Despite the challenges of 2013 BLOM Bank has maintained significant growth thanks to its ability to react to developments in Lebanon and the region. Saad Azhari, the bank’s chairman and general manager, shares his experience and looks to 2014 with Executive.
Tell us a bit about the performance of the bank in 2013.
Our nine month results [show] an improvement; the profits of the bank increased 4 to 5 percent. There was also growth in assets, in deposits and in loans, so overall I would say a moderate growth of around 5 percent [across] the balance sheet.
What is your take on the macroeconomic situation?
For sure, if the situation of the economy was better we would have had higher growth. Normally it is better. The economic growth in the country estimated this year is around 1.5 percent, definitely much lower than we have seen between the years 2008 and 2010 and a similar level to last year. Due to the small growth [in the country] we are having a small growth in the balance sheet of the bank, and in the results. We hope that the situation improves.
What are the opportunities for the bank in these harsh economic times?
We are a full service bank. We are growing all businesses we have. We are growing our commercial banking activity and we are growing our retail banking activity. Definitely the highest growth we have is in the sectors where the central bank is helping out. The central bank as you know made a big effort in terms of providing — effectively subsidizing — housing loans. And the biggest growth in terms of lending is in housing loans.
How has this affected the loans-to-deposit ratio?
Loans have increased already compared to last year — 5 to 6 percent. In loans to deposits, there was a slight increase in the ratio.
In terms of investments, what sectors are you looking at?
The biggest investment banking activity we have is being done in Saudi Arabia. Activity in Lebanon was limited in terms of investment banking due to the situation. So the biggest activity in investment banking that happened for us was in our BLOM Invest Saudi Arabia where we have been very active in a lot of deals including real estate funds — we have created several real estate funds in Saudi Arabia.
In Lebanon, we have increased our activities in terms of asset management and in terms of private banking, but the opportunities for investment banking were really very limited.
From an industry level, what would you consider the biggest challenges?
The situation of the bank is relatively good, and we are trying more and more to expand our operations overseas. In just the next few weeks we are entering the Iraqi market. We will be opening our Baghdad branch effectively next week. In Erbil we will be opening our branch in March. We are strengthening our presence in the countries that we are present in.
The only area where we had a retraction of our activity is in Syria. The bank in Syria, due to the situation, definitely faced important challenges. But really we have managed to scale down our operation. Our lending in Syria two years ago was around $650 million. Now it’s around $40 million. So we are able to lower the size of our portfolio, and at the same time operationally we are still profitable.
Our positive experience in Syria during the crisis, [is that] the first thing [our loan customers did was] to close their loans, [which] really gave us a lot of confidence that in the future, when the situation stabilizes, we will definitely rapidly expand our activity in Syria. People respected their engagements and repaid their loans when the situation was very tough. This shows how the Syrian businesspeople are; they really care for their reputation. And this gives us a lot of courage for the future to deal with those customers again when the situation stabilizes in Syria.
What would you like to see happen in 2014?
Well, a lot of things. The biggest problem is the instability in the region that has affected Lebanon. And definitely we hope that there is an improvement in the regional situation which will [hopefully lead to] an improvement in the Lebanese situation. That’s wish number one.
On a financial side, I would say one of the disappointments this year is an increase in the deficit of the government…This year it’s the first time in a while we have seen our debt over gross domestic product go up.
Even a caretaker government can take measures to improve revenues.