After putting it on the market earlier this year, the Qatar Investment Authority (QIA) in early August completed the sale of BLC Bank, its Lebanese banking asset to Fransbank who won a two-round competition to buy BLC Bank with a $153 million bid, $9 million better than what others had put on the table. QIA retained ownership of BLC assets with relevance for the Gulf financial industry. In an interview with Executive, Fransabank chairman Adnan Kassar said that BLC Bank was one of the oldest in the country with a wide client base and deep roots within the Lebanese business community.
He also hinted that tactically, “the acquisition has advanced our ranking in respect to total deposits from fifth to fourth, and further deepened the gap percentage of other indicators that distance us from other immediate competitors.”
According to BLC Bank chairman Shadi Karam, Fransabank can make the leap to becoming Lebanon’s fourth largest bank by consolidating the balance sheets of the two banks while maintaining their separate brands. Fransabank now owns around $7.33 billion in assets and $6.13 billion in deposits.
Fransabank’s purchase in line with expansion
Local economist Elie Yachoui said that Fransabank might want to restructure BLC Bank and sell it on with a profit at a later stage. He did not see a great value in having a higher spot on the pecking order. “Whether fourth or fifth, it’s all the same,” he told Executive.
When QIA bought BLC Bank in 2005 for $236 million, the bank had been restructured under central bank stewardship from an ill-managed, muddled, loss-making, even shady, bank into an ambitious, forward looking entity. QIA did not divulge its reasons for selling at an undisclosed profit (the lower transaction value reflected the fact that the sale did not include BLC Bank France and its offices in the GCC) but analysts see the move tied to Lebanon’s economic paralysis.
A prominent economist with ties to the banking sector compared the acquisition price for BLC with that for Bank Saradar. BLC Bank fetched almost as much as Bank Audi paid for Saradar a few years ago but Audi got more value for its investment (through Bank Saradar’s high-end client base and asset structure which offered greater potential), he opined on condition of anonymity.
Of course Fransabank sees it differently. Referring to BLC Bank by its older name, Banque Libanaise pour le Commerce, Fransabank’s statement to Executive conveyed that the step is entwined within an expansion strategy that rotates “around two main fully synchronized axes”: an axis of international and regional expansion and a local axis.
The statement pointed to international expansion plans with focus on “selective, potential world markets,” including the existing presence in three foreign countries — France, Algeria, and Sudan — and prospective presence in Syria and Libya (rep office) this year and in Belarus, Iraq, and Turkey next year.
Fransabank said its local expansion strategy, which entailed four smaller takeovers of banks before the BLC Bank deal, was a mix of organic growth and acquisitions with strategic value for blending horizontal and vertical growth. The synergies between Fransabank and BLC Bank would extend to retail as well as to corporate (including small and medium businesses), capital markets, private and investment banking, and asset management.
While Kassar was quoted by the local media as saying that the acquisition of BLC Bank reflects Fransabank’s confidence in Lebanon’s economy and investment atmosphere, sector analysts maintain that the local market continues to offer less growth potential to Lebanese banks than cross-border expansion.
The takeover will not have a negative impact on BLC’s human resources. “There will not be a reduction of staff, but a reduction of operating expenses,” Karam was quoted by the Zawya Dow Jones newswire.
According to Kassar’s statement to Executive, Fransabank does not need to raise additional capital after the acquisition of BLC Bank. “We have financed our local and international expansion from our bank’s resources. Our capital adequacy ratio is in full compliance with the pertinent local and international requirements,” he said.
Neither does Fransabank have imminent plans for going to the Beirut bourse, where BLC Bank is listed. “We believe that listing Fransabank’s shares on the Beirut Stock Exchange is an important manner that necessitates careful consideration of market conditions and sentiments, and securing added value to shareholders’ investment,” Kassar’s statement read.
In Fransabank’s view, there is no room for considering a flotation of its stock because of Lebanon’s political crisis and its severe economical implications, including uncertainty and anxiety created by the power contest.
Kassar, a former minister of economy, had a final word to say about the quagmire: “We hope that the diverse political parties will advance the interest of the country over their own individual narrow interests and revert back to dialogue, as the only venue to reach an equitable political solution and put an end to the current seemingly endless political crisis, consequently allowing the economy to resume its development and growth.”