BLOM BANK of Lebanon has been consistently recognised as the country’s best performer by a range of leading regional and international industry voices. Its business operations are based on a universal banking model that spans a range of divisions including: commercial banking, investment and private banking, asset management, insurance, retail and Islamic banking. It’s this breadth of expertise that has seen the bank continue to expand and progress in challenging circumstances. BLOM BANK is looking to strengthen its regional presence in the medium-to long-term through a balanced growth strategy that adheres to its conservative but rewarding business model.
The European caught up with Chairman and General Manager, Saad Azhari, to discuss the bank’s strategy and the market in the Middle East.
Please tell us how BLOM BANK came to be established.
Saad Azhari: BLOM BANK was established in 1951, primarily as a commercial bank. True to its name as Bank of Lebanon and Overseas (Banques Liban et O’uter Mer), it branched out to Saudi Arabia in 1953. In the 1970s, as a result of the Lebanese civil war, it expanded to Europe and the UAE to serve Lebanese and Arab expatriates.
In the 2000s it prospered as a full-service, universal bank, specialising in corporate, retail, private, investment and Islamic banking, in addition to asset management, capital markets, and insurance services. It also expanded into new countries in the region: Jordan, Egypt, Qatar and Iraq. It is currently present in 12 countries in Europe and the Middle East. It serves niche markets for Arab clients in Europe and operates as a full-fledged local bank in countries of the Middle East.
Technology has changed the banking landscape over the last decade, what’s been the key for BLOM BANK to ensure you remain at the forefront of innovation?
SA: BLOM BANK is reputed to be a conservative bank, but it is also highly innovative and constantly creates products and services that are world-class and at the cutting-edge in terms of digital technology. This arises from our belief that although banking is basic and fundamental, its modes of delivery must change to meet the changing needs of our customers and to ease the channels of communicating with them. That is why we were the first in Lebanon to initiate e-banking, to develop e-Cash, and to launch the NEXT programme for youth, to name just a few. We are capable of doing this because we devote enough resources to strengthening our IT capabilities and because of our talented and dedicated staff.
There is also the additional factor that emanates from the tough competition in the domestic market, as well as in foreign markets, which always acts as an incentive to work harder and to rise above and beyond the competition.
Why do you think BLOM BANK has become the banking partner of choice in Lebanon?
SA: BLOM BANK’s motto is ‘Peace of Mind’ and it is a motto that the bank adheres to by word and deed. This translates to the bank making sure that its products and services are not only innovative and remunerative but also safe. We spend a lot of time designing services that meet our clients’ return profiles but with the minimum risk possible; and we also work hard that these services abide all regulatory and compliance standards.
Besides the quality of our products, there is also their diversity that spreads over the entire banking spectrum. And combined with our regional spread, BLOM BANK is able to offer its clients the opportunity to engage in banking and financial activities across different countries and across different services, maximising synergies and the benefits from cross transactions.
Despite fluctuating economic conditions in the Middle East, BLOM BANK has achieved an increase in its net profit. Please highlight how.
SA: BLOM BANK’s net profit in 2016 increased to $463.3m, higher by 14.61% on 2015. This implied a return on average common equity of 17.43%, and a return on average assets of 1.58%, both the highest among listed Lebanese banks. And as noted, this was accomplished in difficult circumstances amid a politically unstable domestic environment, at least up until the fall of 2016.
The bank was able to achieve this performance mainly due to three reasons. First is its ability to diversify over products and countries such that its profits arose from different banking activities and from foreign as well as domestic markets. Second are its conservative credit and investment policies and its priority to control banking risks and cost. This is reflected in the bank achieving a capital adequacy ratio of 19% (against a required ratio of 14%), a primary liquidity ratio of more than 70%, and a cost-to-income ratio of 35.81% (the lowest among listed banks). Third is its capable and stable management structure and its efficient and experienced staff members, who always give their best to keep BLOM BANK as the best bank in Lebanon and the one with the most industry recognition.
BLOM BANK serves a niche market of Lebanese and Arab expatriates in Europe. How does this set you apart from your competition?
SA: As mentioned earlier, the bank moved to Europe in the 1970s to cater for the banking and financial needs of Lebanese and Arab expatriates. What sets BLOM BANK apart from the competition in this niche market are several things. First is that we have a first-mover advantage since we were among the very first Middle Eastern banks to expand to Europe. Second is the diversity of our products, which covers all bases across corporate and private banking services and trade finance. Third is the fact that we are present in more countries: France, Switzerland, England, Cyprus and Romania. Last, but not least, is the quality of our products and services and the opportunities that they represent to all our clients for cross transactions with countries in the Middle East region and beyond.
Is there a particular highlight over the last 12 months for BLOM BANK?
SA: I think the most notable event is the conclusion of a sale and purchase agreement for the Lebanese operations of HSBC. The agreement became effective on 16 November 2016, following many months of negotiations. We competed for the deal with no less than eight Lebanese banks. HSBC has three branches in Lebanon; employs around 200 people; and generates around $20m in net profit annually on deposits of some $820m and loans of $520m equally divided between retail and corporate. It is also highly active in trade finance. As part of the agreement, we will retain all employees.
We are currently working on getting all the final approvals and expect the operation to be fully merged by end of June 2017.