Samih Saadeh is general manager of Lebanon’s 18th largest bank, Banque BEMO, and has been with the bank since 2003. He started working in the banking industry in 1978 and has been a senior executive at American Express Bank-Beirut, Bank of Beirut and ABN AMRO Bank.
Bank BEMO has total assets of $1.05 billion, and if the bank’s Syrian affiliate is included, some $3 billion. In the first half of 2009, the bank’s total assets grew by 15.6 percent. Executive sat down with Saadeh to talk about his bank’s success and gain insight into the role smaller banks play in Lebanon today.
E As a medium sized “beta” bank, how does your strategy differ from an alpha bank? What are the top priorities on your agenda?
This is a board decision, it’s the oversight of the bank. We compare our private banking to Bank Audi Saradar sometimes, yes, [but] on a smaller case though, because they have larger capital and client base. Certainly when you have a universal bank you have a larger client base, which allows you to make more money and to be more exposed.
What we’re trying to do on a smaller scale is have a boutique bank, instead of having a universal bank. I respect everybody’s strategy, I probably agree with other’s strategy sometimes — because it’s faster to make money and grow — and you come to BEMO and you see it’s very little and a bit slower.
If you want to be a private bank in this country, you really have to have political stability. If people want to believe in putting money with you, you don’t have to rely on the locals. I hope one day the political stability arrives, but this is one of the missing links in the chain to complete the services of Lebanon as a financial center. All of the potential that Lebanon has is not prospering because of the political instability. People want to trust this bank in 10 or 20 years, and this is what we are betting on. We want to build this; we want to complete this closed chain in Lebanon.
E Now, how to survive? Bank Audi, for example, has built a lot of things around their vision and one of them is private banking.
Corporate banking and retail banking need a lot of capital. You need to either open capital or get other investors. Private banking, in reality, doesn’t need a lot of capital. It needs a lot of know-how, conservatism and trust.
E What kind of customers do you cater to?
We as BEMO have a different strategy than Lebanese banks. We don’t want to play volume. We would like to grow, certainly, but if you want to grow you have to have large capital and to possibly go into retail banking. You also have to have a strategic vision for the bank, which allows you to be like any other bank. In Beirut, we’re very specialized. Our motto is ‘corporate and private banking.’ We don’t do retail banking — we do to an extent though.
Recently we started to buy some Lebanese government sovereign paper. If you want to collect deposits and you don’t put it in a sovereign bank, you have to lend it. You are bound by ratios as well, on how much you lend. There is a limitation to how large we can grow in volume. So we always look at how much we can grow in fee income, not how much we can grow in volume. Even if I get a large deposit today, I lose a lot of money. Either you put it in the government, outside, or with the central bank. Even if the central bank pays for you half a point — you lose a lot of money.
Originally Lebanese banks collected deposits — they lent around 50 percent and placed with the government and the central bank up to 55 percent. We, on the contrary, have 25 percent with the central bank, and with the government we have 3 percent to 5 percent, not more. This is why growth is a limitation to us. If you compare us to the rest, we are a beta bank in volume, but our strategy forbids us from being an alpha bank, even if we wanted to.
E How has the bank’s strategy changed since the global financial crisis struck and now after?
Banque BEMO has always had the strategy to grow to be a private bank whereby we would be acting as a financial advisor for every high net worth individual throughout their life — no matter what stage they are in. If you want to act as a financial advisor, you need to build the reputation. Building this reputation takes decades actually. We’re building on the heritage the Obegi family has, for the last 50 years. Now we have another decade to work on, to earn this trust from the people. Also, we use a business model of relationships. That means every client has his own financial advisor or relationship manager.
When the financial crisis came — and this is an approach to private banking — people stopped dealing and we make a lot of money on people making deals. So part of our income was hurt… Now, it’s catching up, thank God, the trust is starting to be rebuilt. People are getting into the market.
On the corporate side, we didn’t suffer at all. We had a certain amount of money lent, and we had lent it. In percentage, we are the highest lent bank to corporates in the country. We are lending around 45 percent of our total assets to corporates. We don’t go into the government too much.
Private banking income was a little bit on a standstill. We hope that it will catch up again.
We didn’t change our strategy, it stayed the same… we just weren’t aggressive in pursuing it in the last year. But the board decided that strategically this is what they want. They want to stay as a private, corporate bank.
E Since the financial crisis, how has your advice to your clients changed? What are the most common investments you tell them to make?
Frankly it’s not easy to let them come back. Everybody lost, depending on the extent of the loss — nobody can claim they didn’t lose… If they bought their portfolios five, 10 years ago or two years ago they probably didn’t lose — the starting point is most important [factor]. We are inviting them to come back because the markets are starting to pick up, there’s a lot of opportunity. But, be prudent at least. You have the safe investments, if you go into medical and commodities. There are aggressive and risky investments like financials. Depends on your profile. We always split our client base into categories.
E Recently, the International Monetary Fund said Lebanon’s economy could grow much faster than their previous projection of 4 percent. But, the IMF emphasized that the top priority for Lebanese banks should be dealing with the public debt. What is your take on this?
This is quite a thorny issue. Who is right? Imagine if the banks didn’t give money; what would have happened? Also, imagine that we didn’t have this flagship of the economy — the banking sector — nobody would have heard of it. The economy is built on the financial sector.
Certainly, the financial sector is benefitting from lending to the government, but it’s also to the benefit of all stakeholders. We were saved from the financial crisis because our debt was local. Lebanese banks cannot stop financing the government; it’s in their interest now.
For me, the public debt is the least thing we should worry about. If we spent the same time talking about the debt on increasing productivity, the GDP of the country would soar.
Recently, Lebanon’s GDP increased to $33 billion; it could be $50 billion! This year we have a growth of 6 percent, when everyone else around the world is suffering negative growth. Imagine if there was political stability; the growth could be far higher.
Debt is not a problem as long as you generate productivity!