Hadi Naffi is the executive general manager of Banque Misr Liban (BML). Naffi sits with Executive to talk about strategies for a small bank to remain competitive in the Lebanese market, and the impact of turmoil in Egypt.
Tell us about the performance of the bank in 2013.
Our deposits increased by over 12 percent in the first 10 months of the year. Our advances to the private sector, the credits to the clientele increased 16-17 percent. The situation is healthy, the situation is good for now. We are making profits but we are not making as big profits as we could have expected in a flourishing economic situation, that’s all. The times are tough, we are fighting, we are working hard, but our numbers are good. We have witnessed a serious development of our bank.
In Lebanon there are five large banks that alone dominate 60-65 percent of the market. When you think that in total there are 49 banks in Lebanon, of which 10 control up to 85 percent of the market, the others have to fight for the remaining 15 percent of the market.
When we arrived [on the scene] in 1929 BML did not even represent 0.5 percent of the market. Today, despite its growth, we only represent around 1.1 percent of the market. That’s nothing.
Have the developments in Egypt had a negative impact on your bank?
None. None because it is Egypt that invests in Lebanon, we don’t invest anything in Egypt. We are completely autonomous, and the flow of investments [means it] is the Banque Misr in Egypt that invests in the capital of Banque Misr Liban. The BML doesn’t invest anything in Egypt, doesn’t give credits to Egypt.
What were your largest investments in 2013?
We have made many investments that are not apparent, we have invested in technology, in the sense that we are updating our IT platform.
We also invested in the workflow of operations within the bank to ensure a higher quality of service to the clientele.
Today we are in very tough competition between banks. The only thing — the only value added thing — that one bank can have over another is to offer a more sophisticated service which responds better to the needs of the clients. The more sophisticated it is the better equipped we are to participate in an active competition.
Small banks, when they are dynamic — such as the Credit Bank led by Tarek Khalife — the reason they are dynamic is because they want to attract capital which will allow them to take a bigger share of the market. To what extent does BML have this option?
Dynamic banks, such as Tarek Khalife’s…they see big. They have reason to see big. They tell themselves, ‘by staying dynamic I will be able to show that [others] have an interest in joining me.’ This is normal. The only difference between Tarek Khalife and BML is the following: Over there it’s under the control of the family of Tarek. Here it’s under the control of an Egyptian financial institution. The decisions within Tarek’s bank will be made more easily.
So would the idea of augmenting capital and having a more aggressive strategy work?
It exists, but I will explain one thing. When I arrived here at the end of 2007, the capital was LL27 billion — a little less than $20 million. In 2009, I asked for an increase in capital. We brought it to LL100 billion. Today, we don’t [increase capital] because we don’t need it. We know that the Basel II and Basel III calls for capital adequacy ratio of liquidity coverage rate and all of that and we have completely conformed. Certainly we will need to increase the capital when there is an increase in activity, but this will come with time.
Today the Banque Misr in Egypt is subject to compliance with regulators there. To what extent, on a regulatory level, do you have to accommodate?
Today, we are living in an environment of globalization, a world of globalization. All regulators, worldwide, in the emerging countries and in the developing countries, are referring to the recommendations of Basel committees. Basel II and Basel III have [put forward] many recommendations, some very complicated. But in all cases, all regulators are applying them, though in different ways. But at the end of the day it’s the same regulation everywhere. This problem is not raised [for our bank] at any time because actually [we all follow] the same regulations. It’s all based on the Basel committee.