Life’s good in insurance
Lebanon’s life insurance industry should see significant growth in the coming four years, says Business Monitor International (BMI). Between 2011 and 2015 the independent research and analysis firm expects double-digit growth for Lebanon’s life insurance market, as well as those of other Middle Eastern countries. The underdeveloped nature of the regional insurance market has kept growth estimates high for years. BMI estimates that Lebanon’s insurance premiums totaled $1.26 billion last year, with non-life premiums amounting to $859.7 million and life premiums $399.3 million. Further, the company extrapolates that by 2015, premiums will total $2.1 billion with $1.4 billion in non-life and $691.4 million in life premiums. BMI’s report further predicts that the penetration of life insurance should increase to $155.63 per capita by 2015, from $95.28 per capita in 2011. The BMI report touted the success of companies like MedGulf and Arabia Insurance, which have expanded into multiple countries in the Middle East.
Lebanese commercial bank deposits fall
Lebanese commercial bank deposits witnessed a 1 percent month-on-month decrease in January 2011, according the latest figures from Banque du Liban, Lebanon’s central bank. Deposits totaled $106.13 billion in the first month of 2011, dropping from $1.08 billion at end-2010, compared to a $225 million growth over the same period a year earlier. Withdrawals by non-residents, amounting to $779 million, accounted for most of the decrease in deposits, while residents’ deposits fell by $297 million. The dollarization rate increased 2.1 percent since end-2010, as significant local currency withdrawals of $2.55 billion offset an increase of $1.48 billion in foreign currency deposits. Lebanese banks’ overall consolidated balance sheet also contracted by 0.4 percent in January 2011, as deposits made up 82.7 percent of the balance sheet. The contraction was also accompanied by a 1.1 percent expansion in lending activity. Loans grew by $377 million in the first month of 2011 as those extended to non-residents rose by $616 million. Meanwhile, a $239 million drop in loans granted to residents reflected a prevailing wait-and-see mood amongst Lebanese consumers and investors, amid escalated political tensions in the country and in the region.
Multi-billion dollar Etisalat-Zain deal falls through
Abu-Dhabi based Etisalat has scrapped plans to acquire a 46 percent stake in Kuwaiti telecom company Zain, estimated at $12 billion. Etisalat’s statement on March 19 mentioned due diligence results, political turmoil, disagreement among Zain shareholders and new Kuwaiti bylaws binding offers as reasons behind the company’s decision. The deal has been beset with obstacles since talks were initiated in November 2010. In late February 2011, National Investments Company ended its commitment as the deal’s architect after Zain had rejected three bids for a stake in its Saudi Arabia unit, valued at $750 million. The sale of the 25 percent stake was a term for the merger as regulatory authorities prohibited Etisalat from concurrently owning its Saudi affiliate Mobily and Zain KSA. At the time, Etisalat reiterated interest in the deal, offering a maximum of $6.11 per Zain Group share. On March 13, Zain’s board accepted a joint offer by Kingdom Holding and Bahrain Telecom Company (Batelco) for its Saudi assets, reviving hope for the separate deal with Etisalat. The offer is worth a total of $5 billion, out of which Kingdom and Batelco will pay $950 million in cash, and cover $3.8 billion of debt. Zain KSA will pay for the remaining $250 million. Both Kingdom and Batelco are still committed to buying Zain’s Saudi operations. All three were slated to sign a preliminary contract, including a breakup fee, at the end of March.
BDL cleans up
Established for anti-money laundering purposes by Banque du Liban (BDL), Lebanon’s central bank, the Special Investigation Commission (SIC) issued its 2010 annual report this month. The report revealed 254 suspected money-laundering cases, out of which 65.3 percent were local and 34.7 percent were referred from abroad. The results indicate a 25.7 percent increase in alleged dirty money cases since 2009, and a record since 2003, when 272 cases were suspected. Out of the 189 cases investigated by the SIC, 119 were referred to judicial authorities while 70 cases did not fall under the framework of Law 318, the anti-money laundering law. Accordingly, BDL lifted banking secrecy on 23 cases, 21 of which were domestic. Forgery accounted for 21.16 percent of the investigated cases, followed by terrorism and financing of terrorism at 12.7 percent, trade of narcotics at 4.23 percent, organized crime at 1.59 percent and embezzlement of private funds and illegal arms trading, at 0.53 percent each. The remaining 56 percent were not categorized. Local sources, financial investigative units as well as the United Nations and foreign embassies provided a combined 103 names for 22 cases related to terrorism. Institutions including commercial banks, insurance companies, brokerage firms and financial institutions were also examined by the SIC to monitor compliance with Law 318.
Big banks investigated over LIBOR Rate
American, Japanese and British authorities are focusing on major international banks as part of an investigation into the manipulation of the London Interbank Offered Rate (LIBOR) during the 2008 financial crisis. Japanese and US regulators have subpoenaed Barclays, UBS, Citigroup and Bank of America, while WestLB has also received requests for information. Swiss UBS’s 2010 annual report shed light on the investigation, disclosing that the US Securities and Exchange Commission (SEC), the US Commodity Futures Trading Commission (CFTC) and the Japanese Financial Services Authority (FSA), had subpoenaed the bank. Regulators are probing into whether UBS and other major borrower banks have colluded to set their interbank rates too low during the financial crisis to comfort spooked investors and downplay their borrowing costs. LIBOR is calculated by Thompson Reuters for the British Bankers’ Association (BBA), pooling interest rates that banks expect to charge or pay each other for dollar and other currency loans, and calculating their average. The rate is considered a global benchmark rate to price derivatives and financial instruments, and is referred to by more than $350 trillion worth of financial products worldwide. Data reviewed by regulators initially lead to the investigation, signaling a divergence between banks’ low offered rates and their high credit risks during the financial crisis.
Port profits surge, Dubai World reaches debt deal
Dubai World, which announced in November 2009 a standstill on nearly $24 billion in debt, said on March 23 that a final agreement has been signed with almost 80 creditors to restructure its debt, now totaling close to $25 billion. The agreement divides Dubai World’s bank debt into two tranches, with $4.4 billion to be repaid over a five-year period and the remaining $10.3 billion over eight years, with a fixed interest rate of 2.4 percent, described by Bloomberg as “below market.” The remaining debt, owed to the Dubai government, will be converted into equity. On the same day, DP World, a ports operator subsidiary of Dubai World, said its 2010 profits rose 35 percent to $450 million, driven by volume growth in the second half of the year and cost controls. This year is also shaping up nicely for one of Dubai World’s largest holdings, according to DP World executives. “In the first two months of 2011 we have seen 12 percent volume growth across our consolidated portfolio with further margin improvement from the full year 2010,” disclosed DP World’s CEO Mohammed Sharaf.
QIIB to buy out Islamic Bank of Britain
Qatar International Islamic Bank (QIIB), a Qatar-based sharia-compliant bank, announced on March 17 that the bank is undergoing negotiations to complete the purchase of a minority stake in the Islamic Bank of Britain (IBB) with assets of $350 million. QIIB, which boasted assets of $5 billion at the end of 2010, already holds a 80.95 percent stake in the British Islamic lender, and is offering one pence per share for the remainder in a deal that values the IBB at $40.9 million. According to QIIB, the board of directors of IBB has already approved the terms of the offer, although it represents a 70 percent discount on the British bank’s market price. The IBB’s official website listed Qatar’s Sheikh Thani bin Abdulla with a 6.44 percent equity stake as a shareholder and the bulk of the remaining 12 percent in public hands. QIIB’s growth is expected to accelerate following the Qatari central bank’s decision to prohibit Islamic banking branches at conventional lenders by the end of 2011. Earlier in March, QIIB received approval from its shareholders to issue sukuk (Islamic bonds) to boost capital if needed, giving the bank more capacity to potentially acquire Islamic assets from conventional counterparts.
Egypt’s banks get bumped
Moody’s Investor Services, a global credit ratings agency, on March 21 downgraded by one notch from Ba3 to B1 the foreign-currency deposit ratings of Egyptian state-owned banks National Bank of Egypt, Banque Misr, Banque du Caire, as well as privately-owned Commercial International Bank, and Bank of Alexandria. Local-currency deposit ratings for the three state-owned banks were also dropped two notches, from Ba1 to Ba3, and by one notch to Ba2 for Commercial International Bank. Exposure to lower-rated government debt along with deteriorating economic conditions prompted a decline in the standalone credit strength of the affected banks. Furthermore, the ratings agency pointed out that the downgrade of Egypt’s sovereign rating limits the country’s capacity to support its banking system. But the government is taking action to bolster its financial position. According to an EFG-Hermes report, Egyptian Finance Minister Samir Radwan told Egypt’s Al Mal newspaper that the country has requested a $5 billion loan from the International Monetary Fund.
