annual report 2010 - fransabank

Annual Report 2010

Fransabank > Annual Report 2010 1

Contents

Consolidated Financial Highlights

Statement of the Deputy Chairman and Chief Executive Officer

Corporate Governance> Corporate Governance Framework

> Main Holders of Common Shares

> Biographies of Board Members

> Group Chart

> Organization Chart - Fransabank SAL

> Committees - Fransabank SAL

> Management - Fransabank SAL

> Local Banking Subsidiaries - Board of Directors and General Managers

> Overseas Banking Subsidiaries and Associate - Board of Directors and General Managers

Historical Milestones

Management Report> Lebanon’s Economic Performance in 2010

> Consolidated Results of Operations

> Core Banking Activities

- Investment and Private Banking - Corporate Banking - Retail Banking, Branch Management and SME

> Local Subsidiaries and Associate

- BLC Bank SAL- Fransa Invest Bank SAL (FIB)- Lebanese Leasing Company SAL (LLC)- Bancassurance SAL- Société Générale Foncière SAL (Sogefon)

> Overseas Subsidiaries and Associate

- Fransabank (France) SA- Fransabank El Djazaïr SPA- Fransabank Syria SA- Fransabank OJSC (Belarus)- United Capital Bank (Sudan)

> Risk Management

> AML Compliance

> Human Resources

> Information and Communication Technology

Consolidated Financial Statements> Independent Auditors’ Report

> Consolidated Statement of Financial Position

> Consolidated Income Statement

> Consolidated Statement of Comprehensive Income

> Consolidated Statement of Changes in Equity

> Consolidated Statement of Cash Flows

> Notes to the Consolidated Financial Statements

Group Network> Lebanon - Mother Company, Subsidiaries and Associates

> Overseas Subsidiaries

> Overseas Associate

> Representative Offices

2

6

10

12

13

16

18

20

21

24

25

30

34365050

51

51

5555

55

55

56

56

5757

58

58

59

59

60626366

70727475767880

166171173173

prog.10/09

Consolidated Financial Highlights

Fransabank > Annual Report 20102

31.12.06

4,312.34

856.34

54.51

449.25

5,228.39

25.57%

-

61

1,214

1,507.5

prog.07/06 31.12.07

6,173.21

1,430.32

60.83

517.75

7,228.98

17.89%

-

103

1,777

1,507.5

+16%

+20%

+45%

+46%

+17%

prog.08/07 31.12.08

7,149.64

1,715.55

88.33

756.55

8,454.52

27.93%

10.22%

103

1,957

1,507.5

+26%

+35%

+18%

+42%

+28%

prog.09/08 31.12.09

9,013.02

2,308.95

104.22

1,074.27

10,812.62

-

11.85%

104

2,475

1,507.5

+12%

+36%

+40%

+20%

+13%

+43%

+67%

+12%

+15%

+38%

31.12.10

10,081.95

3,141.85

145.75

1,287.55

12,243.95

-

12.00%

107

2,702

1,507.5

In million of USD

Customers’ Creditor Accounts

Loans and Advances to Customers (Net)

Net Profit for the Financial Year

Shareholders' Equity

Total Assets

Solvency Ratio as per Basel I Requirements

(net profit included after distribution of dividends)

Solvency Ratio as per Basel II Requirements

(net profit excluded)

Number of Local Branches

Staff Number

Exchange Rate USD/LBP

2006

2007

2008

2009

2010

0

3,000

6,000

9,000

12,000

15,000

5,2

28

.39 7

,22

8.9

8

8,4

54

.52 1

0,8

12

.62

12,2

43.9

5

2006

2007

2008

2009

2010

Total Assets(in million of USD)

+23.71%CAGR

Loans & Advances to Customers (Net)(in million of USD)

+38.40%CAGR

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1,4

30

.32

1,7

15

.55

2,3

08

.95

85

6.3

4

3,14

1.85

54

.51

60

.83

88

.33

10

4.2

2

Net Profit for the Financial Year(in million of USD)

+27.87%CAGR

1,29

0

0

30

60

90

120

150

145.

75

2006

2007

2008

2009

2010

0

50

100

150

200

250

300

11

7.8

1

12

8.0

3

19

2.5

0

20

9.6

1

Net Interest Income(in million of USD)

+22.00%CAGR

260.

95

2006

2007

2008

2009

2010

16

.53 2

0.9

0

28

.02

34

.28

(in million of USD)

+29.35%CAGR

0

10

20

30

40

50

46.2

7

2006

2007

2008

2009

2010

0

5

10

15

20

25

30

35

4,3

12

.34 6

,17

3.2

1

7,1

49

.64 9

,01

3.0

2

Customers’ Creditor Accounts(in million of USD)

+23.65%CAGR

0

2,000

4,000

6,000

8,000

10,000

12,000

10,0

81.9

5

44

9.2

5

51

7.7

5

75

6.5

5

1,0

74

.27

Shareholders’ Equity(in million of USD)

+30.11%CAGR

0

300

600

900

1,200

1,500

1,28

7.55

2006

2007

2008

2009

2010

2006

2007

2008

2009

2010

19

.86

% 23

.17

%

24

% 25

.62

%

Loans & Advances to Customers to Customers' Creditor Accounts

31.1

6%

2006

2007

2008

2009

2010

Net Fee & Commission Income


Look at the solar sideOnly 10% of solar energy is actually used when in just 15 minutes

of full sun, we could capture enough solar energy to provide the

electrical needs of everyone on the whole planet for a full year.

Source: www.brennerbooks.com, “Solar Facts and Figures”, 2010.

Statement of the Deputy Chairman and Chief Executive Officer


The year 2010 carries a very special significance for

Fransabank Group. It is at the eve of its 90th anniversary

and marks at the same time another record

performance year for the Group. In this context,

the year 2010 evidenced a strong profit growth of

39.84%, translated into net profit for USD 145.75

million for the Group, and USD 92.59 million for

the mother company, Fransabank SAL. This growth

is mainly due to the Group’s effective strategy at

home and in selective regional and international

markets, complimented by the Group’s efficient

management of its expenses exposure. Total

assets reached USD 12.24 billion, growing by

13.24% relative to end of 2009; customers’

deposits reached USD 10.08 billion, growing by

11.86% as compared to the same period of 2009 and

loans portfolio reached USD 3.14 billion, growing

by 36.07% as compared to the same period of

2009. The cost-to-income ratio stood at 48.30% in

the year 2010 as compared to 54.70% in the year

2009. Return on Average Common Equity and

Return on Average Assets stood at 13.06% and

1.26% respectively. The capital adequacy ratio

stood at 12% as at December 31, 2010, which is

above the minimum capital adequacy ratio

required by the Central Bank of Lebanon of 8%. The

proceedings evidenced and further accentuated the

Group core strength as built mainly on market

share and profitability.

Fransabank Group is committed: to be one of the

most leading and prominent financial Groups within

the local and regional markets; to provide quality

service to its customers through innovation,

cutting-edge, value-added banking services and

financial solutions; to invest in and empower the

professional career path of its employees; while

aligning responsible business practices and social

investments to create long-term value and sustain-

ability for the Group and for its communities.

Fransabank Group has built up its core strength to

further advance and consolidate its leading

position in the banking sector whether locally,

regionally and internationally on a multi-

dimensional business development strategy. This

was achieved through very selective regional and

international expansion strategy, acquisitions and

mergers, product diversification and local and

regional branch network expansion.

At the international and regional levels, Fransabank

Group is present in eight countries, namely France,

Algeria, Syria, Sudan, Belarus, Libya, Cuba and most

recently in Cyprus, in addition to Lebanon of course.

Another emerging market to Fransabank is Iraq,

whereby the related implementation process has

been initiated to open branches in Iraq. This network

of subsidiaries, associate and representative offices

reflect the expansion strategy adopted by

Fransabank Group over the past few years. The

Group has been targeting promising regional and

international markets, where it can bring added

value where it operates and build up on the

synergies linking its different entities, the Lebanese

business communities established in these

countries, as well as the local operators and the

international investors.

At the local level, the Group’s organic growth has

been driven by the opening of new branches and

expanding the scope of business activities and the

range of services. In this vein, the Group ranks first

with 108 branches spread out all over the country.

The strategic objective is to provide the Lebanese

community with a wide range of traditional and

innovative products and services that are very likely

to satisfy the personal and professional banking

wants and needs. These consequently enable the

Group to fulfill its role in the development of the

Lebanese economy including a balanced and

sustainable growth throughout the Lebanese

communities.

Fransabank Group continues to adopt and

implement prudent and conservative policies to

further develop its management practices, to

consolidate its financial strength and to maintain

high asset quality. These include continuous and

strict compliance to local and international

regulatory requirements, advanced risk management

and corporate governance norms and standards, as

well as the implementation of international

standards on fighting money laundering.

Fransabank, a universal banking Group by all

international norms and standards thrives to further

consolidate its position by tailoring innovative

product-offering and by the continuous enrichment

of the quality of service-delivery. In this regards as

well, Fransabank Group provides an optimal and


eco-friendly products and services to its valued

customers. It also adopts eco-friendly banking

technology and holds itself to the local and

international standards of best-practice, which

includes continual enhancement of the Group’s

human capital through the investment in their

future and the continuous introduction of

advanced career development initiatives.

Fransabank Group corporate social responsibility

and sustainability will continue to develop in the

medium to long-term. The integration of corporate

social responsibility and sustainable business

practices is and will increasingly become part of

the Group’s corporate culture. It is an exciting

prospect, with many challenges. Our course is set,

and we will take a steady and incremental approach

towards achieving ongoing improvement -

‘meeting the needs of the future’ is our inspiration

to deliver the best solutions for all of Fransabank

Group shareholders and stakeholders.

As we look back and consider what we have so far

achieved throughout the years that led to our 90th

anniversary at year end 2011; we believe our

potential are endless; we are ready, able and

capable to capture the opportunities that will be

present to us and mitigate the threats that we

might face in our mother market and other markets

we exist and will exist.

We are very proud of the legacy we have established

and confident of the progress of this legacy for the

many years to come. We are very proud of our

leadership, innovation, operational excellence,

transparency, the trust of our clients, the commitment

of our staff, the support of our shareholders and the

pledge to our community. Those long years of

expertise and professionalism are based on a

foundation of sound banking principles, guided by

the Bank’s deep-rooted values.

Adel Kassar

Adnan Kassar • Chairman Adel Kassar • Deputy Chairman

Consider wind powerAn average wind speed of 14 miles per hour is needed to convert

wind energy into electricity, but with new materials and technology,

the amount of wind speed needed is decreasing year by year.

Source: www.factsaboutwindpower.com, “Wind Power Facts and Trivia 004”, March 2011.

Corporate Governance

> Corporate Governance Framework


Fransabank implements a Corporate Governance Framework,

which is in line with best practices guidelines and takes into

consideration that the Bank’s business and affairs are closely

governed by its Board of Directors and Senior Management.

This framework defines the rights, roles and responsibilities of

the Bank shareholders, directors and managers; guarantees the

availability of timely, accurate and integral information in all

material issues; and assures the accountability of the Board of

Directors to its shareholders.

Fransabank has always been committed to the highest level of

transparency, integrity and ethics, which became the corner-

stone of its culture. It has also developed a Corporate

Governance structure through the creation of Board committees,

which include Corporate Governance Committee, Risk

Management Committee, and Audit Committee.

> GOVERNANCE STRUCTURE

Fransabank’s governance structure is comprised of the

Shareholders’ General Assembly, the Board of Directors, the

Chairman, Deputy Chairman, Senior Management, the

Corporate Governance Committee, the Risk Management

Committee, the Audit Committee, the External Auditors and

support function divisions.

> GOVERNANCE FRAMEWORK

Fransabank is governed by the Board of Directors, which

consists of eleven members elected by the General Assembly

of the shareholders for a term of three years. The responsibilities

of the Board are to ensure the right direction towards the

defined objectives; the supervision of Senior Management; and

the adequate control of the Bank, with the objective of adding

value to all shareholders, investors, clients, and community in

the short, medium, and long terms.

> ELECTION OF THE BOARD OF DIRECTORS

The board members are elected by the Shareholders’ General

Assembly whereby every shareholder has the right to vote.

Shareholders who hold their shares for more than two years

shall have a double voting right according to Article 117 of the

Lebanese Code of Commerce.

> BOARD MEETINGS

During 2010, the Board of Directors has met on four occasions.

Some of the major issues discussed during these meetings

were:

• Measure business performance vis-à-vis budget and business

development

• Approve the budget and identifying the objectives of year

2010

• Reconsider the formation and the prerogatives of specialised

committees

• Participate in increasing the capital of Fransabank OJSC and

Fransabank Syria SA

• Approve the issuance of preferred shares

• Discuss the reports prepared by the Chief Risk Officer and the

Internal Auditor

• Opening of new branches

• Purchase of locations for new branches.


> BOARD COMMITTEES

In carrying out its duties, the Board is supported by the

Corporate Governance Committee, the Risk Management

Committee, and the Audit Committee.

Corporate Governance Committee

The Corporate Governance Committee is chaired by a

non-executive director and composed of three other members.

The committee members meet at least quarterly. The

responsibility of the Corporate Governance Committee is to

ensure that Corporate Governance practices are in line with

best practices and Fransabank Corporate Governance

Guidelines as well as to assist the Board in maintaining an

effective governance framework, an optimal Board composition

and an effective Board structure.

During 2010, the Corporate Governance Committee held

several meetings whereby it discussed many issues among

which, the Charter of the Corporate Governance Committee,

the organisation structure of the Risk Management Division and

the formation of a Corporate Governance Unit.

Risk Management Committee

The Risk Management Committee is chaired by a non-executive

director, and comprises two other members. The Committee

meets at least quarterly. The Committee’s responsibilities are to

assist the Board of Directors in fulfilling its oversight responsibilities;

identifying the Bank’s risks profile vis-à-vis its risk appetite and

risk tolerance; monitoring all aspects of the risks inherent in the

Bank’s activities; and assessing the Bank’s risk management and

control practices.

During 2010, the Risk Management Committee held several

meetings whereby it discussed many issues among which, the

charter of the Risk Management Committee and the Chief Risk

Officer roles and responsibilities.

Audit Committee

The Audit Committee is composed of four members; three of

them are non-executive members of the Board of Directors. The

Audit Committee is established to assist the Board of Directors

in its oversight responsibilities with respect to audit and

compliance with Central Bank of Lebanon and Banking Control

Commission and the implementation of accounting standards

related to financial reporting. The Committee meets on a

quarterly basis and when necessary. Moreover, the Committee

assists the Board of Directors in fulfilling its tasks and supervisory

role, particularly in regard to internal control regulations

and procedures, supervision of the Internal Audit’s activities,

appointment of external auditors and follow up on their

activities along with other responsibilities.

During 2010, the Audit Committee held six meetings.


> Main Holders of Common Shares


MAIN HOLDERS OF COMMON SHARES AS AT DECEMBER 31, 2010

Adnan Kassar

Adel Kassar

Crédit Agricole SA (2)

Deutsche Investitions Und Entwicklungsgesellschaft mbh (DEG) (3)

Al-Fadl Holdings Limited

The Public Institution for Social Security – Kuwait

Others (4)

TOTAL SHAREHOLDING

36.37

36.21

6.00

5.00

2.70

2.00

11.72

100.00

PERCENT (1)

(1) Percent of total share capital consisting of 21,000,000 Common Shares as at 31.05.2011

(2) Crédit Agricole SA also owned, through its specialized subsidiary, Crédit Agricole Assurances (CAA), 29% of the share capital of Bancassurance SAL,

an associated company of the Bank.

(3) Deutsche Investitions Und Entwicklungsgesellschaft mbh DEG is one of Germany’s top development and investment banks. DEG is owned by

Kreditanstalt für Wiederaufbau KfW, which, in turn, is owned by the German Government.

(4) Each with less than 2%



H.E. Mr. Adnan KassarChairman of the Board of Directors

Born in 1930 - Lebanon

H.E. Mr. Adnan Kassar is the Chairman

and General Manager of Fransabank

SAL and a member of the Board of

Directors of BLC Bank SAL, Fransabank

(France) SA and Fransabank Syria SA.

He is also Chairman of the

Supervisory Board of Fransabank

OJSC. H.E. Mr. Kassar was Minister of

State in Lebanon from 2009 to 2011

and Minister of Economy and Trade in

Lebanon from 2004 to 2005. He was

the first Arab businessman elected

Chairman of the International

Chamber of Commerce (ICC) and

headed the ICC from 1999 to 2000. He

was also former President of Beirut

Chamber of Commerce, Industry and

Agriculture for over 30 years (from

1972 to 2002). He is the Head of the

Lebanese Economic Organizations

and actual President of the General

Union of Chambers of Commerce,

Industry and Agriculture of the Arab

Countries. He has a law degree from

Saint Joseph University, Beirut.

Mr. Adel KassarDeputy Chairman of the Board of Directors


Mr. Adel Kassar is the Deputy

Chairman and Chief Executive

Officer of Fransabank SAL and the

Chairman of the Board of Directors

of Fransabank (France) SA and

Fransabank Syria SA. He is also

Chairman of the Board of Directors

and General Manager of

Bancassurance SAL and Lebanese

Leasing Company SAL. He is member

of the Supervisory Board of

Fransabank OJSC and member of the

Board of Directors of BLC Bank SAL.

He is a former Chairman of the

Association of Banks in Lebanon and

is the Honorary Consul General of

the Republic of Hungary in Lebanon.

He has a degree in Lebanese and

French law from Saint Joseph

University, Beirut.

Mr. Henri Guillemin Director

Born in 1947 – France

Mr. Henri Guillemin began his career

at Crédit Lyonnais from 1973 to

1978. He then joined Indosuez Bank

in 1979 and was appointed at

different management positions in

Singapore, Saudi Arabia (Jeddah and

Riyadh), Bahrain and Paris. In 1998,

he was Director at Crédit Agricole

Indosuez (CALYON), Paris for the

Middle East, and in 2003 he was

promoted Director for the Middle

East and Africa region. Since January

2008 and till today, he is the

Managing Director of Crédit

Agricole Egypt. He has a DES

diploma in Economic Sciences from

Sorbonne University and Master in

Business Administration from

INSEAD Fontainebleau.


Mr. Rafic Charafeddine

Director


Mr. Rafic Charafeddine is a

businessman, and has partici-

pations in various companies.

He deals into construction

projects and real estate invest-

ments.

Sheikh Fahd Mazyad Al Rajaanrepresenting The Public Institution for Social Security - Kuwait

Director

Born in 1948 - Kuwait

Sheikh Fahd Mazyad Al Rajaan

began his career in 1976 as

manager of New Issues

Department at Kuwait

Investment Company. In 1981,

he served as Chairman and

Managing Director for the

Kuwait Real Estate Investment

Consortium. Sheikh Al Rajaan

is the Chairman of Ahli United

Bank in Bahrain, Egypt, United

Kingdom and Wafra

Investment Advisory Group in

New York. In 1984, he has

been appointed as General

Director of the Public

Institution for the Social

Security in force currently in

Kuwait, and which he maintains

this position till today. He has a

BA in Business Administration

from the American University

of Washington.

Mrs. Magda Rizk

Director


Mrs. Magda Rizk is a substantial

property owner in Lebanon.

She is also member of the

Audit Committee of the Bank.

She has a law degree from

Saint Joseph University, Beirut.

H. E. Mr. Nehmé Tohmé

Director


H. E. Mr. Nehmé Tohmé is the

Chief Executive Officer for

many contractors companies

operating in Saudi Arabia,

Qatar and Bahrain. Being

pioneer in numerous real

estate and touristic projects in

Lebanon and abroad, H.E. Mr.

Tohmé established several

corporations, and served as

well as shareholder or partner

or member of the Board in

many companies. He was

elected as member of

Lebanese parliament in 2000

and appointed as Minister of

displaced from 2005 to 2008.

He has a BS in Civil

Engineering from the

American University of Beirut.







H.E. Mr. Walid Daouk , Esq.

Director


H. E. Mr. Walid Daouk, Esq. is a

member of the Board of

Directors of various companies,

banks and financial institutions

in Lebanon and abroad including

Fransabank (France) SA,

Fransabank El Djazaïr SPA, BLC

Bank SAL, Bancassurance SAL

and the Lebanese Leasing

Company SAL. He is the

Government Commissioner at

the Beirut Stock Exchange. He

is also the president of the

Audit Committee of the Bank

and member of the Corporate

Governance and Risk

Management Committees.

H.E. Mr. Daouk is currently

Minister of Information in

Lebanon as of June 2011. He

has a degree in Lebanese and

French law from Saint Joseph

University, Beirut.

Mr. Mohamad Al Fadl

Director

Born in 1954 - Saudi Arabia

Mr. Mohamad Al Fadl is a

member of Jeddah Chamber

of Commerce and Industry

since 1996 and a Board

Member of public companies

in Saudi Arabia. He is the

Chairman of Gulf One Bank,

Bahrain and the Honorary

Counsel of Cyprus in Kingdom

of Saudi Arabia. He has a

degree in economic sciences

and marketing from University

of San Francisco.

Dr. Walid Naja

Director


Dr. Walid Naja is a former

Chairman of the Central Bank

of Lebanon - Banking Control

Commission, served as Economic

Counselor at the Lebanese

Embassy in Washington DC,

and as General Manager of the

Beirut Chamber of Commerce,

Industry and Agriculture. He is

the President of the Risk

Management and Corporate

Governance Committees and

member of the Audit

Committee. He holds graduate

degrees in economics and

international relations from

the American University of

Beirut and Yale University of

USA.

Mr. Antoine Jeancourt Galignani

Director

Born in 1937 - France

Mr. Antoine Jeancourt Galignani

began his career at the French

Ministry of Finance, and after a

while he joined Chase

Manhattan Bank in New York

and the Crédit Agricole. In

1979 he was appointed as

Managing Director then

Chairman of Bank Indosuez.

He was also member of Board

of Directors of the Saudi AL

Fransi Bank, in Saudi Arabia for

15 years. From 1994 to 2006,

Mr. Galignani was appointed

as Chairman and CEO of AGF,

which was later acquired by

Allianz Group. He also served

in numerous Boards such as

TOTAL, Bouygues and Société

Générale and he occupied the

position of Board member at

the Institute of International

Finance in Washington from

1991 to 1994. Mr. Jeancourt

Galignani is currently the

Chairman of the Board of

Eurodisney France. He holds a

Master degree in Economics

and political Sciences from ENA,

France.



> Group Chart

Banks AbroadBanks Abroad Banks in Lebanon

Companies in Lebanon

Representative OfficesRepresentative Offices

68%

Fransabank El DjazaïrSPA - Algeria

• Group CMA-CGM (Franco-Lebanese) 25%

• Maghreb Truck Cie SPA Algeria 7%

48%

Fransabank Syria SASyria

• Other Private Sectors 52%

60%

Fransabank (France) SAFrance

• BPCE International et Outre Mer (IOM) 40%

20%

United Capital BankSudan

• Aref Investment Group & one of its affiliates - Kuwait 40%

• Al Alami Group - Egypt 6.25%

• Boubyan Group & its affiliates - Kuwait 24.60%

• Al Imtiaz Investment Co - Kuwait 5.83%

• Others 3.32%

• Others 0.06%

80%

Fransabank OJSCBelarus

• Fransa Holding SAL - Lebanon 19.94%

*Fransabank Group chart updated for events occurring up to May 2011

USB Bank PLCCyprus

Fransabank

94%

Cuba

Libya


BLC Bank SAL Bank of Beirut and theArab Countries SAL

Banks Abroad Banks in LebanonBanks in Lebanon

Companies in LebanonCompanies in Lebanon

Representative Offices40%

• Crédit Agricole Assurances (Groupe Crédit Agricole France) - France 29%

• Banque Libano-Française SAL 31%

68.583%

6.25%

100%

SAL

FransaInvest Bank SAL

37.054%

Bancassurance SAL

87.50%

• DEG Germany 12.50%

Lebanese LeasingCompany SAL

Fransabank Insurance Services Co SAL

99.88%

Sogefon SAL

99.70% 99.60% 96.70%

Express SARLSwitch & ElectronicServices SAL



> Organization Chart - Fransabank SAL

Corporate GovernanceCommittee

Support Functions

Administration CentralOperations Legal Organization

CreditAdministration &

InformationHuman

ResourcesFinancialControl &

Accounting

Boardof Directors

Chairman &Deputy Chairman

ManagementGroup

Marketing

Inspection

ExecutiveCommittee

GeneralServices

Engineering

MaintenanceInfrastructure& Security

Procurement

Finance

TradeFinance

Transfers &Payments

TreasuryB.O.

Collection,Clearing& Domiciliation

ProjectManagement

Documentation

FinancialControl

Accounting

SoftwareDevelopment

ICT ProductionEnvironment

Credit AppraisalSMEs

Credit AppraisalCorporate

Marketing &CorporateCommunications

MarketingResearch

ProductsQualityAssurance

Credit Reporting& Documentation

Credit Monitoring& Classification

CreditInformation

Planning,Staffing &EmployeesRelations

Training &Development

Compensation& Benefits

LegalAdvisory

Relations withAuthorities& Audiences

Judicial

Secretariat ofBOD & Shareholders’Meetings

Information &Communication

Technology Credit

Appraisal

19Fransabank > Annual Report 2010

AMLCommittee

Advisors

AML Compliance

Lines of Business

Control Functions

S & D

Retail Banking International CorporateBanking

Treasury &Capital Markets Loan Recovery Real EstatePolicies &

ProceduresInformation

SecurityStrategy &

Development

AuditCommittee

Internal Audit

IT Audit

Risk Management

Risk ManagementCommittee

RegionalManagers

BranchManagement

SMEs

Local & OverseasCredit Cards

RetailRisk

Retail Products& Services

E-Banking

BusinessLines

SupportSection

SpecialCredits

LocalProcedures

OverseasProcedures

CorrespondentBanking &FinancialInstitutions

OverseasAffiliations &RepresentativeOffices

OverseasPrivate Clientele

Bank Credit RiskAnalysis

Treasury

Branch Audit

Internal Control Audit

Compliance Audit

Financial Audit

International Audit

Credit Risk

Operational Risk

Market Risk

Basel Implementation

CapitalMarkets


> Executive Committee

H.E. Mr. Adnan Kassar Chairman & General Manager

& or

Mr. Adel Kassar Deputy Chairman & Chief Executive Officer

Mr. Nadim Kassar General Manager

Mr. Mansour Bteish General Manager

Mr. Nabil Kassar Secretary General

Dr. Joe Sarrouh Executive Advisor to the Chairman


> Committees - Fransabank SAL

> Corporate Governance Committee

> Audit Committee

> Risk Management Committee

> Management Committee

> Credit Committees

> Assets & Liabilities Committee

> Banking Technology & IT Security Committee

> Anti-Money Laundering Committee

> Human Resources Committee

> Organization Committee

> Marketing Committee


> General Management

Mr. Nadim Kassar General Manager

Mr. Mansour Bteish General Manager

Mr. Nabil Kassar Secretary General

> Advisor to the Chairman

Dr. Joe Sarrouh Executive Advisor to the Chairman

> Management

Mr. Ahmad El Radi Chief Risk Officer, Head of Risk Management

Mr. Nadim Moujaes Deputy General Manager, Head of Strategy & Development

Dr. Nicolas Khairallah Deputy General Manager, Head of Human Resources

Mr. Philippe El Hajj Deputy General Manager, Head of Retail Banking

Dr. Mohamad Daher Deputy General Manager, Head of Corporate Banking

Miss Mona Khoury Deputy General Manager, Head of International

Mr. Nabih Saddy Deputy General Manager, Head of Financial Control & Accounting

Mr. Nabil Tannous Deputy General Manager, Head of Treasury & Capital Markets






> Management

Mr. Wajdi Abi Chacra Advisor, Legal

Mr. Fawzi Moussa Advisor, Corporate Banking

Mr. Antoine Asmar Business Development Consultant, Corporate Banking

Mr. Charbel Aouad Head of Central Operations

Mr. Antoine Younes Head of Credit Appraisal

Mr. Zouheir Chouraiki Head of Internal Audit

Mrs. Samia Abou Ezze Head of Information & Communication Technology

Mr. Khalil Assaf Head of Special Credits

Mr. Zakaria El Khatib Head of Inspection

Mrs. Dania Kassar Head of Marketing

Mr. Pierre Posbic Head of Organization

Mr. Sami Naffah Head of Policies & Procedures

Mr. Antoine Zarifeh Head of Small & Medium Enterprises

Mrs. Magida Kasbani Head of Administration

Mr. Adel Moubarak Head of Information Security

Mrs. Dalal Halabi Head of Credit Reporting & Documentation

Mr. Roger Abboud Head of Credit Information

Mr. Sami Dfouni Head of Credit Monitoring & Classification

Miss Lama Dick Head of Credit Cards

Mr. Wissam Ali Hassan Head of Electronic Banking

Mr. Joseph Saab Head of Anti-Money Laundering


> Local Network Management

Mr. Joseph Akiki Head of Branch Management

Mrs. Najwa Sandid Regional Manager, Beirut I

Mr. Antoine Nehmeh Regional Manager, Beirut II

Mr. Francis Abi Nakhoul Regional Manager, Mount Lebanon A

Mr. Georges Saliba Regional Manager, Mount Lebanon B

Mr. Ajwad Al Halabi Regional Manager, Mount Lebanon C

Dr. Khodr Heloui Regional Manager, North

Mr. Talal Hamadeh Regional Manager, South

Mr. Amine Abou Mhaya Regional Manager, Bekaa

Mr. Mounir Daoud Deputy Regional Manager, Bekaa I

Mr. Farouk Chreif Deputy Regional Manager, Bekaa II




> Local Banking SubsidiariesBoard of Directors and General Managers


> BLC Bank SAL

Board of Directors

H.E. Mr. Maurice Sehnaoui Chairman & General Manager

Mr. Nadim Kassar Deputy Chairman & General Manager

H.E. Mr. Adnan Kassar Member

Mr. Adel Kassar Member

Mr. Nabil Kassar Member

H.E. Mr. Nazem El Khoury Member

H.E. Mr. Walid Daouk, Esq. Member

Mr. Mansour Bteish Member

Mr. Walid Ziade, Esq. Member

Mr. Raoul Nehme Member

Mr. Charles El-Hajj Member

General Managers

Mr. Raoul Nehme

Mr. Georges Tabet

Lebanon

> Fransa Invest Bank SAL

Board of Directors

Mr. Nadim Kassar Chairman & General Manager

Mr. Nabil Kassar Member

Fransabank SAL Member


General Managers

Mr. Mansour Bteish

Dr. Joe Sarrouh



> Overseas Banking Subsidiaries and AssociateBoard of Directors and General Managers

> Fransabank (France) SA

Board of Directors

Mr. Adel Kassar Chairman & General Manager

Mr. Yvan de La Porte De Theil Vice Chairman

H.E. Mr. Adnan Kassar Member

Mr. Bruno Deletré Member, representing BPCE IOM

Mr. Charles Milhaud Member


Mr. Nabil Kassar Member, representing Fransabank SAL


Mr. Dany Makhlouf Member

General Manager

Mr. Henri de Courtivron

France

> Fransabank El Djazaïr SPA

Board of Directors

Mr. Nadim Kassar Chairman


Mr. Raja Sarkis Member, representing CMA-CGM SA

Mr. Lazhar Hani Member, representing Merit Corporation SAL

Mr. Abdelrahmane Salhi Member, representing Maghreb Truck SPA



General Manager

Mr. Alain Santi

Algeria

Belarus




> Fransabank Syria SA

Board of Directors

Mr. Adel Kassar Chairman

H.E. Mr. Adnan Kassar Member, representing Fransabank SAL


Mr. Chadi Karam Member, representing Fransabank SAL

Mr. Ahmad Al-Shihabi Member

Mr. Elie Sioufi Member

Mr. Ali Wahib Merhi Member

Mr. Sami Rabbath Member

Mr. Mohammad Sabih Al-Nahas Member

General Manager

Mr. Nadim Moujaes

Syria

> Fransabank OJSC

Supervisory Board

H.E. Mr. Adnan Kassar Chairman, representing Fransabank SAL

Mr. Adel Kassar Member, representing Fransa Holding (Liban) SAL

Mr. Georges Andraos Member, representing Fransabank SAL

Mr. Ghantous Gemayel Member, representing Fransa Holding (Liban) SAL

General Manager

Mr. Ibrahim Koleilat

> USB Bank PLC

Board of Directors

H.E. Mr. Maurice Sehnaoui Chairman Non ExecutiveDependent (BLC Bank)

Mr. Nadim Kassar Non Executive - Dependent (BLC Bank)

Mr. Nabil Kassar Non Executive - Dependent (BLC Bank)

H.E. Mr. Walid Daouk, Esq. Non Executive - Dependent (BLC Bank)

Mr. Raoul Nehme Non Executive - Dependent (BLC Bank)

Fransabank SAL Non Executive - Dependent

represented by Mr. Adel Kassar (shareholder in BLC Bank)

Fransa Invest Bank SAL Non Executive - Dependent

represented by Mr. Mansour Bteish (shareholder in BLC Bank)

BLC Bank SAL Non Executive - Dependent

represented by Mr. Walid Ziade, Esq.

Mr. Andrea Theodorides Executive - Dependent (USB Bank)

Mr. Despo Polycarpou Executive - Dependent (USB Bank)

Mrs. Tania Moussallem Non Executive - Dependent (BLC Bank)

Mr. Georges Galatariotis Non Executive - Dependent

Mr. Georges Stylianou Non Executive - Dependent

Mr. Philippos Philis Non Executive - Dependent

Mr. Agis Taramides Non Executive - Dependent

Deputy Managing Director

Mr. Andrea Theodorides

Cyprus

> United Capital Bank

Board of Directors

Mr. Adel Al Majed Chairmanrepresenting Boubyan Bank

Mr. Mansour Bteish Vice Chairman

Mr. Feras Al Bahar Memberrepresenting Aref Investment Group

Mr. Mohamad Al Adasani Memberrepresenting Aref Investment Group

Mr. Modar Al Razzouki Memberrepresenting Aref Investment Group

Mrs. Amira Al Alami Memberrepresenting Financial Company

for Investment and Development

Mr. Sharif Budur MemberSudanese Independent Director

Mr. El Zubeir Hassan MemberSudanese Independent Director

General Manager

Mr. Kamal El Zubeir

Sudan




Reduce CO2 emissionsToday, around 73 million tons of CO2 are wasted every year around

the world due to infrastructure inefficiencies.

Source: www.enviro.aero/ facts and figures, “improving Efficiency”, 2011.


Historical Milestones

1921

Fransabank was first established in Beirut as a full branch of one

of the then major French banks, Crédit Foncier d’Algérie et de

Tunisie (C.F.A.T.).

Fransabank is registered n° 1 on the list of banks operating in

Lebanon indicating that it is the oldest Bank in the country.

C.F.A.T. changed its name to become Société Centrale de

Banque.

Société Centrale de Banque in Beirut was acquired by Banque

Française pour le Moyen-Orient SAL (B.F.M.O.), a Lebanese

company whose shares were predominantly owned by Banque

Indosuez Group.

Banque Indosuez (now Crédit Agricole SA, one of the Bank’s

continuing principal shareholders) was also the major

shareholders of Banque Sabbag SAL. Banque Indosuez merged

these two banks under the name of Banque Sabbag et

Française pour le Moyen-Orient SAL.

Banque Indosuez sold its shares in Banque Sabbag et Française

pour le Moyen-Orient SAL to a financial group headed by

Messrs. Adnan & Adel Kassar.

The Bank’s denomination was changed to Fransabank SAL.

Fransabank concluded a cooperation agreement with Crédit

Agricole SA – France aiming at establishing closer business

relations between the two banks. It led at first to the joint

creation in Paris of Fransabank (France) SA, and to the

participation of Crédit Agricole SA - France in the shareholding

of Fransabank SAL.

Fransabank acquired the Assets & Liabilities of Chase

Manhattan Bank’s branches in Beirut.

Fransabank acquired Banque Tohmé SAL.

D.E.G. (German Investment and Development Company), an

organization that is part of the development cooperation

organization of the Federal Republic of Germany, acquired of

5% of the Bank’s share capital.

A private placement of shares took place, pursuant to which 5%

of the Bank’s shares were sold to Lebanese, Arab and foreign

investors.

The Public Institution for Social Security – Kuwait acquired 2%

of the Bank’s share capital.

1984

1985

1993

1995

1997

1963

1971

1978

1980


Fransabank acquired Universal Bank SAL.

Fransabank opened its branch in the Damascus free zone in Syria.

Fransa Invest Bank (FIB), investment banking subsidiary of

Fransabank started its operations.

Fransabank acquired United Bank of Saudi & Lebanon SAL.

Fransabank acquired all the shares of Banque de la Békaa SAL.

Subsequently, in 2007, the Bank sold Banque de la Békaa.

Fransabank became one of the major shareholders (37.054%) of

Bank of Beirut & the Arab Countries SAL (BBAC).

Fransabank was the first Lebanese bank to enter the Algerian

market with the opening of its new subsidiary Fransabank El

Djazaïr SPA.

Fransabank launched its operations in Sudan through an

associate bank, United Capital Bank.

Fransabank acquired BLC Bank SAL along with its two

subsidiaries, BLC Services SAL and BLC Finance SAL.

Fransabank concurrently purchased 34% of the share capital of

Fransabank (France) SA held by Crédit Agricole SA (bringing its

participation in the share capital to 100%), and sold 40% of the

share capital of Fransabank (France) SA to Financière Océor, a

subsidiary of Groupe Caisse d’Epargne (France), following

which the Bank’s participation in the share capital of

Fransabank (France) SA is 60%.

Fransabank entered the Libyan market by establishing a

representative office in Tripoli.

Fransabank issued its Series A preferred shares for USD 100 million

in Tier 1 capital.

Fransabank acquired Fransabank OJSC, formerly known as

Golden Taler Bank.

Fransabank became operational in Syria through its subsidiary,

Fransabank Syria SA.

Fransabank issued its Series A preferred shares for USD 85 million

in Tier 1 capital.

BLC Bank SAL acquired 9.9% of USB Bank PLC – Cyprus and

increased this share to become 94% in February 2011. Thus,

Fransabank Group expanded its international network to

include Cyprus besides the seven existing foreign presence.

1998

2001

2002

2003

2005

2006

2007

2008

2009

2010

Dare to innovate50% of the world's energy will come from renewable sources by 2040.

Source: www.conserve-energy-future.com, “Future of Solar Energy”.


Management Report

> Lebanon’s Economic Performance in 2010

The Lebanese economy continued on its growth trail in 2010

albeit at relatively slower pace, amidst a challenging global

environment. Real GDP grew by 7.1% in 2010. This growth has

been mainly driven by construction, tourism, retail trade, high

capital inflows which amounted to USD 8.4 billion in 2010 and

financial services.

Most real sectors’ indicators point to this annual economic

growth: property sales’ transactions increased by 12.7%, value

of property sales by 35.1%, cement deliveries by 6.7%, the

number of tourists by 17.1% and the number of passengers at

the Hariri International Airport by 11.3% among others.

In 2010, both imports and exports, according to the figures

released by the Higher Customs Council show that the foreign

trade increased by 12.6% reaching USD 22.21 billion in 2010,

compared with USD 19.72 billion in 2009. Total exports reached

USD 4.25 billion in 2010, an increase of 22.1%, as compared to

USD 3.48 billion in 2009. Total imports reached USD 17.96 billion

in 2010, increasing by 10.6% compared to USD 16.24 billion in

2009. The growth of exports coupled with the relatively smaller

growth of imports resulted in a decrease in the trade deficit

balance, which stood at USD 13.71 billion in 2010, compared

with USD 12.76 billion in 2009. Furthermore, the export/import

coverage ratio improved from 21.43% in 2009 to 23.66% in

2010. The balance of payments registered a surplus

USD 3.34 billion in 2010 as compared to USD 7.90 billion in

2009.

The year 2010 witnessed an improvement on the fiscal level,

mainly due to a drop in overall Government expenditure, a

lower decrease in total revenues, leading to a contraction in the

overall fiscal deficit that stood at USD 2.92 billion in 2010 as

compared to USD 2.96 billion in 2009 and coupled with an

improvement of the primary surplus that registered

USD 1.20 billion in 2010 as compared to USD 1.02 billion in 2009.

Total public revenues, including budgetary and Treasury

receipts, decreased by 0.2%, reaching USD 8.41 billion in 2010,

compared with USD 8.43 billion in 2009. Total public spending,

including budgetary and Treasury spending, decreased also

by 0.5%, reaching USD 11.33 billion in 2010, compared with

USD 11.39 billion in 2009. This is due to a contraction of 1.1% in

Treasury expenditures and a drop of 0.4% in budget-linked

expenditures. As for the gross public debt, it increased by 2.9%,

reaching USD 52.59 billion at the end of 2010, compared with

USD 51.10 billion at the end of 2009, noting that this growth is

slower than the previous two years, where the growth stood at

8.7% and 11.9% in 2009 and 2008 respectively. The net public

debt increased by 2.0%, reaching USD 45.01 billion in 2010,

compared with USD 44.11 billion in 2009. The gross public

debt/ nominal GDP ratio stood at 133.48% in 2010, as compared

to 147.99% in 2009, thus gradually improving the country’s

overall risk profile.

The money stock (M4) surged by an amount of USD 10.36 billion

in 2010, as LBP-denominated time deposits and foreign currency

deposits increased by USD 4.71 billion and USD 4.98 billion,

respectively, while money stock (M1) and Treasury bills

held by the public both progressed by USD 459 million

and USD 206 million, respectively.

The Consumer Price Index variation (CPI), published by the

Consultation and Research Institute, reached 6.2% in 2010,

compared to 4.2% in 2009. This increase was mainly due to the

rise in prices of: food and beverages by 9.76%, recreation by

17.25%, housing by 7.33%, education by 6.74%, and

miscellaneous goods and services by 6.85%.

The Central Bank of Lebanon successfully build-up its foreign-

currency reserves to a record of USD 28.6 billion in 2010, i.e an

annual increase of USD 2.9 billion. Total foreign currency assets

of the Central Bank of Lebanon increased by 8.1%, reaching

USD 30.60 billion in 2010, compared with USD 28.30 billion in

2009. In this context, gold reserves increased by 29.3%,

amounting to USD 13.01 billion in 2010, compared with

USD 10.06 billion in 2009, and financial sector deposits grew as

well by 12.9%, attaining USD 42.7 billion in 2010, compared

with USD 37.8 billion in 2009.

In 2010, the Lebanese banking sector registered yet another

impressive performance. Total assets grew by 11.4 % reaching


USD 134.16 billion at end-December 2010 as compared to

USD 120.38 billion at end-December 2009. Total deposits,

accounting for 83.4% of total balance sheet at end-December

2010, continued to be a major drive for the banking sector

activity, increasing by 11.7% and reaching USD 111.84 billion at

end-December 2010 as compared to USD 100.07 billion at end-

December 2009. On the other hand, total claims on the private

sector grew by 22.5% reaching USD 35.98 billion at end-

December 2010 as compared to USD 29.36 billion at end-

December 2009, while the total claims on the public sector

grew by 0.5% reaching USD 30.33 billion at end-December

2010 as compared to USD 30.16 billion at end-December 2009.

Total capital accounts grew by 15.9% reaching USD 9.94 billion

at end-December 2010 as compared to USD 8.57 billion at end-

December 2009.

Public Finance's Indicators

Public revenues

Public spending

Fiscal deficit

Gross public debt

Net public debt

Primary surplus

Gross public debt / Nominal GDP

Monetary Situation Indicators

Central Bank of Lebanon gross foreign currency assets

Consumer Price Index (CPI)

Central Bank of Lebanon gold reserves

Financial sector deposits

Banking Sector's Indicators

Total assets

Total deposits (Commercial & Investment Banks)

Total claims on the private sector

Total claims on the public sector

Total capital accounts

Foreign Sector's Indicators

Exports

Imports

Trade deficit

Balance of payments

8.43

11.39

(2.96)

51.10

44.11

1.02

147.99%

28.30

4.2%

10.06

37.8

120.38

100.07

29.36

30.16

8.57

3.48

16.24

(12.76)

7.90

(0.2%)

(0.5%)

(1.3%)

2.9%

2.0%

17.6%

(14.5%)

8.1%

2.0%

29.3%

12.9%

11.4%

11.7%

22.5%

0.5%

15.9%

22.1%

10.6%

7.4%

(57.7%)

Variation20092010(in billion of USD)

Sources: Ministry of Finance, Central Bank of Lebanon, Association of Banks in Lebanon and Higher Customs Council.

8.41

11.33

(2.92)

52.59

45.01

1.20

133.48%

30.60

6.2%

13.01

42.7

134.16

111.84

35.98

30.33

9.94

4.25

17.96

(13.71)

3.34

> LEBANON'S MAJOR ECONOMIC INDICATORS

Management Report



Overview

Fransabank Group has registered in 2010 another yet record

growth. The Group’s net income amounted to LBP 219.71 billion

(USD 145.75 million) in 2010 compared to LBP 157.12 billion

(USD 104.22 million) in 2009, an increase of 39.84%. In 2010, the

Return on Average Assets stood at 1.26% and the Return on

Average Common Equity at 13.06% compared to 1.08% and

11.84% respectively in 2009.

Resolutions of Fransabank SAL Ordinary GeneralAssembly

The Ordinary General Assembly of Fransabank SAL shareholders

held on 18 May 2011:

> Approved the accounts and the Balance Sheet of Fransabank

SAL as at end December 2010

> Acquitted Fransabank SAL Board of Directors for their

management of the business activities of the fiscal year 2010

> Decided to allocate out of Fransabank SAL net profit

(LBP 139,572,356 thousands) as follows:

• 10% to Legal reserve (LBP 13,957,236 thousands),

• LBP 14,840,000 thousands to Reserve for General Banking Risks

• LBP 5,577,932 thousands to reserve for assets acquired in

settlement of bad loans,

• LBP 942,114 thousands to special reserve for non productive

loans,

• LBP 1,246,517 thousands interest on subordinated loan,

• LBP 37.8 billion (LBP 1,800/share) as dividend distribution on

common shares, LBP 12,813,750 thousands on preferred

shares - Series A and LBP 4,484,813 thousands on preferred

shares - Series B, representing respectively 36.70%, 12.44%

and 4.35% of the Bank’s 2010 distributable profits,

• LBP 47,909,994 thousands i.e. the remaining balance, to the

Free Reserves.

1. NET INCOME

Fransabank SAL net income, in 2010, amounted to LBP 139.57 billion

(USD 92.59 million) compared to LBP 94.92 billion (USD 62.97 million)

in 2009, an increase of 47.04%. This has translated in 2010 into a

Return on Average Assets of 1.17% and a Return on Average

Common Equity of 11.25%.

The Group’s net income in 2010 amounted to LBP 219.71 billion

(USD 145.75 million) compared to LBP 157.12 billion

(USD 104.22 million) in 2009, an increase of 39.84%. This has

translated in 2010 into a Return on Average Assets of 1.26%. In

2010, the Group has booked in compliance with IFRS

requirements, unrealized profits on available for sale securities for

LBP 341,818,315 thousands (USD 226,745 thousands) against

LBP 304,396,470 thousands (USD 201,921 thousands) in 2009. This

has reduced the ROACE to 13.06% from 16.49% if unrealized

profits were excluded.

1.1 Net Interest Income

In 2010, the Group’s net interest income amounted to

LBP 393.39 bil l ion (USD 260.95 mil l ion) compared to

LBP 315.99 billion (USD 209.61 million) in 2009, an increase of

24.49%.

In 2010, interest received amounted to LBP 1,009.31 billion

(USD 669.53 mill ion) compared to LBP 887.94 bil l ion

(USD 589.02 million) in 2009, an increase of 13.67%. Interest

received from investment securities, loans and advances to

customers and from loans to banks & placements with banks,

represents of total 2010 interest income 64.67%, 31% and 4.33%

respectively, compared to 67.17%, 26.52% and 6.31% respectively

in 2009.

in thousands of LBP

From loans and advances to customers

From investment securities

From loans to banks and placements with banks

TOTAL

> BREAKDOWN OF INTEREST RECEIVED

20092010

235,451,607

596,472,567

56,017,527

887,941,701

312,867,464

652,701,550

43,743,044

1,009,312,058


In 2010, the monthly average Interest-Earning Assets reached

LBP 15,181.01 billion (USD 10,070.32 million) compared to

LBP 12,066.99 billion (USD 8,004.64 million) in 2009 (+ 25.81%).

This growth is due to the increase of:

• investment securities (+ LBP 1,388.32 billion or c/v

USD 920.94 million),

• loans and advances to customers (+ LBP 1,130.97 billion or

c/v USD 750.23 million)

• loans to Banks and financial institutions plus placements

with Banks and financial institutions (+ LBP 594.73 billion or

c/v USD 394.52 million).

In 2010, the interest paid amounted to LBP 615.93 billion

(USD 408.57 million) compared to LBP 571.95 billion

(USD 379.41 million) in 2009 (+ 7.69%). In 2010, the largest

single component of interest paid belongs to customers’

deposits, which represented 95.48% of the total compared to

95.33% in 2009.

The monthly average Interest-Bearing Liabilities reached

LBP 14,673.57 billion (USD 9,733.71 million) in 2010

against LBP 12,119.64 billion (USD 8,039.56 million) in 2009

(+ 21.07%). This growth is largely attributed to the 20.65%

increase in the Customers creditor accounts which amounted

to LBP 2,376.26 billion (USD 1,576.29 million).

in thousands of LBP

Investment securities

Banks and financial institutions

Loans and advances to customers

TOTAL

> AVERAGE INTEREST-EARNING ASSETS

20092010

6,467,260,419

2,778,152,699

2,821,574,347

12,066,987,465

7,855,582,571

3,372,884,252

3,952,546,218

15,181,013,041

in thousands of LBP

On deposits and loans from banks

On deposits from customers at amortized cost

On cash contributions to Share Capital

TOTAL

> BREAKDOWN OF INTEREST PAID

20092010

(25,540,138)

(545,216,479)

(1,197,972)

(571,954,589)

(26,654,061)

(588,074,209)

(1,197,972)

(615,926,242)

in thousands of LBP

Soft loans


Customers’ deposits at amortized cost

Cash contributions to Share Capital

TOTAL

> AVERAGE INTEREST-BEARING LIABILITIES

20092010

318,811,712

278,092,112

11,505,618,991

17,113,885

12,119,636,700

318,271,193

456,307,952

13,881,875,785

17,113,885

14,673,568,815


Management Report


1.2 Net Fees and Commissions Income

In 2010, net fees and commissions income reached LBP 69.75

billion (USD 46.27 million), an increase of 34.96% compared to

LBP 51.68 billion (USD 34.28 million) in 2009.

Fees and commissions received reached LBP 94.21 billion

(USD 62.49 million) an increase of 26.02% compared to


Fees and commissions received comprise mainly commissions

on documentary LCs and on LGs and fees on customers’

transactions, which represented 29.03% and 70.67% respectively

compared to 22.95% and 73.39% in 2009.

Fees and commissions paid reached LBP 24.46 billion

(USD 16.22 million) an increase of 6.02%, compared to


Fees and commissions paid comprise fees on customers’

transactions and commissions on transactions with banks,

which represented 90.68% and 9.32% respectively compared to

88.77% and 11.23% in 2009.

1.3 Income from Trading Portfolio

In 2010, income from trading portfolio reached LBP 8.69 billion

(USD 5.76 million) compared to LBP 17.26 billion (USD 11.45 million)

in 2009. The decline of the trading income in 2010 compared to

the previous year is due to the significant improvement in 2009

of the market value of trading securities after the 2008 global

crisis, which was translated into a positive change in fair value

of LBP 10.89 billion (USD 7.22 million) whereas in 2010 this

change in fair value amounted to LBP 2.12 billion (USD 1.41 million)

which is reasonably normal given the volume of our trading

portfolio.

In 2010, income from trading portfolio comprises interest

received, dividends received, change in fair value and gain on

sale of trading securities, which represented 58.68%, 12.66%,

24.40% and 4.26% compared to 30.81%, 6.09%, 63.07% and

0.03% in 2009 respectively.

in thousands of LBP

Fee and commission received

Commissions on documentary LCs and on LGs

Service fees on customers’ transactions

Commissions on transactions with banks

Asset management fees

Fee and commission paid

Commissions on transactions with banks

Other commissions paid (including those on customers’ transactions)

NET FEE AND COMMISSION INCOME

> BREAKDOWN OF NET FEE AND COMMISSION INCOME

20092010

74,751,952

17,152,758

54,863,946

53,919

2,681,329

(23,072,609)

(2,592,168)

(20,480,441)

51,679,343

94,205,629

27,348,154

66,574,909

268,975

13,591

(24,460,476)

(2,279,320)

(22,181,156)

69,745,153


1.5 Foreign Exchange Gain

1.6 Other Operating Income

In 2010, other operating income reached LBP 65.49 billion

(USD 43.44 mil l ion) compared to LBP 36.19 bil l ion

(USD 24.00 million) in 2009 (+ 80.98%).

Other operating income comprises gain on sale of available for

sale securities, dividends received on investment securities,

share in profit of associates, realized income on business

acquisition, gain on sale of assets acquired in satisfaction of

loans and on disposal of properties & equipments and other

income, which represented 43.91%, 8.47%, 13.73%, 11.80%,

15.10% and 6.99% in 2010 compared to 9.47%, 15.78%, 20.94%,

0.04%, 37.45% and 16.32% in 2009 respectively.

The net interest on financial instruments designated at fair

value represents the interest paid on the structured products

issued by Fransabank, namely 3x3 GEM I, 3x3 GEM II, Winners 9

and Easy Times. In 2010, the interest expense (coupons) paid

on those instruments amounted to LBP 7.76 billion (USD

5.15 million), compared to LBP 9.86 billion (USD 6.54 million) in

2009 (- 21.30%). To note that the volume of financial instru-

ments designated at fair value decreased from LBP 162.71 bil-

lion (USD 107.94 million) as at 31 December 2009 to LBP 73.14

bllion (USD 48.52 million) as at 31 December 2010 due to the

fact that 3x3 GEM I and 3x3 GEM II matured in 2009 and 2010

respectively, hence the relevant interest paid in 2010 is less than

that of 2009.

in thousands of LBP

Interest income on trading securities

Dividends received on trading securities

Change in fair value of trading portfolio (net)

Gain on sale of trading assets

INCOME FROM TRADING PORTFOLIO

> BREAKDOWN OF INCOME FROM TRADING PORTFOLIO

20092010

5,318,688

1,050,973

10,889,336

5,691

17,264,688

5,100,039

1,100,029

2,120,565

370,080

8,690,713

1.4 Net Interest on Financial Instruments Designated at Fair Value

in thousands of LBP

Gain on sale of available for sale

Dividends received on sale of available for sale and held to maturity securities

Gain from disposal of part of equity interest in an associate

Share in profit of associates

Realized income on business acquisition

Gain on sale of assets acquired in satisfaction of loans and

on disposal of properties & equipments

Other

OTHER OPERATING INCOME

> BREAKDOWN OF OTHER OPERATING INCOME

20092010

3,425,253

5,710,871

14,100

7,579,190

-

13,550,134

5,905,560

36,185,108

28,755,672

5,549,080

-

8,992,528

7,728,744

9,888,224

4,574,104

65,488,352

In 2010, foreign exchange gain reached LBP 22.32 billion (USD 14.81 million) compared to LBP 10.40 billion (USD 6.90 million) in 2009

(+ 114.74%), resulting from growth in business activities.

Management Report


In 2010, the Group’s net allocation to provisions for loans and

advances to customers amounted to LBP 6.12 bil l ion

(USD 4.06 million) compared to a recovery of provisions for

LBP 6.86 billion (USD 4.55 million) in 2009, resulting form:

• allowance for impairment of customers’ loans and advances

for LBP 23.53 billion (USD 15.61 million) compared to

LBP 5.03 billion (USD 3.34 million) in 2009,

• bad debts expense for LBP 0.08 billion (USD 0.05 million),

compared to LBP 1.22 billion (USD 0.81 million) in 2009,

• write-back of impairment loss on loans and advances for

LBP 15.80 billion (USD 10.48 million), against LBP 12.36 billion

(USD 8.20 million) in 2009,

• write-back of discount on loan portfolio purchased for

LBP 1.69 billion (USD 1.12 million) against LBP 0.75 billion

(USD 0.50 million) in 2009.

1.7 Net Allocation to Provisions for Loans & Advances to Customers

In 2010, the Group’s general expenses comprising staff costs,

administrative expenses, depreciation, provisions for impairment

of assets and amortization of deferred charges, reached

LBP 273.06 bi l l ion (USD 181.13 mil l ion) compared to

LBP 236.93 billion (USD 157.17 million) in 2009, an increase of

15.25%. This is due to:

the increase of :

• 17.64% in salaries and related charges which amounted to

LBP 160.93 billion (USD 106.75 million) in 2010 compared to


• 22.20% in administrative expenses which amounted to



• 597.51% in provisions for charges which amounted to



and the decrease of :

• 2.36% in depreciation and amortization of assets which

amounted to LBP 16.21 billion (USD 10.75 million) in 2010

compared to LBP 16.60 billion (USD 11.01 million) in 2009,

• 39.61% in amortization of deferred charges which amounted

to LBP 7.94 billion (USD 5.27 million) in 2010 compared to

LBP 13.15 billion (USD 8.72 million) in 2009. The amortization

of deferred charges is related to the impairment of the losses

resulting from the Bank’s acquisition of Universal Bank SAL in

1999 and United Bank of Saudia & Lebanon SAL in 2002. This

amortization is covered by the net income deriving from

interest on Treasury Bills acquired through the soft loans

granted to the Bank by the Central Bank of Lebanon after the

acquisition of the two aforementioned Banks.

1.8 General Expenses


in thousands of LBP

Allowance for impairment of loans and advances

Write-back of impairment loss on loans and advances

Bad debts expense

Write-back of discount on loan portfolio purchased

TOTAL

> NET ALLOCATION TO PROVISIONS FOR LOANS & ADVANCES TO CUSTOMERS

20092010

(5,029,126)

12,355,562

(1,214,349)

751,765

6,863,852

(23,528,498)

15,793,450

(77,135)

1,692,748

(6,119,435)


in thousands of LBP

Staff costs

Administrative expenses

Provisions for charges

Depreciation and amortization of assets

Amortization of deferred charges

GENERAL EXPENSES

> BREAKDOWN OF GENERAL EXPENSES

20092010

(136,801,983)

(70,040,742)

(342,473)

(16,602,965)

(13,145,885)

(236,934,048)

(160,931,818)

(85,586,893)

(2,388,788)

(16,210,455)

(7,938,195)

(273,056,149)

in thousands of LBP

Soft loans from Banque du Liban

Long-term borrowings


Customers’ creditor accounts

Subordinated loan

Shareholders’ Equity

TOTAL

> BREAKDOWN OF FUNDING SOURCES AS AT 31 DECEMBER

20092010

2.00%

0.59%

2.07%

85.19%

-

10.15%

100%

1.32%

0.70%

2.31%

84.68%

0.18%

10.81%

100%

236,777,936

125,512,349

414,620,408

15,198,534,272

31,874,560

1,940,983,172

17,948,302,697

The Group’s income tax for the financial year 2010 amounted to

LBP 45.35 billion (USD 30.09 million), compared to LBP 28.69 billion

(USD 19.03 million) for the financial year 2009. Deferred tax on

associates and subsidiaries’ profits for the financial year 2010

amounted to LBP 7.64 billion (USD 5.07 million), compared to

LBP 5.79 billion (USD 3.84 million) for the financial year 2009.

1.9 Income Tax and Deferred Taxes

2. TOTAL BALANCE SHEET

2.1 Funding Sources

As at December 31, 2010, funding sources amounted to

LBP 17,948.30 billion (USD 11,906.01 million) compared to

LBP 15,949.96 billion (USD 10,580.40 million) as at 31 December

2009, reflecting a year-on-year increase of 12.53%.

Similar to all other Lebanese commercial banks, the principal

source of funding are customers’ creditor accounts which

represented 84.68% of total funding sources as at 31 December

2010 as compared to 85.19% as at 31 December 2009. Other

funding sources include in addition to the shareholders’ equity,

long-term credit lines provided by international banks and

financial institutions, deposits of banks and financial institutions,

subordinated loan and soft loans from the Central Bank of

Lebanon related to banks acquisitions eligible under the

merger and acquisition Lebanese laws.

319,209,718

93,610,373

330,547,147

13,587,124,218

-

1,619,465,589

15,949,957,045

Amount % %Amount

As at 31 December 2010, the Group’s Total Balance Sheet amounted to LBP 18,457.76 billion (USD 12,243.95 million) compared to

LBP 16,300.03 billion (USD 10,812.62 million) as at year-end 2009, an increase of 13.24%. At year-end 2010, the Group maintained its 4th

ranking within the Lebanese banking sector in terms of Total Balance Sheet, with a market share of 8.47%.

Management Report



in thousands of LBP

Lebanese Pounds

U.S. Dollars

Euros

Other foreign currencies

TOTAL

> FUNDING SOURCES BY CURRENCY AS AT 31 DECEMBER

20092010

43.42%

46.18%

6.32%

4.08%

100%

42.95%

46.45%

5.47%

5.13%

100%

7,709,506,485

8,336,738,955

981,302,658

920,754,599

17,948,302,697

6,925,056,245

7,365,658,328

1,008,803,822

650,438,650

15,949,957,045

Amount % %Amount

in thousands of LBP

Short-term funding (less than 1 year)

Medium-term funding (between 1 & 3 years)

Long-term funding (more than 3 years)

TOTAL

> FUNDING SOURCES BY MATURITY AS AT 31 DECEMBER

20092010

88.41%

1.16%

10.43%

100%

86.68%

1.13%

12.19%

100%

15,558,046,804

202,704,643

2,187,551,250

17,948,302,697

14,101,190,690

185,826,779

1,662,939,576

15,949,957,045

Amount % %Amount

As at 31 December 2010, 57.05% of the Bank’s major funding sources were denominated in foreign currencies, as compared to 56.58%

as at 31 December 2009.

Customers’ Creditor Accounts :

As at 31 December 2010, the Group’s customers’ creditor accounts

amounted to LBP 15,198.53 billion (USD 10,081.95 million). An

increase of 11.86% over the 31 December 2009 level of

LBP 13,587.12 billion (USD 9,013.02 million).

This increase was mainly due to the growth in time saving

accounts + LBP 837.97 billion (USD 555.87 million) and in term

deposits + LBP 471.44 billion (USD 312.73 million). As at 31

December 2010, customers’ creditor accounts represent

82.34% of the Group’s Total Assets.

As at 31 December 2010, the Group maintained its 4th ranking

within the Lebanese banking sector in terms of customers’

creditor accounts, with a market share of 8.57%.

in thousands of LBP

Customers' creditor accounts at amortized cost

Demand and sight saving accounts

Time saving accounts

Term deposits

Blocked accounts

Margins and collateral accounts

Related Parties accounts

Customers' creditor accounts designated at fair value through profit or loss

Accrued interest

TOTAL CUSTOMERS CREDITOR ACCOUNTS

Lebanese Pounds

Foreign currencies

> BREAKDOWN OF CUSTOMERS CREDITOR ACCOUNTS BY TYPE AS AT 31 DECEMBER

20092010

13,349,904,125

1,203,465,550

8,126,420,412

3,198,314,285

33,412,853

561,833,047

226,457,978

160,192,439

77,027,654

113,587,124,218

39.26%

60.74%

15,042,354,090

1,432,247,516

8,964,393,683

3,669,750,387

41,588,460

677,484,417

256,889,627

72,592,991

83,587,191

15,198,534,272

39.89%

60.11%


in thousands of LBP

> BREAKDOWN OF CUSTOMERS CREDITOR ACCOUNTS BY AMOUNT AS AT 31 DECEMBER 2010

Total

Amount % % Cum.

2,129,529,245

1,342,905,244

1,651,221,707

2,196,301,830

2,026,813,482

2,025,221,922

3,826,540,842

15,198,534,272

14.01%

8.84%

10.86%

14.45%

13.34%

13.32%

25.18%

14.01%

22.85%

33.71%

48.16%

61.50%

74.82%

100%

FCs

Amount % % Cum.

956,196,228

619,890,951

742,102,531

1,162,083,169

1,234,802,323

1,363,250,498

3,056,813,377

9,135,139,077

10.47%

6.79%

8.12%

12.72%

13.52%

14.92%

33.46%

10.47%

17.26%

25.38%

38.10%

51.62%

66.54%

100%

LBP

Amount % % Cum.

1,173,333,017

723,014,293

909,119,176

1,034,218,661

792,011,159

661,971,424

769,727,465

6,063,395,195

19.35%

11.92%

14.99%

17.06%

13.06%

10.92%

12.70%

19.35%

31.27%

46.26%

63.32%

76.38%

87.30%

100%

A < 50 million

50 million ≤ A < 100 million



500 million ≤ A < 1.5 billion

1.5 billion ≤ A < 5 billion

A ≥ 5 billion

TOTAL 100% 100% 100%

in thousands of LBP

> BREAKDOWN OF CUSTOMERS CREDITOR ACCOUNTS BY INITIAL MATURITY AS AT 31 DECEMBER 2010

Total

Amount % % Cum.

5,931,285,085

5,227,360,812

2,900,062,499

683,144,069

297,189,595

75,905,021

83,587,191

15,198,534,272

39.03%

34.39%

19.08%

4.49%

1.96%

0.50%

0.55%

39.03%

73.42%

92.50%

96.99%

98.95%

99.45%

100%

FCs

Amount % % Cum.

3,287,522,428

3,051,848,641

1,918,856,451

532,519,390

241,076,107

60,598,104

42,717,956

9,135,139,077

35.99%

33.41%

21.00%

5.83%

2.64%

0.66%

0.47%

35.99%

69.40%

90.40%

96.23%

98.87%

99.53%

100%

LBP

Amount % % Cum.

2,643,762,657

2,175,512,171

981,206,048

150,624,679

56,113,488

15,306,917

40,869,235

6,063,395,195

43.60%

35.88%

16.18%

2.49%

0.93%

0.25%

0.67%

43.60%

79.48%

95.66%

98.15%

99.08%

99.33%

100%

P ≤ 1 month

1 month < P ≤ 3 months

3 months < P ≤ 12 months

1 year < P ≤ 3 years

3 years < P ≤ 5 years

P > 5 years

Accrued interest

TOTAL

Number of accounts

Average per account

Weighted average period

100% 100% 100%

212,075

28,591

101 days

198,938

45,920

166 days

411,013

36,978

140 days

Shareholders’ Equity :

Shareholders’ equity as at 31 December 2010 stood at

LBP 1,940.98 billion (USD 1,287.55 million), compared to

LBP 1,619.47 billion (USD 1,074.27 million) as at 31 December 2009,

reflecting a year-on-year increase of 19.85%. This year-on-year

increase resulted mainly from the 2010 net income, and the

increase of the positive cumulative change in fair value of

investment securities from LBP 304.40 billion (USD 201.92 million)

as at 31 December 2009 to LBP 341.82 billion (USD 226.75 million)

as at 31 December 2010 as well as the issuance in August 2010 of

Perpetual Non-Cumulative Convertible Redeemable Series B

Preferred shared for the amount of USD 85 million.

Management Report



in thousands of LBP

Cash

Compulsory reserves and Central Banks


Securities portfolio


TOTAL

> BREAKDOWN OF USES OF FUNDS AS AT 31 DECEMBER

20092010

0.52%

16.53%

10.02%

50.56%

22.37%

100%

0.56%

13.96%

11.08%

47.30%

27.10%

100%

97,905,375

2,439,407,579

1,935,553,966

8,265,895,217

4,736,342,603

17,475,104,740

81,336,245

2,571,560,823

1,557,969,522

7,866,941,515

3,480,742,204

15,558,550,309

Amount % %Amount

in thousands of LBP

Lebanese Pounds

U.S. Dollars

Euros

Other foreign currencies

TOTAL

> USES OF FUNDS BY CURRENCY AS AT 31 DECEMBER

20092010

43.10%

44.95%

6.76%

5.19%

100%

42.94%

45.30%

5.81%

5.95%

100%

7,504,387,406

7,916,485,103

1,014,487,037

1,039,745,194

17,475,104,740

6,705,038,855

6,994,057,178

1,051,219,724

808,234,552

15,558,550,309

Amount % %Amount

in thousands of LBP

Short-term (less than 1 year)

Medium-term (between 1 and 3 years)

Long-term (more than 3 years)

TOTAL

> USES OF FUNDS BY MATURITY AS AT 31 DECEMBER

20092010

47.31%

20.60%

32.09%

100%

47.60%

21.99%

30.41%

100%

8,317,714,706

3,842,449,069

5,314,940,965

17,475,104,740

7,361,620,126

3,204,392,816

4,992,537,367

15,558,550,309

Amount % %Amount

Cash, Central Banks, Banks and Financial Institutions :

As at 31 December 2010, Cash, Central Banks and Banks

& financial institutions amounted to LBP 4,472.87 billion

(USD 2,967.08 million) and constituted 24.23% of total

assets compared to LBP 4,210.87 billion (USD 2,793.28 million)

and 25.83% as at 31 December 2009, reflecting a year-on-

year increase of 6.22%. To note that the Blocked deposits

with central Banks are related to the issuance by BLC Bank SAL

of 40,000 Preferred shares.

2.2 Uses of Funds

The Bank uses of its funds to comply with Central Banks regula-

tory reserve requirements, liquid short term placements with

international banks and financial institutions, loans and

advances to Customers and investment in securities portfolio.


in thousands of LBP

Cash on hand

Compulsory reserves and Central Banks

Compulsory reserves with Central Banks

Obligatory placements

Current accounts with Central Banks

Free placements with Central Banks

Blocked deposits with Central Banks

Accrued interest


Current accounts with banks

Term placements with banks

Purchased checks for collection

Loans to banks

Accrued interest

TOTAL

> BREAKDOWN OF CASH, CENTRAL BANKS AND FINANCIAL INSTITUTIONS AS AT 31 DECEMBER

20092010

1.93%

61.07%

13.38%

26.63%

4.45%

16.56%

-

0.05%

37.00%

2.69%

32.55%

0.29%

1.39%

0.08%

100%

2.19%

54.54%

9.58%

26.75%

3.83%

14.32%

0.01%

0.05%

43.27%

5.14%

32.54%

0.24%

5.16%

0.19%

100%

97,905,375

2,439,407,579

428,491,739

1,196,685,870

171,254,780

640,416,745

400,000

2,158,445

1,935,553,966

230,095,048

1,455,316,794

10,706,176

231,047,979

8,387,969

4,472,866,920

81,336,245

2,571,560,823

563,381,680

1,121,457,005

187,390,239

697,151,180

-

2,180,719

1,557,969,522

113,249,966

1,370,492,670

12,458,021

58,492,444

3,276,421

4,210,866,590

Amount % %Amount

Securities Portfolio :

As at 31 December 2010, the Group’s securities portfolio, which

consists of both fixed and variable income securities,

amounted to LBP 8,265.90 billion (USD 5,483.18 million)

compared to LBP 7,866.94 billion (USD 5,218.54 million)

as at 31 December 2009, an increase of 5.07%.

Securities portfolio constituted 44.78% of total assets as

at 31 December 2010 against 48.26% as at 31 December

2009.

in thousands of LBP

Held for trading securities

Available for sale investment securities

Held to maturity investment securities

TOTAL

> BREAKDOWN OF SECURITIES PORTFOLIO BY CLASSIFICATION AS AT 31 DECEMBER

20092010

1.22%

80.84%

17.94%

100%

1.11%

82.34%

16.55%

100%

91,846,442

6,806,047,080

1,368,001,695

8,265,895,217

95,821,389

6,359,346,312

1,411,773,814

7,866,941,515

Amount % %Amount

Management Report



in thousands of LBP

Equities with variable income

Lebanese Treasury bills

Lebanese Government bonds

Government bonds – Non-resident

Banks, corporate and subordinated Eurobonds

Certificates of deposit issued by Central Bank of Lebanon

Certificates of deposit issued by commercial banks

Alternative funds

Banks and corporate bonds

Asset-backed securities

Accrued interest

TOTAL

Lebanese Pounds

Foreign currencies

> BREAKDOWN OF SECURITIES PORTFOLIO BY TYPE AS AT 31 DECEMBER

20092010

2.46%

22.02%

22.99%

-

0.34%

48.99%

0.97%

-

0.39%

0.03%

1.81%

100%

2.34%

18.03%

21.31%

-

0.62%

54.77%

0.89%

-

0.33%

0.03%

1.68%

100%

193,426,871

1,490,374,210

1,761,219,371

358,785

51,003,332

4,527,497,833

73,230,666

360,113

27,470,750

2,224,392

138,728,894

8,265,895,217

193,403,925

1,732,277,251

1,808,623,056

-

26,826,160

3,853,989,209

76,167,980

365,579

30,564,313

2,224,392

142,499,650

7,866,941,515

Amount % %Amount

66.14%

33.86%

64.03%

35.97%

Loans and Advances to Customers :

As at 31 December 2010, the Group’s loans and advances to

customers, net of provisions and unrealized interest for non-

performing loans and discount on loan book, amounted to

LBP 4,736.34 bi l l ion (USD 3,141.85 mil l ion) against

LBP 3,480.74 billion (USD 2,308.95 million) as at 31 December

2009. An increase of 36.07%.

As at 31 December 2010, the Group maintained its 5th ranking

within the Lebanese banking sector in terms of net loans and

advances to customers, with a market share of 7.16%.


in thousands of LBP

Short term (Commercial loans & other current debtor accounts)

Medium & long term

Consumer loans

Housing loans

IFC housing loans

EPH housing loans

Housing loans to army personnel

Education loans

Loans subsidized by the Government

KAFALAT guaranteed loans

Car loan

Loans to enterprises

Other loans

Loans and advances to related parties

Substandard debts

Doubtful and bad debts

Accrued interest

TOTAL

Less :

Unrealized interest for substandard debts

Provisions and unrealized interest for doubtful and bad debts

Discount on loan book

Collective provisions for un-classified debts

NET LOANS AND ADVANCES TO CUSTOMERS

Lebanese Pounds

Foreign currencies

> BREAKDOWN OF LOANS AND ADVANCES TO CUSTOMERS BY TYPE AS AT 31 DECEMBER

23.07%

76.93%

19.06%

80.94%

20092010

1,949,191,171

1,216,382,314

240,891,170

87,177,275

426,478

189,306,332

37,924,821

1,502,459

77,222,349

67,284,651

245,186,488

204,234,091

65,226,200

170,111,276

42,099,182

984,935,097

7,519,379

4,370,238,419

(14,668,362)

(859,567,394)

(10,035,093)

(5,225,366)

3,480,742,204

2,698,676,591

1,778,742,498

336,482,259

153,678,337

316,672

277,562,505

77,742,373

11,877,930

128,248,075

90,476,587

329,480,725

358,169,306

14,707,729

153,837,034

48,222,616

852,130,093

11,169,127

5,542,777,959

(19,413,504)

(761,174,237)

(9,332,427)

(16,515,188)

4,736,342,603

Management Report



in thousands of LBP

Regular, watch and unclassified accounts

Restructured

Un-restructured

Substandard accounts

Restructured

Un-restructured

Doubtful & bad debts

Restructured

Un-restructured

Purchased loan book

Accrued interest

TOTAL LOANS AND ADVANCES TO CUSTOMERS

Less provisions, discount and unrealized interest for non performing debts :

Provisions for doubtful and bad debts

Provisions for restructured doubtful and bad debts

Provisions for Un-restructured doubtful and bad debts

Discount on loan book

Discount on restructured loan book

Discount on Un-restructured loan book

Collective Provisions

Collective provisions for doubtful and bad debts

Collective provisions for un-classified debts

Unrealized interest for doubtful and bad debts

Unrealized interest for restructured doubtful and bad debts

Unrealized interest for un-restructured doubtful and bad debts

Unrealized interest for substandard accounts

Unrealized interest for restructured substandard accounts

Unrealized interest for un-restructured substandard

NET LOANS AND ADVANCES TO CUSTOMERS

> ASSET QUALITY AS AT 31 DECEMBER

20092010

3,335,684,761

23,013,389

3,312,671,372

42,099,182

8,803,779

33,295,403

981,257,223

15,471,433

965,785,790

3,677,874

7,519,379

4,370,238,419

(889,496,215)

(223,944,541)

(6,472,987)

(217,471,554)

(10,035,093)

(433,807)

(9,601,286)

(10,585,992)

(5,360,626)

(5,225,366)

(630,262,227)

(4,158,503)

(626,103,724)

(14,668,362)

(1,140,534)

(13,527,828)

3,480,742,204

4,631,256,123

27,490,475

4,603,765,648

48,222,616

9,035,181

39,187,435

848,540,188

10,726,901

837,813,287

3,589,905

11,169,127

5,542,777,959

(806,435,356)

(195,410,642)

(1,118,056)

(194,292,586)

(9,332,427)

(121,115)

(9,211,312)

(23,295,693)

(6,780,505)

(16,515,188)

(558,983,090)

(5,438,136)

(553,544,954)

(19,413,504)

(1,655,653)

(17,757,851)

4,736,342,603

As at 31 December 2010, the Group’s doubtful and bad debts,

net of provisions, discount and unrealized interest, amounted

to LBP 81.62 billion (USD 54.14 million) compared to

LBP 115.33 billion (USD 76.51 million) as at 31 December

2009, thus a decrease of 29.23%.

As at 31 December 2010, the provisions, discount and

unrealized interest for doubtful and bad debts amounted to

LBP 770.51 billion (USD 511.12 million) against LBP 869.60 billion

(USD 576.85 million) as at 31 December 2009. This places the

coverage ratio in 2010 at 90.42% compared to 88.29% in 2009.

As at 31 December 2010, the Group’s substandard accounts,

net of unrealized interest, amounted to LBP 28.81 billion

(USD 19.11 mil l ion) compared to LBP 27.43 bi l l ion

(USD 18.20 million) as at 31 December 2009.


Doubtful debts and purchased loans (net) to Total loans and advances to customers (net)

Doubtful debts and purchased loans (net) to Shareholders’ equity

Substandard accounts (net) to Total loans and advances to customers (net)

Provisions, discount and unrealized interest to Doubtful debts and purchased loans

Unrealized interest for substandard accounts to Substandard accounts

> ASSET QUALITY RATIOS AS AT 31 DECEMBER

> BREAKDOWN OF LOANS AND ADVANCES TO CUSTOMERS BY ECONOMIC SECTOR

20092010

3.31%

7.12%

0.79%

88.29%

34.84%

1.72%

4.21%

0.61%

90.42%

40.26%

42%

17%

6%

24%

2%

9%

31.12.10

Trade & Services

Industry

Construction

Agriculture

Retail

Miscellaneous

46%

16%

6%

21%

2%

9%

31.12.09

Trade & Services

Industry

Construction

Agriculture

Retail

Miscellaneous

in thousands of LBP

> BREAKDOWN OF GROSS LOANS AND ADVANCES TO CUSTOMERS BY AMOUNT AS AT 31 DECEMBER 2010

Total

Amount % % Cum.

855,671,306

273,171,459

362,167,784

427,031,316

675,991,917

1,352,009,508

1,596,734,669

5,542,777,959

15.44%

4.93%

6.53%

7.70%

12.20%

24.39%

28.81%

15.44%

20.37%

26.90%

34.60%

46.80%

71.19%

100%

FCs

Amount % % Cum.

460,304,504

103,488,304

142,370,780

288,759,708

571,739,693

1,194,714,287

1,305,711,507

4,067,088,783

11.32%

2.54%

3.50%

7.10%

14.06%

29.38%

32.10%

11.32%

13.86%

17.36%

24.46%

38.52%

67.90%

100%

LBP

Amount % % Cum.

395,366,802

169,683,155

219,797,004

138,271,608

104,252,224

157,295,221

291,023,162

1,475,689,176

26.79%

11.50%

14.89%

9.37%

7.07%

10.66%

19.72%

26.79%

38.29%

53.18%

62.55%

69.62%

80.28%

100%

A < 50 million




500 million ≤ A < 1.5 billion

1.5 billion ≤ A < 5 billion

A ≥ 5 billion

TOTAL 100% 100% 100%

3. CAPITAL ADEQUACY RATIO

The Group’s capital adequacy ratio is 12.00% as at 31 December

2010, as compared to 11.85% as at 31 December 2009. The

capital adequacy ratio is calculated according to the Central Bank

of Lebanon guidelines, which are in line with the recommendations

of the Committee on Banking Regulations and Supervisory

Practices of the Bank for International Settlements (the Basel II

Accord). On a stand alone basis, Fransabank’s capital adequacy

ratio is 14.81% as at 31 December 2010, as compared to 13.50% as

at 31 December 2009. The statutory minimum capital adequacy

ratio required by the Central Bank of Lebanon is 8%. Basel III Capital

Framework, which was designed to address the weaknesses of the

recent international financial crisis, was also considered by

Fransabank through an internal quantitative impact study that

was conducted to assess the impact of the proposed ratios and

limits on Fransabank status. Accordingly, Fransabank SAL and

Fransabank Group will be abiding by the proposed limits and

ratios as of 31 December 2010.

Management Report



INVESTMENT AND PRIVATE BANKING

Investment, private banking and capital markets activities are

provided to Fransabank clients through its wholly-owned

investment banking subsidiary, Fransa Invest Bank (FIB) : refer to page 55.

Fransa Invest Bank investment banking activity was multi-

dimensional covering advisory and equity/debt financing to

diversified projects in both the private and the public sectors.

On the grounds of FIB’s objective to directly support the

Lebanese manufacturing industry with export potential, the

Bank was active in evaluating various proprietary equity

opportunities in the junk food, dairy products, construction

material, and jewelry sectors. FIB’s scope was also extended to

the services sector covering education and tourism. In respect

to the latter, the Bank capitalized on its solid experience and

expertise in project financing to act as the financial advisor of

two new environmental-friendly touristic projects that are

expected to be the first of their kinds outside Greater Beirut. FIB

continued being active in corporate finance through extending

loans to industrial, agriculture, hospitalization, financial, and real

estate companies. It has also acted as the advisor of Fransabank

in relation to a pioneer international trade financing transaction

that will bring, and for the first time, an international insurance

body to the Lebanese market. In addition, FIB represented

Fransabank Group in a selected committee of prime Lebanese

commercial banks for the purpose of discussing the role of the

Lebanese banking sector in the public sector’s projects initiated

under the new Public Private Partnership (PPP) scheme. The

2010 discussions evolved around the electricity distribution

service providers’ project introduced by the Ministry of Energy

& Water.

Fransa Invest Bank Private Banking and Asset Management

department was very active in brokerage trading and

structured products activities. The team of the Private Banking

and Asset Management department was involved in the

issuance of a USD Republic of Lebanon Eurobond and the

Fransabank Series B preferred shares.

6.375% March 2020 Republic of Lebanon Eurobond

Fransa Invest Bank was selected as joint lead manager along

with two other banks to issue a new Republic of Lebanon

Eurobond maturing on March 9, 2020. The objective was to

refinance the maturing March 2010 Republic of Lebanon

Eurobond. The transaction had all the makings of a landmark

deal. The issue was highly successful, and set the bar higher for

future issues. Among the most impressive achievements were:

• The book size: the transaction was three times oversubscribed

• The quality of investors: significant international participation

(international investment managers, banks and financial

institutions)

• The geographic distribution: robust demand, domestically and

internationally, including good demand from the UK,

Switzerland and US offshore

• The pricing: favorable pricing despite extraordinary market

conditions at the time. With the international spotlight on the

Greek debt crisis, investors were wary of the sustainability of

emerging markets and peripheral European finances, driving

yields up

Fransa Invest Bank role was instrumental in placing the

transaction successfully. The Bank was involved in every step

of the transaction, from pre-launching phase, close follow-up

with the Ministry of Finance, close daily follow-up with

potential investors, marketing materials and roadshow for local

investors; to launching book orders, pricing and allocation.

Fransabank Preferred Shares

Fransa Invest Bank was designated as the placement agent and

book runner for Fransabank Series B preferred shares,

successfully closed on August 6, 2010. The shares are Tier I,

non–cumulative, convertible and redeemable. The aim of the

issue was to reinforce Fransabank Group’s expansion and

development in Lebanon and in other promising markets of the

region. The success of the issue was very high in terms of book

size, quality of investors, strong international participation and

cost-effectiveness. Due to high investor demand, the offering

was oversubscribed, resulting in a final issue amount of

USD 85 million. Pricing was also very favorable, resulting in a

final dividend yield of 6.75% p.a. Demand came from both

private and institutional investors both in Lebanon and abroad,


whereby the final allocation of the preferred shares reached

64.7% Lebanese investors and 35.3% non-Lebanese.

Brokerage and Structured Products

Fransa Invest Bank’s brokerage services expanded, resulting in

significantly higher activity in 2010 and a rise in the client base.

This was backed by higher risk appetite, favorable financial

markets and an increase in volatility that encouraged investors

to seek opportunities. FIB also continued to come up with

innovative investment solutions tailored for high-value clients

that put it ahead of the competition.

FIB, with hard work and clear vision, has developed the

investment and private banking expertise and knowledge to

benefit from Fransabank Group expansion strategy to grow its

business accordingly at home and abroad.

With Fransabank Group’s ongoing partnership with international

financing institutions (IFC, EIB, ATFP…) and the complete range

of subsidized loans, project financing and trade finance offered

to the Group’s corporate clients, newly established and existing

businesses from different sectors of the economy were able to

finance their various projects, benefiting from personalized

banking services offered at competitive rates. In addition, and in

the scope of Fransabank’s expansion strategy, corporate clients

were able to benefit from a wider market access and a more

effective trade finance activity through the Group's regional

and international subsidiaries and associate.

During 2010, the Group’s corporate loans registered a substantial

growth of 49.37% to reach USD 1.66 billion as at 31 December

2010 compared to USD 1.11 billion as at 31 December 2009.

In its continuing aim to be the supporting arm of the leading

businesses in the Lebanese economy, Fransabank has further

developed its Corporate Banking Department restructuring its

team into concentrated business units and their main task is to

provide a personalized service and an undivided attention to a

definite cluster of customers. Within this structure, the

Corporate Banking Department team has continued to treat

clients as partners offering them financial guidance and

tailoring a broad spectrum of commercial banking services to

their individual business needs.

As for Fransabank SAL, the corporate loan portfolio increased by

16.80% in direct balance sheet utilizations (loans, overdrafts ….)

to reach USD 1,072.75 million in 2010 as compared to the

previous year, distributed over the main sectors of the

Lebanese economy as follows:

The retail banking activity at Fransabank Group covers a wide

range of diversified products and services including consumer

lending products, payment cards, small and medium size

business loans, savings and insurance products, micro credits,

special services, accounts, internet banking, mobile banking,

phone banking among others. This is supported by a local

branch network of 108 branches strategically spread all over the

country and resulting in being the largest branch network in

Lebanon.

CORPORATE BANKING

Wholesale & Retail Trade

Tourism & Services

Manufacturing

Contracting & Construction

Agriculture

Other

34%

10%

13%

20%

20%

3%

RETAIL BANKING, BRANCH MANAGEMENT & SME

Management Report



During 2010, the Group’s retail and SME loans registered a

significant growth of 28.27% to reach USD 1.42 billion as at 31

December 2010 compared to USD 1.10 billion as at 31

December 2009.

At Fransabank SAL, the Retail Banking Division continued to put

into practice its ever-expanding strategy along with its sustainable

growth approach, by focusing on clients’ specific needs and

relentlessly ensuring their ultimate satisfaction. This strategy has

unfolded exactly as intended and outstanding results were

recorded. Historically and over the past years, the retail team

succeeded in creating value to Fransabank’s clients by

anticipating their banking financial needs, while providing

them with the highest levels of professionalism and expertise.

As a result, the Retail Banking activities at Fransabank

contributed to strengthen its position as a key player in the

retail banking industry.

Local Geographical Expansion

Fransabank’s local expansion strategy comes in line with the

Bank’s overall business strategy which partially aims, on the

local level, at developing and increasing its organic growth,

either by expanding the Bank’s business activities or by enriching

its overall geographic expansion. Accordingly, and within this

geographic expansion strategy framework, three new branches

were inaugurated in 2010 as for:

• Beirut - Moussaitbeh,

• North - Zgharta &

• South – Ghazieh.

On the other hand, five new branches are going to be inaugurated

in 2011 within three different regions.

Within the Beirut region:

• Hamra Sadat

• Focheville

• Blvd. Hadi Nasrallah

Within the Mount Lebanon region:

• Bauchrieh

Within the Bekaa region:

• Daher El Ahmar

Products and Services Launched in 2010

The remarkable results achieved in 2010 were coupled with a

diversification of both the Retail and the SME products range,

be it through the introduction of new products or the amendment

of existing features and conditions, thus adapting to the ever

changing needs and demands of Fransabank’s clients.

In the retail business line, Fransabank was the first Bank to sign

three different housing loan protocols with several ministries

and Government entities. These initiatives fall within

Fransabank’s corporate social responsibility whereby the Bank

continuously seeks to contribute to the effective economic and

social development of Lebanon, as well as to the improvement

of the social conditions of all Lebanese citizens. These housing

loan protocols offer the beneficiaries very special features and

conditions.

• The housing loan for Lebanese Judges, reached following an

agreement with the Judges Cooperation Funds

• The housing loan for the Internal Security Forces, reached fol-

lowing an agreement with the Internal Security Forces

Directory

• The displaced housing loan intended for people affected by

displacement before 1990, to reconstruct, renovate, repair or

improve their homes

In order to promote rural community development, the

agricultural loan protocol was signed with the Ministry of

Agriculture. It is devoted to encourage and develop the sector

of agriculture in Lebanon, by offering a minimized interest rate

loan with personalized amount and tenor.

Engaged in the promotion of environmental sustainability,

Fransabank was the first Bank to launch energy loans for

businesses and individuals, with respect to the agreement

signed between the Ministry of Energy and the Central Bank of

Lebanon. These energy loans also feature minimized interest

rate and very flexible conditions.

The SME activities succeeded in covering and supporting the

requirements relating to non-subsidized sectors and

professionals such as traders, doctors, engineers and others, in

accordance with the new Circulars and Decrees issued by the

Central Bank of Lebanon and targeted for the SME business


activities. As a result, and by means of “partnership”, the SME

Department introduced the Commercial Property Loan - that

falls under Decree 185 issued by the Central Bank of Lebanon,

which offers clients the needed resources to acquire/refurbish

their business premises and purchase the necessary

equipment. This mutually beneficial product gave the client an

advantage with very favorable conditions in terms of interest

rates and grace period.

Moreover, two Bancassurance products were launched in 2010:

the FransaPlus insurance product covering risks against

unexpected accidents, and the new FransaVie insurance plan

for the coverage of overdrafts.

Business Growth

In 2010, the Retail Banking Division continued to deliver the

Bank’s clients easy, secure, and pertinent solutions for their

growing financial needs, yielding a notable increase in sales

activities, positively affecting both the deposits and lending

portfolio. As a result, a favorable growth was recorded in all

business lines at the end of 2010.

Clients’ Deposits

For the past two years, the clients’ deposit portfolio growth rate

was on a substantial upward trend. Thus, between end-

December 2009 and end-December 2010, the clients’ deposits

portfolio in branches increased by 12%.

Retail Loans

The past few years witnessed a steady growth of the overall

retail lending portfolio, while retail loans surged by nearly 38%

in 2010.

Accordingly, the consumer loans portfolio increased by almost

38% at the end of 2010, compared with a year earlier, accounting

for 31% of total retail loans portfolio. The housing loans

portfolio also registered an annual increase of nearly 47% at the

end of the year 2010, representing around 44% of total retail

loans portfolio. As for the car loans portfolio, it progressed by a

yearly 25%, accounting for 21% of the total retail loans portfolio.

Payment Cards

The credit cards portfolio increased by 17% at year-end 2010 as

compared to year-end 2009, and the debit cards portfolio

increased by almost 8% at year-end 2010 as compared to year-

end 2009, resulting in an overall increase of 11% in the total

payment cards portfolio in 2010. Year-on-year, total spending

on payment cards expanded by nearly 8%.

Evolution of Retail Loans (in million of LBP)

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

02006 2007 2008 2009 2010

Credit Cards Number / Spending Volume (in million of USD)

100,000

200,000

300,000

400,000

500,000

600,000

700,000

0 0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

2007 2008 2009 2010

31%

44%

4%

21%

Breakdown of Retail Loans by Type

Consumer

Housing

Car

Others

Management Report



Bancassurance Products

At the end of 2010, the overall Bancassurance products

portfolio increased by an annual 16% approximately.

Accordingly, the Bancassurance portfolio was mainly constituted

as follows: Fransavenir (retirement saving plan) with nearly 39%,

Fransajeunesse (education saving plan) with 38%, Fransavie (life

insurance plan) with 14%, Fransaplus (life insurance plan with

accidental coverage) with 8% and Fransafuture (retirement

saving plan with investment and financial markets) with 1%.

SME Loans and Facilities

Between end-December 2009 and end-December 2010,

total SME loans and facilities portfolio significantly increased

as it achieved a remarkable growth of 46%. Accordingly, the

SME portfolio was constituted as follows: regular term loans

with nearly 33%, Kafalat loans with 28%, loans falling within

Regulation 185 issued by the Central Bank of Lebanon with

28%, and Daam loans with 11%.

It is also worth mentioning that the SME lending portfolio

was distributed on a variety of business sectors, mainly

trade with 33%, industries with 18%, agriculture with 10%,

tourism with 9% and various other sectors (e.g. education,

media, health and social services, etc.) representing altogether

30%.

Breakdown of Bancassurance Products by Type

Fransavenir

Fransajeunesse

Fransavie

Fransaplus

Fransafuture

39%

38%

1%

14%

8%

33%

28%

11%

28%

Breakdown of SME Portfolio by Type

Regular Term Loan

Kafalat

Regulation 185

Daam

Breakdown of SME Portfolio by Sector

Agriculture

Industry

Tourism

Trade

Others

18%

33%

9%

30%

10%

Management Report



BLC Bank is the local banking subsidiary of Fransabank Group. In

2010, BLC Bank continues to post record financial results

exceeding the average growth ratios of the Lebanese Alpha

Banking Group in line with management’s strategic growth

plans.

BLC Bank consolidated net income reached USD 45.3 million in

2010, registering a strong increase of 32.6% compared to 2009,

while total assets and total customers’ deposits increased

respectively by 19.6% and 14.5%, reaching USD 3.10 billion and

USD 2.60 billion. The Bank's portfolio of performing loans

registered a growth of 50% reaching USD 672 million at year

end 2010, as a result of increased lending activities in the retail

and corporate banking. This confirms BLC Bank’s active role in

the local market underscoring its involvement in financing the

productive economic sectors.

In September 2010, BLC Bank acquired 9.9% of the shares of

USB Bank PLC Cyprus to become a 94% majority shareholder in

February 2011, reflecting the Bank’s expansionary vision in the

region. This acquisition will allow BLC Bank to meet its strategic

growth objectives in a record time increasing its consolidated

balance sheet to USD 3.80 billion in total assets, USD 3.2 billion

in total customers’ deposits and USD 1.1 billion in total net

loans and advances to customers.

The success of the Bank’s strategy asserts the confidence

entrusted to BLC Bank Chairman H.E. Mr. Maurice Sehnaoui by

Fransabank Group. These excellent results in 2010 will be the

stepping stone to successfully benefit from future opportunities

and achieve the Bank’s ambitious development plans in 2011

and further.

Fransa Invest Bank is the fully owned investment and private

banking subsidiary of Fransabank Group. It aims to provide

value-added investment banking services meeting the needs

of its institutional and individual clients through a full range of

dedicated professional financial services, including:

• Corporate finance advisory encompasses mergers and

acquisitions, equity capital markets, private placements, debt

advisory, vertical/horizontal expansion, re-organization and

balance sheet re-structuring.

• Equity and debt financing opportunities for corporate and

project finance.

• Wealth management advice, expertise and solutions on a

non-discretionary basis to optimize returns on client's investments.

• Capital markets activities include full brokerage services,

available for a wide range of financial products including

currencies, bonds, stocks, commodities, futures, and options

with access to local, regional (GCC, Jordan, and Egypt) and

international markets (North America, Europe, and Asia).

FIB also provides in-house economic, market and country

research and analysis, supported by international banks and

asset managers.

Fransa Invest Bank achieved remarkable performance in 2010,

whereby total assets increased by 3.54% to reach USD 348.62 million

at the end of 2010, as compared to USD 336.69 million at the

end of 2009. Customers’ deposits increased by 5.04 % to reach

USD 254.71 million at the end of 2010, as compared to

USD 242.50 million at the end of 2009. Net income increased by

2.40% to reach USD 9.37 million in 2010, as compared to

USD 9.15 million in 2009, Return on Average Equity (ROAE)

reached 15.53% in 2010 and Return on Average Assets (ROAA)

reached 2.70%.

The Lebanese Leasing Company, a subsidiary of Fransabank

Group posted another good year in 2010, with results, excluding

income tax, nearly attaining USD one million, which was a

record since its inception over ten years ago.

The Lebanese Leasing company offers the following services:

• Financial Lease: LLC buys the machinery and equipment for

and on behalf of the clients and rents it back to them for a

period reaching up to seven years, depending on the expected

BLC BANK SAL

FRANSA INVEST BANK SAL (FIB)

LEBANESE LEASING COMPANY SAL (LLC)

Management Report


lifetime of the financed equipment, with an option for its

client to buy back such equipment at a symbolic price at the

end of the lease period.

• Leaseback: LLC gives its clients the option to refinance the

existing equipment to boost their cash flow.

• Cross-border Leasing: LLC finances equipment outside

Lebanon to Lebanese contractors.

In addition, LLC also teamed up with local car rental agencies to

offer operational leases to some of their clients, a turnkey

leasing technique which combines financing and maintenance

of car and van fleets.

Regarding the year 2011, LLC looks forward to reinforcing its

business activity by widening its clientele portfolio.

Bancassurance, an associate company of Fransabank Group,

was established in 1999 by Fransabank SAL and Crédit Agricole

Assurances, the insurance company affiliated to Crédit Agricole

- France.

Bancassurance was, once again, ranked first in the bank-

insurance market based on the volume of its portfolio and third

in the life insurance market in Lebanon, as published by

Al Bayan Magazine, April 2010 issue.

In 2010, Bancassurance registered very impressive financial

results, with net profits increasing by 35.21% to USD 8.18 million,

compared with USD 6.05 million in 2009, reflecting a constant

growth over the past 8 years. Likewise, the collected premiums

increased by 9.71%, reaching USD 37.41 million during the year

2010, compared with USD 34.10 million the year earlier.

Bancassurance Products

Compulsory Life Insurance Products for Loans

The compulsory life insurance products for loans covers the

Bank in case of death or total permanent disability of the

borrower in all types of loans: personal loan, housing loan,

housing loan with the Public Housing Establishment, Kafalat

loans, university loan, among others. In 2010, Bancassurance

launched a life insurance product covering housing loans for

refugees, Judges and Internal Security Forces members, a

tailor-made life insurance product on overdraft.

Term Life Products

The term life products are non-refundable plans intended for

family protection in case of death or permanent disability of the

insured. Bancassurance offers two types of term life products:

the ordinary term life insurance (Fransavie) and the personal

accident insurance (Fransaplus).

Saving and Life Insurance Products

These saving and insurance products allow the insured to

secure a decent and comfortable retirement (Fransavenir) or to

secure his children’s future university education

(Fransajeunesse), while benefiting from a life insurance to

protect his family. The unit link products (Fransafuture) are

intended for the constitution of a capital that meets the

financial plans of the insured, granting him investment

opportunities in international financial markets, while ensuring

his life and protecting his family. In 2010, Bancassurance added

to the educational plan an additional and optional schooling

cover securing the schooling tuitions of the child in case of

death or total permanent disability of the insured.

Sogefon is the real estate service company, subsidiary of

Fransabank Group. Sogefon devoted and qualified team

managed to liquidate a substantial share of Fransabank

properties, at market value and succeeded in maintaining a

remarkable profit margin of 41 % in 2010, the same as achieved

in 2009 despite the slowdown in real estate transactions in the

second half of the year 2010.

With the increase of property acquisitions in 2010, Sogefon now

manages an extensive real estate portfolio, and will devote all

its efforts to market a substantial part of these assets.


BANCASSURANCE SAL

SOCIÉTÉ GÉNÉRALE FONCIÈRE SAL (SOGEFON)

Management Report



FRANSABANK (FRANCE) SAIn 2010, Fransabank Group continued to dynamically pursue its

expansion strategy, spreading through 8 countries other than

Lebanon, with Cyprus being the latest addition to Fransabank’s

international network consisting of:

5 subsidiaries in France, Algeria, Syria, Belarus and currently

Cyprus

1 associate bank in Sudan

2 representative offices in Cuba and Libya

In September 2010, BLC Bank SAL (74.83% owned by

Fransabank) acquired 9.9% of the Cypriot USB Bank PLC, further

strengthening the Group’s position in Europe. This participation

increased to 93.85% in February 2011. As at end of 2010, total

assets of USB Bank PLC reached USD 721.2 million and its

shareholders’ equity attained USD 35 million, while being

operational through 16 local branches.

Total assets of Fransabank foreign subsidiaries currently

account for 16% of the Group’s total assets. In fact, the Group’s

foreign entities achieved in 2010 a much satisfactory

performance despite the unfavorable economic conditions. In

what concerns Fransabank Syria and Fransabank OJSC, efforts

were deployed during 2010 towards expanding their local

network of branches. Following the inauguration of a branch in

Oran, the second largest city in Algeria at the beginning of 2010,

Fransabank El Djazaïr enlarged its corporate customer base,

which translated into a substantial growth of activity.

Moreover, during the 4th quarter of 2010, Fransabank SAL’s

Board of Directors has approved to open branches in Iraq and

the related implementation process has been initiated. The

Bank is also contemplating to diversify more its international

footprints by entering West & Central Africa.

In conclusion, being a mother company, Fransabank SAL, in its

designated supervisory role, is conducting periodic on-site

missions at its subsidiaries, relating to AML, Risk Management,

Audit, etc..., to ascertain their compliance with the norms and

regulations, and provide, when necessary, the technical support

for that purpose. In addition to that, Fransabank SAL

continuously seeks to increase the synergies amongst the

Group’s entities.

The year 2010 continued to reflect a weakened global

economic climate, though recovery signs started to be felt

around year end. In this difficult and uncertain environment,

Fransabank (France) focused on consolidating its business

relations with corporate customers and succeeded in achieving

a notable growth of activity. On the one hand, its net loans to

customers increased by 11% in 2010 reaching Euro 120 million

as at year end v/s Euro 108 million at end 2009, and the volume

of clients’ documentary credits it dealt recorded a 37% increase,

compared with a 32% decline in 2009. In addition, Fransabank

(France) benefited from the established synergies with the

Group entities whereby, in particular, the number of letters of

credit processed in 2010 on behalf of Fransabank El Djazaïr

increased more than seven folds compared to 2009. As a result,

an annual growth of 29% was recorded in the Bank’s 2010 net

profits, which stood at Euro 1.64 million in 2010 compared to

Euro 1.27 million in 2009.

During 2010, the Bank pursued its development strategy to

expand its client base in West and Central Africa and therefrom

diversify its portfolio. With this end in view, a mission was

organized to the Democratic Republic of Congo, which

prospects promise to be favorable.

Finally, the continuous support of the Bank’s shareholders

allowed Fransabank (France) to cope with the requirements

imposed by the newly set extra restrictive regulations,

particularly with respect to the maximum exposure that a

French bank is allowed to take on financial institutions.

Management Report



Fransabank El Djazaïr, which is the only Lebanese Bank

subsidiary in Algeria, operates through two branches, in the

capital Algiers and since January 2010 in Oran, the second

largest Algerian city. The Bank is further planning to open a

branch in Constantine in North-East Algeria and two new

branches in Algiers.

During 2010, Fransabank El Djazaïr successfully developed its

corporate customer base and its loans to customers registered

consequently a notable increase by 169%, standing at USD

144.2 million at end 2010 up from USD 53.7 million at end 2009.

The volume of documentary credits dealt by the Bank on behalf

of its clients grew by 335%, reaching USD 458.5 million during

the whole year of 2010, compared with USD 105.5 million in

2009. This substantial increase was also partly contributed to by

the regulation issued in July 2009 by the Central Bank of Algeria

‘Supplementary Finance Act’, confining all import transactions

to documentary credits. The said law has also prohibited

Algerian banks from conducting retail banking activities, except

for housing loans.

The staff at Fransabank El Djazaïr was timely and adequately

reinforced in order to meet this rapid growth of activity and to

efficiently respond to customers’ needs and expectations. Its

number passed from 82 at end 2009 to 120 at end 2010.

Fransabank El Djazaïr net profits recorded USD 5 million in 2010,

compared with USD 1.1 million in 2009 (+355%).

Fransabank Syria operates through a network of seven branches

covering five major Syrian districts, two of which are in Aleppo,

one in each of Homs, Tartus and Latakia, in addition to two

branches in Damascus.

Through this network, Fransabank Syria offers the full array of

commercial banking services, including retail, corporate and

trade finance. These include a large range of retail products,

including personal and specialized loans, car and housing loans,

along with corporate and SME financing, whether large

syndicated loans, project financing or small startups financing

as well as trade finance and investment schemes. Leasing is

among Fransabank Syria’s target plans. Moreover, the Bank

offers its agents credit card systems - issuing & acquiring - and

shall soon provide internet banking services.

With more than USD 500 million of total assets in a couple of

years since Fransabank Syria started its operations, the Bank

succeeded in reflecting the willingness of Fransabank Group to

have a prominent role in the Syrian market within a relatively

brief span.

Following several regulatory measures taken in 2010 concerning

capital increase schemes and other relevant issues, Fransabank

Syria shall raise its capital to SYP 5.25 billion (+/- USD 115 million)

by mid 2011.

FRANSABANK SYRIA SAFRANSABANK EL DJAZAÏR SPA


Belarus recorded a GDP real growth rate of 7.6% in 2010

compared to 0.2% in 2009 . However, its current account

registered a deficit of USD 8 billion in 2010 versus USD 6.4 billion

in 2009 which direct impacts were an increase of its gross

foreign debt to USD 28.5 billion, representing 52% of GDP and

a shrinking of the country’s official foreign exchange reserves by

23% to USD 3.6 billion. The National Bank of the Republic of

Belarus managed to control fluctuations of the national currency

within narrow corridors.

During 2010, Fransabank OJSC expanded its network of

branches so to reach main Belarusian cities: 2 in Brest and 1 in

each of Grodno, Gomel and Lida.

The Bank was able to develop stronger franchise in trade

finance and retail banking, whereby net loans expanded by

147% reaching USD 39.6 million at end 2010 compared with

USD 16 million at end 2009. Total assets doubled to reach

USD 105.5 million at end 2010. As for net profits, they reached

a satisfactory level of USD 3.18 million in 2010. Shareholders’

equity stood at USD 31.2 million at end 2010.

At 31.12.2010, the number of employees at Fransabank OJSC

totaled 313.

The year 2010 was characterized by a continuing difficult

economic and political atmosphere in Sudan. The USD/ SDG

exchange rate depreciated by nearly 17.3% and inflation stood

at roughly 11%. Real GDP grew by 5.2% in 2010.

United Capital Bank realized in 2010 a major progress in the

reorganization of its core installation elements finalizing the

implementation of a new banking application iMAL from Path

Solutions thus improving its management information system.

Also, in September 2010, the Bank relocated its head office and

main branch to a new building it fully owns. The inauguration

ceremony was attended by the Sudanese Finance Minister, the

Central Bank Governor and several Sudanese businessmen.

During 2010, the Bank continued on servicing its prime

corporate clients. It arranged a syndicated facility on behalf of

White Nile Sugar Company for a total amount of Euro 60 million.

This syndication is the first of its kind in Sudan in terms of size

of participation of local and foreign banks, in addition to its

tenor. Furthermore, in December 2010 United Capital

Bank concluded an agreement with the Arab Organization for

Agricultural Development, a Pan Arab organization based in

Khartoum, which focus is the promotion of agricultural

investment in Sudan.

Despite the unfavorable local economic climate, the Bank

realized satisfactory returns in 2010. Its net profits increased by

54% to stand at SDG 32.1 million, compared to SDG 20.8 million

in 2009. As at 31.12.10, total assets amounted to SDG 879 million

v/s SDG 779 million as at 31.12.09, i.e. an increase of 13%.

Finance to customers reached SDG 396 million as at end 2010,

compared to SDG 335 million as at end 2009 (+18%).

FRANSABANK OJSC (BELARUS) UNITED CAPITAL BANK (SUDAN)

Management Report

> Risk Management


Fransabank implements a forward looking corporate strategy

aimed to achieve its ambitious objectives, which targets

selective regional and international promising markets, and

develops new business activities. This strategy is commensurate

with Fransabank’s risk appetite and risk tolerance. Fransabank’s

risk management practice covers all processes by implementing

risk policies and procedures for the identification, measurement,

monitoring and management of all types of risks, mainly credit

risk, operational risk, market risk, liquidity risk, strategic risk, and

other risks arising from the diversity of its business activities in

various geographical locations: locally, regionally and

internationally, in addition to maintaining efficient capital that is

commensurate with those risks.

The Board of Directors (BOD), the Risk Management Committee

(RMC), the Senior Management, the Risk Management Division,

and the Internal Audit Department are key members in the risk

management process. Yet, the BOD is ultimately responsible for

providing overall risk management oversight; for approving the

overall risk tolerance; and for ensuring the adequacy and

effectiveness of controls implemented by Fransabank Group.

The RMC, the Audit Committee, and the Risk Management

Division, support the BOD in managing the Group’s risks.

Fransabank’s Chief Risk Officer (CRO) monitors and controls all

risk exposures and concentrations across the Bank. He has the

responsibility to assist the BOD and the Senior Management in

developing Fransabank Group’s risk policy; to promote risk

management culture; to examine risk management reports

developed by Fransabank’s subsidiaries; to conduct stress tests

on different scenarios in a systematic and continuous manner;

and to provide the BOD and the RMC with comprehensive

periodic reports highlighting the risks faced by the Group.

The risk management function, which is independent of the

business line functions, is organised in accordance with the

different risk types, mainly credit risk, operational risk, market

risk, liquidity risk, strategic risk, and other risks. Those risks are

accurately measured, closely monitored and carefully

controlled. Fransabank has established an appropriate structure

for risk management functions evidenced by its Risk

Management Division (RMD), which includes four departments:

Basel Implementation, Credit Risk, Market Risk and Operational

Risk departments. It defined a sound risk management process

to identify, measure, monitor, and report all types of risks that

Fransabank Group is facing. The RMD assumes its responsibility

by reporting to the RMC through periodic reports describing

Fransabank Group risk profile and the level of the capital

adequacy. The RMD is implementing an action plan to comply

with Basel II, the Central Bank of Lebanon and the Banking

Control Commission (BCC) requirements. The Bank complies

with Basel II Pillar I quantitative requirements, which are related

to the calculation of the Capital Adequacy Ratio (CAR) in

conformity with the BCC methodology. Fransabank has also

advanced in the implementation of the qualitative

requirements of Pillar II and Pillar III of Basel II, which cover the

Risk Management Policy and Procedures, Corporate

Governance Guidelines, Internal Capital Adequacy Assessment

Process (ICAAP) and Market Discipline.

The Credit Risk Management Department (CRMD) implements

a proactive credit risk management process evidenced by the

review it conducts on the credit files to be submitted to

Fransabank SAL Corporate Credit Committee, identification of

credit risk inherent in an individual file, and the assessment of

their impact on the economic sectors to which they belong and

on the CAR levels, should the requested facilities be approved

and used by: the borrowers. In addition, the CRMD prepares

quarterly reports that highlight the concentration by facility

type; type of claim; borrower; geographic areas; economic

sectors; facility tranches; and collateral type. Furthermore, the

CRMD monitors on daily basis all transactions that are exposed

to potential losses due to the failure of a counterparty to meet

its obligation, and closely monitors any excesses over the

authorised credit limits.


The Market Risk Management Department (MRMD) promoted a

market risk management culture at Fransabank through the

continuous interaction with the related parties regarding the

major risks that emerge from banking operations. On a parallel

manner, the MRMD addresses several reports to ALCO and

senior management regarding analysis of interest rate risk in

the banking book and the trading book at the portfolio level, in

addition to investment reports tackling the impact of interest

rate and liquidity risks on individual investment opportunities

and their effect on Fransabank’s financial status. Furthermore,

the MRMD prepares quarterly risk reports on the major market

risk exposures.

The Operational Risk Management Department (ORMD) is

promoting a risk culture on a group-wide basis, evidenced by

the risk and control self-assessment project that has been

conducted on several processes at the level of Fransabank SAL

and its subsidiaries through dedicated missions completed by

the ORMD team. Furthermore and in compliance with

supervisory regulations, the ORMD is building up the Bank’s

loss database as a tool for assessing the Bank’s exposure to

operational risk. In parallel, the ORMD is actively participating in

Fransabank’s systems implementation process and in reviewing

newly issued policies and procedures. In addition, the ORMD

has started the development of a methodology for the

identification of Key Risk Indicators and has initiated the

process of mapping Fransabank’s activities to the Basel II

business lines in order to implement the standardized

approach for the operational risk calculation.

The Basel Implementation Department (BID) is monitoring the

Basel action plan and assisting in its implementation. Periodic

reports related to Fransabank SAL and its subsidiaries, including

the capital management process, the allocation of capital

charge to each risk category, and the stress tests conducted for

various scenarios and their effect on CAR, were provided to the

RMC. Moreover, assessment visits were undertaken to

Fransabank subsidiaries in order to follow up on their risk

management process and Basel implementation. Furthermore,

Basel III capital framework, which was designed to address the

weaknesses of the recent international financial crisis, was also

considered by Fransabank through an internal quantitative

impact study that was conducted to assess the impact of the

proposed ratios and limits on Fransabank status. Furthermore,

Fransabank Management is considering enhancing the risk

monitoring systems by acquiring a comprehensive risk

management solution.

Management Report

> AML Compliance

Objectives and Guidelines

The main purpose of Fransabank Group’s Anti-Money

Laundering Policy is to establish, within the Group, the essential

standards fighting money laundering operations and terrorism

financing. Should the applicable anti-money laundering laws

and regulations of any country/jurisdiction require higher

standards, Fransabank Group's overseas subsidiaries and

associate banks must conform to those standards. However, in

case any applicable laws are inconsistent with the Group’s

policy, the relevant subsidiary and associate must refer to the

Group’s Anti-Money Laundering Department to resolve the

conflict.

This Policy also encompasses the following objectives:

• Promoting a “Know Your Customer” standard as a corner-

stone principle for Fransabank Group business ethics and

practices;

• Establishing a controlled environment where no business

with a customer is performed without obtaining all the

required information relating to the customer;

• Consolidating within the Group, the AML efforts deployed by

the Fransabank entities;

• Conducting self-evaluations on the compliance with the AML

policy and procedures.

Consequently, it is essential to adopt this policy in order to

ascertain that all Fransabank Group’s entities, whatever their

geographic location, fully comply with the enacted Anti-Money

Laundering Legislation. The Group is committed to overseeing

its AML strategies, objectives and guidelines on an ongoing

basis and supporting an effective AML Policy within the Group’s

business.

Anti-Money Laundering Policy Statements

Customer’s Due Diligence and Know Your Customer

• Prior to any transaction of any type, Fransabank Group’s

entities gather and document the relevant customer

identification data, along with the background information,

the purpose and the intended nature of the business;

• Fransabank Group’s entities retain and document any

additional customer information, relevant to the assessment

of the money laundering risk by adopting a risk-based

approach.

Additional Due Diligence Measures for Financial Institutions

Fransabank Group’s entities engage to take the following

additional due diligence measures while establishing and

maintaining correspondent relations:

• Gathering sufficient documentary evidence on a respondent

institution, to avoid any relationships with “shell banks”;

• Enquiring about the good reputation of a respondent

institution from public sources of information, including

whether it has been subject to a money laundering or

terrorist financing investigation or other regulatory action;

• Verifying, on a periodic basis, that the respondent institution

is implementing sufficient and effective procedures to fight

money laundering and terrorist financing.

Monitoring and Reporting of Suspicious Transactions/Activity

• Fransabank Group’s entities apply due diligence measures in

case of any unusual or suspicious transaction/activity, taking

into account the legal framework of the concerned institution;

• All suspicious transactions/activity complying with the

laws/regulations of the respective jurisdiction are reported;

• The Group’s AML Department is notified of all suspicious

transactions/activity when doubts arise.

Training

• Training sessions are periodically organized for all Fransabank

Group’s employees to enforce an up-to-date compliance

culture;

• Attendance and training documentation and records are kept

for future reference.


Management Report

> Human Resources

At Fransabank, we have long put our faith in our human capital,

and believed it is the most valuable asset and most solid

foundation. Being a cornerstone in the Bank’s development

and expansion strategy, hiring and retaining individuals of great

merit remained an essential asset reflected in the Bank’s vision

statement and strategies.

Consequently, during the year, Fransabank Group population

expanded by 10.15%, reaching 2702 employees in 2010,

compared with 2453 in 2009.

The Human Resources Division continued to provide an

environment of continuous learning, and ensure the build-up

of a strategically motivated, polyvalent and professional human

capital. The HR policy regarding internal training consists in

decentralizing its training activities, by providing sessions on a

regular basis and independently according to every region’s

needs. Within this context, Training and Development offered

a “Train-the-Trainer” seminar, intended for the capacity building

of selected employees from all regions – Beirut, Mount

Lebanon, North, Bekaa, South, as well as for Fransabank Group

overseas subsidiary and associate. Thus, skilled trainers were

formed out of them, qualified to conduct workshops where

needed, ensuring training customization and continuity. These

“Train-the-Trainer” workshops also allow reducing transportation

costs of Beirut-borne trainers, saving commuting time, reducing

traffic accidents and offering optimal training customization

adapted to the local environment and business needs, among

others benefits.

In order to build the capacities of the human capital, maintain

the Bank’s competitive edge, and break through the daily

routine, Training and Development offered a series of internal

seminars to the Bank’s employees during 2010. These internal

seminars (including Central Bank of Lebanon Decree 103

mandated securities examination training and review sessions)

numbered 108 sessions and totaled 16,850 hours.

As for external training, 78 external seminars were held for a

total of 2,517 hours.

In summary, both internal and external trainings were mainly

about banking and financial techniques representing 75%,

marketing and selling skills 12%, management and behavioral

skills 8%, foreign languages 3%, information technology 2% and

economic and financial education less than 1%.


53%47%

Gender Breakdown

MaleFemale

SecuritiesCustomer Relationship ManagementPlastic CardsLoans, Services & SME LoansBranch LaboratoryBancassuranceLegal AspectsRegional Credit Officer

Supervisory SkillsSenior Management Development ProgramPreferred SharesInformation SecurityTrain the Trainer Plastic CardsAnti-Money LaunderingIncome Compensation

21%

13%8%

7%

5%

13%13%

1%1%1%1%

1%2%3%

10%

Internal Seminars by Topic

Banking & Financial TechniquesForeign LanguagesManagement & Behavioral SkillsInformation TechnologyEconomic & Financial EducationMarketing & Selling Skills

46%

2%3%4%

21%

24%

Breakdown of External Training

Management Report

> Human Resources


Talent Management

Talent Management is a practice consisting in selecting new

recruits or recently hired employees (with a total experience

at Fransabank ranging from 1 to 5 years) whose career path

is yet to be determined or ascertained. Talent are high profile

individuals, selected based on a combination of personal

skills, educational background and banking knowledge.

Training and Development seeks to exploit and enhance

their existing capabilities, constantly monitoring their

potential career progress purposes. In 2009, 140 talent were

uncovered, and 16 more were discovered in 2010, thus the

total number of talent reached 156 individuals, divided as

follows:

Total training hours, both internal and external, registered an

increase of 23.07%, reaching 19,367 in 2010, compared with

15,736 in 2009.

Training to Fransabank Group Employees fromOverseas Subsidiaries and Associate

The Training and Development Department at Fransabank also

received employees from Fransabank Group overseas

subsidiaries and associate and offered them specialized

on-the-job training in the various branches and departments,

in order to strengthen their capacities, each in his own field,

share the best practices and mobilize Fransabank Group

population around shared objectives.

Central Bank of Lebanon Decree 103

The Training & Development Department at Fransabank

enrolled 95 employees in the Securities Examination

Certification Program related to Decree 103 issued by the

Central Bank of Lebanon, and 53 out of them passed it,

representing a 56% success rate.

Training to Future Generations

Training and Development provided a summer internship

program to 247 students from various universities, with the

objective of forging strong links with the world of higher

education, enabling students to discover its activities and

values; moreover, it is actively recruiting new talent.

20%

26%

8%

23%

11%

12%

Interns Breakdown by Regions

Head OfficeBeirutMount LebanonNorthBekaaSouth

6%

22%

7%

46%

19%

Interns Breakdown by University

LAUAUBLUUSJOthers

Evolution of Total Training Hours 2008-2010

Year 2010Year 2009Year 2008Internal TrainingExternal Training

2,51

7

6,75

58,14

0

8,98

1

16,1

65

16,8

50


Moreover, after evaluating all the departments (excluding HRD),

T&D discovered 76 additional talent.

Potentials Development

High potential individuals are existing employees who

exhibited an exceptional competence in their functions,

and were thus carefully chosen by T&D to occupy higher

positions in the short and medium term. Accordingly,

Training & Development identified and ascertained the

potential of 202 individuals.

Polyvalence Development

Polyvalence is an advanced concept where an employee

assumes, when needed, multiple functions at the same

time, both for contingency purposes and productivity

improvement. In 2010, 190 polyvalent employees were

distributed according to the following graph. Moreover, 50

new polyvalent employees shall be selected in 2011.

31%

29%

10%

18%

12%

Talents Breakdown by Region

BeirutMount LebanonBekaaNorthSouth

27%

38%

8%

18%

9%

Potentials Development by Region


23%

41%

9%

11%

16%

Polyvalence Development by Region


Continuous Education as a Principle

Consistent with Fransabank’s vision of encouraging employees

to further develop their professional skills, the Human

Resources Division committed itself for many years to extend

financial support to all the employees interested in obtaining a

professional certification or a higher Degree. As a matter of fact,

the HRD grants eligible employees financial facilities equivalent

to a value of 40 salaries, to be reimbursed on a period of 10

years with zero interest.

Human Resources Projects Development

Striving, as customary, to improve the Bank’s competitive edge,

The Human Resources Division embarked on a series of key

projects, with the most crucial ones described below:

1. Human Resources Management System: The objective of

the HRMS is to develop, update, and automate human

resources processes and centralize them as part of a unique

system including a single consolidated database.

> Information& Communication Technology


The mission of the Information and Communication

Technology (ICT) Division is to ensure that Fransabank Group’s

entities maintain their competitive edge by providing the latest

technology adopted in the banking sector. Consequently,

equipped with state-of-the-art information technology

systems, the Group’s entities are well-disposed to provide a

diversified portfolio of banking products and high quality

services to their customers.

In 2010, the ICT Division gave a high priority to the improvement

of the security and availability of the overall information

technology systems. Moreover, the continuous enhancement

of the staff productivity, efficiency and collaboration is an

unbroken achievement that started a couple of years ago and

remains one of the main objectives for the coming years.

In order to enable Fransabank Group’s entities to provide

unified and standardized services to their customers, the

following projects were implemented:

• The ICT Division, in collaboration with the E-banking unit,

implemented and is in the process of finalizing the steps to

launch two new and advanced Internet banking solutions for

the investment arm of Fransabank, Fransa Invest Bank and for

Fransabank Group’s subsidiary in Syria, Fransabank Syria.

• The ICT Division is continuously supporting and providing

management, consulting and implementation services to

Fransabank’s subsidiaries in Algeria, Syria and Belarus.

• The ICT Division carried out a major restructuring project for

Fransabank OJSC (Belarus). The main objective of such

project is to give the said Bank competitive advantage and

enable it to offer the latest and most efficient banking

products and services.

• The ICT Division collaborated and worked closely with the IT

Department of Fransabank's Group banking subsidiary in

Lebanon, BLC Bank, to create synergy and cooperation

regarding the acquisition and implementation of new IT

solutions.

2. HRD Policies and Procedures: The entire set of human

resources policies, procedures, structures, formats and work-

flows were thoroughly reviewed in 2010, and subsequently

enhanced and updated to reflect the Bank’s evolving situation.

3. Grading and Competences: The objective of the grading

and competences project, as set forth by the Association of

Banks in Lebanon, is to allocate functions in a two-dimensional

structure, to promote a form of standardization, to simplify

benchmarking processes and to allow career planning for

employees, while offering consistency across functions, in

different job families, through proper scoring methodologies.

4. The Entrance Exam Automation Project: In line with HRD’s

policy of continuous process improvement and productivity

enhancement, Fransabank decided to upgrade its existing

entrance exam in early 2010, and automate it, by acquiring CSP

Solutions’ Exam Manager® Software.

5. The Transportation / Vacation Automation System: The

purpose of this ongoing project is to ensure effective and

accurate management of staff transportation allowance and

vacation requests / balance. Moreover, paperwork is effectively

minimized and responses on requests are faster.

Management Report

> Human Resources


On the other hand, several advanced applications were initiated

during the past couple of years and implemented in 2010.

• An advanced Call center/CRM solution was launched and

made available to Fransabank’s customers on March 2010. It

allowed the Bank to better understand its customer’s needs,

while improving its customer services, satisfaction and

retention. This system had an excellent impact in the areas

of unified contact center, marketing and sales, through the

automation of the marketing process and customer services,

thus improving the internal and external customer support.

During the first quarter of 2011, the functions of the CRM

solution were expanded to include the efficiency

enhancement in the bill collection process. Most importantly,

the CRM gave the branches a 360 degree view of their

customer base, allowing to strengthen customers’ relations

and to offer the right products and services to the right

customers at the right time, as well as being able to respond

to their queries in a quick and efficient manner.

• An advanced and integrated credit cards and merchant

management solution was implemented to offer new and

improved credit card products and services. The merchant

management solution is in the final stages of completion and

will be soon initiated.

• A new banking core solution, SAB is in the process of

implementation and integration with the Bank’s existing

infrastructure and applications.

• A comprehensive and integrated enterprise resource

planning application is being finalized with the collaboration

of several business departments from the Bank. The

new system ensures a sound management of the Human

Resources Division, namely payroll, recruitment cycle,

manpower planning, leave management and employees’

self-service and training. This solution is expected to be

launched by the third quarter of 2011. It enables the

Administration and Purchasing Department to fully

automate and better manage the full life cycle of fixed assets,

procurement process, maintenance and the complete

financial aspect from purchase orders, contracts handling, to

payables and receivables.

In order to face the growing security threats in Lebanon and the

region, and to comply with the local regulations and international

recommendations regarding the Business Continuity Planning,

Fransabank Group embarked in a wide-range exercise for the

mother company, local, regional and international subsidiaries

and associate. The ultimate objective of the Business Continuity

Plan is to elaborate and test a well-structured and coherent

plan, which will enable Fransabank Group’s entities to quickly

and efficiently recover in case of an unforeseen disaster or

emergency that interrupts normal business operations. To do

so, it is essential to assess the Group’s exposure in times of dis-

asters or emergency situations and regarding critical business

processes, and to determine the repercussions inherent to the

loss of service or below-the-standard customer service. As a

matter of fact, Fransabank SAL is in the process of finalizing a

disaster site, using one of the existing Fransabank locations,

where a duplicate IT infrastructure will be hosted and from

where a considerable number of key personnel can operate in

case the headquarters is not operational. According to the plan,

this site will be transformed from a cold site status, where data

is daily restored on the backup servers, into a full hot site status

able to successfully handle the bulk of the Bank’s operations in

case of a disaster affecting the headquarters. In addition to that,

and in line with the projected growth of Fransabank Group, the

Board of Directors issued a decision to build a Disaster Recovery

Site representing a replica of each entity’s headquarters.

At the organizational level, the ICT Division was still seeking to

acquire talented and highly skilled individuals and to invest in

the training of its professional staff to strengthen their

capabilities and skills. Thus, the ICT personnel will be well

equipped in technology, and, consequently disposed to fully

support and serve the growing demand of the stakeholders’

community of Fransabank Group.

Save the wastewaterNearly 97% of the world’s water is salty or otherwise undrinkable.

Another 2% is locked in ice caps and glaciers. That leaves us just 1%

for all of humanity’s needs.

Source: www.benefits-of-recycling.com.


Independent Auditors’ Report

> Report on the financial statements

We have audited the accompanying consolidated financial statements

of Fransabank SAL, and its subsidiaries (The “Group”) which comprise

the consolidated statement of financial position as at December 31,

2010, and the consolidated income statement, the consolidated

statement of comprehensive income, consolidated statement of

changes in equity and the consolidated statement of cash flows for the

year then ended, and a summary of significant accounting policies and

other explanatory information.

> Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of

these financial statements in accordance with International Financial

Reporting Standards, and for such internal control as management

determines is necessary to enable the preparation of financial

statements that are free from material misstatement, whether due to

fraud or error.

> Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated

financial statements based on our audit. We conducted our audit in

accordance with International Standards on Auditing. Those standards

require that we comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance whether the financial

statements are free from material misstatement.

To the Shareholders

Fransabank SAL

Beirut, Lebanon


An audit involves performing procedures to obtain audit evidence

about the amounts and disclosures in the financial statements, within

the framework of local banking laws. The procedures selected depend

on the auditor’s judgment, including the assessment of the risks of

material misstatement of the financial statements, whether due to fraud

or error. In making those risk assessments, the auditor considers internal

control relevant to the entity’s preparation and fair presentation of the

financial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the entity’s internal

control. An audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of accounting

estimates made by management, as well as evaluating the overall

presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our audit opinion.

> Opinion

In our opinion, the consolidated financial statements present fairly, in all

material respects, the consolidated financial position of Fransabank SAL

as of December 31, 2010, and of its financial performance and its

consolidated cash flows for the year then ended in accordance with

International Financial Reporting Standards.

Beirut, Lebanon

April 8, 2011

B. D. O. Deloitte & Touche


Financial Statements

> Consolidated Statement of Financial Positionas at December 31,

2,652,897,068

1,499,152,008

95,821,389

58,817,514

3,480,742,204

6,359,346,312

1,411,773,814

113,482,239

47,039,352

189,101,540

192,333,734

55,651,275

143,872,028

16,300,030,477

401,435,169

366,326,284

375,876,728

2009Notes 2010

> ASSETS

LBP’000

Cash and Central Banks 5 2,537,312,954

Deposits with banks and financial institutions 6 1,699,576,783

Trading assets 7 91,846,442

Loans to banks 8 235,977,183

Loans and advances to customers 9 4,736,342,603

Available for sale investments 10 6,806,047,080

Held to maturity investments 10 1,368,001,695

Customers' liability under acceptances 11 230,195,669

Investments in associates 12 45,828,336

Assets acquired in satisfaction of loans 13 209,439,064

Property and equipment 14 266,882,161

Intangible assets 15 55,266,864

Other assets 16 175,044,273

TOTAL ASSETS 18,457,761,107

FINANCIAL INSTRUMENTS WITH OFF-FINANCIAL POSITION RISKS

Documentary and commercial letters of credit 40 589,821,848

Guarantees and standby letters of credit 40 371,294,759

Forward contracts 392,262,163


330,547,147

162,712,400

13,424,411,818

113,482,239

412,820,091

-

198,618,966

37,972,227

14,680,564,888

420,000,000

10,000,000

140,750,000

17,113,885

123,814,947

2,547,675

304,396,470

242,390,633

144,760,203

1,405,773,813

213,691,776

1,619,465,589

16,300,030,477

2009Notes 2010

> LIABILITIES

LBP’000

Deposits and borrowings from banks 17 414,620,408

Liabilities designated at fair value through profit or loss 18 73,136,366

Customers' accounts at amortized cost 19 15,125,397,906

Customers' acceptance liability 11 230,195,669

Other borrowings 20 362,290,285

Subordinated loan 21 31,874,560

Other liabilities 22 237,105,254

Provisions 23 42,157,487

TOTAL LIABILITIES 16,516,777,935

> EQUITY

Share capital – Ordinary shares 24 420,000,000

Share capital – Preference shares 26 18,500,000

Issue premium on preference shares 26 260,387,500

Shareholders’ cash contribution to capital 25 17,113,885

Reserves 27 155,398,845

Special reserve 28 3,990,675

Cumulative change in fair value of investment securities 29 341,818,315

Retained earnings 303,517,452

Net profit for the year 31 198,868,068

Equity attributable to the owners of the Bank 1,719,594,740

Non-controlling interests 30 221,388,432

TOTAL EQUITY 1,940,983,172

TOTAL LIABILITIES AND EQUITY 18,457,761,107



> Consolidated Income StatementFor the Financial Year ended December 31,

887,941,701

(571,954,589)

315,987,112

74,751,952

(23,072,609)

51,679,343

17,264,688

(9,855,561)

46,580,904

421,656,486

(5,020,459)

11,747,971

(1,214,349)

751,765

598,924

428,520,338

(136,801,983)

(70,040,742)

(29,748,850)

(342,473)

191,586,290

(28,686,061)

(5,785,026)

157,115,203

144,760,203

12,355,000

157,115,203

2009Notes 2010LBP’000

Interest income

Interest expense

Net interest income

Fee and commission income

Fee and commission expense

Net fee and commission income

Net interest and other gain/(loss) on trading portfolio

Net interest and other gain/(loss) on financial instruments

designated at fair value through profit or loss

Other operating income

Net financial revenues

Allowance for impairment of loans and advances

Write-back of impairment loss on loans and advances

Bad debts expense

Write-back of discount on loan portfolio purchased

Write-back of impairment loss on loans off financial position

Net financial revenues after impairment of loans and advances

Staff costs

Administrative expenses

Depreciation and amortization

Provisions for charges (net)

Profit before income tax

Income tax expense

Deferred tax on associates and subsidiaries' profits

NET PROFIT FOR THE PERIOD

Attributable to:

Owners of the Bank

Non-controlling interests

1,009,312,058

(615,926,242)

393,385,816

94,205,629

(24,460,476)

69,745,153

8,690,713

(7,756,622)

87,812,349

551,877,409

(23,386,148)

15,432,980

(77,135)

1,692,748

218,120

545,757,974

(160,931,818)

(85,586,893)

(24,148,650)

(2,388,788)

272,701,825

(45,354,969)

(7,635,902)

219,710,954

198,868,068

20,842,886

219,710,954

33

34

35

36

37

38

39

9

9

9

14,15,16

6, 10, 16, 23

22

31

31

31



> Consolidated Statement of Comprehensive IncomeFor the Financial Year ended December 31,

Notes

39

12

157,115,203

336,822,110

(3,425,253)

(48,414,570)

2,624,526

1,800,062

289,406,875

446,522,078

416,612,698

29,909,380

446,522,078

20092010LBP’000

Profit for the year

Other comprehensive income:

Net change in fair value of available for sale investment securities

Change in fair value recycled to profit and loss

Deferred tax

Net change in currency translation adjustment

Unrealized gain of associates reported directly on equity

TOTAL COMPREHENSIVE INCOME

Attributable to:

Owners of the Bank

Non-controlling interests

219,710,954

74,647,293

(28,775,672)

(7,042,680)

(15,346,833)

335,141

23,817,249

243,528,203

222,423,327

21,104,876

243,528,203



> Consolidated Statement of Changes in EquityFor the Financial Year ended December 31,

Equity Attributable to

LBP’000

ReservesCapital

PreferenceShares

CapitalOrdinary

Shares

Shareholders’ Cash

Contributionto Capital

IssuePremium

PreferenceShares

96,185,040

-

-

391,033

-

3,134

26,025,901

(1,414,687)

2,624,526

123,814,947

-

-

-

5,882

-

-

47,098,275

(1,461,491)

142,959

(14,201,727)

155,398,845

17,113,885

-

-

-

-

-

-

-

-

17,113,885

-

-

-

-

-

-

-

-

-

-

17,113,885

140,750,000

-

-

-

-

-

-

-

-

140,750,000

-

-

119,637,500

-

-

-

-

-

-

-

260,387,500

10,000,000

-

-

-

-

-

-

-

-

10,000,000

-

-

8,500,000

-

-

-

-

-

-

-

18,500,000

420,000,000

-

-

-

-

-

-

-

-

420,000,000

-

-

-

-

-

-

-

-

-

-

420,000,000

Balance as at January 1, 2009

Dividends paid – Ordinary shares

Dividends paid – Preference shares

Effect of acquisition of additional equity interest

Deferred liabilities

Other movement

Allocation of 2008 profit

Reallocation between reserves and retained earnings

Comprehensive income for the year 2009

BALANCE AS AT DECEMBER 31, 2009

Dividends paid - Ordinary shares

Dividends paid - Preference shares

Issuance of preference shares

Effect of acquisition of additional equity interest

Deferred liabilities

Prior years adjustments

Allocation of 2009 profit

Reallocation between reserves and retained earnings

Additional revaluation surplus

Comprehensive income for the year 2010

BALANCE AS AT DECEMBER 31, 2010


the Owners of the Parent

Total Equity

CumulativeChange in

Fair Value ofInvestment

Securities

TotalProfit for theYear (Group)

RetainedEarnings

Special Reserve

Non-Controlling

Interests

125,139,638

(3,687,105)

-

61,278,990

911,874

138,999

-

-

29,909,380

213,691,776

(5,937,494)

-

-

(8,094,165)

480,428

50,645

-

-

92,366

21,104,876

221,388,432

1,015,359,380

(21,000,000)

(7,537,500)

142,776

2,275,411

(78,952)

-

-

416,612,698

1,405,773,813

(21,000,000)

(12,813,750)

128,137,500

(4,332,196)

1,546,642

(283,555)

-

-

142,959

222,423,327

1,719,594,740

36,968,563

-

-

-

-

-

-

-

267,427,907

304,396,470

-

-

-

-

-

-

-

-

-

37,421,845

341,818,315

124,892,599

(21,000,000)

(7,537,500)

-

-

-

(96,355,099)

-

144,760,203

144,760,203

(21,000,000)

(12,813,750)

-

-

-

-

(110,946,453)

-

-

198,868,068

198,868,068

169,449,293

-

-

(248,257)

2,275,411

(82,086)

67,781,523

1,414,687

1,800,062

242,390,633

-

-

-

(4,338,078)

1,546,642

(283,555)

62,405,178

1,461,491

-

335,141

303,517,452

-

-

-

-

-

-

2,547,675

-

-

2,547,675

-

-

-

-

-

-

1,443,000

-

-

-

3,990,675

1,140,499,018

(24,687,105)

(7,537,500)

61,421,766

3,187,285

60,047

-

-

446,522,078

1,619,465,589

(26,937,494)

(12,813,750)

128,137,500

(12,426,361)

2,027,070

(232,910)

-

-

235,325

243,528,203

1,940,983,172



> Consolidated Statement of Cash FlowsFor the Financial Year ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

Profit for the year before tax 272,701,825

Adjustments for:

Unrealized gain on trading assets 37 (2,120,565)

Share in profits of associates 12 (8,992,528)

Depreciation, amortization and write-off 14,15,16 24,148,650

Amortization of deferred charges on business acquisition 16 4,459,364

Impairment / (write back) allowance of loans and advances to customers 9 6,260,420

(Write back) / impairment allowance of banks 6 (76,244)

Impairment allowance of investment in securities 10 29,964

Impairment allowance of property and equipment 14 65,308

Realized income on business acquisition 16 (7,728,744)

Gain on disposal of property and equipment (1,115,609)

Loss on disposal of intangible assets 248,737

Gain on disposal of assets acquired in satisfaction of loans (9,021,352)

Gain on disposal of part of equity interest in an associate -

Gain on increase of equity interest in subsidiary -

Provisions 14, 16, 23 6,708,806

Interest expense 34, 38 623,682,864

Interest income 33, 37 (1,014,412,097)

Dividend income 37, 39 (6,649,109)

(111,810,310)

Net decrease in trading assets 7 6,011,073

Net (increase) / decrease in loans to banks 8 (172,555,535)

Net increase in loans and advances to customers 9 (1,292,435,747)

Net increase in investment securities 10 (360,766,727)

Net increase in other assets 16 (31,944,735)

Net decrease / (increase) in compulsory deposits with Central Banks 5 130,305,371

Net increase in deposits and borrowings from banks 17 81,919,327

Net (decrease) / increase in deposits at FVTPL 18 (87,453,152)

Net increase in deposits at amortized cost 19 1,692,449,965

Net decrease in pledged deposits 6 -

Net increase / (decrease) in other liabilities 22 12,084,776

Proceeds from disposal of foreclosed assets 22,952,705

Settlement of provisions 23 (2,507,182)

(113,750,171)

2009Notes 2010LBP’000

191,586,290

(10,889,336)

(7,579,190)

29,748,850

-

(7,479,277)

131,375

126,269

-

-

(95,832)

22,975

(13,477,277)

(14,100)

(2,002,191)

3,208,779

581,841,712

(893,260,389)

(6,761,844)

(134,893,186)

496,188

24,145,268

(861,086,762)

(1,606,106,657)

(36,239,632)

(139,618,102)

167,196,731

267,757

2,694,763,431

4,045,837

(1,441,221)

33,519,424

(2,896,670)

142,152,406


Interest paid (613,983,109)

Interest received 1,010,788,107

Dividends received 14,551,865

Income tax paid 22 (34,150,843)

Net cash provided from operating activities 263,455,849

CASH FLOWS FROM INVESTING ACTIVITIES

Amounts and costs paid in business acquisition 16 (6,065,313)

Proceeds from disposal of property and equipment 3,614,867

Proceeds from disposal of part of equity interest in associate -

Paid-up share in subsidiaries 3A (11,935,272)

Net decrease / (increase) in placements with banks 385,485,040

Acquisition of property, plant and equipment 14 (87,575,123)

Acquisition of intangible assets 15 (3,171,060)

Net cash provided from / (used in) investing activities 280,353,139

CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of preferred shares 26 128,137,500

Net (decrease) / increase in other borrowings 20 (51,516,090)

Increase in subordinated loan 31,874,560

Cash invested by minority in subsidiaries -

Dividends paid 32 (39,751,244)

Net cash provided from financing activities 68,744,726

Net increase in cash and cash equivalents 612,553,714

Unrealized translation adjustment in foreign subsidiaries (12,489,746)

Cash received from acquiring of subsidiaries -

Cash and cash equivalents beginning of year 2,417,880,261

CASH AND CASH EQUIVALENTS END OF YEAR 42 3,017,944,229

2009Notes 2010LBP’000

(563,163,116)

1,100,896,246

9,711,098

(32,888,207)

656,708,427

-

1,306,728

250,598

(54,453,342)

(76,785,037)

(40,903,104)

(2,214,510)

(172,798,667)

-

28,282,793

-

46,409,342

(32,224,605)

42,467,530

526,377,290

4,381,232

33,441,529

1,853,680,210

2,417,880,261


> Notes to the Consolidated Financial StatementsFor the Year ended December 31, 2010

1. GENERAL INFORMATION

Fransabank SAL (the “Bank”) is a Lebanese joint-stock company

registered in the Trade Register under Number 25699 and in the

Central Bank of Lebanon list of banks under number 1. The

consolidated financial statements of the Bank comprise the

Bank and its subsidiaries (the “Group”). The Group is primarily

involved in investment, corporate and retail banking.

The Bank’s registered address is Fransabank Center, Hamra, P.O.

Box 11-0393 Beirut, Lebanon.

2. ADOPTION OF NEW AND REVISED INTERNATIONALFINANCIAL REPORTING STANDARDS (IFRSs)

2.1 Standards and Interpretations effective for thecurrent period with no effect on the financialstatements

The following new and revised standards, interpretations have

been adopted in the current period with no material impact on

the disclosures and amounts reported for the current and prior

years but may affect the accounting for future transactions or

arrangements:

Amendments to IFRS 2 Share-based Payment – Group Cash-

settled Share-based Payment Transactions.

The amendments clarify the scope of IFRS 2, as well as the

accounting for group cash-settled share-based payment

transactions in the separate (or individual) financial statements

of an entity receiving the goods or services when another

group entity or shareholder has the obligation to settle the award.

IFRS 3 (revised) Business Combinations and consequential

amendments to IAS 27 (revised) Consolidated and Separate

Financial Statements, IAS 28 (revised) Investments in

Associates and IAS 31 (revised) Interests in Joint Ventures.

IFRS 3 (revised) allows a choice on a transaction-by-transaction

basis for the measurement of non-controlling interest either at

fair value or at the non-controlling interests. Share of recognized

identifiable net assets of the acquiree. Contingent consideration is

measured at fair value at the acquisition date; subsequent

adjustments to the consideration are recognized against the

cost of acquisition only to the extent that they arise from new

information obtained within the measurement period about

the fair value at the date of acquisition. All other subsequent

adjustments to contingent consideration classified as an asset

or a liability are recognized in profit or loss. All acquisition-related

costs are expensed. IAS 27 (revised in 2008) requires that

transactions with non-controlling interests to be recognized

within equity, with no impact on goodwill or profit or loss.

Amendments to IAS 39 Financial Instruments: Recognition and

Measurement – Eligible Hedged Items

The amendments provide clarification on two aspects of hedge

accounting: identifying inflation as a hedged risk or portion, and

hedging with options.

IFRIC 17 Distributions of Non-cash Assets to Owners

The Interpretation provides guidance on the appropriate

accounting treatment when an entity distributes assets other

than cash as dividends to its shareholders.

IFRIC 18 Transfers of Assets from Customers

The Interpretation addresses the accounting by recipients for

transfers of property, plant and equipment from customers’ and

concludes that when the item of property, plant and

equipment transferred meets the definition of an asset from

the perspective of the recipient, the recipient should recognize

the asset at its fair value on the date of the transfer, with the

credit being recognized as revenue in accordance with IAS 18

Revenue.

Improvements to IFRSs issued in 2009 (those that are mandatory

for the first time for the financial year beginning January 1,

2010)

• Amendments to IFRS 5 Non-current Assets Held for Sale and

Discontinued Operations – Disclosures of non-current assets

(or disposal groups) classified as held for sale or discontinued

operations.


• Amendments to IFRS 8 Operating Segments – Disclosure of

information about segment assets.

• Amendments to IAS 1 Presentation of Financial Statements –

Current/non-current classification of convertible instruments.

• Amendments to IAS 7 Statement of Cash Flows –

Classification of expenditures on unrecognized assets.

• Amendments to IAS 17 Leases – Classification of leases of

land and buildings.

• Amendments to IAS 36 Impairment of Assets – Unit of

accounting for goodwill impairment test.

• Amendments to IAS 38 Intangible Assets – Additional conse-

quential amendments arising from revised IFRS 3. Measuring

the fair value of an intangible asset acquired in a business

combination.

• Amendments to IAS 39 Financial Instruments: Recognition

and Measurement – Treating loan prepayment penalties as

closely related embedded derivatives. Scope exemption

for business combination contracts. Cash flow hedge

accounting.

• IFRIC 9 Reassessment of Embedded Derivatives - Scope of

IFRIC 9 and revised IFRS 3.

• IFRIC 16 Hedges of a Net Investment in a Foreign Operation

– Amendment to the restriction on the entity that can hold

hedging instruments.

2.2 Standards and Interpretations in issue but notyet effective

The Group has not applied the following new standards,

amendments and interpretations that have been issued but not

yet effective:

• Amendments to IFRS 1 Limited Exemption from Comparative

IFRS 7 Disclosures for First-time Adopters.

Effective for annual periods beginning on or after July 1, 2010

• Amendments to IFRS 7 Disclosures – Transfers of Financial

Assets increase the disclosure requirements for transactions

involving transfers of financial assets. These amendments are

intended to provide greater transparency around risk exposures

of transactions when a financial asset is transferred but the

transferor retains some level of continuing exposure in the

asset. The amendments also require disclosures where

transfers of financial assets are not evenly distributed

throughout the period. Currently, the Group has not entered

into such transactions.


• IFRS 9 Financial Instruments issued in November 2009 and

amended in October 2010 introduces new requirements for

the classification and measurement of financial assets and

financial liabilities and for derecognition. IFRS 9 requires all

recognized financial assets that are within the scope of IAS 39

to be subsequently measured at amortized cost or fair value.

Specifically, debt investments that are held within a business

model whose objective is to collect the contractual cash

flows, and that have contractual cash flows that are solely

payments of principal and interest on the principal outstanding

are generally measured at amortized cost. All other debt

investments and equity investments are measured at their

fair values. At initial recognition, an entity may make an

irrevocable election to present in other comprehensive

income subsequent changes in the fair value of an

investment in an equity instrument that is not held for trading.

The gain or loss that is presented in other comprehensive

income includes any related foreign exchange component.

Dividends on such investments are recognized in profit or

loss in accordance with IAS 18 Revenue unless the dividend

clearly represents a recovery of part of the cost of the

investment. Amounts presented in other comprehensive

income shall not be subsequently transferred to profit or loss.

However, the entity may transfer the cumulative gain or loss

within equity.

The most significant effect of IFRS 9 regarding the classification

and measurement of financial liabilities relates to the

accounting for changes in fair value of a financial liability

(designated as at fair value through profit or loss) attributable

to changes in the credit risk of the issuer. Specifically, under

IFRS 9, for financial liabilities that are designated as at fair

value through profit or loss, the amount of change in the fair

value of the financial liability that is attributable to changes in

the credit risk of the issuer is recognized in other comprehensive

income, unless the recognition of the effects of changes in

the liability’s credit risk in other comprehensive income

would create or enlarge an accounting mismatch in profit or

loss. Changes in fair value attributable to a financial liability’s

credit risk are not subsequently reclassified to profit or loss.



The directors anticipate that IFRS 9 will be early adopted in

the Group’s consolidated financial statements for the annual

period beginning January 1, 2011 and that its application will

have an impact on amounts reported in respect of the

Group’s financial assets as summarized under section 2.3

below.

Early adoption decided by the Group effective January 1, 2011

• IAS 24 Related Party Disclosures (as revised in 2009) modifies

the definition of a related party and simplifies disclosures for

government-related entities. The disclosure exemptions

introduced in IAS 24 (as revised in 2009) do not affect the

Group because it is not a government-related entity.

However, disclosures regarding related party transactions

and balances in these financial statements may be affected

when the revised version of the Standard is applied in future

accounting periods because some counterparties that did

not previously meet the definition of a related party may

come within the scope of the Standard.

Effective for annual periods beginning on or after January 1, 2011

• The amendments to IAS 32 titled Classification of Rights

Issues address the classification of certain rights issues

denominated in a foreign currency as either an equity

instrument or as a financial liability. To date, the Group has

not entered into any arrangements that would fall within the

scope of the amendments.

Effective for annual periods beginning on or after February 1, 2010

• Amendment to IFRIC 14 - Prepayments of a Minimum

Funding Requirement. The amendments correct an unintended

consequence of IFRIC 14 IAS 19 – The Limit on a Defined

Benefit Asset, Minimum Funding Requirements and their

Interaction.

Effective for annual periods beginning on or after January 1, 2011

• IFRIC 19 Extinguishing Financial Liabilities with Equity

Instruments provides guidance regarding the accounting for

the extinguishment of a financial liability by the issue of equity

instruments. In particular equity instruments issued under

such arrangements will be measured at their fair value, and

any difference between the carrying amount of the financial

liability extinguished and the fair value of equity instruments

issued will be recognized in profit or loss. To date, the Group

has not entered into transactions of this nature.


• Improvements to IFRSs issued in 2010 - Amendments to: IFRS

3; IFRS 7; IAS1; IAS 27; IAS 34; IFRIC 13.

Most of the amendments are effective for annual periods

beginning on or after January 1, 2011

2.3 Impact of the adoption of IFRS 9 effectiveJanuary 1, 2011 on the amounts reported

As discussed in section 2.2 above, the directors anticipate that

IFRS 9 will be adopted in the Group’s consolidated financial

statements for the annual period beginning January 1, 2011.

Management preliminary assessment of the impact of the

application of IFRS 9 is summarized as follows:

• In accordance with the provisions of IFRS 9, adoption by the

Group in 2011 will be applied retrospectively and comparative

amounts will not be restated as permitted by IFRS 9.

• Effective January 1, 2011 the Group’s available for sale financial

assets under IAS 39 will be classified as financial assets

through profit or loss and as amortized cost. Accordingly it is

expected that the cumulative change in fair value in relation

to these available for sale financial assets amounting to LBP

360.54 billion as of December 31, 2010 will be reclassified to

retained earnings to the extent of approximately LBP 55.04

billion and the remaining amount (along with the cumulative

deferred tax charge of approximately LBP 46.02 billion) will

be offset against those financial assets which will be

reclassified as amortized cost.

• Effective January 1, 2011 part of the Group’s financial assets

classified as amortized cost (held to maturity) under IAS 39

will be classified as financial assets through profit or loss.

Accordingly, the related change in fair value gain estimated

at approximately LBP 3.38 billion will be booked as an

adjustment to retained earnings as at January 1, 2011 net of

tax effect.


3. SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The consolidated financial statements have been prepared in

accordance with International Financial Reporting Standards

(IFRSs).

Basis of Measurement

The consolidated financial statements have been prepared on

the historical cost basis except for the following:

- Land and buildings acquired in years prior to 1993 are

measured at their revalued amounts based on market prices

prevailing during 1995.

- Financial assets and liabilities designated at fair value through

profit and loss.

- Available for sale financial assets are measured at fair value.

- Derivative financial instruments are measured at fair value.

The principal accounting policies are set out below:

A. Basis of Consolidation:

The consolidated financial statements of Fransabank SAL

incorporate the financial statements of the Bank and enterprises

controlled by the Bank (its subsidiaries). Control is achieved

when, among other things, the Bank has the power to govern

the financial and operating policies of an entity so as to obtain

benefits from its activities.

The results of subsidiaries acquired or disposed of during the

year are included in the consolidated income statement from

the effective date of acquisition or up to the effective date of

disposal, as appropriate.

The consolidated subsidiaries consist of:

During 2010, the Bank increased its share in the equity stake of

Fransabank OJSC by 17.79% through acquisition of shares from

a related party.

Where necessary, adjustments are made to the financial

statements of the subsidiaries to bring their accounting policies

into line with those used by other entities of the Group.

All intra-group transactions balances, income and expenses are

eliminated in full on consolidation.

Non-controlling interests in the net assets (excluding goodwill)

of consolidated subsidiaries are identified separately from the

Group’s equity therein. Non-controlling interests that are present

ownership interests and entitle their holders to a proportionate

share of the entity's net assets in the event of liquidation may be

initially measured either at fair value or at the non-controlling

interests' proportionate share of the recognised amounts of the

acquiree's identifiable net assets. The choice of measurement

Fransa Invest Bank SAL Lebanon 99.99 99.99 SpecializedBank

Fransabank (France) SA France 59.98 59.98 Banking

Lebanese Leasing Lebanon 87.47 87.47 Financial Company SAL Leasing

Switch and Electronics Lebanon 99.60 99.60 Financial Services SAL Services

Sogefon SAL Lebanon 99.88 92.88 Real Estate Company

Fransabank Insurance Lebanon 99.70 99.70 InsuranceServices Co. SAL

Fransabank El Djazaïr SPA Algeria 67.99 67.99 Banking

BLC Bank SAL & its Lebanon 74.83 74.81 BankingSubsidiaries (BLC Services SAL,

BLC Finance SAL & Lati Bank SAL)

Express SARL Lebanon 98.35 98.35 Restaurant

Fransabank Syria Syria 48.00 48.00 Banking

Fransabank OJSC Belarus 80.00 62.21 Banking

Company Country ofIncorporation

% of Ownership2010 2009

BusinessActivity


basis is made on a transaction-by-transaction basis. Other types

of non-controlling interests are measured at fair value or, when

applicable, on the basis specified in another IFRS. Non-

controlling interests consist of the amount of those interests at

the date of the original business combination and their share of

changes in equity since the date of the combination. Total com-

prehensive income/(loss) attributable to the non-controlling

interests are allocated to the non-controlling interests even if

this results in the non-controlling interests having a deficit

balance.

B. Business Combinations:

Business combinations are accounted for using the acquisition

method as at the acquisition date, which is the date on which

control is transferred to the Group. The cost of the business

combination is measured as the aggregate of the fair values (at

the date of exchange) of assets given, liabilities incurred or

assumed, and equity instruments issued by the Group in

exchange for control of the acquiree, plus any costs directly

attributable to the business combination. The acquiree’s

identifiable assets, liabilities and contingent liabilities that meet

the conditions for recognition under IFRS 3 Business

Combinations are recognized at their fair values at the acquisition

date, except for non-current assets that are classified as held for

sale in accordance with IFRS 5 Non-current Assets Held for Sale

and Discontinued Operations, which are recognized and

measured at fair value less costs to sell.

The Group measures goodwill at the acquisition date as:

• The fair value of the consideration transferred; plus

• The recognized amount of any non-controlling interests in

the acquiree; plus if the business combination is achieved in

stages, the fair value of the existing equity interest in the

acquiree; less

• The net recognized amount of the identifiable assets acquired

and liabilities assumed.

When the excess is negative, a bargain purchase gain is

recognized immediately in profit or loss.

C. Foreign Currencies:

The consolidated financial statements are presented in

Lebanese Pound which is the Group’s reporting currency.

However, the primary currency of the economic environment in

which the Group operates (functional currency) is the U S Dollar.

In preparing the financial statements of the individual entities,

transactions in currencies other than the Group’s reporting

currency (foreign currencies) are recorded at the rates of

exchange prevailing at the dates of the transactions. At each

statement of financial position date, monetary items

denominated in foreign currencies are retranslated at the rates

prevailing at that date. Non-monetary items carried at fair value

that are denominated in foreign currencies are retranslated at

the rates prevailing at the date when the fair value was

determined. Non-monetary items that are measured in terms

of historical cost in a foreign currency are not retranslated.

Exchange differences are recognized in profit or loss in the

period in which they arise except for exchange differences on

transactions entered into in order to hedge certain foreign

currency risks, and exchange differences on monetary items

receivable from or payable to a foreign operation for which

settlement is neither planned nor likely to occur, which form

part of the net investment in a foreign operation, and which are

recognized in the foreign currency translation reserve and

recognized in profit or loss on disposal of the net investment.

For the purpose of presenting consolidated financial

statements, the assets and liabilities of the Group’s foreign

operations are expressed in Lebanese Pound using exchange

rates prevailing at the statement of financial position date.

Income and expense items are translated at the average

exchange rates for the period. Exchange differences arising, if

any, are classified as equity and recognized in the Group’s

foreign currency translation reserve. Such exchange differences

are recognized in profit or loss in the period in which the

foreign operation is disposed of.



D. Financial Assets and Liabilities:

Recognition and Derecognition:

The Group initially recognizes loans and advances, deposits,

debt securities issued and subordinated liabilities on the date

that they are originated. All other financial assets and liabilities

are initially recognized on the trade date at which the Group

becomes a party to the contractual provisions of the

instrument.

The Group derecognizes a financial asset when the contractual

rights to the cash flows from the asset expire, or it transfers the

rights to receive the contractual cash flows on the financial

asset in a transaction in which all the risks and rewards of

ownership of the financial asset are transferred.

Debt securities exchanged against securities with longer

maturities with similar risks, and issued by the same issuer, are

not derecognized because they do not meet the conditions for

derecognition. Premiums and discounts derived from the

exchange of said securities are deferred to be amortized as a

yield enhancement on a time proportionate basis, over the

period of the extended maturities.

When the Group enters into transactions whereby it transfers

assets recognized on its statement of financial position and

retains all risks and rewards of the transferred assets, then the

transferred assets are not derecognized, for example, securities

lending and repurchase transactions.

The Group derecognizes a financial liability when its contractual

obligations are discharged, cancelled or expired.

Offsetting:

Financial assets and liabilities are set-off and the net amount is

presented in the statement of financial position when, and only

when, the Group has a legal right to set-off the amounts or

intends either to settle on a net basis or to realize the asset and

settle the liability simultaneously.

Fair Value Measurement:

Fair value is the amount agreed to exchange an asset or to

settle a liability between a willing buyer and a willing seller in

an arm’s length transaction.

When published price quotations exist, the Group measures the

fair value of a financial instrument that is traded in an active

market using quoted prices for that instrument. A financial

instrument is regarded as quoted in active market if quoted

prices are readily and regularly available and those prices

represent actual and regularly occurring market transactions

on an arm’s length basis.

If the market for a financial instrument is not active, the Group

establishes fair value by using valuation techniques. Valuation

techniques include observable market data about the market

conditions and other factors that are likely to affect the

instrument’s fair value. The fair value of a financial instrument

is based on one or more factors such as the time value of

money and the credit risk of the instrument and adjusted for

any other factors such as liquidity risk.

Impairment of Financial Assets:

Financial assets, other than those at fair value through profit or

loss, are assessed for indicators of impairment at the end of

each reporting period. Financial assets are impaired where

there is objective evidence that, as a result of one or more

events that occurred after the initial recognition of the asset, a

loss event has occurred which has an impact on the estimated

future cash flows of the asset.

Objective evidence that an impairment loss related to financial

assets has been incurred can include information about the

debtors’ or issuers’ liquidity, solvency and business and financial

risk exposures and levels of and trends in delinquencies for

similar financial assets, taking into account the fair value of

collateral and guarantees.

For investments in equity securities, a significant or prolonged

decline in fair value below cost is objective evidence of

impairment.


Impairment losses on assets carried at amortized cost are

measured as the difference between the carrying amount of

the financial assets and the present value of estimated future

cash flows discounted at the original effective interest rate.

Losses are recognized in profit or loss and reduce the carrying

amount of the asset to its estimated recoverable amount. If, in a

subsequent period, the amount of the impairment loss decreases,

the previously recognized impairment loss is reversed through

profit or loss to the extent that the carrying amount of the

investment at the date the impairment is reversed does not

exceed what the amortized cost would have been had the

impairment not been recognized.

In respect of available for sale investment securities, the

previously accumulated losses recorded under equity are

recognized in profit or loss in case of objective evidence of

impairment. Any increase in fair value subsequent to an

impairment loss is not recognized in profit or loss for available

for sale equity securities. Any increase in fair value subsequent

to an impairment loss is recognized in profit or loss for available

for sale debt securities.

Designation at Fair Value through Profit or Loss:

The Group has designated financial assets and liabilities at fair

value through profit or loss when either:

• The assets or liabilities are managed, evaluated and reported

internally on a fair value basis;

• The designation eliminates or significantly reduces an

accounting mismatch which would otherwise arise; or

• The asset or liability contains an embedded derivative that

significantly modifies the cash flows that would otherwise be

required under the contract.

Financial assets and liabilities designated at fair value through

profit or loss are initially recognized and subsequently

measured at fair value.

A description of the basis for each designation at fair value

through profit or loss is set out in the note for the relevant asset

or liability class.

E. Investment Securities:

Investment securities are initially measured at fair value plus

incremental direct transaction costs, and subsequently

accounted for depending on their classification as either held to

maturity or available for sale.

Held to Maturity Investment Securities:

Held to maturity investments are non-derivative assets with

fixed or determinable payments and fixed maturity that the

Group has the positive intent and ability to hold to maturity,

and which are not designated at fair value through profit or loss

or available for sale.

Held to maturity investments are carried at amortized cost

using the effective interest method. Any sale or reclassification

of a significant amount of held to maturity investments not

close to their maturity would result in the reclassification of all

held to maturity investments as available for sale, and prevent

the Group from classifying investment securities as held to

maturity for the current and the following two financial years,

unless the amount of held-of held to maturity is insignificant, or

close to maturity, or in case of significant deterioration in the

issuer credit worthiness, or change in statutory or regulatory

requirement or in major business combination.

Available for Sale Investment Securities:

Available for sale investments are non derivative investments

that are not designated as another category of financial assets.

Unquoted equity securities whose fair value cannot be reliably

measured are carried at cost. All other available for sale

investments are carried at fair value and unrealized gains or

losses are included in other comprehensive income and

accumulated under equity.

F. Trading Assets and Liabilities:

Trading assets and liabilities are initially recognized and sub-

sequently measured at fair value. Transaction costs are includ-

ed in the income statement. Subsequent changes in fair value

of these securities are recognized immediately in profit or loss.

Subsequent to their initial recognition, trading assets are not

reclassified, except in rare circumstances.



G. Loans and Advances:

Loans and advances are non-derivative financial assets with

fixed or determinable payments that are not quoted in an

active market. Loans and advances are disclosed at amortized

cost net of unrealized interest and after provision for credit losses

where applicable. Bad and doubtful debts are carried on a cash

basis because of doubts and the probability of non-collection of

principal and/or interest.

H. Derivative Financial Instruments:

Derivatives are initially recognized at fair value at the date a

derivative contract is entered into and are subsequently

re-measured to their fair value at each statement of financial

position date. The resulting gain or loss is recognized in profit or

loss immediately unless the derivative is designated and

effective as a hedging instrument, in which event the timing of

the recognition in profit or loss depends on the nature of the

hedge relationship. The Group designates certain derivatives as

either hedges of the fair value of recognized assets or liabilities

or firm commitments (fair value hedges), hedges of highly

probable forecast transactions or hedges of foreign currency

risk of firm commitments (cash flow hedges), or hedges of net

investments in foreign operations.

Embedded Derivatives:

Derivatives embedded in other financial instruments or other

host contracts are treated as separate derivatives when their

risks and characteristics are not closely related to those of the

host contracts and the host contracts are not measured at fair

value with changes in fair value recognized in profit or loss.

Hedge Accounting:

The Group designates certain hedging instruments, which

include derivatives, embedded derivatives and non-derivatives

in respect of foreign currency risk, as either fair value hedges,

cash flow hedges, or hedges of net investments in foreign

operations. Hedges of foreign exchange risk on firm

commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship, the entity documents

the relationship between the hedging instrument and the

hedged item, along with its risk management objectives and its

strategy for undertaking various hedge transactions.

Furthermore, at the inception of the hedge and on an ongoing

basis, the Group documents whether the hedging instrument

that is used in a hedging relationship is highly effective in off-

setting changes in fair values or cash flows of the hedged item.

Fair Value Hedge:

Changes in the fair value of derivatives that are designated and

qualify as fair value hedges are recorded in profit or loss

immediately, together with any changes in the fair value of the

hedged item that are attributable to the hedged risk. The

change in the fair value of the hedging instrument and the

change in the hedged item attributable to the hedged risk are

recognized in the line of the income statement relating to the

hedged item.

Hedge accounting is discontinued when the Group revokes the

hedging relationship, the hedging instrument expires or is sold,

terminated, or exercised, or no longer qualifies for hedge

accounting. The adjustment to the carrying amount of the

hedged item arising from the hedged risk is amortized to profit

or loss from that date.

Cash Flow Hedge:

The effective portion of changes in the fair value of derivatives

that are designated and qualify as cash flow hedges are included

in other comprehensive income and accumulated under equity.

The gain or loss relating to the ineffective portion is recognized

immediately in profit or loss, and is included in the “other gains

and losses” line of the income statement.

Amounts previously accumulated in equity are recycled in profit

or loss in the periods when the hedged item is recognized in

profit or loss, in the same line of the income statement as the

recognized hedged item. However, when the forecast transaction

that is hedged results in the recognition of a non-financial asset

or a non-financial liability, the gains and losses previously


deferred in equity are transferred from equity and included in

the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the Group revokes the

hedging relationship, the hedging instrument expires or is sold,

terminated, or exercised, or no longer qualifies for hedge

accounting. Any cumulative gain or loss deferred in equity at

that time remains in equity and is recognized when the forecast

transaction is ultimately recognized in profit or loss. When a

forecast transaction is no longer expected to occur, the

cumulative gain or loss that was deferred in equity is

recognized immediately in profit or loss.

I. Investments in Associates:

An associate is an entity over which the Group has significant

influence and that is neither a subsidiary nor an interest in a

joint venture. Significant influence is the power to participate in

the financial and operating policy decisions of the investee but

is not control or joint control over those policies.

Investments in associates over which the Group has significant

influence are accounted for at cost and reflected on the basis of

the equity method of accounting in the consolidated financial

statements.

J. Financial Guarantees:

Financial guarantees contracts are contracts that require the

Group to make specified payments to reimburse the holder for

a loss it incurs because a specified debtor fails to make payment

when due in accordance with the terms of a debt instrument.

These contracts can have various judicial forms (guarantees,

letters of credit, credit-insurance contracts).

Financial guarantee liabilities are initially measured at their fair

value, and subsequently carried at the higher of this amortized

amount and the present value of any expected payment (when

a payment under the guarantee has become probable).

Financial guarantees are included within other liabilities.

K. Property and Equipment

Property and equipment except for buildings acquired prior to

1993 are stated at historical cost, less accumulated depreciation

and impairment loss, if any. Buildings acquired prior to 1993 are

stated at their revalued amounts, based on market prices

prevailing during 1995 less accumulated depreciation and

impairment loss, if any. Resulting revaluation surplus is reflected

under “Reserves” in equity.

Depreciation is recognized so as to write off the cost or

valuation of property and equipment, other than land and

advance payments on capital expenditures less their residual

values, if any, over the estimated useful lives of the related

assets using the straight-line method as follows:

Years

Buildings 50

Office improvements and installations 5 - 17

Furniture, equipment and machines 5 - 12

Computer equipment 3 - 5

Vehicles 5 - 10

The estimate useful life, residual values and depreciation

method is reviewed at each year end, with the effect of any

changes in estimate accounted for on a prospective basis.

The gain or loss arising on the disposal or retirement of an item

of property and equipment is determined as the difference

between the sales proceeds and the carrying amount of the

asset and is recognized in profit or loss.

L. Intangible Assets:

Computer Software:

Intangible assets consisting of computer software are amortized

over a period of 3 to 5 years and are subject to impairment

testing. Subsequent expenditure on software assets is capitalized

only when it increases the future economic benefits embodied

in the specific asset to which it relates. All other expenditure is

expensed as incurred.



Goodwill:

Goodwill represents the excess of the cost of acquisition over

the Group’s interest in the net fair value of the identifiable

assets, liabilities and contingent liabilities of the acquiree. When

the excess is negative, it is recognized immediately in profit or

loss.

Goodwill is measured at cost less accumulated impairment

losses.

M. Assets Acquired in Satisfaction of Loans

Real estate property acquired through the enforcement of

security over loans and advances to customers is measured at

cost less any accumulated impairment losses. The acquisition of

such assets is regulated by the local banking authorities which

require the liquidation of these assets within 2 years from

acquisition. In case of default of liquidation the Group’s lead

regulator requires an appropriation from the yearly net income

to a special reserve that is reflected under equity.

N. Impairment of Tangible and Intangible Assets (Except

Goodwill):

At each statement of financial position date, the Group reviews

the carrying amounts of its tangible and intangible assets to

determine whether there is any indication that those assets

have suffered an impairment loss. If any such indication exists,

the recoverable amount of the asset is estimated in order to

determine the extent of the impairment loss (if any).

Recoverable amount is the higher of fair value less costs to sell

and value in use. In assessing value in use, the estimated future

cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the

time value of money and the risks specific to the asset for which

the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less

than its carrying amount, the carrying amount of the asset is

reduced to its recoverable amount. An impairment loss is

recognized immediately in profit or loss, unless the relevant

asset is carried at a revalued amount, in which case the

impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying

amount of the asset (cash-generating unit) is increased to the

revised estimate of its recoverable amount, but so that the

increased carrying amount does not exceed the carrying

amount that would have been determined had no impairment

loss been recognized for the asset (cash-generating unit) in

prior years. A reversal of an impairment loss is recognized

immediately in profit or loss, unless the relevant asset is carried

at a revalued amount, in which case the reversal of the

impairment loss is treated as a revaluation increase.

O. Impairment of Goodwill:

Goodwill is not amortized but is reviewed for impairment at

least annually. For the purpose of impairment testing, goodwill

is allocated to each of the Group’s cash-generating units that is

expected to benefit from the synergies of the combination.

Cash generating units to which goodwill has been allocated are

tested for impairment annually, or more frequently when there

is an indication that the unit may be impaired. If the recoverable

amount of the cash-generating unit is less than its carrying

amount, the impairment loss is allocated first to reduce the

carrying amount of any goodwill allocated to the unit and then

to the other assets of the unit on a pro-rata basis on the

carrying amount of each asset in the unit. Any impairment loss

for goodwill is recognized directly in profit or loss in the

consolidated income statement. An impairment loss

recognized for goodwill is not reversed in subsequent periods.

P. Employees' Benefits:

Obligations for contributions to defined employees’ benefits

are recognized as an expense on a current basis.

Employees' End-of-Service Indemnities: (Under the Lebanese

jurisdiction)

The provision for staff termination indemnities is based on the

liability that would arise if the employment of all the staff were

terminated consensually at the statement of financial position


date. This provision is calculated in accordance with the

directives of the Lebanese Social Security Fund and Labor laws

based on the number of years of service multiplied by the

monthly average of the last 12 months remunerations and less

contributions paid to the Lebanese Social Security National

Fund and interest accrued by the Fund.

Defined Benefit Plans: (Under other jurisdictions)

Obligations in respect of defined benefit pension plans is calcu-

lated separately for each plan by estimating the amount of

future benefit that employees have earned in return for their

service in the current and prior periods; that benefit is discount-

ed to determine its present value, and any unrecognized past

service costs and the fair value of any plan assets are deducted.

Q. Provisions:

Provision is recognized if, as a result of a past event, the Group

has a present legal or constructive obligation that can be

estimated reliably, and it is probable that an outflow of

economic benefits will be required to settle the obligation.

R. Revenue and Expense Recognition:

Interest income and expense are recognized on an accrual

basis, taking account of the principal outstanding and the rate

applicable, except for non-performing loans and advances for

which interest income is only recognized upon realization.

Interest income and expense include the amortization discount

or premium.

• Interest income and expense presented in the income

statement include:

- Interest on financial assets and liabilities at amortized cost.

- Interest on available for sale investment securities.

- Fair value changes in qualifying derivatives and related

hedged items when interest rate risk is the hedged risk.

• Net trading income presented in the income statement

includes:

- Interest income and expense on the trading portfolio.

- Dividend income on the trading equities.

- Realized and unrealized gains and losses on the trading

portfolio.

• Interest income and expense on financial portfolio designated

at fair value through profit or loss upon initial recognition is

recognized under net income from other financial instruments

carried at fair value.

• Fees and commission income and expense that are integral

to the effective interest rate on a financial asset or liability (i.e.

commissions and fees earned on the loan book) are included

under interest income and expense.

• Other fees and commission income are recognized as the

related services are performed.

• Dividend income is recognized when the right to receive

payment is established.

S. Income Tax:

Income tax expense represents the sum of the tax currently

payable and deferred tax. Income tax is recognized in the

income statement except to the extent that it relates to items

recognized directly in other comprehensive income, in which

case it is recognized in other comprehensive income.

The tax currently payable is based on taxable profit for the year.

Taxable profit differs from profit as reported in the consolidated

income statement because of items that are never taxable or

deductible. The Group’s liability for current tax is calculated

using tax rates and has been enacted is substantively enacted

by the end of the reporting period.

Income tax payable is reflected in the consolidated statement

of financial position net of taxes previously settled in the form

of withholding tax.

Deferred tax is recognized on differences between the carrying

amounts of assets and liabilities in the financial statements and

the corresponding tax base used in the computation of taxable

profit, and are accounted for using the statement of financial

position liability method. Deferred tax liabilities are generally

recognized for all taxable temporary differences and deferred

tax assets are recognized to the extent that it is probable that

taxable profits will be available against which deductible

temporary differences can be utilized.



4. CRITICAL ACCOUNTING JUDGMENTS AND KEYSOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are

described in note 3, the directors are required to make judgments,

estimates and assumptions about the carrying amounts of

assets and liabilities that are not readily apparent from other

sources. The estimates and associated assumptions are based

on historical experience and other factors that are considered

to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an

ongoing basis. Revisions to accounting estimates are

recognized in the period in which the estimate is revised if the

revision affects only that period or in the period of the revision

and future periods if the revision affects both current and future

periods.

A. Critical Accounting Judgments in Applying the

Group’s Accounting Policies:

Classification of Financial Assets:

The Group’s accounting policies provide scope for investment

securities to be designated on inception into different categories

in certain circumstances based on specific conditions.

In designating financial assets or liabilities at fair value through

profit or loss, the Group has determined that it has met one of

the criteria for this designation set out in accounting policy 3D.

B. Key Sources of Estimation Uncertainty:

The following are the key assumptions concerning the future,

and other key sources of estimation uncertainty at the statement

of financial position date, that have a significant risk of causing

a material adjustment to the carrying amounts of assets and

liabilities within the next financial year.

Allowances for Credit Losses:

Specific impairment for credit losses is determined by assessing

each case individually. This method applies to classified loans

and advances and the factors taken into consideration when

estimating the allowance for credit losses include the

counterparty’s credit limit, the counterparty’s ability to generate

cash flows sufficient to settle his advances and the value of

collateral and potential repossession. Loans collectively

assessed for impairment are determined based on losses

incurred by loans portfolios with similar characteristics.

Determining Fair Values:

The determination of fair value for financial assets for which

there is no observable market price requires the use of valuation

techniques as described in Note 3D. For financial instruments

that trade infrequently and have little price transparency, fair

value is less objective, and requires varying degrees of judgment

depending on liquidity, concentration, uncertainty of market

factors, pricing assumptions and other risks affecting the specific

instrument.

Where available, management has used market indicators in its

mark to model approach for the valuation of the Lebanese

government debt securities and Central Bank Certificates of

Deposits at fair value. The IFRS fair value hierarchy allocates the

highest priority to quoted prices (unadjusted) in active markets

for identical assets or liabilities, and the lowest priority to

unobservable inputs. The fair value hierarchy used in the

determination of fair value consists of three levels of input data

for determining the fair value of an asset or liability.

Level 1 - quoted prices for identical items in active, liquid and

visible markets such as stock exchanges,

Level 2 - observable information for similar items in active or

inactive markets,

Level 3 - unobservable inputs used in situations where

markets either do not exist or are illiquid.

Unobservable inputs are used to measure fair value to the

extent that observable inputs are not available, thereby allowing

for situations in which there is little, if any, market activity for the

asset or liability at the measurement date. However, the fair

value measurement objective should remain the same; that is,

an exit price from the perspective of a market participant that

holds the asset or owes the liability. Unobservable inputs are

developed based on the best information available in the

circumstances, which may include the reporting entity's own


data. Where practical, the discount rate used in the mark to

model approach included observable data collected from

market participants, including risk free interest rates and credit

default swap rates for pricing of credit risk (both own and

counter party), and a liquidity risk factor which is added to the

applied discount rate. Changes in assumptions about any of

these factors could affect the reported fair value of the

Lebanese Government debt Securities and Central Bank

Certificates of Deposits.

Impairment of Available for Sale Equity Investments:

The Group determines that available for sale equity investments

are impaired when there has been a significant or prolonged

decline in the fair value below its cost. This determination

requires judgment. In making this judgment the Group evaluates

among other factors, the history of the Lebanese government

default with respect to government bonds and the normal

volatility in share price.

5. CASH AND CENTRAL BANKS

LBP’000

Cash on hand

Current accounts with Central Bank of Lebanon

Current accounts with Central Bank of France

Current accounts with Central Bank of Algeria

Current accounts with Central Bank of Syria

Current accounts with Central Bank of Belarus

Term placements with Central Bank of Lebanon

Term placements with Central Bank of Algeria

Term placements with Central Bank of Belarus

Blocked deposits with Central Bank of Lebanon

Accrued interest receivable

TOTAL

DECEMBER 31, 2009

of whichCompulsory/Regulatory

Deposits

Total

DECEMBER 31, 2010

of whichCompulsory/Regulatory

Deposits

Total

-

372,129,811

3,970,911

10,392,852

41,882,891

115,274

1,196,685,870

-

-

-

-

1,625,177,609

97,905,375

513,055,872

4,000,641

11,137,337

68,200,664

3,352,005

1,682,673,525

121,264,090

33,165,000

400,000

2,158,445

2,537,312,954

-

521,924,856

3,476,759

15,254,492

22,393,217

332,356

1,121,457,005

-

-

-

-

1,684,838,685

81,336,245

655,879,155

3,858,887

26,512,156

58,359,284

6,162,437

1,558,420,225

260,187,960

-

-

2,180,719

2,652,897,068


Compulsory deposits with Central Bank of Lebanon are not

available for use in the Group’s day-to-day operations.

Compulsory deposits under current accounts with Central Bank of

Lebanon are in Lebanese Pounds and non-interest earning. These

deposits are computed on the basis of 25% and 15% of the

average weekly sight and term customers’ deposits in Lebanese

Pounds in accordance with the local banking regulations.

Regulatory deposits under term placements with Central Bank of

Lebanon are in foreign currencies and made in accordance with

local banking regulations which require banks to maintain interest

earning placements in foreign currency to the extent of 15% of

customers’ deposits in foreign currencies, certificates of deposits

and loans acquired from non-resident financial institutions.


2011

2012

2013

2014

2015

TOTAL

TotalAverageInterest Rate %

AverageInterest Rate %

0.74

1.19

1.19

3.15

1.20

DECEMBER 31, 2010

AmountAmountMaturity

508,969,775

472,601,250

149,242,500

1,507,500

131,152,500

1,263,473,525

3.19419,200,000

-

-

-

-

419,200,000

Term placements with Central Bank of Lebanon bear the following maturities:

928,169,775

472,601,250

149,242,500

1,507,500

131,152,500

1,682,673,525

LBP Base Accounts F/Cy Base Accounts

2010

2011

2012

2013

2014

TOTAL



0.79

-

1.17

1.17

-

DECEMBER 31, 2009


558,200,850

-

472,601,250

149,242,500

-

1,180,044,600

3.02

1.17

1.16

-

1.67

368,200,000

3,391,875

753,750

-

6,030,000

378,375,625

926,400,850

3,391,875

473,355,000

149,242,500

6,030,000

1,558,420,225


Term placement with Central Banks of Algeria and Belarus mature within one year or less.

Interest rates on term placements with Central Bank of Lebanon reprice at each coupon date.

LBP’000

LBP’000


6. DEPOSITS WITH BANKS AND FINANCIAL INSTITUTIONS

20092010LBP’000

Checks in course of collection

Current accounts with banks and financial institutions

Term placements with banks and financial institutions

Term placements with related banks and financial institutions


Accrued interest receivable - Related parties

Regulatory allowance for country risk

TOTAL

10,706,176

230,152,369

1,455,316,794

-

3,458,765

-

(57,321)

1,699,576,783

12,458,021

113,389,251

1,345,653,245

24,839,425

2,947,817

3,534

(139,285)

1,499,152,008

2011

2012

TOTAL



1.12

5.50

DECEMBER 31, 2010


1,436,823,732

7,493,062

1,444,316,794

4.18

-

11,000,000

-

11,000,000

Term placements bear the following maturities:

1,447,823,732

7,493,062

1,455,316,794


2010

2012

TOTAL



1.13

5.50

DECEMBER 31, 2009


1,324,943,652

11,849,018

1,336,792,670

3.96

-

33,700,000

-

33,700,000

1,358,643,652

11,849,018

1,370,492,670


LBP’000

LBP’000



7. TRADING ASSETS

20092010LBP’000




Equities – Quoted

Equities – Unquoted


TOTAL

2,825,376

60,977,876

2,555,417

24,020,581

361,800

1,105,392

91,846,442

2,875,790

63,584,155

2,344,139

25,465,674

361,800

1,189,831

95,821,389

20092010LBP’000




TOTAL

84,750

1,010,911

9,731

1,105,392

83,995

1,096,572

9,264

1,189,831

20092010LBP’000

Balance January 1

Additions

Additions from acquired subsidiaries

Write back

Effect of exchange rates changes

BALANCE DECEMBER 31

139,285

-

-

(76,244)

(5,720)

57,321

-

131,375

12,178

-

(4,268)

139,285

The movement of the regulatory allowance for country risk was as follows:

Accrued interest receivable on trading assets consists of the following:

The unrealized gain on trading securities during 2010 amounted to LBP 2.1 billion and is reflected under “Net Interest and Other Gain / Loss

on Trading Portfolio” in the accompanying consolidated income statement (LBP 10.9 billion during 2009) – Note 37.


8. LOANS TO BANKS

20092010LBP’000

Regular performing accounts

Regular performing accounts - Related parties


Accrued interest receivable - Related parties

TOTAL

152,998,021

78,049,958

231,047,979

1,755,613

3,173,591

235,977,183

56,060,848

2,431,596

58,492,444

249,555

75,515

58,817,514

Loans to banks are reflected at amortized cost and consist of the following as at December 31:

Loans to banks mature as follows:

Up to 1 year

1 to 3 years

3 years to 5 years

Beyond 5 years

TOTAL

Interest Rate %Interest Rate %

6.85

5.82

-

-

DECEMBER 31, 2010

C/V of F/CyLBPLBP’000

141,735,358

7,744,007

-

-

149,479,365

5.46

3.74

3.16

2.69

3,290,818

11,146,000

16,646,000

55,415,000

86,497,818

Up to 1 year

1 to 3 years

3 years to 5 years

Beyond 5 years

TOTAL

Interest Rate %Interest Rate %

12.35

-

13.44

-

DECEMBER 31, 2009

C/V of F/CyLBPLBP’000

16,430,690

-

16,748,105

-

33,178,795

-

-

-

5.45

208,719

-

-

25,430,000

25,638,719

20092010LBP’000

Balance January 1

Additions

Additions due to acquisition of subsidiary

Settlements

Effect of exchange rate changes

BALANCE DECEMBER 31

58,492,444

190,259,916

-

(17,380,288)

(324,093)

231,047,979

68,754,969

2,366,067

13,882,743

(26,690,218)

178,883

58,492,444

The movement of loans to banks was as follows during 2010 and 2009:



9. LOANS AND ADVANCES TO CUSTOMERS

LBP’000

Loans and advances to customers are reflected at amortized cost and consist of the following:

Regular and Watch ListRetail Customers:

Mortgage loans 509,299,887 - - - 509,299,887 313,290,461 - - - 313,290,461

Personal loans 336,482,259 - - - 336,482,259 240,891,170 - - - 240,891,170

Car loans 329,480,725 - - - 329,480,725 245,186,488 - - - 245,186,488

Credit cards 34,586,198 - - - 34,586,198 31,379,884 - - - 31,379,884

Educational loans 11,877,930 - - - 11,877,930 1,502,459 - - - 1,502,459

Overdrafts 711,326 - - - 711,326 1,242,970 - - - 1,242,970

Other 19,807,821 - - - 19,807,821 25,308,332 - - - 25,308,332

Loans to staff 8,067,341 - - - 8,067,341 8,531,142 - - - 8,531,142

Regular and Watch ListCorporate Customers:

Corporate 2,468,388,893 - - - 2,468,388,893 1,647,965,654 - - - 1,647,965,654

Small and medium enterprises 885,063,268 - - - 885,063,268 797,372,812 - - - 797,372,812

Non-PerformingLoans and Advances:

Purchased loan book 3,589,905 - - - 3,589,905 3,677,874 - - - 3,677,874

Substandard 39,187,435 (17,757,851) - - 21,429,584 33,295,403 (13,527,828) - - 19,767,575

Doubtful 673,129,409 (434,526,126) (7,976,629) (149,862,219) 80,764,435 811,603,939 (518,017,892) (8,059,495) (172,917,326) 112,609,226

Bad 164,683,878 (119,018,828) (1,234,683) (44,430,367) - 154,181,851 (108,085,832) (1,541,791) (44,554,228) -

Restructured Loansand Advances:

Regular 27,490,475 - - - 27,490,475 23,013,389 - - - 23,013,389

Substandard 9,035,181 (1,655,653) - - 7,379,528 8,803,779 (1,140,534) - - 7,663,245

Doubtful and bad 10,726,901 (5,438,136) (121,115) (1,118,056) 4,049,594 15,471,433 (4,158,503) (433,807) (6,472,987) 4,406,136

Allowance for CollectivelyImpaired Loans:

Un-Classified loans - - - (16,515,188) (16,515,188) - - - (5,225,366) (5,225,366)

Doubtful and bad - - - (6,780,505) (6,780,505) - - - (5,360,626) (5,360,626)

Accrued Interest Receivable 11,169,127 - - - 11,169,127 7,519,379 - - - 7,519,379

TOTAL 5,542,777,959 (578,396,594) (9,332,427) (218,706,335) 4,736,342,603 4,370,238,419 (644,930,589) (10,035,093) (234,530,533) 3,480,742,204

GrossAmount

UnrealizedInterest

Discount onLoan Book

ImpairmentAllowance

CarryingAmount

GrossAmount

UnrealizedInterest

Discount onLoan Book

ImpairmentAllowance

CarryingAmount

DECEMBER 31, 2009DECEMBER 31, 2010


The carrying value of loans and advances to customers include

accidentally temporary debtors with carrying value amounting

to LBP 51.6 billion as at December 31, 2010 (LBP 39.1 billion as

at December 31, 2009).

The carrying value of loans and advances to customers include

loans to related parties in the aggregate of LBP 154.03 billion as

at December 31, 2010 (LBP 170.89 billion in 2009) (See Note 41)

Restructured loans represent loans with renegotiated terms

and are categorized within the same loan classification prior to

restructuring.

20092010LBP’000

Balance January 1

Additions


Recoveries (Note 33)

Write-off

Transfer to off financial position

Reclassification from unrealized interest to allowance for impairment

Transfer (to) / from allowance for collectively impaired loans

Change in expected contractual write-off


BALANCE DECEMBER 31

644,930,589

115,021,538

-

(7,344,609)

(139,965,956)

(1,990,516)

(35,541)

(5,218)

(32,005,773)

(207,920)

578,396,594

616,826,280

126,031,169

1,846,391

(8,406,228)

(51,805,659)

(38,365,501)

(56,461)

1,223

(1,103,318)

(37,307)

644,930,589

20092010LBP’000

Balance January 1

Additions

(Adjustments)/additions from acquired subsidiaries

Recoveries

Write-off


Reclassification to allowance for impairment from unrealized interest

Transfer (to) / from allowance for collectively impaired loans


Other movement


BALANCE DECEMBER 31

223,944,541

10,763,218

(740,792)

(15,392,951)

(20,267,306)

(1,215,932)

35,541

(430,546)

(727,144)

(660,365)

102,378

195,410,642

251,774,234

5,020,459

2,929,999

(11,112,717)

(20,756,130)

(5,469,903)

56,461

36,650

1,781,382

-

(315,894)

223,944,541

The movement of allowance for impairment of doubtful and bad loans during 2010 and 2009 is summarized as follows:

The movement of unrealized interest during 2010 and 2009 is summarized as follows:



20092010LBP’000

Balance January 1

Additions


Recoveries

Transfer from / (to) specific allowance for impairment

Transfer from / (to) unrealized interest

Transfer to unrealized interest in off financial position

Write-off


BALANCE DECEMBER 31

10,585,992

12,622,930

115,009

(40,029)

430,546

5,218

(407,025)

-

(16,948)

23,295,693

9,887,949

-

1,411,962

(635,254)

(36,650)

(1,223)

-

(40,792)

-

10,585,992

20092010LBP’000

Balance January 1

Additions


Recoveries

Write-off


BALANCE DECEMBER 31

10,035,093

1,138,737

(105,392)

(1,692,748)

(98,306)

55,043

9,332,427

10,655,959

-

-

(751,765)

(653,710)

784,609

10,035,093

The movement of the discount on loan book purchased during 2010 and 2009 is summarized as follows:

The movement of the allowance for collectively impaired loans during 2010 and 2009 is as follows:


10. INVESTMENT SECURITIES

Equities and preferred shares 119,473,487 48,063,503 167,536,990 - 1,507,500 1,507,500

Lebanese Treasury bills 1,251,884,654 - 1,251,884,654 235,664,180 - 235,664,180

Lebanese Government bonds - 1,029,563,990 1,029,563,990 - 670,677,505 670,677,505

Foreign Eurobonds issued by banks - 25,854,857 25,854,857 - - -

Corporate Eurobonds - 22,887,225 22,887,225 - - -

Subordinated Eurobonds - 2,261,250 2,261,250 - - -

Certificates of deposit issued

by Central Bank of Lebanon 3,643,046,951 451,910,650 4,094,957,601 125,000,000 304,984,815 429,984,815

Certificates of deposit issued by banks - 65,764,250 65,764,250 - 7,466,416 7,466,416

Alternative funds - 360,113 360,113 - - -

Corporate bonds - 27,470,750 27,470,750 - - -

Government bonds - Non-residents - - - - 358,785 358,785

Asset-backed securities - 2,224,392 2,224,392 - - -

Accrued interest receivable 84,346,394 30,934,614 115,281,008 2,811,772 19,530,722 22,342,494

TOTAL 5,098,751,486 1,707,295,594 6,806,047,080 363,475,952 1,004,525,743 1,368,001,695

DECEMBER 31, 2010

LBPLBP’000 C/V of F/Cy Total LBP C/V of F/Cy Total

Available for Sale Held to Maturity

Equities and preferred shares 119,618,195 46,450,756 166,068,951 - 1,507,500 1,507,500

Lebanese Treasury bills 1,376,741,737 - 1,376,741,737 352,659,724 - 352,659,724

Lebanese Government bonds - 1,042,048,268 1,042,048,268 - 702,990,633 702,990,633

Foreign Eurobonds issued by banks - 26,577,372 26,577,372 - 248,788 248,788


by Central Bank of Lebanon 3,094,793,820 447,270,665 3,542,064,485 - 309,580,585 309,580,585

Certificates of deposit issued by banks - 68,733,790 68,733,790 - 7,434,190 7,434,190

Alternative funds - 365,579 365,579 - - -

Banks and corporate bonds - 27,701,737 27,701,737 - 2,862,576 2,862,576

Asset-backed securities - 2,224,392 2,224,392 - - -

Accrued interest receivable 74,520,672 32,299,329 106,820,001 13,705,056 20,784,762 34,489,818

TOTAL 4,665,674,424 1,693,671,888 6,359,346,312 366,364,780 1,045,409,034 1,411,773,814

DECEMBER 31, 2009

LBPLBP’000 C/V of F/Cy Total LBP C/V of F/Cy Total

Available for Sale Held to Maturity



A. Available for Sale Investments:

Quoted equities - - - - 8,330,608 - 11,544,173 3,213,565

Quoted preference shares - - - - 8,213,424 (125,712) 8,087,712 -

Unquoted equities 87,847,029 - 119,473,487 31,626,458 24,913,926 (8,813,419) 16,159,060 58,553

Unquoted preference shares - - - - 12,272,558 - 12,272,558 -

Lebanese Treasury bills 1,207,621,841 - 1,251,884,654 44,262,813 - - - -

Lebanese Government bonds - - - - 969,799,331 - 1,029,563,990 59,764,659

Foreign Eurobonds issued by banks - - - - 25,584,337 (519,555) 25,854,857 790,075

Corporate Eurobonds - - - - 22,887,225 - 22,887,225 -

Subordinated Eurobonds - - - - 2,261,250 - 2,261,250 -


by Central Bank of Lebanon 3,399,656,988 - 3,643,046,951 243,389,963 429,451,303 - 451,910,650 22,459,347

Certificates of deposit

issued by banks - - - - 64,677,359 - 65,764,250 1,086,891

Alternative funds - - - - 541,133 (181,020) 360,113 -

Capital funds - - - - 390,443 (390,443) - -

Corporate bonds - - - - 26,989,459 (270,240) 27,470,750 751,531

Asset-backed securities - - - - 2,236,819 - 2,224,392 (12,427)

Accrued interest receivable 84,346,394 - 84,346,394 - 30,934,614 - 30,934,614 -

TOTAL 4,779,472,252 - 5,098,751,486 319,279,234 1,629,483,789 (10,300,389) 1,707,295,594 88,112,194

DECEMBER 31, 2010

AmortizedCost

Allowancefor

Impairment

CarryingFair

Value

CumulativeChange in Fair

ValueLBP’000Amortized

Cost

Allowancefor

Impairment

CarryingFair

Value


Value

Balances in LBP Balances in F/Cy

DECEMBER 31, 2009

AmortizedCost

Allowancefor

Impairment

CarryingFair

Value


ValueLBP’000Amortized

Cost

Allowancefor

Impairment

CarryingFair

Value


Value


Quoted equities - - - - 20,674,017 - 24,705,188 4,031,171

Unquoted equities 87,987,868 ( 170,000) 119,618,195 31,800,327 30,500,434 (8,813,418) 21,745,568 58,552

Lebanese Treasury bills 1,313,864,364 - 1,376,741,737 62,877,373 - - - -

Lebanese Government bonds - - - - 1,005,574,965 - 1,042,048,268 36,473,303

Foreign Eurobonds issued by banks - - - - 26,827,440 (140,985) 26,577,372 (109,083)


by Central Bank of Lebanon 2,890,118,984 - 3,094,793,820 204,674,836 427,100,687 - 447,270,665 20,169,978

Certificates of deposit

issued by banks - - - - 67,062,230 - 68,733,790 1,671,560

Alternative funds - - - - 541,133 - 365,579 (175,554)

Banks and corporate bonds - - - - 27,828,238 - 27,701,737 (126,501)

Asset-backed securities - - - - 2,226,102 - 2,224,392 (1,710)

Accrued interest receivable 74,520,672 - 74,520,672 - 32,299,329 - 32,299,329 -

TOTAL 4,366,491,888 (170,000) 4,665,674,424 299,352,536 1,640,634,575 (8,954,403) 1,693,671,888 61,991,716


Available for sale fixed income investments are segregated over remaining periods to maturity as follows:

Lebanese Treasury bills:Up to one year 506,176,800 505,972,285 518,185,195 8.68

1 year to 3 years 519,871,250 518,992,097 551,286,738 9.40

3 years to 5 years 135,310,000 136,407,459 137,453,199 7.10

5 years to 10 years 46,250,000 46,250,000 44,959,522 7.90

1,207,608,050 1,207,621,841 1,251,884,654Lebanese Government bonds:Up to one year 138,989,993 138,970,372 139,712,382 7.78

1 year to 3 years 175,515,271 175,606,188 177,604,524 6.36

3 years to 5 years 97,318,265 97,107,261 101,127,487 7.80

5 years to 10 years 258,877,699 268,271,983 285,010,706 8.69

Beyond 10 years 290,694,241 289,843,527 326,108,891 8.15

961,395,469 969,799,331 1,029,563,990Foreign Eurobonds issued by banks:Up to one year 15,118,969 14,907,479 14,907,479 16.97

1 year to 3 years 1,507,500 1,492,425 1,492,425 7.24

5 years to 10 years 7,537,500 7,616,581 8,403,123 7.50

Beyond 10 years 1,329,615 1,048,297 1,051,830 9.22

25,493,584 25,064,782 25,854,857Corporate Eurobonds:5 years to 10 years 15,075,000 15,729,135 15,729,135 6.25

Beyond 10 years 7,537,500 7,158,090 7,158,090 4.75

22,612,500 22,887,225 22,887,225 Subordinated Eurobonds:5 years to 10 years 2,261,250 2,261,250 2,261,250 6.75

2,261,250 2,261,250 2,261,250 Certificates of deposit issued by Central Bank of Lebanon:1 year to 3 years 1,261,727,040 1,266,427,381 1,383,228,576 10.48

3 years to 5 years 1,560,134,625 1,569,746,820 1,704,871,825 9.57

5 years to 10 years 990,000,000 992,934,090 1,006,857,200 8.07

3,811,861,665 3,829,108,291 4,094,957,601Certificates of deposit issued by banks:Up to one year 3,017,916 3,017,916 3,017,916 4.75

1 year to 3 years 61,674,902 61,659,443 62,746,334 6.85

64,692,818 64,677,359 65,764,250Corporate bonds:1 year to 3 years 299,616 29,376 29,376 7.25

3 years to 5 years 14,929,936 14,867,811 15,603,077 4.81

5 years to 10 years 4,899,739 4,864,346 5,440,027 7.40

Beyond 10 years 6,911,028 6,957,686 6,398,270 4.91

27,040,319 26,719,219 27,470,750Asset-backed securities:5 years to 10 years 2,261,250 2,236,819 2,224,392 7.25

2,261,250 2,236,819 2,224,392Capital funds:Beyond 10 years 390,443 - - 5.75

390,443 - -

DECEMBER 31, 2010

Redemption ValueAmortized Cost

(Net of Allowance for Impairment)

Net CarryingFair Value

AverageInterest Rate

%

LBP’000

Remaining period to maturity



DECEMBER 31, 2009

Available for sale fixed income investments are segregated over remaining periods to maturity as follows:


1 year to 3 years 1,028,199,250 1,026,691,270 1,086,489,011 9.34

3 years to 5 years 25,750,000 25,747,586 26,301,186 8.23

1,318,112,510 1,313,864,364 1,376,741,737Lebanese Government bonds:Up to one year 56,385,909 56,264,212 56,316,916 7.06

1 year to 3 years 352,455,706 351,607,791 353,106,462 6.96

3 years to 5 years 95,081,859 94,926,575 96,574,690 7.79

5 years to 10 years 271,590,446 281,806,667 298,894,937 9.05

Beyond 10 years 221,724,608 220,969,720 237,155,263 8.25

997,238,528 1,005,574,965 1,042,048,268Foreign Eurobonds issued by banks:Up to one year 12,555,242 12,555,242 12,555,242 15.43

1 year to 3 years 1,402,244 1,402,244 1,402,244 15.50

3 years to 5 years 3,768,750 3,748,655 3,692,979 5.00

5 years to 10 years 7,537,500 7,476,506 7,404,405 7.50

Beyond 10 years 1,507,500 1,503,808 1,522,502 5.25

26,771,236 26,686,455 26,577,372Certificates of deposit issued by Central Bank of Lebanon:Up to one year 96,000,000 95,880,248 97,572,654 11.30

1 year to 3 years 169,045,020 168,944,371 176,830,485 8.61

3 years to 5 years 2,635,698,000 2,643,440,458 2,859,092,807 10.01

5 years to 10 years 406,426,250 408,954,594 408,568,539 8.47

3,307,169,270 3,317,219,671 3,542,064,485Certificates of deposit issued by banks:Up to one year 14,924,250 14,927,474 14,946,711 7.63

1 year to 3 years 52,158,657 52,134,756 53,787,079 7.63

67,082,907 67,062,230 68,733,790Banks and corporate bonds:3 years to 5 years 20,116,581 19,977,805 19,941,172 5.23

5 years to 10 years 7,914,067 7,850,433 7,760,565 7.44

28,030,648 27,828,238 27,701,737Asset-backed securities:3 years to 5 years 2,261,250 2,226,102 2,224,392 7.25

2,261,250 2,226,102 2,224,392

Redemption ValueAmortized Cost

(Net of Allowance for Impairment)

Net CarryingFair Value

AverageInterest Rate

%

LBP’000

Remaining period to maturity


20092010LBP’000

Balance January 1

Additions


Write off


BALANCE DECEMBER 31

9,124,403

29,964

1,322,703

(170,000)

(6,681)

10,300,389

7,702,044

126,269

1,296,090

-

-

9,124,403

The movement of the allowance for impairment of available for sale investments was as follows:

20092010LBP’000



Foreign Eurobonds issued by banks

Corporate Eurobonds

Subordinated Eurobonds

Certificates of deposit issued by Central bank of Lebanon

Certificates of deposit issued by banks

Alternative funds

Corporate bonds

Asset-backed securities

TOTAL

22,881,387

21,863,867

542,100

354,482

21,240

68,934,723

271,282

8,465

367,081

36,381

115,281,008

25,193,345

23,495,580

268,503

-

-

56,704,549

763,082

-

368,891

26,051

106,820,001

Accrued interest receivable on available for sale investments is broken down as follows as at December 31:


include certificates of deposit with carrying value of LBP 47.6 billion

and nominal value of LBP 42.13 billion maturing in 2015 with a

put option exercisable at a redemption value of 91.63% of par

in year 2012. The Group follows the policy of providing annually

for the difference of 8.37% between the nominal value and the

early redemption value in 2012. Provisions booked up to 2010

year-end is reflected under “Other Liabilities” (Note 22) and

amounted to LBP 1.55 billion (LBP 1.38 billion up to 2009 year-end).

Available for sale equities comprise as at December 31, 2010 an

equity participation of 9.89% in USB Bank PLC (Cyprus) in the

amount of LBP 6.75 billion (counter-value of Euro 3,382,150)

reflected at cost and included under unquoted equity

securities. The Group concluded an agreement for the

acquisition of an additional 62.95%. In order to be able to

acquire these shares, the Bank had to proceed with a Public

Offer for acquiring up to 100% of USB Bank share capital. Upon

the approbation of regulatory authorities and the completion

of the Public Offer the total acceptance level reached the

62.95% already agreed on and an additional 21.01% of minority

shares. Hence, the Bank became a 93.85% majority shareholder

of the said bank.



B. Held to Maturity Investments:

Unquoted equities





Government bonds - Non-resident


TOTAL

Fair ValueFair Value

1,507,500

-

705,840,106

324,389,389

7,690,367

358,785

19,530,722

1,059,316,869

DECEMBER 31, 2010

Carrying ValueCarrying ValueLBP’000

1,507,500

-

670,677,505

304,984,815

7,466,416

358,785

19,530,722

1,004,525,743

-

245,379,705

-

125,000,000

-

-

2,811,772

373,191,477

-

235,664,180

-

125,000,000

-

-

2,811,772

363,475,952


Unquoted equities






Corporate bonds


TOTAL

Fair ValueFair Value

1,507,500

-

727,557,145

234,114

325,277,707

7,594,868

3,096,554

20,784,762

1,086,052,650

DECEMBER 31, 2009

Carrying ValueCarrying ValueLBP’000

1,507,500

-

702,990,633

248,788

309,580,585

7,434,190

2,862,576

20,784,762

1,045,409,034

-

357,725,309

-

-

-

-

-

13,705,056

371,430,365

-

352,659,724

-

-

-

-

-

13,705,056

366,364,780


At December 31, 2010 the Group had held to maturity Treasury

bills with carrying value of LBP 236 billion (LBP 319 billion as at

December 31, 2009) that are pledged against soft loans

granted by Central Bank of Lebanon in connection with the

acquisition by the Group of problematic banks – (Notes 20(f)

and 43) and provide liquidity to cover 60% of the replacement

value of buildings and equipment pertaining to its directly

damaged clients from the effect of July war on Lebanon.


DECEMBER 31, 2010

Held to maturity investments are segregated over the remaining period to maturity as follows:


1 year to 3 years 15,677,250 15,677,250 16,067,007 7.24

3 years to 5 years 197,786,000 197,786,000 206,579,999 7.88

235,686,990 235,664,180 245,379,705Lebanese Government bonds:Up to one year 110,047,500 109,928,044 110,621,779 7.78

1 year to 3 years 202,683,440 201,416,881 205,941,736 7.27

3 years to 5 years 62,259,750 62,259,750 66,848,689 9.00

5 years to 10 years 253,733,355 253,275,033 272,814,499 8.07

Beyond 10 years 43,925,535 43,797,797 49,613,403 8.25

672,649,580 670,677,505 705,840,106Certificates of deposit issued by Central Bank of Lebanon:Up to one year 125,000,000 125,000,000 125,000,000 3.73

1 year to 3 years 196,532,775 196,420,354 205,177,741 8.95

3 years to 5 years 105,525,000 108,564,461 119,211,648 10.00

427,057,775 429,984,815 449,389,389Certificates of deposit issued by banks:1 year to 3 years 7,537,500 7,466,416 7,690,367 7.63

7,537,500 7,466,416 7,690,367Government bonds - Non-resident:Beyond 10 years 358,785 358,785 358,785 4.75

358,785 358,785 358,785

Redemption Value Amortized Cost Fair ValueAverage

Interest Rate%

LBP’000



DECEMBER 31, 2009


1 year to 3 years 30,711,720 30,703,691 31,814,635 9.10

3 years to 5 years 2,560,000 2,584,970 2,726,463 8.54

352,676,740 352,659,724 357,725,309Lebanese Government bonds:Up to one year 98,289,000 98,281,900 98,239,891 7.13

1 year to 3 years 325,965,865 323,297,243 324,966,094 7.44

3 years to 5 years 67,762,125 67,756,576 71,824,633 8.99

5 years to 10 years 164,338,605 163,840,719 179,095,048 9.01

Beyond 10 years 49,955,535 49,814,195 53,431,479 8.25

706,311,130 702,990,633 727,557,145Foreign Eurobonds issued by banks:Up to one year 226,125 248,788 234,114 12.00

226,125 248,788 234,114Certificates of deposit issued by Central Bank of Lebanon:1 year to 3 years 273,415,275 277,756,522 292,141,496 9.09

3 years to 5 years 23,119,020 23,177,854 23,970,436 8.54

5 years to 10 years 8,215,875 8,646,209 9,165,775 10.00

304,750,170 309,580,585 325,277,707Certificates of deposit issued by banks:1 year to 3 years 7,537,500 7,434,190 7,594,868 7.63

7,537,500 7,434,190 7,594,868Corporate bonds:1 year to 3 years 148,628 148,628 217,345 6.00

3 years to 5 years 770,382 783,882 849,587 7.50

5 years to 10 years 1,940,190 1,930,066 2,029,622 9.34

2,859,200 2,862,576 3,096,554

Redemption Value Amortized Cost Fair ValueAverage

Interest Rate%

LBP’000

Held to maturity certificates of deposit issued by Central Bank of

Lebanon include certificates of deposit with carrying value of

LBP 108 billion and nominal value of LBP 105 billion maturing in

2015 which carry a put option exercised at a redemption value

of 91.63% of par in year 2012. The Group follows the policy of

providing annually for the difference of 8.37% between the

nominal value and the early redemption value in 2012.

Provisions booked up to 2010 year-end is reflected under

“Other Liabilities” (Note 22) and amounted to LBP 6.66 billion

(LBP 5.49 billion up to 2009 year-end).


20092010LBP’000




Certificates of deposit issued by Central bank of Lebanon


Corporate bonds

Government bonds - Non-resident

TOTAL

2,745,513

15,729,300

-

3,793,680

28,343

-

45,658

22,342,494

13,705,056

16,823,533

6,391

3,814,631

28,343

111,864

-

34,489,818

Accrued interest receivable on held to maturity investments is segregated as follows:

20092010LBP’000

Balance January 1 47,039,352

Unrealized gain through other comprehensive income 335,141

Dividends received (7,902,756)

Share in net profit (Note 39) 8,992,528

Investment incorporated in consolidation -

Partial disposal of equity interest -

Currency translation adjustment (2,316,706)

Prior year's adjustment (booked to retained earnings) (319,223)

BALANCE DECEMBER 31 45,828,336

48,674,046

1,800,062

(2,949,254)

7,579,190

(6,021,194)

(236,498)

(1,807,000)

-

47,039,352

The movement of investments in associates is as follows:

11. CUSTOMERS’ LIABILITY UNDER ACCEPTANCES

Acceptances represent documentary credits which the Group

has committed to settle on behalf of its customers against

commitments by those customers (acceptances). The

commitments resulting from these acceptances are stated as a

liability in the statement of financial position for the same

amount.

12. INVESTMENTS IN ASSOCIATES

Investments in the associates, which are unlisted, are as follows:

Bancassurance SAL

United Capital Bank

International payment Network

TOTAL

20092009 %

9,211,328

36,702,558

1,125,466

47,039,352

Interest Held

20102010 %Country of

IncorporationLBP’000

8,637,134

35,985,405

1,205,797

45,828,336

39.99

20.00

18.80

39.99

20.00

18.80

Lebanon

Sudan

Lebanon



13. ASSETS ACQUIRED IN SATISFACTION OF LOANS

The major asset component of entities in which the Group has

acquired an equity interest in satisfaction of debts consists of

real estate properties.

The acquisition of assets in settlement of loans requires the

approval of the banking regulatory authorities and these should

be liquidated within 2 years. In case of default of liquidation, a

regulatory reserve should be appropriated from the yearly net

profits over a period of 5 years. However, the intermediary

circular No.41 has allowed banks to extend yearly appropriation

over a period of 20 years with respect to those assets acquired

through loans’ restructurings approved by Central Bank of

Lebanon or with respect to the entirety of those assets acquired

in settlement of loans provided that the Banks restructure

before 2007 year end, at least 50% of the balance of non-

performing loans outstanding at June 30, 2003. This condition

was satisfied by the Group during year 2006.

Assets acquired in satisfaction of loans have been acquired through enforcement of security over loans and advances to customers.

The movement of assets acquired in satisfaction of loans during 2010 and 2009 was as follows:

Cost:

Balance January 1, 2009 218,663,042 1,507,500 220,170,542

Additions 5,111,411 - 5,111,411

Disposals (19,335,873) (1,507,500) (20,843,373)

Transfer to property and equipment (Note 14) (1,285,314) - (1,285,314)

Balance December 31, 2009 203,153,266 - 203,153,266

Additions 34,224,676 - 34,224,676

Disposals (14,059,449) - (14,059,449)

Balance December 31, 2010 223,318,493 - 223,318,493

Impairment allowance:

Balance January 1, 2009 (14,852,952) - (14,852,952)

Retirement upon disposal 800,999 - 800,999

Write-off against unrecorded registration fees 227 - 227

Balance December 31, 2009 (14,051,726) - (14,051,726)

Retirement upon disposal 172,297 - 172,297

Balance December 31, 2010 (13,879,429) - (13,879,429)

Carrying amount:

DECEMBER 31, 2010 209,439,064 - 209,439,064

DECEMBER 31, 2009 189,101,540 - 189,101,540

LBP’000 TotalEquity InterestReal Estate


14. PROPERTY AND EQUIPMENT

Cost/Revaluation:

Land

Building

Furniture, equipment

and computer

Vehicles

Office improvements

and installations

Key money

TOTAL

Accumulated depreciation:

Building


and computer

Vehicles

Office improvements

and installations

Key money

TOTAL

Provision for impairment:

Advance payments:

NET BOOK VALUE

Balance as at December 31,

2010

CurrencyTranslationAdjustment

Transfer toIntangible

Assets

Transfer toOther

Liabilities

Adjustmentmade toRetainedEarnings

RevaluationAdjustment

Retirements

Additionsand Transfer

fromAdvance

Payments

Balance atJanuary 1,

2010LBP’000

(66,385)

(340,305)

(265,319)

(34,727)

(140,130)

-

(846,866)

14,650

132,337

16,548

37,833

-

201,368

-

-

-

-

-

-

(133,687)

(133,687)

-

-

-

-

133,653

133,653

-

-

-

-

-

-

-

-

175,890

-

-

-

-

175,890

-

-

-

-

-

-

-

-

-

(1,448)

-

(20,517)

-

(21,965)

-

-

111,047

227,752

40,580

25,412

-

404,791

(40,562)

(107,217)

(16,062)

(5,625)

-

(169,466)

-

-

(2,570,019)

(2,253,108)

(158,481)

(5,161,627)

-

(10,143,235)

309,913

2,112,680

98,097

5,144,392

-

7,665,082

(21,105)

-

31,935,119

8,447,288

257,343

5,996,640

-

46,636,390

(2,816,881)

(5,405,266)

(346,405)

(4,372,481)

-

(12,941,033)

(65,308)

16,968,444

146,024,824

60,585,262

3,531,476

50,451,719

133,687

277,695,412

(24,456,763)

(37,659,424)

(1,426,383)

(35,531,449)

(133,653)

(99,207,672)

(3,253,236)

17,099,230

192,333,734


16,902,059

175,160,666

66,741,875

3,636,191

51,172,014

-

313,612,805

(26,813,753)

(40,928,338)

(1,674,205)

(34,747,847)

-

(104,164,143)

(3,339,649)

60,773,148

266,882,161


Balance at December 31,

2009


Transfer fromAssets

Acquiredagainst Debts

Additions dueto Acquisitionof Subsidiaries

RetirementsAdditions andTransfer from

AdvancePayments


2009LBP’000

During 2010, the Group has adjusted the fair value of the

property acquired through the merger with Lati Bank SAL by an

amount of LBP 2.28 billion with offset to deferred charges on

business acquisition (see Note 16 (g)). The property has not yet

been registered in the name of the Bank.

Cost/Revaluation:

Land 1,809,242 15,175,962 - - - (16,760) 16,968,444

Building 134,827,384 5,778,614 (1,042,531) 5,121,584 1,285,314 54,459 146,024,824


and computer 54,866,400 4,934,935 (1,410,849) 2,168,588 - 26,188 60,585,262

Vehicles 2,993,296 326,200 (191,210) 403,720 - (530) 3,531,476

Office improvements

and installations 46,117,481 4,537,506 (345,111) 123,899 - 17,944 50,451,719

Key money 133,687 - - - - - 133,687

TOTAL 240,747,490 30,753,217 (2,989,701) 7,817,791 1,285,314 81,301 277,695,412


Building (21,507,289) (2,896,336) 126,198 (176,974) - (2,362) (24,456,763)


and computer (32,560,061) (5,284,443) 1,122,894 (928,430) - (9,384) (37,659,424)

Vehicles (1,132,582) (310,074) 188,171 (170,743) - (1,155) (1,426,383)

Office improvements

and installations (31,075,564) (4,764,313) 341,542 (24,102) - (9,012) (35,531,449)

Key money (133,653) - - - - - (133,653)

TOTAL (86,409,149) (13,255,166) 1,778,805 (1,300,249) - (21,913) (99,207,672)

Provision for impairment: (3,253,236) - - - - - (3,253,236)

Advance payments: 4,915,522 17,099,230

NET BOOK VALUE 156,000,627 192,333,734


15. INTANGIBLE ASSETS


2010


Transfer fromProperty and

Equipment

Additions dueto Merger of

Lati Bank SALRetirements

Additions andTransfer from

AdvancePayments


2010LBP’000


2009


Additions dueto Acquisitionof Subsidiary

Retirements

Additions andTransfer from

AdvancePayments


2009LBP’000

The additional goodwill recognized during 2009 is derived from 2 subsidiaries as follows:

- Goodwill in the amount of LBP 721 million being original goodwill upon initial acquisition of Fransabank OJSC

- Goodwill in the amount of LBP 901 million derived from the additional equity interest in BLC Bank SAL


Cost:

Purchase software 21,405,576 3,666,960 (248,737) - - (132,638) 24,691,161

Goodwill 44,816,144 - - - - - 44,816,144

Licenses 20,577 - - - - (940) 19,637

Key money - 60,300 - 2,030 133,687 - 196,017

TOTAL 66,242,297 3,727,260 (248,737) 2,030 133,687 (133,578) 69,722,959


Purchase software (13,398,732) (3,266,364) - - - 96,118 (16,568,978)

Licenses (2,129) (2,019) - - - 114 (4,034)

Key money - (1,039) - (2,030) (133,653) - (136,722)

TOTAL (13,400,861) (3,269,422) - (2,030) (133,653) 96,232 (16,709,734)


NET BOOK VALUE 55,651,275 55,266,864

Cost:

Purchase software 20,253,963 1,228,882 (88,365) - 11,096 21,405,576

Goodwill 43,194,326 - - 1,621,818 - 44,816,144

Licenses - - - 20,577 - 20,577

TOTAL 63,448,289 1,228,882 (88,365) 1,642,395 11,096 66,242,297


Purchase software (10,102,074) (3,347,257) 65,390 - (14,791) (13,398,732)

Licenses - (542) - (1,587) - (2,129)

TOTAL (10,102,074) (3,347,799) 65,390 (1,587) (14,791) (13,400,861)


NET BOOK VALUE 55,170,426 55,651,275


16. OTHER ASSETS

20092010LBP’000

Deferred charges on acquired problematic banks (a)

Derivative assets held for risk management (b)

Deferred tax asset (c)

Regulatory blocked deposit (d)

Assets in process of acquisition in settlement of loans (e)

Deferred charges (f)

Deferred receivables (g)

Sundry accounts receivable (h)

Advance payment for subscription in preference shares

Prepayments

Foreign exchange operations

Accrued income

Allowance for doubtful accounts receivable (i)

TOTAL

9,772,748

1,170,480

1,943,450

7,854,950

1,011,272

4,036,120

30,588,391

64,801,862

-

23,432,493

2,026,965

724,386

(3,491,089)

143,872,028

1,834,553

1,011,624

2,183,457

7,802,494

1,011,272

1,587,221

37,648,050

78,145,152

4,531,527

41,100,865

1,106,870

512,719

(3,431,531)

175,044,273

(a) Deferred charges on acquired problematic banks represent

losses related to problematic banks acquired in previous years

and compensated by Central Bank of Lebanon in the form of

future cash flows and benefits originated from the soft loans

granted to the Group (refer to Note 20 f).

The Group is amortizing these charges against the reduction of

future economic benefits derived from the soft loans and thus

the carrying value of these deferred charges corresponds to the

present value of future cash flows expected to be derived from

the soft loans.

The movement of “deferred charges on acquired problematic banks” was as follows:

TotalUniversal BankSAL

160,008,712

(33,804,414)

126,204,298

(137,090,079)

(13,145,885)

(150,235,964)

33,804,414

(7,938,195)

(124,369,745)

1,834,553

9,772,748

United Bank ofSaudi and

Lebanon SALLBP’000

123,426,043

-

123,426,043

(102,235,024)

(12,798,841)

(115,033,865)

-

(7,591,151)

(122,625,016)

801,027

8,392,178

Gross:

As at December 31, 2009 and 2008

Write off

As at December 31, 2010

Accumulated amortization:

Balance, December 31, 2008

2009 amortization

Balance December 31, 2009

Write off

2010 amortization

Balance December 31, 2010

Carrying value:

DECEMBER 31, 2010

DECEMBER 31, 2009

36,582,669

(33,804,414)

2,778,255

(34,855,055)

(347,044)

(35,202,099)

33,804,414

(347,044)

(1,744,729)

1,033,526

1,380,570


(b) The derivative assets held for risk management consist of the following:

20092010LBP’000

Over-the counter (OTC) Structured derivative

Forward contracts SWAP

TOTAL

1,011,624

-

1,011,624

1,157,920

12,560

1,170,480

20092010LBP’000

Unamortized costs related to deposits with embedded derivatives

Other deferred charges

TOTAL

1,557,385

29,836

1,587,221

4,006,284

29,836

4,036,120

The OTC structured derivative is designated as fair value hedge.

The OTC structured derivative represents an embedded derivative

in 3 structured deposit products which guarantee a minimum

redemption value of 100% during 2010 and 2009 (Note 18).

The forward contract swap derivative is designated as cash

flows hedge.

The Group used forward contract swaps to manage its

exposure to exchange rate movements on forward contracts

with National Bank of the Republic of Belarus by purchasing

foreign currencies against buying Belarussian Ruble. At

December 31, 2009 currencies with notional principal

amounts of BYR 12.5 billion were designated as hedges of

future cash flows against USD 5 million.

(c) Deferred tax asset as at December 31, 2010 and 2009

represent deferred tax on loss of a subsidiary.

(d) The regulatory blocked deposits represent non-interest

earning compulsory deposits placed with the Lebanese

Treasury and Central Bank of Syria upon the inception of banks

according to Article 132 of the Lebanese Code of Money and

Credit and article 19 of the Syrian Law No.28 respectively and

are refundable in case of cease of operations.

(e) Assets in process of acquisition in settlement of debts

represent the value of loans written-off against enforcement of

real estate security held and will be reallocated to “Assets

Acquired in Settlement of Loans”. The registration in the name

of the Group is not yet finalized due to incidents on these

properties.

(f) Deferred charges consist of the following at December 31:

(g) Deferred receivables represent excess of consideration and

acquisition costs over fair value of net assets of Bank Lati SAL.

On September 8, 2009, the Bank acquired the shares of Lati Bank

SAL for a total consideration of USD 20,037,192. The merger was

completed in 2010 and was accompanied by a soft loan of LBP

185 billion (Note 20) from Central Bank of Lebanon for a period

of 4.5 years bearing interest at a fixed rate of 2.6% per annum,

to compensate for the excess consideration paid over the fair

value of the net assets acquired, with the possibility of increasing

the loan amount to cover acquisition costs and additional

consequent charges which were incurred or will be incurred as

determined within a period of six months from the date of the

final approval of the merger transaction. Such additional

consequent charges include, but are not limited to, termination

indemnities paid to the acquired bank’s employees.



The soft loan proceeds were invested during 2010 in Lebanese

treasury bills, pledged in favor of the Central Bank of Lebanon as

collateral against the soft loan obtained.

The excess consideration paid over the fair value of the net

assets acquired and the related acquisition costs discussed

above, amounted to LBP 42 billion up to 2010 year end. These

costs were booked as deferred charges, to be amortized

effective 2010, over the term of the soft loan. Amortization

charge is treated as a yield adjustment to the interest income

on the pledged Lebanese treasury bills acquired from the soft

loan proceeds. The amortization charge booked in 2010

amounted to LBP 4.46 billion.

In addition, the Bank has realized in 2010 income in the amount

of LBP 7.7 billion representing the difference between the total

amount booked as deferred charges, and the net present value

of the future contractual cash flows of the pledged treasury bills

and the soft loan, discounted at the effective interest rate of one

year treasury bills in Lebanese Pound.

The condensed classes of assets and liabilities of Lati Bank SAL that were acquired and assumed as at December 31, 2009 are as follows:

December 31, 2009LBP’000

ASSETS

Cash and banks 27,912,538

Loans and advances to customers 6,739,031

Investment securities 48,701,667

Customers’ liability under acceptances 2,491,769

Property, equipment and other assets 4,953,629

TOTAL ASSETS 90,798,634

LIABILITIES

Deposits and borrowings from banks 2,279,562

Customers’ accounts at amortized cost 85,033,147

Liability under acceptances 2,491,769

Provisions and other liabilities 739,241

TOTAL LIABILITIES 90,543,719

FAIR VALUE OF NET ASSETS 254,915

Consideration paid 30,206,067

Additional acquisition costs 637,239

TOTAL 30,843,306

EXCESS OF CONSIDERATION AND ACQUISITION COSTS OVER FAIR VALUE OF NET ASSETS 30,588,391


17. DEPOSITS AND BORROWINGS FROM BANKS

The movement of deferred charges on business acquisition during the year 2010 was as follows:

LBP’000 2010

Balance as at January 1, 30,588,391

Income realized on acquisition 7,728,744

Fair value adjustment of investment securities acquired 102,935

Fair value adjustment of building acquired (Note 14) ( 2,275,034)

Additional acquisition costs 1,449,222

Deferred charges covered by soft loan 37,594,258

Additional acquisition incidental costs incurred above the approved amount 4,513,156

42,107,414

Amortization for the year (4,459,364)

BALANCE AS AT DECEMBER 31, 37,648,050

(h) Sundry account receivable include an amount of LBP 36.5

billion (USD 24,228,000) representing the amount paid by the

Group on behalf of one of the shareholders in Fransabank El

Djazaïr for the increase of the capital of this subsidiary. This

payment was deferred against pledging of the shareholder’s

shares and possible subsequent acquisition of the shares.

(i) The majority of the allowance for doubtful accounts

receivable relate to old advances made in previous years

against purchases of property and equipment.

20092010LBP’000

Current deposits of banks and financial institutions 65,567,981

Current deposits - Related parties 133,569

Money market deposits - Central Bank of Belarus 33,279,570

Money market deposits 312,104,859

Money market deposits - Related parties -

Other short term borrowings 399,247

Accrued interest payable 3,135,182

Accrued interest payable - Related parties -

TOTAL 414,620,408

85,023,119

110,751

-

183,675,025

30,736,482

30,020,522

970,647

10,601

330,547,147

Deposits and borrowings from banks are reflected at amortized cost and consist of the following:

Money market deposits and other short term borrowings have maturities of one year or less.



(a) Certain deposits from customers have been designated at

fair value through profit or loss as they are matched with an

embedded derivative. An accounting mismatch would arise if

customers’ deposits were accounted for at amortized cost,

because the related derivative is measured at fair value with

movements in the fair value taken through the income statement.

By designating those deposits from customers at fair value, the

movements in the fair value of these deposits are recorded in

the income statement. These instruments provide notional

amounts protection for customers of LBP 69 billion equivalent to

100% of the initially invested amount (LBP 157 billion in 2009).

(b) Represents deposits denominated in Lebanese pounds

with option to redeem in US Dollar at fixed rate of exchange. An

accounting mismatch would arise if customers’ deposits were

accounted for at amortized cost, because the related derivative

is measured at fair value with movements in the fair value taken

through the profit or loss. By designating those deposits from

customers at fair value, the movements in the fair value of these

deposits are recorded in the income statement.

18. LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

This section consists of the following:

20092010LBP’000

Customers’ deposits with guaranteed capital at fair value through profit or loss (a)

Customers’ deposits at fair value through profit or loss (b)

Accrued interest payable

TOTAL

70,211,905

2,381,086

543,375

73,136,366

157,942,443

2,249,996

2,519,961

162,712,400

20092010LBP’000

Customers’ deposits at fair value through profit or loss

Related derivative contracts - Note 16

72,592,991

1,011,624

160,192,439

1,157,920

The fair value recognized on these deposits and the related derivatives is as follows:


19. CUSTOMERS’ ACCOUNTS AT AMORTIZED COST

DECEMBER 31, 2010

LBP’000Non-Interest

BearingInterestBearing Total Total

F/Cy Base Accounts

Non-InterestBearing

InterestBearing Total

LBP Base Accounts

DECEMBER 31, 2009



F/Cy Base Accounts

Non-InterestBearing


LBP Base Accounts


Deposits from customers:

Current / demand deposits 83,758,433 193,890,971 277,649,404 265,884,005 900,844,786 1,166,728,791 1,444,378,195

Term deposits 5,370,535,901 38,442,648 5,408,978,549 7,196,342,047 104,614,882 7,300,956,929 12,709,935,478

Collateral against loans

and advances 275,933,494 4,568,428 280,501,922 357,297,292 13,797,926 371,095,218 651,597,140

Margins and other collateral:

Margins for irrevocable import

letters of credit 44,414 662,488 706,902 53,785,654 55,830,855 109,616,509 110,323,411

Margins on letters of guarantee 28,219,417 2,911,785 31,131,202 29,513,739 9,506,880 39,020,619 70,151,821

Other margins 7,793,018 568 7,793,586 239,724 3,941,958 4,181,682 11,975,268

Blocked accounts 8,518,140 4,865,169 13,383,309 21,608,073 7,784,445 29,392,518 42,775,827

Credit versus debit - - - 215 1,216,735 1,216,950 1,216,950

Accrued interest payable: 40,861,390 - 40,861,390 42,182,426 - 42,182,426 83,043,816

TOTAL 5,815,664,207 245,342,057 6,061,006,264 7,966,853,175 1,097,538,467 9,064,391,642 15,125,397,906

Deposits from customers:

Current / demand deposits 80,148,588 146,952,587 227,101,175 272,120,144 717,458,235 989,578,379 1,216,679,554

Term deposits 4,750,984,543 43,203,791 4,794,188,334 6,526,471,525 70,689,266 6,597,160,791 11,391,349,125


and advances 224,829,980 8,807,193 233,637,173 289,776,591 18,184,700 307,961,291 541,598,464



letters of credit 208,294 27 208,321 35,930,579 43,886,870 79,817,449 80,025,770

Margins on letters of guarantee 27,906,172 2,273,613 30,179,785 36,282,683 8,077,046 44,359,729 74,539,514

Other margins 1,360,549 9,111 1,369,660 5,895,944 2,288,747 8,184,691 9,554,351

Blocked accounts 2,074,254 1,983,421 4,057,675 23,105,758 7,399,828 30,505,586 34,563,261

Credit versus debit - - - 211 1,593,875 1,594,086 1,594,086

Accrued interest payable: 40,800,995 - 40,800,995 33,706,698 - 33,706,698 74,507,693

TOTAL 5,128,313,375 203,229,743 5,331,543,118 7,223,290,133 869,578,567 8,092,868,700 13,424,411,818


DECEMBER 31, 2010



F/Cy Base Accounts

Non-InterestBearing


LBP Base Accounts

DECEMBER 31, 2009



F/Cy Base Accounts

Non-InterestBearing


LBP Base Accounts

Customers’ deposits include related parties deposits detailed as follows:

Deposits from related:

Current / demand deposits 635,882 621,457 1,257,339 3,183,160 7,690,180 10,873,340 12,130,679

Term deposits 14,396,496 1,019 14,397,515 61,392,952 941 61,393,893 75,791,408


and advances 164,945,301 - 164,945,301 2,355,015 - 2,355,015 167,300,316



letters of credit - - - - 317,424 317,424 317,424

Margins on letters of guarantee - - - 2,261 9,422 11,683 11,683

Other margins - - - - 150,750 150,750 150,750

Blocked accounts - - - 1,114,721 72,646 1,187,367 1,187,367

Accrued interest payable: 54,265 - 54,265 1,458,001 - 1,458,001 1,512,266

TOTAL 180,031,944 622,476 180,654,420 69,506,110 8,241,363 77,747,473 258,401,893

Deposits from related:

Current / demand deposits 549,695 598,443 1,148,138 2,045,359 10,020,507 12,065,866 13,214,004

Term deposits 5,982,533 3,050,046 9,032,579 54,018,881 3,562,968 57,581,849 66,614,428


and advances 144,171,740 - 144,171,740 551,092 361,800 912,892 145,084,632


Margins for irrevocable import letters of credit - - - - 381,466 381,466 381,466

Margins on letters of guarantee - - - 2,261 10,779 13,040 13,040

Blocked accounts - - - 1,077,763 72,645 1,150,408 1,150,408

Accrued interest payable: 15,670 - 15,670 1,480,733 - 1,480,733 1,496,403

TOTAL 150,719,638 3,648,489 154,368,127 59,176,089 14,410,165 73,586,254 227,954,381


Less than LBP 200 million

From LBP 200 million to LBP 1.5 billion

Above LBP 1.5 billion

TOTAL

DECEMBER 31, 2010

LBP’000Total Deposits% to Total

Deposits% to TotalDeposits Total

F/Cy Base Accounts

Nº of Accounts Total Deposits

LBP Base Accounts

Less than LBP 200 million

From LBP 200 million to LBP 1.5 billion

Above LBP 1.5 billion

TOTAL

DECEMBER 31, 2009

LBP’000Total Deposits% to Total

Deposits% to TotalDeposits Total

F/Cy Base Accounts

Nº of Accounts Total Deposits

LBP Base Accounts

Deposits at amortized cost are allocated by brackets of deposits as follows:

Term deposits from customers at December 31, 2010 include a

total amount of LBP 60.3 billion assigned to an offering of Tier I

non-cumulative perpetual redeemable “Series A” preferred

shares that are expected to be issued by one of the Bank’s

subsidiaries in 2011. Issuance of the preferred shares was

approved by the Bank’s assembly of shareholders on July 30,

2010.

Deposits from customers at amortized cost include at

December 31, 2010 coded deposit accounts totaling LBP 248.14

billion (LBP 228.73 billion in 2009). These accounts are subject

to the provisions of Article 3 of the Lebanese Banking Secrecy

Law dated September 3, 1956 which provides that the Bank’s

management, in the normal course of business, cannot reveal

the identities of these depositors to third parties, including its

independent public accountants.

Deposits from customers include fiduciary deposits received

from resident and non-resident banks for a total amount of LBP

44.3 billion and LBP 304.4 billion respectively (LBP 16.6 billion

and LBP 408.9 billion respectively in 2009).


398,925 2,805,466,486 46 2,259,179,762 25 5,064,646,248

9,174 1,823,840,889 30 2,385,148,005 26 4,208,988,894

977 1,431,698,889 24 4,420,063,875 49 5,851,762,764

409,076 6,061,006,264 100 9,064,391,642 100 15,125,397,906

376,301 2,558,373,541 48 2,130,989,338 26 4,689,362,879

8,147 1,576,210,592 30 2,119,725,752 26 3,695,936,344

778 1,196,958,985 22 3,842,153,610 48 5,039,112,595

385,226 5,331,543,118 100 8,092,868,700 100 13,424,411,818


(a) Borrowings from European Investment Bank:

Borrowings from European Investment Bank represent term

borrowings obtained by the Group to finance loans extended

to customers. These borrowings are divided into 2 types, a 12

years line of credit for touristic loans for a limit of Euro 30 million

(LBP 60 billion) or its equivalent in U S Dollar and a 10 years line

of credit for industrial loans for a limit of Euro 30 million (LBP 60

billion). These loans mature during 2012, 2013, 2015, 2019 and

2020.

(b) Borrowing from Agence Française de Développement:

Borrowing from Agence Française de Développement

represents a 10 years line of credit for a limit of Euro 15 million

(LBP 30 billion) and is granted to help the small and medium

enterprises that were affected by the July and August 2006

Lebanon war. This loan matures during 2017.

(c) Borrowing from International Finance Corporation:

The borrowing from International Finance Corporation

represents a 6 years line of credit for a limit of USD 25 million

(LBP 38 billion) and is granted to help the Group’s customers

that were affected directly and indirectly by the July and August

2006 Lebanon war. This loan matures during 2013.

(d) Borrowing from EFSD-CDR:

ESFD loan is funded by European Union through the Lebanese

Council for Development and Reconstruction for the purpose

of lending to small size enterprises. Loan duration is for six years

with a grace period of 12 months starting the date of

disbursement of the first tranche from the fund. Repayments

of principal will be in quarterly installments in the remaining

five years. The cost of funds is linked to the benchmark of the

two-year certificates of deposits as issued by Central Bank of

Lebanon.

(e) Borrowing from Arab Trade Financing Program:

The borrowing from Arab Trade Financing Program represents

a revolving line of credit for USD 15 million (LBP 23 billion)

granted in year 2000 to support inter-Arab Trade exchanges.

This loan matures during 2011.

DECEMBER 31, 2010 DECEMBER 31, 2009

LBP’000 TotalC/V of F/CyLBPTotalC/V of F/CyLBP

Borrowings from European Investment Bank (a) - 51,997,661 51,997,661 - 39,979,646 39,979,646

Borrowings from Agence

Française de Développement (b) - 25,006,960 25,006,960 - 27,041,505 27,041,505

Borrowings from International Finance Corporation (c) - 8,342,203 8,342,203 - 11,122,938 11,122,938

ESFD-CDR loan funded by the European Union (d) 10,627,012 - 10,627,012 11,456,600 - 11,456,600

Borrowings from Arab Trade Financing Program (e) - 13,935,299 13,935,299 - 3,621,015 3,621,015

Soft loans from Central Bank of Lebanon (f) 235,533,232 - 235,533,232 318,811,712 - 318,811,712

Borrowings from related parties (g) - 15,074,959 15,074,959 - - -

Accrued interest payable 1,245,410 527,549 1,772,959 399,381 387,294 786,675

TOTAL 247,405,654 114,884,631 362,290,285 330,667,693 82,152,398 412,820,091

20. OTHER BORROWINGS

Borrowings are reflected at amortized cost and consist of the following:


(f) Soft Loans from Central Bank of Lebanon:

This caption represents soft loans granted by the Central Bank of Lebanon in connection with the acquisition in previous years of

problematic banks as detailed below:

Additional soft loan

against merger

with Universal Bank SAL

Soft loan against merger

with United Bank of Saudi

and Lebanon SAL


against merger with

United Bank of Saudi

and Lebanon SAL


against merger with


and Lebanon SAL


with Bank Lati SAL

(Note 16 (g))

4 Soft loans against providing liquidity to

cover 60% of the replacement value of buildings

and equipment pertaining to four of the bank's

clients who were directly damaged from the

July 2006 Lebanon war:

- Loan 1

- Loan 2

- Loan 3

- Loan 4

TOTAL

InterestExpense

During theYear

CarryingValue of

Loan

InterestRate

%

InterestExpense

During theYear

CarryingValue of

Loan

InterestRate

%Maturity DateDate Granted

LBP’000

435,774

17,979,161

488,216

513,129

-

-

-

-

-

19,416,280

8,843,712

289,000,000

10,468,000

10,500,000

-

-

-

-

-

318,811,712

4.86

6.24

4.60

4.82

-

-

-

-

-

435,774

9,242,325

488,216

473,229

3,113,139

36,982

359,266

128,485

8,304

14,285,720

8,843,712

-

10,468,000

10,500,000

185,000,000

2,758,270

12,012,000

5,177,250

774,000

235,533,232

4.86

6.24

4.60

2.92

2.60

1.56

3.40

2.88

2.18

June 28, 2013

August 6, 2010

December 20, 2013

October 25, 2012

November 6, 2014

February 24, 2011

February 12, 2015

February 21, 2012

July 2, 2015

June 30, 2005

August 8, 2002

December 22, 2005

October 25, 2007

May 13, 2010

February 25, 2010

February 18, 2010

February 25, 2010

July 8, 2010

20092010



Soft loans are secured against pledged Lebanese Treasury bills detailed as follows:

Pledged Treasury Bills Against:Additional soft loan

against merger

with Universal Bank SAL


with United Bank of Saudi

and Lebanon SAL


against merger with


and Lebanon SAL


against merger with


and Lebanon SAL


with Bank Lati SAL

4 Soft loans against providing liquidity to

cover 60% of the replacement value of buildings

and equipment pertaining to four of the bank's

clients who were directly damaged from the

July 2006 Lebanon war:

- Loan 1

- Loan 2

- Loan 3

- Loan 4

TOTAL

InterestIncome

During theYear

InterestRate

%

AmortizedCost

RedemptionValue

InterestIncome

During theYear

InterestRate

%

AmortizedCost

RedemptionValueLBP’000

821,178

27,008,797

944,708

981,289

-

-

-

-

-

29,755,972

9.26

9.32

9.00

9.32

-

-

-

-

-

8,843,720

289,000,000

10,468,000

10,500,000

-

-

-

-

-

318,811,720

8,843,720

289,000,000

10,468,000

10,500,000

-

-

-

-

-

318,811,720

821,178

14,429,357

944,708

941,827

4,919,526

130,945

772,022

302,471

23,185

23,285,219

8,843,720

-

10,468,000

10,500,000

185,000,000

2,889,210

12,012,000

5,177,250

774,000

235,664,180

8,843,720

-

10,468,000

10,500,000

185,000,000

2,912,020

12,012,000

5,177,250

774,000

235,686,990

9.26

9.32

9.00

7.42

7.92

5.29

7.38

6.86

6.16

20092010

(g) Borrowings from Related Parties:

Borrowings from related parties represent a 10 year loan amounting to LBP 15.1 billion (USD 10 million) granted during 2010 by an

associated company of the Bank to a group subsidiary with a fixed interest rate of 11%.


The remaining contractual maturities of all above borrowings are as follows:

The Group has not had any defaults of principal, interest or other breaches with respect to these borrowings.

Accrued interest payable is segregated as follows as at December 31:

20092010LBP’000

Less than one year

From 1 to 3 years

From 3 to 5 years

From 5 to 10 years

More than 10 years

TOTAL

301,819,941

33,712,413

45,362,430

31,732,298

193,009

412,820,091

28,602,126

64,157,575

222,707,902

46,822,682

-

362,290,285

20092010LBP’000

European Investment Bank

Agence Française de Développement

International Finance Corporation

ESFD-CDR loan funded by the European Union

Arab Trade Financing Program

Soft loans from Central Bank of Lebanon

Related parties

TOTAL

141,346

161,188

64,973

1,375

19,787

398,006

-

786,675

219,512

170,378

46,199

706

41,713

1,244,704

49,747

1,772,959

This caption represents loan according to a contract signed

between the Bank and “Proparco” on January 19, 2010 for an

amount of USD 21,144,000 and is to be settled over a period of

10 years including a 6 year grace period. The loan matures on

July 15 of each year starting year 2011 for the interest and year

2016 for the principal. The applicable interest rate is 7.61%.

The computation of the interest on this loan starts from June 30,

2010 and the accrued interest for each year is paid from the

year’s net income after the meeting of the yearly ordinary

general assembly that approves the previous year’s financials.

This is according to Central Bank of Lebanon Decree No.35. The

due interest expense on this loan for the year 2010 amounts to

USD 827,000 approximately.

21. SUBORDINATED LOAN



20092010LBP’000

8,151,696

51,978,018

1,236,303

13,395,289

5,513,614

1,468,330

28,580,450

29,788,630

3,282

42,954

1,380,268

5,488,017

1,627,290

2,493,015

47,471,810

198,618,966

19,434,113

59,020,698

1,617,135

17,803,767

7,468,690

1,650,630

32,922,520

39,124,250

3,282

-

1,553,710

6,658,751

2,595,196

519,149

46,733,363

237,105,254

22. OTHER LIABILITIES

Current tax liability (a)

Deferred tax liability on change in fair value of investment securities (Note 29)

Deferred tax liability on interest

Deferred tax liability on share in profits of associates

Withholding and other taxes payable

Due to the Social Security National Fund

Checks and incoming payment orders in course of settlement

Accrued expenses

Accrued interest payable - Cash contribution to capital

Derivative liabilities held for risk management (b)

Provision for early redemption of available for sale investments (Note 10)

Provision for early redemption of held to maturity investments (Note 10)

Financial guarantee contracts issued

Effect of exchange rates changes on structural position

Sundry accounts payable

TOTAL

(a) Current tax liability is computed as follows:

20092010LBP’000

191,586,290

29,607,327

(921,266)

28,686,061

(21,881,049)

1,322,648

24,036

8,151,696

272,655,695

42,603,548

2,751,421

45,354,969

(25,999,147)

141,911

(63,620)

19,434,113

Profit before tax

Income tax based on national applicable rates

Effect of non-deductible expense and non taxable income

Income tax expense

Less: Tax paid in advance

Net effect of deferred tax assets (Note 16 (c))


CURRENT TAX PAYABLE

(b) The derivative liabilities held for risk management as at December 31, 2009 represent forward contract swapdesignated as cash flow hedge.

The Group used forward contract swaps to manage its

exposure to exchange rate movements on forward contracts

with National bank of the Republic of Belarus by purchasing

foreign currencies against buying Belarussian Ruble. At

December 31, 2009 currencies with notional principal amounts

of BYR 6.8 billion were designated as hedges of future cash

flows against EUR 1.5 million.


23. PROVISIONS

Provisions consist of the following:

The movement of provision for staff termination indemnities is as follows:

20092010LBP’000

Provision for staff termination indemnities

Provision for contingencies

Provision for loss on foreign currency position

TOTAL

17,804,543

20,080,252

87,432

37,972,227

20,436,930

21,640,964

79,593

42,157,487

20092010LBP’000

Balance January 1

Additions - Employees

Additions - Lawyers

Additions in business combination (Lati Bank SAL)

Additions - Legal expenses

Transfer from other liabilities

Settlements

BALANCE DECEMBER 31

15,561,131

3,229,089

60,362

185,481

76,122

-

(1,307,642)

17,804,543

17,804,543

4,146,385

43,617

-

79,506

-

(1,637,121)

20,436,930

The movement of the provision for contingencies was as follows:

20092010LBP’000

Balance January 1

Additions recorded within provisions for charges

Additions recorded within staff costs

Additions in business combination (Fransabank OJSC)

Settlements

Write-back


BALANCE DECEMBER 31

21,567,707

1,950,434

-

71,643

(1,665,150)

(1,865,605)

21,223

20,080,252

20,080,252

2,518,621

56,270

-

(870,061)

(21,435)

(122,683)

21,640,964



24. SHARE CAPITAL

At December 31, 2010 and 2009, the authorized ordinary

share capital of the Bank was LBP 420 billion consisting of

21,000,000 fully paid shares of LBP 20,000 each.

Up to 2010 year-end, the Bank has established a fixed

exchange position in the amount of USD 48,888,889 authorized

by Central Bank of Lebanon to hedge its equity against

exchange fluctuations within the limit of 60% of equity

denominated in Lebanese Pounds.

25. SHAREHOLDERS’ CASH CONTRIBUTION TO CAPITAL

The shareholders’ cash contribution to capital is for a total

amount of LBP 17.1 billion (USD 11,352,494) as at December

31, 2010 and 2009 and it is subject to a yearly interest of 7%

payable from unrestricted profits after securing the

approval of Central Bank of Lebanon.

This sort of financial instrument is accounted for in foreign

currency and therefore allows hedging against national

currency exchange fluctuation.

26. PREFERENCE SHARES

27. RESERVES

On June 30, 2008 and upon the decision taken in the share-

holders’ General Assembly meeting held on March 28, 2008

and the approval of the Central Bank of Lebanon dated

March 15, 2008, the Bank issued 500,000 non-cumulative

convertible redeemable series “A” preference shares with

nominal value of LBP 20,000 each at an issue price of USD

200 per share.

On September 30, 2010 and upon the decision as taken in

the Shareholders’ General Assembly meeting held on April

30, 2010 and are approved of the Central Bank of Lebanon

dated July 21, 2010, the Bank issued 425,000 non-cumulative

convertible redeemed Series “B” preference shares with

nominal value of LBP 20,000 each at an issue price of USD

200 per share.

Reserves consist of the following:

20092010LBP’000

Legal reserve

Reserve for general banking risks

Reserve for assets acquired in satisfaction of loans - Note 13

Owned buildings revaluation reserve

Foreign currency translation reserve

TOTAL

28,406,857

43,573,937

22,286,706

26,140,614

3,406,833

123,814,947

43,641,836

68,704,886

27,563,444

26,283,573

(10,794,894)

155,398,845


The legal reserve is constituted in conformity with the

requirements of the Lebanese Money and Credit Code on

the basis of 10% of net profit. This reserve is not available for

distribution.

The reserve for general banking risks is constituted according to

local banking regulations, from net profit, on the basis of a

minimum of 2 per mil and a maximum of 3 per mil of the

total risk weighted assets, off-financial position risk and

global exchange position as defined for the computation of

the solvency ratio at year-end. This reserve is constituted in

Lebanese Pound and in foreign currencies in proportion to

the composition of the Group’s total risk weighted assets

and off-financial position items. This reserve is not available

for distribution.

28. SPECIAL RESERVE

29. CUMULATIVE CHANGE IN FAIR VALUE OF INVESTMENT SECURITIES

Based on item “4” paragraph “f” of article 1 of the intermediary

circular 41, the Bank has allocated during 2010 an amount of

LBP 1.4 billion to special reserve for the uncovered portion of

the doubtful debts outstanding as at June 30, 2003. This

reserve was appropriated from 2009 net income (LBP 2.5 billion

during 2009 appropriated from 2008 net income).

20092010LBP’000

49,337,049

62,915,013

(109,083)

229,377,467

2,614,561

(126,501)

33,471,316

(1,710)

(471,264)

(51,978,018)

325,028,830

(20,632,360)

304,396,470

30,722,488

86,206,364

790,075

270,381,964

2,029,892

751,531

32,479,846

(12,427)

(471,264)

(59,020,698)

363,857,771

(22,039,456)

341,818,315

Unrealized gain on Lebanese Treasury bills

Unrealized gain on Lebanese Government bonds

Unrealized gain/(loss) on foreign Eurobonds issued by banks

Unrealized gain on certificates of deposit issued by BDL

Unrealized gain on certificates of deposit issued by banks

Unrealized gain/(loss) on corporate bonds

Unrealized gain on equity securities

Unrealized loss on asset-backed securities

Other

Less: Deferred tax

Total

Non-controlling interests share

OWNERS OF THE BANK'S SHARE

The cumulative change in fair value of available for sale investment securities consists of the following:

The cumulative change in fair value as reflected above was adjusted for the effect of fair value adjustment of investment securities

acquired through the business combination with BLC Bank SAL during 2007.



30. NON – CONTROLLING INTERESTS

Non-controlling interests represent the minority share in the subsidiaries’ equities as follows:

31. PROFIT FOR THE YEAR

The consolidated income is allocated as follows between the Bank and its subsidiaries:

20092010LBP’000

Capital

Change in fair value of available for sale investment securities

Reserves and retained earnings

Effect of acquisition of Fransabank OJSC

Profit for the year

TOTAL

163,054,006

20,632,360

14,923,666

2,726,744

12,355,000

213,691,776

156,444,686

22,039,456

22,061,404

-

20,842,886

221,388,432

TotalOwners

of the Bank ShareNon-ControllingInterests Share

YEAR ENDED DECEMBER 31, 2010

Income of the Bank 127,183,152 - 127,183,152

Income of subsidiaries:

Fransa Invest Bank SAL 12,852,832 377 12,853,209

Fransabank France SA 2,000,921 1,304,384 3,305,305

Lebanese Leasing Company SAL 1,112,415 159,352 1,271,767

Switch and Electronics Services SAL 275,426 1,106 276,532

Sogefon SAL (242,916) 121 (242,795)

Fransabank El Djazaïr SPA 5,237,614 2,464,760 7,702,374

Fransabank Insurance Services SAL 1,696,901 5,106 1,702,007

BLC Bank SAL and subsidiaries 51,087,100 17,200,058 68,287,158

Express SARL (7,490) (126) (7,616)

Fransabank Syria 81,330 88,107 169,437

Fransabank OJSC 3,877,061 969,265 4,846,326

Deferred tax on profit from associates and subsidiaries (6,286,278) (1,349,624) (7,635,902)

TOTAL 198,868,068 20,842,886 219,710,954


TotalOwners

of the Bank ShareNon-ControllingInterests Share

YEAR ENDED DECEMBER 31, 2009

32. DIVIDENDS PAID

The following dividends were declared and paid by the Group:

20092010LBP’000

LBP 1,000 per ordinary share paid by the Bank from 2009

net income (LBP 1,000 during 2009 paid from 2008 net income)

USD 17 (LBP 25,627.50) per preference share during 2010

(USD 10 (LBP 15,075) per Preference share during 2009)

Dividends paid by subsidiaries to its non-controlling interests

21,000,000

7,537,500

3,687,105

21,000,000

12,813,750

5,937,494


Income of the Bank 90,323,298 - 90,323,298

Income of subsidiaries:

Fransa Invest Bank SAL 13,844,356 368 13,844,724

Fransabank France SA 1,599,548 1,067,339 2,666,887

Lebanese Leasing Company SAL 708,113 101,437 809,550

Switch and Electronics Services SAL 270,093 1,085 271,178

Sogefon SAL (192,675) (6) (192,681)

Fransabank El Djazaïr SPA 1,499,234 703,907 2,203,141

Fransabank Insurance Services SAL 1,565,614 4,711 1,570,325

BLC Bank SAL and subsidiaries 38,527,364 13,089,003 51,616,367

Express SARL 5,138 86 5,224

Fransabank Syria (2,016,689) (2,184,746) (4,201,435)

Fransabank OJSC 3,529,932 453,719 3,983,651

Deferred tax on profit from associates and subsidiaries (4,903,123) (881,903) (5,785,026)

TOTAL 144,760,203 12,355,000 157,115,203


33. INTEREST INCOME

34. INTEREST EXPENSE

20092010LBP’000

38,620,368

13,482,205

102,888

464,769,001

101,947,594

29,755,972

2,906,973

905,093

215,776,364

10,394,087

8,406,228

747,018

127,910

887,941,701

17,360,577

17,448,595

3,177,400

549,007,945

80,408,386

23,285,219

5,631,293

125,179

296,075,155

8,099,381

7,344,609

1,208,236

140,083

1,009,312,058

Deposits with Central Banks

Deposits with banks and financial institutions

Deposits with related party banks and financial institutions


Held to maturity investment securities

Held to maturity investment securities against soft loan (Note 20)

Loans to banks

Loans to related party banks


Loans and advances to related parties

Interest recognized on impaired loans and advances to customers (Note 9)

Interest recognized on impaired loans transferred to off financial position

Other interest

TOTAL

Interest income realized on impaired loans and advances to customers represent recoveries of interest. Accrued interest on impaired

loans and advances is not recognized until recovery / rescheduling agreements are signed with customers.

Interest income on trading portfolio is included under net interest and gain on trading portfolio (Note 37).

Interest expense on customers’ accounts designated at fair value through profit or loss is included under net interest and gain

on financial instruments designated at fair value through profit or loss (Note 38).

20092010LBP’000

Deposits and borrowings from Central Bank of Belarus

Deposits and borrowings from banks and financial institutions

Customers’ deposits at amortized cost

Related parties’ deposits at amortized cost

Other borrowings (Note 20)

Borrowings from related party (Note 20)

Shareholders’ cash contribution to capital (Note 25)

TOTAL

-

3,231,147

528,619,010

16,597,469

22,308,991

-

1,197,972

571,954,589

265,502

8,401,781

572,813,616

15,260,593

17,287,526

699,252

1,197,972

615,926,242


35. FEE AND COMMISSION INCOME

20092010LBP’000

Commission on documentary credits

Commission on letters of guarantee

Service fees on customers’ transactions

Commission on transactions with banks

Asset management fees

TOTAL

12,192,641

4,960,117

54,863,946

53,919

2,681,329

74,751,952

18,938,304

8,409,850

66,574,909

268,975

13,591

94,205,629

This caption consists of the following:

Fee and commission income include fee and commission to related parties with immaterial amounts.

37. NET INTEREST AND OTHER GAIN / LOSS ON TRADING PORTFOLIO

20092010LBP’000

Interest income

Dividends income

Net unrealized gain

Net realized gain

TOTAL

5,318,688

1,050,973

10,889,336

5,691

17,264,688

5,100,039

1,100,029

2,120,565

370,080

8,690,713


36. FEE AND COMMISSION EXPENSE

20092010LBP’000

Commission on transactions with banks and financial institutions

Other (including commissions on customers' transactions)

TOTAL

2,592,168

20,480,441

23,072,609

2,279,320

22,181,156

24,460,476


Fee and commission expenses include fee and commission to related parties with immaterial amounts.



38. NET INTEREST AND OTHER GAIN / LOSS ON FINANCIAL INSTRUMENTS DESIGNATED ATFAIR VALUE THROUGH PROFIT OR LOSS

20092010LBP’000

Interest expense on customers’ accounts designated at fair value through profit or loss

Fee income on customers’ accounts designated at fair value through profit or loss

TOTAL

(9,887,123)

31,562

(9,855,561)

(7,756,622)

-

(7,756,622)


39. OTHER OPERATING INCOME

40. FINANCIAL INSTRUMENTS WITH OFF-FINANCIAL POSITION RISKS

Other operating income for the year 2009 includes an amount of LBP 2.9 billion representing income recognized from the increase of

investment in “Fransabank OJSC”.

20092010LBP’000

Gain on sale of available for sale securities

Dividends income on investment securities

Gain from disposal of part of equity interest in an associate (Note 12)

Share in profits of associates (Note 12)

Realized income on business acquisition (Note 16 g)

Foreign exchange gain

Other operating income – Net

TOTAL

3,425,253

5,710,871

14,100

7,579,190

-

10,395,796

19,455,694

46,580,904

28,755,672

5,549,080

-

8,992,528

7,728,744

22,323,997

14,462,328

87,812,349


The guarantees and standby letters of credit and the documentary

and commercial letters of credit represent financial instruments

with contractual amounts representing credit risk. The guarantees

and standby letters of credit represent irrevocable assurances

that the Group will make payments in the event that a

customer cannot meet its obligations to third parties and are

not different from loans and advances on the statement of

financial position. However, documentary and commercial

letters of credit, which represent written undertakings by the

Group on behalf of a customer authorizing a third party to draw

drafts on the Group up to a stipulated amount under specific

terms and conditions, are collateralized by the underlying

shipments documents of goods to which they relate and,

therefore, have significantly less risks.


41. BALANCES / TRANSACTIONS WITH RELATED PARTIES

In the ordinary course of its activities, the Group conducts

transactions with related parties including shareholders,

directors, subsidiaries and associates. Also, the Group conducts

sale and purchase transactions of investment securities with

subsidiary banks and these transactions are made at net book

value of the financial instruments. Balances with related parties

as at year-end consist of the following:

Shareholders, directors and other key management personnel & close family members:Direct facilities & credit balances

Secured loans and advances 134,636,538

Unsecured loans and advances 554,898

Deposits at amortized cost 209,870,409

Indirect facilities

Letters of guarantees 767,394

Associated companies:Term placement with banks -

Loans to banks 78,049,958

Deposits from banks 133,569

Money market deposits from banks -

Borrowings 15,074,959

Direct facilities & credit balances

Secured loans and advances 2,562,750

Unsecured loans and advances 16,082,848


Indirect facilities

Letters of credit 1,912,651

Letters of guarantee 48,668

Accrued interest receivable:Term placement with banks -

Loans to banks 3,173,591

Loans and advances 190,577

Accrued interest payable:Money market deposits from banks -


Borrowings 49,747

Cash contribution to capital 3,282

Income statement accounts:Interest income from deposits with banks 3,177,400

Interest income from loans to banks 125,179

Interest income from loans and advances 8,099,381

Interest expense on deposits at amortized cost 15,260,593

Interest expense on borrowings from related parties 699,252

Interest expense on cash contribution to capital 1,197,972

20092010LBP’000

135,982,095

1,774,356

179,829,978

1,521,113

24,839,425

2,431,596

110,751

30,736,482

-

13,560,952

18,793,873

46,628,000

2,543,108

625,543

3,534

75,515

777,414

10,601

1,496,403

-

3,282

102,888

905,093

10,394,087

16,597,469

-

1,197,972



Interest rates charged on balances outstanding are the same

rates that would be charged in an arm’s transaction. Secured

loans and advances are covered by real estate mortgage to the

extent of LBP 1.6 billion (LBP 24.7 billion in 2009) and by

pledged deposits of the respective borrowers to the extent of

LBP 167.9 billion (LBP 144.6 billion in 2009) and by car mortgage

to the extent of LBP 145 million (shares pledged to the extent of

LBP 10.4 billion during 2009).

The remunerations of executive management amounted to

LBP 29.2 billion during 2010 (LBP 22.1 billion during 2009). This

includes accrued remuneration payable to the chairman and

vice chairman calculated on the basis of 8% of profit before tax.

42. CASH AND CASH EQUIVALENTS

20092010LBP’000

Cash

Current accounts with Central Banks

Time deposits with Central Banks

Purchased checks

Current accounts with banks and financial institutions

Time deposits with banks and financial institutions

TOTAL

81,336,245

206,453,846

752,221,310

12,458,021

113,249,966

1,252,160,873

2,417,880,261

97,905,375

185,733,817

1,080,737,615

10,706,176

230,095,048

1,412,766,198

3,017,944,229

Cash and cash equivalents for the purpose of the cash flows statement consist of the following:

Time deposits with Central Banks and banks and financial

institutions represent inter-bank placements and borrowings

with an original term of 90 day or less.

The following non-cash transactions were excluded from the

statement of cash flows:

(a) Positive change in fair value of available for sale securities of

LBP 45.87 billion and related deferred tax liability of LBP 7.04

billion during 2010 (Positive change of LBP 333.4 billion and

deferred tax liability of LBP 48.4 billion during 2009).

(b) Assets acquired in satisfaction of loans in the amount of

LBP 34.2 billion during 2010 (LBP 5.1 billion during 2009).

(c) Increase in the value of the acquired property from Lati Bank

SAL with an amount of LBP 2.28 billion against deferred

charges on business acquisition during 2010.

(d) Transfer of provision of LBP 175 million from property and

equipment to other liabilities during 2010.

(e) Reclassification of held to maturity securities with an amount

of LBP 44.9 billion to available for sale securities as a result of

the merger with Lati Bank SAL.

(f) Transfer from assets acquired in satisfaction of loans in the amount

of LBP 1.3 billion to property and equipment during 2009.

(g) Change in derivative assets held for risk management in the

amount of LBP 146 million during 2010 (LBP 1.7 billion during

2009).

(h) Assets for the amount of LBP 60.39 billion and liabilities for

the amount of LBP 85.77 billion acquired from “Lati Bank

SAL” excluded for the year ended 2009.

(i) Assets for the amount of LBP 42.14 billion and liabilities for

the amount of LBP 13.17 billion acquired from increasing the

interest held in “Fransabank OJSC” and achieving control

over this entity (previously classified as associate) excluded

for the year ended 2009.

(j) Plant and property for an amount of LBP 13.02 billion were

purchased during 2010 from which an amount of LBP 460

million is still unpaid and is recorded under “Other liabilities”.


43. COLLATERAL GIVEN

44. RISK MANAGEMENT OF FINANCIAL INSTRUMENTS

Financial assets given as collateral are as follows at December 31:

Treasury bills held to maturity 8,843,720 Soft loan 8,843,712 June 28, 2013

Treasury bills held to maturity 10,468,000 Soft loan 10,468,000 December 20, 2013

Treasury bills held to maturity 10,500,000 Soft loan 10,500,000 October 25, 2012

Treasury bills held to maturity 185,000,000 Soft loan 185,000,000 November 6, 2014

Treasury bills held to maturity 12,012,000 Soft loan 12,012,000 February 12, 2015


Treasury bills held to maturity 774,000 Soft loan 774,000 July 2, 2015


TOTAL 235,664,180 235,533,232

DECEMBER 31, 2010

LBP’000

Corresponding FacilitiesRedemption Value

of Pledged Assets Nature of Facility Amount of Facility Maturity Date

Treasury bills held to maturity 8,843,720 Soft loan 8,843,712 June 28, 2013

Treasury bills held to maturity 10,468,000 Soft loan 10,468,000 December 20, 2013

Treasury bills held to maturity 289,000,000 Soft loan 289,000,000 August 6, 2010

Treasury bills held to maturity 10,500,000 Soft loan 10,500,000 October 25, 2012

TOTAL 318,811,720 318,811,712

DECEMBER 31, 2009

LBP’000

Corresponding FacilitiesRedemption Value

of Pledged Assets Nature of Facility Amount of Facility Maturity Date

Risk Management Framework

The Group is exposed to different types of risk mainly credit risk,

liquidity risk, market risk and operational risk. These risks are

inherent in the Group’s activities but are managed through an

ongoing process of identification, measurement and monitoring,

subject to risk limits.

The responsibility for risk management of the Group resides

within the Board of Directors, the Risk Management Committee

and the Risk Management Division. In addition, the Internal

Audit Department has the responsibility to review the risk

management process as described below.



Board of Directors

The Board of Directors has overall responsibility for the

establishment of the Group's risk management framework and

overseeing the bank’s risks. It is ultimately responsible for

defining the strategic objectives, identifying and setting the

level of tolerable risk to which Fransabank Group is exposed,

and approving the Risk Management policies and procedures.

Risk Management Committee

The Risk Management Committee assists the Board of Directors

in fulfilling its oversight responsibilities; identifying the Bank’s

risks profile vis-à-vis its risk appetite and risk tolerance; monitoring

all aspects of the risks inherent in the Bank’s activities; and

assessing the Bank’s risk management and control practices.

Risk Management Division

The Risk Management Division, which is headed by the Chief

Risk Officer, is independent of the bank’s business lines. It works

closely with the Risk Management Committee and Senior

Management to assist them in managing the Group's risks and

ensuring that proper controls procedures are set up in order to

highlight risks and mitigate them.

In addition to the above, the Risk Management Division ensures

that the capital is adequate to cover all types of risks that the

bank is exposed to and monitors compliance with risk

management policies, procedures and risk limits and

accordingly, reports to the Risk Management Committee with

appropriate recommendations.

Internal Audit Department

Risk management processes are independently reviewed by

the Internal Audit Department, at least annually. This review

includes examination of both adequacy and effectiveness of

risk control procedures.

Credit Risk

Credit risk is most simply defined as the potential that a bank’s

borrower or counterparties fail to meet their obligations in

accordance with agreed terms. One of the primary goals of

credit risk management is to maximize Group’s risk-adjusted

rate of return by maintaining credit risk exposure within

acceptable parameters.

Oversight of credit risk starts at the level of the Executive

Committee, which is responsible for: (i) deciding on strategies

and credit policies within the guidance provided by the Group’s

main regulator (Central Bank of Lebanon), (ii) evaluating the

quality of the credit portfolio based on applicable policies and

procedures and (iii) evaluating expansion projects.

Management of credit risk mainly includes:

a) Implementing credit policies and procedures with respect

to the credit file origination, analysis, approval and review in

addition to lines of authority in granting loans at each

administrative level and the policies for the eligible credit

risk mitigation.

b) Providing guidance for compliance with regulatory

requirements while assessing credit risk at the borrower’s

level.

c) Assessing credit risk for new and existing facilities through

conducting a credit review that tackles among other things

following up the accounts’ performance, recurring

over-limits and counterparty’s financial situation.

d) Providing adequate controls over risk by ensuring that credit

exposures are within levels consistent with prudential

threshold limits stipulated by Central Bank of Lebanon, as

well as internal limits.

Retail Lending:

Different retail credit applications are used for each product

type which are submitted by sales channels and analyzed

centrally based on the set policies and procedures. These

comprise the following:

• Borrower’s eligibility criteria (i.e., age, nationality, years of

experience, monthly income / salary, etc…)

• Required documents (i.e., income declaration, proof of

residence, etc…)


• General conditions (i.e., monthly installment over monthly

income ratio, financing ratio)

• Collateral

Loan applications are approved by the Retail & Housing

Committee which is composed of the Head of Product and

Credit Manager. The Head of the Retail Risk Department

approves or rejects the request in case of un-unanimous

agreement and/or deviations from standard credit policies and

procedures.

The Retail & Housing Committee meets on a daily basis to cater

for prompt feedback to clients. Different authority levels are

specified for approving each product types depending on loan

amount.

The Collection Unit handles delinquency issues. The main

purpose of creating this unit in 2004 is to centralize the follow-

up of delinquent retail loans. Clients in default are contacted

within 7 days after the maturity becomes due. Rescheduling,

extension of payment, warning letters, salary domiciliation and

other means of payment arrangements are frequently considered

by the collection staff to prevent downgrading a loan, and

eventually becomes subject to a legal suit.

Corporate Lending:

The Corporate Banking Department processes credit applications

with total combined facilities above the equivalent of USD 2

million and/or turnover above USD 5 million. These applications

are fully prepared by the Relationship Manager and his

assistant. Applications are then reviewed by the Team Leader

and sent to the Head of Corporate Banking Division for comments

and thereafter to the Credit Appraisal Unit for an independent

opinion and the Risk Management Division for assessing credit

risk inherent in individual credit requests as well as the entire

portfolio prior to their discussion and approval by the Credit

Committee.

SME Lending:

A company is classified Small and Medium enterprise (SME) as

long as its annual sales turnover does not exceed USD 5 million

and/or its total exposure is within USD 2 million.

Measurement of Credit Risk

Loans and advances to customers:

In measuring credit risk of loans and advances, the Bank considers

the following:

• Ability of the counterparty to honor its contractual obligations

based on the account’s performance, recurring overdues and

related reasons, the counterparty’s financial position and

effect thereto of the economic environment and market

conditions;

• Exposure levels of the counterparty and unutilized credit

limits granted;

• Exposure levels of the counterparty with other banks;

• Purpose of the credit facilities granted to the counterparty

and conformity of utilization by the counterparty.



In accordance with Central Bank of Lebanon circular No.58 the Group’s customers are categorized into five classifications as

described below:

CLASSIFICATION DESCRIPTION

Standard monitoring

Special monitoring

(Watch list)

Substandard

Doubtful

Bad

Indicates that borrowers are able to honor their commitments

and there is no reason to doubt their ability to repay principal and

interest in full and in a timely manner. Some of the indicators

related to this category are: continuous cash inflows, timely

submission of financial statements and / or sufficient collateral.

Indicates that borrowers are able to honor their current

commitments, although repayment may be adversely affected

by specific factors. Such borrowers are subject to special

monitoring. Major characteristics of this category are: inadequate

loan information such as annual financial statements availability,

condition of and control over collateral held is questionable and

/ or declining profitability.

Indicates that borrowers' ability to serve their commitments is in

question. In this context, borrowers cannot depend on their

normal business revenues to pay back principal and interest, i.e.

losses may occur. The main characteristics of this category are

severe decline in profitability and in cash inflows. In this case, the

Group considers interests and commissions as unrealized but

does not establish an allowance for impairment.

Indicates that borrowers cannot honor their commitments in full

and on time. Significant losses will be incurred even collateral

held is invoked due to payment overdues. The net realizable

value of collateral held is insufficient to cover payment of

principal and interest. In this case, the Group considers interests

and commissions as unrealized and established an allowance for

impairment accordingly.

Indicates that commitments cannot be covered even after taking

all possible measures and resorting to necessary legal

procedures. Some signals of this category would be inexistence

of collateral, low value of collateral and / or, losing contact with

the borrower. In this case, the bank considers interests and

commissions as unrealized, ceases their accumulation,

and provides the whole amount of the exposure’s balance.

12

3

4

5

>

>

>

>

>


Loans’ classifications are assessed and updated regularly.

Note 9 discloses the distribution of loans and advances to customers by classification.

Most of customers’ exposures represent credit facilities granted to corporations which do not have external credit rating.

Loans classified as standard and special monitoring include overdue accounts as follows:

20092010LBP’000

Less than 30 days

Between 30-60 days

Between 60-90 days

Between 90-180 days

Beyond 180 days

TOTAL

5,128,746

9,577,363

1,010,026

1,667,481

7,988,203

25,371,819

32,407,181

6,079,316

1,592,014

5,610,844

15,169,840

60,859,195

Debt investment securities and other bills:

The risk of the debt instruments included in the investment

portfolio relates mainly to sovereign risk (including Central Bank

of Lebanon) to the extent of 96% in 2010 and 2009.

Limiting of Credit Risk

The Bank structures the levels of credit risk undertaken by

placing limits on the amount of risk accepted in relation to one

borrower, and/or groups of related borrowers. Such risks are

monitored on a revolving basis and subject to an annual or

more frequent review, when considered necessary.

Exposures to any one borrower including banks are further

restricted by sub-limits covering on and off-financial position

exposures. Actual exposures against limits are monitored on a

regular basis.

In addition to the above, the Group’s lead regulator (Central

Bank of Lebanon – BDL) and the Banking Control Commission

(BCC) have set up the following regulations with respect to

limits of credit risks:

• With respect to loans and advances to customers, BDL basic

circular No.81 provides the following:

- The Board of Directors should be periodically informed

about single borrowers (or group of related borrowers)

with total facilities in excess of USD 1 million or equivalent.

- Facilities granted to related parties should not exceed 5%

of the Bank’s capital base. This percentage falls to 2% in

case the Bank does not abide with article 152 of the

Lebanese Code of Money and Credit.

- Allowed temporary and accidental over-limits should not

exceed 10% of authorized overdraft limit.

• BDL circular No.48 and BCC circular No.258 (issued during

December 2007) specify the ceiling for the credit facilities

and regulations related to country limits and exposures per

customer or group of customers.

• BDL circular No.51 states that facilities granted against the

pledge of shares, in case the purpose is acquiring said shares,

should not exceed 50% of value of listed shares.



Concentration of credit risk by geographical location:

2010

LBP’000GulfEurope Other TotalMiddle East &

AfricaLebanon North America

Financial and trading assets:

Cash and Central Banks 2,274,886,172 213,545,226 - 48,881,556 - - 2,537,312,954

Deposits with banks and

financial institutions 36,649,985 320,283,707 103,494,606 1,061,011,500 167,578,365 10,558,620 1,699,576,783

Trading assets 90,262,522 - 280,244 1,077,027 226,649 - 91,846,442

Loans to banks 87,170,965 135,874,379 - (659,623) - 13,591,462 235,977,183

Loans and advances

to customers 3,737,473,562 705,254,560 1,400,328 112,587,676 109,572,029 70,054,448 4,736,342,603

Available for sale investments 6,721,740,670 7,559,466 7,853,888 40,345,276 28,547,780 - 6,806,047,080

Held to maturity investments 1,367,597,252 - - 404,443 - - 1,368,001,695

Derivative assets held for

risk management 983,976 9,282 4,700 8,571 4,305 790 1,011,624

TOTAL 14,316,765,104 1,382,526,620 113,033,766 1,263,656,426 305,929,128 94,205,320 17,476,116,364

Financial liabilities:

Deposits and borrowings

from banks 26,581,427 244,182,047 8,831,129 93,187,675 41,836,358 1,772 414,620,408

Liabilities designated at

fair value through

profit or loss 69,697,242 1,353,973 251,931 1,210,049 547,006 76,165 73,136,366

Customers' accounts

at amortized cost 12,465,726,245 982,088,219 48,332,200 575,687,441 958,388,820 95,174,981 15,125,397,906

Other borrowings 262,530,360 - 8,342,203 77,440,710 13,977,012 - 362,290,285

Subordinated loan - - - 31,874,560 - - 31,874,560

Financial guarantee

contracts issued 2,595,196 - - - - - 2,595,196

TOTAL 12,827,130,470 1,227,624,239 65,757,463 779,400,435 1,014,749,196 95,252,918 16,009,914,721


2009

LBP’000GulfEurope Other TotalMiddle East &

AfricaLebanon North America



Cash and Central Banks 2,287,568,583 349,978,650 - 15,349,835 - - 2,652,897,068


financial institutions 63,416,987 316,827,727 42,100,261 999,674,070 71,141,248 5,991,715 1,499,152,008

Trading assets 92,206,753 - - 3,445,677 168,959 - 95,821,389

Loans to banks 25,638,716 2,507,113 - 13,882,743 - 16,788,942 58,817,514

Loans and advances

to customers 2,893,187,614 357,003,230 512,569 90,528,504 89,228,059 50,282,228 3,480,742,204

Available for sale investments 6,315,600,764 335,288 3,367,154 25,773,125 14,269,981 - 6,359,346,312

Held to maturity investments 1,408,193,258 - - 3,580,556 - - 1,411,773,814

Derivative assets held for

risk management 1,125,787 10,344 5,238 22,112 6,119 880 1,170,480

TOTAL 13,086,938,462 1,026,662,352 45,985,222 1,152,256,622 174,814,366 73,063,765 15,559,720,789



from banks 50,957,787 142,218,363 7,593,433 94,520,525 34,535,735 721,304 330,547,147

Liabilities designated at

fair value through

profit or loss 155,861,816 2,019,430 362,028 1,689,132 2,670,658 109,336 162,712,400

Customers' accounts

at amortized cost 11,098,049,241 699,254,622 34,080,708 562,003,120 942,020,273 89,003,854 13,424,411,818

Other borrowings 330,667,693 - 11,187,911 67,323,685 3,640,802 - 412,820,091

Derivative liabilities held

for risk management - - - 42,954 - - 42,954

Financial guarantee

contracts issued 1,627,290 - - - - - 1,627,290

TOTAL 11,637,163,827 843,492,415 53,224,080 725,579,416 982,867,468 89,834,494 14,332,161,700


a) Collateral:

The principal collateral types for loans and advances consist of

mortgages over real estate properties and bank guarantees.

The Group will seek additional collateral from the counterparty

as soon as impairment indicators are noticed for the relevant

individual loans and advances.

b) Netting arrangements:

The Group enters into netting arrangements when with

counterparties having a significant volume of transactions in

order to restrict its exposure to credit losses. These

arrangements do not generally result in an offset of assets and

liabilities balances in the statement of financial position.

Other specific control and mitigation measures are outlined below:


DECEMBER 31, 2010

LBP’000

GrossExposure Netof UnrealizedInterest and

Discount

Allowancefor

ImpairmentNet

Exposure Pledge Funds

DECEMBER 31, 2009

LBP’000

GrossExposure Netof UnrealizedInterest and

Discount

Allowancefor

ImpairmentNet

Exposure Pledge Funds

Collateral Held against Loans and Advances to Customers:

Market Risks

Market risk is defined as the risk of losses in on and off-financial

position, arising from adverse movements in market prices. The

risks subject to Market Risk include: Interest Rate Risk and Equity

Risk in the trading book, Foreign Exchange Risk and

Commodities Risk.

The overall authority for market risk is vested in ALCO.

Management of Market Risks

Trading Portfolio

A Trading Book consists of positions in financial instruments

held either with trading intent or in order to hedge other

elements of the trading book. The market risk for trading book

is managed and monitored using the Standardized

Measurement Method.


Standard and special monitoring 4,642,425,250 - 4,642,425,250 685,615,717

Sub-standard (including restructured debts) 28,809,112 - 28,809,112 3,842,254

Doubtful (including restructured debts) 235,771,227 (150,957,198) 84,814,029 2,389,198

Loss (including restructured debts) 44,453,444 (44,453,444) - 2,348,069

Loan portfolio purchased 3,589,905 - 3,589,905 -

Allowance for collectively impaired loans - (23,295,693) (23,295,693) -

TOTAL 4,955,048,938 (218,706,335) 4,736,342,603 694,195,238

Standard and special monitoring 3,343,204,140 - 3,343,204,140 576,665,636

Sub-standard (including restructured debts) 27,430,820 - 27,430,820 3,488,732

Doubtful (including restructured debts) 295,669,337 (178,653,975) 117,015,362 2,379,493

Loss (including restructured debts) 45,290,566 (45,290,566) - 2,349,577

Loan portfolio purchased 3,677,874 - 3,677,874 -

Allowance for collectively impaired loans - (10,585,992) (10,585,992) -

TOTAL 3,715,272,737 (234,530,533) 3,480,742,204 584,883,438


BankGuarantees

& KafalatMortgage

on PropertiesEquity

SecuritiesDebt

Securities Others

TotalCollateral

Held

Lesser ofIndividualExposureor Total

Collateral

FAIR VALUE OF COLLATERAL HELD

BankGuarantees

& KafalatMortgage

on PropertiesEquity

SecuritiesDebt

Securities Others

TotalCollateral

Held

Lesser ofIndividualExposureor Total

Collateral

FAIR VALUE OF COLLATERAL HELD

Foreign Exchange Risk

Foreign exchange risk arises from the exposure on banking

assets and liabilities, denominated in foreign currencies.

The capital charge for foreign exchange risk applies to foreign

exchange risk of the entire business. Two processes are used to

calculate the capital charge for foreign exchange risk. The first is

to measure the bank’s net open position in each currency. The

second is to measure the risks inherent in the bank’s mix of long

and short positions in different currencies. The capital charge is

8% of the higher of either the net long currency position or the

net short currency position.

150,107,272 2,214,105,131 41,734,033 1,892,089 798,200,973 3,891,655,215 2,699,821,014

606,919 53,839,747 167,357 - 6,791,673 65,247,950 24,864,706

90,320 254,615,013 5,224 - 3,671,938 260,771,693 161,980,218

70,769 12,436,106 13,500 - 1,509,861 16,378,305 9,868,133

- - - - - - -

- - - - - - -

150,875,280 2,534,995,997 41,920,114 1,892,089 810,174,445 4,234,053,163 2,896,534,071

125,526,453 1,454,582,130 106,771,923 3,204,977 646,397,750 2,913,148,869 1,882,695,047

388,628 55,309,509 183,789 - 726,971 60,097,629 24,422,169

128,008 257,997,395 5,224 - 1,297,908 261,808,028 166,306,045

70,769 12,265,815 13,500 - 1,655,410 16,355,071 10,027,687

- - - - - - -

- - - - - - -

126,113,858 1,780,154,849 106,974,436 3,204,977 650,078,039 3,251,409,597 2,083,450,948

Assets and liabilities are segregated as follows by major currencies:


DECEMBER 31, 2010

LBP’000USD Euro Other TotalLBP


ASSETS

Cash and Central Banks 846,022,452 1,396,298,543 92,701,452 202,290,507 2,537,312,954


financial institutions 11,608,823 995,061,878 388,696,749 304,209,333 1,699,576,783

Trading assets 5,129,140 74,259,278 12,303,783 154,241 91,846,442

Loans to banks 86,497,818 18,128,956 131,350,409 - 235,977,183

Loans and advances to customers 1,092,901,735 2,942,023,490 183,796,072 517,621,306 4,736,342,603

Available for sale investments 5,098,751,486 1,539,180,566 152,645,221 15,469,807 6,806,047,080

Held to maturity investments 363,475,952 951,532,392 52,993,351 - 1,368,001,695

Customers' liability under acceptances 150,000 215,448,119 1,354,459 13,243,091 230,195,669

Investments in associates 9,842,931 35,985,405 - - 45,828,336

Assets acquired in satisfaction of loans 63,236,128 146,202,936 - - 209,439,064

Property and equipment 209,649,503 (1,049,974) 157,766 58,124,866 266,882,161

Intangible assets 54,438,075 - 52,874 775,915 55,266,864

Other assets 64,303,918 68,501,792 3,064,339 39,174,224 175,044,273

TOTAL ASSETS 7,906,007,961 8,381,573,381 1,019,116,475 1,151,063,290 18,457,761,107

LIABILITIES

Deposits and borrowings from banks 23,847,902 107,931,861 29,715,424 253,125,221 414,620,408

Liabilities designated at fair value

through profit or loss 2,388,931 70,747,435 - - 73,136,366

Customers' accounts at amortized cost 6,061,006,264 7,600,908,546 900,155,371 563,327,725 15,125,397,906

Customers' acceptance liability 150,000 215,448,119 1,354,459 13,243,091 230,195,669

Other borrowings 247,405,654 88,609,940 26,274,691 - 362,290,285

Subordinated loan - 31,874,560 - - 31,874,560

Other liabilities 132,667,404 82,945,564 (743,133) 22,235,419 237,105,254

Provisions 31,050,847 5,733,533 449,424 4,923,683 42,157,487

TOTAL LIABILITIES 6,498,517,002 8,204,199,558 957,206,236 856,855,139 16,516,777,935

Currencies to be received 1,510,275 354,766,561 22,468,327 14,089,533 392,834,696

Currencies to be delivered (300,200,000) (34,602,054) (23,375,753) (33,554,048) (391,731,855)

(298,689,725) 320,164,507 (907,426) (19,464,515) 1,102,841

NET ON-BALANCE SHEET FINANCIAL POSITION 1,108,801,234 497,538,330 61,002,813 274,743,636 1,942,086,013


ASSETS

Cash and Central Banks 944,046,626 1,266,250,293 93,044,195 349,555,954 2,652,897,068


financial institutions 35,005,613 672,127,139 531,449,451 260,569,805 1,499,152,008

Trading assets 4,971,306 75,301,284 13,996,447 1,552,352 95,821,389

Loans to banks 25,638,719 8,386,361 16,788,941 8,003,493 58,817,514

Loans and advances to customers 663,337,387 2,456,056,613 183,099,937 178,248,267 3,480,742,204

Available for sale investments 4,665,674,424 1,527,327,486 156,039,721 10,304,681 6,359,346,312

Held to maturity investments 366,364,780 988,608,002 56,801,032 - 1,411,773,814

Customers' liability under acceptances 299,999 90,243,948 12,328,252 10,610,040 113,482,239

Investments in associates 10,336,794 36,702,558 - - 47,039,352

Assets acquired in satisfaction of loans 63,752,591 125,348,949 - - 189,101,540

Property and equipment 169,460,072 (1,028,869) 151,282 23,751,249 192,333,734

Intangible assets 53,614,177 57,458 37,633 1,942,007 55,651,275

Other assets 59,161,708 62,200,356 2,608,228 19,901,736 143,872,028

TOTAL ASSETS 7,061,664,196 7,307,581,578 1,066,345,119 864,439,584 16,300,030,477

LIABILITIES

Deposits and borrowings from banks 34,007,884 149,961,870 16,257,663 130,319,730 330,547,147


through profit or loss 2,256,269 160,456,131 - - 162,712,400

Customers' accounts at amortized cost 5,331,543,118 6,750,772,945 939,684,726 402,411,029 13,424,411,818

Customers' acceptance liability 299,999 90,243,948 12,328,252 10,610,040 113,482,239

Other borrowings 330,667,693 53,331,447 28,820,951 - 412,820,091

Other liabilities 105,003,808 65,584,396 15,167,542 12,863,220 198,618,966

Provisions 20,021,753 14,945,224 485,988 2,519,262 37,972,227

TOTAL LIABILITIES 5,823,800,524 7,285,295,961 1,012,745,122 558,723,281 14,680,564,888

Currencies to be received 1,454,868 347,242,057 20,874,489 5,942,326 375,513,740

Currencies to be delivered (300,890,480) (26,608,332) (20,331,022) (25,652,805) (373,482,639)

(299,435,612) 320,633,725 543,467 (19,710,479) 2,031,101

NET ON-BALANCE SHEET FINANCIAL POSITION 938,428,060 342,919,342 54,143,464 286,005,824 1,621,496,690

DECEMBER 31, 2009

LBP’000USD Euro Other TotalLBP

Non-Trading Portfolio – Interest Rate Risk

Fransabank Group is also exposed to Interest Rate Risk in the Banking Book (IRRBB) which includes financial instruments not subject to

the above definition of Market Risk in the trading book. IRRBB arises from core banking activities such as lending, deposit taking, etc…

The IRRBB is measured by using a maturity / repricing schedule which is referred to as “gap analysis”.

Interest rate risk is managed principally through monitoring interest rate gaps.


A summary of the Group’s interest rate gap position is as follows at December 31, 2010:

Interest sensitivity analysis for accounts in Lebanese pounds as at December 31, 2010

INTEREST RATE SENSITIVITY STATEMENT OF FINANCIAL POSITION

LBP’000

Non-InterestBearing Up to

3 months3 monthsto 1 year

1 to 3years

3 to 5years

Floating


ASSETS

Cash and Central Banks 426,421,498 419,600,954 - - -

Deposits with banks and financial institutions 69,660 11,539,163 - - -

Trading assets - 1,799,158 - - -

Loans to banks 467,818 - - - -

Loans and advances to customers 4,484,632 290,692,387 70,077,952 144,063,863 101,335,287

Available for sale investments 203,819,881 157,239,186 - - -

Held to maturity investments 2,811,772 127,889,210 - - -

Customers' liability under acceptances 150,000 - - - -

Investments in associates 9,842,931 - - - -

Assets acquired in satisfaction of loans 63,236,128 - - - -

Property and equipment 209,649,503 - - - -

Intangible assets 54,438,075 - - - -

Other assets 64,303,918 - - - -

TOTAL ASSETS 1,039,695,816 1,008,760,058 70,077,952 144,063,863 101,335,287

LIABILITIES

Deposits and borrowings from banks 11,528,691 12,071,059 - - -


through profit or loss 7,845 - - - -

Customers' accounts at amortized cost 245,342,057 5,283,483,255 173,171,980 27,187,071 -

Customers' acceptance liability 150,000 - - - -

Other borrowings 1,274,571 3,448,401 2,063,628 41,195,135 14,423,919

Other liabilities 132,667,404 - - - -

Provisions 31,050,847 - - - -

TOTAL LIABILITIES 422,021,415 5,299,002,715 175,235,608 68,382,206 14,423,919

INTEREST RATE GAP POSITION 617,674,401 (4,290,242,657) (105,157,656) 75,681,657 86,911,368



Over5 years

Total Over 3 monthsless than 1 year

1 to 3years

3 to 5years

Over5 years

Total

GrandTotal

Floating Fixed

- 419,600,954 - - - - - 846,022,452

- 11,539,163 - - - - - 11,608,823

- 1,799,158 - 1,115,170 - 2,214,812 3,329,982 5,129,140

7,000,000 7,000,000 2,823,000 11,146,000 16,646,000 48,415,000 79,030,000 86,497,818

198,225,632 804,395,121 65,618,238 134,583,174 65,881,825 17,938,745 284,021,982 1,092,901,735

- 157,239,186 360,946,009 1,530,217,260 1,794,712,428 1,051,816,722 4,737,692,419 5,098,751,486

- 127,889,210 19,311,720 15,677,250 197,786,000 - 232,774,970 363,475,952

- - - - - - - 150,000

- - - - - - - 9,842,931

- - - - - - - 63,236,128

- - - - - - - 209,649,503

- - - - - - - 54,438,075

- - - - - - - 64,303,918

205,225,632 1,529,462,792 448,698,967 1,692,738,854 2,075,026,253 1,120,385,279 5,336,849,353 7,906,007,961

- 12,071,059 248,152 - - - 248,152 23,847,902

- - 2,381,086 - - - 2,381,086 2,388,931

- 5,483,842,306 330,334,118 - - - 331,821,901 6,061,006,264

- - - - - - - 150,000

- 61,131,083 - 1,487,783 185,000,000 - 185,000,000 247,405,654

- - - - - - - 132,667,404

- - - - - - - 31,050,847

- 5,557,044,448 332,963,356 1,487,783 185,000,000 - 519,451,139 6,498,517,002

205,225,632 (4,027,581,656) 115,735,611 1,691,251,071 1,890,026,253 1,120,385,279 4,817,398,214 1,407,490,959


Interest sensitivity analysis for accounts in foreign currency as at December 31, 2010


LBP’000



1 to 3years

3 to 5years

Floating


ASSETS

Cash and Central Banks 261,391,555 675,395,197 - 621,843,750 131,152,500

Deposits with banks and financial institutions 185,506,523 1,446,064,090 - - -

Trading assets 25,301,395 97,426 - - -

Loans to banks 4,461,386 14,678,835 14,424,503 7,744,007 -

Loans and advances to customers 110,727,941 2,475,336,856 373,353,201 205,596,705 110,077,431

Available for sale investments 74,835,730 - - 7,544,790 -

Held to maturity investments 21,038,222 - - - -

Customers' liability under acceptances 230,045,669 - - - -




Intangible assets 828,789 - - - -

Other assets 110,740,355 - - - -

TOTAL ASSETS 1,264,298,564 4,611,572,404 387,777,704 842,729,252 241,229,931

LIABILITIES

Deposits and borrowings from banks 16,023,503 283,548,091 73,262,520 - -


through profit or loss 1,547,154 - 30,588,683 38,611,598 -

Customers' accounts at amortized cost 1,097,538,467 6,811,177,424 845,804,772 54,673,894 -

Customers' acceptance liability 230,045,669 - - - -

Other borrowings 527,549 12,876,567 5,352,243 12,813,047 10,184,947

Subordinated loan - - - - -


Provisions 11,106,640 - - - -

TOTAL LIABILITIES 1,461,226,832 7,107,602,082 955,008,218 106,098,539 10,184,947

INTEREST RATE GAP POSITION (196,928,268) (2,496,029,678) (567,230,514) 736,630,713 231,044,984



Over5 years


1 to 3years

3 to 5years

Over5 years

Total

GrandTotal

Floating Fixed

- 1,428,391,447 - - 1,507,500 - 1,507,500 1,691,290,502

- 1,446,064,090 48,904,285 7,493,062 - - 56,397,347 1,687,967,960

- 97,426 - 32,835,450 8,759,492 19,723,539 61,318,481 86,717,302

- 36,847,345 108,170,634 - - - 108,170,634 149,479,365

99,254,391 3,263,618,584 41,967,736 77,770,688 122,357,387 26,998,532 269,094,343 3,643,440,868

- 7,544,790 162,160,277 638,625,923 164,343,160 659,785,714 1,624,915,074 1,707,295,594

- - 109,928,044 405,303,651 170,824,211 297,431,615 983,487,521 1,004,525,743

- - - - - - - 230,045,669

- - - - - - - 35,985,405

- - - - - - - 146,202,936

- - - - - - - 57,232,658

- - - - - - - 828,789

- - - - - - - 110,740,355

99,254,391 6,182,563,682 471,130,976 1,162,028,774 467,791,750 1,003,939,400 3,104,890,900 10,551,753,146

- 356,810,611 17,938,392 - - - 17,938,392 390,772,506

- 69,200,281 - - - - - 70,747,435

- 7,711,656,090 239,823,524 13,866,061 1,507,500 - 255,197,085 9,064,391,642

- - - - - - - 230,045,669

13,672,460 54,899,264 3,059,167 10,149,393 13,099,036 33,150,222 59,457,818 114,884,631

- - - - - 31,874,560 31,874,560 31,874,560

- - - - - - - 104,437,850

- - - - - - - 11,106,640

13,672,460 8,192,566,246 260,821,083 24,015,454 14,606,536 65,024,782 364,467,855 10,018,260,933

85,581,931 (2,010,002,564) 210,309,893 1,138,013,320 453,185,214 938,914,618 2,740,423,045 533,492,213


Interest sensitivity analysis for accounts in Lebanese pounds as at December 31, 2009

ASSETS

Cash and Central Banks 575,349,039 368,697,587 - - -

Deposits with banks and financial institutions 903,318 34,102,295 - - -

Trading assets 87,730 - - - -

Loans to banks 208,719 - - - -

Loans and advances to customers 22,386,465 175,358,389 34,622,262 81,769,083 55,701,862


Held to maturity investments 13,705,056 99,982 - - -

Customers' liability under acceptances 299,999 - - - -





Other assets 59,161,708 - - - -

TOTAL ASSETS 1,163,404,535 735,776,860 34,622,262 81,769,083 55,701,862

LIABILITIES



through profit or loss 6,272 - - - -


Customers' acceptance liability 299,999 - - - -

Other borrowings 398,006 - 292,221,173 15,643,825 22,404,689


Provisions 20,021,753 - - - -

TOTAL LIABILITIES 354,047,410 4,646,604,301 471,930,522 57,051,438 22,404,689

INTEREST RATE GAP POSITION 809,357,125 (3,910,827,441) (437,308,260) 24,717,645 33,297,173


LBP’000



1 to 3years

3 to 5years

Floating



- 368,697,587 - - - - - 944,046,626

- 34,102,295 - - - - - 35,005,613

- - - 2,875,790 - 2,007,786 4,883,576 4,971,306

- - 1,400,000 5,646,000 5,646,000 12,738,000 25,430,000 25,638,719

87,096,305 434,547,901 43,813,776 109,947,221 44,872,054 7,769,970 206,403,021 663,337,387

- 157,518,607 204,005,587 1,086,489,011 2,654,488,447 369,033,905 4,314,016,950 4,665,674,424

- 99,982 319,271,082 30,703,691 2,584,969 - 352,559,742 366,364,780

- - - - - - - 299,999

- - - - - - - 10,336,794

- - - - - - - 63,752,591

- - - - - - - 169,460,072

- - - - - - - 53,614,177

- - - - - - - 59,161,708

87,096,305 994,966,372 568,490,445 1,235,661,713 2,707,591,470 391,549,661 4,903,293,289 7,061,664,196

- 21,776,821 - - - - - 34,007,884

- - - 2,249,997 - - 2,249,997 2,256,269

- 4,845,944,442 269,509,746 2,421 - - 269,512,167 5,331,543,118

- - - - - - - 299,999

- 330,269,687 - - - - - 330,667,693

- - - - - - - 105,003,808

- - - - - - - 20,021,753

- 5,197,990,950 269,509,746 2,252,418 - - 271,762,164 5,823,800,524

87,096,305 (4,203,024,578) 298,980,699 1,233,409,295 2,707,591,470 391,549,661 4,631,531,125 1,237,863,672


Over5 years


1 to 3years

3 to 5years

Over5 years

Total

GrandTotal

Floating Fixed


Interest sensitivity analysis for accounts in foreign currency as at December 31, 2009

ASSETS

Cash and Central Banks 235,785,903 691,781,636 130,398,750 472,601,250 149,242,500

Deposits with banks and financial institutions 88,391,703 470,543,521 875,109,646 - -

Trading assets 26,929,575 - - - -

Loans to banks 116,350 10,406,999 7,662,770 8,374,053 4,187,026

Loans and advances to customers 117,817,986 2,031,302,922 131,004,085 129,326,877 77,455,277


Held to maturity investments 22,292,262 98,281,900 - - -

Customers' liability under acceptances 113,182,240 - - - -





Other assets 84,710,320 - - - -

TOTAL ASSETS 950,781,771 3,357,104,592 1,144,175,251 610,302,180 230,884,803

LIABILITIES



through profit or loss 3,671,609 - 85,414,950 71,369,572 -


Customers' acceptance liability 113,182,240 - - - -

Other borrowings 387,294 2,776,394 5,201,026 9,233,349 12,965,680


Provisions 17,950,474 - - - -

TOTAL LIABILITIES 1,194,233,703 6,429,436,479 819,237,937 112,640,655 12,965,680

INTEREST RATE GAP POSITION (243,451,932) (3,072,331,887) 324,937,314 497,661,525 217,919,123


LBP’000



1 to 3years

3 to 5years

Floating



- 1,444,024,136 18,843,750 4,144,690 6,051,963 - 29,040,403 1,708,850,442

- 1,345,653,167 24,839,425 - 5,262,100 - 30,101,525 1,464,146,395

- - 1,752,974 950,186 39,283,873 21,933,475 63,920,508 90,850,083

- 30,630,848 2,431,597 - - - 2,431,597 33,178,795

45,844,053 2,414,933,214 97,574,056 60,152,950 101,971,857 24,954,754 284,653,617 2,817,404,817

- 54,787,614 29,031,236 589,648,768 351,114,392 594,496,713 1,564,291,109 1,693,671,888

- 98,281,900 248,787 608,636,588 91,718,310 224,231,187 924,834,872 1,045,409,034

- - - - - - - 113,182,240

- - - - - - - 36,702,558

- - - - - - - 125,348,949

- - - - - - - 22,873,662

- - - - - - - 2,037,098

- - - - - - - 84,710,320

45,844,053 5,388,310,879 174,721,825 1,263,533,182 595,402,495 865,616,129 2,899,273,631 9,238,366,281

- 288,262,056 - - - - - 296,539,263

- 156,784,522 - - - - - 160,456,131

- 6,899,057,724 229,575,776 7,085,479 - - 236,661,255 8,092,868,700

- - - - - - - 113,182,240

18,764,933 48,941,382 836,048 8,835,239 9,992,061 13,160,374 32,823,722 82,152,398

- - - - - - - 93,615,158

- - - - - - - 17,950,474

18,764,933 7,393,045,684 230,411,824 15,920,718 9,992,061 13,160,374 269,484,977 8,856,764,364

27,079,120 (2,004,734,805) (55,689,999) 1,247,612,464 585,410,434 852,455,755 2,629,788,654 381,601,917


Over5 years


1 to 3years

3 to 5years

Over5 years

TotalGrandTotal

Floating Fixed

Accounts withno Maturity

Up to3 months


Liquidity Risk

Liquidity risk is the risk that the Group is unable to meet its obliga-

tions when they fall due and the incapability to fund increases in

assets. The table below summarizes the maturity profile of the

Group's assets compared to its financial liabilities based on

contractual undiscounted repayment obligations. The Group

maintains a portfolio of highly marketable and diverse assets readily

liquefiable in the event of an unforeseen interruption to cash flow.

The Group maintains obligatory reserves with Central Bank of

Lebanon and other Central Banks. Liquidity is assessed and managed

using a variety of stressed scenarios applicable to the Group.

DECEMBER 31, 2010

3 monthsto 1 year

1 to 3years

3 to 5years

Over5 years Total

Lebanese Pounds Base Accounts

LBP’000


ASSETS

Cash and Central Banks 425,557,548 420,464,904 - - - - 846,022,452


financial institutions 608,823 11,000,000 - - - - 11,608,823

Trading assets - 1,799,158 - 1,115,170 - 2,214,812 5,129,140

Loans to banks 58,586 - 3,232,232 11,146,000 16,646,000 55,415,000 86,497,818

Loans and advances

to customers 171,269,894 59,471,363 199,539,316 279,047,609 167,225,446 216,348,107 1,092,901,735

Available for sale investments 119,473,488 219,285,015 383,246,573 1,530,217,260 1,794,712,428 1,051,816,722 5,098,751,486

Held to maturity investments - 130,485,212 19,527,490 15,677,250 197,786,000 - 363,475,952

Customers' liability

under acceptances 150,000 - - - - - 150,000

Investments in associates 9,842,931 - - - - - 9,842,931

Assets acquired in

satisfaction of loans 63,236,128 - - - - - 63,236,128

Property and equipment 209,649,503 - - - - - 209,649,503

Intangible assets 54,438,075 - - - - - 54,438,075

Other assets 64,303,918 - - - - - 64,303,918

TOTAL ASSETS 1,118,588,894 842,505,652 605,545,611 1,837,203,289 2,176,369,874 1,325,794,641 7,906,007,961

LIABILITIES


from banks 11,574,278 12,025,472 248,152 - - - 23,847,902

Liabilities designated at fair

value through profit or loss 7,845 - 2,381,086 - - - 2,388,931

Customers' accounts

at amortized cost 334,177,676 5,193,519,354 504,616,583 28,692,228 423 - 6,061,006,264

Customers' acceptance liability 150,000 - - - - - 150,000

Other borrowings - 4,411,022 2,375,578 41,195,135 199,423,919 - 247,405,654

Other liabilities 132,667,404 - - - - - 132,667,404

Provisions 31,050,847 - - - - - 31,050,847

TOTAL LIABILITIES 509,628,050 5,209,955,848 509,621,399 69,887,363 199,424,342 - 6,498,517,002

MATURITY GAP 608,960,844 (4,367,450,196) 95,924,212 1,767,315,926 1,976,945,532 1,325,794,641 1,407,490,959



Up to3 months

ASSETS

Cash and Central Banks 260,376,124 676,410,628 - 621,843,750 132,660,000 - 1,691,290,502


financial institutions 219,305,287 1,412,265,326 48,904,285 7,493,062 - - 1,687,967,960

Trading assets 24,382,383 97,426 919,012 32,835,450 8,759,492 19,723,539 86,717,302

Loans to banks - 14,298,074 127,437,284 7,744,007 - - 149,479,365

Loans and advances

to customers 1,637,175,726 682,202,477 680,958,799 283,855,147 232,973,951 126,274,768 3,643,440,868

Available for sale investments 44,344,144 19,598,831 173,053,033 646,170,712 164,343,160 659,785,714 1,707,295,594

Held to maturity investments 1,507,501 13,574,255 115,884,509 405,303,652 170,824,211 297,431,615 1,004,525,743


under acceptances 230,045,669 - - - - - 230,045,669


Assets acquired in



Intangible assets 828,789 - - - - - 828,789

Other assets 110,740,355 - - - - - 110,740,355

TOTAL ASSETS 2,768,126,977 2,818,447,017 1,147,156,922 2,005,245,780 709,560,814 1,103,215,636 10,551,753,146

LIABILITIES


from banks 52,669,203 246,901,035 91,202,268 - - - 390,772,506


value through profit or loss 1,547,154 - 30,588,683 38,611,598 - - 70,747,435

Customers' accounts

at amortized cost 1,250,688,936 6,647,315,754 1,093,636,119 71,243,242 1,507,500 91 9,064,391,642

Customers' acceptance liability 230,045,669 - - - - - 230,045,669

Other borrowings - 13,239,791 8,575,735 22,962,440 23,283,983 46,822,682 114,884,631

Subordinated loan - - - - - 31,874,560 31,874,560


Provisions 11,106,640 - - - - - 11,106,640

TOTAL LIABILITIES 1,650,495,452 6,907,456,580 1,224,002,805 132,817,280 24,791,483 78,697,333 10,018,260,933

MATURITY GAP 1,117,631,525 (4,089,009,563) (76,845,883) 1,872,428,500 684,769,331 1,024,518,303 533,492,213

DECEMBER 31, 2010

3 monthsto 1 year

1 to 3years

3 to 5years

Over5 years Total

Foreign Currencies Base Accounts

LBP’000



Up to3 months

ASSETS

Cash and Central Banks 575,427,168 368,619,458 - - - - 944,046,626


financial institutions 1,305,613 33,700,000 - - - - 35,005,613

Trading assets (2) - - 2,959,786 - 2,011,522 4,971,306

Loans to banks - - 1,608,719 5,646,000 5,646,000 12,738,000 25,638,719

Loans and advances

to customers 82,088,446 51,163,359 142,426,338 191,951,295 100,657,890 95,050,059 663,337,387

Available for sale investments 119,714,446 208,163,553 227,785,062 1,086,489,011 2,654,488,447 369,033,905 4,665,674,424

Held to maturity investments - 13,557,335 319,518,785 30,703,691 2,584,969 - 366,364,780


under acceptances 299,999 - - - - - 299,999


Assets acquired in




Other assets 59,161,708 - - - - - 59,161,708

TOTAL ASSETS 1,135,161,012 675,203,705 691,338,904 1,317,749,783 2,763,377,306 478,833,486 7,061,664,196

LIABILITIES


from banks 13,424,686 20,583,198 - - - - 34,007,884


value through profit or loss 6,272 - - 2,249,997 - - 2,256,269

Customers' accounts

at amortized cost 277,452,653 4,583,478,887 431,288,579 39,322,999 - - 5,331,543,118

Customers' acceptance liability 299,999 - - - - - 299,999

Other borrowings - - 292,619,179 15,643,825 22,404,689 - 330,667,693


Provisions 20,021,753 - - - - - 20,021,753

TOTAL LIABILITIES 416,209,171 4,604,062,085 723,907,758 57,216,821 22,404,689 - 5,823,800,524

MATURITY GAP 718,951,841 (3,928,858,380) (32,568,854) 1,260,532,962 2,740,972,617 478,833,486 1,237,863,672

DECEMBER 31, 2009

3 monthsto 1 year

1 to 3years

3 to 5years

Over5 years Total

Lebanese Pounds Base Accounts

LBP’000




Up to3 months

ASSETS

Cash and Central Banks 517,148,436 410,419,086 149,242,500 476,746,085 155,294,335 - 1,708,850,442


financial institutions 123,057,695 1,217,178,912 118,647,692 - 5,262,096 - 1,464,146,395

Trading assets 25,827,474 - 2,757,647 965,796 40,348,216 20,950,950 90,850,083

Loans to banks - 10,523,347 10,094,369 8,374,053 4,187,026 - 33,178,795

Loans and advances

to customers 1,513,654,272 383,829,579 454,929,873 202,271,741 187,157,853 75,561,499 2,817,404,817

Available for sale investments 43,558,735 75,130,363 39,718,917 589,648,768 351,114,392 594,500,713 1,693,671,888

Held to maturity investments 1,507,500 112,925,200 6,390,249 608,636,590 91,718,312 224,231,183 1,045,409,034


under acceptances 113,182,240 - - - - - 113,182,240


Assets acquired in




Other assets 84,710,320 - - - - - 84,710,320

TOTAL ASSETS 2,609,608,939 2,210,006,487 781,781,247 1,886,643,033 835,082,230 915,244,345 9,238,366,281

LIABILITIES


from banks 70,382,162 178,963,260 47,193,841 - - - 296,539,263


value through profit or loss 3,671,608 - 85,414,950 71,369,573 - - 160,456,131

Customers' accounts

at amortized cost 972,130,739 6,160,285,875 921,280,289 39,171,797 - - 8,092,868,700

Customers' acceptance liability 113,182,240 - - - - - 113,182,240

Other borrowings - 2,925,107 6,275,655 18,068,588 22,957,741 31,925,307 82,152,398


Provisions 17,950,474 - - - - - 17,950,474

TOTAL LIABILITIES 1,270,932,381 6,342,174,242 1,060,164,735 128,609,958 22,957,741 31,925,307 8,856,764,364

MATURITY GAP 1,338,676,558 (4,132,167,755) (278,383,488) 1,758,033,075 812,124,489 883,319,038 381,601,917

DECEMBER 31, 2009

3 monthsto 1 year

1 to 3years

3 to 5years

Over5 years Total

Foreign Currencies Base Accounts

LBP’000


45. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The fair value of financial assets and liabilities as at December 31, 2010 and 2009 was as follows:

TradingAssets

Assets at FairValue throughProfit or Loss

Available for Sale

Held to Maturity

Loans andReceivables

Other atAmortized

Cost

TotalCarrying

Value

Total FairValueLBP’000

DECEMBER 31, 2010



Cash and Central Banks - - - - - 2,537,312,954 2,537,312,954 2,536,907,362


financial institutions - - - - - 1,699,576,783 1,699,576,783 1,699,576,783

Trading assets 91,846,442 - - - - - 91,846,442 91,846,442

Loans to banks - - - - 235,977,183 - 235,977,183 225,065,198

Loans and advances to customers - - - - 4,736,342,603 - 4,736,342,603 4,749,717,797

Available for sale investments - - 6,806,047,080 - - - 6,806,047,080 6,806,047,080

Held to maturity investments - - - 1,368,001,695 - - 1,368,001,695 1,426,263,183

Derivative assets held

for risk management - 1,011,624 - - - - 1,011,624 1,011,624

TOTAL 91,846,442 1,011,624 6,806,047,080 1,368,001,695 4,972,319,786 4,236,889,737 17,476,116,364 17,536,435,469


Deposits and borrowings from banks - - - - - 414,620,408 414,620,408 414,527,445

Customers' accounts - 73,136,366 - - - 15,125,397,906 15,198,534,272 15,198,534,272

Other borrowings - - - - - 362,290,285 362,290,285 369,154,675

Subordinated loan - - - - - 31,874,560 31,874,560 41,592,311

Financial guarantee contracts issued - 2,595,196 - - - - 2,595,196 2,595,196

TOTAL - 75,731,562 - - - 15,934,183,159 16,009,914,721 16,026,403,899



Cash and Central Banks - - - - - 2,652,897,068 2,652,897,068 2,656,717,187


financial institutions - - - - - 1,499,152,008 1,499,152,008 1,499,152,008

Trading assets 95,821,389 - - - - - 95,821,389 95,821,389

Loans to banks - - - - 58,817,514 - 58,817,514 52,245,962

Loans and advances to customers - - - - 3,480,742,204 - 3,480,742,204 3,508,202,170

Available for sale investments - - 6,359,346,312 - - - 6,359,346,312 6,359,346,312

Held to maturity investments - - - 1,411,773,814 - - 1,411,773,814 1,438,329,535

Derivative assets held

for risk management - 1,170,480 - - - - 1,170,480 1,170,480

TOTAL 95,821,389 1,170,480 6,359,346,312 1,411,773,814 3,539,559,718 4,152,049,076 15,559,720,789 15,610,985,043


Deposits and borrowings from banks - - - - - 330,547,147 330,547,147 330,547,144

Customers' accounts - 162,712,400 - - - 13,424,411,818 13,587,124,218 13,587,124,218

Other borrowings - - - - - 412,820,091 412,820,091 387,142,100

Derivative liabilities held for risk

management - 42,954 - - - - 42,954 42,954

Financial guarantee contracts issued - 1,627,290 - - - - 1,627,290 1,627,290

TOTAL - 164,382,644 - - - 14,167,779,056 14,332,161,700 14,306,483,706

TradingAssets

Assets at FairValue throughProfit or Loss

Availablefor Sale

Held toMaturity

Loans andReceivables

Other atAmortized

Cost

TotalCarrying

Value

Total FairValueLBP’000

DECEMBER 31, 2009

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value,

grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

TotalLevel 3Level 1LBP’000

Assets at Fair Value:

Trading securities


Liabilities at Fair Value:


67,825,861

6,786,415,195

6,854,241,056

-

91,846,442

6,806,047,080

6,897,893,522

73,136,366

24,020,581

19,631,885

43,652,466

73,136,366

DECEMBER 31, 2010


TotalLevel 3Level 1LBP’000

Assets at Fair Value:

Trading securities


Liabilities at Fair Value:


70,355,715

6,334,641,124

6,404,996,839

-

95,821,389

6,359,346,312

6,455,167,701

162,712,400

25,465,674

24,705,188

50,170,862

162,712,400

DECEMBER 31, 2009

46. CAPITAL MANAGEMENT

The Group manages its capital to comply with the capital

adequacy requirements set by the Central Bank of Lebanon, the

Group’s lead regulator. The Group’s foreign entities are also required

to respect particular ratios according to the competent authorities

of supervisions.

The Group’s capital is split as follows:

Tier I Capital: Comprises share capital after deduction of treasury

shares, Shareholders’ cash contribution to capital, certain reserves

from appropriation of profits, retained earnings (exclusive of

current year’s net profit) and non-controlling interests. Goodwill

is deducted from Tier I Capital.

Tier II Capital: Comprises qualifying subordinated liabilities,

collective impairment allowance and cumulative change in fair

value of available for sale securities.

Investments in associates are deducted from Tier I and Tier II capital.

Also, various limits are applied to the elements of capital base:

Qualifying Tier II capital cannot exceed Tier I capital and qualifying

short term subordinated loan capital may not exceed 50% of

Tier I capital.

The Group has complied with the imposed capital

requirements throughout the period.

47. APPROVAL OF THE FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Bank’s Board of Directors in its meeting held on April 8, 2011.

The Group is calculating its capital adequacy according to pillar I of Basel II Accord. The Group’s capital adequacy ratio was as

follows (without taking into consideration the net profit for the year):

Total regulatory capital

Credit risk

Market risk

Operational risk

RISK-WEIGHTED ASSETS OF CREDIT, MARKET AND OPERATIONAL RISKS

CAPITAL ADEQUACY RATIO

20092010LBP’000

1,139,584,000

8,880,428,000

142,247,000

595,119,000

9,617,794,000

11.85%

1,397,398,000

10,758,711,000

132,592,000

752,353,000

11,643,656,000

12.00%



1.08%

11.84%

65.14%

2.14%

12.26%

54.70%

26.14%

1.83%

4.56

0.66

51.00%

24.90%

98.04%

34.14%

9.94%

45.06%

11.85%

3.31%

7.12%

88.29%

0.79%

34.84%

20.35%

1.26%

13.06%

61.48%

2.25%

12.64%

48.30%

29.20%

1.83%

6.39

1.19

53.49%

28.55%

97.48%

39.88%

10.52%

39.08%

12.00%

1.72%

4.21%

90.42%

0.61%

40.26%

14.55%

Main Ratios

A. PROFITABILITY

ROAA (Return on Average Assets)

ROACE (Return on Average Common Equity)

Total interest paid to Total interest received

Net interest income to Average assets

Net commissions to Net financial revenues (before allocation to provisions)

Operating expenses to Net financial revenues (Cost-to-income ratio)

Non-interest income to Net financial revenues (before allocation to provisions)

Operating expenses to Average customers’ creditor accounts

EPS in USD (Earnings per Common Share in US Dollar)

DPS in USD (Dividend per Common Share in US Dollar)*

Dividend payout ratio*

(Dividends on Common and Preferred Shares / Distributable profits)

B. LIQUIDITY

Average net customers’ loans to Average customers’ creditor accounts

Average customers’ creditor accounts to Average total deposits

Foreign currency customers’ loans to Foreign currency customers’ creditor accounts

C. CAPITAL ADEQUACY

Shareholders’ equity to Total assets

Shareholders’ equity to Loans and acceptances

Capital Adequacy Ratio as per Basel II requirements

D. ASSET QUALITY RATIOS

Doubtful debts (net) to Total customers’ loans (net)

Doubtful debts (net) to Shareholders’ equity

Provisions for doubtful debts to Doubtful debts

Substandard accounts (net) to Total customers’ loans (net)

Unrealized interest for substandard accounts to Substandard accounts

Total provisions and unrealized interest to Total customers’ loans

(*) On an unconsolidated basis.

20092010

Adopt sustainable cultureCurrently, global resource use by humans is growing at about

5.5% each year; at that rate, human demand on the earth's

resources doubles every 13 years.

Source: Operation Fresh Start, Changing Direction toward Sustainable Culture, Northwest Report.


Group Network

> Lebanon - Mother Company, Subsidiaries and Associates

Mother Company

• Fransabank SAL

64 branches

• 34 branches in Beirut & Suburbs

• 9 branches in Northern Lebanon

• 2 branches in Aley & Chouf

• 7 branches in the Bekaa Region

• 10 branches in Southern Lebanon

• 2 branches temporarily closed

Subsidiaries

• BLC Bank SAL (with BLC Services & BLC Finance)

43 branches

• 24 branches in Beirut & Suburbs

• 6 branches in Northern Lebanon

• 2 branches in the Bekaa Region

• 3 branches in Southern Lebanon

• 8 branches temporarily closed

• Fransa Invest Bank SAL (FIB)

• Société Générale Foncière SAL (Sogefon)

• Lebanese Leasing Company SAL (LLC)

• Fransabank Insurance Services Company SAL

• Switch & Electronic Services SAL

• Société Express SARL

Associated Companies

• Bancassurance SAL

• International Payment Network SAL

108 branches subdivided as follows:

• 64 Fransabank branches

• 43 BLC Bank branches

• 1 branch for Fransa Invest Bank


Group Network

> Lebanon - Mother Company

• ChoueifatMahmoud El Kheshen Bldg.,

Haret Al Oumara, Saida Main Road

(Saida Old Road)

Tel (961) 5 431169

(961) 5 431178

Fax (961) 5 431183

• Elyssar (Mazraat Yachouch)Fransabank Bldg.,

Mazraat Yachouh, Bikfaya Main Road

Tel (961) 4 914802/3/4

Fax (961) 4 914805

• Furn El ChebbakSaadeh Center,

Opposite Planete Abraj, Damas Str.

Tel (961) 1 293025/6

Fax (961) 1 293027

• HadathBechara Beik Karam Str., Al Saha,

Near Al Saydeh Church, Main Road

Tel (961) 5 463974/5/6/7

Fax (961) 5 463980

• HamraFransabank Center, Hamra Str.,

1st Floor

Tel (961) 1 340180/1/8

(961) 1 750125

Fax (961) 1 341413

• Hamra (Sadat)Itani Bldg., Sadat Str.

Tel (961) 1 743135/6

(961) 1 748370

Fax (961) 1 743138

• HazmiehUnigroup Bldg., Sayyad Square

Tel (961) 5 459602

(961) 5 450350

Fax (961) 5 457312

• Jal El DibLe Baron Center, Jal El Dib Highway,

1st floor

Tel (961) 1 889884/5

Fax (961) 1 902959

Fransabank SAL

> Headquarters

Fransabank Headquarters, Hamra Str.,

P.O.Box 11-0393

Riad El Solh Beirut 1107 2803

Lebanon

Tel (961) 1 340180/8

(961) 1 745761/4

(961) 3 650700

Fax (961) 1 354572

Cable FRANSABANK

Swift FSAB LB BX

Email [email protected]

Website www.fransabank.com

Call Center (961) 1 734000

1552

Forex Tel (961) 1 343706

(961) 1 344216

Reuters FRBK

> Beirut & Suburbs

• Ashrafieh (Sassine)Notre Dame Center, Sassine Square

Tel (961) 1 203466/7

Fax (961) 1 200651

• Ashrafieh (Saydeh)Debs Bldg., Saydeh Str.

Tel (961) 1 200842/3

(961) 1 215940

Fax (961) 1 215422

• Ashrafieh (Sodeco)Dakota Bldg., Ground Floor, Sodeco

Tel (961) 1 423573/4

Fax (961) 1 423577

• Ain El MreissehNawrass Bldg.,

Opposite Ain El Mreisseh Mosque

Tel (961) 1 373240/1/2/4

Fax (961) 1 373243

• Allenby(temporarily closed)

• AnteliasOrder Antonin Maronite Bldg.,

Catholicossat Armenien Str.

Tel (961) 4 417240 /1

Fax (961) 4 412990

• Bab EdrissSabbagh Bldg., Patriarch Hoayek Str.

(temporarily closed)

• BadaroKhatoun Bldg., Badaro Str.

Tel (961) 1 387024

(961) 1 386900

Fax (961) 1 390409

• BastaFransabank Bldg., Cross Roads

of Saleh Ben Yehia, Basta Str.

Tel (961) 1 663116/8

Fax (961) 1 663117

• BauchriehChaer Center, Sin El Fil Blvd.

Tel (961) 1 897490/1/2

Fax (961) 1 897029

• BikfayaAdel Dagher Bldg., Bikfaya Place,

Main Road

Tel (961) 4 986901/2

Fax (961) 4 986903

• Bourj El BrajnehAhmad Nabbouh Bldg.,

Ain El Sekkeh, Dr Hosni Jalloul Str.

Tel (961) 1 453200/1/2

(961) 3 740410

Fax (961) 1 453203

• Bourj HammoudHarboyan Center, Near St. Vartan Str., Bourj

Hammoud entrance, 2nd floor

Tel (961) 1 258100/1/2

Fax (961) 1 264446

• ChiyahTayyar Bldg., facing Moawad junctions,

Ghobeiri Blvd., Chiyah

Next to the Ministry of Labor

Tel (961) 1 279671/3

Fax (961) 1 279680


• JbeilCordahi Center, Jbeil

Tel (961) 9 547178/9

(961) 9 945108/9

Fax (961) 9 540967

• JnahAssaf Bldg., Adnan El Hakim Str.

Tel (961) 1 857973/4

(961) 1 857833

Fax (961) 1 857972

• JouniehSaint Paul Center, P.T.T. Str.

Tel (961) 9 830190/1

Fax (961) 9 830192

• MansouriehMaalouf Center, Opposite P.T.T.,

Main Road

Tel (961) 4 409840/1

(961) 3 740420

Fax (961) 4 409840

• Mar EliasMetco Center, Moussaitbeh,

Mar Elias Str.

Tel (961) 1 818529/30

(961) 1 817770

Fax (961) 1 300617

• Moussaitbeh Al Lou’loua Bldg., Selim Salam Str.

Tel (961) 1 308791/2/3/4

Fax (961) 1 305189

• SaifiAndraos Bldg., El-Arz Str.

Tel (961) 1 442418

(961) 1 585699

(961) 3 650703

Fax (961) 1 442417

• SarbaAntoine & Youssef Kallas Bldg.,

Sarba Highway

Tel (961) 9 640293

(961) 9 640060

Fax (961) 9 640543

• Sin El FilKibinian & Kazangian Bldg.,

Delta Center, Horch Tabet

Tel (961) 1 510571/2/3

(961) 3 650708

Fax (961) 1 481680

• StarcoStarco Center, Bloc C,

Omar Daouk Str.

Tel (961) 1 367346/7/8

Fax (961) 1 367350

• TabarisSNA Bldg., Tabaris Roundabout

Tel (961) 1 203422

(961) 1 328600

Fax (961) 1 201141

• Tarik JdideKassar Bldg., Loubos Str.

Tel (961) 1 702930/1/2

(961) 3 650705

Fax (961) 1 309090

• VerdunVerdun 730 Center,

Rachid Karame Str., 1st floor

Tel (961) 1 788690/1/2/3/4

(961) 3 650709

Fax (961) 1 788691

• ZoukChrist le Roi Center, Zouk Highway

Tel (961) 9 217271/2/3

Fax (961) 9 217271/2/3

> North

• Chekka Faddous Bldg., Main Road

Tel (961) 6 545035

(961) 6 540642/3

Fax (961) 6 545035

• HalbaMarwan Ibrahim Bldg., Main Road

Tel (961) 6 693331/2

(961) 6 692000

Fax (961) 6 692001

• KalamounEzzedine Al Mir Bldg., Main Road

Tel (961) 6 400102/3

Fax (961) 6 400096

• MeryataAyoush Bldg., Ardeh Road

Tel (961) 6 255560/1/2/3

Fax (961) 6 255564

• Tripoli (Abou Samra)Sayadi Bldg., Saadoun Square

Tel (961) 6 424617/9

Fax (961) 6 424611

• Tripoli (Al Mina)Hassan & Hassane Abbas Bldg.,

Bawabet Al Mina Str.

Tel (961) 6 611524

(961) 6 611249/50

Fax (961) 6 611250

• Tripoli (Gemmayzat)Fattal Bldg., Gemmayzat Str.

Tel (961) 6 430011/2/3

Fax (961) 6 625735

• Tripoli (Tell)Gaston Habib Bldg., Kayal Square

Tel (961) 6 442815

(961) 6 441881/2

Fax (961) 6 441881/2

• ZghartaZgharta El-Abbeh, El-Kasr roundabout,

Road 1, El-Kareh & Zakhia Center

Tel (961) 6 667951/2/3/4/6

Fax (961) 6 667956

> Aley & Chouf

• AleySaid Chehayeb Bldg. (DANA),

Next to Telephone Central, Main Road

Tel (961) 5 557042/3/4

Fax (961) 5 557046

• BaaklineAkram El Eid Center, El Marj

Tel (961) 5 303005

(961) 5 301267

Fax (961) 5 303006

Fransabank SAL


> Off-Premises ATM,s

- UFA Insurance, Down Town

- Verdun 730 Center, Verdun

- Verdun 732 Center, Verdun

- Hamra Street

- Caserne El Helou, Mar Elias

- Biel Convention Center,

Down Town

- US Embassy, Aoukar

- United Nations Center,

Nakoura

- Mema Gas Station, Faraya

- Caliprix Supermarket,

Jounieh

- Obeid Supermarket,

Kabrechmoun

- Club La Marina, Dbayeh

• ChehimWehbe Center, Main Road

Tel (961) 7 241916/7

Fax (961) 7 241921

• GhaziehKhalifeh Center, Ghazieh, Main Road

Tel (961) 7 224430/50/60

Fax (961) 7 224480

• JezzineSt. Therese Center, Jezzine Highway

Tel (961) 7 780941 - 780052

Fax (961) 7 780941

• MarjeyounRaef Abla Bldg., Main Road

Tel (961) 7 830139 - 830140

Fax (961) 7 830139

• NabatiehKodeih Center, Sabbagh Str.

Tel (961) 7 760258 - 764264

Fax (961) 7 761750

• NakouraHamzeh Bldg., Near UNIFIL,

Main Road, 1st Floor

Tel (961) 7 460235/6/7

(961) 3 067702

Fax (961) 7 460236

• SaidaFransabank Bldg., Riad El Solh Str.

Tel (961) 7 722180/1/2

(961) 3 650701

Fax (961) 7 721194

• TyrAbou Saleh Bldg., Senegal Str.,

Tyr Main Entrance, 1st Floor

Tel (961) 7 345278 - 345315

Fax (961) 7 345308

• Tyr (Abbasieh)Khalaf Bldg., Jal El Bahr, Main Road

Tel (961) 7 740388

(961) 7 740486

Fax (961) 7 740084

> Bekaa

• BaalbeckMohammad Said El Lakiss Bldg.,

Ras Al-Ayn, Main Road

Tel (961) 8 373150/1

(961) 8 371800/1

Fax (961) 8 370379

• BednayelAli Fouad Sleiman Bldg., Main Road

Tel (961) 8 911124/5

(961) 8 912021

Fax (961) 8 911125

• ChtauraHaddad Bldg., Main Road

Tel (961) 8 541988

(961) 8 542498

Fax (961) 8 543843

• LaboueNear Laboue Square, Main Road

Tel (961) 8 230801/2/3/4/5

Fax (961) 8 230805

• RiyakHosch Hala, Main Road

Tel (961) 8 900333

(961) 8 900444

Fax (961) 8 900107

• Zahle (Barbara)Ghossain Bldg., St. Barbe Str.

Tel (961) 8 811061

(961) 8 803715

Fax (961) 8 822335

• Zahle (Warde)Warde Center, Main Road

Tel (961) 8 800340

(961) 8 821411

Fax (961) 8 810187

> South

• Bint JbeilFransabank Bldg., Saf El-Hawa,

Main Road

Tel (961) 7 450700/1/2/3/4

(961) 3 239092

Fax (961) 7 450701


Group Network

> Lebanon - Subsidiaries & Associate

BLC Bank SAL

BLC Bank Bldg., Adlieh squareP.O.Box 2064-5809 Beirut, LebanonTel (961) 1 387000

(961) 1 429000Fax (961) 1 616984Email [email protected] www.blcbank.com

Fransa Invest Bank SAL (FIB)

Fransabank Headquarters, Hamra Str., 2nd FloorP.O.Box 11-0393 Riad El Solh Beirut

1107 2803, LebanonTel (961) 1 745978/9Fax (961) 1 351030Email [email protected]

Lebanese Leasing Company SAL (LLC)

Fransabank Headquarters, Hamra Str., 9th Floor P.O.Box 11-0144 Beirut, LebanonTel (961) 1 738610/1/2/3

(961) 1 750310/1Fax (961) 1 738614Email [email protected]

Bancassurance SAL

Géfinor Center, Clémenceau Str.,Bloc A, 2nd FloorP.O.Box 11-0393 Beirut, LebanonTel & Fax (961) 1 744403Email [email protected] www.ebancassurance.com

Société Générale Foncière SAL (Sogefon)

Fransabank Headquarters, Hamra Str., 6th Floor P.O.Box 11-0393 Riad El Solh Beirut

1107 280, LebanonTel (961) 1 749418Fax (961) 1 340180


FRANCE SYRIA

ALGERIA

> Fransabank Syria SA

Headquarters & Main Branch Abou Remmaneh Al Mahdi Ben Barakeh Str.

Al Otaki Bldg., Damascus, Syria

Tel (963) 11 33 53 030

Fax (963) 11 33 53 039

Swift FSBS SY DA


Website www.fransabank.sy

Baghdad Str.Baghdad Str., facing Al Horria Institute, Damascus, Syria

Tel (963) 11 23 26 890/1

Fax (963) 11 23 26 892

Al AziziyehAl Aziziyah Str., Shallal Roundabout, Facing Public Garden, Kurdi

Bldg., Aleppo, Syria

Tel (963) 21 22 42 601/2

Fax (963) 21 22 42 603

FaisalFaisal Str., facing Georges Salem Institute, Aleppo, Syria

Tel (963) 21 22 18 265/8

Fax (963) 21 22 18 270

Homs Hachem Al Atasi Str., Plaza Bldg., Homs, Syria

Tel (963) 31 24 56 030/1

Fax (963) 31 24 56 033

Tartous Thawra Avenue, Ali Abdel Latif Ismail Bldg., Tartous, Syria

Tel (963) 43 32 90 60

Fax (963) 43 32 90 64

Latakia West Kornish, Latakia, Syria

Tel (963) 41 45 98 29/30/31

Fax (963) 41 45 99 07

Group Network


> Fransabank El Djazaïr SPA

Headquarters & Main Branch 45B, Lot Petite Provence, Boulevard Ben Youssef Ben Khedda

(Sidi Yehya), Hydra, Algiers, Algeria

Tel (213) 21 48 12 96 / (213) 21 48 27 09

Fax (213) 21 48 12 43

Swift FSBK DZ AL


Oran 1 El-Zouhour Cooperative, no. 12 Cité Dar El Beida, Oran, Algeria

Tel (213) 41 46 09 06

Fax (213) 41 46 09 07

Oran 2 5, ANP Avenue, Hai En-Nakhil, Oran, Algeria

(Opening soon)

Constantine Cité Ali Besbes, Lot G no 23, Sidi Mabrouk, Constantine, Algeria

(Opening soon)

> Fransabank (France) SA

Headquarters & Main Branch 104, Avenue des Champs-Elysées, 75008 Paris, France

Tel (33) 1 53 76 84 00

Fax (33) 1 45 63 57 00

Swift FRAF FR PP



BELARUS CYPRUS

> Fransabank OJSC

Headquarters & Main Branch 95A, Nezavisimosty Avenue,

220012 Minsk, Republic of Belarus

Tel (375) 17 389 36 36

Fax (375) 17 389 36 37

Swift GTBN BY 22


Website www.fransabank.by

Corporate Clients Office 4 Kalvariyskaya Str., 220004 Minsk, Republic of Belarus

Tel (375) 17 211 07 16

Fax (375) 17 210 58 10

Gomel 1 22 Krestianskaya Str., 246050 Gomel, Republic of Belarus

Tel (375) 23 274 91 84

Fax (375) 23 274 53 80

Gomel 25A Krasnaarmeiskaya Str., 246017 Gomel, Republic of Belarus

Telefax (375) 23 275 03 40

Grodno 10, Dominikanskaya Str., 230023 Grodno, Republic of Belarus

Tel (375) 152 77 35 30

Fax (375) 152 77 04 06

Brest 1105/2 Suvorova Str., 224022 Brest, Republic of Belarus

Tel (375) 162 48 56 56

Fax (375) 162 43 30 43

Brest 246 Sovetskaya Str., 224005 Brest, Republic of Belarus

Tel/Fax (375) 162 23 56 05

Lida10 Sovetskaya Str., 231291 Lida, Republic of Belarus

Tel (375) 154 52 88 58

Fax (375) 154 52 54 70

Group Network


> USB Bank PLC subsidiary of BLC Bank

Headquarters 83 Digeni Akrita Avenue, 1070 Nicosia, CyprusTel (357) 22 88 33 26

Fax (357) 22 45 87 53

Website www.usb.com.cy

16 branches subdivided into 5 branches in Nicosia

3 branches in Limassol

3 branches in Paphos

3 branches in Famagusta

2 branches in Larnaca

Group Network

> Overseas Associate > Representative Offices

LIBYA

> Fransabank SAL

Bourj El Fateh, Tower 1, 17th floor, Office nº 174,

P.O.Box 81963 Tripoli, Libya

Tel (218) 21 335 1250

Fax (218) 21 335 1251


CUBA

> Fransabank SAL

Calle 72 no 505 e/ 5ta - Ave. y 5ta, A Miramar Playa

La Habana, Cuba

Tel (537) 204 92 72 - 204 93 05/6

Fax (537) 204 92 73


SUDAN

> United Capital Bank

Headquarters & Main Branch Plot 411, Square 65, Mamoun Beheiry Str., South Green Square

P.O.Box 8210 Al Amarat, Khartoum, Sudan

Tel (249) 183 24 77 00

Fax (249) 183 24 84 90

Swift CBSKSDKH


Website www.bankalmal.com

Khartoum North Plot 130, Square 8, Al Sinaat Str., P.O.Box 1173 Khartoum North,

Sudan

Tel (249) 185 32 44 80

Fax (249) 185 32 40 01

Rabak Plot 390, Square 3, P.O.Box 203 Rabak, Sudan

Tel (249) 572 82 94 80

Fax (249) 572 82 94 81

Nyala Plot 48, Square 7D, Nyala, Sudan

Tel (249) 711 82 34 14/82 38 99

Fax (249) 711 82 39 99


w w w . f r a n s a b a n k . c o m

annual report 2010 - fransabank

Documents