Two niche markets are driving the business and growth of Jammal Trust Bank (JTB) at the start of 2014. One is in the bank’s home base in Lebanon and the other in West Africa. This diversification is not bad for a medium-sized lender that feels very comfortable being a mid-sized operator with just under $1 billion in assets — but what is surprising is that these two niches are at first sight entirely unconnected and even appear to represent opposite poles of core banking competencies.
In Africa, JTB’s market comprises primarily the expatriate Lebanese business community “in every country that borders the Atlantic starting from Angola and all the way up to Dakar [Senegal]. We are present in these countries in the sense that we have clients there who are basically larger-end clients,” says Anwar Jammal, JTB’s chairman and general manager.
In Lebanon, his clientele is far from big-ticket accounts and corporate transactions. Here, Jammal describes himself as banker of the small and medium enterprise (SME) clientele and JTB as a specialist bank in the much-neglected business of micro-lending, which not only in Lebanon is of no particular interest to the biggest banks. “We cater to SMEs and micro-businesses and in fact were the first bank to initiate micro-lending in Lebanon back in 1999,” he says, differentiating microcredit from small consumer loans by its purpose.
best of both worlds
The common denominator behind the opposing specializations is market knowledge. With most members of his generation in the Jammal family born as Lebanese expatriates in Africa, he claims to have an edge over other Beirut-based banks that approach the market as outsiders.
In the domestic market, JTB nurtured its role to be the “people’s bank” and has developed its expertise in the behavior of small customers ever since conducting a study finding that 50 to 60 percent of the bankable Lebanese population did not bank with anyone. From this study, which according to Jammal was done more than 10 years prior, JTB concluded that it would not try to chase a very small slice of the Lebanese market for large corporate accounts but rather focus on cultivating a clientele among the unbanked population and specifically target those 30 to 35 percent of bankable Lebanese citizens who thought that no bank would be interested to take them on as clients.
The strategy of the two niches has rewarded JTB nicely, with appreciable growth in the past few years. Partial banking sector figures for 2013 up to the month of November have shown JTB with growth across key indicators: seen year-on-year, assets expanded 27.4 percent, deposits grew 20.5 percent and lending increased by just under 27 percent. Net profits shot up tremendously, by 182 percent, but this has to be attributed to a large drop in exceptional expenses from the same period in the previous year, Jammal tells Executive.
While full-year results for the Lebanese banking sector in 2013 were not yet available at the time of the interview with JTB, last year’s partial sector results retrospectively provide a nice frame for the bank’s 50th anniversary near the end of last year. In a wider look over JTB’s financial evolution over the period since Anwar Jammal assumed the bank’s chairmanship in May 2005, growth rates showed broad strength. “Our average yearly growth of loans from 2005 till last year is 19.4 percent, average growth of total assets is just under 11 percent and the average growth of deposits is about 13.4 percent,” he says, adding that this pace of development allowed JTB to move its ranking by size of assets up by about 10 positions since 2005, to 23rd or 24th place in the sector.
Notwithstanding the growth rates that JTB recorded since he assumed the chairmanship in family succession, Jammal insists that he made no fundamental changes. “I can’t say that I have done anything innovative. We basically streamlined ourselves and focused ourselves on our core banking business. We tried not to be anything other than what we are: a medium-sized bank and we cater to the SMEs of Lebanon.”
He appears, however, to be prone to understatement in a very British way. Moreover, besides its dual market focus there is a second combination of seeming contradictions in JTB’s corporate DNA that is linked to his chairmanship. Jammal is not only the bank’s chairman and general manager; he also is its controlling shareholder since 2005. But while this combination is as close to operational omnipotence as it can get for a banker, the heir of JTB explains that he instead created a new governance structure with a board whose members, apart from him, hold no executive positions in the bank.
“I gave full power to the board, believe it or not. When I took over the bank, the powers that the chairman general manager actually had were frightening. I said to myself we either come out of this particular cycle to have a professional institution or maintain a small family-run business mindset. The first decision was that we want to go into being a professional institution, so I rescinded most of the authorities that I had and gave to the board,” Jammal explains.
Looking forward to the coming years, he foresees no diminishing of demand for credit in Africa and expects that the bank’s lending growth abroad will be curtailed by central bank-set limits for lending in countries with lower sovereign ratings long before any slackening of demand from borrowers.
Demand from SME borrowers and micro-credit applicants in Lebanon is also not going to wane in Jammal’s expectation and he assesses this market segment as less likely than others to be impacted by the continuing economic challenges related to the Syrian crisis.
SME lending constitutes the bank’s most important domestic credit activity, with a total amount of LL74 billion ($49 million) in lending to SMEs in 2012, followed by housing loans at LL69 billion ($46 million) and corporate loans at LL67 billion ($45 million) and SME loans were also the fastest growing loan segment between 2011 and 2012, displaying a year-on-year growth of over 60 percent from LL46 billion ($30.5 million) in 2011.
just the right size
While Jammal says that micro-lending is actually less risky than consumer lending in terms of default, he concedes that dealing with this clientele, many of whom have never banked before, makes the credit business much more labor intensive, which is reflected in higher interest rates. While reluctant to divulge the premium in interest rates that his bank charges over common market rates in Lebanon, the JTB chairman is adamant to compare the bank’s loan offers to those of non-banking money lenders. He emphasizes that prior to JTB’s focusing on micro-lending, small borrowers had no alternative to dealing with loan sharks and their extortive interest charges.
For developing the micro-credit and SME credit business of JTB, Jammal says the bank has a strategy to lower costs by automating and streamlining delivery and at the same time attracting more borrowers. He adds that this two-pronged approach is supported by risk assessment processes that the bank has developed on the basis of its experience with borrowers and which enable the bank to calculate credit scores in the profiling of loan applicants.
While he is decidedly working for growing the business of JTB — and in the long term aims to dilute the family aspect in the bank’s shareholder base by bringing in new shareholders — Anwar Jammal is one Lebanese banker who wants to profitably remain situated in the upper tiers of the beta banks (with deposits between $500 million and $2 billion). To him, going alpha would mean losing the bank’s competitive edge. “For as long as I am chairman, I certainly don’t want JTB to be one of the top 10 banks in Lebanon,” he says.
