlines the expected conduct of all parties in order to achieve theobjectives set for the Bank.
The Bank recognizes the paramount importance of Corporate Governance for its proper functioning and for the creation of anoptimal operational environment. To that end, the board and management deployed all means for the proper implementationof the Code in 2008. The Board itself partly exercises its duties and authorities through four Board Committees (the Audit Committee,the Risk Management Committee, the Consulting Strategy and Corporate Governance Committee in addition to the Nomination andRemuneration Committee) and is the body ultimately responsible for ensuring the best possible practice of Corporate Governance atBLOM BANK.Awareness sessions for all BLOM employees on Corporate Governance were organized and are planned for new employees in orderto introduce the Code and related principles, while enhancements will be communicated to all personnel.The Code was also published on the Bank’s Website. Relevant information on the Board charter and shareholders rights were madeavailable to the public in compliance with the disclosure requirements of the Code.
In light of the current global financial situation, the Bank’s Board of Directors view the ongoing development of CorporateGovernance as a matter of even greater importance and necessity in enhancing its competitive position by continuing to further raiseits standards vis-à-vis internal organization and services to clients.
2. BLOM BANK S.A.L MAJOR COMMON SHAREHOLDERS
NAME
Bank of New York Melon**
Banorabe S.A., SPF***
AZA Holding (Azhari Family over 50%)
Azhari Family
Actionnaires Unis (Azhari Family over 50%)
Shaker Holdings S.A.L. (Shaker Family)
Mrs. Nada Aoueini
Jaroudy Family
Saade Family
Khoury Family
Others
Address
1 Wall Street, NY 10286, USA
67 Blvd De La Petrusse- L2320- Luxembourg
BLOM BANK’s bldg- Rashid Karami st., Beirut
C/O BLOM BANK, Rashid Karame Street, Beirut Lebanon
Grosvenor Sq., London W1K6LB – UK
Tallet El-Khayat – Aoueini Bldg- Beirut, Lebanon
Ain Ek Tineh, Al Sakhra Bldg
P.O. Box 4370 – Dubai – United Arab Emirates
Naccache – Villa Khoury
COMMON SHARES IN CAPITAL *
34.37 %
11.86 %
9.33 %
2.86 %
1.83%
5.39 %
5 %
4.91 %
1.91 %
1.97 %
20.57 %
*Total common shares: 21,500,000
**Starting 1998, and after the issuance of Global Depositary Receipts (GDR) by BLOM Bank Shareholders, the Bank of New Yorkas Depositary, became shareholder on the Bank’s register.
***The major shareholders of Banorabe S.A, SPF (formerly Banorabe Holding S.A) are the same as in BLOM BANK S.A.L. (exceptBank of New York and AZA Holding).
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3. BLOM BANK S.A.L BOARD OF DIRECTORS
Name
Mr. Saad N. AZHARI
Mr. Samer N. AZHARI
H.E. Me Youssef S. TAKLA
H.E. Cheikh Ghassan I. SHAKER
Cheikh Salim B. EL-KHOURY
Mr. Habib L. RAHAL
Mr. Nicolas N. SAADE
Dr. Fadi T. OSSEIRAN
Mr. Joseph E. KHARRAT
Mr. Marwan T. JAROUDI
Position
Chairman & General Manager
Director & Secretary Generalof BLOM BANK Group
Director
Director
Director
Director & General Manager
Director
Director
Director
Director
Background/Competencies
Master in Engineering & MBA
Master in Civil Engineering & MBA
Diploma in Law
B.A in Finance
Diploma in Law
B.A. in Accounting Economics
MBA in Finance & B.A. in Economics
Ph.D. in Economics
B.A. in Ecomomics
MBA in Ecomomics
Director since 1996 Chairman and General Managersince 2007
Director since 1997
Director since 2006
Director since 1964
Director since 1987
Director since 2008General Manager since 1992
Director since 1990
Director since 2008
Director since 1984
Director since 2008
Number of directorship years with the Bank
3.1 List of Board Members
Dr. Naaman W. AZHARI Chairman of BLOM BANK GROUP
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Dr. Naaman W. AZHARI
CHAIRMAN OF BLOM BANK GROUP
Born in 1928
Head of the “Nomination andRemuneration Committee” at BLOMBANK.
Dr.Naaman AZHARI started his banking experiencein 1951. He worked in a French bank in Paris (whichbecame Société Générale).
At the end of the 1950s, he established one of thelargest banks in Syria, “Banque de l’Orient Arabe” andwas appointed Chairman of the Bank.
From 1961 to 1962, he occupied the position ofMinister of Finance, Economy and Planning in Syria.
In 1962, he was appointed General Manager ofBLOM BANK S.A.L.
From 1971 until 2007, he occupied the position ofChairman and General Manager of BLOM BANK S.A.L.
In 2007 he was appointed Chairman of BLOMBANK GROUP.
Dr. Naaman AZHARI holds a State Degree PHD inEconomics from the University of Paris I (Sorbonne)and a Diploma in Law and a Diploma in PoliticalSciences from the “Institut des SciencesPolitiques” in Paris.
Mr. Saad N. AZHARI
3.2 Information About Board of Directors
Chairman of the Board and GeneralManager of BLOM BANK S.A.L.
Born in 1961
Chairman of the Board and GeneralManager of BLOM BANK S.A.L.
Chairman and General Manager ofBLOMINVEST BANK
Chairman of BLOM BANK(SWITZERLAND)
Chairman of BLOM BANK EGYPT
Chairman of BLOM BANK QATAR
Board Member of BLOMINVESTSaudi Arabia
Board Member of BANK OF SYRIAAND OVERSEAS.
Board Member of Société Fonçièredu Liban et D’Outre-Mer S.A.L.
Mr. Saad AZHARI started his banking career in 1986 inPBZ Privatbank, an affiliate of the UBS Group, in whichhe worked until 1991. During that time he was promot-ed to run, from Zurich, the Bank’s operations in theMiddle East and Hong Kong.
He joined BLOM BANK (Switzerland) in 1991 andwas appointed its General Manager in 1997. In1998, he was elected Chairman and GeneralManager of BLOMINVEST BANK. This wasfollowed by his election to the position of Chairmanof BLOM BANK (SWITZERLAND) in 2001. At thesame time, he was appointed Vice – Chairman andGeneral Manager of BLOM BANK S.A.L.
In 2005 Mr. AZHARI became Chairman of BLOMBANK EGYPT and in 2007 he was elected Chairman& General Manager of BLOM BANK S.A.L. Since2008, Mr. AZHARI has been Chairman of BLOMBANK Qatar and a Member of the Board and Vice-Chairman of BLOMINVEST SAUDI ARABIA.
He is also a Member of the Board of Directors ofBank Of Syria & Overseas as well as being aMember of the Board of BLOM DEVELOPMENTBank S.A.L. and was its Chairman from 2006 untilbeginning of 2009.
Mr. Saad AZHARI is also a Member of the Board ofDirectors of Société Fonçière du Liban et D’Outre-Mer S.A.L.
Since 2001, he has held the position of Vice-President of the Association of Banks in Lebanon.Mr. Saad AZHARI holds a Masters Degree in ComputerEngineering and an MBA from the University ofMichigan-Ann Arbor in the United States.
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H.E. Sheikh Ghassan I. SHAKER
(Grand Officier de la Légion d’Honneur)
Non-Executive Director of BLOMBANK S.A.L.
Born in 1937
Director of BLOM BANK FRANCE
Businessman, banker, industrialist and diplomat, HisExcellency Ghassan Ibrahim SHAKER, is among themost highly decorated personalities from the Arabworld, including being a Grand Officier de la LégionD’Honneur-France.H.E. Sheikh Ghassan SHAKER has been a Memberof BLOM BANK’s Board since 1964 and is also aBoard Member of BLOM BANK FRANCE.He is a Personal Advisor to His Majesty The Sultan ofOman and Omani Ambassador at United NationsGeneva, Switzerland. Omani Minister Plenipotentiaryat The Court of St James United Kingdom, OmaniEconomic Counsellor in United Arab Republic and Deanof Goodwill Ambassador at Unesco – Paris, France.H.E. Sheikh Ghassan SHAKER is also Chairman andMember of Board of Directors of various companiesin Asia and Europe:- Chairman of Arab Eastern Insurance Co. Ltd-Bahrain, - Chairman of Hussein Aoueini & Co. Ltd -Saudi Arabia.- Chairman of Gulf Conversion Co. Ltd –United Arab Emirates- Member of Group of 50 Investcorp Bank –Bahrain.
He was educated at Victoria College Alexandria, Egypt(1944-1956) and at St. John’s College, CambridgeUniversity - England (1956-1959). He is member of theBoard of Trustees, Georgetown University, Washington DC.
H.E. Me. Youssef S. TAKLA
Non-Executive Director of BLOMBANK SAL
Born in 1937
Member of the “Nomination andRemuneration Committee” at BLOMBank S.A.L.
H.E. Me Youssef TAKLA has been a Board memberof BLOM BANK SAL since 2006.
He was a member of the Beirut Bar Association since1961 and Member of the Paris Bar Association since1983 . Between 1993 and 1999, Me. TAKLA was alsomember of the International Court of Arbitration of theInternational Chamber of Commerce.
He has been additionally since 1992 a Member ofthe Legislative Commission in the LebaneseMinistry of Justice and a Member of the Committeeof Modernization and Coordination of Banking Lawsat the Central Bank of Lebanon since 1993.
H.E. Me. TAKLA was nominated Minister of State inLebanon in 2008 . He holds a diploma in law from the University ofSaint-Joseph in Beirut .
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Mr. Samer N. AZHARI
Director of BLOM Bank S.A.L.
Born in 1958
Secretary General of BLOM BANKGROUP
Chairman and General Manager ofBLOM BANK FRANCE
Board Member of BLOMINVEST BANK
Board Member of BANK OF SYRIAAND OVERSEAS
Mr. Samer AZHARI joined Banque Banorabe,affiliated bank of BLOM BANK, in Paris in 1985 andbecame its General Manager in 1994.
In 1997 he was appointed as General Manager of BLOMBANK SAL and occupied this position until 2001.
Since 2001, Mr. Samer AZHARI has been Chairman& General Manager of BLOM BANK FRANCE(formerly BANQUE BANORABE.)
He was Chairman and General Manager of AROPEINSURANCE, an affiliated insurance company ofBLOM BANK, from 1998 until 2008.
From 1999 until 2001, he occupied the position ofVice–President of the Association of Banks in Lebanon.
Mr. Samer AZHARI has been BLOM BANK Group’sSecretary General since 2007.
Mr. Samer AZHARI holds a Master of Sciencedegree in Civil Engineering from the University ofIllinois, USA and an MBA from INSEAD, France
Mr. Habib L. RAHAL
Director & General Manager of BLOM BANK S.A.L.
Born in 1944
Member of the “Consulting, Strategyand Corporate Governance Committee”at BLOM BANK S.A.L.
Chairman & General Manager ofAROPE INSURANCE S.A.L.
Board Member of BLOMINVESTBANK S.A.L.
Board Member of AROPE EGYPT LifeInsurance
Board Member of AROPE EGYPTProperties Insurance
Chairman of Société des Servicesd’Assurances et de Marketing
Mr. Habib RAHAL started his banking experienceat Société Centrale de Banques and occupiedseveral managerial positions at Moscow NarodnyBank and Royal Bank of Canada before joiningBanque du Credit Populaire where he wasappointed General Manager from 1974 to 1990 .
In 1990, he joined BLOM BANK as Chairman’sAdvisor and was appointed in 1992 as the Bank’sGeneral Manager.
Mr. Habib RAHAL has been a Member of theBoard of Directors of AROPE INSURANCE since2004 and was elected its Chairman and GeneralManager in 2007.
Mr. RAHAL has been a Board Member of BLOMBANK SAL. since 2008 and a Board Member ofBLOMINVEST BANK since 2001.
He is also the Chairman of Société des Servicesd’Assurances et de Marketing since 2003.
In 2008 he became Board Member of AROPEEGYPT LIFE INSURANCE and a Board Member ofAROPE EGYPT PROPERTIES INSURANCE.
Mr. RAHAL represents BLOM BANK S.A.L. and sitsas Director on the following Boards of Directors:Banque de L’Habitat, Société Financière du Libanand IPN.
Habib RAHAL is holder of a Bachelor Degree inAccounting & Economics from ESEC.
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Sheikh Salim B. EL-KHOURY
Non – Executive Director of BLOMBANK SAL
Born in 1931
Non – Executive Director of BLOMBANK SAL
Sheikh Salim EL KHOURY has been a Member of the
Board of Directors of BLOM BANK SAL since 1987.
He holds a degree in French law from the
University of Lyon in France and a degree in
Lebanese Law from Saint – Joseph University’s
“Ecole de Droit de Beyrouth” and has complet-
ed an Advanced Management Program at
Harvard Business School.
Mr. Nicolas N. SAADE
Non- Executive Director of BLOM BANK SAL
Born in 1950
Head of the “Board Audit Committee” atBLOM BANK S.A.L.
Head of the “Board Risk ManagementCommittee” at BLOM BANK S.A.L.
Member of the “Consulting, Strategy andCorporate Governance Committee” atBLOM BANK S.A.L.
Board Member of BLOM DEVELOPMENTBANK
Board Member of BLOM BANK Qatar
Mr. Nicolas SAADE has been a Board Director ofBLOM BANK since 1990.
From April 1985 to July 1987, he was RegionalManager of BLOM in Dubai, UAE.
Between 1980 and 1985 he was Deputy GeneralManager of Union de Banques en Cote d”Ivoire(BANAFRIQUE).
In 1975, he joined the Toronto Dominion Bank inwhich he stayed until July 1980, occupying variousmanagerial positions.
Mr. Nicolas SAADE is proprietor and ManagingDirector of the Nicolas SAADE Est. in Dubai, which is abanking, investment and financial consulting firm. He isalso the Managing Director of Elite ConsultantsInternational, Inc in Delaware, USA, an SEC registeredinvestment advisory firm, and proprietor of PioneerAuditing in Dubai. Previously, he was fund manager atFriends Provident International Elite Fund in the Isle ofMan.
Mr. Nicolas SAADE is holder of an Honors BA inEconomics from McMaster University in Canada andhas an MBA from Wharton School, University ofPennsylvania, USA .
25
Dr. Fadi T. OSSEIRAN
Director of BLOM BANK SAL
Born in 1956
General Manager of BLOMINVESTBANK SAL
Board Member of BLOM BANK Egypt
Board Member of BLOMINVESTSAUDI ARABIA.
Dr. Fadi OSSEIRAN started his banking career atBLOM BANK as Assistant Dealer from 1981 to1982.From 1990 until 1933 , he was Manager ofCorporate Planning and Human ResourcesDevelopment at Méditerranée Group Services. From1985 to 1987, he moved to teach in the EconomicsDepartment at the American University of Beirut andbecame Assistant Professor at the Institute ofMoney and Banking of AUB from 1988 to 1993.
Since 1994, he has been General Manager of BLOM-INVEST BANK S.A.L. and Advisor to the Chairman –General Manager of BLOM Bank S.A.L. Dr. Osseiranbecame a Member of the Board of Directors ofBLOM BANK S.A.L. in 2008, and a Member of theBoard of BLOM BANK Egypt in 2005. He has been aDirector of BLOMINVEST BANK Saudi Arabia since2008.
Dr. OSSEIRAN has held the position of President ofthe “Association of Stock Brokers in Beirut” since2004 and has been a Member of the “LebaneseEconomic Association” since 2004. He was alsoMember of the “Research Committee” (1992-2006)and Member of the “Training Committee” (1994-1996) of the Association of Banks in Lebanon.
He was Board Member of the LebaneseManagement Association from 1992 to 1996 andhas many publications in the Banking and EconomicsFields.
Dr. OSSEIRAN is holder of a PHD in Economics fromNew York University (NYU) in the United States.
Mr. Marwan T. JAROUDI
Non-Executive Director of BLOM BANK SAL
Born in 1959
Head of the “Consulting, Strategy andCorporate Governance Committee” atBLOM BANK S.A.L.
“Nomination and RemunerationCommittee” Member at BLOM BANKS.A.L.
“Board Audit Committee” Member atBLOM BANK S.A.L.
“Board Audit Committee” Member atBLOM BANK FRANCE
“Board Risk Management Committee”Member at BLOM BANK S.A.L.
Board Member of BLOM BANK FRANCE
Board Member of BLOMINVEST BANK
Board Member of BLOMINVEST SAUDI ARABIA
He is Board Member of BLOM BANKQATAR
Board Member of AROPE INSURANCE
Board Member of AROPE SYRIA
Board Member of Banorabe S.A., SPF
Board member of BLOM DEVELOPMENTBANK (in 2010)
Mr. Marwan JAROUDI currently sits on the Boardof Directors of the following Companies:
• Industry Intelligence Inc., Los Angeles - USA• Forestweb, Inc., Los Angeles• BLOMINVEST Saudi Arabia • BLOMINVEST Bank s.a.l. • Arope Insurance s.a.l. • Arope Syria, Syria • United Shareholders, • BLOM BANK FRANCE,• BLOM BANK SAL
He has been a Board Member and Vice Chairmanof BLOM BANK QATAR since 2008.
He is Co-Founder, Director in Industry IntelligenceInc., Los Angeles – California, since 2007 .Since 1999, he occupies the position- of Co-Founder, Director in Forestweb, Inc., Los Angeles From 1996 until 1999 he was Co-Founder,Managing Director in Pulptrade, Choueifat,Lebanon.
From 1985 until 1995, Mr. JAROUDI occupied anumber of managerial positions at Saudi HollandiBank in Jeddah.
From 1989 until 1991 he was co-founder andFinance Director at Gulf Medical Co ltd.
Mr. JAROUDI is holder of a Master of Arts degreein Economics from Syracuse University in New Yorkand has a BA in Economics from the AmericanUniversity of Beirut.
26
Mr. Joseph T. KHARRAT
Non – Executive Director of BLOMBANK S.A.L
Born in 1941
Board Member of Audit Committee atBLOM BANK S.A.L
Member of the “Nomination andRemuneration Committee” at BLOMBANK S.A.L.
“Board Risk Management Committee”Member at BLOM BANK S.A.L.
Member of the “Consulting, Strategyand Corporate Governance Committee”at BLOM BANK S.A.L.
Board Member of BLOMINVEST BANK
Mr. Joseph KHARRAT is a non-Executive Director
of BLOM BANK since 1984 until to date. He is a
Board Member of BLOMINVEST BANK S.A.L since
1994 until to date.
He is Chairman and General Manager of several
textile and real estate companies of which:
Kamaco S.A.L., Satexi (Abidjian) and Kharrat
Immobilière (Abidjian).
Mr. Joseph KHARRAT is holder of a Bachelor degree
in Economics from Reading University in the U.K
27
3.3 Number and Date of Board Meetings Held in 2009
The following BLOM BANK S.A.L board meetings were held during 2009: - On 6/2/2009- On 16/3/2009- On 8/4/2009- On 28/5/2009- On 29/7/2009- On 16/9/2009- On 9/12/2009
Total: 7 Board meetings
4. INFORMATION ON KEY MEMBERS OF BLOM BANK S.A.L MANAGEMENT
Mr. Amr N. AZHARI
General Manager of BLOM BANKS.A.L.
Born in:1970
Vice Chairman of Bank of Syria andOverseas
Chairman and General Manager ofBLOM DEVELOPMENT BANK
Chairman of AROPE SYRIAInternational Insurance.
Chairman of Société Fonçière duLiban et D’Outre-Mer S.A.L.
Mr. Amr AZHARI started his banking experience in 1991 at Banque Banorabe – Paris.
From 1991 to 1992, he worked at Gestion Pictet & CieMontreal – Canada, and from1995 to 1997 heoccupied the position of Assistant Manager – BanqueBanorient, Geneva – Switzerland.
From 1997 to 1999, he was General ManagementExecutive at Banque Banorabe – Paris.
He moved on to become from 1999 to 2001 theFinance Manager of Banque Banorabe – Dubai – UAE,followed by Manager of Banque Banorabe Pairs –France from 2001 – 2004.
In 2004, he became Vice-Chairman of Bank of Syriaand Overseas and Assistant General Manager ofBLOM BANK.
In 2006, in addition to the above, Mr. AZHARI becameChairman of AROPE Syria International Insurance.
In 2008, Mr. AZHARI became General Manager of BLOMBANK, Chairman & General Manager of BLOMDEVELOPMENT BANK, Chairman of Société Fonçière duLiban et d’Outre-Mer S.A.L., and served as a Board Memberof the Damascus Stock Exchange from 2006 to 2009.
Mr. Amr AZHARI holds the following degrees fromMcGill University- Montreal, Canada: Master ofBusiness Administration, Bachelor of Civil Law andBachelor of Arts, major in Economics.
Mr. Elias E. ARACTINGI
Deputy General Manager ofBLOM BANK S.A.L., in charge ofStrategy, Organization and RetailBanking
Born in 1959
Member of the Board of BLOMBANK EGYPT
Member of the Board AuditCommittee of BLOM BANK EGYPT
Mr. Elias ARACTINGI started his banking career in 1983at Bank Audi USA in New York where he was promotedseveral times until he reached the title of Vice Presidentand Head of Operations. He joined BSI (Banca dellaSvizzera Italiana)’s New York branch in 1988 as VicePresident in the International Private Banking Group.
In 1990, Mr. ARACTINGI joined Booz.Allen and Hamilton,based in Singapore as an Associate and was promotedto Senior Associate in 1993, then to manager of theBangkok office in 1994 and finally to Principal in 1995.
At the end of 1995, he joined BLOM Bank in Beirut asAdvisor to the Chairman, focusing on branch and headoffice reengineering. In 1997, he initiated BLOM’s RetailBanking activities.
In 2005, he was appointed Managing Director and CEOof BLOM BANK EGYPT, a position he held untilSeptember 2006. He was promoted in 2008 to DeputyGeneral Manager of BLOM Bank SAL. In 2009, he wasre-appointed as Managing Director and CEO of BLOMBANK EGYPT and was elected Chairman of BLOM EgyptSecurities, until March 2010.
Mr. Elias ARACTINGI holds a Bachelor Degree inBusiness Administration with distinction from theAmerican University of Beirut and an MBA in Financefrom Columbia University’s Graduate School of Business.
28
Mr. Antoine N. LAWANDOS*
Assistant General Manager andChief Information Officer of BLOMBank SAL
Born in 1963
Mr. Antoine LAWANDOS started his career in 1986with Istisharat, a leading software vendor, where hebecame the head of one of the Istisharat's bankingsystems development units (ICBS), and where heacquired extensive experience in managing thedevelopment, implementation and integration ofcomplex and mission critical universal bankingsystems, subject to different local and internationalbanking requirements and environments.
Before joining BLOM BANK in 1993, he also held theposition of Systems Engineering Department Managerat BML (Business Machines of Lebanon), IBMrepresentatives in Lebanon. After BML, he joined MDSLas project manager for the implementation of aninternational universal banking package.
In 1993, he joined BLOM BANK as Project Directorfor the core banking application change, and then in1995, he was appointed Senior Manager for the ITand Systems Development Department until 2006when he became Chief Information Officer (CIO) ofBLOM BANK.
In 2008, he was appointed Assistant GeneralManager of BLOM BANK in addition to being CIO.
Mr. LAWANDOS holds an MSc. Degree in“Electronics and Information Systems Engineering”from “Ecole Superieure des Ingenieurs de Beyrouth(ESIB)”, with over 24 years of experience in the ICTfield applied to the financial services industry.
Mr. Talal A. BABA*
Assistant General ManagerHead of Accounting Department atBLOM BANK S.A.L.
Born in 1967
Mr. Talal BABA joined BLOM BANK in 1991. In2002 he was appointed Accounting Manager. In2006 he was promoted to Senior AccountingManager. In July 2008 he was appointedAssistant General Manager - Head of theAccounting Department at BLOM BANK S.A.L.
Mr. BABA is holder of a Master in BusinessAdministration from the Lebanese AmericanUniversity- Beirut.
Dr. Pierre G. ABOU-EZZE*
Assistant General Manager and Head of Human Resources at BLOM BANK S.A.L.
Born in:1955
Dr. Pierre Abou-Ezze has 15 years of hands-onexperience in Human Resources.He has been the Head of HR at BLOM BANK S.A.Lsince 1998, and he served as Advisor to theChairman on training issues from 1995 to 1998.
Prior to joining BLOM BANK, Dr. Abou-Ezze was in aca-demia. He served as the Director of the Graduate Schoolof Business and Management at the AmericanUniversity of Beirut from 1993 to 1997, and he wasAssistant Professor at the same school since 1991.
Before moving back to Lebanon, Dr. Abou-Ezzestarted his career as an Assistant Professor ofEconomics at the University of Ottawa, Canada, andat the University of Kuwait.
Dr. Abou-Ezze continues to lecture at variousUniversities in Lebanon, and to lead seminars andworkshops in the field of Human Resources. Heserved as the Chairman of the Human Resources &Social Affairs Committee at the Association ofBanks in Lebanon for 2 consecutive terms from 2005to 2009.
Dr. Abou-Ezze holds a Ph.D in Economics fromMcMaster University, Hamilton, Canada.
* By alphabetical order
Dr. Naaman AZHARI
Mr. Saad AZHARI
Mr. Habib RAHAL
Mr. Amr AZHARI
Mr. Elias ARACTINGI
Dr. Pierre ABOU EZZE
Mr. Talal BABA
Mr. Antoine LAWANDOS
Mr. Mustapha GHALAYINI
Sheikh Fahim MO’DAD
Mr. Georges SAYEGH
(*) By Alphabetical Order
29
Any commercial arrangement between the Bank and any of its affiliates is pre-approved by the General Assembly ofShareholders of the Bank and of the concerned affiliate according to art. 158 of the Lebanese commerce law, whenapplicable. No change of control has occurred during 2008.
5. BLOM BANK S.A.L COMMERCIAL ARRANGEMENTS
General Managers
Assistant General Managers (*)
Chairman of BLOM BANK GROUP
Retail Banking Department & Strategic Planning & Organization Department
Human Resources Department
Accounting Department
Information Systems Department
Formerly Vice Governor of the Central Bank of Lebanon
Advisors (*)
6. GENERAL MANAGEMENT OF BLOM BANK S.A.L
Deputy General Manager (*)
Chairman & General Manager
Principal ManagersMr. Grégoire AZARMrs. Jocelyne CHAHWANMr. Georges CHEDIDMr. Samir KASSIS Mr. Mekhael KAZZIMr. Naoum RAPHAELMr. Jacques SABOUNGIMr. Fouad SAIDMe. Aimee SAYEGHMr. Riad TABBARAMr. Ramzi TARABISHIMr. Samih ZEIN EL DINE
Regional ManagerMr. Elias MOKHACHEN
Managers (A)Mr. Jean HOMSIMr. Gerard RIZKDr. Gladys YOUNES
Managers (B)Mr. Michel GHANEMMr. Rabih HALABIMr. Imad KADIMr. Mounir TOUKAN
Deputy Managers (A)Mr. Marcel ABOU JAOUDEMr. Malek COSTAMr. Imad JUNDI
Assistant Managers (A)Mr. Charles HADDAD
(*) By Alphabetical Order
Management (*) Departments & Units
International Affairs & Treasury DepartmentRetail Banking Department
Marketing Department / Syrian DeskCorporate Unit
Back Office Operations DepartmentGroup Inspection Unit
Trade Finance DepartmentMarketing Department / Overseas
Legal Affairs DepartmentChairman / General Manager’s office
Internal Audit DepartmentAdministration Department
Marketing Department / Syrian Desk
Marketing Department / Syrian DeskRisk Management Department
Communication & Investor Relations Department
Marketing DepartmentStrategic Planning & Organization Department & Purchasing Department
Retail Credit DivisionCredit Department
Marketing Department / OverseasCompliance DepartmentBack Office Operations
Recovery & General Management Secretariat Unit
30
MANAGEMENT DISCUSSION & ANALYSIS 2009
1. OPERATING ENVIRONMENT
Despite the global recession, the Lebanese economy managed to weather the effects that afflicted the world in 2009.When the global economy shrank by 0.8 %, Lebanon boasted an 8 % growth of its gross domestic product that wasaccompanied by a moderate inflation and a flourishing economic activity.
The housing market, a main propeller of the economy, continued a strong upward trend, stimulated by an expandingdemand that emanated from both resident and non-resident end-users. In parallel, tourism activity prospered and theyear ended with a record number of tourists. In other areas of the economy, consumer spending increased considerablyin 2009 as household real income made strong gains and remittances remained stable. Business investment rose at asolid rate for the year as a whole as businesses in Lebanon continued to add jobs at a steady pace, and theunemployment rate decreased further.
The combination of two complementary factors was primarily behind the strong performance delivered by almost allthe sectors in 2009: the return to political stability and solid financial inflows. As a matter of fact, Lebanon had apeaceful year in 2009, as the legislative elections were organized and a new unity government was formed withoutany security setbacks. This restored the confidence of both resident and non-resident segments of the population,encouraging consumers to revert to spending and investors to resume projects that were put on hold for years. Withthe increased return of tourists, demand expanded significantly and exports of services grew at unprecedented levels,boosting economic activity throughout the year.
Moreover, solid growth, political stability, high interest rate differentials with the rest of the world, the peg policy andthe endogenous strength of Lebanon’s banking sector enabled the country to benefit from the global financial crisis.As Lebanese banks were spared from complex financial products proscribed by local monetary authorities, Lebaneseexpatriates and Arab investors that were looking for a safe financial haven transferred their holdings to the localbanking system. Huge capital inflows, strong conversions to higher yielding Lebanese pound deposits and stableremittances that reached $ 7 billion provided the economy with a generous reserve of liquidity. In turn, this liquiditystimulated growth by enhancing money supply, triggering an ease in interest rates and encouraging lending to the realsector.
Despite the rapidly growing consumption, the considerable capital inflows, the high growth rate and the mild overheatof some sectors, especially tourism, inflation remained moderate. The end-of-period Consumer Price Index (CPI)climbed by 3.4 % year-on year from a higher rate of 5.5 % in 2008 as imported inflation retreated due to the drop inoil and commodities prices during 2009.
Since inflation was slowing down, Banque du Liban (BDL) adopted an accommodative monetary policy which allowedan ease in interest rates. This policy was meant to lower the cost of financing for the real sector, foster sustainableeconomic expansion and reduce pressures on banks’ profitability margins. As a matter of fact, large capital inflowsput a downward pressure on interest rate differentials between the use of funds and deposits. In parallel, the CentralBank tried to absorb the excess of liquidity and to help the banks find ways to invest their deposits by issuingcertificates of deposits (CD) and T-bills and by encouraging lending in all currencies by decreasing the reserverequirement of banks.
36
MANAGEMENT DISCUSSION & ANALYSIS 2009
On the other hand, abundant funding fueled the upswing in housing prices that mirrored the expansion of demand aswell as the rise in the cost of land. Delinquency rates on consumer loans and on most types of mortgages remainedlow. As for businesses, balance sheets were quite liquid, credit quality was good, and most firms enjoyed readyaccess to funds due to the high liquidity at commercial banks.
With respect to public finances, in absolute terms, fiscal deficit remained relatively stable while increasing by only1.31 % to $ 2.96 billion. However, in relative terms, the deficit-to-GDP ratio decreased to 8.85 % from 9.76 % in 2008,as revenues progressed at a higher pace than both outlays and gross domestic product. Correspondingly, the primarysurplus hiked by 80.55 % to $ 1.078 billion, or 3.22 % of GDP compared to 1.99 % in 2008.
Government receipts rose 20.4 % to $ 8.42 billion or 25.2 % of nominal GDP, as a result of an upsurge in both tax andnon-tax revenues. The former outpaced GDP growth, reaching $ 5.95 billion, up by almost 25 % from the previous year,driven by the receipts of taxes on international trade that surged by 68 % to $ 1.76 billion. As for outlays, they roseboth in absolute and relative terms, driven by public sector wages, debt service and transfers to governmental insti-tutions. Total expenditures soared by 14.77 % to $ 11.38 billion or 34.04 % of nominal GDP, compared to 33.14 % in2008. In particular, interest payments surged by 16.68 % to $ 3.83 billion as the state was over financing its deficitfor sterilization purposes and Banque du Liban (BdL) allowed only a limited decline in interest rates. Transfers toElectricité du Liban (EdL) retreated by 7 % to $ 1.5 billion, due to the drop in oil prices in Q4 2008 and H1 2009.
With a relatively high primary surplus, the government could have limited the increase of its public debt to the debtservice level. However it opted to accumulate deposits at the Central Bank in preparation for the parliamentary elec-tions that took place in June 2009. Consequently, total gross debt rose 8.6 % to $ 51.09 billion. Nonetheless, the ratioof public debt to GDP declined to 152.84 % in 2009 compared to 157.06 % the previous year, as nominal GDP outpacedthe debt increase.
On the external front, Lebanon’s current account deficit is estimated to have remained stable in 2009, hovering around$ 3 billion. In fact, the surplus in services probably expanded substantially in H2 2009 in spite of a drop in H1, follow-ing the boom in tourism. This compensated the minor deterioration in current transfers as well as the slump of netincome from abroad that decreased by 178 % during H1 2009. In parallel, the structural trade deficit slightly increasedby 0.78 % to $ 12.75 billion.
The relative stability of the trade deficit resulted mainly from the drop in oil and commodities prices. The volume ofimports jumped 17 % to 14.64 million tons while their value only increased by 0.65 % to $ 16, 24 million. As theNominal Real Effective Exchange Rate (NEER) appreciated and the purchasing power of consumers dropped around theworld, the value of exports augmented by a shy 0.17 % to $ 3.48 billion, hiding a 19 % fall in their volume.
Management Discussion & Analysis 2009
37
Nonetheless, the balance of payment registered a record surplus of $ 7.89 billion owing to large capital inflows. The
conservative management at commercial banks as well as the regulatory practices of the Central Bank few years ago
that banned financial institutions from investing in the subprime market, constituted crucial factors that enhanced
confidence in the Lebanese financial system during the global financial crisis. Lebanon’s banking system appeared as
a safe haven despite its lower rating compared to other regional and international markets. Consequently, capital con-
tinued to flow in the market and foreign direct investment (FDI) is estimated to have exceeded its 2008 level of $ 3.6
billion.
Correspondingly, local financial markets showed strong resilience in 2009 against the global and regional woes. BDL
lowered its overnight interbank rate to 3 % in December 2009; from 4 % a year before as Central Banks around the
world cut their benchmark rates to historic lows. Money continued to be oversupplied as the broad monetary aggre-
gate M3 shot up by 19.54 % to $ 82.07 billion, compared to a growth rate of 14.75 % in 2008. Dollarization of deposits
shrank by 4 percentage points between January and December to 64.5 %, as demand for the higher yielding Lebanese
Pound deposits went up significantly. Interest rates on both the Lebanese Pound and the USD declined in 2009. The
former fell to an average 7.04 % from 7.25 % in 2008, while the latter recorded a bigger fall to 3.22 % from 3.70 %.
On the fixed income side, Lebanese sovereign Eurodollar bonds ended the year at premium, while they were traded at
discount by the end of 2008. As a matter of fact, the increased demand for local debt on falling yields of global sov-
ereigns pushed the BLOM Bond Index (BBI) up by 16 % to 110.047 points. Consequently, the weighted bond yield
slipped 394 basis points to 5.51 %, closing the gap by 507 bps against US benchmarks.
Concerning the stock market and following the stable political climate, Lebanese listed stocks pitched in 2009, lifting
the BLOM Stock Index (BSI) up by 33 % to close at 1,566. Thus, the Lebanese gauge ended as the third best performer
among its Arab peers. Though Solidere shares remained the main player in the market, capturing the bulk of trades
and climbing by an average of 43 %, banking stocks hiked 45 %, outperforming Arab banking shares. That said, the
turnover at the Beirut stock exchange totaled $1.04 billion in 2009, sliding 40 % from last year’s $1.7 billion, as 102.6
million shares exchanged hands compared to 105.5 million in 2008.
In the banking sector, capital inflows generated primarily from Lebanese expatriates and Gulf investors fueled a sub-
stantial upsurge in bank deposits. Consequently, non-resident private sector deposits rose by 44 % in 2009 to $16.5
billion while total private sector deposits surged by 23.1 % to hit a record of $ 95.76 billion, mirroring the increasing
confidence in Lebanon’s financial system. Loans grew at a slower pace than deposits, recording a year on year
increase of 13.5% to $28.37 billion. The considerable increase in loans and deposits resulted in a 22.3 % upsurge in
total assets to $115.3 billion or more than three times Lebanon’s GDP. Nonetheless, the strong influx of liquidity put
a pressure on profit margins of banks. Consequently, the growth of the banking sector’s profits dropped in 2009,
increasing by 20.2 % to $ 1,465 million.
38
In conclusion, the Lebanese economy has once again proven its resilience and ability to weather yet another global
scale financial crisis even though no serious reforms were implemented as set forth during the Paris III donors con-
ference.
The latter highlights the potential of the country in easing its public debt situation and setting forth a sustainable
trend of growth for the coming year.
2. OVERVIEW
In 2009, BLOM Bank witnessed another successful year marked by a solid financial position, a diversification of prod-
ucts and services, and an increasing regional expansion.
BLOM Bank’s strong position as the leading banking group in Lebanon was reflected by the number of awards the bank
received in 2009:
- “Best Mutual Fund in the Middle East for 2009” from Banker Middle East
- “Best Investment Advisory Service in the Middle East for 2009” from Banker Middle East
- “Best Private & Investment Banking website in Lebanon for 2009” from Pan Arab Web Awards
- “Best Bank in Middle East for 2009” from The Banker
- “Best Bank in Lebanon for 2009” from The Banker
- “Best Bank in the Middle East for 2009” from Banker Middle East
- “Best Commercial & Corporate Bank Website in Lebanon for 2009” from Pan Arab Web Awards
- “The Strongest Bank in Lebanon for 2009” from The Asian Banker
- “Best Bank in Lebanon for 2009” from Global Finance
- “Best Banking Group in Lebanon for 2009” from World Finance
- “Best Bank Representative in the Levant for Investor Relations”
BLOM Bank also continued to maintain the highest financial ratings in Lebanon. As such, the Bank has been repeat-
edly rated by Capital Intelligence, a Middle East-specialized rating agency, “BBB-”, which is the highest financial
strength rating in Lebanon. Moreover, Moody’s maintained its highest National Scale rating of Aa1.lb.
In 2009, BLOM Bank continued to top the list and maintained its position as the most profitable bank in Lebanon. As one of the
largest banks in the country, net profits increased by an annual 16.5 % to USD 293.02 million while total assets reached USD
20,702.38 million and total customers’ deposits attained USD 17,969.89 million by the end of 2009.
Management Discussion & Analysis 2009
39
In terms of strategy, BLOM Bank continued to build on its geographic expansion and business services diversification. Foreignexpansion not only spreads the risk of operating in Lebanon, but also takes advantage of the economic and business opportunitiespresent in regional economies. In 2009, BLOM BANK Group was operational in 11 countries: Lebanon, Syria, Egypt, Jordan, Qatar,UAE, France, Switzerland, England, Cyprus and Romania. In addition, the Bank has developed further its retail network by openingnew branches in Egypt, Jordan, Saudi Arabia, Syria, and Romania. In Lebanon during 2010, the Bank inaugurated five new branchesin the areas of Bab Idriss, Kfar Hbab, Jib Jannine, Amyoun and Broumana.
The other component of the strategy is to diversify business activities towards a universal banking model. As a result, the bank hasexpanded the operations of its investment arm, BLOMINVEST BANK, by enhancing its private and investment banking and capitalmarket activities, in addition to introducing asset and wealth management services. The latter aims at establishing funds andinvestment vehicles for retail and high net-worth investors diversified in their asset composition and geography. Following thesuccess of the BLOM Cedars and Petra Balanced funds that received numerous awards from leading international agencies,BLOMINVEST launched the BLOM Bank Egypt Fund, BLOM Bank Money Market Fund, and the BLOM Bond Fund. The aim of the newproducts is the diversification in the sources of income that gives increasing share for non-interest income.
To conclude, BLOM Bank will continue to pursue its organic growth strategy in the coming years by capitalizing on its existingresources and capabilities.
3. EVOLUTION OF TOTAL ASSETS
BLOM Bank witnessed a double digit growth in assets by the end of 2009. This resulted from the bank’s expansionary policy and theperceived confidence of expatriates in BLOM BANK Group as a trustworthy source of placing their deposits. In fact, with the globalrecession and the drop in interest rates, there was a shift to higher yielding Lebanese Pound accounts.
Total assets of the bank grew by 15.67% to reach USD20.7 billion, as compared to USD17.9 billion recorded in 2008. Consequently,assets denominated in foreign currencies dropped to 70.85% from 75.66% a year earlier.
4. SOURCES OF FUNDS
BLOM BANK’s main sources of funding include customers’ deposits, capital funds (Tier I & Tier II), banks and financial insti-tutions and other liabilities. Customers’ deposits constituted the biggest share of sources of funds with 86.8% of total fund-ing in 2009. Tier I and Tier II capital constituted 8.25% of total funds for 2009, while the share of banks and financial insti-tutions amounted to 2.26% in 2009 and other liabilities comprised 2.69%.
16,000
12,000
8,000
4,000
0
Evolution of Total Assets (in USD Millions)
2008
20,000
25,000
17,898
2009
20,702
16,639
20072006200520042003
14,21211,918
10,8358,786
40
4.1 Customers’ DepositsIn the latter part of 2009, deposits at BLOM Bank continued to rise at an increasing rate compared to 2008.Customers’ depositsincreased by 18.94%, up from USD 15,109 million in 2008 to reach USD 17,970 million in 2009 as BLOM BANK continued to attractdepositors who opted for a safe haven for their funds. In fact, the share of customers’ deposits from total funding went up by 238basis points to 86.80% compared to 84.42% in 2008.
In terms of deposits by country, Lebanon maintained the lead share with 72%. The rest were distributed between regional and Europeancountries. With regards to foreign currencies’ share of total deposits, they kept declining by the end of 2009 to 70.98% of total deposits,down from 75.44% recorded in 2008. This decrease in the share of foreign currency is attributed to the rise in demand for the localcurrency due to the higher yields on Lebanese Pound deposits compared to the low interest rates abroad. Another factor augmenting thistrend is the resilience of the Lebanese financial system that was relatively unaffected by the global financial crisis largely due to theprudent regulatory measures imposed by the Lebanese Central Bank ( Banque du Liban) which enhanced the confidence in the LebanesePound. This partly explains the rise in fiduciary deposits that reached USD 4,155 million in 2009, increasing 18.01% year-on-year.
On the other hand, BLOM BANK’s market share in terms of customers’ deposits in the Lebanese banking sector accounted for16.01% in 2009.
4.2 Capitalization (Tier I & Tier II Capital)Tier I and Tier II capital increased 17.10% yearly to USD 1,708.49 million at the end of 2009, bringing its contribution of total funds to8.25% from 8.15% in 2008.
Tier I Capital alone increased by 12.56% to USD 1,628.28 million at the end of 2009 compared to an increase of 5.67% by the end of2008. Tier I increase can be mainly attributed to retained profits of the year 2009 amounting to USD 289.29 million after dividenddistribution. This measure falls in line with the bank’s strategy of growing organically and at a steady pace.
Moreover, Tier II capital’s decreasing trend was reversed in 2009, rising to USD 80.21 million as a result of a surge in the cumulativechange in fair values due to the increase in financial assets prices.
Management Discussion & Analysis 2009
16,000
18,000
12,000
8,000
4,000
0
Evolution of Customers’ Deposits (in USD Millions)
2008
15,109
2009
17,970
13,737
20072006200520042003
11,73510,161
8,9927,686
Sources of Funds
g Customers’ Deposits
g Tier I & Tier II Capital
g Banks & Financial Institutions
g Other Liabilities
20082009
8.15%
84.42%
4.43% 3.00%
8.25%
86.80%
2.26%2.69%
41
4.3 Banks and Financial InstitutionsAs the world plunged deeper into recession in 2009 as a result of the global financial crisis, banking institutions were the mosthardly hit entities. Consequently, this was reflected in the drop of Banks and Financial Institutions’ contribution to BLOM BANK’sfunds. This share fell from 4.43% in 2008 to 2.26% by the end of 2009 to USD 467.95 millions. That said, the decline was more thanoffset by the increase in depositor base.
5. USES OF FUNDS
BLOM Bank’s strategy stresses on the maintenance of high asset quality and a strong portfolio of investments. The risk component,which has always been the Bank’s primary consideration while assessing the uses of funds, is reflected in the return on assets ratiothat has always been at the forefront of listed Lebanese banks. The 2009 return on assets ratio stood at a formidable 1.52%.
Within the overall use of funds, the share of Lebanese Pound Treasury Bills as well as other governmental debt securities to totalassets fell to 21.93% in 2009, down from 26.42% in 2008. Nevertheless, the share of cash and deposits at the Central Bank to totalassets rose to 31.57% in 2009 from 24.05% in 2008, and the share of bonds and financial instruments with fixed income rose to5.46% in 2009, up from 4.78% in 2008. On the other hand, loans granted to customers constituted 19.41% of total assets in 2009,a ratio similar to that of 2008. The Bank placements with other banks and financial institutions amounted to 18.87% of total assetsin 2009 compared to 22.2% in 2008.
5.1 Cash and Balances With the Central BanksOverall cash and central banks reserves stood at USD 6,536 million in 2009, up 51.87% from last year. The share of subscription incertificates of deposit amounted to 52.36% of total cash and balances with central banks, up from 44.81% in 2008 as the banksought to diversify its portfolio holding of government debt between Treasury Bills and Bonds.
1600
1800
1200
800
400
0
Tier I & Tier II Capital (in USD Millions)
1,247.35
20062005200420032002
894.25
696.51553.73484.85
1,368.95
2007
84.5 84.7 94.1 63.6 24.0 19.1
Tier I Capital Tier II Capital
1,446.56
2008
12.4
1,628.28
2009
80.2
Uses of Funds
g Lebanese Treasury Billsand other government bonds
g Cash and Central banks
g Banks & Financial Institutions
g Bonds and FinancialInstruments with fixed Income
g Loans to Customers
g Others
20082009
3.14%26.42%
24.05%
22.20%
4.78%
19.41%2.76%
21.93%
31.57%
18.87%
5.46%
19.41%
42
Central Banks reserves in 2009 dropped to 45.93% of total cash and balances with central banks as compared to 52.77% in 2008. Thisis attributable to the Lebanese Central Bank’s easing of requirements reserve of banks in an attempt to stimulate lending and economicgrowth. Finally, cash represented the remaining USD 112 million, slightly up from its contribution of USD 104 million in 2008.The cash and central banks category includes non-interest bearing balances held by the Bank at the Lebanese Central Bank (BanqueDu Liban) in compliance with the obligatory reserve requirements for all banks operating in Lebanon on commitments in LebanesePounds (calculated on the basis of 25% of sight and 15% of term commitments). The requirement also applies to interest bearingplacements at the rate of 15% of total deposits in foreign currencies, as well as the certificates of deposit issued by the LebaneseCentral Bank (Banque Du Liban).
5.2 Lebanese Treasury Bills and Other Governmental Bills and Bonds The Bank’s portfolio of Lebanese Treasury Bills and other governmental debt securities decreased by 3.97% to reach USD 4,540.82million in 2009 from USD 4,728.61 million in 2008. This came as the bank replaced its holding of Treasury Bills with relatively betteryielding instruments. Moreover, the currency composition of the portfolio mirrored last year’s status as the share of Lebanese poundsdenominated treasury bills edged to 57.18% of the total portfolio as compared to 57.34% in 2008. Also, the foreign currency-denominated governmental bills constituted 42.82% of the total in 2009 as compared to 42.66% in 2008.The treasury portfolio according to the new IFRS (International Financial Reporting Standards) classification adopted since January2005 shows the following:
Management Discussion & Analysis 2009
Distribution of Cash and balances with Central Banks (in USD Millions)
Cash Central BanksCertificates of DepositTotal
%2.42%52.77%44.81%
100%
%1.71%45.93%52.36%
100%
Amount104
2,271 1,928 4,303
Amount112
3,0023,4226,536
End of year 2009 End of year 2008
Distribution of the Treasury Portfolio (in USD Millions)
Investments Held for Trading:Treasury Bills and BondsAccrued interest
Available for sale investments:Treasury Bills and BondsAccrued interestUnrealized premiumsUnrealized discounts
Held to maturity:Treasury Bills and Bonds Accrued interestUnrealized premiumsUnrealized discounts
Loans & Receivables :Treasury Bills and BondsAccrued interestUnrealized premiumsUnrealized discounts
Total
20081.541.51 0.03
3,007.58 2,966.75
52.07 0.32
(11.56)
131.75 129.88 3.19 0.04 (1.36)
1,587.74 1,578.55
31.91 3.29
(26.01)
4,728.61
20094.864.780.08
2,861.63 2,821.88
45.83 5.97
(12.05)
177.67 175.01 2.98 0.19 (0.51)
1,496.66 1,478.91
30.98 2.83
(16.06)
4,540.82
43
5.3 Bonds and Financial Instruments with Fixed IncomeBonds and financial instruments with fixed income increased by 32.13% in 2009 to USD 1,130.91 million from USD 855.97 milliona year earlier as the Bank opted for a diversification of its investments into higher yielding instruments as global interest rates hita rock bottom and the inflow of capital into Lebanon depressed the yields of short term instruments.This caption includes bonds and certificates of deposit that are classified as follows:- Held for Trading- Available for Sale- Loans and Receivables- Held to Maturity- Fair Value through Profit & Loss
Distribution of the Treasury Billsand other Governmental Bills
g Lebanese Treasury Bills
g Other Governmental Bonds in Foreign Currencies
20082009
Distribution of Bonds and Financial Instruments with Fixed Income (in USD Millions)
Investment Held For Trading:BondsAccrued InterestAvailable for Sale investments:BondsUnrealized PremiumsUnrealized DiscountsLess: provision for impairment Accrued interestCD'sUnrealized PremiumsUnrealized DiscountsAccrued interestHeld to Maturity:BondsUnrealized PremiumsUnrealized DiscountsLess: provision for impairment Accrued interestCD'sAccrued interestLoans & Receivables: CD'sAccrued interestUnrealized PremiumsUnrealized DiscountsBondsUnrealized PremiumsUnrealized DiscountsLess: provision for impairment Accrued interestFair Value through Profit & Loss :Convertible BondsAccrued InterestInvestments related to unit linked contractsTotal
2008
0.010.01 0.00
100.6052.21 0.000.00 0.00 1.90 45.10 0.00 0.00 1.39
289.02 287.28 0.00 0.00 (0.43)2.17 0.00 0.00
411.98 86.98 2.49 0.02 (0.13)339.66 0.00(9.29)(10.00)2.25
54.36 27.00 0.16 27.20
855.97
2009
0.89 0.89 0.00
248.05 122.530.03 (4.88)0.00 1.86
126.96 0.02 (0.03)1.56
336.43 326.63 0.16
(11.41)0.00 0.91 20.00 0.14
453.07 83.66 1.77 0.01 (0.11)375.43 0.00 (8.35)0.000.66
92.4792.17 0.30 0.00
1,130.91
46.66%
57.34%
42.82%
57.18%
44
5.4 Banks and Financial InstitutionsBLOM BANK’s deposits at banks and financial institutions decreased by 1,66% in 2009 to USD 3,907 million as compared to USD3,973 million in 2008. This came as the bank sought better yields in other investment vehicles amid historic low global interest rates. Time deposits constituted 90.58% of total deposits with banks and financial institutions in 2009, down from 91.10% in 2008. As inprevious years, 97.72% of the current and time deposits are denominated in foreign currencies.
5.5 Loans and Advances to CustomersFollowing BLOM Bank’s adoption of a conservative loan strategy in order to maintain a high asset quality, the ratio of net loans andadvances to total deposits, which has been successfully maintained at relatively low levels, slightly decreased from 22.99% in 2008to 22.36% in 2009. Nevertheless, outstanding loans reached USD 4,019 million at the end of 2009, increasing 15.68% from last yeardriven by the easing of local reserve requirements.
BLOM Bank’s market share in terms of total loans and advances reached 14.17% in 2009, up from 13.87% in 2008.
The Credit risk classification of the Bank’s Loans portfolio is as follows :
The above loan classification is in accordance with the Lebanese Central Bank‘s (Banque Du Liban) classification under decree N0.7159 dated November, 10th, 1998 relating to bad debt classification dated December 2001. Below is a briefing about the basis ofloan classification defining each category’s characteristics.- Regular Accounts:A- Unconditional: Covers accounts which display regular movements sufficient to repay the loan in accordance with the repaymentschedule. The latest financial statements should be available and adequate collateral should be taken to cover the loan.
Management Discussion & Analysis 2009
2,000
1,500
1,000
500
0
Evolution of Total Loans and Advances (in USD Millions)
2008
2,500
3,474
2,772
20072006200520042003
1,988
1,670
1,3521,164
3,500
3,000
4,000
4,500
Credit Risk Classification of Total Net Loan Portfolio (in USD Millions)
Regular AccountsSpecial Attention AccountsNet SubstandardNet Doubtful AccountsNet Provisions for Commercial & Consumer Loans not ClassifiedBad Debt AccountsTotal
20083,442.96
15.57 10.26 30.26 (24.85)
- 3,474.20
20093,956.96
41.54 12.14 34.05 (26.04)
- 4,018.65
45
2009
4,019
B- Incomplete file: As in point (A), adequate collateral and repayment on schedule are foreseen. However, the file is consideredincomplete because the client is late in submitting his financial statements.
- Special Attention Accounts:Display signs of irregular movements or exceed the credit limit on a continuous basis. Recent financial statements areunavailable and adverse economic conditions may affect the borrower’s ability to repay the debt. Collateral has not beenevaluated for the last three years. Such an account may be considered recoverable. However, it should be closely monitoredfor a year, at the end of which the account is reclassified if the previously mentioned conditions are not regularized.
- Non-performing Accounts (substandard):Covers loans which display most or all of the following: - A significant drop in the client’s profitability- A drop in the flow of cash into the account for a period exceeding 2 years, and thus resulting in repetitive delays in repay-ment exceeding a period of 3 months. - A noticeable depreciation in the value of the collateral provided and repetitive delays in repayment for a period not exceed-ing three months. - Credit facilities are not used – partially or in whole – for the purpose specified in the loan agreement.
The credit risk committee will review the repayment schedule with the client and will keep the account under close obser-vation. However, interest and commissions will be classified as unrealized until the account is regularized.
- Doubtful Accounts:Represent loans which display all of the conditions of a non-performing account in addition to having a complete lack of cred-it movement into the account for a period of six months and a delay in payments of the rescheduled loan which exceeds threemonths from the date of maturity. The Bank will make a partial provision for the loan and consider interest and commissionas unrealized.
- Bad Debt Accounts:Includes all “Doubtful Accounts” which are considered unrecoverable due to the lack of a collateral or to the loss of contactwith the client. In this case, interest ceases to be accrued and a provision of 100% of the principal amount of the loan ismade. The account is under litigation until a ruling by the court is made, after which it is written-off.
The improving quality of the loan portfolio due to the enhanced risk and control measures was further highlighted by adecrease in the Bank’s ratio of gross doubtful debts to gross total loans to 3.44% in 2009 from 3.92% in 2008. The coverageof doubtful accounts decreased to 94.41% in 2009 from 96.19% in 2008, still below the 98.04% of 2006.
Provisions and unrealized interest for doubtful debts and non-performing accounts decreased to reach USD 143.93 million atthe end of 2009, compared to USD 144.66 million in 2008. The amount includes provisions for commercial loans not classi-fied at the end of 2009 amounting to USD 26.04 million.
The ratio of foreign currency loans with respect to total loans in 2009 decreased from 91.71% to 90.09% while the ratio offoreign currency loans to foreign currency deposits increased to 28.39% in 2009, up from 27.96% in 2008.
The breakdown of the loan portfolio by maturities shows that medium and long term loans with maturities exceeding oneyear constituted 32.36% of the bank’s outstanding net loans in 2009 as compared to 32.07% in 2008, whereas short termloans, with maturities of less than one year, constituted 67.64% of the total net loans, compared to 67.93% in 2008.
46
As for the breakdown of the loan portfolio by economic sectors, the highest share of loans was granted to consumer activities atUSD 1,071 million or 26.67% of total loans up from 24.67% in 2008. This is followed by the services and trade sectors respectively.Loans to the agriculture sector witnessed a decrease to 0.39% of the total loan portfolio in 2009 from 0.72% in 2008. Loans grantedto the manufacturing sector increased to 10.78% in 2009 up from 10.20% in 2008. On the other hand, the global economic recessionin 2009 had an adverse effect on commerce as trade loans decreased from 22.12% in 2008 to 18.23% in 2009 with 2.43% of theportfolio granted to retail trade and 15.8% to wholesale trade. Moreover, loan portfolio to the services sector improved to 26.24%in 2009 up from 22.82% a year earlier as the number of incoming tourists recorded new highs. Unlike 2008, the construction sectorwitnessed an increase in real estate activity and accounted for 12.89% of the loan portfolio for the year 2009, up from 10.78% in2008. Loans given to freelance professions have decreased from 8.69% in 2008 to 4.8% in 2009.
Additionally, the analysis of the loan portfolio by type of collateral reveals that the commercial loans secured by mortgages account-ed for the largest share of the 2009 portfolio, falling from 31.66% in 2008 to 28.92% in 2009. Moreover, advances against person-al guarantees fell, representing 12.86% of the total loans portfolio in 2009, down from 13.41% in 2008. Advances against cash col-lateral went down also to 16.18% in 2009 from 17.67% in 2008. The share of LC financing declined to 1.21% in 2009, down from1.46% in 2008, whereas syndicated loans were 4.91% in 2009 compared to 0% in 2008. Retail loans recorded an increase in 2009,with its share in the total loan portfolio going up to 26.16% in 2009 from 24.49% in 2008. Loans to members of staff slightlyincreased to 0.21% while loans to directors and related parties accounted for 0.18%, down from 0.86% in 2008. Overdraft fell in2009, representing 9.37% of the total loans portfolio from 10.25% in 2008.
Management Discussion & Analysis 2009
Distribution of Loans byEconomic Sector
g Agriculture and Forestry
g Manufacturing
g Trade
g Services
g Construction
g Freelance Professions
g Consumer Loans
20082009
Distribution of Loans by Type of Collateral
g Commercial Loans Securedby Mortgages
g Advances Against Personal Guarantees
g LC Financing
g Advances Against CashCollateral
g Syndicated Loans
g Retail Loans
g Loans to Member of Saff
g Loans to Directors andRelated Parties
g Overdraft
20082009
0.39%
10.78%18.23%
26.24%
12.89%
4.80%
26.67%
10.25% 31.66%
13.41%
1.46%
17.67%0.00%
24.49%
0.20%0.86%
9.37% 28.92%
12.86%
1.21%
16.18%4.91%
26.16%
0.21%0.18%
0.72%
10.20%22.12%
22.82%
10.78%
8.69%
24.67%
47
6. LIQUIDITY
BLOM Bank’s ability to maintain high liquidity levels, minimize risks and ensure high quality of assets has been at the center ofliquidity management and core objectives of the Group. The Bank has successfully maintained ample liquidity in 2009 whenoverall liquidity stood at 70.59%. As such, the Lebanese Pound liquidity ratio (including Lebanese government Treasury Bills)was 103.82% in 2009, reflecting high liquidity levels. Moreover, the immediate liquidity (cash & banks) in foreign currenciesaccounted for 56.76% of foreign currency deposits in 2009, slightly increasing from 55.83% in 2008.Maturity mismatch between assets and liabilities, which characterizes the Lebanese banking sector, was also noticeable inBLOM Bank accounts. In 2009, the gap was negative in the maturities from zero to one month and from as a whole one to threemonths, amounting to USD 7,086 million and USD 2,668 million respectively. After three months, the maturity gaps turn positive,reaching a maximum of USD 5,430 million for maturities of two to five years.
7. PROFITABILITY
BLOM Bank preserved its position as the most profitable bank in Lebanon for the year 2009. In fact, the bank recorded net profits ofUSD 293.02 million, increasing by a considerable 16.46% compared to the year 2008 where net profits stood at USD 251.6 million.BLOM BANK’s Lebanese operations still constitute the lion’s share with 80.26% of total net income. BLOM Bank’s profits contributedto the biggest portion of the total banking sector profits as it accounted for a share of 20.00% of the total.
BLOM BANK’s performance was also reflected in attaining the highest profitability ratios. Return-on-average common equity stoodat 21.30% in 2009, slightly increasing from 20.60% a year earlier. Return-on-average assets for the year 2009 amounted to 1.52%,improving from the previously 1.46% recorded in 2008.
On the other hand, earnings per share increased to USD12.88 in 2009 from USD10.69 in 2008.
Asset-Liabilities Maturity Gap (2009) (in USD Millions)
Total AssetsTotal Liabilities & Shareholder’s Equity2009 Liquidity GapCumulative Maturity Gap
TotalOver 5years
From 2 to 5years
From 1 to 2years
From6 months to 1 year
From 3 to 6
months
From 1 to 3
months
Up to1 month
6,499
13,585
(7,086)
(7,086)
979
3,647
(2,668)
(9,754)
1,271
912
359
(9,395)
1,429
424
1,005
(8,390)
2,574
146
2,428
(5,962)
5,622
192
5,430
(532)
2,328
1,796
532
-
20,702
20,702
-
200.00
150.00
100.00
50.00
0.00
Evolution of Net Income (in USD Millions)
2008
250.00
204.70
20072006200520042003
180.30
136.85
91.1588.30
300.00
350.00
48
251.60
2009
293.02
7.1 Net interest incomeNet interest income registered a 2.15% increase in 2009 to USD 418.93 million. The growth came as a result of a 5% increase in interestand similar income to USD 1,136.27 million in 2009, and a 6.74% increase in interest charges in 2009 to reach USD 717.34 million.
On the other hand, net interest revenue after provisions and doubtful loans, went up by 5.21% to reach USD 422.39 million in 2009as compared to USD 401.45 million in 2008.
The growth of net interest income will be further elaborated through the breakdown of net interest income into interest and similarincome, interest and similar charges, interest margin as well as net provisions for doubtful loans.
7.1.1 Interest and similar incomeInterest and similar income witnessed a 5% increase in 2009. Average interest earning assets increased by 12.43% to reach USD 16,968 mil-lion in 2009, up from USD 15,092 million in 2008.
The below table illustrates the breakdown of average earning assets by currency at the end of 2009:
In 2009, the weights of interest and similar interest generating assets changed from those of the year 2008. Lebanese and othergovernmental bills accounted for 26.15% of total average interest earning assets in 2009, falling from 26.62% in 2008. The averagedeposits with banks and central banks stood at 29.27% of the total in 2009, down from 34.64% in 2008. The share of bonds andother financial instruments with fixed income, including certificates of deposit, accounted for 22.84% up from 17.28%, a year earlierand the weight of loans and advances increased to 21.74% in 2009, compared to 21.46% in 2008.
The breakdown of Interest and Similar Income is detailed in the following table:
The breakdown of interest and similar income reveals an increase in the share of Lebanese Treasury Bills and other governmental bills to34.38% in 2009 compared to 32.28% in 2008. On the other hand, the portion of income generated from deposits with banks and centralbanks dropped to 9.39% from 22%. This is attributed to the diversification of interest income generating instruments where the bank optedto make better use of investments by transferring into relatively safer and better yielding bonds and certificates of deposit. As a result, thecontribution of bonds and other financial instruments with fixed income (including certificates of deposit) stood at 30.12% in 2009, up from20.34% a year earlier. Finally, interest income generated from loans and advances including related parties represented 26.11% of the totalin 2009, increasing from 25.38% in 2008 due to the increase in retail lending.
Management Discussion & Analysis 2009
Breakdown of Average Interest Earning Assets at the End of 2009 (in USD Millions)
Lebanese Treasury Bills and Other Governmental BillsDeposits with Banks and Central Banks Bonds and Other Financial Instruments with Fixed Income Including Certificates of DepositLoans and AdvancesTotal
TotalForeigncurrencies
LBP
2,209
138
1,838
358
4,543
2,228
4,829
2,037
3,331
12,425
4,437
4,967
3,875
3,689
16,968
Breakdown of Interest and Similar Income (in USD Millions)
Lebanese Treasury Bills and Other Governmental BillsDeposits with Banks and Central BanksBonds and Other Financial Instruments with Fixed Income Including Certificates of DepositLoans and Advances Including Related PartiesTotal
% of totalAmountAmount
390.67
106.65
342.23
296.72
1,136.27
349.37
238.06
220.09
274.65
1,082.17
32.28%
22.00%
20.34%
25.38%
100.00%
% of total
34.38%
9.39%
30.12%
26.11%
100.00%
End of 2008End of 2009
49
7.1.2 Interest and Similar Charges Interest and similar charges rose by 6.74% to USD 717.34 million in 2009 up from USD 672.07 million in 2008, and averageinterest bearing liabilities went up by 13.77% to USD 16,756 million compared to USD 14,728 million a year earlier.
Deposits from customers including related parties accounted for the largest share of the average interest bearing liabilities,amounting to 98.85% in 2009 while deposits from banks and financial institutions represented the remaining 1.15%.
The breakdown of the interest and similar charges shows a decrease in the portion of deposits and similar accounts from banks andfinancial institutions to 0.97% in 2009, down from 1.84% in 2008 while the share of interest paid on customers’ deposits slightlyincreased to 99.03% in 2009 compared to 98.16% in 2008. Finally, charges from notes and fixed income financial instrumentsremained nil for the third year in a row.
Breakdown of Interest andSimilar Income
g Lebanese Treasury Bills and Other Governmental Bonds
g Deposits with Banks and Central Banks
g Bonds and Other Financial Instruments with Fixed Incomeincluding Certificates of Deposit
g Loans and Advances (including related parties)
20082009
Breakdown of Average Interest Bearing Liabilities (in USD Millions)
Deposits and Similar Accounts from Banks and Financial InstitutionsDeposits from Customers Including Related PartiesTotal
TotalForeigncurrencies
LBP
16
4,483
4,499
177
12,080
12,257
193
16,563
16,756
Breakdown of Interest and Similar Charges (in USD Millions)
Deposits & Similar Accounts from Banks & Financial InstitutionsDeposits from Customers Including Related PartiesTotal
Amount
6.99
710.35
717.34
% of total
0.97%
99.03%
100.00%
25.38% 32.28%
22.00%20.34%
26.11% 34.38%
9.39%30.12%
2009
50
7.1.3 Interest Margin (Before Provisions For Doubtful Loans)The Bank’s Net Interest Income before provisions for doubtful loans rose by 2.15% in 2009 to USD 418.93 million, while the netinterest margin before provisions on doubtful loans stood at 2.18% in 2009, down from 2.42% in 2008.
The ratio of interest charges to interest income increased to 63.13% up from 62.10% in 2008 due to a slight higher increase ininterest charges than the increase in interest income. (Offset by a faster drop in interest income yielding investments)
Management Discussion & Analysis 2009
200
150
100
50
0
Net Interest Income (in USD Millions)
2008
250
410
271
20072006200520042003
181
157153148
350
300
400
20082009
450
2002
299
2009
419
1.71%
98.29%
0.97%
99.03%
51
Breakdown of Interest andSimilar Changes
g Deposits and Similar Accounts with Banks and FinancialInstitutions
g Deposits from CustomersIncluding Related Parties
7.1.4 Net Provisions for Doubtful LoansThe net provisions for doubtful loans increased from a negative balance of USD 8.65 million in 2008 to a positive balance ofUSD 3.46 million in 2009, in the wake of the consequences of the global recession.
7.2 Non-Interest IncomeNon-interest income decreased by 1.48% year-on-year, amounting to USD 147.76 million in 2009 compared to USD 149.98 mil-lion in 2008.
2.00%
1.50%
1.00%
0.50%
0.00%
Net Interest Margin (in percent)
2008
2.50%
2.13%
20072006200520042003
1.77%1.75%
2.13%2.34%
3.00%
2002
2.03%
2.42%
64.0%
62.0%
60.0%
58.0%
56.0%
Interest Cost / Interest Income Ratio (in percent)
2008
66.0%67.81%
20072006200520042003
70.66%71.25%70.91%70.40%
68.0%
2002
69.69%
62.10%
2009
2.18%
2009
63.13%
70.0%
72.0%
52
Although, the ongoing financial and economic turmoil in 2009 impacted the non interest income bearing operations of the bank, BLOM BANKwas able to record an increase as a result of its operational efficiency.Net commissions decreased from 2008 by 9.09% to USD 80.78 million in 2009, but still maintained the largest share of total non-interestincome, accounting for 54.67%, down from 49.37% in 2008. Moreover, net trading income recorded a year- on- year decline of 12.66% toUSD 23.93 million, representing 16.20% of the total non-interest income as compared to 18.27% in 2008. Net loss on financial assets andliabilities designated at fair value through Profit & Loss rose significantly from USD –3.00 million in 2008 to USD 4.98 million in 2009,accounting for 3.37% of the total and increasing from –2.00% in 2008. Net income from financial operations, which rose 292.93% to USD25.58 million, stood at 17.31% of total non-interest income, increasing sharply from 4.34% in 2008. In the wake of an increase in investmentand banking operations, other operating income decreased by 72.26% to USD 12.49 million in 2009, representing 8.45% of the total com-pared to 30.02% in 2008.
7.3 Staff and Operating ExpensesStaff and operating expenses reached USD 206.08 million in 2009, registering a year-on-year increase of 8.04% as the bankexpanded its operations locally and regionally.Staff expenses (salaries and related benefits) increased by 10.27% in 2009 to USD 127.42 million while operating expenses wentup by 4.61% to reach USD 78.66 million. Thus, staff expenses accounted for the largest share of staff and operating expenses with61.83% of the total while operating expenses stood at 38.17%.That said, BLOM Bank is still maintaining a relatively low cost-to-income ratio, reflecting the Bank’s efficient cost-containmentpolicy. The cost-to-income ratio fell to 35.58 % in 2009 compared to 37.26% 2008.
Management Discussion & Analysis 2009
Net CommissionsNet Trading IncomeNet Gain/Loss on Financial Assets & Liabilities designated at fair value through Profit & LossNet Gain/Loss on Financial OperationsOther Operating IncomeTotal
% of total49.37%18.27%
-2.00%4.34%30.02%
100.00%
% of total54.67%16.20%
3.37%17.31%8.45%
100.00%
Amount74.05 27.40
(3.00)6.5145.02
149.98
Amount80.78 23.93
4.98 25.58 12.49
147.76
2009 2008
% change-9.09%-12.66%
-266.00%292.93%-72.26%
Constituents of Non-Interest Income
g Net Commissions
g Net Trading Income
g Net Gain/Loss on FinancialAssets and Liabilities designated at Fair Value Through Profit and Loss
g Net Gain/Loss on FinancialOperations
g Other Operating Income
20082009
Breakdown of Non-Interest Income (in USD Millions)
Staff ExpensesOperating ExpensesTotal
% of total60.58%39.42%
100.00%
% of total61.83%38.17%
100.00%
Amount115.55 75.19
190.74
Amount127.42 78.66
206.08
2009 2008
% change10.27%4.61%8.04%
Distribution of Staff and Operating Expenses (in USD Millions)
30.02% 49.37%
18.27%
4.34%
-2%
8.45% 54.67%
16.20%
17.31%
3.37%
53
8. DIVIDEND DISTRIBUTION AND PREFERRED SHARES REVENUES
During BLOM Bank’s Annual General Assembly, on April 9th 2010, the distribution of dividends for the year 2009 was approved.Holders of preferred shares series 2004 and 2005 received a respective of USD 8.5 and USD 9.5 per share. As for holders ofcommon stocks and Global Depositary Receipts (GDR), they received the equivalent of LBP 6,000 per share.
9. CAPITAL ADEQUACY RATIOS
The Bank’s capital adequacy ratio reached 26.33% (before dividend distribution) at the end of 2009, which is almost three foldsthe international ratio of 8% required by the Basel I Commission. For Tier I capital alone, the capital adequacy ratio stood at24.96% at the end of 2009. After dividend distribution, the capital adequacy ratio reached 13.96% for Tier I &Tier II and 13.68%for Tier I alone.
10. INTEREST RATE RISK
Interest rate risk arises from adverse movements in interest rates, thus affecting the bank’s interest earning assets and liabili-ties. Interest rate risk is well managed through the continuous re-pricing of assets and liabilities. Most assets and liabilitiesare re-priced within one year. Given that the majority of the bank’s deposits are re-priced within the three months interval, whilemost of the bank’s treasury bills and government bonds portfolio are re-priced after the three months period, interest rate riskcontinues to concentrate within this period.
Cost to Income Ratio
200720031999 2006200520042001 200220001997 1998
45%
40%
35%
30%
25%
50%
55%
2008 2009
47.34%
42.56%
38.37% 38.09%36.80%
38.58%39.77%
40.93%
34.11%
35.10%
34.63%
37.26%
35.58%
Capital Adequacy Ratios before Dividend Distribution (in percentage) (According to Basel I)
35.00%
30.00%
25.00%
20.00%
15.00%
40.00%
29.88% 33.23%29.76% 28.22%
36.10%
29.05% 27.85% 26.33%
2002 2003 2004 2005 2006 2007 2008 2009
26.06%28.02% 27.34%
30.71%35.33%
28.60%27.61% 24.96%
Tier I + Tier II CapitalTier I
54
The bank’s interest rate sensitivity position based on contractual re-pricing arrangements as of December 31, 2009 is as follows:
11. RISK MANAGEMENT AND BASEL II PREPARATIONS
11.1 RISK MANAGEMENT
The consolidated Basel II Capital Adequacy ratio of the group reached 13.96% by the end of 2009 against 12.7% in 2008. This ratiois calculated in accordance with the Standardized Approach for Credit Risk, the Basic Indicator Approach for Operational Risk andthe Standardized Measurement for Market Risk. The Bank’s policy is to maintain a Capital Adequacy Ratio above the 10% threshold,as means of sustaining capital buffer.
For regulatory as well as internal purposes, the Bank calculates Basel Capital Adequacy Ratio on a group consolidated basis and byindividual legal entity, allowing for close monitoring of the capital position of each banking subsidiary. In the latter case, every singleentity achieved a Basel II Capital Adequacy Ratio above the minimum 8% international requirement.By type of risk, Credit Risk comprises the largest proportion of Risk Weighted Assets, accounting for some 90% of the total. Thisposition is relatively affected by Lebanon’s sovereign rating of B+ which impacts the Risk Weighting of Foreign Currency governmentsecurities holdings of the bank.
20,000,000
15,000,000
10,000,000
5,000,0002007
Market Risk Tier I Ratio Credit Risk
2008 2009
Management Discussion & Analysis 2009
Interest-Rate Sensitivity Position (in USD Millions)
Total AssetsTotal Liabilities and Shareholder's EquityInterest Rate Sensitivity Gap for 2009Cumulative Interest Rate Sensitivity Gap
Non-Sensitive to Interest rate Risk
Over 5years
TotalFrom 2 to 5years
From 1 to 2years
From6 months to 1 year
From 3 to 6
months
From 1 to 3
months
Up to1 month
4,764
12,575
(7,811)
(7,811)
885
3,433
(2,548)
(10,359)
1,079
876
203
(10,156)
2,494
140
2,354
(6,772)
5,408
175
5,233
(1,539)
1,660
17
1,643
104
20,702
20,702
-
3,022
3,126
(104)
-
1,390
360
1,030
(9,126)
CARTier I Ratio
55
2008 20092007
14.00%
13.50%
13.00%
12.50%
12.00%
BLOM BANK GROUP (excl. Arope) Capital Adequacy Ratio/Tier I Ratio
BLOM BANK GROUP (excl. Arope) Risk Weighted Assets by Risk Type (in Millions of LBP)
The Bank’s capital position is closely monitored by General Management and Group Risk Management. The latter is delegated by the Boardof Directors to ensure sound, comprehensive and effective Risk Management practices and processes are in place throughout the Group. Tohelp achieve this, Group Risk Management has developed a plan to implement a variety of systems that cover the three broad areas of riskand help the bank comply with some of the more advanced approaches under Pillar I of Basel II.
Group Risk Management has implemented a Risk Management Structure within the Group whereby each country in which the Bank ispresent has its own Risk Management structure that reports to the Group Chief Risk Officer. Currently, there are eight country Risk Managers. All areas of risk coverage by the Group underwent continued development during 2009:
Under Credit Risk, the generation of Internal Ratings for our commercial and corporate credit portfolios continued with new specializedscorecards to be introduced in 2010. Application and Behavioral scorecards for a number of Retail Banking products were developed anddelivered in 2009 by Fair Isaac. The retail products covered include car loans, personal loans and credit cards. In 2009, the Sungard CapitalManager (Basel II) system which automates Basel II Capital Adequacy calculation and reporting was implemented. This system has extensivestress test and scenario generation capability which would allow the Bank to meet Pillar II requirements in relation to the credit portfolio.For Market Risk, static ALM for BLOM BANK Lebanon was implemented under the Sungard Focus ALM system project, in preparation forselling the system to subsidiary branches in 2010. Similar to the Capital Manager system, the ALM system has extensive stress testing andscenario generating capabilities which in addition to helping the Bank meet Pillar II requirements that are also extensively used by ALCO.The Market Risk team closely monitors the Bank’s funding and liquidity position. The Bank places importance on maintaining high liquidityto meet short term needs, as well as a strong base of core deposits. In addition, through the Focus ALM system, tracking of Interest RateRisk for BLOM BANK Group has been automated with detailed Interest Rate Sensitivity Gaps, Earnings at Risk and Interest Rate and ForeignExchange Rate shock scenarios.
The Operational Risk team of Group Risk Management ensures that all activities are covered by clear policies and procedures taking intoaccount all relevant risk aspects which are highlighted through periodic risk assessments. The Bank maintains a detailed Loss IncidenceDatabase reflecting Basel requirement whereby business lines and loss types are clearly highlighted. Moreover, the Operational Risk teamis preparing a Business Continuity Plan that covers potential emergency scenarios and ensures that Business Continuity policies are inconformity with best practices. To this end, the Bank is planning a new secondary emergency site that can cater for future developments inthis particular area.
11.2 CORPORATE GOVERNANCEThe Board exercises its oversight function to a large degree through four dedicated Board Committees: the Board Audit Committee,the Board Risk Management Committee, the Consulting Strategy and Corporate Governance Committee and the Nomination andRemuneration Committee.
The Board Audit Committee’s responsibility is to monitor and assess the integrity of the Bank’s financial accounting. The auditcommittee also assesses the competence of External Auditors as well as the Internal Audit Department, in addition to internalcontrols and compliance with the Bank’s by-laws and internal regulations.The Board Risk Management Committee periodically reviews and evaluates the Risk Management function of the Group, and reportsand drafts recommendations to the Board.
The Consulting Strategy and Corporate Governance Committee oversees the development of the strategic plan and monitors itsprogress throughout the Group. It approves and monitors large projects, develops corporate governance policies and practices, andadvises the Board on overall business development.
The Nomination and Remuneration Committee provides assistance to the Board in identifying individuals qualified for directorshipto sit on Board committees. Also, it plans the succession of executive and non-executive directors and evaluates the performanceof top management, including Board members.
The Bank in its Corporate Governance Code has established independence criteria for non executive members of the Board who mustconstitute a majority of the Board. The Board Committees are fully functional and meet in accordance with their stipulated frequency.The Bank firmly believes in the basic principles of accountability, reporting and transparency throughout the organizational structure.Senior management exercises the authority delegated to it by the Board through clear and segregated reporting channels, includingManagement Committees covering all areas of operations. They also ensure that internal risk and control procedures and structuresare overseen by respective departments, namely Internal Audit, Risk Management and Compliance.
The Bank makes sure that all employees act professionally, ethically and with the utmost integrity in accordance with an establishedCode of Ethics and Conduct. Additionally, the Bank recognizes the value of its Human Resources as a prime stakeholder in theinstitution, endeavoring to treat all employees in the most equitable manner. As such, all employees are required to attendpresentations on the Bank’s Code of Conduct and Corporate Governance. The Bank will continue to develop its Corporate Governancepractices while seeking to protect and enhance stakeholders’ interests from shareholders to employees.
56
12. UNIVERSAL BANKING SERVICESIn line with its aim of maximizing customer satisfaction and increasing shareholders’ value, BLOM Bank has sustained the policy ofdiversification of its products and services. BLOM Bank provides the following universal banking services that suit all customers’ needs:- Private and investment banking- Commercial banking and corporate banking- Retail banking- Islamic banking- Insurance services
12.1 Private and Investment BankingBLOM Bank provides private banking services such as investment consulting and wealth management through both its investment-bankingarm BLOMINVEST Bank Sal and its Geneva-based affiliate BLOM Bank Switzerland. Some of these services include:- Investment Products: includes a variety of investment funds and structured products focusing on Lebanese and foreign instruments. Thebank successfully launched in 2008 two mixed-asset mutual funds, Blom Cedars Balanced Fund and Blom Petra Balanced Fund that targetthe Levant region.- Project Finance: consists of extending medium and long term financing and participating in bank loan syndications.- Treasury & Capital Market Services: includes brokering on the Beirut Stock Exchange (BSE), advising on trades in international equities,trading in debt securities and dealing in foreign exchange markets.- Investment Banking: participates in the underwriting and distribution of Lebanese and other debt instruments and provides advice onmergers and acquisitions and privatisation. - Asset & Portfolio Management: covers management of portfolios of shares, bonds and term placements in all currencies.- Research Department: produces daily, weekly and quarterly reports on the Lebanese economy, and analyzes leading Lebanese economicsectors. In addition, it provides country reports on regional economies, especially those where BLOM BANK has a presence. It publishes aswell the BLOM Stock Index (BSI), Lebanon’s first financial market index that covers all stocks quoted on the BSE, and conducts equity researchon major Lebanese and regional companies.
12.2 Commercial and Corporate BankingDuring 2009, and despite the global financial crisis, BLOM Bank continued to expand its credit portfolio. Indeed, it benefited from two majordevelopments. The first one was Lebanon’s real estate boom and the second one was Banque du Liban’s (Central Bank) directives of easingreserve requirements of banks in order to spur lending activity. Accordingly, and in line with the conservative lending practices of BLOM bank, several new loans were granted in 2009 to corporate andcommercial clients, especially in project finance and real estate developments. Most notable of these was the USD 130 million long termloan granted to the “Landmark Project”, a large mixed-use development in the Beirut Central District (BCD) region that includes a 5-star hotel,apartments, shopping mall and cinemas. In addition to the real estate projects, the bank has increased its commercial loans for small and medium size businesses operating indifferent sectors. The bank’s expansion policy continued through the opening of a new subsidiary in Qatar in July 2009, which emphasized the presence of thebank in the gulf region. BLOM Bank Qatar provides various conventional corporate and private banking services in the Qatari market andother GCC countries. This new subsidiary with the support of BLOM headquarters in Beirut was able in a short period of time to attractreputable corporate clients to the country by offering them diversified credit facilities.Furthermore, BLOM and its regional subsidiaries had participated in various syndicated loans that were extended to multinationalcorporations in order to finance huge projects in different countries such as Syria and Egypt.In short, BLOM bank kept on pursuing its mission of fundamentally contributing to the development of the Lebanese economy and Arab regionthrough its financing of new tourism, industrial and commercial projects.
12.3 Retail BankingIn 2008, BLOM BANK offered more than 115 retail products, classified under different categories:
Payment cards: BLOM Bank offers a wide range of payment cards that target different customers, provide several methods of payments and meet multiplepurposes. These cards vary according to type and currency. The segmentation of cards took into consideration the various types of customersand their card needs; debit, charge, credit, co-branded and prepaid.As such, BLOM cards come under both brands, Visa and MasterCard and range from Electronic, Classic, Gold, Titanium, Platinum, BlackPlatinum, and Corporate (Business Platinum, Platinum Corporate, and Classic Corporate cards). Moreover, the Bank has Internet cardsdedicated for Internet users, a Euro card for those who visit Europe frequently, and prepaid cards such as “mini” for those wishing to havea card without opening an account.
With the approach of the football world cup, BLOM Bank launched a unique Visa card “BLOM 2010 FIFA World Cup TM” that has a tailor-made design and enables the cardholder to enter a draw to win tickets to attend world cup matches.BLOM BANK launched a special card “Watan” dedicated solely to the Lebanese army, internal security and national security forces. BLOM became the first bank in Lebanon to launch the “Personalize your card” service whereby cardholders are able to add a personal imagefrom their own collection, or an image from BLOM’s unique Photo Library, which includes categories like sports, wildlife, love, pets, holidaysand special occasions etc. This service is exclusively offered online through our website www.blomretail.com.
Management Discussion & Analysis 2009
57
BLOM also launched “Watan”; a card for the sole use of the Lebanese army, internal security and national security forces.
“Personalize your card” is the first service of its kind in Lebanon to be provided by BLOM bank. By using this feature, cardholderscan add a personal image from their own collection, or select one from BLOM’s Image Library, which includes categories like sports,wildlife, scenery, pets, etc. The bank exclusively offers the possibility of having this service completed via the internet by visitingboth BLOM and BLOM Retail websites. This service is also available throughout our network of branches.
POS Machines:Retailers wishing to install BLOM POS machines have a choice between: - GPRS machines: wireless devices that require no electricity or telephone cables. With a SIM card provided by BLOM Bank, our GPRSmachines are mobile. They accept dual currencies (USD and LBP)- Hypercom POS machines: require electricity and a fixed telephone line. They are a dual currency machines: USD and LBP.- Veriphone machines: require electricity line and a fixed telephone line. They are a single currency machine: USD or LBP.
BLOM machines accept payment cards such as Visa, Visa Electron, MasterCard, MasterCard Electronic, and Maestro.The machines are equipped with the latest EMV technology that allows acceptance of chip cards. Such technology provides ultimate securityto both the cardholder and the merchant.BLOM provides retailers with a next day settlement of the transaction amount, with a one day value date. BLOM bank also dedicates anaccount manager to handle all inquiries and suggestions concerning POS issues. In addition, BLOM Bank places at the disposal of its retailersa 24 hour call center which is tailored to cater for all needs and providing relevant support.
Consumer loansBLOM Bank customers have the option to apply for a number of consumer loans that meet their various needs: - KARDI for personal loans - SAYARATI for car loans (new or used vehicles) - DARATI for house loans (primary home or other) - Housing in Collaboration with the CPH for house loans- Housing Loan for projects under construction
Bancassurance ServicesAROPE Insurance, an entity of BLOM BANK Group, offers all kinds of insurance services from personal accident to health, fire, car insurance andso on. BLOM Bank also offers investment programs coupled with a life insurance policy in collaboration with Arope Insurance. Moreover, new andmore flexible products in USD were launched; DAMANATI Plus, a retirement plan coupled with life insurance and WALADI Plus, a child’s educationprogram, coupled with life insurance.
Reward ProgramsThe BLOM Golden Points Loyalty program enables customers to win a variety of gifts -such as airline tickets, free stays at the finest hotels,electronics and much more- by accumulating Golden points with every $100 purchases using BLOM cards. The BLOM Gifts Loyalty program allows cardholders to win valuable gifts for purchases at specified retailers over a period of 6 months. Our co-branded card, Alfa BLOM MasterCard, offers free mobile talk time to cardholders on card spending on a monthly basis.
Investment ProductsBLOM Bank offers a collection of Investment products to help manage one’s finances in a better, safer and more profitable way. Accordingly,BLOM Bank, in collaboration with BLOMINVEST Bank, offers a collection of Mutual Fund programs. Additionally, BLOM Bank and AropeInsurance offer structured products such as Tayseer, an investment product which has been introduced more than six times, each time witha different underlying investment such as Oil, Gold, BLOM GDR, Solidere, Lebanese Eurobonds, and Euro as a currency.
Special AccountsBLOM Bank offers a number of special accounts, catered for specific needs. In addition to the traditional savings and current accounts, a weddingaccount, Maksabi a special savings account, utility bills account, salary domiciliation accounts, and three types of bundled accounts (Account PlusClassic, Account Plus Gold and Account Plus Platinum) that offer the client current accounts with various services for a monthly fee.
SME Loans:Small and medium enterprises, or even self employed or business owners can benefit from a variety of loans tailored to their requirements:- SMALL BUSINESS LOAN for SME- BUSINESS LOAN for financing an office, a warehouse, a clinic, etc.- KAFALAT is a subsidized loan for small business owners
Network Branches & ATMsThe primary aim of BLOM bank is to better service its customers by offering the best products and services. In addition to the traditionalbranches which are conveniently distributed throughout Lebanon, BLOM has already opened five retail branches that offer express retailservices. All BLOM branches have ATM’s which allow 24-hour cash withdrawal.
58
Sales ForceBLOM has multiple sales channels ranging from direct sales, to indoor sales, to telemarketing teams available to promote and sell retailproducts/services.
Call CenterBLOM customers can enjoy the convenience of a 24-hour call center, ready to cater for all their needs and inquiries. The retail department alsohas a telemarketing team to make outbound informative calls to existing clients. The Call Center’s monitoring system has been upgraded to offerbetter services.
E-bankingBLOM Bank offers its customers phone banking services such as “Allo BLOM” (a 24-hour customer service) as well as internet banking servicessuch as e-BLOM. This service allows users to complete many of their routine banking transactions in the comfort of their home/office. The clientmay even apply for a card, issue a prepaid card, or even perform outgoing transfers.
SMS Alert ServiceThe Bank provides a convenient SMS ALERT service, enabling customers to receive alerts whenever the balance of accounts changes or whenevera transaction is being performed.
Public WebsiteBLOM retail products and services enjoy an independent, user-friendly website where users can make use of simulators and online applicationsthrough www.blomretail.com.
WorkflowBLOM internally developed a workflow system to process car loans, personal loans, credit cards and debit cards electronically, thus benefitingfrom Electronic Archiving, as well as fast approval and response cycles (e.g.: 1 hour for car loans). However, the most important achievement liesin the instant granting of Personal Loans that is unique in Lebanon and second in the Middle East region.
12.4 Islamic Banking:The region is witnessing a fast growing Islamic financial sector. According to the latest statistics, the size of the market is growing at an increasingrate of 17% per year.In 2009, BLOM DEVELOPMENT BANK’s (BDB) depositor base grew significantly enabling BLOM’s Islamic bank to tap new local and regional markets. During 2009, BLOM DEVELOPMENT BANK’s (BDB) structured Lebanon’s first Sharia Compliant Capital Protected Equity-Murabaha fund that wasengineered by BlomInvest. The product, named QITAF, is a 3 year 100% capital protected fund with 100% participation in the upside performanceof the BDB Sharia Compliant Emerging Market Index. This product is offered exclusively to investors wishing to engage in Sharia compliantemerging equity markets while diversifying their invested portfolio.BDB has also launched a Sharia Compliant stock market trading account, in conjunction with the trading desk of Blom BANK and BlomInvest,enabling its clients to buy and sell on the international equity and commodity markets the available Sharia compliant stocks and commodities.BDB is also adopting international Sharia compliant filtering methodologies. BDB ended 2009 by launching its website, www.blomdevelopment.com, which includes the latest news as well as product offerings. The websiteis integrated with the Group’s platform.The major milestone for BDB in 2009 is undoubtedly the opening of its branch in Tripoli’s Mina area. The new location will serve BDB clients inNorth Lebanon and it promises to mark a new phase in the strategy of our group’s expansion and sustained development.In Brief, year 2009 witnessed the initial phase of BDB’s strategic expansion plan which engulfs the opening of new branches in key areas inLebanon and the development of new Sharia complaint products both on the retail and corporate fronts. BDB continues its mission incomplementing the group’s services regionally and globally.
12.5 Insurance Products & ServicesAROPE was able to maintain its position as the fourth insurance company on the Lebanese Market by registering increases in both life and non-life premiums. In the light of becoming a regional insurance financial services leader, and after the establishment of Syria International Insurance(AROPE Syria) in 2006, AROPE was granted approval from the Egyptian Financial Supervisory Authority (EFSA) to establish two companies, AROPELife Insurance s.a.l, and AROPE Insurance for Properties and Liabilities s.a.l in Egypt. Both companies are fully operational today and are showinggood results.
13. INFORMATION SYSTEMS AND TECHNOLOGYThe 21st century has witnessed a change in the banking industry from paper-based banks to digitized, networked and service-oriented banks. Theconvergence of computing, communications, information and knowledge has fundamentally changed the delivery channels that banks use to interactwith their customers. In order to reap the benefits of powerful information technologies, investments are being made in IT in order to encompass allareas of banking. In effect, we have been using state-of-the-art systems to diversify our delivery channels, innovate in payments and cardstechnologies, manage risks, enhance systems security, address regulatory requirements, and gain customer insights and business intelligence.
Management Discussion & Analysis 2009
59
13.1 Customer Relationship ManagementDuring this year, the bank kept on enhancing its on-line, real-time, around the clock banking services using a variety of channels including IVR,Internet, ATMs, SMS, and Call Center in addition to the traditional branches, in order to interact with its customers. This overall view of customers’activity with the bank is enabled by the eBlom suite of integrated electronic banking delivery channels that consist of:
- eBlom – ALLO BLOM – the Bank’s Interactive Voice Response system.- eBlom – Internet Banking – our online banking service that offers a wide array of services which are continuously expanded, enhanced andadapted to customers’ needs and demands.- eBlom – Self Service – using the bank network of ATMs deployed all over Lebanon with additional services being constantly developed. - eBlom – SMS Alert – a real-time alerting system based on delivering messages to our customers’ mobile phones to notify them about thelatest transactions.- eBlom – Call Center – our call center is available on a 24 hour basis all year long and is benefiting from continuous enhancements basedon CTI and IP telephony to achieve seamless integration with the Bank’s CRM application.- eBlom – Live Information Broadcasting System – a system that enables the bank to broadcast in real-time over LCD screens at the brancheslive and updated information covering stock quotes, foreign exchange quotes, news feeds, marketing campaigns, new promotions, TVcommercials etc. - eBlom – Targeted Information Passing System – a campaign management and referral tool that allows the profiling of customers using acentralized knowledge base that offers customers new products and services tailored to their needs. These custom offerings are presentedto customers during their presence at the branch.
13.2 Advanced Electronic Payment SystemsIn 2009, we kept on growing our Visa and MasterCard card offerings and enhancing the reliability and effectiveness of our payment systems.We also expanded into the business-to-business (B2B) market by providing Point of Sales to merchants across Lebanon.Furthermore, we capitalized on the benefits of our online card fraud monitoring system that is capable of sending real-time alerts to the bankcall center agents, thus enabling immediate action and insight as well as reporting and tracking of fraud. The card fraud monitoring systemsignificantly reduced fraud losses and incidences.
13.3 Enterprise Application Integration (EAI)During 2009, the Service Oriented Architecture (SOA) framework was developed to achieve the highest degree of integration between thebank’s different information systems through the use of web-services and a powerful yet flexible workflow engine. This will enable the bankto manage the complexity and control the quality and cost of business processes throughout their lifecycle.In addition, this EAI framework was applied to many processes, in particular to the consumer loans processing systems consisting of a loanorigination system, a loan assessment system, and a loan granting system. This framework has allowed the offering of an instant loan grant-ing system aimed at instantaneously granting walk-in customers a personal loan specially targeted to their needs. In addition, a credit scor-ing system for loans based on the Fair Isaac scoring model was initiated. Moreover, the EAI framework was introduced in the automation of incoming checks from the national clearing house through de-materializ-ing the checks’ clearing by scanning and electronically sending the checks’ images to the branches instead of sending the physical checks.
13.4 Basel II & Regulatory ComplianceThis year, special emphasis was put on credit management with the completion of a state-of-the-art corporate and commercial credit riskrating system acquired from MOODYS. Other software-based systems related to Assets & Liabilities Management, Funds Transfer Pricingand Capital Management were also acquired from SUNGARD. Some of these projects were completed in 2009 while others are planned forexecution during 2010.
13.5 Systems Security & High AvailabilityAs a financial institution that has been around for over 55 years, the bank’s systems and data are considered important assets for business continu-ity. Therefore, increased infrastructure availability and reliability was maintained. For this purpose, server virtualization and consolidation and enter-prise storage was introduced.
60
In 2009, a new Disaster Recovery Data Center was put in place. This facility would protect the bank’s information systems from loss in case of anunforeseen disaster and it would accelerate the development of new services to meet the bank’s future demands for expansion. The Data Center alsofeatures efficient power consumption in accordance with green data center requirements and was designed in full compliance with the ANSI 942standard, which sets prerequisites for assuring the highest levels of continuity, security and performance. Moreover, employee awareness was raised, in addition to developing Information Security Policies and Procedures to address and prevent securitythreats and to pro-actively monitor systems activity through implementing advanced preventive and detective controls and online monitoring.
13.6 Financial Reporting & ConsolidationDuring 2009, we launched the IBM Cognos 8 Controller which is a comprehensive web-based solution that offers powerful financial reporting andconsolidation. It also provides built-in financial intelligence and advanced analytics that allows timely and accurate information and improved deci-sion-making support. This solution will enable us to consolidate the financial statements across the entities of the BLOM Bank Group.
14. PEOPLE DEVELOPMENT14.1 General OverviewBLOM Bank Management considers human resources as a critical factor in keeping the bank on its successful path to become a major play-er in the regional financial sector. Human resources at BLOM are considered to be the most valuable asset, and the talent of our employeesis recognized as essential for the effective functioning of the Bank. Human resources at BLOM are managed in a fair, ethical and transpar-ent manner. A set of standards and procedures guide the relation of the bank with its employees, with regards to recruitment, promotion,compensation, development, employment conditions, and privileges. The BLOM BANK Group is an equal opportunities employer and pro-hibits discrimination on the basis of gender, religion, ethnicity, age and disability.
All employees, on the other hand, are required to comply with a set of policies concerning safety, information security and a general code ofconduct. They are expected to adhere to the highest standards of ethical behavior in what relates to confidentiality, professionalism,transparency, conflict of interest and integrity.
The most visible characteristic of BLOM Bank employees is their high level of education, in addition to their relative young age. The majorityof employees (74.3 percent) hold a university level degree or higher, while the average age of employees is 35.9 years. The following tablepresents the structure and distribution of BLOM Bank employees across the various units of BLOM Group, and according to various criteria.
* New Units include Abu Dhabi, BLOMINVEST KSA, and Qatar.
Management Discussion & Analysis 2009
Distribution of BLOM Employees Across the Various Units of the Group by Gender, Age, Level of Education and Function as at 31/12/2009
Gender
Age
Level of Education
Functions
BSOAROPEBLOMEGYPT
BLOMSWITZERLAND
BLOMFRANCE
BLOM DEV BLOMINVEST
BLOM LEBANON,
Total
Male
Female
Total
< 25
26-35
36-45
46-55
56-64
Total
Average Age
Graduate Degrees
Professional Certificates
Bachelor Degrees
Technical Certificates
Others
Total
Managers and Above
Deputies/ Assistant Managers
Supervisors
Employees
Total
955
746
1701
393
631
303
245
129
1701
35.5
356
8
840
39
458
1701
116
150
139
1296
1701
59
35
94
23
43
20
7
1
94
32.2
37
2
41
1
13
94
10
6
6
72
94
13
4
17
5
4
4
2
2
17
36.3
3
1
7
0
6
17
5
1
0
11
17
132
119
251
24
69
75
45
38
251
42.0
32
1
127
33
58
251
17
47
24
163
251
12
9
21
1
3
4
7
6
21
47.4
5
1
1
14
21
2
4
6
9
21
566
175
741
132
326
159
94
30
741
33.0
18
7
623
87
6
741
91
69
74
507
741
NewUnits*
33
6
39
6
18
12
1
2
39
34.3
12
3
19
3
2
39
15
1
-
23
39
137
163
300
74
140
55
26
5
300
33.0
23
2
174
45
56
300
29
9
35
227
300
238
157
395
153
191
40
8
3
395
28.0
31
3
266
54
41
395
31
7
34
323
395
2145
1414
3559
811
1425
672
435
216
3559
35.9
517
28
2098
276
640
3559
316
294
318
2631
3559
61
14.2 Policies and ProceduresBLOM Bank recognizes the importance of the role of a talented pool of employees in keeping the bank highly competitive.Appropriate policies are implemented so that the creation and development of talent is maintained through attracting,developing and retaining the best and the brightest employees.
14.2.1 Recruitment The recruitment and selection process is of critical importance to hire the best talent in line with the principles of non-discriminationand equal opportunities for all.The requests of all departments and branches are received by the recruitment section and matched with profiles from the data base.CVs in our data base are gathered from numerous sources including e-mail, job fairs, recommended trainees from the internshipprogram, referrals from managers and employees, walk-ins, ads and recruitment agencies. Selected CVs are evaluated and approvedby line managers and department heads before a set of exams is administered to the selected candidates. This will be followed bya set of interviews including the HR department, the concerned manager, and, for senior positions, the General Manager. The filewill be then presented to the HR committee for final decision after it passes a satisfactory background check and a clearance fromthe Anti-Money Laundering unit.During the year 2009, the various units of BLOM Bank group recruited a total of 600 new employees to support the expansion of thebank across the region and to replace departing and retiring employees (see table below). New banking units in Saudi Arabia, Qatar,and Abu Dhabi started their operations during 2009, and a host of new branches in the various units of the group were added to ourbranch network. The majority of the new recruits were in BLOM Lebanon, (38%), BSO (21%), AROPE (19%), and BLOM Egypt (14%).
14.2.2 TrainingInvestment in intellectual capital ranks amongst BLOM Bank’s top priorities, and the importance of continuous training is very muchemphasized by BLOM management. Effective training ensures that the skills, knowledge, abilities and performance meet the currentand future needs of both, the individual employee and the bank. This is done by performing training needs assessment on regularbasis, and through the development, implementation and evaluation of training programs addressing the specific needs of groupsand individuals.The HR department organizes a wide range of in-house and external training seminars for central departments and branchemployees. Technical in-house seminars are usually developed and delivered by field experts from BLOM Bank, while soft skilldevelopment seminars are delivered by professional trainers from local and international training firms. The total number of training hours performed during 2009 reached 79,851 (see table below). Training was made available to themajority of BLOM employees, where the training activities covered technical and non-technical areas such as finance, bankingtechniques, risk management, marketing, leadership, information technology, and foreign languages.
New RecruitsTurnover Rate
*New Units include Abu Dhabi, BLOMINVEST KSA, and Qatar
BSOAropeBLOMEGYPT
BLOMSWITZERLAND
BLOMFRANCE
BLOM DEV ELOPMENT
BLOMINVEST
BLOM LEBANON
Total
230
6.8
14
6.7
4
6.518
15.3
0
4.7
83
11.5
NEWUNITS*
13
16.9
114
18.0
124
14.7600
10.2
Distribution of Training Activities Across the Various Units of BLOM Group in 2009
New Recruits and Turnover Rates of the Various Units of BLOM Group in 2009
Hours of training
*New Units include Abu Dhabi, BLOMINVEST KSA, and Qatar
AROPEBSOBLOMEGYPT
BLOMSWITZERLAND
BLOMFRANCE
BLOM DEVEVELOPMENT
BLOMINVEST
BLOM LEBANON
Total
44,293 2,343 419 713 35 12,449
NEWUNITS*
574 2,797 3,695 84,591
62
14.2.3 Career Development and Promotion Career development and promotion at BLOM Bank focuses on a number of well defined criteria. This ensures that the selection ofcandidates for supervisory and managerial positions is made up of highly competitive and qualified people who have the necessaryskills and competencies required for top-level performance. BLOM Bank policy emphasizes the importance of career development for employees in order to help in creating a large pool of talentthat is essential for keeping the bank highly competitive in the local and the regional markets. This is supported by the increasing levelof investment in human capital. In addition to the individual training programs that are designed for high potential employees to preparethem for higher positions in the future, two particular programs, the Management Training Program (MTP), and the Fast Track Program(FTP) were designed to respond to the immediate need for talent and develop those talents.The selection of candidates for these two programs follows a rigorous and transparent process where immediate supervisors, linemanagers and HR are involved to ensure that the best performers with the highest potential are selected from the pool of young,ambitious and motivated employees.At the end of 2009, the number of participants in the Management Training Program was 41, and the number of participants in the FastTrack Program was 50.We continue to spare no effort to win the war for talent to better serve our customers and maintain our competitive edge.
15. BANK’S OPERATIONAL EFFICIENCY
In 2009, the group achieved a major improvement in its operational efficiency. Net profit per branch increased by 9.6% to reach USD2,154,564 at a time when the number of branches increased by 6.2%. Furthermore, net profit per employee gained 7.3% to USD 82,332.In addition, average assets by branch rose by a significant 8.86% to reach USD 152,223,411 at the end of year 2009, compared to USD139,828,125 recorded in 2008.
16. REGIONAL EXPANSION
In 2009, BLOM BANK continued to pursue its expansionary policy both in Lebanon and abroad.
In Lebanon, BLOM BANK finalized the groundwork for the opening of five new branches in 2010: Bab Idriss (Beirut Central District), KfarHbab (Kesrwan, North Beirut), Jib Jannine (South Lebanon), Amyoun (North Lebanon), and Broumana (Metn Area), bringing the totalnumber of branches to 62.
In terms of regional expansion, BLOM BANK JORDAN completed the opening of a branch in Abdoun.
On the other hand, Bank of Syria and Overseas (BSO) increased the number of its branches by three in 2009: Hasya’a and Mahatta inHomos, and Al Fourkan in Aleppo. Moreover, BSO concluded planning on introducing four branches in 2010: Mouhardeh in Hama, Al JeserAl Abyad in Damascus, Deir Al Zour, and Banyas, therefore expanding the number of branches in Syria to 27.
In Egypt, BLOM BANK EGYPT opened two new branches in Port Said and Manshia in 2009 and plans on opening another branch in Haramin 2010, thus increasing the number of branches to a total of 26.
By the end of 2009, BLOM INVEST SAUDI ARABIA (Investment Bank) and BLOM BANK QATAR (Commercial and Private Bank) becameoperational.
In Europe, BLOM BANK FRANCE opened a branch in Volontarii (Romania) in 2009 and is in the process of opening an electronic branch inDubai (Jabal Ali).
Management Discussion & Analysis 2009
Number of EmployeesNumber of BranchesUSD Net Profit per Employee USD Average Assets per EmployeeUSD Average Assets per BranchUSD Net Profit per Branch
BLOM Group’s Operational Efficiency Indicators
2009
3,559
136
82,332
5,816,910
152,223,411
2,154,564
2008
3,279
128
76,730
5,458,371
139,828,125
1,965,625
63
BLOM BANK S.A.LCONSOLIDATED AUDITED 2009 FINANCIAL STATEMENTS
69
70
Interest and similar incomeInterest and similar expense
Net interest income
Fees and commission incomeFees and commission expense
Net fees and commission income
Net trading incomeNet gain (loss) on financial assets designated at fair value through profit or lossNet profit on financial investmentsOther operating income
Total operating income
Credit loss (expense) incomeImpairment losses on financial investments
Net operating income
Personnel expensesDepreciation of property and equipmentAmortization of intangible assetsOther operating expenses
Total operating expenses
Net operating profits
Net profit from sale or disposal of other assets
Profit before tax
Income tax expense
Profit for the year
Attributable to:Equity holders of the parentMinority interest
Basic/diluted earnings per share attributable to equity holders of the parent for the year (in LL)
NOTES 2009LL million
1,631,367(1,013,138)
618,229
138,208(15,976)
122,232
41,305(4,523)9,8097,433
794,485
(13,040)(15,723)
765,722
(174,191)(25,462)
(947)(112,420)
(313,020)
452,702
5,024
457,726
(78,472)
379,254
365,27113,983379,254
16,116
2008LL million
CONSOLIDATED INCOME STATEMENT Year ended 31 December 2009
1,712,928(1,081,395)
631,533
144,735(22,957)
121,778
36,0817,507
38,55818,836
854,293
5,21515,721
875,229
(192,083)(33,118)(1,770)
(120,676)
(347,647)
527,582
129
527,711
(85,982)
441,729
429,55812,171
441,729
19,421
45
6
7
8
922
10232411
12
13
71
2009LL million
2008LL million
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended 31 December 2009
Profit for the year
Net gain (loss) on available-for-sale financial assets Exchange differences on translation of foreign operations
Other comprehensive income (loss) for the year
Total comprehensive income for the year
Attributable to: Equity holders of the parentMinority interests
441,729
104,864(9,882)
94,982
536,711
522,44114,270
536,711
379,254
(11,966)5,229
(6,737)
372,517
356,83815,679
372,517
72
ASSETSCash and balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fair value through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesNon-current assets held for saleFinancial investments – available-for-saleFinancial assets classified as loans and receivablesFinancial investments – held-to-maturityInvestment propertiesProperty and equipmentIntangible assetsOther assetsGoodwill
Total assets
Liabilities and equityLiabilitiesDue to banks and financial institutionsDerivative financial instrumentsCustomers' depositsRelated parties` depositsEngagements by acceptancesCurrent tax liabilitiesOther liabilitiesProvisions for risks and chargesRetirement benefits obligation
Total liabilities
Equity attributable to equity holders of parentShare capital - common sharesShare capital - preferred sharesShare premium on common sharesShare premium on preferred sharesCapital reservesTreasury sharesReserves for revaluation variance - real estateAvailable-for-sale reserveForeign currency translation reserveOther reservesResults of the financial period – profitRetained earnings
Minority interest
Total equity
Total liabilities and equity
NOTES 2009LL million
3,580,4675,817,382
39,86714,26481,955
5,230,4476,926
202,21127,561
4,691,9866,094,232634,306
581324,5765,307
165,60063,145
26,980,813
1,196,74656,779
22,636,095140,278202,21153,159
430,21131,48134,534
24,781,494
223,60018,200
374,059246,310595,391(39,877)14,7273,905
46,565106
365,271229,863
2,078,120121,199
2,199,319
26,980,813
2008LL million
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 December 2009
4,693,9745,787,117
33,54424,763
139,4026,046,601
11,522197,63729,846
4,694,2218,200,247
774,997618
374,8506,727
129,51063,268
31,208,844
705,43823,526
26,859,051230,554197,63748,588
491,52238,42138,558
28,633,295
223,60018,200
374,059246,310714,051(58,723)
14,727106,18437,169
331429,558341,061
2,446,527129,022
2,575,549
31,208,844
141516171819392021222222
23242526
271628392029303132
3333333334352336
73
OFF FINANCIAL POSITION
Financing commitments- Commitments issued to financial institutions- Commitments received from financial institutions- Commitments issued to customers
Guarantees commitments- Guarantees issued to financial institutions- Guarantees received from financial institutions- Guarantees issued to customers- Guarantees received from customers
Foreign currency operations- Foreign currencies to receive- Foreign currencies to deliver
Commitments on term financial instrumentsOther commitmentsFiduciary depositsFinancial assets under management Impaired loans fully provided for and transferred to off financial position
NOTES 2009LL million
35,51731,071449,489
260,67558,886525,271
8,625,099
2,072,6512,056,942
77,325159,144
1,225,6494,082,514
83,928
2008LL million
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 December 2009 (CONTINUED)
17,80533,089
330,711
209,04045,050
505,6029,561,921
3,699,0673,708,139
1,110,062173,810951,344
5,312,36882,695
40
40
40
4045-1 (A)
16
16
414119
74
OPERATING ACTIVITIESProfit for the financial period before income tax Adjustments for:Prior year adjustment by subsidiary companyDepreciation of property and equipmentAmortization of intangible assetsProfit from sale of property and equipmentWrite-back of provision for loans and advances, netProvision for impairment of financial assetsImpairment allowance for placements with other banksUnrealized loss (profit) for investment propertiesProvision for doubtful sundry debtorsProvision for retirement obligation benefitsNet provision for risks and chargesProvision for fiduciary customers’ commitmentsNet provision for outstanding claims and IBNR reservesProfit from sale of non-current assets held for saleProfit from sale of financial assets classified as loans and receivablesProfit from sale of available-for-sale financial investmentsUnrealized loss on financial assets designated at fair value through profit or loss
Changes in operating assets and liabilities:Financial assets held-for-trading (2)Financial assets designated at fair value through profit or lossBanks and financial institutions – debitDerivative financial instruments – debitLoans and advances to customersLoans and advances to related partiesNon-current assets held for saleOther assetsDerivative financial instruments – creditBanks and financial instruments – creditCustomers' depositsRelated parties’ depositsOther liabilities
Cash from operationsTaxes paidSettlement of provisions for risks and charges Retirement obligation benefits paid
Net cash from operating activities
NOTES 2009LL million
457,726
(8,773)25,462
947(5,024)(1,160)15,7233,765
211,27510,526
5749,1607,226(1,184)(101)
(9,232)4,523
511,454
26,866(23,408)(229,354)(20,837)
(1,055,920)(986)
(13,460)(34,144)32,696104,308
2,029,54238,31547,903
1,412,975(56,838)(1,591)(2,194)
1,352,352
2008LL million
CONSOLIDATED STATEMENT OF CASH FLOW for the Year ended 31 December 2009
527,711
-33,1181,770(129)
(5,215)(15,721)
-(37)
-6,4841,575
-7,056
(2,474)(23,398)(14,265)(7,507)
508,968
(10,499)(49,940)
(142,618)6,323
(810,939)(4,596)
25245,677
(33,253)(125,650)4,222,956
90,27661,311
3,758,268(91,055)(1,915)(2,551)
3,662,747
2324
2215
2532313131
88
32
75
INVESTING ACTIVITIESTerm deposits with central banksFinancial investments – available for sale (1) (3)Financial assets classified as loans and receivables (1) (2) (3)Financial assets – held to maturityPurchase of intangible assetsPurchase of property and equipmentCash proceeds from the sale of property and equipment
Net cash used in investing activities
FINANCING ACTIVITIESRedemption of preferred sharesPurchase of treasury shares, netMinority interestsDividends paid
Net cash used in financing activities
Effect of exchange rate changes
Increase (Decrease) in cash and cash equivalents
Cash and cash equivalents as of 1 JanuaryCash and cash equivalents as of 31 December
Operational cash flows from interest and dividendsInterest paidInterest receivedDividend received
(1) Non cash transactions in the investing activities include an increase in financial assets classified as loans and receivables in the amount ofLL 2,775,362 million, against a decrease in financial investments – available-for-sale in the investing activities in the same amount during2008.(2) Non cash transactions in the investing activities include an increase in financial assets classified as loans and receivables in the amount ofLL 63,424 million, against a decrease in financial assets held for trading in the operating activities in the same amount during 2008.(3) Non cash transactions in the investing activities include an increase in financial assets classified as loans and receivables in the amount ofLL 921,530 million against a decrease in financial investments – available-for-sale for the same amount during 2009.
NOTES 2009LL million
(199,704)(1,588,100)(180,179)(634,956)(1,760)(98,760)11,034
(2,692,425)
(113,093)(3,635)17,446
(157,552)
(256,834)
4,879
(1,592,028)
8,853,5287,261,500
1,019,5781,593,881
8,255
2008LL million
142,291101,717
(2,067,550)(140,041)
(3,451)(115,848)
23,406
(2,059,476)
-(17,128)(6,447)
(136,906)
(160,481)
(8,908)
1,433,882
7,261,5008,695,382
1,053,8501,693,483
1,500
2423
38,35
37
Balance at 1 January 2009
Results of the financial period–profit for the year 2009Other comprehensive income
Total comprehensive income
Minority interests share in capital increase of a subsidiary company (note 33)Dividends distributions (note 38)Appropriation of 2008 profits (note 34)Purchase of treasury shares (note 35)Sales of treasury shares (note 35)Minority interests share from dividends distribution in subsidiary companiesDividends on treasury shares (note 35)
Balance at 31 December 2009
Balance at 1 January 2008
Results of the financial period–profit for the year 2008Other comprehensive loss
Total comprehensive income
Capital increase (note 33, 34)Redemption of preferred shares 2002 (note 33)Dividends distributions (note 38)Appropriation of 2007 profits (note 34)Purchase of treasury shares Sale of treasury shares (note 35)Minority interests share in capitalof newly established subsidiary companiesMinority interests share from dividends distribution in subsidiary companiesReallocation of tax related to dividends distribution booked in 2007 Dividends on treasury shares (note 35) Other adjustment related to a subsidiaryOther transfers
Balance at 31 December 2008
Attributable to equity holders of the parent
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2009
Capital
reserves
LL million
Share
permium on
preferred
shares
LL million
Share
capital
preferred
shares
LL million
Share
capital
common
shares
LL million
Treasury
shares
LL million
Share
permium on
common
shares
LL million
223,600
--
-
-----
--
223,600
215,000
--
-
8,600
-----
-
-
----
223,600
18,200
--
-
-----
--
18,200
25,000
--
-
700
(7,500)----
-
-
----
18,200
374,059
--
-
-----
--
374,059
374,059
--
-
-
-----
-
-
----
374,059
246,310
--
-
-----
--
246,310
351,903
--
-
-
(105,593)----
-
-
----
246,310
595,391
--
-
--
116,942-
1,718
--
714,051
528,961
--
-
(9,300)
--
83,936-
120
-
-
(8,326)---
595,391
(39,877)
--
-
---
(78,373)59,527
--
(58,723)
(36,122)
--
-
-
---
(14,900)11,145
-
-
----
(39,877)
76
Results of
the financial
period -profit
LL millionTotal Equity
LL million
Total
LL million
Minority
interest
LL million
Available-
for-sales
reserve
Retained
earnings
LL million
Foreign
currency
translation
reserve
LL million
Other
reserve�
LL million
Reserve
for
revaluation
variance
Real Estate
LL million
14,727
--
-
-----
--
14,727
14,727
--
-
-
-----
-
-
----
14,727
3,905
-102,279
102,279
-----
--
106,184
13,995
-(10,090)
(10,090)
-
-----
-
-
----
3,905
46,565
-(9,396)
(9,396)
-----
--
37,169
37,737
-1,657
1,657
-
-----
-
-
---
7,171
46,565
106
--
-
--
225--
--
331
-
--
-
-
--
106--
-
-
----
106
229,863
--
-
--
105,923--
-5,275
341,061
175,603
--
-
-
--
60,289--
-
-
8,3261,589(8,773)(7,171)
229,863
365,271
429,558-
429,558
-(142,181)(223,090)
--
--
429,558
303,472
365,271-
365,271
-
-(159,141)(144,331)
--
-
-
----
365,271
2,078,120
429,55892,883
522,441
-(142,181)
-(78,373)61,245
-5,275
2,446,527
2,004,335
365,271(8,433)
356,838
-
(113,093)(159,141)
-(14,900)11,265
-
-
-1,589(8,773)
-
2,078,120
121,199
12,1712,099
14,270
75--
(13)13
(6,522)-
129,022
88,074
13,9831,696
15,679
-
-----
21,227
(3,730)
--
(51)-
121,199
2,199,319
441,72994,982
536,711
75(142,181)
-(78,386)61,258
(6,522)5,275
2,575,549
2,092,409
379,254(6,737)
372,517
-
(113,093)(159,141)
-(14,900)11,265
21,227
(3,730)
-1,589(8,824)
-
2,199,319
77
NOTES TO THE AUDITED CONSOLIDATED 2009 FINANCIAL STATEMENTS
1. CORPORATE INFORMATION 822. ACCOUNTING POLICIES 823. SEGMENTAL INFORMATION 984. INTREST AND SIMILAR INCOME 1015. INTREST AND SIMILAR EXPENSES 101 6. NET FEES AND COMMISSION INCOME 1017. NET TRADING INCOME 101 8. NET PTOFIT ON FINANCIAL INVESTMENTS 101 9. CREDIT LOSS INCOME (EXPENSES) 102 10. PERSONNEL EXPENSES 102 11. OTHER OPERATING EXPENSES 10212. INCOME TAX 10313. EARNINGS PER SHARE 10314. CASH AND BALANCES WITH CENTRAL BANKS 10415. DUE FROM BANKS AND FINANCIAL INSTITUIONS 10416 DERIVATIVE FINANCIAL INSTRUMENTS 10417. FINANCIAL ASSETS HELD FOR TRADINGS 10518. FINANCIAL ASSETS DESIGNATED AT FAIR
VALUE THROUGH PROFIT AND LOSS 10619. LOANS AND ADVANCES TO CUSTOMERS 10620. BANK ACCEPTANCES/ ENGAGEMENTS BY ACCEPTANCES 10821. NON-CURRENT ASSETS HELD FOR SALE 10822 FINANCIAL INVESTMENTS 10823. PROPERTY AND EQUIPMENT 10924. INTANGIBLE ASSETS 11025. OTHER ASSETS 11126. GOODWILL 11227. DUE TO BANKS AND FINANCIAL INSTITUTIONS 113
28. CUSTOMERS’ DEPOSITS 114
29. CURRENT TAX LIABILITIES 114
30. OTHER LIABILITIES 114
31.PROVISIONS FOR RISKS AND CHARGES 115
32. RETIREMENT BENEFITS OBLIGATION 115
33. SHARE CAPITAL AND PERMIUMS 115
34. CAPITAL RESERVES 117
35. TREASURY SHARES 118
36. CUMULATIVE CHANGES IN FAIR VALUES 118
37. CASH AND CASH EQUIVALENTS 118
38.DIVIDENDS DECLARED AND PAID 119
39. RELATED PARTY TRANSACTIONS 120
40. CONTINGENT LIABILITIES,
COMMITMENTS AND LEASING ARRANGEMENTS 120
41. FIDUCIARY DEPOSITS, ASSETS UNDER
MANAGEMENT AND CUSTODY ACCOUNTS 120
42. FAIR VALUE OF THE FINANCIAL INSTRUMENTS 121
43. MATURITY ANALYSIS OF ASSETS AND LIABILITIES 125
44. LEGAL CASES AND CONTINGENT LIABILITIES 126
45. RISK MANAGEMENT 127
46. CAPITAL MANAGEMENT 140
47. COMPARATIVE INFORMATION 141
1. CORPORATE INFORMATION
BLOM Bank SAL (the “Bank”), a Lebanese joint stock company, was incorporated in 1951 and registered under No 2464 at thecommercial registry of Beirut and under No 14 on the banks’ list published by the Bank of Lebanon. The headquarters of theBank are located in Verdun, Rashid Karameh Street, Beirut, Lebanon.
The Bank, together with its affiliated banks and subsidiaries (the Group), provides a wide range of banking (commercial,investment and private) as well as insurance and brokerage services.
On 14 February 2008, the Central Bank of the United Arab Emirates licensed BLOM Bank SAL to open a representative office inAbu Dhabi. This license is valid for five years.
On 12 March 2008, the Group obtained the approval from the Egyptian authorities for the establishment of two insurancecompanies in Egypt: (1) Arope Life Insurance Egypt SAE, activity includes life insurance, with a capital of EGP 100 million, and(2) Arope Insurance of Properties and Responsibilities Egypt SAE, activity includes properties and related responsibilitiesinsurance, with a capital of EGP 100 million. On 11 June 2008, the Group paid 50% of the issued capital allocated to the Group.
2. ACCOUNTING POLICIES
2.1 Basis of preparationThe consolidated financial statements are prepared under the historical cost convention as modified for the restatement of certaintangible real estate properties in Lebanon according to the provisions of law No 282 dated 30 December 1993, and for themeasurement at fair value of derivative financial instruments, financial assets held-for-trading, financial assets designated at fairvalue through profit or loss, financial investments – available-for-sale.
The consolidated financial statements have been presented in millions of Lebanese Lira (LL millions), which is the functionalcurrency of the Bank. Balances denominated in other currencies have been presented in thousands.
Statement of complianceThe consolidated financial statements have been prepared in accordance with International Financial Reporting Standards(IFRS) as issued by International Standards Board (IASB), and the regulations of the Bank of Lebanon and the Banking ControlCommission.
The Group presents its statement of financial position broadly in order of liquidity. An analysis regarding recovery or settlementwithin 12 months after the statement of financial position date (current) and more than 12 months after the statement offinancial position date (non-current) is presented in note 43.
Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financialposition only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on anet basis, or to realize the assets and settle the liability simultaneously. Income and expense will not be offset in theconsolidated income statement unless required or permitted by any accounting standard or interpretation, as specificallydisclosed in the accounting policies of the Group.
82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
Basis of consolidationThe consolidated financial statements comprise the financial statements of the Bank and its subsidiaries for the year ended 31December. The financial statements of the Bank’s subsidiaries are prepared for the same reporting year as BLOM Bank SAL,using consistent accounting policies.
All intra-group balances, transactions, income and expenses are eliminated in full.
Subsidiaries are fully consolidated from the date on which control is transferred to the Bank. Control is achieved where the Bankhas the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The resultsof subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the date ofacquisition or up to the date of disposal.
Minority interests represent the portion of profit or loss and net assets not owned, directly or indirectly, by the Bank and are pre-sented separately in the consolidated income statement and within equity in the consolidated statement of financial position, sep-arately from parent shareholders’ equity. Any losses applicable to the minority interests in excess of the minority interests are allo-cated against the interests of the parent. Acquisitions of minority interests are accounted for using the parent entity extensionmethod, whereby, the difference between the consideration and the fair value of the share of the net assets acquired is recognizedas goodwill. If the cost of acquisition is below the fair values of the identifiable net assets acquired (i.e. a discount on acquisition),the difference is recognized directly in the consolidated statement of comprehensive income in the year of acquisition.
The consolidated financial statements include the financial statements of BLOM Bank SAL and the subsidiaries listed in thefollowing table:
(a) Effective 1 January 2004, the Group obtained control, by virtue of agreement with other investors, over Bank of Syria andOverseas SA, and consequently, the financial statements of Bank of Syria and Overseas SA have been consolidated with thoseof the Group.(b) Effective 1 January 2006, the Group obtained control, by virtue of agreement with other investors, over Syria InternationalInsurance (Arope Syria) SA, and consequently, the financial statements have been consolidated with those of the Group.(c) In November 2007, BLOM Bank Egypt SAE sold its branches in Romania to BLOM Bank France SA. Consequently, the Grouprealized foreign currency translation reserve in the amount of LL 7,171 million upon the sale of the branches in Romania. During2008, the Group reclassified the foreign currency translation reserve realized in 2007 upon the sale of the branches in Romaniafrom “Retained earnings” to “Foreign currency translation reserve”.
BLOM Bank France SABLOM Bank (Switzerland) SABLOM Invest Bank SALBLOM Development Bank SAL Bank of Syria and Overseas SAArope Insurance SAL Syria International Insurance (Arope Syria) SA BLOM Bank Egypt SAE BLOM Egypt Securities SAE BLOM Invest – Saudi Arabia BLOM Bank Qatar LLC Arope Life Insurance Egypt SAE Arope Insurance of Properties andResponsibilities Egypt SAE Syria and Overseas Company for Financial Services
Notes
c
ad and fb and dc and fdeed and e
d and ee and g
% Effective equity interest
Country of incorporationFranceSwitzerlandLebanonLebanonSyriaLebanonSyriaEgyptEgyptSaudi ArabiaQatarEgypt
EgyptSyria
2009 %
99.99899.99899.87599.88739.00088.93242.18799.41999.62259.93799.00091.039
93.13743.750
2008 %
99.99899.99899.87599.88739.00088.87242.16799.41999.39059.93799.00091.009
93.11843.750
Activities
Banking activitiesBanking activitiesBanking activitiesIslamic banking activitiesBanking activitiesInsurance activitiesInsurance activities Banking activitiesBrokerage activitiesBanking activitiesBanking activitiesInsurance activities
Insurance activitiesBrokerage activities
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(d) The change in ownership is due to restructuring among the Group with no economic substance.(e) These subsidiaries were established in 2008.(f) The ownership interests of these subsidiaries were affected by the share capital increase of the respective subsidiarieswhich resulted in dilution of minority share.(g) Syria and Overseas Company for Financial Services is 52% owned by Bank of Syria and Overseas SA. Consequently thefinancial statements of Syria and Overseas Company for Financial Services have been consolidated with those of the Group.
2.2 Changes in accounting policiesThe accounting policies adopted are consistent with those used in the previous financial year except that the Group has adoptedthe following standards, amendments and interpretations; which did not have any effect on the financial performance orposition of the Group. They did however, give rise to additional disclosures.
IAS 1 Presentation of financial statements This standard requires an entity to present all owner changes in equity and all non-owner changes to be presented either in onestatement of comprehensive income or in two separate statements of income and comprehensive income. The revised standard alsorequires that the income tax effect of each component of comprehensive income be disclosed. In addition, it requires entities topresent a comparative statement of financial position as at the beginning for the earliest comparative period when the entity hasapplied an accounting policy retrospectively, makes a retrospective restatement, or reclassifies items in the financial statements.
The Group has elected to present comprehensive income in two separate statements of income and comprehensive income.Information about the individual components of comprehensive income as well as the tax effects have been disclosed in thenotes to the financial statements. The Group has not provided a restated comparative set of financial position for the earliestcomparative period, as it has not adopted any new accounting policies retrospectively, or has made retrospective restatements,or retrospectively reclassified items in the financial statements.
Amendments to IFRS 7 Financial Instruments: Disclosures - Improving Disclosures about Financial Instruments. Theamendments to IFRS 7 were issued in March 2009 to enhance fair value and liquidity disclosures.
With respect to fair value, the amendments require disclosure of a three-level fair value hierarchy, by class, for all financialinstruments recognised at fair value and specific disclosures related to the transfers between levels in the hierarchy anddetailed disclosures related to level 3 of the fair value hierarchy. In addition, the amendments modify the required liquiditydisclosures with respect to derivative transactions and assets used for liquidity management.
IFRS 8 Operating Segments This standard requires disclosure of information about the Group’s operating segments and replaced the requirement todetermine primary (business) and secondary (geographical) reporting segments of the Group. The Group concluded that theoperating segments determined in accordance with IFRS 8 are the same as the business segments previously identified underIAS 14, IFRS 8 disclosures are shown in Note 3.
IFRIC 16 Hedges of a Net Investment in a Foreign OperationIFRIC 16 is effective for accounting periods beginning on or after 1 October 2008 with early application permitted. The Interpretationapplies to a entity that hedges the foreign currency risk arising from its net investments in foreign operations and wishes to qualifyfor hedge accounting in accordance with IAS 39.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
In addition, the following standards and interpretations are effective for the financial year 2009. The adoption of these standardsand interpretations did not have any effect on the financial performance or position of the Group:
- IAS 23 (Borrowing costs) (Revised)- Amendments to IAS 32 Financial Instruments: Presentations and IAS 1 Presentation of financial Statements, - Puttable
financial Instruments and Obligations Arising on Liquidation.- Amendments to IFRIC 9 Reassessment of Embedded Derivatives and IAS 39 Financial Instruments: Recognition and
Measurement – Embedded Derivatives.- IFRIC 13 Customer Loyalty Programmes.- IFRIC 15 Agreements for the Construction of Real Estate- Improvements to International Financial Reporting Standards (issued 2008)- Improvements to International Financial Reporting Standards (issued 2009)
Future changes in accounting policiesBelow is the list of standards issued but not yet effective for the year ended 31 December 2009:
- IFRS 2 Share – based Payment: Group Cash-settled Share – based Payment Transactions- IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and separate Financial Statements (Amended)- IFRS 9 Financial Instruments: Classification and Measurement.- Amendment to IAS 39 Financial Instruments: Recognition and Measurement – eligible Hedged items.- IFRIC 17 Distributions on Non-cash Assets to Owners- IFRIC 18 Transfers of Assets from Customers- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
Management does not expect the above standards to have a significant impact on the Group’s financial statements whenimplemented in future years.
Improvements to IFRSsIn May 2008 and April 2009 the IASB issued omnibus of amendments to its standards, primarily with a view to removinginconsistencies and clarifying wording. There are separated transitional provisions for each standard. The amendments to thefollowing standards below did not have any impact on the accounting policies, financial position or performance of the Group:
IFRS 5:Non-current Assets Held for Sale and Discontinued OperationsIAS 7: Statement of Cash FlowsIAS 8: Accounting Policies, Change in Accounting Estimates and ErrorIAS 10: Events after the Reporting PeriodIAS 16: Property, Plant and EquipmentIAS 18 RevenueIAS 19: Employee BenefitsIAS 20: Accounting for Government Grants and Disclosures of Government AssistanceIAS 27: Consolidated and Separate Financial StatementsIAS 28: Investment in AssociatesIAS 31: Interest in Joint venturesIAS 34: Interim Financial ReportingIAS 36: Impairment of AssetsIAS 38: Intangible AssetsIAS 39: Financial Instruments: Recognition and MeasurementIAS 40: Investments Properties
2.3 Summary of significant accounting policies
(1) Foreign currency translationThe consolidated financial statements are presented in Lebanese Lira which is the Bank’s functional and presentation currency. Eachentity in the group determines its own functional currency and items included in the financial statements of each entity aremeasured using that functional currency.
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Transactions and balancesTransactions in foreign currencies are initially recorded at the functional currency at the rate of exchange ruling at the date of thetransaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange at thestatement of financial position date. All differences arising on non-trading activities are taken to ‘Other operating income’ in theincome statement, with the exception of differences on foreign currency borrowings that provide an effective hedge against a netinvestment in a foreign entity. These differences are taken directly to other comprehensive income until the disposal of the netinvestment, at which time they are recognized in the income statement. Tax charges and credits attributable to exchange differenceson those borrowings are also recorded in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates asat the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using theexchange rates at the date when the fair value was determined. Any goodwill arising on the acquisition of a foreign operation andany fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and lia-bilities of the foreign operations and translated at closing rate.
Group companiesAs at the reporting date, the assets and liabilities of subsidiaries and overseas branches are translated into the Bank’s presentationcurrency at the rate of exchange as at the statement of financial position date, and their income statements are translated at theweighted average exchange rates for the year. Exchange differences arising on translation are taken directly to a separate compo-nent of equity. On disposal of a foreign entity, the deferred cumulative amount recognized in equity relating to that particular for-eign operation is recognized in the income statement in ‘Other operating expenses’ or ‘Other operating income’, respectively.
(2) Financial instruments – initial recognition and subsequent measurement(i) Date of recognitionAll financial assets and liabilities are initially recognized on the trade date, i.e. the date that the Group becomes a party to the con-tractual provisions of the instrument. This includes purchases or sales of financial assets that require delivery of assets within thetime frame generally established by regulation or convention in the market place.
(ii) Initial measurement of financial instrumentsThe classification of financial instruments at initial recognition depends on the purpose and the management’s intention for whichthe financial instruments were acquired and their characteristics. All financial instruments are measured initially at their fair valueplus transaction costs, except in the case of financial assets recorded at fair value through profit or loss and held for trading assets.
(iii) Derivatives recorded at fair value through profit or lossThe Group uses derivatives such as forward foreign exchange contracts and options on foreign currencies. Derivatives are recordedat fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes inthe fair value of derivatives are included in “Net trading income”.
Derivatives embedded in other financial instruments, such as the conversion option in an acquired convertible bond, are treated asseparate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the hostcontract, and the host contract is not itself held-for-trading or designated at fair value through profit or loss. The embedded deriva-tives separated from the host are carried at fair value in the trading portfolio with changes in fair value recognized in the consoli-dated income statement.
(iv) Financial assets held-for-tradingFinancial assets held-for-trading are recorded in the consolidated statement of financial position at fair value. Changes in fair valueare recognized in “Net trading income”. Interest and dividend income or expense is recorded in “Net trading income” according tothe terms of the contract, or when the right to the payment has been established.
86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
Included in this classification are debt securities and equities which have been acquired principally for the purpose of selling orrepurchasing in the near term.
The Group evaluated its financial assets held-for-trading at fair value whether the intent to sell them in the near term is still appro-priate. When the Group is unable to trade these financial assets due to inactive markets and management’s intent to sell them inthe foreseeable future significantly changes, the Group may elect to reclassify these financial assets in rate circumstances. Thereclassification to loans and receivables, available-for-sale or held-to-maturity depends on the nature of the asset.
(v) Financial assets designated at fair value through profit or lossFinancial assets classified in this category are those that have been designated by management on initial recognition. Managementmay only designate an instrument at fair value though profit or loss upon initial recognition when the following criteria are met, anddesignation is determined on an instrument by instrument basis:
• The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring theassets or liabilities or recognizing gains or losses on them on a different basis; or• The assets are part of a group of financial assets which are managed and their performance evaluated on a fair value basis, inaccordance with a documented risk management or investment strategy; or• The financial instrument contains one or more embedded derivatives which significantly modify the cash flows that otherwisewould be required by the contract.
Financial assets at fair value through profit or loss are recorded in the consolidated statement of financial position at fair value.Changes in fair value are recorded in “Net gain or loss on financial assets designated at fair value through profit or loss”. Interestearned is accrued in “Interest income” using the effective interest rate, while dividend income is recorded in “Other operatingincome” when the right to the payment has been established.
(vi) Available-for-sale financial investmentsAvailable-for-sale investments include equity and debt securities. Equity investments classified as available-for-sale are those whichare neither classified as held-for-trading nor designated at fair value through profit or loss. Debt securities in this category are thosewhich are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in responseto changes in the market conditions.
After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealized gains orlosses recognized as other comprehensive income in the available-for-sale reserve until the investment is derecognized, at which timethe cumulative gain or loss is recognized in net profit or loss on financial operations. Where the Bank holds more than one investmentin the same security they are deemed to be disposed of on a first-in first-out basis. Interest earned whilst holding available-for-salefinancial investments is reported as interest income using the effective interest rate. Dividends earned whilst holding available-for-salefinancial investments are recognized in the income statement as “Net gain on financial investments” when the right of the paymenthas been established. The losses arising from impairment of such investments are recognized in the consolidated statement of incomein “Impairment losses on financial investments” and removed from the “Available-for-sale reserve”.
The Group evaluated its available-for-sale financial assets whether the ability and intention to sell them in the near term is stillappropriate. When the Group is unable to trade these financial assets due to inactive markets and management’s intent significant-ly changes to do so in the foreseeable future, the Group may elect to reclassify these financial assets in rare circumstances.Reclassification to loans and receivables is permitted when the financial asset meets the definition of loans and receivables andhas the intent and ability to hold these assets for the foreseeable future or maturity. The reclassification to held-to-maturity is per-mitted only when the entity has the ability and intent to hold until the financial asset accordingly.
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(vii) Held-to-maturity financial investmentsHeld-to-maturity financial investments are non-derivative financial assets with fixed or determinable payments and fixed maturities,which the Bank has the intention and ability to hold to maturity. After initial measurement, held-to-maturity financial investmentsare subsequently measured at amortized cost using the effective interest rate, less impairment. Amortized cost is calculated by tak-ing into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate. The amor-tization is included in “Interest and similar income” in the income statement. The losses arising from impairment of such invest-ments are recognized in the income statement line “Credit loss expense”.
If the Group were to sell or reclassify more than an insignificant amount of held-to-maturity investments before maturity (other thanin certain specific circumstances), the entire category would be tainted and would have to be reclassified as available-for-sale.Furthermore, the Bank would be prohibited from classifying any financial assets as held-to-maturity during the following two years.
(viii) Financial assets classified as loans and receivablesFinancial assets classified as loans and receivables are non-derivative financial assets with fixed or determinable payments that arenot quoted in an active market. These financial assets are initially recognized at cost, being the fair value of the consideration paidfor the acquisition of the investment. All transaction costs directly attributed to the acquisition are also included in the cost of invest-ment. After initial measurement, loans and receivables are measured at amortised cost, using the effective interest rate method,less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fee that are inte-gral part of the effective interest rate. The amortisation is included in “Interest and similar income” in the consolidated statementof income. Gain or losses are recognized in the consolidated statement of income when the investments are derecognised orimpaired. The losses arising from impairment are recognized in the consolidated of income statement in “Credit loss expense”.
(ix) Due from banks and loans and advances to customers‘Due from banks’ and ‘Loans and advances to customers’, include non-derivative financial assets with fixed or determinable pay-ments that are not quoted in an active market, other than:• Those that the Group intends to sell immediately or in the near term and those that the Group upon initial recognition designatesas at fair value through profit or loss;• Those that the Group, upon initial recognition, designates as available-for-sale; or• Those for which the Group may not recover substantially all of its initial investment, other than because of credit deterioration.
After initial measurement, amount “Due from banks” and “Loans and advances to customers” are subsequently measured at amor-tized cost using the effective interest rate, less allowance for impairment. Amortized cost is calculated by taking into account anydiscount or premium on acquisition and fees and costs that are an integral part of the effective interest rate. The amortization isincluded in “Interest and similar income” in the consolidated income statement. The losses arising from impairment are recognizedin the consolidated income statement in “Credit loss expense”.
(x) Reclassification of financial assetsEffective from 1 July 2008, the Group may reclassify, in certain circumstances, non-derivative financial assets out of the “Held-for-trading” category and into the “Available-for-sale”, “Loans and receivables”, or “Held-to-maturity” categories. From this date it mayalso reclassify, in certain circumstances, financial instruments out of the “Available-for-sale” category and into the “Loans andreceivables” category. Reclassifications are recorded at fair value at the date of reclassification which becomes the new amortizedcost.
The Group may reclassify a non-derivative trading asset out of the “Held-for-trading” category and into the “Loans and receivables”category if it meets the definition of loans and receivables and the Group has the intention and ability to hold the financial asset forthe foreseeable future or until maturity. If a financial asset is reclassified, and if the Group subsequently increases its estimates offuture cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase is recognized as anadjustment to the effective interest rate from the date of the change in estimate.
88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
For a financial asset reclassified out of the “Available-for-sale” category, any previous gain or loss on that asset that has been recognized inother comprehensive income is amortized to profit or loss over the remaining life of the investment using the effective interest rate. Any dif-ference between the new amortized cost and the expected cash flows is also amortized over the remaining life of the asset using the effec-tive interest rate. If the asset is subsequently determined to be impaired, then the amount recorded in other comprehensive income is recy-cled to the consolidated income statement.
Reclassification is at the election of management, and is determined on an instrument by instrument basis. The Group does not reclassifyany financial instrument into the fair value through profit or loss category after initial recognition. An analysis of reclassified assets is dis-closed in Note 42.
(3) Derecognition of financial assets and financial liabilities
i. Financial assetsA financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where:• the rights to receive cash flows from the asset have expired; or• the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cashflows in full without material delay to a third party under a ‘pass-through’ arrangement; and• either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferrednor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, andhas neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the assetis recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognizes an associatedliability. The transferred asset and the associated liability are measured on a basis that reflects rights and obligations that the Grouphas retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the originalcarrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
ii. Financial liabilitiesA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existingfinancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liabilityare substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognitionof a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.
(4) Determination of fair valueThe fair value for financial instruments traded in active markets at the statement of financial position date is based on their quotedmarket price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction fortransaction costs.
For all other financial instruments not traded in an active market, the fair value is determined by using appropriate valuationtechniques. Valuation techniques include the discounted cash flow method, comparison to similar instruments for which marketobservable prices exist, options pricing models, credit models and other relevant valuation models.
An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 42.
(5) Impairment of financial assets The Group assesses at each statement of financial position date whether there is any objective evidence that a financial asset or agroup of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, thereis objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (anincurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or thegroup of financial assets that can be reliably estimated.
89
Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financialdifficulty, the probability that they will enter bankruptcy or other financial reorganization, default or delinquency in interest orprincipal payments and where observable data indicates that there is a measurable decrease in the estimated future cash flows,such as changes in arrears or economic conditions that correlate with defaults.
(i) Financial assets carried at amortised costFor financial assets carried at amortised cost (such as amounts due from banks, loans and advances to customers, financial assetsclassified as loans and receivables as well as held-to-maturity investments), the Group first assesses individually whether objectiveevidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets thatare not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessedfinancial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assessesthem for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be,recognized are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the differencebetween the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit lossesthat have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and theamount of the loss is recognized in the income statement. Interest income continues to be accrued on the reduced carrying amountand is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.The interest income is recorded as part of “Interest and similar income”. Loans together with the associated allowance are writtenoff when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Group.If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring afterthe impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowanceaccount. If a future write-off is later recovered, the recovery is credited to the “Credit loss expense”.
The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loanhas a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. If the Grouphas reclassified trading assets to loans and advances, the discount rate for measuring any impairment loss is the new effectiveinterest rate (Refer to Note 2.3 (2) (x) above) determined at the reclassification date. The calculation of the present value of theestimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs forobtaining and selling the collateral, whether or not foreclosure is probable.
For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the Bank’s internal creditgrading system, that considers credit risk characteristics such as asset type, industry, geographical location, collateral type, past-due status and other relevant factors.
Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the basis ofhistorical loss experience for assets with credit risk characteristics similar to those in the Bank. Historical loss experience is adjustedon the basis of current observable data to reflect the effects of current conditions that did not affect the years on which the historicalloss experience is based and to remove the effects of conditions in the historical period that do not exist currently. The methodologyand assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimatesand actual loss experience.
See Note 22 for details of impairment losses on financial assets carried at amortized cost and Note 19 for an analysis of impairmentallowance on loans and advances by class.
(ii) Available-for-sale financial investmentsFor available-for-sale financial investments, the Group assess at each statement of financial position date whether there is objectiveevidence that an investment is impaired.
90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
91
In the case of debt instruments classified as available-for-sale, the Group assesses individually whether there is objective evidenceof impairment based on the same criteria as financial assets carried at amortized cost. However, the amount recorded for impairmentis the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment losson that investment previously recognized in the consolidated statement of income. Future interest income is based on the reducedcarrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring theimpairment loss. The interest income is recorded as part of “Interest and similar income”. If, in a subsequent period, the fair valueof a debt instrument increases and the increase can be objectively related to credit event occurring after the impairment loss wasrecognized in the consolidated income statement, the impairment loss is reversed through the consolidated income statement.
In the case of equity investments classified as available-for-sale, objective evidence would also include a “significant” or“prolonged” decline in the fair value of the investment below its cost. The Group treats “significant” generally as 20% and“prolonged” as greater than 6 months. Where there is evidence of impairment, the cumulative loss measured as the differencebetween the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in theconsolidated income statement – is removed from other comprehensive income and recognized in the consolidated incomestatement. Impairment losses on equity investments are not reversed through the consolidated income statement; increases in thefair value after impairment are recognized directly in other comprehensive income.
(iii) Renegotiated loansWhere possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending thepayment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated any impairment ismeasured using the original effective interest rate as calculated before the modification of terms and the loan is no longerconsidered past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that futurepayments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated usingthe loan’s original effective interest rate.
(6) Hedge accountingThe Group makes use of derivative instruments to manage exposures to interest rate, foreign currency and credit risks, includingexposures arising from forecast transactions and firm commitments. In order to manage particular risks, the Bank applies hedgeaccounting for transactions which meet the specified criteria.
At inception of the hedge relationship, the Group formally documents the relationship between the hedged item and the hedginginstrument, including the nature of the risk, the objective and strategy for undertaking the hedge and the method that will be usedto assess the effectiveness of the hedging relationship.
Also at the inception of the hedge relationship, a formal assessment is undertaken to ensure the hedging instrument is expected tobe highly effective in offsetting the designated risk in the hedged item. Hedges are formally assessed quarterly. A hedge is expectedto be highly effective if the changes in fair value or cash flows attributable to the hedged risk during the period for which the hedgeis designated are expected to offset in a range of 80% to 125%. For situations where that hedged item is a forecast transaction,the Group assesses whether the transaction is highly probable and presents an exposure to variations in cash flows that couldultimately affect the consolidated income statement.
(i) Fair value hedgesFor designated and qualifying fair value hedges, the change in the fair value of a hedging derivative is recognised in the consolidatedincome statement in ‘Net trading income’. Meanwhile, the change in the fair value of the hedged item attributable to the risk hedgedis recorded as part of the carrying value of the hedged item and is also recognised in the consolidated income statement in ‘Nettrading income’.
If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets the criteria for hedgeaccounting, the hedge relationship is terminated. For hedged items recorded at amortised cost, the difference between the carryingvalue of the hedged item on termination and the face value is amortised over the remaining term of the original hedge using theeffective interest rate. If the hedged item is derecognised, the unamortised fair value adjustment is recognised immediately in theconsolidated income statement.
(ii) Cash flow hedgesFor designated and qualifying cash flow hedges, the effective portion of the gain or loss on the hedging instrument is initially recog-nised directly in equity in the ‘Cash flow hedge’ reserve. The ineffective portion of the gain or loss on the hedging instrument isrecognised immediately in ‘Net trading income’.
When the hedged cash flow affects the consolidated income statement, the gain or loss on the hedging instrument is recorded inthe corresponding income or expense line of the consolidated income statement. When a hedging instrument expires, or is sold, ter-minated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equi-ty at that time remains in equity and is recognised when the hedged forecast transaction is ultimately recognised in the consolidat-ed income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported inequity is immediately transferred to the consolidated income statement.
(iii) Hedge of a net investment Hedges of net investments in a foreign operation, including a hedge of a monetary item that is accounted for as part of the netinvestment, are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effec-tive portion of the hedge are recognised directly in equity while any gains or losses relating to the ineffective portion are recognisedin the income. On disposal of the foreign operation, the cumulative value of any such gains or losses recognised directly in equityis transferred to the consolidated income statement.
(7) Offsetting financial instrumentsFinancial assets and financial liabilities are offset and the net amount reported in the statement of financial position, if, and only if,there is currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or torealize the asset and settle the liability simultaneously.
(8) Operating leasesLeases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leas-es. Operating lease payments are recognized as an expenses in the income statement on a straight-line basis over the lease term.
(9) Recognition of income and expensesRevenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can bereliably measured. The following specific recognition criteria must also be met before revenue is recognized:
(i) Interest and similar income and expenses For all financial instruments measured at amortized cost, interest bearing financial assets classified as available-for-sale and finan-cial instruments designated at fair value through profit or loss, interest income or expense is recorded using the effective interestrate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financialinstrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calcu-lation takes into account all contractual terms of the financial instrument and includes any fees or incremental costs that are direct-ly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses. The carryingamount of the financial asset or financial liability is adjusted if the Group revises its estimates of payments or receipts. The adjust-ed carrying amount is calculated based on the original effective interest rate. However, for a reclassified financial asset (see Note2.3.2 (x)) for which the Group subsequently increases its estimates of future cash receipts as a result of increased recoverability ofthose cash receipts, the effect of that increase is recognized as an adjustment to the effective interest rate from the date of thechange in estimate.
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, inter-est income continues to be recognized using the rate of interest used to discount the future cash flows for the purpose of measur-ing the impairment loss.
(ii) Fee and commission incomeThe Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be divid-ed into the following two categories:
Fee income earned from services that are provided over a certain period of timeFees earned for the provision of services over a period of time are accrued over that period. These fees include commission incomeand asset management, custody and other management and advisory fees.
Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred (together with any incre-mental costs) and recognized as an adjustment to the effective interest rate on the loan. When it is unlikely that a loan be drawndown, the loan commitment fees are recognized over the commitment period on a straight line basis.
Fee income from providing transaction servicesFees arising from negotiating or participating in the negotiation of a transaction for a third party, such as the arrangement of theacquisition of shares or other securities or the purchase or sale of businesses, are recognized on completion of the underlying trans-action. Fees or components of fees that are linked to a certain performance are recognized after fulfilling the corresponding crite-ria.
(iii) Dividend incomeDividend income is recognized when the Group’s right to receive the payment is established.
(iv) Net trading incomeResults arising from trading activities include all gains and losses from changes in fair value and related interest income or expenseand dividends for financial assets and financial liabilities “Held-for-trading”. This includes any ineffectiveness recorded in hedgingtransactions.
(10) Cash and cash equivalentsCash and cash equivalents as referred to in the cash flow statement comprise balances with original maturities of a period of threemonths or less including: cash and balances with central banks, deposits with banks and financial institutions, deposits due to banksand financial institutions, and treasury bills.
(11) Property and equipmentProperty and equipment are stated at cost less accumulated depreciation and accumulated impairment in value. Certain of tangiblereal estate properties purchased prior to 1 January 1994 were restated for the changes in the general purchasing power of theLebanese Lira according to the provisions of law No 282 dated 30 December 1993. The net surplus arising on revaluation is credit-ed to the account of “Reserves for revaluation variance – real estate” recognized in shareholders’ equity.
Changes in the expected useful life are accounted for by changing the depreciation period or method, as appropriate, and treatedas changes in accounting estimates.
Depreciation is calculated on a straight line basis to write down the cost of property and equipment to their residual values overtheir estimated useful lives. Freehold land is not depreciated. The estimated useful lives are as follows:
93
BuildingsVehiclesFurniture, office installations and computer equipment
50 years6.67 years
2 – 16.67 years
Property and equipment is derecognised on disposal or when no future economic benefits are expected from its use. Any gain orloss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amountof the asset) is recognized in “Net profit from sale or disposal of other assets” in the consolidated income statement in the year theasset is derecognised.
(12) Business combinations and goodwillBusiness combinations are accounted for using the purchase method of accounting. This involves recognizing identifiable assets(including previously unrecognized intangible assets) and liabilities (including contingent liabilities but excluding future restructur-ing) of the acquired business at fair value. Any excess of the cost of acquisition over the fair values of the identifiable net assetsacquired is recognized as goodwill. If the cost of acquisition is less than the fair values of the identifiable net assets acquired, thediscount on acquisition is recognized directly in the income statement in the year of acquisition.
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combinationover the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Following ini-tial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annu-ally or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to eachof the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the com-bination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit to which the good-will is allocated:• represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and• is not larger than an operating segment in accordance with IFRS 8 Operating Segments.
Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operation within that unitis disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation whendetermining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the rel-ative values of the operation disposed of and the portion of the cash-generating unit retained.
When subsidiaries are sold, the difference between the selling price and the net assets plus cumulative translation differences andgoodwill is recognized in the consolidated income statement.
(13) Intangible assetsThe Group’s other intangible assets include the value of computer software and key money. An intangible asset is recognized onlywhen its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it willflow to the Group.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a busi-ness combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at costless any accumulated amortization and any accumulated impairment losses.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortizedover the useful economic life. The amortization period and the amortization method for an intangible asset with a finite useful lifeare reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption offuture economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate,and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in theincome statement in the expense category consistent with the function of the intangible asset.
Amortisation is calculated using the straight-line method to write down the cost of intangible assets to their residual values overtheir estimated useful lives as follows:
Key money: the lesser of lease period or 5 years Software development cost: 2-5 years
94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
(14) Non current assets held for saleThe Group occasionally acquires real estate in settlement of certain loans and advances. Such real estate is stated at the lower ofthe amount of the related loans and advances and the current fair value of such assets based on the instructions of the RegulatoryAuthorities. Gains or losses on disposal, and revaluation losses, are recognized in the consolidated income statement for the period.
(15) Impairment of non-financial assetsThe Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, orwhen annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recover-able amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use. Where the carry-ing amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is writtendown to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present valueusing a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuationmultiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previouslyrecognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’sor cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a changein the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversalis limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount thatwould have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such rever-sal is recognized in the consolidated income statement.
Impairment losses relating to goodwill cannot be reversed in future periods.
(16) Financial guaranteesIn the ordinary course of business, the Group gives financial guarantees, consisting of letters of credit, guarantees and acceptanc-es. Financial guarantees are initially recognised in the financial statements (within “Other liabilities”) at fair value, being the pre-mium received. Subsequent to initial recognition, the Group’s liability under each guarantee is measured at the higher of the amountinitially recognized less, when appropriate, cumulative amortization recognized in the consolidated income statement and the bestestimate of expenditure required to settle any financial obligation arising as a result of the guarantee.
(17) Customers’ depositsAll customer deposits are carried at the fair value of the consideration received, less amounts repaid.
(18) Taxation
(i) Current taxTaxation is provided for in accordance with the fiscal regulations of the respective countries in which the Group and its branchesand subsidiaries operate.
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paidto the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enact-ed by the statement of financial position date.
The Bank’s profits from operations in Lebanon are subject to a tax rate of 15% after deducting the 5% tax on interest receivedaccording to Law no. 497/2003 dated 30 January 2003.
Dividends are subject to a flat 10% tax, reducible to 5% provided that the Bank is listed on a regulated stock exchange.
95
(ii) Deferred taxDeferred tax is provided on temporary differences at the statement of financial position date between the tax bases of assets andliabilities and their carrying amounts in the financial reporting purposes. Deferred tax liabilities are recognized for all taxable tem-porary differences, except:
• Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is nota business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and• In respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of thetemporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax loss-es, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and thecarry forward of unused tax credits and unused tax losses can be utilized except:
• Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or lia-bility in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nortaxable profit or loss; and• In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognizedonly to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will beavailable against which the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent thatit is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.Unrecognized deferred tax assets are reassessed at each statement of financial position date and are recognized to the extent thatit has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized orthe liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement of finan-cial position date.
Current tax and deferred tax relating to items recognized directly in equity are also recognized in equity and not in the consolidatedincome statement.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets againstcurrent tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
(19) Provisions for risks and chargesProvisions are recognized when the Group has a present obligation (legal or constructive) arising from a past event and the costs tosettle the obligation are both probable and able to be reliably measured.
(20) Retirement benefits obligation The Group provides retirement benefits obligation to its employees. The entitlement of these benefits is based upon the employees’final salary, length of services and other local regulations where the Group operates. The expected costs of these benefits areaccrued over the period of employment.
For the Bank and its branches operating in Lebanon, end-of-service benefit subscriptions paid and due to the National Social SecurityFund (NSSF) are calculated on the basis of 8.5% of the staff salaries. The final end-of-service benefits due to employees after com-pleting 20 years of service, at the retirement age, or if the employee permanently leaves employment, are calculated based on thelast salary multiplied by the number of years of service. The Bank is liable to pay to the NSSF the difference between the subscrip-tions paid and the final end-of-service benefits due to employees. The Bank provides for end-of-service benefits on that basis.
96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
(21) Treasury sharesOwn equity instruments of the Bank which are acquired by it or by any of its subsidiaries (treasury shares) are deducted from equity andaccounted for at weighted average cost. Consideration paid or received on the purchase sale, issue or cancellation of the Bank’s own equityinstruments is recognized directly in equity. No gain or loss is recognized in the consolidated income statement on the purchase, sale, issueor cancellation of the Bank’s own equity instruments.When the Bank holds own equity instruments on behalf of its clients, those holdings are not included in the Bank’s statement of financialposition.
(22) Fiduciary assetsThe Group provides trust and other fiduciary services that result in the holding or investing of assets on behalf of its clients. Assets held ina fiduciary capacity are not reported in the financial statements, as they are not the assets of the Group; and accordingly are recorded as offfinancial position items.
(23) Dividends on ordinary sharesDividends on ordinary shares are recognised as a liability and deducted from equity when they are approved by the Bank’s shareholders.
Dividends for the year that are approved after the statement of financial position date are disclosed as an event after the statement offinancial position date.
(24) Segment reportingThe Group’s segmental reporting is based on the following operating segments: Retail banking, corporate banking, treasury, money andcapital markets and asset management and private banking.
(25) Accounting policies of subsidiary-insurance companiesThe financial statements of the subsidiary insurance companies have been prepared in accordance with International Financial ReportingStandards and the requirements of the regulations related to insurance and reinsurance companies where the subsidiaries operate. The keyaccounting policies are as follows:
Premiums earnedNet premiums and accessories (gross premiums) are taken to income over the terms of the policies to which they relate using the proratatemporis method for non-marine business and 25% of gross premiums for marine business. Unearned premiums reserve represents theportion of the gross premiums written relating to the unexpired period of coverage.
If the unearned premiums reserve is not considered adequate to cover future claims arising on these premiums a premium deficiency reserveis created.
Commissions earned and paidCommissions earned are recognized at the time policies are written.
Commissions paid are expensed over the terms of the policies to which they relate using the pro-rata temporis method for non-marinebusiness and 25% of commissions paid for marine business. Deferred acquisition costs represent the portion of commissions paid relatingto the unexpired period of coverage.
(26) Bank acceptancesBank acceptances represent term documentary credits which the Group has committed to settle on behalf of its clients against commitmentsby those clients (acceptances). The commitments resulting from these acceptances are stated as a liability in the statement of financialposition for the same amount.
2.4 Significant accounting judgments and estimates
In the process of applying the Group’s accounting policies, management has exercised judgment and estimates in determining the amountsrecognized in the financial statements. The most significant use of judgment and estimates are as follows:
Going concernThe Group’s management has made an assessment of the Group’s ability to continue as a going concern and is satisfied that the Group hasthe resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any material uncertaintiesthat may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the consolidated financial statementscontinue to be prepared on the going concern basis.
97
Fair value of financial instrumentsWhere the fair values of financial assets and financial liabilities recorded on the consolidated statement of financial position cannot bederived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models.The input to these models is taken from observable market data where possible, but where observable market data are not available,judgment is required to establish fair values. The valuation of financial instruments is described in more detail in Note 42.
Impairment losses on loans and advancesThe Group reviews its individually significant loans and advances at each statement of financial position date to assess whether animpairment loss should be recorded in the income statement. In particular, judgment by management is required in the estimation of theamount and timing of future cash flows when determining the impairment loss. In estimating these cash flows, the Group makes judg-ments about the borrower’s financial situation and the net realizable value of collateral. These estimates are based on assumptions abouta number of factors and actual results may differ, resulting in future changes to the allowance.
Loans and advances that have been assessed individually and found not to be impaired and all individually insignificant loans andadvances are then assessed collectively, in groups of assets with similar risk characteristics, to determine whether provision should bemade due to incurred loss events for which there is objective evidence but whose effects are not yet evident.
The collective assessment takes account of data from the loan portfolio (such as credit quality, levels of arrears, credit utilization, loanto collateral ratios etc), concentrations of risks and economic data (including levels of unemployment, real estate prices indices, countryrisk and the performance of different individual groups).
The impairment loss on loans and advances is disclosed in more detail in note 9.
Impairment of available-for-sale investmentsThe Group reviews its debt securities classified as available-for-sale investments at each statement of financial position date to assesswhether they are impaired. This requires similar judgment as applied to the individual assessment of loans and advances.
The Group also records impairment charges on available-for-sale equity investments when there has been a significant or prolongeddecline in the fair value below their cost. The determination of what is “significant” or “prolonged” requires judgment. In making thisjudgment, the Group evaluates, among other factors, historical share price movements and the duration and extent to which the fair valueof an investment is less than its cost.
Deferred tax assetsDeferred tax assets are recognized in respect of tax losses to the extent that it is probable that taxable profit will be available againstwhich the losses can be utilized. Judgment is required to determine the amount of deferred tax assets that can be recognized, basedupon the likely timing and level of future taxable profits, together with future tax planning strategies.
3. SEGMENTAL INFORMATION
The Group’s segments provide products or services subject to different risks and returns than other segments.
The Group operates in four major business segments: retail, corporate, treasury, money and capital markets, and asset managementand private banking.
Retail banking: Principally handling individual, customers’ deposits and providing consumer loans, overdrafts, credit cards facilities and funds transfer facilities.
Corporate banking: Principally handling loans and other credit facilities and deposit and current accountsfor corporate and institutional customers.
Treasury, money and capital markets: Principally handling various investment services including operations in the money market for the Group’s customers, trading operations (locally and internationally) and management of the liquidity risks and market risks. This segment also handles the management of the Group’s portfolio of equities, debt securities and other financial instruments.
98
Asset management and private banking: Principally providing investment products and services to institutional investors and intermediaries.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource alloca-tion and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects is meas-ured differently from operating profit or loss in the financial statements. Income taxes are not allocated to operating segments.
Interest income is reported net since the majority of the segments’ revenues are from interest. Management primarily relies on netinterest revenue as performance measure, not the gross revenue and expense amounts.
No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the Group’s total rev-enue in 2009 or 2008.
Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.
The following table presents income and profit and certain asset and liability information regarding the Group’s operating segments.
RevenueNet interest incomeNet fee and commission incomeNet trading incomeNet gain on financial assets designated at fair value through profit or lossNet gain on financial investmentsOther operating income
Total operating income
Credit loss income (expense)Write-back of provision on financial investments
Net operating income
Unallocated expensesIncome tax expense
Profit of the year
Segment’s assets
Segment’s liabilities
Treasury, money and capital marketsLL million
2009
Corporate bankingLL million
Retail bankingLL million
Asset management andprivate bankingLL million
UnallocatedLL million
TotalLL million
466,61711,20011,639
7,50738,558
-
535,521
-
15,721
551,242
24,314,720
20,536,777
102,67967,343
-
---
170,022
6,915
-
176,937
4,266,159
4,519,098
58,04316,14024,442
--
18,836
117,461
(1,700)
-
115,761
1,617,871
2,554,587
4,1949,537
-
---
13,731
-
-
13,731
177,370
206,874
-17,558
-
---
17,558
-
-
17,558
832,724
815,959
631,533121,77836,081
7,50738,55818,836
854,293
5,215
15,721
857,229
(347,518)(85,982)
441,729
31,208,844
28,633,295
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
99
100
RevenueNet interest incomeNet fees and commission incomeNet trading incomeNet gain or loss on financial assets designated at fair value through profit or lossNet profit on financial investmentsOther operating incomeCredit loss (expense) incomeWrite back of provision (impairment losses)on financial investments
Net operating income
Total operating expensesNet profit from sale or disposal of other assets
Profit before tax
Total assets
Capital expenditures
2009 LL million
515,01571,56613,419
7,50731,6197,4118,269
-
654,806
(188,734)75
466,147
18,674,224
34,156
Domestic
2008 LL million
389,14560,59110,879
(4,523)7,6553,4185,470
-
472,635
(182,294)725
291,066
15,718,922
37,217
2009 LL million
116,51850,21222,662
-6,939
11,425(3,054)
15,721
220,423
(158,913)54
61,564
12,534,620
85,143
International
2008 LL million
229,08461,64130,426
-2,1544,015
(18,510)
(15,723)
293,087
(130,726)4,299
166,660
11,261,891
63,303
2009 LL million
631,533121,77836,081
7,50738,55818,8365,215
15,721
875,229
(347,647)129
527,711
31,208,844
119,299
Total
2008 LL million
618,229122,23241,305
(4,523)9,8097,433
(13,040)
(15,723)
765,722
(313,020)5,024
457,726
26,980,813
100,520
RevenueNet interest incomeNet fee and commission incomeNet trading incomeNet loss on financial assets designated at fair value through profit or lossNet gain on financial operationsOther operating income
Total operating income
Credit loss income (expense)Impairment losses on financial investments
Net operating income
Unallocated expensesIncome tax expense
Profit of the year
Segment’s assets
Segment’s liabilities
Treasury, money and capital marketsLL million
Corporate bankingLL million
Retail bankingLL million
Asset management andprivate bankingLL million
UnallocatedLL million
TotalLL million
461,32511,91414,269
(4,523)9,809
-
492,794
(14,200)
(15,723)
462,871
20,954,459
17,931,199
117,47471,066
-
---
188,540
982
-
189,522
3,946,658
4,566,084
34,98720,62727,036
--
7,433
90,083
178
-
90,261
1,324,940
1,359,929
4,4438,030
-
---
12,473
-
-
12,473
167,987
172,686
-10,595
-
---
10,595
-
-
10,595
586,769
751,596
618,229122,23241,305
(4,523)9,8097,433
794,485
(13,040)
(15,723)
765,722
(307,996)(78,472)
379,254
26,980,813
24,781,494
2008
Geographic informationThe Group operates in two geographic markets based on the location of its markets and customers. The local market represents theLebanese market and the international market represents markets outside Lebanon. The following table shows the distribution of theGroup’s external net operating income, total assets and capital expenditure by geographical segment.
The Group’s major business segment is banking. Insurance activities represent 2% (2008: 2%) of profit before income tax and 1% (2008:1%) of total assets.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
4. INTEREST AND SIMILAR INCOME
5. INTEREST AND SIMILAR EXPENSES
6. NET FEES AND COMMISSION INCOME
7. NET TRADING INCOME
8. NET PROFIT ON FINANCIAL INVESTMENTS
Financial investments – available-for-saleFinancial investments – classified as loans and receivablesFinancial investments – held to maturityFinancial investments – fair value through profit or lossDeposits and similar accounts with banks and financial institutionsLoans and advances to customersLoans and advances to related parties
2009LL million
389,128684,44427,6483,625
160,777446,272
1,0341,712,928
2008 LL million
493,298332,87329,1083,184
358,869413,558
4771,631,367
Deposits and similar accounts from banks and financial institutionsDeposits from customers and other credit balancesDeposits from related parties
2009LL million
10,5341,064,548
6,3131,081,395
2008 LL million
18,682989,0855,371
1,013,138
Fees and commission incomeLetters of credit, guarantees and acceptancesLoans and advances to customersAsset management and correspondent’s accounts (arising from fiduciary activities)Checking accounts and transfersCredit cardsCustomers’ deposits Insurance premiums’ commissionsOther services
Fees and commission expense:Correspondents’ accounts
2009LL million
26,53822,2639,537
11,20012,25818,54117,55826,840
144,735
(22,957)121,778
2008 LL million
28,32524,0058,03011,91410,27818,73610,59526,325138,208
(15,976)122,232
Debt securitiesEquitiesForeign exchange
2009LL million
1,7936,808
27,48036,081
2008 LL million
4,6734,73031,90241,305
Dividend incomeGain from sale of financial assets classified as loans and receivablesGain from sale of available for sale financial investments
2009LL million
89523,39814,26538,558
2008 LL million
476101
9,2329,809
101
“Equities” income includes the results of buying and selling, and changes in the fair value of equity securities.
“Debt securities” income includes the results of buying and selling and changes in the fair value of debt securities as well as the related inter-est income and expense.
‘Foreign exchange’ income includes gains and losses from spot and forward contracts and other currency derivatives.
9. CREDIT LOSS INCOME (EXPENSES)
10. PERSONNEL EXPENSES
11. OTHER OPERATING EXPENSES
Provisions for loans and advances:Commercial loans (note 19)Consumer loans (note 19)Banks and financial institutions (note 15)Fiduciary customers’ commitments (note 31)Sundry debtors (note 25)
Write-back of provisions for loans and advances:Commercial loans (note 19)Consumer loans (note 19)Unrealized interest (note 19)Off-financial position loansCommitment by signatureSettled legal suitsRisk and charges
2009LL million
(6,744)(3,331)
---
(10,075)
4,9801,6312,4125,529
-65088
15,2905,215
2008 LL million
(24,270)(99)
(3,765)(9,160)(1,275)(38,569)
12,218277
6,6306,169
14221
-25,529(13,040)
Wages and salariesSocial security contributionsProvisions for retirement benefits obligation (note 32)Additional allowances Bonus paid
2009LL million
100,72617,7096,484
22,48244,682
192,083
2008 LL million
89,89815,89310,52617,81840,056174,191
Board of directors’ attendance feesTaxes and feesFee for guarantee of depositsRent and related chargesElectricity and fuelProfessional feesPostage and telecommunicationsMaintenance and repairsTravel expensesInsuranceMarketing and advertisingStationary and printingsFiscal stampsOthers
2009LL million
1,23812,3468,2259,1174,670
13,0369,972
10,8003,3781,7919,6045,1624,119
27,218120,676
2008 LL million
1,1536,5666,7688,5854,71010,85510,7068,3743,9731,20110,2656,9733,42728,864112,420
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
12. INCOME TAX
The components of income tax expense for the years ended 31 December 2009 and 2008 are:
Reconciliation of total tax changeThe relationship between taxable profit and accounting profit of BLOM Bank SAL and its foreign branches and subsidiaries is as follow:
(*) The insurance company in Lebanon is subject to income tax at the rate of 15% calculated based on gross insurance premiumsweighted differently for each class of business.
13. EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing the net profit for the year attributable to ordinary equity holders of the Bank bythe weighted average number of ordinary shares outstanding during the year.
The following table shows the income and share data used in the basic earnings per share calculations:
No figure for diluted earnings per share has been presented as the Bank has not issued any instruments which would have an impact onearnings per share when exercised.
Net profit for the year Less :Proposed dividends on preferred shares (note 38)Minority interestNet profit attributable to ordinary equity holders of the parentWeighted average number of ordinary shares for basic earnings per shareBasic earnings per share
2009
441,729(23,931)(12,171)405,627
20,885,99719,421
2008
379,254(23,931)(13,983)341,340
21,179,58416,116
LL millionLL millionLL millionLL million
LL
103
5% tax paid on interest revenue during the yearIncome tax on profit for the year
2009LL million
32,32753,65585,982
2008LL million
21,67856,79478,472
Profit before income taxLess: Results of the subsidiary insurance company located in Lebanon(*)
Accounting profit before income tax
Add:Provisions non tax deductibleOther non tax deductible chargesUnrealized loss on difference of exchange
Less:Dividends received and previously subject to income taxRemunerations already taxed4% of a subsidiary’s capital eligible to be tax deductibleWrite-back of provisions previously subject to income taxNon taxable incomePermanent deductible chargesLosses related to prior yearsOthers
Taxable profit
Effective income tax rate
Income tax expense in the consolidated income statement
2009LL million
527,711(7,702)
520,009
4,76141,681
868567,319
(3,969) (8,571)
(400)(30,505)(6,582)
(13,895)(41,655)
(172)
461,570
16.29%
85,982
2008LL million
457,726(6,722)
451,004
50,15731,5791,914
534,654
(410)(8,735)(400)
(18,137)(2,956)(49,964)(21,393)
(132)
432,527
17.14%
78,472
There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of approvalof these consolidated financial statements.
14. CASH AND BALANCES WITH CENTRAL BANKS
Cash and balances with the Central Banks include non-interest bearing balances held by the Group at the Bank of Lebanon in coverage ofthe obligatory reserve requirements for all banks operating in Lebanon on deposits in Lebanese Lira as required by the Lebanese bankingrules and regulations. This obligatory reserve is calculated on the basis of 25% of sight commitments and 15% of term commitments.
In addition to the above, all banks operating in Lebanon are required to deposit with the Bank of Lebanon interest- bearing placements atthe rate of 15% of total deposits in foreign currencies regardless of nature.
Foreign subsidiaries are also subject to obligatory reserve requirements with varying percentages, according to the banking rules and regu-lations of the countries in which they are located.
15. DUE FROM BANKS AND FINANCIAL INSTITUTIONS
Time deposits include US$ 185 million (2008: US$ 450 million) being guarantees against short term cash advances in the amount ofEuro 105 million (2008: Euro 290 million). According to the contracts entered into with these banks, the Bank can withdraw theseterm deposits upon the settlement of the short-term cash advances.
The movement of the impairment allowance for placements with other banks is due to the difference of exchange of LL 4 million.
16. DERIVATIVE FINANCIAL INSTRUMENTS
The table below shows the fair values of derivative financial instruments, recorded as assets or liabilities, together with their notionalamounts. The notional amount, recorded gross, is the amount of a derivative’s underlying asset, reference rate or index and is the basis uponwhich changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at the yearend and are indicative of neither the market risk nor the credit risk.
Current accountsCurrent accounts
Time depositsTime depositsDoubtful accounts with banksLess: Impairment allowance for placements with other banks (note 9)Less: Unrealized interest for placements with other banks
2009LL million
554,720
5,231,0275,197
(3,769)(58)
5,232,3975,787,117
2008LL million
533,017
5,282,9885,142(3,765)
-5,284,3655,817,382
Derivatives held-for-tradingForward foreign exchange contractsEquity swaps and options
Derivatives used as fair value hedgesForward foreign exchange contracts(Hedge of net investment in foreign operations)
AssetsLL million
LiablitiesLL million
Total Notionalamount
LL million
21,6325,072
26,704
6,8406,840
33,544
18,4545,072
23,526
--
23,526
3,466,0081,110,0624,576,070
233,059233,059
4,809,129
37,8731,99439,867
--
39,867
30,8361,99432,830
23,94923,94956,779
1,842,08277,325
1,919,407
230,569230,569
2,149,976
AssetsLL million
LiablitiesLL million
Total Notionalamount
LL million
104
Cash on handCurrent accounts with Central BanksDeposits with the Central Banks
2009LL million
168,3311,870,9862,654,6574,693,974
2008LL million
157,2571,262,7702,160,4403,580,467
2009 2008
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
Derivatives often involve at their inception only a mutual exchange of promises with little or no transfer of consideration. However, theseinstruments frequently involve a high degree of leverage and are very volatile. A relatively small movement in the value of the asset, rate orindex underlying a derivative contract may have a significant impact on the profit or loss of the Group.Over-the-counter derivatives may expose the Group to the risks associated with the absence of an exchange market on which to close outan open position.
The Group’s exposure under derivative contracts is closely monitored as part of the overall management of the Group’s market risk (see alsoNote 45).
ForwardsForward contracts are contractual agreements to buy or sell a specified financial instrument at a specific price and date in the future.Forwards are customized contracts transacted in the over-the-counter market.
The Group has credit exposure to the counterparties of forward contracts. Forward contracts are settled gross and are, therefore, consideredto bear a liquidity risk. Forward contracts result in market risk exposure.
OptionsOptions are contractual agreements that convey the right, but not the obligation, for the purchaser either to buy or sell a specific amount ofa financial instrument at a fixed price, either at a fixed future date or at any time within a specified period.
The Group purchases and sells options through regulated exchanges and in the over-the-counter markets. Options purchased by the Groupprovide the Group with the opportunity to purchase (call options) or sell (put options) the underlying asset at an agreed-upon value either onor before the expiration of the option. The Group is exposed to credit risk on purchased options only to the extent of their carrying amount,which is their fair value.
Derivative financial instruments held for trading purposesMost of the Group’s derivative trading activities relate to deals with customers which are normally offset by transactions with othercounterparties. The Group may also take positions with the expectation of profiting from favorable movements in prices, rates orindices. Also included under this heading are any derivatives entered into for hedging purposes which do not meet the IAS 39 hedgeaccounting criteria.
Derivative held for hedging purposesAs part of its asset and liability management, the Group uses derivatives for hedging purposes in order to reduce its exposure tocurrency risk.
The Group uses forward foreign exchange contracts to hedge against specifically identified currency risks.
Hedge of net investment in foreign operationsForward foreign exchange contracts (to sell Euros and buy US Dollars) designated as a hedge of the Bank’s net investment in itsFrench subsidiary, and is being used to hedge the Bank’s investment exposure to foreign exchange risk on this investment amount-ing to Euro 107,904 thousand (2008: same). The notional amount of these contracts amounted to Euro 107,904 thousand (LL 233,059million) as at 31 December 2009 (2008: LL 230,569 million). The forward foreign exchange contracts were revalued as of 31December 2009 and resulted in unrealized gain of LL 6,840 million (2008: unrealized losses of LL 23,949 million). The contractsmature on 4 February 2010 at latest.
17. FINANCIAL ASSETS HELD-FOR-TRADING
Debt securitiesEquitiesInvestment funds
2009LL million
8,65413,3972,712
24,763
2008 LL million
2,3359,7932,13614,264
105
18. FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
(i) The unrealized gain on investments related to unit-linked contracts amounted to LL 3,497 million for the year ended 31 December 2009(2008: unrealized loss of LL 3,138 million)
19. LOANS AND ADVANCES TO CUSTOMERS
Breakdown by economic sector
A reconciliation of the allowance for impairment losses for loans and advances, by class, is as follows:
Convertible bondsInvestments related to unit-linked contracts (i)
2009LL million
66,30573,097
139,402
2008 LL million
40,95041,00581,955
Commercial loansConsumer loansLess: Allowance for impairment lossesAllowance for unrealized interest on impaired loans
2009LL million
4,621,8661,641,713
(178,946)(38,032)
6,046,601
2008LL million
4,102,4851,346,041
(182,260)(35,819)
5,230,447
Agriculture and forestryManufacturingTrade retailTrade wholesaleServicesConstructionFreelance professionsConsumer loans
2009LL million
24,454671,633151,063983,881
1,653,459803,133334,243
1,641,7136,263,579
2008LL million
39,076556,334193,911
1,013,2971,237,941588,088473,838
1,346,0415,448,526
Balance at 1 January Add:Charge for the yearProvision transferred from off financial position - RecoveryForeign exchange difference
Less:Provisions written-offWrite-back of provisionsProvision transferred to off financial positionForeign exchange difference
Balance at 31 December
Individual impairment Provision for loans not classified yet
Gross amount of loans individually determined to be impaired
106
Commercialloans
LL million
Consumerloans
LL millionTotal
LL million
161,159
6,744
-3,083
170,986
(4,685)(4,980)(5,144)
(57)(14,866)156,120
134,61821,502
156,120
202,828
21,101
3,331
-25
24,457
-(1,631)
--
(1,631)22,826
5,07617,75022,826
13,225
182,260
10,075
-3,108
195,443
(4,685)(6,611)(5,144)
(57)(16,497)178,946
139,69439,252
178,946
216,053
231,025
24,270
227(1,122)254,400
(59,423)(12,218)(21,706)
106(93,241)161,159
141,45619,703161,159
204,043
21,311
99
--
21,410
(32)(277)
--
(309)21,101
3,35117,75021,101
10,006
252,336
24,369
227(1,122)275,810
(59,455)(12,495)(21,706)
106(93,550)182,260
144,80737,453182,260
214,049
Commercialloans
LL million
Consumerloans
LL millionTotal
LL million
2009 2008
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
Collateral repossessedDuring the year, the Bank took possession of real estates with a carrying value of LL 14,411 million (2008: LL 15,463 million) at the statementof financial position date, which the Bank is in the process of selling.
A reconciliation of allowance for unrealized interest on impaired loans, by class, as follows:
As required by Bank of Lebanon regulations, impaired loans fulfilling certain conditions have been transferred to off financial position,together with the related allowance for impairment losses provisions and allowance for unrealized interest.
The movement of allowance for impairment losses and allowance for unrealized interest against fully impaired loans included in the offfinancial position accounts is as follows:
Balance at 1 JanuaryAdd:Unrealized interest for the yearForeign exchange differenceTransferred from off-financial position
Less:Recoveries of unrealized interestAmounts written-off Transferred to off-financial position
Balance at 31 December
Unrealized interest on substandard loansUnrealized interest on doubtful loans
2009Commercial
loansLL million
35,819
35,118(1,553)
-69,384
(2,412)(26,505)(2,435)
38,032
13,00025,03238,032
2008Commercial
loansLL million
89,841
7,07011761
97,089
(6,630)(17,664)(36,976)
35,819
12,18723,63235,819
Balance at 1 January Add:Unrealized interest for the yearProvision and unrealized interest transferred from the statement of financial positionForeign exchange difference
Less: Provisions written-backRecoveriesAmounts written-offProvision and unrealized interest transferred to the statement of financial positionForeign exchange difference
Balance at 31 December
2009LL million
83,928
6,7477,579
3698,290
(2,767)(2,762)
(10,066)--
(15,595)82,695
2008LL million
28,312
5,75658,682
-92,750
(3,632)(2,537)(2,251)(288)(114)
(8,822)83,928
107
The fair value of collateral that the Group holds relating to loans and advances to corporate customers individually determined tobe impaired amounts to LL 179,329 million as of 31 December 2009 (LL 122,459 million as of 31 December 2008). The collateralconsists of cash, securities, letters of guarantee and properties.
As for the consumer loans that are individually determined to be impaired, the fair value of the collateral that the Group holds exceedthe carrying value of these loans at the statement of financial position date.
20. BANK ACCEPTANCES / ENGAGEMENTS BY ACCEPTANCES
Acceptances resulted from letters of credit opened for accounts of customers, with deferred payments.
21. NON-CURRENT ASSETS HELD FOR SALE
22. FINANCIAL INVESTMENTS
CostAt 1 January AdditionsDisposalsTranslation difference
At 31 December
ImpairmentAt 1 January
At 31 December
Net carrying valueAt 31 December
2008LL million
20,09915,463(819)22
34,765
(7,204)
(7,204)
27,561
Acceptances as of 31 December
2009LL million
197,637
2009LL million
34,76514,411
(12,189)63
37,050
(7,204)
(7,204)
29,846
2008LL million
202,211
Quoted investments EquitiesDebt securitiesCertificates of deposit – commercial banks and financial institutions
Unquoted investments Government debt securitiesDebt securities (i)Certificates of deposit – Central Bank of LebanonCertificates of deposit – Commercial banks and financial institutionsEquities (ii)Granted financial loansInvestment fund (iii)
Collective impairment
Available-for-sale
investmentsLL million
Financial investments
classified as loans &
receivablesLL million
Held-to-maturity
investmentsLL million
12166,349
121,279287,640
4,313,91113,858
-
72,4606,201
-151
4,406,581-
4,694,221
-554,365
4,557558,922
2,256,217-
5,158,477
124,080-
102,551-
7,641,325-
8,200,247
-440,255
-440,255
267,83536,554
-
30,353---
334,742-
774,997
92267,512
19468,628
4,533,92313,858
-
70,0835,343
-151
4,623,358-
4,691,986
-501,425
4,546505,971
2,393,514-
2,907,053
130,175-
172,594-
5,603,336(15,075)
6,094,232
-411,793
-411,793
198,61624,547
-
----
223,163(650)
634,306
2009
Available- for-sale
investmentsLL million
Financial investments
classified as loans & receivablesLL million
Held-to-maturity
investmentsLL million
2008
108
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
Collective impairment allowance for financial investments classified as loans and receivables and held-to- maturity
A reconciliation of the collective impairment allowance for financial investments classified as loans and receivables and held-to-maturity (relating to unquoted debt securities), is as follows:
All unquoted available-for-sale financial investments are recorded at fair value as of 31 December except for the following:
All unquoted available-for-sale financial investments listed above are recorded at cost since their fair value cannot be reliably esti-mated. There is no market for these investments, and the Group intends to hold them for the long term.
In 2008 and due to the financial crisis in international markets and the ongoing decrease in the market value of some financial instru-ments, the Group’s management decided to provide a collective provision covering any upcoming decrease in the value of its finan-cial assets amounted to USD 10,431 thousand (LL 15,725 million) for the year ended 31 December 2008. This provision was written-bank during 2009 taking into consideration the significant increase in the market value of these financial instruments.
23. PROPERTY AND EQUIPMENT
109
At 1 JanuaryCharge for the yearWrite-back during the yearDifference on exchange
At 31 December
2009LL million
15,725-
(15,721)(4)
-
2008LL million
-15,723
-2
15,725
Debt securities (i)Equities (ii)Investment fund (iii)
2009LL million
13,8586,201
15120,210
2008LL million
13,8585,343151
19,352
CostAt 1 January 2009AdditionsDisposalsTransfersAdjustmentsTranslation difference
At 31 December 2009
DepreciationAt 1 January 2008Charge for the yearRelating to disposalsTranslation difference
At 31 December 2009
Net carrying valueAt 31 December 2009
Freehold landand buildings
LL millionVehicles
LL million
Furniture, officeinstallations and
computerequipmentLL million
217,57524,587(2,043)28,636
-650
269,405
34,6725,959
-(85)
40,546
228,859
4,8071,110(639)
60-
(231)
5,107
2,806814
(590)(147)
2,883
2,224
199,00222,383(4,013)
6,989-
(2,968)
221,393
106,74126,345(2,983)(2,288)
127,815
93,578
47,41167,768
(19,721)(35,910)(9,587)
228
50,189
----
-
50,189
468,795115,848(26,416)
(225)(9,587)(2,321)
546,094
144,21933,118(3,573)(2,520)
171,244
374,850
Advances onacquisition
of fixed assetsand construction
in progressLL million
TotalLL million
Certain freehold land and buildings purchased prior to 1 January 1999 were restated for the changes in the general purchasing power of theLebanese Lira giving rise to a net surplus amounting to LL 14,727 million, which was credited to equity under “reserves forrevaluation variance – real estate”.
24. INTANGIBLE ASSETS
CostAt 1 January 2008AdditionsDisposalsTransfersTranslation difference
At 31 December 2008
DepreciationAt 1 January 2008Charge for the yearRelating to disposalsTranslation difference
At 31 December 2008
Net carrying valueAt 31 December 2008
Freehold landand buildings
LL millionVehiclesLL million
Furniture, officeinstallations and
computerequipmentLL million
182,81236,567(6,595)7,871(3,080)
217,575
31,1985,193(1,123)(596)
34,672
182,903
4,498520(125)
-(86)
4,807
2,078848(124)
4
2,806
2,001
146,11936,335(1,729)18,380(103)
199,002
88,98919,421(1,613)
(56)
106,741
92,261
48,58325,338(421)
(26,251)162
47,411
----
-
47,411
382,01298,760(8,870)
-(3,107)
468,795
122,26525,462(2,860)(648)
144,219
324,576
Advances onacquisition
of fixed assets andconstructionin progressLL million
TotalLL million
CostAt 1 January 2009AdditionsDisposalsTransfersTranslation difference
At 31 December 2009
AmortizationAt 1 January 2009Charge for the yearRelating to disposalsTranslation difference
At 31 December 2009
Net carrying valueAt 31 December 2009
Softwaredevelopment
LL millionKey money
LL million
Advances onacquisition
of intangibleassets
LL million
8,2993,038(149)
23356
11,477
5,9001,623(149)
127
7,501
3,976
9,048---
101
9,149
6,615147
-65
6,827
2,322
475413
(434)(8)
(17)
429
----
-
429
17,8223,451(583)
225140
21,055
12,5151,770(149)
192
14,328
6,727
TotalLL million
110
25. OTHER ASSETS
(i) Compulsory deposits represent amounts deposited with local authorities based on local regulations of the countries in which thesubsidiaries are located, and are detailed as follows:
(ii) Sundry debtors
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
111
CostAt 1 January 2008AdditionsTransfersTranslation difference
At 31 December 2008
AmortizationAt 1 January 2008Charge for the yearTranslation difference
At 31 December 2008
Net carrying valueAt 31 December 2008
Softwaredevelopment
LL millionKey moneyLL million
Advances onacquisition
of intangibleassets
LL million
6,0071,411707174
8,299
4,927799174
5,900
2,399
8,869--
179
9,048
6,37714890
6,615
2,433
887349(707)(54)
475
---
-
475
15,7631,760
-299
17,822
11,304947264
12,515
5,307
TotalLL million
Compulsory deposits (i)Precious metals and stampsCustomers’ transactions between head office and branchesPrepaid expensesTransactions pending between consolidated subsidiariesSundry debtors (ii)Other revenues to be collectedReinsurer’s share of technical reserves Taxes paid in advance Investment in a non-consolidated subsidiary (iii)Other assets
2009LL million
15,094740
13,50522,2756,2528,8747,754
21,846-
5033,120
129,510
2008LL million
15,033615
16,92927,7625,7292,5498,52814,44834,007
5039,950165,600
BLOM Invest SALBank of Syria and Overseas SABLOM Development Bank SAL
2009LL million
1,5009,0944,500
15,094
2008LL million
1,5009,0334,50015,033
Sundry debtorsLess: Provision against sundry debtors
2009LL million
11,613(2,739)
8,874
2008LL million
5,286(2,737)2,549
The movement of provision against sundry debtors is summarized as follows:
(iii) The book value of the subsidiary’s equity which was not consolidated because it is immaterial to the consolidated finan-cial statements as at 31 December is detailed as follows:
26. GOODWILL
Impairment testing of goodwillGoodwill acquired through business combinations has been allocated to two individual cash-generating units, which are sub-sidiaries of the Bank, for impairment testing as follows:
• BLOM Bank Egypt SAE• BLOM Bank (Switzerland) SA
The carrying amount of goodwill allocated to each of the subsidiaries is as follows:
Société de Services d’Assurances et de Marketing SAL
2009LL million
216
2008LL million
163
BLOM Bank Egypt SAEBLOM Bank (Switzerland) SA
2009LL million
61,5501,718
63,268
2008LL million
62,0771,06863,145
Balance at 1 January Provided during the year (Note 9)Translation differenceBalance at 31 December
2009LL million
2,737-2
2,739
2008LL million
1,4661,275
(4)2,737
Cost:At 1 JanuaryTranslation differenceAt 31 December
2009LL million
63,145123
63,268
2008LL million
60,5862,55963,145
112
Shareholders’ equity
Key assumptions used in value in use calculationsThe recoverable amount of BLOM Bank Egypt SAE has been determined based on a value in use calculation, using cash flowprojections based on financial budgets approved by senior management covering a ten-year period. The following rates areused by the Bank.
The calculation of value in use for BLOM Bank Egypt SAE is most sensitive to the following assumptions:• Interest margins;• Discount rates;• Projected growth rates;• Gross domestic product of the country where the subsidiary operates;• Local inflation rates.
Interest marginsInterest margins are based on average values achieved in the 13 months proceeding of the budget period. These areincreased over the budget period for anticipated market conditions.
Discount ratesDiscount rates reflect management’s estimate of return on capital employed. Discount rates are calculated by using theweighted average cost of capital.
Projected growth rates, GDP and local inflation ratesAssumptions are based on management analysis and published industry research.
Sensitivity to changes in assumptionsManagement believes that reasonable possible change in any of the above key assumptions would cause the carrying valueof the units to exceed their recoverable amount.
27. DUE TO BANKS AND FINANCIAL INSTITUTIONS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
Discount rateProjected growth rate (average during the first 5 years)Projected growth rate beyond the five year period
2009%
9.5414.12
0
2008%
9.41120
113
Current accountsTime deposits
2009LL million
305,063400,375705,438
2008LL million
334,912861,834
1,196,746
28. CUSTOMERS' DEPOSITS
Customers' deposits include coded deposit accounts in BLOM Bank SAL and BLOM Invest Bank SAL amounting to LL 82,778million as of 31 December 2009 (2008: LL 64,306 million).
29. CURRENT TAX LIABILITIES
Income tax payableThe relationship between taxable profit and accounting profit of BLOM BANK SAL and its foreign branches and subsidiariesis as follows:
30. OTHER LIABILITIES
(i) Complementary taxes due related to a subsidiary bank represents mainly accruals for additional complementary taxes in asubsidiary resulting from inspection by tax authorities for the years from 1991 onwards. The subsidiary bank settled an amount ofLL 40,133 million in 2009.
Sight depositsTime depositsSaving accountsCredit accounts and deposits against debit accounts
2009LL million
3,666,25512,630,8309,539,9391,022,027
26,859,051
2008LL million
2,632,13110,532,3848,696,333775,247
22,636,095
Income tax liability
Income tax payable is detailed as follows:At 1 January Tax expense for the year Tax paid during the year Exchange difference
At 31 December
2009LL million
48,588
53,15953,655
(58,728)502
48,588
2008LL million
53,159
31,98456,794(35,160)
(459)
53,159
114
Margins on letters of credit Deposits related to entities under constitutionTransactions pending between consolidated subsidiariesAdvances from customers for acquisition of securitiesSundry creditorsDividends payableAccrued expenses Transactions pending between branchesUnearned premiums and liability related to unit linked insurance contractsComplementary taxes due related to a subsidiary bank (i)Other taxes dueOther liabilities
2009LL million
81,134-
21,32222,11941,733
43944,88756,698
189,35210,13617,5866,116
491,522
2008LL million
61,350834
17,02418,75745,819
33940,68617,351164,99350,26912,789
-430,211
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
115
31. PROVISIONS FOR RISKS AND CHARGES
(i) Provisions for risks and charges
(ii) The provision for fiduciary customers’ commitments amounting to LL 9,160 million represents a provision against probable defaultof Investment Dar S.A.K. - Kuwait to settle the fiduciary deposits of BLOM Development Bank SAL’s (a subsidiary) customers.
(iii) Provisions for outstanding claims and IBNR reserves related to subsidiary-insurance companies
32 RETIREMENT BENEFITS OBLIGATION
33. SHARE CAPITAL AND PREMIUMS
a- On 8 May 2008, the nominal value of the common shares was increased from LL 10,000 to LL 10,400 through the transfer of anamount of LL 8,600 million from the free reserves to the share capital.
Provision for risks and charges (i)Provision for fiduciary customers’ commitments (note 9) (ii)Provision for outstanding claims and IBNR reserves related to subsidiary-insurance companies (iii)Other provision
2009LL million
4,3789,160
24,088795
38,421
2008LL million
4,6799,16016,855
78731,481
Balance at 1 JanuaryCharge for the yearProvisions paid during the yearProvisions written-back during the yearExchange differenceBalance at 31 December
2009LL million
4,6791,567
(1,915)-
474,378
2008LL million
5,546637
(1,591)(14)101
4,679
Balance at 1 JanuaryProvision for outstanding claims and IBNR reserves charged for the yearProvisions used during the yearExchange differenceBalance at 31 December
2009LL million
16,8557,056
-177
24,088
2008LL million
9,5127,234
(8)117
16,855
Balance at 1 JanuaryCharge for the year (Note 10)Benefits paidExchange differenceBalance at 31 December
2009LL million
34,5346,484
(2,551)91
38,558
2008LL million
26,16010,526(2,194)
4234,534
Common shares – Authorized, issued and fully paid21,500,000 shares at LL 10,400 per share as of 31 December2009 (2008: same)
Share capitalLL million
223,600
Share premium LL million
374,059
Share premium LL million
374,059
Share capitalLL million
223,600
20082009
116
b- On 16 February 2006, the Bank issued 3,000,000 common shares with a share premium of USD 248,443 thousand (LL 374,059 million).
a- Based on the decision of the ordinary general assembly of the shareholders held on 8 May 2008, the Bank redeemed and can-celled all the preferred shares (2002 issue) and increased the nominal value of the preferred shares from LL 10,000 to LL 10,400through the transfer of an amount of LL 700 million from the free reserves to the share capital.
b- Preferred shares consist of the following:
The total number of preferred shares is 1,750,000 shares as of 31 December 2009 (2008: 1,750,000 shares).
These preferred shares (2004 and 2005 issues) are redeemable 60 days after the annual general assemblies dealing with theaccounts for the years 2009 and 2010 respectively.
In the event of any liquidation, dissolution or winding-up of the Bank, the holders of series 2004 and 2005 preferred shares shall beentitled to be paid out of the assets of the Bank available for distribution to its shareholders on a pro rata basis, before any pay-ment shall be made to common shareholders.
All of the Bank’s common and preferred shares are listed in the Beirut Stock Exchange starting 20 June 2008. Out of the total com-mon shares, 7,389,601 shares are listed as General Depository Receipts (GDRs) in the Luxembourg Stock Exchange.
During 2009, Blom Bank Qatar increased its capital by US$ 5 million (cv LL 7,538 million), where Blom Bank SAL acquired 99% ofthe new issued shares.
Preferred shares – Authorized, issued and fully paid750,000 preferred shares (2004 issue) of LL 10,400 per share as of 31 December 2009 (31 December 2008: same)1,000,000 preferred shares (2005 issue) of LL 10,400 per shareas of 31 December 2009 (31 December 2008: same)
Total preferred shares
Number of shares
Premium (denominated in USD)Non cumulative benefits
4 June 2004 issue
750,000
LL 105,590 million (USD 70,043 thousand) An annual amount for each share equal to USD8.5 based on the exchange rate on the date of theGeneral Assembly Meeting, (subject to theapproval of the Shareholders’ General AssemblyMeeting and the availability of a non-consolidat-ed distributable net income for the year).
Share capitalLL million
7,800
10,400
18,200
Share premium LL million
105,590
140,720
246,310
Share premium LL million
105,590
140,720
246,310
Share capitalLL million
7,800
10,400
18,200
20082009
17 September 2005 issue
1,000,000
LL 140,720 million (USD 93,347 thousand)2005 distributions to be based on a fixedamount of USD 3.75 per share and thereafterat an annual amount equal to 6% of the netconsolidated profit of the Bank, with a mini-mum of 7.5% and a maximum of 9.5% of theissue price (subject to the approval of theShareholder’s General Assembly Meetingand the availability of a non-consolidateddistributable net income for the year).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
117
34. CAPITAL RESERVES
Reserves for general banking risks According to the Bank of Lebanon regulations, banks in Lebanon are required to appropriate from their annual net profit a minimumof 0.2 percent and a maximum of 0.3 percent of total risk weighted assets and off-financial position accounts based on rates speci-fied by the Bank of Lebanon to cover general banking risks. The consolidated ratio should not be less than 1.25 percent of these risksat the end of year ten (2007) and 2 percent at the end of year twenty (2017). This reserve is part of the Group’s equity and cannot bedistributed as dividends. This reserve is based on the denomination (Lebanese Lira and US Dollars) of the risk weighted assets andoff-financial position accounts.
Legal reserveAccording to the Lebanese Code of Commerce and to the Money and Credit Act, banks and companies operating in Lebanon have totransfer 10% of their annual net profit to a legal reserve. This reserve cannot be distributed as dividends.
General reserveThe Group appropriated general reserves from its retained earnings to strengthen its equity. This reserve amounting to LL 326,114million as at 31 December 2009 (2008: LL 270,286 million) is available for dividends distribution.
Reserve for increase of share capitalThe balance amounting to LL 35,669 million (2008: LL 26,658 million) represents a regulatory reserve pursuant to circular no. 167issued by the Banking Control Commission. This reserve cannot be distributed as dividends.
Details of the reserve for increase of share capital are as follows:
Non distributable reservesNon distributable reserves resulted mainly from the increase of share capital of subsidiaries through transfer from the generalreserves and retained earnings.
Recoveries of provisions for doubtful debtsRevaluation reserves for fixed assets soldGain on sale of treasury shares
2009LL million
31,922438
3,30935,669
2008LL million
24,633438
1,58726,658
At 1 January 2008
Appropriation of 2007 profitsCapital increase (note 33)Reallocation of tax related todividends distribution booked in 2007Net gain on sale of treasury shares
At 31 December 2008
Appropriation of 2008 profitsNet gain on sale of treasury shares
At 31 December 2009
Reserve for general banking risksLL million
LegalreserveLL million
General reserveLL million
69,126
10,450-
--
79,576
12,699-
92,275
136,495
25,788-
--
162,283
41,122-
203,405
252,594
35,318(9,300)
(8,326)-
270,286
55,828-
326,114
Reserve forincrease of share capitalLL million
Non distributablereserveLL million
TotalLL million
14,158
12,380-
-120
26,658
7,2931,718
35,669
56,588
--
--
56,588
--
56,588
528,961
83,936(9,300)
(8,326)120
595,391
116,9421,718
714,051
118
35. TREASURY SHARES
Movement of treasury shares recognized in the balance sheet is as follows:
The treasury shares represent Global Depository Receipts (GDR) owned by the Bank. The market value of one GDR was USD 89.80as of 31 December 2009 (2008: USD 72.85).
During 2009, the Bank refunded the distribution of dividends on the treasury shares amounting to LL 5,275 million (2008: LL 1,589million) resulting from the distribution of dividends for all ordinary shares in 2008.
The Group generated profits of LL 1,718 million from the sale of treasury shares during the year 2009 (2008: profits of LL 120 mil-lion). Profit or loss is reflected under “Reserve for increase of share capital” in the “Capital reserves” (note 34).
36. AVAILABLE-FOR-SALE RESERVE
The available-for-sale reserve related to available-for-sale investments are as follows:
37. CASH AND CASH EQUIVALENTS
Balances with the Central Banks include term placements with the Bank of Lebanon, which are considered as cash equivalent basedon a contractual agreement with the Bank of Lebanon.
At 1 January Purchase of treasury shares Sales of treasury sharesAt 31 December
No. of commonshares
LL million
333,732834,968
(586,981)581,719
AmountLL million
36,12214,900(11,145)39,877
AmountLL million
39,87778,386
(59,540)58,723
No. of commonshares
LL million
306,000110,782(83,050)333,732
20082009
Balance at 1 January Net changes in fair values during the yearBalance at 31 December
2009LL million
3,905102,279106,184
2008LL million
13,995(10,090)3,905
Cash and balances with central banks Deposits with banks and financial institutions (whose original maturities are less than 3 months)Debt securities (whose original maturities are less than three months)
Less:Due to banks and financial institutions (whose original maturities are less than 3 months)
2009LL million
4,693,9744,620,657
1,2299,315,860
(620,478)8,695,382
2008LL million
3,438,1764,793,540
15,9208,247,636
(986,136)7,261,500
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
119
38. DIVIDENDS DECLARED AND PAID
According to the General Assembly meetings held during 2009 and 2008, dividends have been distributed as follows:
In the meeting held on 16 March 2010, the board of directors proposed the distribution of dividend from 2009 operations as follows:
39. RELATED PARTY TRANSACTIONS
The Group enters into transactions with major shareholders, directors, senior management, and their related concerns, and entitiescontrolled, jointly controlled or significantly influenced by such parties in the ordinary course of business at commercial interest andcommission rates. All the loans and advances to related parties are performing advances and are free of any provision for possiblecredit losses.
The transactions with related parties are as follows:
The board of directors and senior management remunerations are as follows:
All remunerations paid to board of directors and senior management are short term in nature.
DepositsLoans and advancesIndirect facilitiesInterest received from loans and advancesInterest paid on depositsAccounting services’ revenuesfrom a non-consolidated subsidiary
Major shareholders
LL million
Board of directorsand senior
managementLL million
Otherrelatedparties
LL million
120,1886,682
-
16402
-
109,702-
67
-5,900
-
6644,840
10
1,01811
272
2009LL million
2008LL million
230,55411,522
77
1,0346,313
272
140,2786,926
90
4765,370
203
Distribution to preferred shareholders’ issue 2002 dividends of LL 22,612 / 50 per share in 2008.Distribution to preferred shareholders’ issue 2004 dividends of LL 12,813 / 75 per share(2008: LL 12,813 / 75 per share)Distribution to preferred shareholders’ issue 2005 dividends of LL 14,321 / 25per share (2008: 14,321 / 25 per share)Distribution to common shareholders’ dividends of LL 5,500 per share (2008: LL 5,500 per share)
2009LL million
-
9,610
14,321118,250142,181
2008LL million
16,960
9,610
14,321118,250159,141
Board of directors and senior management remunerations
2009LL million
30,960
2008LL million
25,962
Common shares (LL 6,000 per share)Preferred shares issue 2004 (LL 12,813/75 per share)Preferred shares issue 2005 (LL 14,321/25 per share)
LL million
129,0009,610
14,321152,931
120
40. CONTINGENT LIABILITIES, COMMITMENTS AND LEASING ARRANGEMENTS
Credit – related commitmentsTo meet the financial needs of customers, the Group enters into various irrevocable commitments and contingent liabilities. Theseconsist of financial guarantees, letters of credit and other undrawn commitments to lend. Even though these obligations may not berecognized on the statement of financial position, they do contain credit risk and are therefore part of the overall risk of the Group(see Note 45-1).
Letters of credit and guarantees (including standby letters of credit) commit the Group to make payments on behalf of customers inthe event of a specific act, generally related to the import or export of goods. Guarantees and standby letters of credit carry a similarcredit risk to loans.
The Group has the following credit related commitments:
Capital and operating lease commitmentsCapital expenditure and lease payments that were not provided for as of the consolidated statement of financial position dateare as follows:
Lease arrangementsThe commitments on capital expenditures and operating lease commitments at the statement of financial position date, which werenot provided for, were as follows:
41. FIDUCIARY DEPOSITS, ASSETS UNDER MANAGEMENT AND CUSTODY ACCOUNTS
Fiduciary accounts and financial assets under management include notes, checks, policies, treasury bills/bonds, shares anddocuments for collection held by the Group to the order of third parties.
Capital commitmentsProperty and equipment
Operating lease commitments – Group as lesseeFuture minimum lease payments under operating leases as at 31 December are as follows:During one yearMore than 1 year and less than five yearsMore than five years
Total operating lease commitments at the statement of financial position date
2009LL million
24,731
1,7796,3409,660
17,779
2008LL million
37,685
1,1574,8588,994
15,009
Fiduciary depositsFinancial assets under management
2009LL million
951,3445,312,3686,263,712
2008LL million
1,225,6494,082,5145,308,163
Commitments issued to financial institutionsCommitments issued to customersGuarantees issued to financial institutionsGuarantees issued to customersAcceptances (note 20)
Commitments to lend
2009LL million
17,805330,711209,040505,602197,637
1,260,7952,658,6023,919,397
2008LL million
35,517449,489260,675525,271202,211
1,473,1632,347,5643,820,727
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
121
42. FAIR VALUE OF THE FINANCIAL INSTRUMENTS
A. Determination of fair value and fair value hierarchyThe Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:
31 December 2009
Financial instruments recorded at fair valueThe following is a description of the determination of fair value for financial instruments which are recorded at fair value using val-uation techniques. These incorporate the Group’s estimate of assumptions that a market participant would make when valuing theinstruments.
DerivativesDerivative products valued using a valuation technique with market observable inputs are forward foreign exchange contracts andequity swaps and options. The most frequently applied valuation technique include forward pricing model and swap models, usingpresent value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchangespot and forward rates and interest rate curves.
Financial assetsDerivative financial instruments:Forward foreign exchange contracts held- for- trading Forward foreign exchange contracts used for hedging purposes
Financial assets held- for- trading:Debt securitiesEquitiesInvestment funds
Financial investments designated at fair value through profit or loss:Investments related to unit-linked contractsConvertible bonds
Financial investments available-for-sale:Quoted financial assetsDebt securitiesEquitiesCertificates of deposit – commercial banks and financial institutions
Unquoted financial assets:Government debt securitiesCertificates of deposit – commercial banks and financial institutions
Financial liabilitiesDerivative financial instruments:Forward foreign exchange contracts held for trading
---
8,65413,153
-21,807
-66,30566,305
166,34912
121,279287,640
---
--
26,7046,840
33,544
-244
2,7122,956
73,097-
73,097
----
4,313,91172,460
4,386,371
23,52623,526
---
----
---
----
---
--
Level1LL million
Level 2LL million
Level 3LL million
26,7046,840
33,544
8,65413,3972,712
24,763
73,09766,305
139,402
166,34912
121,279287,640
4,313,91172,460
4,386,371
23,52623,526
TotalLL million
122
Financial investments – available-for-sale Available-for-sale financial assets valued using a valuation technique or pricing models primarily consist of unquoted debt securities and cer-tificates of deposit.
These assets are valued using models which sometimes only incorporate data observable in the market.
Fair value of financial assets and liabilities not carried at fair value The following describes the methodologies and assumptions used to determine fair values for those financial instruments which are notalready recorded at fair value in the financial statements:
(i) Assets for which fair value approximates carrying value For financial assets and financial liabilities that have a short term maturity (less than three months) it is assumed that the carrying amountsapproximate to their fair value. This assumption is also applied to demand deposits, and savings accounts without a specific maturity.
(ii) Fixed rate financial instrumentsThe fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest rates whenthey were first recognised with current market rates for similar financial instruments. The estimated fair value of fixed interest bearingdeposits is based on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and maturity. Forquoted debt issued the fair values are determined based on quoted market prices. For those notes issued where quoted market prices arenot available, a discounted cash flow model is used based on a current interest rate yield curve appropriate for the remaining term to matu-rity and credit spreads.
Set out below is a comparison, by class, of the carrying amounts and fair values of the Group’s financial instruments that are not carried atfair value in the financial statements. This table does not include the fair value of non-financial assets and non-financial liabilities.
B. Reclassification of financial assets2008 was characterized by a substantial deterioration in global market conditions, including a severe shortage of liquidity and cred-it availability. These conditions have led to a reduction in the level of market activity for many assets, and, particularly for residen-tial property-related assets, the inability to sell other than at substantially lower prices. Governments have taken unprecedentedaction to mitigate these circumstances, including the injection of substantial levels of capital into banks, and the provision of bank-ing guarantees and liquidity facilities. However the Lebanese market was not as severely affected as the global market.
�
Financial assetsCash and balances with central banksDue from banks and financial institutionsLoans and advances to customersLoans and advances to related partiesFinancial assets classified as loans and receivablesFinancial investments held-to-maturity
Financial liabilitiesDue to banks and financial institutionsCustomers' depositsRelated parties’ deposits
4,693,9745,787,1176,046,601
11,522
8,200,247774,997
705,43826,859,051
230,554
4,804,8545,817,2386,049,797
11,907
8,831,695745,966
711,01126,930,045
230,852
2009
3,580,4675,817,3825,230,447
6,926
6,094,232634,306
1,196,74622,636,095
140,278
3,810,7055,830,8145,279,381
7,250
5,979,223623,143
1,209,14122,676,813
140,485
Carrying valueLL million
Fair valueLL million
2008
Carrying valueLL million
Fair valueLL million
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
123
Following the amendments to IAS 39 and IFRS 7 Reclassification of Financial Assets (effective from 1 July 2008) and as a result of the con-traction in the market for many classes of assets, the Group has undertaken a review of assets that are classified as “Held-for-trading” and“Available-for-sale”, in order to determine whether this classification remains appropriate. Where it was determined that the market for anasset is no longer active, and that the Group no longer intends to trade, management have reviewed the instrument to determine whether itis appropriate to reclassify it to “Loans and receivables”. This reclassification has only been performed where the Group, at the reclassifica-tion date, has the clear intention and ability to hold the financial asset for the foreseeable future or until maturity.
The following table shows the carrying amount and fair value of financial assets reclassified from “Available-for-sale” to the “Loans andreceivables” category, as at the date of reclassification and as at the reporting date. All transfers occurred on 1 July 2008 and thereafter.There were no reclassifications prior to 1 July 2008.
The following table shows the carrying amount and fair value of financial assets reclassified from “Held-for-trading” to the “Loansand receivables” category, as at the date of reclassification and as at the reporting date. All transfers occurred on 1 July 2008 andthereafter. There were no reclassifications prior to 1 July 2008.
The following table shows the total fair value gains and losses recorded on trading and available for sale assets reclassified to the“Loans and receivables” category, up until the date of transfer. It also shows the undiscounted amount of cash flows expected to berecovered from and the expected effective interest rate applied to, reclassified assets, as assessed at the date of reclassification.
Financial assets reclassified during the yearas at the date of reclassification
Financial assets reclassified during 2008 as at year end
-
2,433,100
-
2,517,836
2009
Available-for-sale
2,771,944
2,784,447
2,771,944
2,657,018
Carrying valueLL million
Fair valueLL million
2008
Carrying valueLL million
Fair valueLL million
Financial assets reclassified during the yearas at the date of reclassification
Financial assets reclassified during 2008 as at year end
-
25,059
-
28,324
2009
Held-for-trading
63,382
62,387
63,382
58,640
Carrying valueLL million
Fair valueLL million
2008
Carrying valueLL million
Fair valueLL million
The following table shows the total fair value gains or losses and the difference net interest income that would have beenrecognized during the period subsequent to reclassification if the Group had not reclassified financial assets from the “Held-for-trading” and “Available-for-sale” to the “Loans and receivables” category. This disclosure is provided for information purposes only;it does not reflect what has actually been recorded in the consolidated financial statements of the Group.
The following table shows the net profit or loss actually recorded on assets reclassified to loans and receivables subsequent toreclassification:
The effect of the reclassification of financial assets on the basic earnings per share is:
Gain on sale of financial investmentsFair value gains and losses which would otherwise have beenrecorded after reclassification, during the current periodNet interest income which would otherwise have been recorded after reclassification, during the current period
Total income or expense which would otherwise have been recorded during the year since reclassification
Income statementLL million
Equity LL million
28,278
5,153
265
33,696
-
210,307
-
210,307
Income statementLL million
Equity LL million
-
(1,703)
54�
(1,649)
-
(116,724)
-
(116,724)
Debt securities2009 2008
2009 2008
Net interest incomeImpairment chargesNet profit
Debt securities held-for-trading
LL million
5,193-
5,193
185,40115,073
200,474
(Decrease) increase of basic earnings per share
2008LL
78
2009LL
(1,613)
Debt securities available for sale
LL million
Debt securities held-for-trading
LL million
1,123-
1,123
54,353(15,073)39,280
Debt securities available for sale
LL million
124
Cost of securities transferredFair value losses recognized in net trading income/equity:Recorded during 2008Recorded during 2007Recorded prior to 2007
Carrying amount at date of reclassification
Expected undiscounted cash recoveries, as assessed at the date of reclassification
Anticipated average effective interest rate over the remaining life of the assets
Debt securitiesheld-for-trading
LL million
Debt securities Available for sale
LL million
62,806
576--
63,382
110,189
7,84%
2,772,702
17,493(2,214)
(16,037)
2,771,944
3,410,339
6,81%
43. MATURITY ANALYSIS OF ASSETS AND LIABILITIES
The table below shows an analysis of assets and liabilities analyzed according to when they are expected to be recovered or settled.
The maturity profile of the Group’s assets and liabilities as at 31 December 2009 is as follows:
ASSETSCash and balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fair value through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesNon-current assets held for saleFinancial investments – available-for-saleFinancial assets classified as loans and receivablesFinancial investments – held-to-maturityInvestment propertiesProperty and equipmentIntangible assetsOther assetsGoodwill
TOTAL ASSETS
LIABILITIESDue to banks and financial institutionsDerivative financial instrumentsCustomers' depositsRelated parties` depositsEngagements by acceptancesCurrent tax liabilitiesOther liabilitiesProvisions for risks and chargesRetirement obligation benefits
TOTAL LIABILITIES
NET
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
2,894,0175,721,689
33,5445,047
4574,086,173
11,522194,475
-1,149,870
939,245192,396
---
112,648-
15,341,083
637,15723,526
26,384,467230,554194,47548,588
468,100-
3,204
27,990,071
(12,648,988)
1,799,95765,428
-19,716
138,9451,960,428
-3,162
29,8463,544,3517,261,002
582,601618
374,8506,727
16,86263,268
15,867,761
68,281-
474,584-
3,162-
23,42238,42135,354
643,224
15,224,537
4,693,9745,787,117
33,54424,763
139,4026,046,601
11,522197,63729,846
4,694,2218,200,247
774,997618
374,8506,727
129,51063,268
31,208,844
705,43823,526
26,859,051230,554197,63748,588
491,52238,42138,558
28,633,295
2,575,549
125
Less than one year
LL million
More than one year
LL millionTotal
LL million
The maturity profile of the Group’s assets and liabilities as at 31 December 2008 is as follows:
44. LEGAL CASES AND CONTINGENT LIABILITIES
Litigation is a common occurrence in the banking industry due to the nature of the business undertaken. The Group has formalcontrols and policies for managing legal claims. Once professional advice has been obtained and the amount of loss reasonablyestimated, the Group makes adjustments to account for any adverse effects which the claims may have on its financial standing. Atyear end, the Group had several unresolved legal claims.
Management, after discussing with its counselors all such cases and proceedings against the Group, considers that the aggregateliability or loss, if any, resulting from an adverse determination would not have a material effect on the consolidated financialposition of the Group.
The Bank’s books in Lebanon have not been reviewed by the tax authorities for the years 2008 and 2009. The ultimate outcome ofany review by the tax authorities on the Bank’s books in Lebanon for these years cannot be presently determined.
The Bank’s books in Lebanon have not been reviewed by the national social Security Fund (NSSF) since 1998. The ultimate outcomeof any review by the NSSF on the Bank’s books in Lebanon from 1998 to 2009 cannot be presently determined.
126
ASSETSCash and balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fair value through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesNon-current assets held for saleFinancial investments – available-for-saleFinancial assets classified as loans and receivablesFinancial investments – held-to-maturityInvestment propertiesProperty and equipmentIntangible assetsOther assetsGoodwill
TOTAL ASSETS
LIABILITIESDue to banks and financial institutionsDerivative financial instrumentsCustomers' depositsRelated parties` depositsEngagements by acceptancesCurrent tax liabilitiesOther liabilitiesProvisions for risks and chargesRetirement obligation benefits
TOTAL LIABILITIES
NET
1,592,2245,482,179
39,8673,793
-3,550,563
6,926202,211
-1,259,321487,49099,963
---
134,709-
12,859,246
1,151,52156,779
22,463,977140,278202,21153,159427,228
-358
24,495,511
(11,636,265)
1,988,243335,203
-10,47181,955
1,679,884--
27,5613,432,6655,606,742534,343
581324,5765,30730,89163,145
14,121,567
45,225-
172,118---
2,98331,48134,176
285,983
13,835,584
3,580,4675,817,382
39,86714,26481,955
5,230,4476,926
202,21127,561
4,691,9866,094,232634,306
581324,5765,307
165,60063,145
26,980,813
1,196,74656,779
22,636,095140,278202,21153,159430,21131,48134,534
24,781,494
2,199,319
Less than one yearLL million
More than one yearLL million
TotalLL million
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
45. RISK MANAGEMENT
The Bank manages its business activities within risk management guidelines as set by the Group’s “Risk Management Policy” approved bythe Board of Directors. The Group recognizes the role of the board of directors and executive management in the risk management processas set out in the Banking Control Commission circular 242. In particular, it is recognized that ultimate responsibility for establishment ofeffective risk management practices and culture lies with the Board of Directors as does the establishing of the Bank’s risk appetite andtolerance levels. The Board of Directors delegates through its Risk Management Committee the day–to–day responsibility for establishmentand monitoring of risk management process across the Bank’s group to the Chief Risk Officer, who is directly appointed by the Board ofDirectors, in coordination with executive management at BLOM Bank SAL.
The Group is mainly exposed to credit risk, liquidity risk, market risk and operational risk.
The Board’s Risk Management Committee has the mission to periodically (1) review and assess the risk management function of theGroup, (2) review the adequacy of the Bank’s capital and its allocation within the Group, and (3) review risk limits and reports andmake recommendations to the Board.
The Chief Risk Officer undertakes his responsibilities through the “Risk Management Department” in Beirut which also acts as GroupRisk Management, overseeing and monitoring risk management activities throughout the Group. The Chief Risk Officer is responsiblefor establishing the function of Risk Management and its employees across the Group.
BLOM Bank’s Group Risk Management aids executive management in monitoring, controlling and actively managing and mitigatingthe Group’s overall risk. The department mainly ensures that:
• Risk policies and methodologies are consistent with the Group’s risk appetite.• Limits and risk across banking activities are monitored throughout the Group.
Through a comprehensive risk management framework, transactions and outstanding risk exposures are quantified and comparedagainst authorized limits, whereas non-quantifiable risks are monitored against policy guidelines as set by the Group’s “RiskManagement Policy”. Any discrepancies, breaches or deviations are escalated to executive senior management in a timely mannerfor appropriate action.
In addition to the Group’s Risk Management in Lebanon, risk managers and / or risk officers were assigned within the Group’s foreignsubsidiaries or branches to report to Group Risk Management and executive senior management in a manner that ensures:
• Standardization of risk management functions and systems developed across the Group.• Regional consistency of conducted business in line with the board’s approved risk appetite.
The major objective of risk management is the implementation of sound risk management practices and the Basel II frame work aswell as all related regulatory requirements within the group. Pillar I capital adequacy calculations have been generated sinceDecember 2004, while preparations for moving on to the more advanced approaches of pillar I have been initiated. Group RiskManagement is progressively complying with the requirements of pillars II and III of the Basel framework.
45-1 Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financialloss. The Group attempts to control credit risk by monitoring credit exposures, limiting transactions with specific counter parties, andcontinuously assessing the creditworthiness of counter parties.
The Group manages credit risk in line with the guidelines set by the Basel Framework and regulatory guidance. The Group has set a creditrisk policy which lays down norms for credit risk governance, methodologies and procedures for credit risk management and measurement.It consists of the following:
• The permissible activities, segments, programs and services that the Group intends to deliver and the acceptable limits;• The mechanism of the approval on credit-facilities;• The mechanism for managing and following up credit-facilities; and• The required actions for analyzing and organizing credit files.
The debt securities included in investments are mainly sovereign risk and standard grade securities. Analysis of investments by counterpartyis provided in notes 17, 18 and 22. For details of the composition of the loans and advances refer to note 19. Information on credit risk relatingto derivative instruments is provided in note 17 and for commitments and contingencies in note 40. The information on the Group’s netmaximum exposure by economic sectors is given in note (A) below.
127
128
The Group’s Risk Management is designed to identify and to set appropriate risk limits and to monitor the risk adherence to limits.Actual exposures against limits are monitored daily, monthly and periodically. Group Risk Management is responsible for monitoringthe risk profile of the Group’s loan portfolio by producing internal reports highlighting any exposure of concern in corporate,commercial and consumer lending. The Group examines the level of concentration whether by credit quality, client groupings oreconomic sector and collateral coverage. Further, the Group monitors non-performing loans and takes the required provisions forthese loans.
The Group in the ordinary course of lending activities holds collaterals and guarantees as security to mitigate credit risk in the loansand advances. Collaterals and guarantees are continuously monitored and revaluated. These collaterals mostly include cashcollateral, quoted shares and debt securities, real estate mortgages, personal guarantees and others. In addition, the Recovery Unitin the Group dynamically manages and takes remedial actions for non-performing loans.
The Group uses an internal classification system based on risk ratings for its corporate and middle market customers. The risk ratingsystem, which is managed by an independent unit, provides a rating based on client and transaction level. The classification systemincludes six grades, of which three grades relate to the performing portfolio (regular credit facilities: risk ratings “1” and “2” andspecial mention – watch list: risk rating “3”), one grade relates to substandard loans (risk rating “4”) and two grades relate to non-performing loans (risk ratings “5” and “6”). Credit cards, personal loans, car loans, housing loans and other loans related to theseloans are classified as regular as they are performing and have timely repayment with no past dues; except for those loans that haveunsettled payments due for more than 90 days. Each individual borrower is rated based on an internally developed debt rating modelthat evaluates risk based on financial as well as qualitative inputs. The associated loss estimate norms for each grade have beencalculated based on the Group’s historical default rates for each rating. These risk ratings are reviewed on a regular basis.
Introduction of the Moody’s Risk Analyst credit analysis and internal ratings system in the domestic market has provided the Bankwith an additional tool to enhance risk measurement and assessment of the corporate and commercial loan portfolios. This systemwill be gradually extended to all group entities over time.
At the same time, implementation of consumer loan application and behavioral scorecards will aid significantly in meeting Basel IIrequirements for the retail portfolio as well as making available new quality management resources.
Non-performing loans are closely monitored and well provisioned as required with remedial actions taken and managed proactivelyby a dedicated Recovery Unit. In line with Basel II, the Group considers payments that are past due for more than 90 days as beingnon-performing.
The Group uses the above internal grading system for the classification of all financial assets portfolio.
A- Risk concentrations: maximum exposure to credit risk without taking account of any collateral and other creditenhancements
The Group concentrations of risk are managed by client/counterparty, by geographical region. The maximum credit exposure to anyclient or counterparty as of 31 December 2009 was LL 306,123 million (2008:LL 188,440 million) before taking account of collateralor other credit enhancements and LL 125,029 million (2008: LL 52,655 million) net of such protection.
The following table shows the maximum exposure to credit risk for the components of the statement of financial position, includingderivatives, by geography before the effect of mitigation through the use of master netting and collateral agreements. Wherefinancial instruments are recorded at fair value, the amounts shown represent the current credit risk exposure but not the maximumrisk exposure that could arise in the future as a result of changes in values.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
Collateral and other credit enhancementsThe amount, type and valuation of collateral is based on guidelines specified in the risk management framework. The main types ofcollateral obtained include real estate, quoted shares, cash collateral and bank guarantees.
The revaluation and custody of collaterals are performed independent of the business units.
Guarantees received from customers are detailed as follows:
Personal guarantees received from customersReal estate guarantees receivedCash collateral received
2009LL million
4,565,1764,020,476
976,2699,561,921
2008LL million
4,283,0133,506,446835,640
8,625,099
Financial assetsBalances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fair value through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesFinancial investments – available-for-saleFinancial assets classified as loans and receivablesFinancial investments – held-to-maturity
Total credit exposure
DomesticLL million
2,922,610585,292
9,90913,724
139,4023,074,309
3,87997,545
3,921,1527,607,132
-
18,374,954
InternationalLL million
1,603,0335,201,825
23,63511,039
-2,972,292
7,643100,092773,069593,115774,997
12,060,740
2009
TotalLL million
4,525,6435,787,117
33,54424,763
139,4026,046,601
11,522197,637
4,694,2218,200,247
774,997
30,435,694
Financial assetsBalances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fair value through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesFinancial investments – available-for-saleFinancial assets classified as loans and receivablesFinancial investments – held-to-maturity
Total credit exposure
2,544,823606,2258,9065,17140,950
2,465,046497
113,1244,091,3915,522,542
4,670
15,403,345
878,3875,211,157
30,9619,09341,005
2,765,4016,42989,087600,595571,690629,636
10,833,441
2008
3,423,2105,817,382
39,86714,26481,955
5,230,4476,926
202,2114,691,9866,094,232634,306
26,236,786
DomesticLL million
InternationalLL million
TotalLL million
129
B- Credit quality per class of financial assetsThe credit quality of financial assets is managed by the Group using internal credit ratings. The table below shows the credit qualityby class of asset for all financial assets exposed to credit risk, based on the Group’s internal credit rating system and the relationshipwith external credit rating. The amounts presented are gross of impairment allowances.
(*) The regular grade includes derivative financial instruments, loans and advances to customers, loans and advances to relatedparties which are not rated by Moody’s.
(*) The regular grade include derivative financial instruments, loans and advances to customers, loans and advance to related partieswhich are not rated by Moody’s.
130
Balances with central banksDue from banks and financial institutionsDerivative financial instruments Financial assets held-for-tradingFinancial assets designated at fair value through profit or lossLoans and advances to customersLoans and advances to related parties Financial investments – available-for-saleQuoted:Debt securities Certificates of deposit
Unquoted:Debt securities Certificates of deposit
Financial assets classified as loans and receivables Financial investments-held-to-maturity Total
Moody’s equivalent
Neither past duenor impaired
4,525,6435,785,747
33,54424,763
139,4025,953,599
11,522
166,349121,279
4,327,76972,460
8,200,247774,997
30,137,321
Aaa-B2*
2009
Regular andspecial
mentionLL million
-----
62,625-
--
----
62,625
Not rated
Past due but notimpaired Individually Impaired
-----
31,302-
--
----
31,302
Not rated
SubstandardLL million
-5,197
---
216,053-
--
----
221,250
Not rated
Nonperforming
LL million
4,525,6435,790,944
33,54424,763
139,4026,263,579
11,522
166,349121,279
4,327,76972,460
8,200,247774,997
30,452,498
TotalLL million
Balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fair value through profit or lossLoans and advances to customers Loans and advances to related parties Financial investments – available-for-saleQuoted:Debt securitiesCertificates of deposit
Unquoted:Debt securitiesCertificates of deposit
Financial assets classified as loans and receivablesFinancial investments-held-to-maturityTotal
Moody’s equivalent
3,423,2105,816,005
39,86714,26481,955
5,183,3436,926
67,512194
4,547,78170,083
6,094,232634,306
25,979,678
Aaa-B3*
-----
23,479-
--
----
23,479
Not rated
-----
27,655-
--
----
27,655
Not rated
-5,142
---
214,049-
--
----
219,191
Not rated
3,423,2105,821,147
39,86714,26481,955
5,448,5266,926
67,512194
4,547,78170,083
6,094,232634,306
26,250,003
Regular andspecial
mentionLL million
Neither past duenor impaired
2008
Regular and specialmention
LL million
Past due but notimpaired Individually Impaired
SubstandardLL million
NonperformingLL million
TotalLL million
Regular andspecial mention
LL million
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
131
C- Aging analysis of past due but not impaired financial assets, by class
See note 19 for more detailed information with respect of the allowance for impairment losses on loans and advances to customers.
Impairment allowanceFor accounting purposes, the Group uses an incurred loss model for the recognition of losses on impaired financial assets. This meansthat losses can only be recognized when objective evidence of a specific loss event has been observed. This approach differs fromthe expected loss model used for regulatory capital purposes in accordance with Basel II.
The main considerations for the loan impairment assessment include whether any payments of principal or interest are overdue bymore than 90 days or whether there are any known difficulties in the cash flows of counterparties, credit rating downgrades, orinfringement of the original terms of the contract. The Group addresses impairment assessment in two areas: individually assessedallowances and collectively assessed allowances.
Individually assessed allowancesThe Group determines the allowances appropriate for each individually significant loan or advance on an individual basis. Itemsconsidered when determining allowance amounts include the sustainability of the counterparty’s business plan, its ability to improveperformance once a financial difficulty has arisen, projected receipts and the expected payout should bankruptcy ensue, theavailability of other financial support, the realisable value of collateral, and the timing of the expected cash flows. The impairmentlosses are evaluated at each reporting date, unless unforeseen circumstances require more careful attention.
Allowances are assessed collectively for losses on loans and advances and for held-to-maturity debt investments that are notindividually significant (including credit cards, residential mortgages and unsecured consumer lending) and for individually significantloans and advances that have been assessed individually and found not to be impaired. Allowances are evaluated separately at eachreporting date with each portfolio.
The collective assessment is made for groups of assets with similar risk characteristics, in order to determine whether provisionshould be made due to incurred loss events for which there is objective evidence but whose effects are not yet evident in theindividual loans assessments. The collective assessment takes account of data from the loan portfolio (such as historical losses onthe portfolio, levels of arrears, credit utilization, loan to collateral ratios and expected receipts and recoveries once impaired) oreconomic data (such as current economic conditions, unemployment levels and local or industry-specific problems). This approximatedelay between the time a loss is likely to have been incurred and the time it will be identified as requiring an individually assessedimpairment allowance is also taken into consideration. Local management is responsible for deciding the length of this period whichcan extend for as long as one year. The impairment allowance is then reviewed by credit management to ensure alignment with theGroup’s overall policy.
Financial guarantees and letters of credit are assessed and provisions are made in a similar manner as for loans.
Commercial loansConsumer loans
Commercial loansConsumer loans
271-
271
32,84412,10144,945
8,9944,910
13,904
3,075430
3,505
2009
45,18417,44162,625
More than 90 days
LL millionTotal
LL million
30 to 60days
LL million
Less than30 days
LL million
60 to 90days
LL million
2008
1,501357
1,858
---
16,6596,82023,479
More than90 days
LL million
Less than90 days
LL million
10,0804,91914,999
5,0781,5446,622
30 to 60days
LL million
Less than30 days
LL millionTotal
LL million
Commitments and guaranteesTo meet the financial needs of customers, the Group enters into various irrevocable commitments and contingent liabilities. Even though theseobligations may not be recognized on the statement of financial position, they do contain credit risk and are therefore part of the overall riskof the Group.
The table below shows the Group’s maximum credit risk exposure for commitments and guarantees.
The maximum exposure to credit risk relating to a financial guarantee is the maximum amount the Group could have to pay if the guaranteeis called on. The maximum exposure to credit risk relating to a loan commitment is the full amount of the commitment. In both cases, themaximum risk exposure is significantly greater than the amount recognized as a liability in the statement of financial position.
Carrying amount of financial assets presented in the statement of financial position whose terms have been renegotiated:
The table below shows the carrying amount of renegotiated financial assets, by class
45-2 Liquidity risk and funding managementLiquidity risk is the risk that the Group will be unable to meet its liabilities when they fall due under normal and stress circumstances.Liquidity risk can be caused by market disruptions or credit downgrades which may cause certain sources of funding to dry upimmediately. To limit this risk, management has arranged diversified funding sources in addition to its core deposit base, managesassets with liquidity in mind, maintaining a healthy balance of cash and cash equivalents and readily marketable securities.
The management of liquidity risk is currently governed by the Group’s Assets and Liabilities Management policy. The main objectivesconverge around the following:
- Set targets and ranges for key financial position or income statement ratios to assure that the needed liquidity capacity of the Groupis maintained at all times, while providing sufficient flexibility to enable the Group to address short term fluctuations in liquiditypressures.- Provide general guidance on the sequence to be followed in drawing on the Group’s funding sources to meet a liquidity drain.- Review the current and prospective liquidity positions and monitor alternative funding sources.- Develop parameters for the pricing and maturity distributions of deposits, loans and investments.- Promulgate a contingency liquidity plan that identifies early indicators of stress conditions and describe actions to be taken in theevent of financial difficulties arising from systemic or other crises, while minimizing adverse long-term implications for the Group’sbusiness.
All assets and liability management issues are subject to review and monitoring by the Asset Liability Committee, which receivesregular reports from the group risk management as well as treasury.
In accordance with Lebanese banking rules and regulations, the Group is required to maintain 40% of its Tier 1 capital in LebaneseLira in liquid assets. It is also required to maintain a non-interest bearing balances at the Bank of Lebanon calculated on the basisof 25% of sight commitments and 15% of term commitments in Lebanese Lira. Regarding foreign currencies, the Group maintainsinterest-bearing placements at the Bank of Lebanon at the rate of 15% of total deposits in foreign currencies regardless of nature.Foreign subsidiaries are also subject to obligatory reserve requirements with varying percentages, according to the banking rules andregulations of the countries in which they are located.
Financial guaranteesLetters of creditOther undrawn commitments to lendOther commitments and guarantees
2008LL million
785,946485,006
2,347,564159,144
3,777,660
2009LL million
714,642348,516
2,658,602173,810
3,895,570
Loans and advances to customers
2008LL million
3,681
2009LL million
38,517
132
The liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating toboth the market in general and specifically to the Group. One of these methods is to maintain limits on the ratio of liquid assets tocustomers’ deposits, set to reflect market conditions. Net liquid assets consist of cash, short-term deposits and liquid debtsecurities available for immediate sale less deposits for banks and financial institutions due to mature within the next month. Theratio during the year was as follows:
45-2-1 Analysis of financial liabilities by remaining contractual maturitiesThe table below summarizes the maturity profile of the Group’s financial liabilities at 31 December based on contractualundiscounted repayment obligations. Trading derivatives are shown at fair value in a separate column. All derivatives used forhedging purposes are shown by maturity, based on their contractual undiscounted repayment obligations. Gross settled, non tradingderivatives are shown separately, by contractual maturity at the foot of the note. As the special commission payments up tocontractual maturity are included in the table, totals do not match with the statement of financial position. The contractualmaturities of assets and liabilities have been determined on the basis of the remaining period at the statement of financial positiondate to the contractual maturity date. Repayments which are subject to notice are treated as if notice were being given immediately.However, the group expects that many customers will not request repayment on the earliest date the Group could be required to payand the table does not reflect the expected cash flows indicated by the Group’s deposit retention history.
At 31 DecemberAverage during the yearHighestLowest
2009%
26.7624.3826.7622.30
2008%
22.9525.5628.2122.95
Financial assetsCash and balances with central banksDue from banks and financial institutions Net settled derivative assetsFinancial assets held-for-tradingFinancial assets designated at fair value through profit or lossLoans and advances to customers Loans and advances to related parties Bank acceptancesFinancial investments – available - for - sale Financial assets classified as loans and receivables Financial investments- held-to-maturity
Total undiscounted financial assets
Financial liabilitiesDue to banks and financial institutionsNet settled derivatives liabilities Customers’ depositsRelated parties’ DepositsEngagements by acceptances
Total undiscounted financial liabilities
Net undiscounted financial assets / (liabilities)
2,039,317554,720
--
-------
2,594,037
305,063-
3,665,254--
3,970,317
(1,376,280)
--
33,544-
-------
33,544
-23,526
---
23,526
10,018
31 December 2009
On demandLL million
Trading derivatives
LL million
842,3284,636,376
-3,849
1,0152,263,518
12,037142,442330,796575,52488,491
8,896,376
332,859-
20,867,948230,869142,442
21,574,118
(12,677,742)
Less than3 months
LL million
34,351553,013
-1,743
3,5022,049,789
14752,033
1,137,0381,010,255
109,594
4,951,465
2,963-
1,985,70357
52,033
2,040,756
2,910,709
3 to 12months
LL million
1,828,52867,226
-5,735
146,8942,014,458
-3,162
3,768,5886,847,706
282,668
14,964,965
43,965-
503,053-
3,162
550,180
14,414,785
1 to 5years
LL million
---
17,224
-358,212
--
153,0862,454,175
322,285
3,304,982
32,365-
28,501--
60,866
3,244,116
Over 5years
LL million
4,744,5245,811,335
33,54428,551
151,4116,685,977
12,184197,637
5,389,50810,887,660
803,038
34,745,369
717,21523,526
27,050,459230,926197,637
28,219,763
6,525,606
TotalLL million
133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
The table below shows the contractual expiry by maturity of the Group’s contingent liabilities and commitments:
The Group expects that not all of the contingent liabilities or commitments will be drawn before expiry of the commitments.
Commitments issued to financial institutionsCommitments issued to customersGuarantees issued to financial institutionsGuarantees issued to customersForeign currencies to receiveOther commitment Commitments to lendCommitments on term financial instruments
Total
17,805-
209,040505,602
--
2,658,602-
3,391,049
-330,711
--
3,699,067173,810
--
4,203,588
2009
On DemandLL million
Less than 3 months
LL million
-------
1,110,062
1,110,062
3 to 12months
LL million
--------
-
1 to 5years
LL million
--------
-
Over 5years
LL million
17,805330,711209,040505,602
3,699,067173,810
2,658,6021,110,062
8,704,699
TotalLL million
Commitments issued to financial institutionsCommitments issued to customersGuarantees issued to financial institutionsGuarantees issued to customersForeign currencies to receiveOther commitment Commitments to lendCommitments on term financial instruments
Total
35,517-
260,675525,271
--
2,347,564-
3,169,027
-449,489
--
2,064,698159,144
--
2,673,331
2008
----
7,953--
77,325
85,278
--------
-
--------
-
35,517449,489260,675525,271
2,072,651159,144
2,347,56477,325
5,927,636
On DemandLL million
Less than3 monthsLL million
3 to 12months
LL million
1 to 5years
LL million
Over 5years
LL millionTotal
LL million
Financial liabilitiesDue to banks and financial institutions Net settled derivative liabilitiesCustomers’ depositsRelated parties depositsEngagements by acceptances
Total undiscounted financial liabilities
334,911-
2,632,131--
2,967,042
-32,830
---
32,830
31 December 2008
On demandLL million
TradingderivativesLL million
797,276-
18,581,026160,693155,289
19,694,284
Less than 3months
LL million
24,102-
1,363,312-
46,922
1,434,336
3 to 12months
LL million
90,360-
171,019--
261,379
1 to 5years
LL million
--
23,499--
23,499
Over 5years
LL million
1,246,64932,830
22,770,987160,693202,211
24,413,370
TotalLL million
134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
45-3 MARKET RISKMarket risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in marketprices. Market risks arise from open positions in interest rate and currency rate as well as equity position, all of which areexposed to general and specific market movements and changes in the level of volatility of market rates or prices such asinterest rates and foreign exchange rates.
Risk management is responsible for generating internal reports quantifying the Group’s earnings at risk due to extrememovements in interest rates, while daily monitoring the sensitivity of the Group’s trading portfolio of fixed income securities tochanges in market prices and / or market parameters. Interest rate sensitivity gaps are reported to executive management andto the Banking Control Commission unconsolidated on a monthly basis and consolidated (Group level) on a semi- annual basis.The Bank’s Asset and Liability Management (ALM) policy assigns authority for its formulation, revision and administration tothe Asset / Liability Management Committee (ALCO) of BLOM Bank SAL Group. Risk management will be responsible formonitoring compliance with all limits set in the ALM policy ranging from core foreign currency liquidity to liquidity mismatchlimits to interest sensitivity gap limits. The Bank is implementing an Asset and Liability Management system “Focus ALM” inthe process of automating the risk management of the Bank’s assets and liabilities from a static and dynamic perspectivesincluding stress testing and extensive scenario analysis.
45-3-1 INTEREST RATE RISKInterest rate risk arises from the possibility that changes in interest rates will affect future profitability or the fair values offinancial instruments. The Group is exposed to interest rate risk as a result of mismatches of interest rate repricing of assetsand liabilities and off-financial position items that mature or reprice in a given period. The Group manages this risk by matchingthe repricing of assets and liabilities through risk management strategies.
Interest rate sensitivityThe following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables heldconstant, of the Group’s income statement or statement of changes in equity.
The sensitivity of the income statement is the effect of the assumed changes in interest rates on the net interest income forone year, based on the floating rate non-trading financial assets and financial liabilities held at the year end, including theeffect of hedging instruments. The sensitivity of equity is calculated by revaluing the available-for-sale investments, based onthe assumption that there are parallel shifts in the yield curve.
The sensitivity of equity is analyzed by maturity of the assets or cash flow hedge swaps. All the non-trading book exposuresare monitored and analyzed in currency concentrations and relevant sensitivities are disclosed in local currency. The sensitivityanalysis does not take account of action by the Group that might be taken to mitigate the effect of such changes.
Currency
Lebanese LiraUnited States DollarEuroOthers
Increase inbasis points
+0.50%+0.50%+0.25%+0.25%
Sensitivity of netinterest income
LL million
(16,234)5,4851,5811,660
0 to 6 monthsLL million
(7,389)(572)
(7)(2,585)
6 monthsto 1 year
LL million
(7,047)(436)
-(2,585)
(1-5)years
LL million
(14,864)(1,612)
-(10,065)
More than 5years
LL million
(6)(277)
-(976)
TotalLL million
(29,306)(2,897)
(7)(16,211)
Sensitivity of equity
2009
Currency
Lebanese LiraUnited States DollarEuroOthers
Decrease inbasis points
-0.50%-0.50%-0.25%-0.25%
Sensitivity of netinterest income
LL million
16,234(5,485)(1,581)(1,660)
0 to 6 monthsLL million
7,03766010
2,637
6 monthsto 1 year
LL million
6,687509
-2,638
(1-5)years
LL million
13,7561,988
-10,284
More than 5years
LL million
6381
-990
TotalLL million
27,4863,538
1016,549
Sensitivity of equity
2009
135
Interest rate sensitivity gapThe table below analyses the Group’s interest rate risk exposure on on-trading financial assets and liabilities. The Group’s assets andliabilities are included at carrying amount and categorized by the earlier of contractual repricing arrangements or maturity dates.
Currency
Lebanese LiraUnited States DollarEuroOthers
Increase in basispoints
+0.50%+0.50%+0.25%+0.25%
Sensitivity of netinterest income
LL million
(9,677)3,0511,378947
0 to 6 monthsLL million
(7,814)(229)
-(154)
6 monthsto 1 yearLL million
(6,775)(207)
-(150)
(1-5)years
LL million
(19,688)(527)
-(1,117)
More than 5years
LL million
-(115)
-(296)
TotalLL million
(34,277)(1,078)
-(1,717)
Sensitivity of equity
2008
Currency
Lebanese LiraUnited States DollarEuroOthers
Decrease in basispoints
-0.50%-0.50%-0.25%-0.25%
Sensitivity of netinterest income
LL million
9,677(3,051)(1,378)(947)
0 to 6 monthsLL million
8,722208
-176
6 monthsto 1 yearLL million
6,943184
-169
(1-5)years
LL million
20,059509
-1,248
More than 5years
LL million
-120
-301
TotalLL million
35,7241,021
-1,894
Sensitivity of equity
2008
2009
ASSETSCash and balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fair value through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesFinancial investments – available-for-saleFinancial assets classified as loans and receivablesFinancial investments – held-to-maturity
TOTAL ASSETS
LIABILITIES Due to banks and financial institutionsDerivative financial instrumentsCustomers' depositsRelated parties` depositsEngagements by acceptancesOther liabilities
TOTAL LIABILITIES
Total interest rate sensitivity gap
Up to 1 month
LL million
810,0994,256,373
--
-1,980,322
11,522-
45,575
18,93858,425
7,181,254
306,644-
18,422,323228,432
--
18,957,399
(11,776,145)
1 to 3months
LL million
37,237359,345
-662
-399,140
--
200,033
247,11290,951
1,334,480
18,964-
5,155,646---
5,174,610
(3,840,130)
3 monthsto 1 year
LL million
11,041516,698
-1,322
-1,760,140
--
829,055
490,613113,818
3,722,687
--
1,862,967---
1,862,967
1,859,720
(1-2)years
LL million
489,93881,332
-869
73,097734,126
--
1,745,176
631,5583,845
3,759,941
--
211,581---
211,581
3,548,360
More than5 years
LL million
95,199--
2,371
-255,309
--
122,110
1,758,176269,127
2,502,292
--
25,387---
25,387
2,476,905
Non interestsensitive
LL million
1,947,979573,36933,54416,234
457198,956
-197,637211,197
736,09834,832
3,950,303
343,65023,526
954,0962,122
197,637491,522
2,012,553
1,937,750
�TotalLL million
4,693,9745,787,117
33,54424,763
139,4026,046,601
11,522197,637
4,694,221
8,200,247774,997
30,604,025
705,43823,526
26,859,051230,554197,637491,522
28,507,728
2,096,297
(2-5)years
LL million
1,302,481--
3,305
65,848718,608
--
1,541,075
4,317,752203,999
8,153,068
36,180-
227,051---
263,231
7,889,837
136
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
45-3-2 CURRENCY RISKCurrency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rate. The Bankprotects its capital and reserves by holding a foreign currency position in US Dollars representing 60% of its shareholders’ equityafter adjustment according to specific requirements set by the Bank of Lebanon. The Bank is also allowed to hold a net tradingposition not to exceed 1 percent of its net shareholders’ equity, as long as the global foreign position does not exceed, at thesame time, 40 percent of its net shareholders’ equity, and that the related banks are abiding in a timely and consistent mannerwith the required solvency rate (Bank of Lebanon circular number 32).
137
ASSETS
Cash and balances with central banks
Due from banks and financial institutions
Derivative financial instruments
Financial assets held-for-trading
Financial assets designated at fair value
through profit or loss
Loans and advances to customers
Loans and advances to related parties
Bank acceptances
Financial investments – available-for-sale
Financial assets classified as loans and
receivables
Financial investments – held-to-maturity
TOTAL ASSETS
LIABILITIES
Due to banks and financial institutions
Derivative financial instruments
Customers' deposits
Related parties` deposits
Engagements by acceptances
Other liabilities
TOTAL LIABILITIES
Total interest rate sensitivity gap
Up to 1 month
LL million
32,022
4,288,765
-
3,470
-
1,598,365
6,926
-
3,708
59,602
83,040
6,075,898
764,536
-
17,741,602
140,278
-
-
18,646,416
(12,570,518)
1 to 3months
LL million
-
637,647
-
-
-
423,219
-
-
177,672
-
53,730
1,292,268
47,586
-
2,828,639
-
-
-
2,876,225
(1,583,957)
3 monthsto 1 yearLL million
75,375
78,888
-
276
-
1,395,898
-
-
1,025,758
313,070
89,172
2,978,437
31,893
-
1,336,392
-
-
-
1,368,285
1,610,152
(1-2)years
LL million
180,901
317,745
-
60
41,005
476,192
-
-
775,376
1,349,996
119,818
3,261,093
-
-
80,542
-
-
-
80,542
3,180,551
More than 5years
LL million
-
-
-
39
-
166,027
-
-
140,750
2,011,188
252,449
2,570,453
-
-
21,308
-
-
-
21,308
2,549,145
Non interestsensitiveLL million
1,674,623
474,005
39,867
8,507
248
265,206
-
202,211
58,597
105,638
4,602
2,833,504
307,506
56,779
559,871
-
202,211
430,211
1,556,578
1,276,926
�TotalLL million
3,580,467
5,817,382
39,867
14,264
81,955
5,230,447
6,926
202,211
4,691,986
6,094,232
634,306
26,394,043
1,196,746
56,779
22,636,095
140,278
202,211
430,211
24,662,320
1,731,723
(2-5)years
LL million
1,617,546
20,332
-
1,912
40,702
905,540
-
-
2,510,125
2,254,738
31,495
7,382,390
45,225
-
67,741
-
-
-
112,966
7,269,424
2008
The table below indicates the consolidated statement of financial position detailed by currency.
The following consolidated statement of financial position as of 31 December 2009, is detailed in Lebanese Lira (LL) and foreigncurrencies, translated into LL.
ASSETSCash and balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fair value through profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesNon-current assets held for saleFinancial investments - available for saleFinancial assets classified as loans and receivablesFinancial investments - held to maturityInvestment propertiesProperty and equipmentIntangible assetsOther assetsGoodwill
TOTAL ASSETS
LIABILITIES Due to banks and financial institutionsDerivative financial instrumentsCustomers' depositsRelated parties` depositsEngagements by acceptancesCurrent tax liabilitiesOther liabilitiesProvisions for risks and chargesRetirement obligation benefits
Total liabilities
NET EXPOSURE
LL million
902,03951,2239,909
-
-599,775
350-
(3,258)3,916,778
3,385,441--
189,2161,170
45,547-
9,098,190
1,525-
7,810,88756,559
-30,708
129,72115,77526,121
8,071,296
1,026,894
US Dollarsin
LL million
2,222,3842,791,059
-20,502
139,4023,296,484
3,842149,400
7,523348,299
4,687,842444,675
-1,482
428,046
-
14,140,944
268,947-
12,986,461114,060149,400
-257,80313,5542,305
13,792,530
348,414
Euro inLL million
84,9591,638,576
--
-234,755
2,59723,263
-13,768
120,861-
618380194
4,745-
2,124,716
274,002-
1,618,0843,862
23,2633,055
28,541--
1,950,807
173,909
Other foreign
currenciesLL million
1,484,5921,306,259
23,6354,261
-1,915,587
4,73324,97425,581
415,376
6,103330,322
-183,772
5,35951,17263,268
5,844,994
160,96423,526
4,443,61956,07324,97414,82575,4579,092
10,132
4,818,662
1,026,332
Total LL million
4,693,9745,787,117
33,54424,763
139,4026,046,601
11,522197,63729,846
4,694,221
8,200,247774,997
618374,850
6,727129,51063,268
31,208,844
705,43823,526
26,859,051230,554197,63748,588
491,52238,42138,558
28,633,295
2,575,549
Total foreign
currenciesLL million
3,791,9355,735,894
23,63524,763
139,4025,446,826
11,172197,63733,104
777,443
4,814,806774,997
618185,634
5,55783,96363,268
22,110,654
703,91323,526
19,048,164173,995197,63717,880
361,80122,64612,437
20,561,999
1,548,655
Foreign currencies in Lebanese Lira
138
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
139
The following consolidated statement of financial position as of 31 December 2008, is detailed in Lebanese Lira (LL) and foreigncurrencies, translated into LL.
ASSETSCash and balances with central banksDue from banks and financial institutionsDerivative financial instrumentsFinancial assets held-for-tradingFinancial assets designated at fair valuethrough profit or lossLoans and advances to customersLoans and advances to related partiesBank acceptancesNon-current assets held for saleFinancial investments - available for saleFinancial assets classified as loans and receivablesFinancial investments - held to maturityInvestment propertiesProperty and equipmentIntangible assetsOther assetsGoodwill
TOTAL ASSETS
LIABILITIES Due to banks and financial institutionsDerivative financial instrumentsCustomers' depositsRelated parties` depositsEngagements by acceptancesCurrent tax liabilitiesOther liabilitiesProvisions for risks and chargesRetirement obligation benefits
Total liabilities
NET EXPOSURE
LL million
646,21966,2348,907
-
-433,889
87-
(2,667)4,090,268
1,117,938--
167,050574
34,450-
6,562,949
12,81927,399
5,557,35936,457
-33,30285,88023,23224,199
5,800,647
762,302
US Dollarsin
LL million
2,103,5572,996,367
-10,683
81,9552,872,684
4,279139,13810,372127,305
4,811,009428,586
-9,637916
33,596-
13,630,084
264,065-
12,278,64658,790139,1381,591
204,900358
1,833
12,949,321
680,763
Euro inLL million
85,3231,610,988
1,353111
-242,5941,89038,775
-7,814
150,314-
581464146
4,029-
2,144,382
706,893-
1,464,32518,08238,7751,32221,945
47208
2,251,597
(107,215)
Other foreign
currenciesLL million
745,3681,143,793
29,6073,470
-1,681,280
67024,29819,856466,599
14,971205,720
-147,4253,67193,52563,145
4,643,398
212,96929,380
3,335,76526,94924,29816,944117,4867,8448,294
3,779,929
863,469
Total LL million
3,580,4675,817,382
39,86714,264
81,9555,230,447
6,926202,21127,561
4,691,986
6,094,232634,306
581324,5765,307
165,60063,145
26,980,813
1,196,74656,779
22,636,095140,278202,21153,159430,21131,48134,534
24,781,494
2,199,319
Total foreign
currenciesLL million
2,934,2485,751,148
30,96014,264
81,9554,796,558
6,839202,21130,228601,718
4,976,294634,306
581157,5264,733
131,15063,145
20,417,864
1,183,92729,380
17,078,736103,821202,21119,857344,3318,24910,335
18,980,847
1,437,017
Foreign currencies in Lebanese Lira
The table below indicates the extent to which the Group was exposed to currency risk at 31 December 2009 on its foreigncurrency positions. The analysis calculates the effects of a reasonably possible movement of the currency rate against theLebanese Lira, with all other variables held constant, including the effect of hedging instruments, on the consolidatedincome statement (due to the fair value of currency sensitive non-trading monetary assets and liabilities) and equity (dueto the change in fair value of currency swaps and forward foreign exchange contracts used as cash flow hedges). Theeffect on equity is not significant. A negative amount in the table reflects a potential net reduction in consolidated incomestatement or equity, while a positive amount reflects a net potential increase.
45-3-3 PREPAYMENT RISKPrepayment risk is the risk that the Group will incur a financial loss because its customers and counterparties repay orrequest repayment earlier than expected, such as fixed rate housing loans when interest rate falls. The fixed rate assets ofthe Group are not significant compared to the total assets. Moreover, other market conditions causing prepayment is not sig-nificant in the markets in which the Group operates. Therefore, the Group considers the effect of prepayment on net interestincome is not material after taking into account the effect of any prepayment penalties.
45-4. OPERATIONAL RISKOperational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail to perform,operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. The Group cannotexpect to eliminate all operational risks, but through a control framework and by monitoring and responding to potential risks, theGroup is able to manage the risks. Controls include effective segregation of duties, access, authorization and reconciliation proce-dures, staff education and assessment processes, including the use of internal audit.
46. CAPITAL MANAGEMENT
The Bank maintains an actively managed capital base to cover risks, inherent in the business. The adequacy of the Bank’s capital ismonitored using, among other measures, the rules and ratios established by the Bank of Lebanon and the Banking ControlCommission.
The primary objectives of the Bank’s capital management are to ensure that the Bank complies with externally imposed capitalrequirements and that the Bank maintains strong credit ratings and healthy capital ratios in order to support its business and to max-imize shareholders’ value.
Banks should maintain a required capital adequacy ratio (not less than 8%) based on their capital funds over the total risk weightedassets. The Bank complies in full with all its externally imposed capital requirements (2008: the same).
The Bank manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk char-acteristics of its activities. In order to maintain or adjust the capital structure, the Bank may adjust the amount of dividend paymentto shareholders, return capital to shareholders or issue capital securities. No changes were made in the objectives, policies andprocesses from the previous years; however, it is under constant scrutiny of the Board.
Currency
USDEUR
Change in currency rate %2009
± 1%± 3%
Effect on profit before tax2009
LL million
± 174± 14,187
Effect on profit before tax2008
LL million
± 6,068± 717
Change in currency rate %2008
± 1%± 3%
140
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 December 2009
141
Regulatory capital
At 31 December 2009 and 2008, the capital consists of the following:
The capital adequacy ratio as of 31 December (including profit for the year less proposed dividends) is as follows:
47. COMPARATIVE INFORMATION
Insurance premiums’ commissions were reclassified from “other operating income” and “other operating expenses” to “fee andcommission income”.
Comparative figures amounting to LL 57,069 million and LL 39,511 million were reclassified accordingly.
Tier 1 capitalTier 2 capital
Total capital
Risk weighted assetsCredit riskMarket riskOperational risk
Total risk weighted assets
2009LL million
2,156,82843,591
2,200,419
14,139,893322,026
1,298,738
15,760,657
2008LL million
1,901,875(7,782)
1,894,093
13,552,886213,936
1,120,450
14,887,272
Tier 1 capital ratio
Total capital ratio
13.68%
13.96%
12.78%
12.72%
CORRESPONDENT BANKS BLOM BANK GROUP MANAGEMENT BLOM BANK GROUP DIRECTORY
COUNTRY
Australia, Sydney
Bahrain, Manam
Canada, Toronto
Denmark, Copenhagen
France, Paris
Germany, Frankfurt am Main
Germany, Frankfurt am Main
Italy, Milan
Italy, Milan
Italy, Rome
Japan, Tokyo
Japan, Tokyo
KSA, Jeddah
KSA, Riyadh
Kuwait, Kuwait
Norway, Oslo
Qatar, Doha
Spain, Madrid
Sweden, Stockholm
Switzerland, Geneva
Switzerland, Zurich
Switzerland, Zurich
Turkey, Istanbul
U.A.E, Dubai
U.K, London
U.K, London
U.S.A, New York
U.S.A, New York
Commonwealth Bank of Australia
National Bank of Bahrain
Canadian Imperial Bank of Commerce (The)
Danske Bank A/S
BLOM BANK France SA
Commerzbank AG
Deutsche Bank AG
Intesa San Paolo SPA
Unicredit SPA
Banca Nazionale Del Lavoro SPA
Bank of Tokyo-Mitsubishi Ltd
JP Morgan Chase Bank N.A.
The National Commercial Bank
Riyad Bank
Gulf Bank KSC
Dnb NOR Bank ASA
Commercial Bank of Qatar (The) (QSC)
Banco Bilbao Vizcaya Argentaria S.A. (BBVA)
Skandinaviska Enskilda Banken AB
BLOM BANK Switzerland SA
Credit Suisse AG
UBS AG
Yapi Ve Kredi Bankasi A.S.
BLOM BANK France SA
BLOM BANK France SA
NATIONAL WESTMINSTER BANK PLC
Bank of New York Mellon (The)
JP Morgan Chase Bank N.A.
CORRESPONDENT BANK
AUD
BHD
CAD
DKK
EUR
EUR
EUR
EUR
EUR
EUR
JPY
JPY
SAR
SAR
KWD
NOK
QAR
EUR
EUR
CHF
EUR
EUR
TRY
AED
GBP
GBP
USD
USD
BLOM BANK Worldwide Correspondent Banks
144
BLOM BANK Group Managemnet and Directory
145
146
151
152
154
156
156
157
157
158
159
159
160
161
161
General Manager - JordanConsultant for General Management in Lebanon
Assistant Regional Manager / Credit
Treasury & Investment ManagerFinancial Controller
Retail ManagerCorporate Manager
Legal ConsultantInternal Audit Manager
IT ManagerRisk Manager
Compliance Manager Central Operations Manager
Personnel
Branch Manager
Chief Representative
Branch Manager
Refer to page 21 until 31 of this report
Dr. Adnan AL ARAJ Mr. Adnan SALLAKHMr. Moder KURDI
Dr. Mohamed AMROMr. Mohanad BALBISSI (AL)Mr. Omar ABDULLAHMr. Wa' el HASSOUNEHMr. Hani DIRANIMr. Said OBEIDALLAHMr. Muhannad ABYADMr. Nabil OBALIMr. Maan ZOABIMr. Eyad ADIMs. Mona KHOUZAI
Ziad EL MURR
Mr. Ramzi AKKARI
Mr. Joseph HAYEK
JORDAN - Regional Management
HEADS OF DEPARTMENTS AND UNITS
BOARD OF DIRECTORS & GENERAL MANAGEMENT
CYPRUS MANAGEMENT
ABU DHABI Representative Office
SYRIA Free Zone
HeadquartersVerdun – Rachid Karami St, BLOM BANK bldg - P.O. Box: 11-1912 Riad El-Solh, Beirut 1107 2807, LebanonPhone: (961-1) 743300 – 738938. Fax: (961-1) 738946 E-mail: [email protected] - www.blom.com.lb
MOHAFAZAT BEIRUT BRANCHES
Main Branch Verdun, Rachid Karami St, BLOM BANK bldgPhone: (961-1) 738938 – 743300. Fax: (961-1) 738946. Senior Manager / Branches: Mr. Walid ARISS
Ashrafieh Sassine SquarePhone: (961-1) 200147/8. Fax: (961-1) 320949. Branch Manager: Mr. Ara BOGHOSSIAN
Ain El-MreissehIbn Sina St – Mashkhas bldgPhone: (961-1) 372780 – 370830. Fax: (961-1) 370237. Branch Manager: Mr. Mahmoud MARRACH
BadaroBadaro Main St - Damascus Road intersection – Buick – Khoury bldgPhone: (961-1) 615818/19/20/21 – 615826. Fax: (961-1) 615825. Branch Manager: Mr. Raoul CHERFAN
BlissBliss St, opposite Hobeish Police Station – Ras Beirut – Al Rayess BldgPhone: (961-1) 363732/34/42. Fax: (961-1) 363732. Branch Manager: Mr. Ziad SROUGI
LEBANON
146
LEBANON
BRANCH NETWORK
Burj Abi HaidarBurj Abi Haidar St, Salam TowerPhone: (961-1) 310687 – 310677/8/9 – 817560. Fax: (961-1) 310679. Branch Manager: Mr. Samer DAYYA
HamraAbdel Aziz St, Daher bldgPhone: (961-1) 346290/1/2/3 – 341955 –343503. Fax: (961- 1) 744407. Senior Manager / Branches: Mr. Sami FARHAT
Hamra - RetailAbdel Aziz St, Daher bldgPhone: (961-1) 747752 /59 /60. Fax: (961-1) 747749. Branch Manager: Mr. Abbas TANNIR
IstiklalIstiklal St, Karakol El-Druze Area, next to Kettaneh Palace, Salhab bldgPhone: (961-1) 738050/1 – 749624. Fax: (961-1) 748337. Branch Manager: Mr. Mohamad Masri SIDANI
Jnah Bir Hassan Area, United Nations St, next to Beirut Hospital, Jaber bldgPhone: (961-1) 855903/4/5. Fax: (961-1) 855906. Branch Manager: Mr. Abbas KALOT
Maarad Emir Bechir St, Hibat el Maarad bldg - DowntownPhone: (961-1) 983230/1/2/3/4. Fax: (961-1) 983230. Branch Manager: Mr. Amer KAMAL
Mar EliasCorniche El Mazraa – opposite Helou’s barracks, Zantout bldg.Phone: (961-1) 818616/7/9 . Fax: (961-1) 818008 . Branch Manager: Mr. Mohamad Abd el wahab Al TABSH
MazraaCorniche El Mazraa, Barbir SquarePhone: (961-1) 648020/1/2 – 664337. Fax: (961-1) 648020. Branch Manager: Mr. Marwan MOHTAR
Mina El HosnBeirut Tower building, Adnan El Hakim street to the south & Fawzi Al Daouk NorthPhone: (961-1) 365234. Fax: (961-1) 365230. Branch Manager: Mr. Samer BOHSALI
NoueiriAl Noueiri Station – Hamada bldgPhone: (961-1) 630309 – 658611 – 658610 – 664489. Fax: (961-1) 630319. Branch Manager: Mr. Yehya ORFALI
RaouchéRaouche Blvd – Al Rayess & Bou Dagher BldgPhone: (961-1) 812603/4/5/6. Fax: (961-1) 801634. Branch Manager: Mr. Mohamad Khodor MARRACH
RmeilAshrafieh, Orthodox Hospital St, Medical Center Phone: (961-1) 565454 – 567140 – 567141. Fax: (961-1) 565252. Branch Manager: Mrs. Salma Rbeiz ACHKOUTY
SaifiAl Arz Street – Akar bldg.Phone: (961-1) 449899 – 581683 – 586340 – 566794 - 587196. Fax: (961-1) 581683. Branch Manager: Dr. Ousama CHAHINE
SanayehChamber of Commerce & Industry bldg.Phone: (961-1) 346042/3 – 748339 – 749623. Fax: (961-1) 346043. Branch Manager: Mrs. Nahida Mehdi WEHBE
Sodeco – Retail BranchSodeco Square, Damascus RoadPhone: (961-1) 611360/1. Fax: (961-1) 611362. Branch Manager: Mrs. Souraya Bshouty KANDIL
Tabaris Gebran Tueini Square - Sursock Tower Phone: (961-1) 203142/3/4. Fax: (961-1) 203145. Senior Manager/Branches: Ms. Claire ABOU MRAD
Tariq Al-JedidehAl Malaab Al Baladi Square – Salim bldg.Phone: (961-1) 818621 – 309959 – 816985. Fax: (961-1) 818620. Branch Manager: Mr. Khodor MNEIMNEH
VerdunVerdun St, opposite F.S.I. Barracks, Abdo bldg.Phone: (961-1) 788412/3 – 800081 – 788411. Fax: (961-1) 800032. Branch Manager: Mr. Hani BAWAB
Verdun - Retail BranchVerdun, Rachid Karami St, BLOM BANK bldg. Phone: (961-1) 750160/1/2/3. Branch Manager: Mr. Marwan PHARAON 147
Ain El-Remaneh Chiyah District, Lamaa St, Next to Kasarjian Barracks Phone: (961-1) 386750/1/2/3. Fax: (961-1) 386750. Branch Manager: Mr. Johnny SALIBI
Aley Al Balakine, Property of Faysal Sultane WahabPhone: (961-5) 556612/13. Fax: (961-5) 556614. Branch Manager: Mrs. May BOU ALWAN
AnteliasNext to the Armenian Patriarchate – Kheirallah bldgPhone: (961-4) 411472 – 520210 – 410123 – 411418 – 410848. Fax: (961-4) 523666. Branch Manager: Mr. Laurent CHEBLI
Aramoun Choueifat – Al Koba, Aramoun Road, Zaynab Center Phone: (961-5) 808591/2/3/4. Fax: (961-5) 808594. Branch Manager: Mrs. Nawal Merhi ABOU DIAB
Burj Al-BarajnehAin El Sekka St – Rahal bldgPhone: (961-1) 450381/2/3/4 – 450446 – 450447. Fax: (961-1) 450384. Branch Manager: Dr. Hassan JABAK
Burj HammoudHarboyan CenterPhone: (961-1) 262067 – 266337/8 – 243604/5 – 242792 – 243139. Fax: (961-1) 266339. Branch Manager: Mr. Youssef HOMSI
ChiyahChiyah Blvd, Round About Mar Mekhayel, Orient Center Bldg.Phone: (961-1) 270172/3/4 – 275783. Fax: (961-1) 270174. Senior Manager / Branches: Mr. Abbas TLAIS
ChoueifatAL Omaraa, Main Road, Al Tiro’s JunctionPhone: (961-5) 433203/6 . Fax: (961-5) 433208. Branch Manager: Mr. Kamal SLIM
DekwanehMain street, Mohana Center, Phone: (961-1) 686072- 686035/6 – 686051. Fax: (961-1) 686095. Branch Manager: Mr. Farid ZOGHBI
DoraBawchrieh, Tripoli Road, Banking Center bldgPhone: (961-1) 256527/28/32/37/38/39/41. Fax: (961-1) 256522. Senior Manager/ Branches: Mrs. Marlène Tranjane DOUMIT
Elissar Beit El Kiko, Antelias - Bickfaya RoadPhone: (961-4) 916111/2/3/4. Fax: (961-4) 916115. Branch Manager: Mr. Joseph Francois GHOUSOUB
Furn el Chebbak – Retail BranchFurn el Chebbak, Abraj Center, Main Str., BeirutPhone: (961-1) 293810 /13. Fax: (961-1) 293816. Branch Manager: Mrs. Alice Haddad AHMARANI
GhobeyriCorniche El Ghobeyri - Chiah Blvd – Tohme & Jaber & Kalot bldgPhone: (961-1) 825509 – 825870 – 821895 – 856219. Fax: (961-1) 820153. Branch Manager: Mrs. Majida Alameh MIKATI
HadathHadath, Sfeir district,Phone: (961-5) 461506 - 461438 - 461365 - 461243. Fax: (961-5) 461815. Branch Manager: Mr. Jules HAIDAR
Haret HreikAl Abiad Area, Sayyed Hadi Nasrallah Highway, Abou Taam & Hoteit bldgPhone: (961-1) 543662 – 543658 – 543659. Fax: (961-1) 543661. Branch Manager: Mr. Ali CHREIF
HazmiehDamascus Road, Joseph Chahine CenterPhone: (961-5) 955240/1/2/3/4. Fax: (961-5) 955240. Branch Manager: Mr. Ziad KAREH
JbeilVoie 13 – Near Mar Charbel JunctionPhone: (961-9) 943702 /3 /4. Fax: (961-9) 943701. Branch Manager: Mr. Zakhia SARKIS
MOHAFAZAT MOUNT LEBANON BRANCHES
148
JouniehFacing “Palais de Justice” – Next to Fouad Chehab PlaygroundPhone: (961-9) 638011/12/13/14. Fax: (961-9) 638011. Branch Manager: Mr. Rachad YAGHI
KaslikKaslik Main St, Debs CenterPhone: (961-9) 640273 – 640095 – 636998/9 – 640297. Fax: (961-9) 831113 Branch Manager: Mr. Charles Nasrallah AOUDE
Mansourieh Mansourieh el Maten, Dar El Ain Plaza – New Highway Phone: (961-4) 532856/7/8. Fax: (961-4) 532854 Branch Manager: Mr. Walid LABBAN
Sin El-FilFar Vision Center Fouad Chehab AvenuePhone: (961-1) 485270/1/2. Fax: (961-1) 485273. Branch Manager: Mr. Fadi EL MIR
Sin El-Fil – RetailHorsh Tabet, Charles De Gaulle St, Tayar CenterPhone: (961-1) 489733 – 489739 – 489750 – 489757. Branch Manager: Mrs. Zeina KHATTAB
Zalka Zalka St, BLOM BANK bldg, Interior RoadPhone: (961-4) 713074/5. Fax: (961-4) 713077. Branch Manager: Mrs. Denise Nasr Abi Raad JALKH
Zouk Mosbeh Zouk Mosbeh,Main St, Le Paradis Centre, Jeita’s cave junction Phone: (961-9) 226991/2/3/4/5. Fax: (961-9) 226990. Branch Manager: Mrs. Marlène Mazraany ABOU NAJM
Tripoli Abi SamraAl-Dinnawi Square, Khaled Darwiche bldgPhone: (961-6) 423565/6/7/8/9. Fax: (961-6) 423565. Branch Manager: Mrs. Salwa Ajaj MERHI
Tripoli – AzmiAzmi St, Fattal bldgPhone: (961-6) 433064 – 443550/1/2. Fax: (961-6) 443550. Branch Manager: Mr. Fouad AL HAJJ
Tripoli – Al TellAbdel Hamid Karameh Square, Ghandour bldgPhone: (961-6) 430153 – 628200/2 – 431624. Fax: (961-6) 628200. Branch Manager: Mr. Chaina ASSI
Tripoli - ZahriehAl Tall St, Alam AL Din & Bissar bldgPhone: (961-6) 430150/2 – 423415 – 423414. Fax: (961-6) 430151. Branch Manager: Mr. Wassim BAGHDADI
ChtauraMain St, Najim El Din bldgPhone: (961-8) 540078 - 544329/30 - 544914. Fax: (961-8) 542504. Branch Manager: Mr. Elie FREIJI
ZahlehManara Center, Fakhoury & Kfoury bldgPhone: (961-8) 807680/1/2/3/4 – 820661. Fax: (961-8) 807680. Branch Manager: Mr. Marwan CHAKRA (AL)
Nabatiyeh Nabatieh Tahta, Hassan Kamel Al Sabbah St, Office 2000 bldgPhone: (961-7) 767854/5/6. Fax: (961-7) 767857. Branch Manager: Mr. Hani HAMMOUD
MOHAFAZAT NORTH LEBANON BRANCHES
MOHAFAZAT BEKAA BRANCHES
MOHAFAZAT NABATIYEH BRANCH
149
SaidaRiad Solh St, Al Zaatari & Fakhoury & Bizri bldgPhone: (961-7) 724866 – 723266 – 722801 – 739276. Fax: (961-7) 722801. Branch Manager: Mr. Moufid NAJJAR
Tyr - AbbassiehTyr, Abbasia, Jabal El Baher, Jabal Amel Hospital's JunctionPhone: (961-3) 059944 – 059933, (961-71) 612312, (961-70) 363830. Branch Manager: Mr. Ali SROUR
TyrMain St, Chehade bldg.Phone: (961-7) 740900 – 741649 – 742903. Fax: (961-7) 348487. Branch Manager: Mrs. Maysaa Arab RAHAL
STAND BY BRANCH MANAGERSMr. Ziad CHANOUHA Mr. Wassim FAHS Mr. Edmond HAMATI Ms. Nelly HARFOUCHE Mr. Joseph KILAJIAN Mr. Antoine MATAR Mr. Ahmad Jamal SINNO Mr. Ahmad Koussai SINNOMr. Adel THAMINE
BLOM BANKRegional Management - Amman18 Al Sharif Abdel Hamid Sharaf St., P.O. Box 930321 Shmeisani, Amman 111 93, JordanPhone: (962-6) 5001200. Fax: (962-6) 5677177, E-mail: [email protected] - www.blom.com.lb
Abdoun Princess Sumaiiah St., Essam Al-Khateeb ComplexPhone: (962-6) 5929663. Fax: (962-6) 5929662. Branch Manager: Mr. Marwan SALAH
Irbid Al-Qubba Circle-Irbid King Abdallah the second St.Phone: (962-2) 7240006. Fax: (962-2) 7240057. Branch Manager: Mr. Ahmad DABAAN
Jubeiha 20 Yajouz St.Phone: (962-6) 5336653. Fax: (962-6) 5336657. Branch Manager: Mr. Omar ABU ASSAF
Mecca Street 152 Mecca St. Al Husseine ComplexPhone: (962-6) 5503131. Fax: (962-6) 5521347. Branch Manager: Mr. Mohannad YOUNES
Shmeisani 18 Al Sharif Abdel Hamid Sharaf StPhone: (962-6) 5001200. Fax: (962-6) 5605652. Branch Manager: Mr. Abdeljawad AL OWAISI
Sweifieh 67 Abed Al Rahim Al Hajj Mohammad StPhone: (962-6) 5865527. Fax: (962-6) 5865346. Branch Manager: Mr. Baker HADDADEEN
Wihdat 453 Al Amir Hassan St, Oum Heiran Phone: (962-6) 4750050. Fax: (962-6) 4750055. Branch Manager: Mr. Iyad GHEITH
Victory House, 205Z Archbishop Makarios Ave, 3030 LimassolP.O.Box: 53243, 3301 Limassol, Cyprus Phone: (357-25) 376433/4/5. Fax: (375-25) 376292, E-mail: [email protected] Manager: Mr. Ziad EL MURR
Al Bateen Towers – Tower C 6 – Suite C 907 - 9th floor, Al Bateen – Bainuna Street – Abu Dhabi – U.A.E.P.O. Box: 63040 - Al Bateen – Abu Dhabi – U.A.E.Phone: (971-2) 6676100. Fax: (971-2) 6676200, E-mail: [email protected] Representative: Mr. Ramzi AKARI
MOHAFAZAT SOUTH LEBANON BRANCHES
JORDAN
CYPRUS
ABU DHABI Representative Office
150
SYRIA Free Zone
Damascus Free Zone, Al-BaramkehPhone: (963-11) 2133170/1. Fax: (963-11)2133173, E-mail: [email protected] Manager: Mr. Joseph HAYEK
Mr. Samer AZHARIDr. Naaman AZHARIHE Sheikh Ghassan Ibrahim SHAKER (Grand Officier de la Légion d’Honneur)Mr. Christian DE LONGEVIALLEMr. Jean-Paul DESSERTINEMr. Marwan JAROUDI
Mr. Samer AZHARIMr. Michel ADWANMr. Gilbert MOINEMr. Iskandar ARAMANMr. Amr EL TURKMr. Bassem ARISSMr. Jean-Pierre BAAKLINIMr. Christian ARLOTMr. Hany BAZ
Chairman & General ManagerHonorary President and Permanent Representative of BLOM BANK S.A.L
Member MemberMemberMember
Chairman & General ManagerDeputy General Manager
Senior ManagerManager Head Office
Senior Manager – LondonRegional Manager – UAE
General Manager – RomaniaRisk Manager
Audit Manager
Board of Directors
General Management
HeadquartersFrance38-40 avenue des Champs-Elysées, 75008 Paris - FrancePhone: (33-1) 44950606. Fax: (33-1) 44950600E-mail : [email protected] - www.blomfrance.com Branch Manager: Mr. Iskandar ARAMAN
DubaiDeira, Al Maktoum St, Sheikh Ahmad Ben Rached al Maktoum bldgPhone: (971-4) 2284655 – 2278196. Fax: (971-4) 2236260. Branch Manager: Mr. Samir HOBEIKA
Sharjah Khaled Lagoon, Corniche al Buhairah, Sheikh Nasser Bin Hamad al Thani bldgPhone: (971-6) 5736700 – 5736100. Fax: (971-6) 5736080. Branch Manager: Mr. Mokhtar KASSEM
London193-195 Brompton Road, London SW3 1LZ – EnglandPhone: (44-20) 75907777. Fax: (44-20) 78237356. Senior Manager: Mr. Amr TURK
FRANCE
UNITED ARAB EMIRATES
UNITED KINGDOM
151
BRANCH NETWORK
ROMANIA
Blom Bank France S.A. Paris, Romania Branch - Headquarter Unirii Bldv. No. 66, Bloc K3, mezanin, Sector 3, Bucharest, P.O. Box 1-850Phone: (40-213) 027201 (06) - Fax: (40-213) 185214 (03)
Headquarter Bucharest – Unirii Customer DeskUnirii Bldv. No. 66, Bloc K3, mezanin, Sector 3, BucharestPhone: (40-213) 027201 (06). Fax: (40-213) 185214 (03)Head of Operations: Mrs. Florentina DELA
Victoria Buzesti Street, No. 72, Sector 1, BucharestPhone: (40-213) 154205 (06/07). Fax: (40-213) 154208 (09)Agency Manager: Mr. Marius VOICULE�
Brasov Mihail Kogalniceanu Street, No. 23, Bloc C7, BrasovPhone: (40-268) 477383 - Fax:(40-268) 477 690Agency Manager: Mr. Marius Constantin VATAVU
Constanta Mamaia Blvd., No. 25 Bis, C.P. 2-89, ConstantaPhone: (40-341) 407485 (89) - Fax: (40-341) 510 952Agency Manager: Mr. Mihai BUTCARU
Voluntari Voluntari Blvd., No. 93-95, Judetul Ilfov Phone: (40-212) 703298 (83). Fax: (40-212) 703771Agency Manager: Mr. Hesham SALEH
Dr. Rateb SHALLAHMr. Amr AZHARIMr. Georges SAYEGHDr. Ihsan BAALBAKIMr. Ibrahim SHEIKH DIBBLOM BANK SALMr. Mehran KHWANDAMr. Habib BETINJANEHMr. Samer AZHARIMr. Saad AZHARIMr. Mohamed Adib JOUD
Mr. Mohamed KHALEDMr. Bachir YAKZANMr. Georges EL HADDADMs. Inaya SOUBRAMr. Mazen ALIEHMs. Rima Jawad ZEINMr. Salem MAHMOUDMr. Jihad EL KHOURYMr. Samir ASMARMr. Elias ANZMr. Ziad KAMAL EL DEENMr. Mhd. Feras SANNOUFA
BOARD OF DIRECTORS
ChairmanVice Chairman
Board Secretary - General ManagerMemberMemberMemberMemberMemberMemberMember
Board Advisor
Retail Banking Credit
Internal AuditInternational
Financial Control & AccountingHuman Resources
Information TechnologyOperations
AdministrationTrade Services
ComplianceRetail Sales
HEAD OF DEPARTMENTS
152
BRANCH NETWORK
HeadquartersAl Harika – Bab Barid - Near the Chamber of Commerce - DamascusP.O. Box: 3103 Damascus – Syria.Phone: +963-11 -2260560. Fax:+963-11-2260555E-mail: [email protected] - www.bso.com.sy
DAMASCUS
Al Harika Al Harika – Bab Barid - Near the Chamber of CommercePhone: (963-11) 2260560. Fax: (963-11) 2260555Branch Manager: Mr. Samir BASSOUS
Al Nejmeh SquareAl Nejmeh Square – Parliament Street - Opposite Dar El Salam SchoolPhone: (963-11) 3344001. Fax: (963-11) 3344021Branch Manager: Mr. Fadi ISTWANI
Al Kassaa Al Kassaa – Burj El Rous – Facing National ParkPhone: (963-11) 5431350. Fax: (963-11) 5431360Branch Manager: Mr. Omar HAMMOUD
AL Mezzeh Mezzeh Highway - Next to Al Razi HospitalPhone: (963-11) 6132411. Fax: (963-11) 6132409Branch Manager: Mr. Tarek SHIHAB
KafarsussehDamascus – Kafarsusseh MallPhone: (963-11) 2143701. Fax: (963-11) 2143705Branch Manager: Ms. Hadil DIB
Al MazraaAl Malek Al Adel StreetPhone: (963-11) 4430140. Fax: (963-11) 4430145Branch Manager: Mr. Eyad AL SATI
Al MidanAl Midan Corniche – Al Ghowas - Behind Al Hassan MosquePhone: (963-11) 8838971. Fax: (963-11) 8838975. Branch Manager: Mr. Bassem MERHEJ
ALEPPOAl Azizieh- Majd El Dine Al Jabiri StreetPhone: (963-21) 2258570. Fax: (963-21) 2249800Branch Manager: Mr. Eddy BECHARA
Al Azizieh Al Azizieh- Majd El Dine Al Jabiri StreetPhone: (963-21) 9960 - 2258570. Fax: (963-21) 2249800Branch Manager: Mr. Eddy BECHARA
Al MadinaSaba’ Bahrat StreetPhone: (963-21) 3312722. Fax: (963-21) 3335377Branch Manager: Mr. Amr KAYAL
Al MuhafazaCairo StreetPhone: (963 21) 2665022. Fax: (963 21) 2665035Branch Manager: Mr. Waleed SAAD
Al Sulaimanieh Aleppo – Al Sulaimanieh StreetPhone: (963-21) 4611102. Fax: (963-21) 4611107Branch Manager: Mrs. Mona JARJOUR
Town MallA’zaz Street - Aleppo- SyriaPhone: (963-21)2521020. Fax: (963-21) 2501025Branch Manager: Mr. Eddy BCHARA
Al Sheikh Najjar Industrial city of Aleppo – SyriaPhone: (963-21) 4716601. Fax: (963-21) 4716605Branch Manager: Mr. Eddy BCHARA
LATTAKIAAl Kamilia, March 8th StreetPhone: (963-41) 452513. Fax: (963-41) 452573Branch Manager: Mr. Zafer WAZZAN
HAMAAl Kouatli StreetPhone: (963-33) 213834. Fax: (963- 33) 213833Branch Manager: Mr. Morhaf AL SHAKAKI
TARTOUSAl Thawra StreetPhone: (963-43) 227474. Fax: (963-43) 226869Branch Manager: Mr. Chamel EL MAKARI
HOMSCity Center Bldg.Phone: (963-31) 9960 - 2453921. Fax: (963-31) 2453936Branch Manager: Ms. Anna DIBE
HassiaHoms - Industrial cityPhone: (963-31) 5360730. Fax: (963-31) 5360735Branch Manager: Ms. Anna DIBE
MahataHoms – Al Mahata areaPhone: (963-31) 2131200. Fax: (963-31) 2131251Branch Manager: Ms. Anna DIBE
Al SWEIDA’A Tishreen StreetPhone: (963 –16) 9960 - 233328Fax: (963-16) 233478Branch Manager: Mr. Toufic BAZ RADWAN
DARA’AAl Kouatli StreetPPhone: (963-15) 9960Fax: (963-15) 233055Branch Manager: Mr. Anwar AL HARES
ADRAADamascus – country side – Industrial city of AdraaaPhone: (963-11) 5851351Fax: (963-11) 5351360Branch Manager: Mr. Hussein OBEID
BRANCHES UNDER ESTABLISHMENTDummar Project – Damascus
SYRIA AND OVERSEAS FOR FINANCIAL SERVICESMazraa – Al Malek El Adel Street – Damascus – SyriaPhone: (963-11) 4432190Fax: (963-11) 4432195
153
Mr. Saad AZHARIMr. Mohammed OZALPDr. Fadi OSSEIRANMr. Shaker ABDULLAHMr. Samir KASSISMr. Elias ARACTINGI
Mr. Mohammed OZALPMr. Talal IBRAHIMMrs. Maya EL KADYMr. Tarek METWALLYMr. Hani DANA
Mr. Abdel Aziz ALYMr. Belal FAROUKMr. Gamal DIAAMrs. Hala EL SAWAFMr. Emad EL GUINDYMr. Khaled YOUSRYMr. Maher ANWARMr. Mohamed RASHWANMr. Talaat EL OMDAMr. Yehia RASHEDMrs. Brigitte ABOU FARAHATMr. Mustapha EZZATMr. Ali ABDELAZIM
ChairmanManaging Director & Chief Executive Officer
MemberMemberMemberMember
Managing Director & Chief Executive OfficerAMD - Total Quality Management
AMD – Retail BankingAMD – Institutional Banking
Chairman’s Advisor & Chief Credit Officer
Governmental AffairsCompliance
Medium Size FinanceHead of Retail Banking
Central OperationsFinancial Institutions
Legal AffairsInternal Audit
Human ResourcesRisk Management
Acting – Administration Group HeadFinancial Control
Remedial Loans
GENERAL MANAGEMENT
Headquarters 64 Mohey Al Din Abo El Ezz, Dokki, Egypt - Phone: (202) 33322770-9. Fax: (202) 37494508 - www.blombankegypt.comAbbasia 109 Abbasia St. - Phone: (202) 29222357 – 33039608. Fax: (202) 29222350. Branch Manager: Mr. Tarek TALAATCairo 15 Abu El Feda St. – Zamalek – CairoPhone: (202) 27355246 – 27368045. Fax: (202) 27351832 – 27358613. Branch Manager: Mrs. Hanaa FOUADHeliopolis 31 El Hegaz St. Heliopolis, In front of Merryland - CairoPhone: (202) 22015236. Fax: (202) 24519710. Acting Branch Manager: Mr. Hisham ABOU SHAHBAAl Hurghada7 El Mena Holiday Inn Center St. AL Saquala Square – Hurghada Phone: (2065) 3447835 – 3448515. Fax: (2065) 3447834. Branch Manager: Mr. Hussein EL SWAIFYIsmalia 15 Street 144 Teraat Al Ismalia – next to El Rai Bridge - IsmaliaPhone: (2064) 3921779. Fax: (2064) 3921767. Branch Manager: Mr. Ahmed ABDEL AAL
154
BOARD OF DIRECTORS
HEAD OF DEPARTMENTS
BRANCH NETWORK
Khalifa El Maamoun20 Al Khalifa El Maamoun St. – Manshiet El Bakry - CairoPhone: (202) 22575625 – 22575645. Fax: (202) 22575651 – 22575665. Branch Manager: Mrs. Heba SAAD
Maadi4 Street 269 from Nasr St. – Albasateen - Maadi – CairoPhone: (202) 25198840 – 25198244. Fax: (202) 25199293 – 25197232. Branch Manager: Mr. Charif MOUHASSEB
Al Mansoura 35 Tanzem Zaghloul Basha St. – MansouraPhone: (2050) 2309123. Fax: (2050) 2309122 – 2309125. Acting Branch Manager: Mr. Abdel Ghany BAKR
Mohandessen54 Lebanon St. – Mohandessen - CairoPhone: (202) 33006518 – 33006502. Fax: (202) 33039806 – 33447734. Branch Manager: Mr. Ahmed SABRY
Mohie Eldin Aboul Ezz 64 Mohie Eldin Aboul Ezz St. Dokki - Cairo Phone: (202) 37494572 – 37494643. Fax: (202) 37494652 – 37494679. Branch Manager: Mrs. Wafaa EZZAT
Nasr CityEl Akkad Mall – El Nasr Road – Nasr City - CairoPhone: (202) 29222360. Fax: (202) 26906803 – 26906805. Branch Manager: Mr. Hesham FOUAD
New Cairo 101 City Commercial Center – El Tagamoa El Khames – New CairoPhone: (202) 29281193 – 29281200. Acting Branch Deputy Manager: Mr. Moataz EL TOHAMY
New Maadi 17/5 El Laselky - Nasr St. – New Maadi - CairoPhone: (202) 29820763 – 29820778. Fax: (202) 27550740 – 27550664. Branch Manager: Mrs. Hanem FAHMY
Opera 17 , Gumhuria Street - CairoPhone: (202) 23923197. Fax: (202) 23925265. Branch Manager: Mr. Ali Ezzat KHAFAGY
Orouba 1 Cleopatra St. El Orouba – Heliopolis – Cairo Phone: (202) 24144769. Fax: (202) 24144793. Branch Manager: Mrs. Nayera LABIB
Shoubra 232 Shoubra St. – EL Khalafawy Square - CairoPhone: (202) 24311416. Fax: (202) 24311364 – 24312678. Branch Manager: Mr. Sherif TAHER
6 th October Central Axis – El Madiena Commercial Center – Area No.4 – 1st District – 6th October cityPhone: (202) 38320602. Fax: (202) 38339279. Branch Manager: Mr. Mamdouh ZAYED
ALEXANDRIA
Montaza 414 Gamal Abd El Naser – El Mandara - AlexandriaPhone: (203) 5488550 – 5488593. Fax: (203) 5488713. Branch Manager: Mr. Magdi SAMAHA
El Shatby 17 Port Said St. – El Shatby – AlexandriaPhone: (203) 5934059 – 5918755. Fax: (203) 5934058. Branch Manager: Mr. Ashraf TAHIO
Sporting 273 El Horria Road – Sporting – AlexandriaPhone: (203) 4282050 – 4271723. Fax: (203) 4200094. Branch Manager: Mrs. Magda FAYED
Stadium 1 Soliman Yousri St. ( Loumomba ) in front of stadium – AlexandriaPhone: (203) 4951629. Fax: (203) 4951635 – 4951636. Branch Manager: Mr. Ayman TALAAT
Manshya 9 Oraby Square – in front of Elguindy El Maghol – AlexandriaPhone: (203) 4856088. Fax: (203) 4856120. Branch Manager: Mr. Sheriff OUF
Sharm El SheikhNaama Bay – El Amir Abdouallah St. – Murray Mall – Sharm El SheikPhone: (2069) 3603546. Fax: (2069) 3603541. Branch Manager: Mr. Alaa METWALLY
Damietta1 Cornish El Nil St. – El Shorta Tower – DamiettaPhone: (2057) 363470. Fax: (2057) 363453. Branch Manager: Mr. Mohamed EL BERGISY
Port Said37 Al Joumhouria Street - Central Bank RoundaboutPhone: (202) 3934622. Acting Branch Manager: Mr. Wassin GALAL
155
Dr. Naaman AZHARIMr. Saad AZHARIMr. André CATTINDr. Werner FREYMe Peter de la GANDARAMr. Ahmad G. SHAKER
Mr. Antoine MAZLOUM
Mr. Thierry OTT
Mrs. Eléonore DAESCHER
Mr. Salim DIAB
Honorary Chairman of the BoardChairman
Vice ChairmanMemberMemberMember
General Manager
Manager
Deputy Manager
Deputy Manager
MANAGEMENT COMMITTEE
1, Rue de la Rôtisserie, Geneva, Switzerland - P.O. Box: 3040 – CH 1211 Geneva 3 – SwitzerlandPhone: (41-22) 8177100. Fax: (41-22) 8177190 - E-mail: [email protected] - www.blombank.ch
Mr. Saad AZHARIMessrs. BLOM BANK SALMr. Joseph Emile KHARRATMr. Marwan JAROUDIMr. Samer AZHARIMr. Habib RAHAL
Mr. Saad AZHARIDr. Fadi OSSEIRAN
Mr. Georges TABETMr. Michel CHIKHANIMr. Elie CHALHOUBMr. Nicolas PHOTIADESMr. Walid KADRIMr. Ramzi TOHMEMr. Marwan MIKHAELMr. Marwan ABOU KHALILDr. Ali BOLBOL
Chairman & General ManagerMemberMemberMemberMemberMember
Chairman & General ManagerGeneral Manager
Assistant General Manager - Head of Private Banking Assistant General Manager - Head of Asset Management
Senior Manager, Head of AdministrationHead of Investment Banking
Head of Planning and OrganizationHead of Operations
Head of ResearchHead of Capital Markets
Economic Advisor
LEBANON
156
BOARD OF DIRECTORS
HEADQUARTERS
GENERAL MANAGEMENT
BOARD OF DIRECTORS
HEADS OF DEPARTMENTS
EGYPT
Verdun , Rachid Karami St, BLOM BANK bldg – 2nd floor - P.O. Box: 11-1540, Riad El Solh, Beirut 1107 2080 Lebanon Phone: (961-1) 738938 – 743300 – 348246. Fax: (961-1) 749148 - E-mail: [email protected] - www.blominvestbank.com
HEADQUARTERS
8 Geziat el Arab st. - Mohandeseen - Phone: (202) 37621611 – 37617683. Fax: (202) 37617683E-mail: [email protected]
Mr. Mohammed OZALPMr. Hani MAHMOUDMr. Mohammed RASHWANMr. Tarek Ibrahim METWALYMrs. Maya Tawfek AL KADYMr. Talal IBRAHIMMr. Michel CHIKHANI
Mr. Hani MAHMOUDMrs. Ola EL MAMDOUHMr. Emam WAKEDMrs. Sandy MORCOSMr. Khaled EL ANSARYMrs. Mayada SAYED
Chairman Vice-Chairman and Managing Director
MemberMemberMemberMemberMember
Managing DirectorDeputy Managing Director
Head of Institutional Sales - LocalHead of Institutional Sales - MENA
Head of Retail Head of Retail Business
Mr. Amr AZHARIMr. Saad AZHARIMr. Marwan JAROUDIMr. Habib RAHALDr. Fadi OSSEIRAN
Mr. Amr AZHARIMr. Mouataz NATAFGIMr. Ghassan CHAMMAS
Mr. Tarek HOUSSAMIMr. Mustapha SIBAIMr. Kamil KASSIR
Chairman & General ManagerMemberMember
Representing BLOM BANK S.A.L.Representing BLOMINVEST BANK S.A.L.
Chairman & General ManagerGeneral Manager
Advisor to the Board of Directors and the Management
Main Branch Manager Financial Control & Investment Manager
Tripoli Branch Manager
157
BOARD OF DIRECTORS
GENERAL MANAGEMENT
HEADQUARTERS
GENERAL MANAGEMENT
BOARD OF DIRECTORS
HEAD OF DEPARTMENTS
Abdel Aziz St, Daher bldg. Beirut, Lebanon
Phone: (961-1) 751090/1/2/3. Fax: (961-1) 751094
E-mail: [email protected] - www.blomdevelopment.com
TripoliAl Mina Road – Al Ahli Bldg.Phone: (961-6) 429101, (961-6) 429102Branch Manager: Mr. Kamil KASSIR
Al Oula Building, 3rd Floor, King Fahd Road, Riyadh, Kingdom of Saudi ArabiaP.O.BOX: 8151 Riyadh - 11482Phone: (966-1) 4949555. Fax: (966-1) 4949551
BRANCH NETWORK
Mr. Abdullah A. AL FOZAN
Mr. Saad Naaman AZHARI
Mr. Mohammad Abdulaziz AL-AGEEL
Mr. Waleed Abdulaziz AL SAGHYIR
Mr. Fahim Mohamed MO'DAD
Dr. Fadi Toufic OSSEIRAN
Mr. Marwan Mohamed Toufic AL JAROUDI
Mr. Khaled Farouk SALHAB
Mr. Nicolas PHOTIADES
Mr. Michel CHIKHANI
Mr. Moataz AL KURDI
Mr. Wael EL-TURK
Mr. Tarek ABDEL REDA
Chairman
Member
Member
Member
Member
Member
Member
Chief Executive Officer
Head of Corporate Finance
Head of Asset Management
Chief Operating Officer
Chief Financial Officer
158
GENERAL MANAGEMENT
BOARD OF DIRECTORS
HEADQUARTERS
Mr. Saad AZHARIMr. Fahim MO’DADMr. Marwan AL JAROUDIMr. Nicolas SAADEMr. Fares EL KADI
Mr. Saad AZHARIMr. Fares EL KADIMr. Abbas BOU DIABMr. Bassam RIZKMr. Gladson DOGHLASS
NBK (Amwal) Tower, 11th floor, Office 1110, Al Wadha Street, West Bay AreaP.O.BOX- 27700 – Doha, QatarPhone: (974-4) 992999. Fax: (974-4) 992990
ChairmanMember
Vice ChairmanMemberMember
ChairmanChief Executive Officer
Head of Compliance & AMLRisk Manager
Head of Private Banking
Mr. Habib RAHALMr. Fateh BEKDACHEMr. Samer AZHARIMr. Victor PEIGNETSCOR SE (Represented by Mr. Patrick LOISY)Mr. Serge OSOUFMr. Rami HOURIEMr. Marwan JAROUDY
Mr. Habib RAHALMr. Fateh BEKDACHEMs. Faten DOUGLAS
Chairman & General ManagerVice-Chairman & General Manager
MemberMemberMemberMemberMemberMember
Chairman & General ManagerVice-Chairman & General Manager
Deputy General Manager
159
GENERAL MANAGEMENT
BOARD OF DIRECTORS
HEADQUARTERS
GENERAL MANAGEMENT
BOARD OF DIRECTORS
HeadquartersVerdun – Rachid Karami St, BLOM BANK bldg, Arope Plaza P.O. Box: 113-5686 Beirut – LebanonPhone: (961-1) 759999. Fax: (961-1) 344012E-mail: [email protected] - www.arope.com
DoraMain Road, Cebaco CenterPhone / Fax: (961 – 1) 262 222
HadathSaint Therese Str. BLOM Bank Branch. Phone: (961 – 5) 461 243Fax: (961 – 5) 461 365
Jounieh Jounieh Highway, Damaa Bldg, 1st FloorPhone: (961 – 9) 643 222
SaidaRiad el Solh Street, Fakhoury Bldg.Phone / Fax: (961 – 7) 725 303
TripoliAl Tall Street, Byssar & Alamuddine Bldg.Phone / Fax: (961 – 6) 446 877
TyrMain Road, BLOM Bank BranchPhone: (961 – 7) 740 900Fax: (961 – 7) 741 649
ZahleZahle's Entrance, Manara CenterPhone / Fax: (961 – 8) 818 640
Mr. Amr AZHARIMr. Fateh BEKDACHEMr. Marwan JAROUDIMr. Hassan BAALBAKIMr. Samer AZHARIMr. Habib BATENJANIMr. Ibrahim EL SHEIKH DIB
Mr. Amr AZHARIMr. Bachar AL HALABI
ChairmanVice-Chairman
MemberMemberMemberMemberMember
ChairmanGeneral Manager
160
BRANCH NETWORK
BRANCH NETWORK
GENERAL MANAGEMENT
BOARD OF DIRECTORS
HeadquartersDamascus Al Rawda, Zuhair Ben Abi Salma St., Malki Bldg N18P.O. Box: 33015 - Phone: (963-11) 9279. Fax: (963-11) 3348144E-mail: [email protected]
AleppoAzizia, Majduldin Al Jabiri Street, P. O. Box: 1293Phone: (963-21) 9279. Fax: (963-21) 2118800
HamaAl Alamayn Street, Al Ashek Building Phone: (963-33) 9279. Fax: (963-33) 33523277
Homs 6th District, City Mall, 1st floorPhone: (963-31) 9279
Latakia Al Kamliah - 8 March Street, Above Bank of Syria and OverseasPhone: (963-41) 9279. Fax: (963-41) 475223
8 Gezirat El Arab, Mohandeseen, Egypt Phone: (202) 33323299 (100 lines). Fax: (202) 33361482 – (202) 33361483. Short No.: (202) 19243 Email: [email protected] - www.aropeegypt.com
8 Gezirat El Arab, Mohandeseen, Egypt Phone: (202) 33323299 (100 lines). Fax: (202) 33361482 – (202) 33361483. Short No.: (202) 19243 Email: [email protected] - www.aropeegypt.com
HEADQUARTERS
161
BRANCH NETWORK
Mr. Hany EL DANAMr. Fateh BEKDACHEMr. Habib RAHALMs. Faten DOUGLASMrs. Maya AL-KADYMr. Tarek METWALLY
ChairmanChairman
Vice-ChairmanMemberMemberMemberMember
GENERAL MANAGEMENT
BOARD OF DIRECTORS
Mr. Michael KELADA Assistant Managing Director & CEO
Mr. Hany EL DANAMr. Fateh BEKDACHEMr. Habib RAHALMrs. Maya AL-KADYMr. Tarek METWALLY
ChairmanChairman
Vice-Chairman and Managing DirectorMemberMemberMember
GENERAL MANAGEMENT
BOARD OF DIRECTORS
Mr. Michael KELADA Assistant Managing Director & CEO
HEADQUARTERS
Opera 17 Gomhoria St., In front of Abdeen Court - CairoPhone: (202) 23927885 - 23923197. Fax: (202) 23925265
Khalifa El Ma’moun 20 Khalifa El Ma’moun St., Heliopolis- CairoPhone: (202) 22575625 - 22575647. Fax: (202) 22575651
Dokki 64 Mohie El Din Abou El Azz St. , Dokki – CairoPhone: (202) 37494572. Fax: (202) 37494643
New Maadi 5, 17 taksim El Laselki , New Maadi– CairoPhone: (202) 25175547 – 25175546. Fax: (202) 25173014 - 25173024
Stadium 1 Soliman Yousry St., In front of the Stadium – AlexandriaPhone: (203) 4951641 - 4951642 - 4951643 – 4951644. Fax: (203) 4951635 - 4951639
New Branches SoonAbbaseya - Shobra - Ouroba
