"I’m much happier in Beirut than in London or Sydney or Melbourne. We belong to our roots,” says Salim Sfeir, chairman of Bank of Beirut (BoB), Lebanon’s seventh largest bank. Sitting in the bank’s headquarters in downtown Beirut, Sfeir is freshly returned from his latest trip to Australia, a country his bank has taken a big bet on.
Lebanon’s banks have been exploring expansion beyond their borders for a while now. To reduce the sovereign exposure and generate more lucrative returns some have set up shop in Iraq, Syria, Paris and Geneva, or looked to the African continent, including Egypt. BoB’s strategy was different; go where its counterparts were not present. And that’s when the bank set its sight on a country over 12,000 kilometers away.
Sfeir expects the bank’s balance sheet in Australia to outweigh that of Lebanon in the next five to 10 years. Currently one sixth of BoB’s $12 billion in assets are located in Australia, where profits are expected to increase by 40 percent this year.
The bank has come a long way. When Sfeir and a group of investors acquired it in 1993, BoB’s assets ranked 35th out of the 71 banks present at the time. Since then, it has expanded significantly in the local market and acquired several local banks over the years, including Banque Libano-Bresilienne, Mebco Bank, Beirut Brokers Company and Transorient Bank. But along the way, it lost its appetite for swallowing up local peers. “When you reach a certain size, acquiring another bank does not give you an added value because most banks have the same customers; 20 percent of the customers account for 80 percent of the business and we see them at most banks,” says Sfeir, adding that the banks that are for sale are not of the best quality.
Crossing Frontiers
Overseas, beyond Australia, BoB has expanded to just one country in the Middle East — Oman — and three in Europe — Germany, the United Kingdom and Cyprus. It also has representative offices in Nigeria, Iraq, Dubai and Qatar. “We look for places where our colleagues are not present because our markets are very small. In Paris, there are five to six Lebanese banks sharing a very small pie,” says Sfeir. Even when the dust settles in Syria, it is not a country he is looking to tap into.
Sfeir insists the bank has remained true to its roots
His strategy seems to be paying off. While Lebanon’s banking sector continues to ride the economic shocks from a fatigued domestic economy and the ongoing conflict next door, the sector’s profitability growth has taken a hit. But BoB has bucked the trend, netting a 15 percent profit in the first six months of the year versus just over 1 percent for the alpha banks — the 13 largest banks with deposits over $2 billion. As of September this year, the bank raked in $93 million in profits, after bringing in $118 million last year when it registered a 13 percent growth versus 8 percent for the alpha banks.
A similar rosy picture is painted by the growth in total assets and customer deposits in the first half of the year — 16 and 17 percent respectively — the bank outgrew the sector by around 7 percent on both key figures. Being the leading local bank in trade finance, opening over $6 billion in letters of credit in 2012 and accounting for just under 30 percent of the alpha banks market share, also helps.
While BoB has set its sights on expansion in further countries — to be revealed only once the plans are concrete — for now 80 percent of the profits still stem from Lebanon. Like the rest of the country’s banks, the key hindrance to further growth remains the country’s political situation.
“It is regrettable that a place like Lebanon is so unlucky with its political environment because Lebanon could have played an extraordinary role in the region, but regretfully our politicians did not take this into consideration, both the old ones and the present ones” says Sfeir. With such a backdrop, Sfeir has no choice but to continue flying back to faraway shores in the quest for the growth missing at home.
