Banks with buying power

profiles ten alpha banks that might be

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Last month’s issue of EXECUTIVE profiled the 10 mostly likely medium and small Lebanese banks to be acquired or merged. As we now seek to identify the potential acquirers, we shift our spotlight towards the banks financially capable and strategically oriented to undertake M&A activities on the buy-side of the table.

Due to the concentration of assets and deposits towards the top of the table, however, the spotlight falls only on the Alpha group of banks, and of those, only some enjoy the combination of all the factors that would render them eager and willing to go down the acquisition path. Before attempting to identify banks that fit such a profile, it is essential to identify the main criteria required to become part of this exclusive “buyers” club.

As is the case with anything in life, members of the club should be “willing and able” to go down the acquisition road. Being “willing” means having an expansion oriented strategy, be it geographical expansion, services expansion, or other forms of expansion. Moreover, such a strategy should be keen on “non-organic growth,” through the acquisition of existing institutions that would help cross milestones faster. Surely enough, being “able” means having sufficient financial resources to undertake such monetarily demanding transactions. Recent years have witnessed a number of new share and debt offerings by major banks, with the primary purpose of funding acquisitions and expansion.

Looking at the “willing and able” candidates, the list shrinks down to the following 10 mostly likely players.

Banque Audi – Saradar

Beginning at the top of the list of banks in Lebanon, Audi-Saradar raced to the top following the closure of the merger between the two banks in mid-June 2004. Resulting in the largest bank in Lebanon, Audi’s acquisition of Banque Saradar accomplishes Banque Audi’s long-lasting favorable outlook on growth from acquisitions. Banque Audi has undertaken significant acquisitions in recent years, beginning with the acquisition of Orient Credit Bank in 1998, Lebanon Invest in 2001, and culminating with the largest acquisition in the history of the banking sector in Lebanon: Banque Saradar in 2004.

Banque Audi – Saradar has become a full-service financial institution, with strong retail and corporate banking operations complimented by a strong and geographically diversified private banking division inherited from Banque Saradar. Moreover, the bank is certainly seeking to expand overseas, operating branches in Jordan, France, Switzerland, and potentially the Gulf.

On another note, Banque Audi – Saradar enjoys one of the highest liquidity levels in the banking sector in Lebanon. The bank enjoys cash levels in excess of $4 billion, in addition to more than $1 billion deposited at other banks. Such liquidity levels far exceed the funding requirements for the acquisition of any local bank.

As such, Banque Audi-Saradar is surely “willing and able” to undertake new acquisitions. It remains to be seen if such activities have been put on hold recently. In fact, the acquisition of Banque Saradar earlier this year is Audi’s largest ever, and will certainly take time to fully digest. Consolidation in a typical merger of that size could take anywhere between 18 months and two years, and as such, the bank is likely to put any other options on hold until then.


Known for more than two decades as “the largest bank in Lebanon” BLOM Bank has been displaced to second position following the Audi-Saradar merger. Shear size has historically been BLOM’s strongest asset, priding itself as having the scale to sustain any shocks in the highly unstable local and regional socio-political and economic environments. While the bank remains significantly large by local standards, it is dwarfed by the major regional banks attempting to gain a foothold in Lebanon. It remains to be seen, however, if BLOM’s management, led by the bank’s founder’s son, Saad Azhari, is seriously considering a scale-oriented strategy to regain its lead over Audi.

Should that be the case, the most rapid way to gain size in the financial industry is through the acquisition of other institutions. Nevertheless, BLOM Bank has historically been absent from the M&A arena, not having undertaken any major acquisition in the sector for years. While this may have been the reason behind other banks catching up to it, BLOM’s management has expressed no intention to seek size through anything other than “organic growth.”

Byblos Bank

Byblos Bank was one of the first Lebanese banks to undertake acquisitions during the peak years of the country’s reconstruction era. The bank acquired the Credit Bancaire du Moyen Orient in 1996, and followed it by the acquisition of Wedge Bank in 2001, and the local operation of ABN Amro in 2002.

Such acquisitions shed some light on the bank’s strategy, as the acquired banks do not really provide Byblos with a significantly wider branch network, but do provide the bank with strength and development in areas where they seemingly lacked. Currently the third largest bank in the country, Byblos Bank is still busy digesting its latest acquisitions while consolidating its retail banking operations. The bank does enjoy a high liquidity level, with cash and deposits at other banks in excess of $3 billion, surely more than enough to undertake M&A activities in the local market. Nevertheless, such activities are likely to be delayed for another two to three years, as the bank is also currently focusing on establishing a presence in Africa, with the first Byblos branch in the Sudanese capital of Khartoum set to become operational in early 2004.

Banque de la Méditerranée

Despite priding itself as being one of the strongest diversified financial groups in the country, and its close affiliation to Prime Minister Rafik Hariri, the bank has also opted to stay away from growth through acquisitions over the past years (the purchase of Allied Bank was too small too represent a new strategic direction). The bank is currently focused on expanding the range of services it provides, maintaining and perhaps gaining market share, and consolidating its operations in the highly unstable domestic environment. The bank’s revenue base remains traditionally interest-driven, with more than 80% of income from interest revenues. Moreover, the bank has a history of investing the majority of excess funds in government T-Bills, which account for more than 30% of total assets. With such a structure leaving the bank with around $1 billion in available cash, it underlines the bank’s distance from the M&A route in the near term.

Banque Libano-Française (BLF)

BLF underwent a number of structural changes in the past years, topped by the decision by major shareholder French bank Crédit Agricole to sell down the majority of its stake in the bank. This comes as somewhat of a surprise as the French banking institution has not expressed any loss of interest in BLF or Lebanon in past years.

Nevertheless, such a development would probably put on hold any expansion plans drafted by BLF for the near term, as the bank’s remaining shareholders are busy seeking investors to acquire part or all of the equity share sold by Crédit Agricole.

On the other hand, and while BLF has been absent from the M&A arena in recent years, the bank remains mostly focused on traditional commercial banking services, and as such is likely to seek the development of new departments to offer additional services, such as private banking, investment banking, and others. In that regard, a preferred means to that end may be through the acquisition of a smaller, more specialized bank that would provide BLF with an existing and efficient operation.

In terms of the bank’s financial ability to undertake such acquisitions, BLF benefits from a considerable level of liquidity, with excess funds around $1.3 billion. Moreover, the bank could potentially acquire another bank by swapping part of Crédit Agricole’s equity stake in the bank with another local bank.


Fransabank has been one of the banks in the spotlight recently, showing off rapid expansion into new services, namely in the areas of private banking and investment banking. While the bank developed the Fransa Invest Bank in-house, the bank has been historically spotted on the M&A route, with the acquisition of Bank Tohme, Universal Bank, and United Bank of Saudi and Lebanon in 1997, 2000, and 2001, respectively. The bank recently acquired, in 2003, Banque de la Bekaa, putting itself in close proximity to the high-potential Syrian market.

As such, the bank has a growth-oriented approach, focused on adding new services, and diversifying away from purely interest-generating activities, which have historically contributed the most to the bank’s bottom line. As the bank is currently focusing on consolidating its human resources and branch network following its recent acquisitions, it may put its expansion on hold in the short-term. Nevertheless, the bank’s strategy remains geared towards growth, and in favor of acquisitions. As such, we may see Fransabank once again on a buying spree in the medium term.

Bank of Beirut

While Bank of Beirut has only undertaken two acquisitions in the past few years, they were relatively significant in size, adding substantially to the bank’s balance sheet. Bank of Beirut acquired Transorient Bank in 1999, following by Beirut Riyadh Bank in 2002. The bank’s primary goal remains growth, with a focus on quality service. While the bank has experienced significant growth in-house, Bank of Beirut’s management seems to favor acquisitions as a means to accelerate such a growth. Based on the bank’s historical track record, and current expansion strategy, targeted acquisitions are likely to be in the pipeline for Bank of Beirut.

In terms of the bank’s ability to undertake such transactions, year-end 2003 numbers reveal sufficient liquidity, with cash and deposits at other banks reaching in excess of $1.3 billion, broadly sufficient to undertake a number of targeted acquisitions locally.

Société Générale de Banque au Liban (SGBL)

While having historically been present early on in the M&A arena, SGBL has been somewhat distant from the scene in the past few years. SGBL was one of the first to undertake M&A activities in the post-war era, acquiring Globe Bank in 1993, Bank Geagea in 1997, and Inaash Bank in 2000. In the past few years, however, and following the acquisition of Fidus, SGBL has been more focused on expanding overseas. SGBL is aggressively growing in Cyprus, expanding the network to four branches (two onshore and two offshore units). In addition, the bank operates 15 branches in Jordan, and is aggressively seeking a license in Syria, where it currently operates an offshore unit in the Damascus free zone area.

While the bank does consider Lebanon to remain its primary market, and has undertaken numerous steps to expand its presence in the local market, it is not likely to commit substantial financial resources to acquire other banks locally, but is likely to do so overseas.

Credit Libanais

Led by Joseph Torbei, the chairman and head of the Association of Lebanese Banks, Credit Libanais remains one of the leading banks in Lebanon, regaining a favorable position in the market following a period of turbulence in the 1990s. The bank has invested substantial amounts to improve the quality of its services, widen the range of such services and create an attractive market image.

Such goals went hand-in-hand with the bank’s acquisition strategy, which started in 1994 with First Phoenician Bank in 1994, and culminated with the acquisition of American Express’s local operation in 2000. The latter added significantly to the bank’s level of service and expertise, as it brought along a professional, modern and experienced management team.

As the bank continues to expand, it may undertake certain acquisitions, but such transactions are likely to be highly selective, and would target only such institutions that would add to the bank in terms of human resources, IT systems, and other value added areas.


While BBAC remains one of the major players in the Lebanese banking sector, its growth strategy differs somewhat from that of other major banks in that it did not seek scale and growth as aggressively. BBAC has been absent from the M&A scene for years, and has not indicated any significant intention to undertake acquisitions.

Growth in the bank, while steady, has been relatively more modest, and focused particularly on retail banking and, to a lesser extent, corporate banking.


It seems then, that while a number of large Lebanese banks are eager to go down the M&A path seeking growth and scale, most are not likely to engage in any such activities in the very short term. Some are busy consolidating recent acquisitions, while others are busy with shareholding or management restructuring.

Considering the fact that a number of smaller banks are ripe for acquisition, such a delay by the larger banks to pursue these smaller banks may seem gloomy at first sight. Nevertheless, and as outlined in last month’s issue of EXECUTIVE, such attractive smaller banks may, while awaiting suitors, work on improving efficiencies, perking up image, and thereby significantly increasing their chances of getting a better value when the time comes to negotiate a sale.

Such a development would certainly, on one hand, please the central bank and its efforts to promote consolidation in the sector, while on the other, it would ensure a healthy consolidation, where the smaller, to-be-acquired banks would provide tangible added value to the buyers.


Putting all things into perspective, and after profiling both buyers and suitors, there may be a certain time-lag before the priorities of buyers and sellers coincide. EXECUTIVE’s June issue identified a number of small and medium-sized Lebanese banks with attractive features for potential consolidation into the larger players, and such banks are likely to be presently willing to undertake such transactions. On the other side of the table, however, and as outlined in the story, banks eager and able to undertake acquisitions are not likely to engage in such activities in the very short term, as most are busy consolidating previous mergers, undergoing internal restructurings, or other activities. Nevertheless, such banks do place considerable importance on growth through selective acquisitions, and are likely to go down the M&A route in late 2005 and 2006.

Historically, larger banks in Lebanon tended to acquire smaller institutions, but have shifted recently to target larger groups (ABN Amro by Byblos, Saradar by Audi). Such a change in strategy, much to the displeasure of the central bank, has dented the buying power of the large institutions, at least for a while. As such, the newly formed, significantly larger institutions will need time to consolidate and go back shopping for more. As the trend returns, however, and as large banks pursue some of the attractive candidates identified in last month’s issue of EXECUTIVE, another problem arises. Top banks in the country are seeking scale through the merger with other large institutions, and added services and access to new markets by acquiring small specialized banks. The side effects of such developments may include a massive gap between newly formed ultra-large, full-service, regional Lebanese banks, and smaller, medium-sized banks from the Beta group, which are too costly to be acquired and too small to acquire on their own and grow sufficiently. The possibility of avoiding such a problem can be reached by encouraging equal mergers by such medium-sized banks, a move likely to be strongly encouraged by the central bank, which is making all attempts to improve efficiencies in the sector by cutting out excess fat and creating scale.