Before 2006, Near East Commercial Bank (NECB) was going nowhere. “There was no increase in revenues, no increase in assets — no increase at all,” said Dominique Lang, the Swiss banker who has acquired the task of reviving it. “It was, in our opinion, a dormant company, but it had a good name and good staff.”
Where the Central Bank saw a stain on Lebanon’s thriving banking scene, Lang saw an opportunity.
Playing the long game
Lang, a Swiss banker for nearly 30 years and chairman of Nomina Finance in Zurich, and his business partner Alfred Wiederkehr finalized the acquisition of the bank in April of this year — a deal nearly 10 years in the making.
NECB has been located at the Place de Beyrouth since 1978 when SNA insurance group owned it, before the Caland family took control.
Since 1993, Lang had been aware of Lebanon’s banking potential through a business relationship with the Caland family, and he became a shareholder at NECB when he and Wiederkehr wholly subscribed to a $9 million capital increase at the bank in 2006, gaining a 43 percent stake. Lang remained a shareholder until 2007, when the Central Bank began putting pressure on NECB to shape up its neglected balance sheets. He then became chief executive and soon enough, the sleeping bank began to show signs of life.
And indeed, the Central Bank’s concerns were not unwarranted. At end-2007 NECB had $142 million in assets and just $17.6 million in loans, with 40 percent of these considered “doubtful” and 10 percent classified as “bad debt.” The bank posted $3 million in losses that year.
But soon after Lang took over the management of the bank, he began to clean house.
“The bank had a big portfolio in real estate which was bringing in no money so we sold the biggest part of this portfolio. The operational result was then in the black,” he said.
Lang dropped most of this underperforming portfolio in favor of much higher-yielding treasury bills. This move significantly improved the bank’s interest margin and sped up the transition from red to black. The recovery was helped as well by the fact that NECB managed to spend significant time in red figures without losing a single depositor — a feat Lang attributes to the relationships between bank staff and clients.
In 2008 the bank made $283,000 in profits; 2009 saw more growth to almost $2 million. And according to Lang, the bank has already generated $2.6 million in profits for the first half of 2010 “The bank is now back to a normal situation,” he said.
It was this success in bringing NECB back from the brink, combined with the owning family’s dwindling interest in the bank that led Lang and Wiederkehr to buy the remaining 57 percent of the bank. The decision was made in January of 2010 and the deal, the value of which both parties have agreed not to release, was approved by the Central Bank in April.
According to Lang, the central bank was very receptive to the acquisition. He says that the close involvement of the Central Bank and Banking Control Commission (BCC) with regards to strategic planning has helped, and was not a hindrance as some of the bigger banks often complain.
Now Lang has the job of improving the bank past mere profitability. A feasibility study is currently being conducted regarding the opening of two new branches in Beirut and Lang plans to continue the bank’s niche profile, focusing mainly on retail and private banking. He plans to focus on small and medium loans (ranging from $50,000 to $500,000) as smaller loans have a better profit margin and entail much lower risk.
Further, Lang says that the banking secrecy law and the know-how within the sector are good selling points to international clients.
“We see a slight demand from people in Europe, in Switzerland, to have an alternative to banks in Europe for the secrecy,” he said. “Lebanon is one of the remaining countries that has a law for banking secrecy. Until now we have brought [international] private clients for an approximate amount of $250 million.”