ANNUAL REPORT 07
At BLOM BANK, our mission has always been to
spread “Peace of Mind” in the region and all
around the world through our international network.
The universal banking services provided by our group
and our concern to maximize customer satisfaction constitute
the key elements for the success of our mission.
Dr. Naaman AZHARI - Chairman of BLOM BANK GROUP
Mr. Saad AZHARI - Chairman and General Manager of BLOM BANK S.A.L
SUMMARY
CHAIRMAN’S LETTER
GROUP CHART
EVOLUTION OF MAIN INDICATORS
FINANCIAL RATIOS
BLOM BANK CUSTOMER DEPOSITS EVOLUTION
STRONG AND CONTINUOUS GROWTH FOR THE LAST 5 YEARS
BLOM BANK SAL BOARD OF DIRECTORS
BLOM BANK’S MAJOR SHAREHOLDERS AND GENERAL MANAGEMENT
BLOM BANK ORGANIZATIONAL CHART
MANAGEMENT DISCUSSION AND ANALYSIS
1. OPERATING ENVIRONMENT
2. OVERVIEW
3. EVOLUTION OF TOTAL ASSETS
4. SOURCES OF FUNDS
5. USES OF FUNDS
6. LIQUIDITY
7. PROFITABILITY
8. DIVIDEND DISTRIBUTION AND PREFERRED SHARES REVENUES
9. CAPITAL ADEQUACY RATIO
10. INTEREST RATE RISK
11. RISK MANAGEMENT AND BASEL II PREPARATIONS
12. UNIVERSAL BANKING SERVICES
13. INFORMATION SYSTEMS AND TECHNOLOGY
14. PEOPLE DEVELOPMENT
15. BANK’S OPERATIONAL EFFICIENCY
16. REGIONAL EXPANSION
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF BLOM BANK SAL
CONSOLIDATED INCOME STATEMENT YEAR ENDED 31 DECEMBER 2007
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2007
CONSOLIDATED CASH FLOWS STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2007
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
BLOM BANK’S WORLDWIDE CORRESPONDENT BANKS
BLOM BANK GROUP DIRECTORY
09
11
12
13
14
15
18
19
21
25
30
31
32
35
46
47
58
58
59
59
61
64
67
68
68
74
75
76
78
80
83
164
166
Mr. Saad AZHARI - Chairman and General Manager of BLOM BANK S.A.L
08
CHAIRMAN’S LETTER
True to its record, BLOM BANK has remained at the forefront of the Lebanese banking system in 2007.
It proved itself once again to be a solid and successful financial institution, earning the highest level
of profits among Lebanese banks at $204.7 million. This was 13.53% higher than the 2006 level, and it
was largely a product of its managerial and financial efficiency as reflected in an effective cost to
income ratio of 34.6% -- the lowest among the leading banks. The banks’ consolidated balance sheet
also saw a significant increase, rising by 17% each for assets and deposits to reach $16,628 million
and $13,737 million respectively. Also significant was the increase in loans -- especially to service
clients in regional markets -- to $2,772 million that lifted the loans to deposits ratio from 16.9% to
20.2%. All this has happened within an operating framework that maintained high levels of liquidity
and strong asset quality to better manage risk and to ensure clients’ “peace of mind”. Thus immediate
net liquidity in Lebanese Pounds and foreign currencies stood at a comfortable 105.9% and 63.2%
respectively; whereas the ratios of gross non-performing loans and loan loss reserves were a
respectable 7.9% and 95.55%. Also, in terms of capital adequacy and its new risk adjustments
according to the standardized approach, BLOM Bank’s ratios reached healthy values of 29.05% and
14.6% according to Basel I and Basel II respectively.
These achievements of BLOM BANK did not translate to the highest profitability in absolute measures
only, but also included relative measures. In terms of returns on average assets and equity, BLOM
retained the highest ratios among leading Lebanese banks at 1.33% and 15.65% respectively. This
was reflected in financial markets, as the price of BLOM’s GDR (Global Depository Receipts)
increased by 50.5% to close the year 2007 at $90.2. In addition, the Bank’s General Assembly of
Shareholders on the 9th of April 2008 approved as follows the distribution of dividends for the financial
year 2007: preferred shares 2002 issue received $15 each, and their corresponding 2004 and 2005
issues $8.5 and $9.5 respectively; whereas each of the listed common shares and GDRs got the
equivalent of $3.65 per share.
This commendable performance under difficult circumstances in the Lebanese economy attracted
several awards and marks of excellence in 2007 from reputable ranking and rating institutions. The
Bank was awarded “Best Bank in Lebanon” from Global Finance; “Highest Financial Strength Rating
at BBB” from Capital Intelligence; “Highest National Rating at Aa1.lb” from Moody’s; “Best Trade
Finance”, “Best Foreign Exchange”, and “Best Customer Internet” Bank from Global Finance; “Best
Use of Technology in the Middle East” from The Banker Middle East; and “Best Deal of the Year” from
the Banker.
Despite the climate of political uncertainty, Lebanon’s economy managed to grow by 3% in real terms
in 2007. Also noteworthy was a solid fiscal performance that saw net debt – at $39.1 billion – fall as
a ratio of Gross Domestic Product to 162% and primary surplus rise as a similar ratio to 3%, an outcome
of improving tax revenues and Paris III donor support.
And, true to its history, the Lebanese banking sector was the backbone of the economy in 2007, continuing
undeterred its healthy domestic growth and foreign expansion. All the basic indicators from the financials
of its domestic operations were up: assets increased by 10.6% to $82.2 billion; deposits by 11.4% to $67.5
billion; loans by 11.7% to $23.9 billion; and capital by 10.5% to $6.3 billion. And the banking system has
crowned these accomplishments by continuing its sustained profitability, with net profits increasing by
11.8% to $850 million. But perhaps the current defining feature of the Lebanese banking sector is its foreign
expansion. The result is that there are currently 17 Lebanese banks with presence in 20 foreign countries
encompassing more than 150 banking units and corresponding to around 15% of banks’ total activities. Of
course, the banking system’s performance was greatly facilitated by the supervisory oversight of Banque
du Liban (BdL). Regulatory directives from BdL ensured that banks have remained well capitalized, at more
than 12% according to Basel II; and also ensured that banks have stayed away from the asset classes
that engendered the credit crises in the US and elsewhere in late 2007. In addition, BdL continued its
sound monetary management of the economy, preserving the exchange rate peg and amassing more
than $12 billion in foreign reserves, ensuring in the process both liquidity and stability in financial markets.
09
In this context, BLOM BANK’s success rests on a two-pronged strategy of geographical expansion
and service diversification, so as to evolve the bank to a regional, universal Bank. BLOM BANK
currently stands to be the Lebanese bank with the largest overseas activities, where overseas
assets and profits represent 36% and 24% of total assets and profits respectively. It is present in
ten countries: Lebanon (BLOM BANK), Syria (Bank of Syria and Overseas, BSO), Jordan (BLOM
BANK), Egypt (BLOM BANK EGYPT), UAE (BLOM BANK FRANCE), France, England, and Romania
(BLOM BANK FRANCE), Cyprus (BLOM BANK), and Switzerland (BLOM BANK (SWITZERLAND)).
The Bank also obtained a license to open a Representative Office in Abu Dhabi in 2007; and has
been granted licenses to operate an investment company in Saudi Arabia, BLOMINVEST Saudi
Arabia, in mid 2008, and to start a private and corporate bank in Qatar in late 2008. Also, in relation to
expansion in individual countries, BSO opened a new branch in Aleppo in 2007 that increased the
number of branches to 10, expected to increase to 20 in 2008; two new branches were opened in
Jordan, and two more are planned to open in 2008, raising the total to 7.
In addition, BLOM BANK EGYPT continued with its robust expansion, increasing its number of
branches to 20 in 2007 and aiming to raise it to 30 in 2008. And not to forget Lebanon, four additional
branches were inaugurated in 2007, and we look forward to add more new branches in 2008,
mainly in the areas of Furn El Cheback, Dekwaneh, Sodeco, Choueifat, and Abbasya.
As important, geographic diversification has been coupled with a process of product and services
diversification to support the Bank’s universal banking model. BLOM BANK’s banking services now
include retail, corporate, investment, asset management, Islamic, and private banking, in addition to
insurance. This has also led to diversification in the sources of income, where fee income now
constitutes 24% of operating income, increasing in 2007 by 19.4% compared to an increase by 11.4%
in net interest income. In turn, the sources of interest income have undergone diversification and
more balance as well, comprising 42% from inter-bank deposits, 29% from government securities, and
29% from customer loans. In this respect also, the activities of BLOMINVEST BANK, the investment
arm of BLOM BANK, have been upgraded and widened as a conduit to increase diversification of
services and income. One prominent product of such widened specialization by BLOMINVEST has
been in the area of asset management, where it established a balanced growth fund, the BLOM
Cedars Balanced Fund, the first of its kind in Lebanon combining both fixed income assets and equities.
And last but not least, a notable undertaking by the Bank has been the development of a corporate
governance code in 2007, to be applied starting 2008. The Bank is fully aware of the importance of
such a code, not only for the healthy functioning of the institution but also for the confidence and trust
that it sheds to all stakeholders. As a result, the code is built to the highest standards, as proposed by
the Basel Committee, and covers all crucial elements that make up an effective governing system.
Notable among them are those that relate to the Board of Directors, its role (effective governance
over the Bank for the benefit of shareholders), structure (majority of independent directors), and
committees (audit, risk management, strategy, and nomination and remuneration). In addition, it covers
elements of transparency and stakeholders relations, ranging from the adoption of internationally
recognized accounting standards, public disclosure rules, code of conduct and banking ethics, to
staff, customers, and suppliers relations.
In conclusion, I would like to pledge that BLOM BANK will continue in its geographical and business
expansion while remaining true to its core values of safety, outstanding customer service, long-term
shareholder value, and responsible corporate citizenship in each of our countries of presence.
I would also like to thank the managers and staff for their dedication and hard work.
Saad Azhari
Chairman and General Manager
10
BLOM BANK GROUP CHART
BLOM BANK GROUP CHART
99.99%
BLOM BANK FRANCE S.A.
100%
Head Office: Beirut
Branches: Lebanon (53 Branches) • Cyprus • Damascus Free Zone • Jordan (6 branches in Amman) • Abu Dhabi (Representative Office)
BLOM BANK S.A.L.
Head Office: Paris
Branches: London • Dubai • Sharjah
Romania (6)
BLOM BANK (SWITZERLAND) S.A.
Head Office: Geneva
BLOM BANK QATAR L.L.C *
99%
Head Office: Doha
99.37%
BLOM BANK EGYPT S.A.A.
Head Office: Cairo
Branches: Egypt (24)
99.97%
BLOM EGYPT SECURITIES
Head Office: Cairo
33.33%
99.88%
BLOMINVEST BANK S.A.L.
66.64%
BLOM DEVELOPMENT BANK S.A.L.
50%
Head Office: Beirut
Head Office: Beirut
BLOMINVEST SAUDI ARABIA *
10%
Head Office: Riyadh
88.56%
AROPE INSURANCE S.A.L.
34%
Head Office: Beirut
Branches Lebanon (9)
AROPE SYRIA
10%
Syria International Insurance
Head Office: Damascus
Branch Aleppo
39.00%
BANK OF SYRIA & OVERSEAS S.A.A.
5%
Head Office: Damascus
Branches: Syria (12)
* Under Establishment
11
EVOLUTION OF MAIN INDICATORS
FINANCIAL RATIOS
EVOLUTION OF MAIN INDICATORS (in millions)
2007
2006
Change
06/07
25,067.014
16,628.202
21,424.611
14,212.014
17.00%
17.00%
20,708.516
13,736.992
17,690.381
11,734.913
17.06%
17.06%
15,839.111
10,506.873
15,946.895
10,578.371
-0.68%
-0.68%
2,063.185
1,368.614
1,880.387
1,247.355
9.72%
9.72%
2,092.409
1,387.999
1,916.544
1,271.339
9.18%
9.18%
4,179.307
2,772.343
2,996.698
1,987.859
39.46%
39.46%
308,586
204.70
271.804
180.301
13.53%
13.53%
TOTAL ASSETS
LBP
USD
CUSTOMER DEPOSITS
LBP
USD
TOTAL NET LIQUIDITY
LBP
USD
SHAREHOLDERS’ EQUITY
LBP
USD
CAPITAL FUNDS
LBP
USD
TOTAL LOANS AND ADVANCES
LBP
USD
NET INCOME AFTER TAX
LBP
USD
12
FINANCIAL RATIOS
(in % or USD)
2007
2006
LIQUIDITY RATIOS
Net liquidity in LBP
Net immediate liquidity
Liquid assets over total assets
105.93%
63.24%
63.19%
109.8%
78.26%
74.39%
9.98%
22.11%
20.18%
7.96%
18.96%
16.94%
1.68%
80.40%
8.19%
7.92%
2.02%
82.35%
8.85%
10.25%
31.53%
29.05%
39.50%
36.35%
15.65%
1.33%
8.22 USD
3.65 USD
44.39%
55.61%
48.77 USD
16.81%
1.38%
7.29 USD
3.32 USD
45.98%
54.02%
44.41 USD
LOANS TO DEPOSITS RATIOS
LBP
F/C
Total
ASSETS QUALITY - NOT INCLUDING GENERAL PROVISION
Net doubtful loans over total loans
Provision over doubtful loans
Provision over total loans
Gross doubtful loans/ Gross total loans
CAPITAL ADEQUACY RATIOS
Before dividend distribution
After dividend distribution
PROFITABILITY RATIOS
Return on average equity
Return on average assets
Earnings per share USD
Dividend per common share USD
Dividend payout ratio
Retention Ratio
Net asset value per common share USD
13
CUSTOMER DEPOSITS EVOLUTION
STRONG AND CONTINUOUS GROWTH FOR THE LAST 5 YEARS
Customer Deposits Evolution (in USD Millions)
Deposits (in millions of USD)
16000
14000
13,737
12000
11,735
10,161
10000
8,992
8000
7,686
6,215
6000
5,525
5,056
4,330
4000
3,861
3,333
2,686
2000
1,605
1,259
504 595
871
14
07
20
05
20
06
20
04
20
03
20
02
20
01
20
00
20
99
19
97
98
19
19
96
19
95
19
94
19
93
19
92
19
19
91
0
Years
Strong and Continuous Growth for the Last 5 Years
Total assets (in USD Millions)
18,000
16,628
16,000
14,212
14,000
11,918
12,000
10,835
10,000
8,000
8,786
6,000
4,000
2,000
0
2004
2003
2005
2006
2007
Net profits (in USD Millions)
250
204.7
200
180.30
150
100
136.85
88.3
91.15
2003
2004
50
0
2005
2006
2007
Tier I & Tier II capital (in USD Millions)
1600
1,388.00
1400
1,271.34
1200
957.8
1000
790.61
800
638.38
600
400
200
0
2003
2004
2005
2006
2007
15
BLOM BANK S.A.L BOARD OF DIRECTORS
BLOM BANK S.A.L MAJOR SHAREHOLDERS AND GENERAL MANAGEMENT
Chairman
of the BLOM BANK Group
Dr. Naaman AZHARI
BLOM BANK S.A.L Board of Directors
Chairman
and General Manager
Mr. Saad AZHARI
Directors
H.E. Sheikh Ghassan SHAKER,
Grand Officier de la Légion d’Honneur
Sheikh Salim Boutros EL- KHOURY
Mr. Samer AZHARI
Group Secretary General
H.E Me. Youssef Selim TAKLA
Mr. Habib RAHAL
General Manager
Mr. Nicolas Nicolas SAADE
18
Mr. Marwan JAROUDI
Mr. Joseph Emile KHARRAT
Dr. Fadi OSSEIRAN
BLOM BANK S.A.L Major Common Shareholders
% of Total Common Shares*
Bank of New York**
Banorabe Holding***
AZA Holding (Azhari Family over 50%)
Azhari Family
Actionnaires Unis (Azhari Family over 50%)
Shaker Holdings S.A.L. (Shaker Family)
Mrs. Nada Aoueini
Jaroudy Family
Saade Family
Khoury Family
Others
34.37 %
11.4 %
9.33 %
2.86 %
1.83 %
5.39 %
5%
4.92 %
2.81 %
2.02 %
20.07 %
* Total common shares: 21,500,000
** Starting 1998, and after the issuance of Global Depositary Receipts (GDR) by BLOM BANK Shareholders, the Bank of New
York as Depositary, became shareholder on the Bank’s register.
*** The major shareholders of Banorabe Holding are the same as in BLOM BANK S.A.L (except Bank of New York and AZA
Holding).
Dr. Naaman AZHARI - Chairman of the Group
Mr. Samer AZHARI - Group Secretary General
BLOM BANK General Management
Mr. Saad AZHARI - Chairman and General Manager
Mr. Habib RAHAL - General Manager
Mr. Amr AZHARI - General Manager
Chairman’s Advisors
Mr. Fawaz KAYAL
-
Sheikh Fahim MOADAD**
Mr. Elias ARACTINGI - Planning & Organization Department, Retail Banking Department
(** Fomerly Vice Governor of the Central Bank of Lebanon)
General Management Consultants
Mr. Georges SAYEGH
Mr. Adnan SALLAKH
19
BLOM BANK GENERAL MANAGEMENT
BLOM BANK’S ORGANIZATINAL CHART
BLOM BANK S.A.L Central Departments & Units
DEPARTMENTS & UNITS *
MANAGEMENT
Accounting
Mr. Talal BABA - Senior Manager
Administration
Mr. Samih ZEINEDDINE - Senior Manager
Anti Money Laundering Unit
Mr. Malek COSTA - Head of Unit
Back Office Operations
Mr. Mekhael KAZZI - Senior Manager
Communication & Investor Relations
Dr. Gladys YOUNES - Manager
Corporate Unit
Mr. Samir KASSIS - Senior Manager
Credit
Mr.Moustapha GHALAYINI - Senior Manager
Engineering
Mr. Mohamed BIZRI - Manager
Follow Up
Mr. Riad TABBARAH - Senior Manager
Foreign Exchange
Mr. Wassim KHODR - Manager
Human Resources
Dr Pierre ABOU EZZE - Senior Manager
Information Systems
Mr. Antoine LAWANDOS - Senior Manager
Information System Security Unit
Ms. Aya YAMOUT - Head of Unit
Internal Audit
Mr. Ramzi TARABICHI - Senior Manager
Internal Audit /Group Inspection
Mr. Naoum RAPHAEL - Senior Manager
International Affairs & Treasury
Mr. Grégoire AZAR - Senior Manager
IT Operations
Mr. Mohamed SOUBRA - Senior Manager
Legal
Me. Aimee SAYEGH - Senior Manager
Marketing
Mr. Michel GHANEM - Manager
Marketing Overseas
Mr. Fouad SAID - Senior Manager
Marketing Overseas
Mr. Marcel ABOU JAOUDE - Manager
Recovery & General Management Secretariat Unit
Mr. Charles HADDAD - Head of Unit
Regional Marketing
Mr. Elias MOKHACHEN - Senior Manager
Regional Marketing
Mr. Georges CHEDID - Senior Manager
Retail Credit
Mr. Imad KADI - Manager
Retail Marketing
Mrs. Jocelyne CHAHWAN - Senior Manager
Risk Management
Mr. Gerard RIZK - Manager
Strategic Planning & Organization
Mr. Rabih HALABI - Manager
Trade Finance
Mr. Jacques SABOUNGI - Senior Manager
* By alphabetical order
20
BLOM BANK’S ORGANIZATIONAL CHART
SHAREHOLDERS
BOARD OF DIRECTORS
BOARD COMMITTEES
Board Audit Committee
Board Risk Management Committee
Consulting, Strategy & Corporate Governance Committee
Nomination & Renumeration Committee
MANAGEMENT COMMITTEES
DEPARTMENTS/ UNITS
Accounting
Executive Committee
Administration
Credit Committee 1
Anti-Money Laundering Unit
Credit Committee 2
Back Office Operations
Exceptional Credit Committee
Communication & Investor Relations
Follow-up Credit Risk Committee
Corporate Unit
Provisions Committee
Credit
Retail Credit Committee
Engineering
Assets & Liabilities Committee
Follow Up
Investment & Treasury Committee
Foreign Exchange
Marketing Committee
Human Resources
Information Technology Committee
Information Systems
Human Resources Committee
Information System Security Unit
Legal Committee
Internal Audit
Internal Audit Committee
Internal Audit /Group Inspection
Compliance Committee
International Affairs & Treasury
Operations & Internal Procedures Committee
IT Operations
Foreign Branches & Subsidaries Committee
Legal
Purchasing & Maintenance Committee
Marketing
Information System Securitiy Committee
Marketing Overseas (2)
Recovery & General Management
Secretariat Unit
Regional Marketing (2)
Retail Credit
EXTERNAL AUDITORS
Ernst & Young-Semaan, Gholam & Co.
Retail Marketing
Risk Management
SOLICITORS
Branch Managers
Strategic Planning & Organization
H.E. ME. Mohamad JAROUDI
Me. Georges ABOU ZAMEL
Me. Antoine MERHEB
53 in Lebanon,
1 in Cyprus
1 in Damascus Free Zone
6 in Jordan
1 Chief Representative in Abu Dhabi
Trade Finance
21
MANAGEMENT DISCUSSION & ANALYSIS 2007
Management discussion & analysis 2007
1. OPERATING ENVIRONMENT
1. OPERATING ENVIRONMENT
Despite the political tensions, the economy recovered slowly in the year 2007 after
the overwhelming adverse effects of the July 2006 war. This was driven mainly by the
strong external assistance that Lebanon received from the Paris III International Donor
Conference in January 2007. The Lebanese government presented an ambitious five-year program to
Paris III, designed to address the country’s fiscal deficit, maintain macroeconomic stability,
promote privatization and improve living standards. While the financial assistance was partly
made available, the economic reforms are still on the agenda, waiting for an end to the political impasse.
Backed by the success of the Paris III conference and the financial support received, real GDP
growth bounced back to the positive rate of 3% after a clear contraction due to the destructive
events of July 2006. This growth was further promoted by the good performance of the construction,
financial and services sectors. Despite the increase in international commodity prices and the
weakening of the US dollar, inflation retreated slightly to 6% in 2007, down from the high of 7%
caused by the supply shortages during the 2006 conflict.
The trade and current account deficits widened up as exports and especially imports
were buoyant in 2007. Total exports increased by 23.4% to $2.8 billion and imports
went up 25.7% reaching $11.8 billion. As a result of the higher trade deficit and the
particular drop in foreign direct investment (FDI), the balance of payments declined
to $2 billion from $3 billion in the previous year. The net foreign assets at the central
Bank declined by $580M and the foreign debt stood at $21.3 billion, representing
89.1% of GDP.
The country’s budget deficit improved by 24.5% to $2.3 billion in 2007, driven by strong VAT revenues,
increasing telecom revenues as well as the Paris III grants. Nevertheless, the gaping holes in
expenditures remain increasing interest payments and transfers to EDL. Consequently, the
ratio of gross public debt to GDP stabilized at 173%.
25
1. OPERATING ENVIRONMENT
Financial markets showed strong resilience and monetary stability was sustained by the
exchange rate peg. The average interbank rate stood at an average of 4.2% in 2007, down from
4.6% a year earlier as the impact of the 2006 conflict slowly faded away. Money demand
remained robust with broad money increasing by 12.5% in 2007 compared to 8.4% in 2006.
Dollarization widened in 2007, registering ratios higher than those prior to the July 2006 conflict. As
such, deposit dollarization increased from 76% in 2006 to 78.1% while dollarization of loans
went up from 84% to 84.5%. Interest rates on the Lebanese Pound declined slightly in 2007 to
7.4% helped by the favourable effects of Paris III and monetary stability that outweighed any
adverse effect from the international global credit crisis. Interest rates in USD widened from
4.71% to 4.75% as they were slightly affected by higher political risk. The value of cleared
check jumped by 19.17% to $38.7 billion in 2007. Lebanese Pound denominated cleared checks
accounted for 23% of total cleared checks’ value while foreign currency denominated cleared check
represented 77% of the total value.
In the banking sector, the consolidated balance sheets of the commercial banks mirrored the
strong momentum of the sector. As such, the balance sheet of domestic banks stood at $82.2
billion in 2007, with a yearly increase of 10.7%. The sector’s high profitability was reflected in
a 12% increase over the previous year to $847M while its capitalisation went up 10.5% to $6.3
billion. Customer deposits and loans rose by 11.4% and 11.7% to $67.5 billion and $23.9 billion
respectively.
The stock market recovered in 2007 despite the political impasse and global financial markets
turbulence. In fact, after a 9.5% decline in 2006, the BLOM Stock Index (BSI), Lebanon’s
benchmark index, picked up by 27% in 2007 to close at 1501.7. Market capitalisation increased
32.5% to $10.2 B while total market turnover dropped by 51% to $991.8 million. On the other
side, the Eurobond market stayed dormant and witnessed very limited trading throughout the
year.
With the continuing political stalemate, the country’s rating started to slip with Standard &
Poor’s downgrading Lebanon’s long term foreign currency sovereign securities from B- to CC+
while Moody’s maintained its B3 rating. In the absence of an active parliament, many actions
that was present on the Paris III reform agenda have been suspended, with the outlook of the
economy closely depending on a possible solution to the political impasse in the country.
26
Management discussion & analysis 2007
Key Indicators
USD Millions or %
GDP Growth Rate
Estimated Inflation
Balance of Payments
Trade Deficit
Budget Deficit
LP/USD
External Debt
Gross Public Debt
Gross FX Reserves
Banks’ Assets
BLOM Stock Index
2006
0.0%
7.0%
$2,749.5
$7,117
$3,040
$1,507.5
$20,430
$40,466
$12,975
$74,293
1,185
2007
3.0%
6.0%
$2,036.6
$9,004
$2,294
$1,507.5
$21,249
$42,060
$12,395
$82,255
1,502
% Change
300 b.p.
-100 b.p.
(25.9%)
26.5%
(24.5%)
0.0%
4.0%
3.9%
(4.47%)
10.72%
26.8%
Notes: Data included in “BLOM’s Environment” are based on several sources.
- Public finance, public debt, interest payments and cost of debt are based on the Ministry of
Finance’s publications.
- Trade balance, FX reserves, cleared checks, balance of payments and banking sector’s
performance are based on Banque du Liban’s publications.
- GDP figures are based on IMF estimations.
- Stock market data, interbank rate, domestic interest spread and average eurobonds yield
are based on calculations performed by the Economic Research Department at BLOMINVEST
BANK s.a.l.
27
2. OVERVIEW
3. EVOLUTION OF TOTAL ASSETS
2. OVERVIEW
BLOM BANK accomplished in 2007 another successful year, marked by a solid financial
position, a diversification of services on offer and an increasing regional presence.
BLOM BANK’s strong stand as the leading banking group in Lebanon was reflected by the
number of awards accredited to it in the year 2007:
- “Best Bank in Lebanon” from Global Finance-February 2008
- “Best Trade Finance in the Middle East” from Banker Middle East-January 2008
- “Best Trade Finance Bank in Lebanon” from Global Finance-December 2007
- “Best Foreign Exchange Bank in Lebanon” from Global Finance-December 2007
- “Best Consumer Internet Bank” from Global Finance- July 2007
- “Best Bank in Lebanon” from Global Finance- April 2007
- “Deal of the Year in Lebanon” from the Banker-April 2007
- “Best use of Technology in the Middle East” from the Banker Middle East- May 2007
BLOM BANK continued to maintain the highest financial ratings in Lebanon. As such, the Bank
has been rated by Capital Intelligence, a Middle East-specialized rating agency, “BBB-” ,
which is the highest financial strength rating in Lebanon and has received the highest
national score rating “Aa1.lb” from Moody’s.
In 2007, BLOM BANK confirmed its position as the most profitable bank of Lebanon, with net
profits reaching $204.7m and as one of the largest banks in the country with total assets of
$16.6bn and total customer deposits of $13.7bn at year end 2007.
In 2007 also, BLOM BANK continued with its strategy of geographic and business services
diversification. Foreign expansion not only spreads the risk of operating mainly in Lebanon,
but also takes advantage of the economic and business opportunities opening up in the
regional economies and of their liberal financial policies. In this respect, 2007 saw the Bank
operate in ten countries: Lebanon, Syria, Egypt, Jordan, UAE, France, Switzerland, England,
Cyprus and Romania. In addition, the Bank has developed further its retail network by
opening new branches in Egypt, Jordan and Syria. In Lebanon, the Bank inaugurated in 2007
four new branches in the areas of Tabaris (Beirut), Jbeil, Mina El Hosn and Hamra Street
(Retail Branch). In addition, BLOM BANK was recently awarded licenses to establish an
investment bank in Saudi Arabia, BLOMINVEST Saudi Arabia, as well as a representative
office in Abu Dhabi (UAE) and a commercial and private bank in Qatar, BLOM BANK Qatar in QFC.
30
Management discussion & analysis 2007
The other component of the strategy is to diversify business activities towards a universal banking
model. As a result, the bank has expanded the operations of its investment arm, Blominvest Bank,
by enhancing its private and investment banking and capital market activities, in addition to introducing
asset and wealth management services. The latter aim at establishing funds and investment vehicles for
retail and high net-worth investors that are diversified in their asset composition and geography. The first
of such funds is the Cedars Balanced Growth Fund that combines Lebanese fixed income and
equity assets. The aim of the services diversification is a diversification in the sources of income
that gives increasing share for non-interest income
AROPE Insurance, BLOM BANK’s subsidiary, has also witnessed a year of growth and
expansion, marked by the opening of three additional branches in Lebanon as well as one
branch in Aleppo (Syria) through AROPE Syria. In 2008, AROPE is projected to continue its
aggressive policy of expansion and will be the first to penetrate Egypt’s commercial insurance
sector through “Arope Egypt for Life Insurances” and “Arope Egypt for Property Insurances”.
3. EVOLUTION OF TOTAL ASSETS
The Bank witnessed a strong growth in assets in 2007. Indeed, total assets increased by
USD2,416 million to reach USD16,628 million in 2007, thus registering a rise of 17% over the
year 2006. A large part of the growth in assets was denominated in foreign currency as a
result of the high rate of dollarization and overseas deposits growth. In addition, BLOM bank
successfully increased its market share in terms of total assets among Lebanese banks from
18.67% in the year 2006 to 20.22% in 2007.
Evolution of Total Assets (in USD Millions)
16,628
16,000
14,212
10,835
12,000
8,000
7,146
11,918
8,786
4,000
0
2002
2003
2004
2005
2006
2007
31
4. SOURCES OF FUNDS
4. SOURCES OF FUNDS
Sources of funding fall into four main categories: customer deposits, capital funds (Tier I &
Tier II), banks and financial institutions and other liabilities. The Bank’s main source of funds
came in the form of customer deposits which accounted for 82.61% of total funding in 2007.
Tier I and Tier II capital constituted 8.35% of total funds for 2007, while the share of banks and
financial institutions amounted at 6.21% in 2007.
Breakdown of sources of funds
2006
Customer Deposits
Tier I & Tier II Capital
6.11%
2007
2.38%
6.21%
2.83%
8.35%
8.95%
Banks & Financial
Institutions
Other Liabilities
82.53%
82.61%
4.1 Customer Deposits
Customer deposits increased by 17%, up from USD 11,735 million in 2006 to reach USD 13,737
million in 2007. This increase is even higher than last year’s 15.49% growth of deposits and
much larger than the 11.4% growth of the market, once again giving evidence for BLOM
BANK’S outgrowth of the market.
As a result of the Bank’s network of expansion locally and regionally, foreign currencies’
share of total deposits went up, standing at 84.07% of total deposits for the year 2007, slightly
up from 82.38% in 2006 and much larger than 76.35% in 2005. The increase in the share of
foreign currency deposits out of total deposits can then be mainly attributed to the Bank’s
regional and international growth.
32
Management discussion & analysis 2007
Evolution of Customer Deposits (in USD Millions)
13,737
16,000
12,000
8,000
6,215
7,686
8,992
2003
2004
10,161
11,735
2005
2006
4,000
0
2002
2007
BLOM BANK’s market share in terms of customer deposits in the Lebanese banking sector
accounted for 20.35% in 2007, up from 19.3% in 2006.
Fiduciary deposits reached USD 2,626.293 million in 2007, increasing 42.7% year-on-year.
33
4. SOURCES OF FUNDS
5. USES OF FUNDS
4.2 Capitalization (Tier I & Tier II Capital)
Tier I Capital increased by 9.72% to USD 1,368.614 million at the end of 2007 compared to an
increase of 39.49% at the end of 2006. Tier I increase can be mainly attributed to retained
profits of the year 2007 amounting to USD 204.7 million before dividend distribution.
Tier II capital continued its decreasing trend, falling by 19.2% at the end of 2007 to USD 19.385
million as a result of a 30% drop in the cumulative change in fair value due to the decline in
financial assets prices.
Tier I and Tier II Capital (in USD Millions)
1600
1,247.35
1,368.61
1200
894.25
800
553.73
484.85
696.51
400
84.5
84.7
94.1
0
2002
Tier I Capital
34
2003
Tier II Capital
2004
63.6
2005
24.0
2006
19.4
2007
Management discussion & analysis 2007
5. USES OF FUNDS
BLOM BANK’s strategy stresses the maintenance of high asset quality and a strong portfolio
of investments. The risk component, which has always been the Bank’s primary consideration
while assessing the uses of funds, is reflected in the return on assets ratio, at 1.33% in 2007.
The share of Lebanese Pound Treasury Bills as well as other government debt securities in
foreign currencies to total assets stood at 20.27% in 2007, up from 16.22% in 2006.
Nevertheless, the share of cash and deposits at the Central Bank to total assets dropped to
25.25% in 2007 from 29.16% in 2006, while the share of bonds and financial instruments with
fixed income rose to 4.65% in 2007, up from 1.80% in 2006. On the other hand, loans granted to
customers constituted 16.67% of total assets in 2007, up from ratio of 13.99% in 2006. The Bank
placements with other banks and financial institutions amounted to 30.07% of total assets in
2007 compared to 36.19% in 2006
Breakdown of uses of funds
2006
Lebanese Treasury Bills
and other government bonds
2.64%
13.99%
2007
16.22%
16.67%
4.65%
1.80%
3.09%
20.27%
Cash and Central Banks
Banks and Financial
Institutions
Bonds and Financial
Instruments with Fixed Income
30.07%
36.19%
29.16%
25.25%
Loans to Customers
Others
35
5. USES OF FUNDS
5.1 Cash and Central Bank
Cash and central banks reserves stood at USD 4,199 million in 2007, up 1.33% from last year.
The share of subscription in certificates of deposit amounted to 43.86% of total cash and
balances with central banks, down from 57.91% in 2006. Central Banks reserves accounted for
the largest share in 2007, standing at 54.12% of total cash and balances with central banks as
compared to 40.60% in 2006; while cash represented the remaining 2.02%, slightly up from its
contribution of 1.49% in 2006.
The cash and central banks category includes non-interest bearing balances held by the Bank
at the Lebanese Central Bank (Banque Du Liban) in compliance with the obligatory reserve
requirements for all banks operating in Lebanon on commitments in Lebanese Pounds (calculated
on the basis of 25% of sight and 15% of term commitments). The requirement also applies to interest
bearing placements at the rate of 15% of total deposits in foreign currencies, as well as the
certificates of deposit issued by the Central Bank of Lebanon.
Distribution of Cash and Central Banks
(In USD Millions)
End of Year 2007
Amount
Cash
Central banks
Certificates of Deposit
Total
36
85
2,272
1,842
4,199
End of Year 2006
%
2.02
54.12
43.86
100.00
Amount
62
1,682
2,400
4,144
%
1.49
40.60
57.91
100.00
Management discussion & analysis 2007
5.2 Lebanese Treasury Bills and Other Governmental Bills and Bonds
The Bank’s portfolio of Lebanese Treasury Bills and other governmental debt securities increased
by USD 46.2% to reach USD 3,370million in 2007 from USD 2,305 million in 2006. Nevertheless, the
share of Lebanese pounds denominated treasury bills dropped to 47.13 % of the total portfolio as
compared to 57.50% in 2006. On the other hand, the foreign currency-denominated government
bills constituted 52.87% of the total in 2007 as compared to 42.50% in 2006.
The treasury portfolio according to the new IFRS (International Financial Reporting Standards)
classification that was adopted starting 1st January 2005 shows the following:
Distribution of the Treasury Portfolio ( Lebanese Treasury Bills & other Governmental Bills and Bonds )
(In USD Millions)
At December 31, 2007
At December 31, 2006
51.04
50.10
0.937
33.531
32.843
0.688
Available for sale Investments
Treasury Bills and Bonds
Accrued Interest
Unrealized Premiums
Unrealized Discounts
3,318.988
3,291.218
65.822
3.744
(41.796)
2,271.557
2,240.045
47.080
1.868
(17.436)
Total
3,370.032
2,305.088
Investments held for trading
Treasury Bills and Bonds
Accrued Interest
Distribution of the Treasury Bills and other Governmental Bills
2007
2006
Lebanese Treasury Bills
Other Governmental Bonds
in Foreign Currencies
42.50%
52.87%
47.13%
57.50%
37
5. USES OF FUNDS
5.3 Bonds and financial instruments with fixed income
Bonds and financial instruments with fixed income registered a significant 202% growth in
2007, up to USD 773 million in 2007 from USD 256 million a year earlier as the Bank opted for a
diversification of its investments in high yielding instruments that are rated BBB or above.
This caption includes bonds and certificates of deposit that are classified as follows:
- Held for trading
- Available for sale
- Loans and receivables
Distribution of Bonds and Financial Instruments with Fixed Income
(in USD Millions)
At December 31, 2007
At December 31, 2006
44.255
43.739
0.516
0
0
0
578.563
573.164
0
5.399
92.538
91.450
0
1.088
0
0
0
0
0
0
Loans & Receivables
Certificates of Deposit
Accrued Interest
150.077
145.386
4.691
163.582
159.755
3.826
Total
772.895
256.120
Trading
Bonds
Accrued Interest
Available for Sale
Bonds
Less: provision for Impairment
Accrued Interest
Held To Maturity
Bonds
Accrued Interest
38
Management discussion & analysis 2007
5.4 Banks and Financial Institutions
The bank’s deposits at banks and financial institutions decreased by 2.82% in 2007 to USD
4.999 billion as compared to USD 5.144 billion 2006. This small decrease resulted from the
Bank’s investments in fixed income instruments. Nonetheless, those deposits continued to
represent the largest shares of the Bank’s assets, accounting for 30.07% of the total in 2007 as
compared to 36.17% in 2006.
Time deposits constituted 95.65% of total deposits with banks and financial institutions in 2007,
slightly down from 96.12% in 2006. Like for previous years, more than 99% of the current and
time deposits are denominated in foreign currencies.
5.5 Loans and Advances to Customers
The Bank is following a conservative loan strategy in order to maintain a high asset quality.
This strategy has been reflected by a ratio of net loans and advances to total deposits which
has been successfully maintained at low levels, standing at 20.2% in 2007. Outstanding loans
reached USD 2,772 million at the end of 2007, increasing 39.46% from last year driven by growth
in regional loans. In comparison, local loans grew by 11.7% in 2007.
BLOM BANK’s market share in terms of total loans and advances reached 11.6% in 2007, up
from 9.28% in 2006.
Evolution of Total Loans and Advances (In USD Millions)
2,772
3,000
2,500
1,988
2,000
1,500
1,000
1,352
996
1,670
1,164
500
0
2002
2003
2004
2005
2006
2007
39
5. USES OF FUNDS
The Credit risk classification of the Bank’s Loans portfolio is as follows :
Credit Risk Classification of Total Net Loan Portfolio
(in USD Millions)
Regular Accounts
Special Attention Accounts
Net Non-Performing Accounts
Net Doubtful Accounts
Net Provisions for Commercial Loans not Classified
Bad Debt Accounts
Total
2007
2,691.25
46.12
14.62
46.56
(26.55)
0.00
2,772
2006
1,894.94
59.97
28.50
40.16
(35.71)
0.00
1,987.66
The above loan classification is in accordance to the Central Bank of Lebanon’s (Banque Du
Liban’s) classification under decree N0 7159 dated November, 10th, 1998 and the decree
related to bad debt classification dated December 2001. Below is a briefing about the basis of
loan classification defining each category’s characteristics.
- Regular Accounts
A- Unconditional: Covers accounts which display regular movements sufficient to repay the
loan in accordance with the repayment schedule. The latest financial statements should be
available and adequate collateral should be taken to cover the loan.
B- Incomplete file: as in point (A), adequate collateral and repayment on schedule are foreseen.
However, the file is considered incomplete because the client is late in submitting his financial
statements.
- Special Attention Accounts
Display signs of irregular movements or exceed the credit limit on a continuous basis. Recent
financial statements are unavailable and adverse economic conditions may affect the borrower’s
ability to repay the debt. Collateral has not been evaluated for the last 3 years. Such an
account may be considered recoverable.
However, it should be closely monitored for a year, at the end of which the account is reclassified if the
previously mentioned conditions are not regularized.
40
Management discussion & analysis 2007
- Non-performing Accounts
Covers loans which display most or all of the following:
- a significant drop in the client’s profitability
- a drop in the flow of cash into the account for a period exceeding 2 years, and thus resulting in
repetitive delays in repayment exceeding a period of 3 months.
- a noticeable depreciation in the value of the collateral provided and repetitive delays in
repayment for a period not exceeding three months.
- credit facilities are not used – partially or in whole – for the purpose specified in the loan
agreement.
The credit risk committee will review the repayment schedule with the client and will keep the
account under close observation. However, interest and commissions will be classified as
unrealized until the account is regularized.
- Doubtful Accounts
Represents loans which display all of the conditions of a non-performing account in addition
to having a complete lack of credit movement into the account for a period of 6 months and a
delay in payments of the rescheduled loan which exceeds 3 months from the date of maturity.
The Bank will make a partial provision for the loan and consider interest and commission as
unrealized.
- Bad Debt Accounts
Includes all “Doubtful Accounts” which are considered unrecoverable due to the lack of a
collateral or the loss of contact with the client. In this case, interest ceases to be accrued and
a provision of 100% of the principal amount of the loan is made. The account is under litigation
until a ruling by the court is made, after which it is written-off.
The improving quality of the loan portfolio was further highlighted by a decrease in the Bank’s ratio
of gross doubtful debts to gross total loans to 7.92% in 2007 from 10.25% in 2006. The coverage of
doubtful accounts dropped to 91.57% in 2007 from 98.04% in 2006
Provisions and unrealized interest for doubtful debts and non-performing accounts decreased
by USD 5.304 million to reach USD 226.984 million at the end of 2007. The amount includes
provisions for commercial loans not classified at the end of 2007 after deducting the amount
of USD 9 million of provisions for doubtful loans no more required and transferring provisions
written-off amounting to USD 34.56 million.
41
5. USES OF FUNDS
The ratio of foreign currency loans with respect to total loans went up to 92.12% in 2007 from
91.72% in 2006 while the ratio of foreign currency loans to foreign currency deposits increased
to 22.11% in 2007, up from 18.86% in 2006.
The breakdown of the loan portfolio by maturities shows that medium and long term loans with
maturities exceeding one year constituted 28.5% of the bank’s outstanding net commercial
loans in 2007 as compared to 17.57% in 2006, whereas short term loans, with maturities of less
than one year, constituted 71.5% of the total net commercial loans, compared to 82.43% in
2006.
As for the breakdown of the loan portfolio by economic sectors, it appears that the highest
share of loans was granted to trade and services activities, followed by construction and
manufacturing. Loans to the agriculture sector witnessed a slight increase to 0.71% of the
total loan portfolio in 2007 from 0.60% in 2006. Loans granted to the manufacturing sector
dropped to 10.42% in 2007 down from 13.01% in 2006 while trade loans decreased also from
30.37% in 2006 to 24.22% in 2007 with 7.41% of the portfolio granted to retail trade and 16.81%
to wholesale trade. Loan portfolio to the services sector slightly improved to 20.69% in 2007,
up from 20.21% a year earlier. The construction sector witnessed a strong boom in 2007, driven
mainly by the post-war reconstruction projects, and accounted for 16.73% of the loan portfolio for
the year 2007, up from 7.19% in 2006. Loans given to freelance professions dropped further to
8.08% in 2007 from 12.65% in 2006. Finally, consumer loans recorded a significant increase to
19.15% in 2007, up from 15.99% in 2006.
Distribution of Loans by Economic Sector
2006
2007
Agriculture and Forestry
Manufacturing
Trade
Services
13.01%
0.60%
0.71%
Consumer Loans
42
24.22%
15.99%
Construction
Freelance Professions
10.42%
30.37%
19.15%
8.08%
12.65%
7.19%
20.21%
16.73%
20.69%
Management discussion & analysis 2007
The analysis of the loan portfolio by type of collateral reveals that the commercial loans
secured by mortgages accounted for the largest share of the 2007 portfolio, despite a small
drop from 29.30% in 2006 to 28.07% in 2007. Similarly, advances against personal guarantees
decreased, representing 11.96% of the total loans portfolio in 2007, down from 16.60% in 2006.
Advances against cash collateral dropped also to 17.09% in 2007 from 19.78% in 2006. On the
other hand, the share of LC financing went up to 2.86% in 2007, up from 1.62% in 2006 and
syndicated loans stood at 0.27% in 2007, up from nil a year earlier. Retail loans recorded an
important increase in 2007, with its share in the total loan portfolio going up to 19.15% in 2007
from 15.99% in 2006. Loans to members of staff increased to 0.20% from 0.13% while loans to
directors and related parties accounted for 2.44%, up from 0.04%. Overdraft also increased in
2007, representing 17.96% of the total loans portfolio in 2007 from 16.36% in 2006.
Distribution of Loans by Type of Collateral
2006
2007
Advanced Against Personal
Guaranties
LC Financing
Syndicated Loans
Advanced Against Cash
Collateral
Retail Loans
Loans to Member of Saff
16.36%
17.96%
29.30%
0.04%
0.13%
2.44%
0.20%
28.07%
15.99%
19.15%
0.00%
0.27%
11.96%
16.60%
19.78%
1.62%
17.09%
2.86%
Loans to Directors
Overdraft
Commercial Loans
Secured by Mortages
43
6. LIQUIDITY
7. PROFITABILITY
6. LIQUIDITY
BLOM BANK’s ability to maintain high liquidity levels, minimizing risks and ensuring high
quality of assets, has been at the centre of liquidity management and core objectives of the
Group. The Bank has successfully maintained ample liquidity in 2007, despite a light drop in
its ratio. As such, the Lebanese Pound liquidity ratio (including Lebanese government
Treasury Bills) stood at 105.93% in 2007 compared to 109.80% in 2006, reflecting high liquidity
levels. Moreover, the immediate liquidity (cash & banks) in foreign currencies accounted for
63.24% of foreign currency deposits in 2007 compared to 78.26% in 2006, a small drop mainly
due to the Bank’s regional expansion activities.
Maturity mismatch between assets and liabilities, which characterises the Lebanese banking
sector, was also noticeable in BLOM BANK accounts. In 2007, the gap was negative in the
maturities from zero to one month and from 1 to 3 months, amounting to USD 4,530 million and
USD 1,872 million respectively. Afterwards, the maturity gaps turned back positive, reaching a
maximum of USD 3,639 for maturities of 2 to 5 years.
Asset-Liabilities Maturity Gap
(In USD Millions)
Total Assets
Total Liabilities
& Shareholder’s Equities
2007 Liquidity Gap
2007 Cumulative Maturity Gap
46
Up to
1 Month
From
1 to 3
Months
From
3 to 6
Months
6,861
11,391
1,015
2,887
833
517
(4,530)
(4,530)
(1,872)
(6,402)
316
(6,086)
From
6 Months
to 1 Year
From
1 to 2
Years
From
2 to 5
Years
705
266
1,776
42
3,687
48
439 1,734
(5,647) (3,913)
3,639
(274)
Over
5 Years
Total
1,751 16,628
1,477 16,628
274
0
0
0
Management discussion & analysis 2007
7. PROFITABILITY
BLOM BANK was ranked first by net profits in Lebanon in 2007. In fact, the Bank recorded net
profits of USD 204.7 million for the year 2007, increasing 13.53% compared to the year 2006
where net profits reached USD 180.3 million.
Return-on-average equity stood at 15.65% in 2007, down from 16.81% a year earlier.
Return-on-average assets for the year 2007 amounted at 1.33%, slightly less than 1.38% in 2006
due to the larger growth in assets of 17% compared to a 13.53% rise in net profits.
Earning per share increased from USD 7.28 in 2006 to USD 8.22 in 2007.
Evolution of Net Income (In USD Millions)
250.00
180.30
200.00
150.00
100.00
204.7
136.85
83.60
88.30
91.15
2003
2004
50.00
0.00
2002
2005
2006
2007
47
7. PROFITABILITY
7.1 Net Interest Income
Net interest income registered a 12% increase in 2007 to USD 302.56 million. The growth
came as a result of a 17.9% increase in interest and similar income to USD 988.89 million in
2007, despite a 20.6% increase in interest charges in 2007 to reach USD 686.326 million.
On the other hand, net interest revenue after provisions and doubtful loans, went up by
15.03% to reach USD 310.148 million in 2007 as compared to USD 269.620 million in 2006.
The growth of net interest income will be further elaborated through the breakdown of net
interest income into interest and similar income, interests and similar charges, interest margin as
well as net provisions for doubtful loans.
7.1.1 Interest and Similar Income
Interest and similar income witnessed a 17.9% increase in 2007, after a hike of 35.67% in 2006.
Average interest earning assets increased by 16.1% to reach USD 13,359 million in 2007 from
USD 11,507 million in 2006.
The below table illustrates the breakdown of average earning assets by currency at the end
of 2007:
Breakdown of Average Interest Earning Assets at the End of 2007
(In USD Millions)
LBP
Lebanese Treasury Bills and Other Governmental Bills
Deposits with Banks and Central Banks
Bonds and Other Financial Instruments with Fixed
Income Including Certificates of Deposit
Loans and Advances
Total
48
Foreign
Currencies
Total
1,367
115
585
1,248
5,723
1,996
2,615
5,838
2,581
190
2,257
2,135
11,102
2,325
13,359
Management discussion & analysis 2007
In 2007, the weights of interest and similar income components remained very similar to those
of the year 2006. Lebanese and other government bills accounted for 19.57% of total average
interest earning assets in 2007, decreasing modestly from 21.13% in 2006. The average
deposits with banks and central banks stood at 43.70% of the total in 2007, up from 42.25% in
2006. The share of bonds and other financial instruments with fixed income, including certificates
of deposits, accounted for 19.32%, down from 20.57% a year earlier while the weight of loans and
advances increased to 17.40% in 2007, compared to 16.04% in 2006.
The breakdown of Interest and Similar Income is detailed in the following table:
Breakdown of Interest and Similar Income
(In USD Millions)
End of 2007
Amount
Lebanese Treasury Bills
and Other Governmental Bills
Deposits with Banks and Central Banks
Bonds and Other Financial Instruments
with Fixed Income Including Certificates of Deposit
Loans and Advances Including Related Parties
Total
End of 2006
% of Total
Amount
% of Total
230.407
23.30%
214.092
25.52%
324.262
231.026
32.79%
23.36%
249.140
215.388
29.69%
25.67%
203.193
988.888
20.55%
100.00%
160.401
839.021
19.12%
100.00%
The breakdown of interest and similar income reveals a decrease in the share of Lebanese
Treasury Bills and other government bills to 23.30% in 2007 compared to 25.52% in 2006. On the
other hand, the portion of income generated from deposits with banks and central banks
increased to 32.79%, up from 29.69%; while the contribution of bonds and other financial
instruments with fixed income (including certificates of deposit) stood at 23.36% in 2007, down
from 25.67% a year earlier. Finally, interest income generated from loans and advances including
related parties represented 20.55% of the total in 2007, increasing from 19.12% in 2006.
49
7. PROFITABILITY
Breakdown of Interest and Similar Income
2006
2007
Deposits with Banks
and Central Banks
Bonds and Other Financial
Instruments with Fixed
Income Including
Certificates of Deposit
19.12%
25.52%
20.55%
23.30%
25.67%
26.69%
23.36%
32.79%
Loans and Advances
Lebanese Treasury Bills
and Other Governmental
Bonds
7.1.2 Interest and Similar Charges
Interest and similar charges increased 20.6% to USD 686 million in 2007 up from USD 569
million in 2006, while average interest bearing liabilities went up by 16.9% to USD 12,870
million compared to USD 11,011 million a year earlier.
Deposits from customers including related parties accounted for the largest share of the
average interest bearing liabilities, amounting to 97.40% in 2007 while deposits from banks
and financial institutions represented the remaining 2.59%.
Average Interest Bearing Liabilities at the End of 2007
(In USD Millions)
Deposits and Similar Accounts from Banks and Financial Institutions
Deposits from Customers Including Related Parties
Total
50
LBP
Foreign
Currencies
Total
3
2,168
2,171
331
10,368
10,669
334
12,536
12,870
Management discussion & analysis 2007
The breakdown of the interest and similar charges shows a modest increase in the portion of
deposits and similar accounts from banks and financial institutions to 1.85% in 2007, up from
1.56% in 2006 while the share of interest paid on customers’ deposits slightly retreated to
98.15% in 2007 compared to 98.44% in 2006. Finally, charges from notes and fixed income
financial instruments remained nil for the second year on a row.
Breakdown of Interest and Similar Charges
(In USD Millions)
End of 2007
Amount
Deposits & Similar Accounts
from Banks & Financial Institutions
Notes & Financial Instruments
with Fixed Income
Deposits from Customers
Including Related Parties
Total
% of Total
End of 2006
Amount
% of Total
12.678
1.85%
8.851
1.56%
0
0.00%
0
0.00%
673.648
98.15%
560.017
98.44%
686.326
100.00%
568.868
100.00%
Distribution of Loans by Type of Collateral
2006
2007
Deposits from Customers
Including Related Parties
Deposits and Similar
Accounts from Banks
& Financial Institutions
1.56%
0.00%
1.85%
0.00%
Notes and Financial
Instruments with
Fixed Income
98.44%
98.15%
51
7. PROFITABILITY
7.1.3 Interest Margin (Before Provisions For Doubtful Loans)
The Bank’s Net Interest Income before provisions for doubtful loans rose by 11.4% in 2007 to
USD 302.56 million, while the net interest margin before provisions on doubtful loans stood at
2.03% in 2007, down from 2.13% in 2006.
The ratio of interest charges to interest income increased to 69.4% up from 67.8% in 2006 due
to a larger increase in interest charges as compared to interest income.
Net Interest Income (Before Provisions) (In USD Millions)
350
303
271
300
250
200
150
148
153
157
2003
2004
181
100
5
0
2002
2005
2006
2007
2.13%
2.03%
Net Interest Margin (in percent)
2.50%
2.34%
2.13%
1.75%
2.00%
1.77%
1.50%
1.00%
0.50%
0.00%
2002
52
2003
2004
2005
2006
2007
Management discussion & analysis 2007
Net Interest Margin (in percent)
72.0%
70.91%
71.0%
71.25%
70.66%
70.40%
70.0%
69.40%
69.0%
67.81%
68.0%
67.0%
66.0%
2002
2003
2004
2005
2006
2007
7.1.4 Net Provisions for Doubtful Loans
The net provisions for doubtful loans increased from USD 0.536 million in 2006 to a positive balance
of USD 7.585 million in 2007.
53
7. PROFITABILITY
7.2 Non-Interest Income
Non-interest income increased by 21.6% year-on-year, amounting at USD 92.35 million in 2007
compared to USD 75.960 million in 2006.
Breakdown of Non-Interest Income
(In USD Millions)
2007
Amount
Net commission
Net income from
financial operations
Other income
Total
2006
% of Total
Amount
% Change
% of Totalx
63.998
26.313
69.30
28.49
54.861
17.775
72.23
23.40
16.65
48.03
2.040
92.351
2.21
100.00
3.322
75.958
4.37
100.00
(38.59)
21.6
Net commissions maintained the largest share of the total non-interest income, accounting for
69.30%, decreasing slightly from 72.23% in 2006. Net income from financial operations represented
28.49% of total non-interest income in 2007, registering a rise of 48% compared to 2006 due to the
active private banking and asset management operations. Other net income accounted for 2.21%
of the total, decreasing 38.59% year-on-year.
Constituents of Non-Interest Income
2006
4.37%
Net Commissions
Net Income From Financial
Operations
2007
2.21%
28.49%
23.40%
Other Income
72.23%
54
69.30%
Management discussion & analysis 2007
7.3 Staff and Operating Expenses
Staff and operating expenses reached USD 139.6 million in 2007, registering a 14.85% increase
year-on-year.
Staff (salaries and related benefits) increased by 14.89% in 2007 to USD 85.66 million while
operating expenses went up by 14.79% to reach USD 53.94 million. Staff expenses accounted
for the largest share of staff and operating expenses with 61.36% of the total while operating
expenses stood at 38.64% of the total.
BLOM BANK is successfully maintaining a low cost-to-income ratio, reflecting the Bank’s
cost-containment policy. In fact, cost-to-income ratio dropped further to 34.63% in 2007
compared to 35.31% in 2006.
Distribution of Staff and Operating Expenses
(In USD Millions)
2007
Staff Expenses
Operating Expenses
Total
2006
% Change
Amount
% of Total
Amount
% of Totalx
85.66
53.94
139.60
61.36
38.64
100.00
74.56
46.99
121.55
61.34
38.66
100.00
14.89
14.79
14.85
Cost to Income Ratio
55%
50%
47.34%
45%
42.56%
38.37%
40%
38.09% 38.58%
39.77%
40.93%
36.80%
34.11%
35%
35.10% 34.63%
30%
25%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
55
8. DIVIDEND DISTRIBUTION &PREFERRED SHARES REVENUES
9. CAPITAL ADEQUACY RATIOS
10. INTEREST RATE RISK
11. RISK MANAGEMENT & BASEL II PREPARATIONS
8. DIVIDEND DISTRIBUTION &PREFERRED SHARES REVENUES
During BLOM BANK’s Annual General Assembly, on April 9th, 2008, the distribution of dividends
for the year 2007 was approved. Preferred shares, issue 2002, will yield USD 15, while the preferred
shares, issue 2004, will pay USD 8.5 and their corresponding 2005 issue will give USD 9.5. As for
the common stocks and Global Depositary Receipts (GDR), each will pay a dividend of LBP 5,500
per share.
9. CAPITAL ADEQUACY RATIOS
The Bank’s capital adequacy ratio reached 31.53% (before dividend distribution) at the end of
2007, a ratio which is almost four times the international ratio of 8% required by the Basel
Commission. For Tier I capital alone, the capital adequacy ratio stood at 31.07% at the end of
2007. After dividend distribution, the capital adequacy ratio reached 29.05% for Tier I &Tier II
and 28.60% for Tier I alone.
Capital Adequacy Ratios (After Dividend Distribution )
40.00%
36.10%
35.00%
30.00%
25.00%
35.33%
33.23%
35.00%
29.88%
30.71%
29.76%
29.05%
28.22%
26.06%
27.34%
28.02%
28.60%
20.00%
15.00%
2002
Tier I Capital
58
2003
2004
2005
Tier I + Tier II Capital
2006
2007
Management discussion & analysis 2007
10. INTEREST RATE RISK
Interest rate risk arises from adverse movements in interest rates, affecting the interest earning
assets and liabilities of the bank. Interest rate risk is well managed through the continuous
re-pricing of assets and liabilities. Most assets and liabilities are repriced within one year. With
the major parts of the Bank’s deposits re-priced within the 3 months interval, interest rate risk
continues to be concentrated within this period, while the biggest part of Bank’s treasury bills
and governmental bonds portfolio being re-priced after the 3 months period.
The bank’s interest rate sensitivity position based on contractual re-pricing arrangements as
of December 31,2007 is as follows:
Interest-Rate Sensitivity Position at the end of 2007
(In USD Millions)
Total Assets
Total Liabilities
and Shareholder’s Equilty
Interest Rate Sensitivity
Gap for 2007
Cumulative Interest Rate
Sensitive Gap
Up to
1 Month
Over
5 Years
Non-sensitive to
interest rate risk
From
1 to 2
Years
From
2 to 5
Years
656
184
1,774
31
3,778
48
1,460
38
1,689
2,559
265
472
1,743
3,730
1,422
(870)
(6,497)
(6,025)
(4,282)
(552)
870
0
From
1 to 3
Months
From
3 to 6
Months
5,641
10,647
878
2,634
753
488
(5,006)
(1,756)
(5,006)
(6,762)
From
6 Months
to 1 Year
11. RISK MANAGEMENT & BASEL II PREPARATIONS
BLOM BANK’s responsibility for establishment of effective risk management practices and
culture lies with the Board of Directors as does the setting up of the bank’s risk appetite and
tolerance levels. The Board of Directors delegates through its Risk Management Committee
the day-to-day responsibility for establishing and monitoring of risk management processes
across the bank’s group to the Head of Risk Management, who is directly appointed by the
Board of Directors and works closely with the bank’s Executive Senior Management in Beirut.
59
11. RISK MANAGEMENT & BASEL II PREPARATIONS
12. UNIVERSAL BANKING SERVICES
In addition to the Group’s Risk Management in Beirut, risk managers and/or risk officers were
assigned within the Group’s foreign subsidiaries or branches to report to the department and
Executive Senior Management in a manner that ensures:
- Standardization of risk management functions and systems across the Group.
- Regional consistency of conducted business in line with the Board’s approved risk
appetite.
As regards to Basel II capital adequacy ratio calculations, the Risk Management
Department started, since December 2004’s consolidated balances, to issue internal
reports to Executive Management and the Board revealing multiple scenarios of capital
charges’ calculations for credit and market risks under the Standardized approaches and
for operational risk under the Basic Indicator approach. In addition, the bank has submitted to the
Lebanese Banking Control Commission two Quantitative Impact Studies for the Basel 2
capital adequacy calculations for June and December 2007 balances, and is maintaining a
ratio well above the minimum international requirement of 8%.
In December 2006, the bank acquired, through an enterprise-wide license, the Moody’s KMV
Risk Advisor, a state-of-the-art credit analysis and rating system for corporate and commercial
borrowers, in order to aid the bank in moving at a later stage to internal ratings-based
measurements under Basel II. The credit risk team is responsible for the implementation and
administration of the Moody’s Risk Advisor system along with the generation of internal ratings
for all analyzed credit files.
In terms of market risk, the department is responsible for generating internal reports
quantifying the Bank’s liquidity risk and earnings at risk due to extreme movements in
interest rates, while daily monitoring the sensitivity of the bank’s trading portfolio of fixed
income securities to changes in market prices and/or market parameters. All abovementioned
reports as well as interest rate sensitivity and liquidity gaps are reported to Executive Senior
Management and to regulatory authorities on a monthly basis. This is done in line with the
bank’s Asset & Liability Management (ALM) policy which assigns authority for its formulation,
revision and administration to the Asset/Liability Management Committee (ALCO) of BLOM
BANK s.a.l. The market risk team is responsible for monitoring compliance with all limits
set in the ALM Policy and is also in the process of implementing the newly acquired
(October 2007) Asset & Liability Management system “Focus ALM” by Sungard, which
provides for ALM analysis from both static and dynamic perspectives including stress
testing and extensive scenario analysis.
60
Management discussion & analysis 2007
As for operational risk, the department conducted a series of operational risk assessments on
head office departments and functions and on local and foreign branches, resulting in a
set of amendments on operational procedures and system processes. In addition, a loss
incident reporting system has been introduced to record losses across the bank’s operating
activities, as the bank builds up an operational risk database in line with regulatory and
Basel 2 directives. The operational risk team is responsible for continuously introducing
modifications on the bank’s core banking application in relation to specific branch operations
and control measures. At the same time, Risk Management has broken down the bank’s
internal accounts according to Basel 2 designated business lines with losses apportioned
accordingly and in preparation for later moving on to the more advanced approaches of
operational risk measurements.
11.1 Corporate Governance
The Board of Directors of BLOM BANK sal approved a Corporate Governance Code at the
end of 2007. The Code applies to BLOM BANK sal and its Lebanese subsidiaries and affiliates.
It complies not only with Lebanese laws and regulations, but also with the Basel
Committee directives on Corporate Governance for Banks.
The Code covers shareholders rights and key ownership functions as well as their constitution. It also
clarifies the Board’s structure and composition, its role, duties and functions. Issues related to Board
meetings, practices and committees are discussed as well as those related to management
committees and the internal control system. The Code highlights the importance of stakeholders
relations with the Bank’s own human resources as well as with customers and suppliers, and
also the prominence of banking ethics in the conduct of business.
The Code is designed to enforce transparency and clarity of reporting lines in guiding the
Bank’s operations, policies and strategies, and in helping deliver the highest quality of
service to the Bank’s clients and value to its shareholders.
12. UNIVERSAL BANKING SERVICES
In line with its policy of maximizing customers’ satisfaction and increasing shareholders’
value, BLOM BANK has sustained the diversification of its products and services. BL0M
BANK GROUP provides the following universal banking services that suit all customers
needs:
- Commercial corporate banking
- Private and investment banking
- Retail banking
- Islamic banking
- Insurance products & services
61
12. UNIVERSAL BANKING SERVICES
12.1 Commercial and Corporate Banking
BLOM BANK continues to apply a conservative lending policy. Throughout 2007, the bank
expanded its credit portfolio to corporate and commercial customers especially in projects
finance and real estate developments. In addition, the bank has financed several hotel
projects in Beirut Central District (BCD) and other promising touristic areas. BLOM BANK has
also catered for the commercial sector, in particular trade and working capital financing.
Furthermore, the bank’s policy is to expand even further in regional countries to satisfy the
needs of the Lebanese and Arab expatriates in those countries.
With the collaboration of IFC, BLOM has extended unique soft loans to customers affected by
the July 2006 war with the objective of helping them overcome the consequences of this
war and enabling them to recover their prewar financial status.
12.2 Private and investment banking
BLOM BANK provides private banking services such investment consulting and portfolio
management through both its investment-banking arm BLOMINVEST Bank Sal and its
Geneva-based affiliate BLOM Bank Switzerland. Some of these services are listed below:
- Investment Products: includes a variety of investment funds and structural products
focusing on Lebanese and foreign instruments. The first, BLOM Cedars Balanced Fund,
launched in early 2008 and is considered the first investment vehicle of its kind in Lebanon
for its equity and fixed-income investments.
- Project Finance : consists of extending medium and long term financing and in participating
in bank loan syndications.
- Treasury & Capital Market Services: includes brokering on the Beirut Stock Exchange
(BSE), advising on trades in international equities, trading in debt securities and dealing
in the foreign exchange markets.
- Investment Banking: participates in the underwriting and distribution of Lebanese and
other debt instruments and provides advices on mergers and acquisitions and privatisation.
- Asset & Portfolio Management: covers management of portfolios of shares, bonds and
term placements in all currencies.
- Research Department : produces weekly and quarterly reports on the Lebanese economy,
and analyzes leading Lebanese economic sectors. In addition, it provides country reports
on regional economies, especially those where BLOM Bank has a presence. It publishes
as well the BLOM Stock Index (BSI), Lebanon’s first financial market index that covers all
stocks quoted on the BSE, and conducts equity research on major Lebanese and regional
companies.
62
Management discussion & analysis 2007
12.3 Retail Banking
As of December 31, 2007, BLOM BANK offered more than 110 retail products, classified in
different families:
- Payment cards: BLOM BANK offers a wide range of payment cards that target different
customers, provide different methods of payments and meet different purposes. As such,
BLOM Visa comes in Classic, Gold and Corporate; also the Bank offers Internet cards dedicated for
Internet users, Platinum and Platinum Black cards as well as Mini cards. In addition, the Bank has
been the pioneer in launching the first Titanium MasterCard in Lebanon. In 2007, BLOM
introduced the Alfa BLOM Mastercard, a first of its kind in Lebanon and the Middle East,
offering to its holders free minutes on the Alfa Active and Alfa Classic lines. Also in 2007,
a new card “Watan” was launched for the Lebanese army, internal security and national
security forces.
- Rewards programs: BLOM Golden Points Loyalty program enables customers to win a
variety of gifts -such as airline tickets, free stays at the finest hotels, electronics and much
more- by accumulating Golden points with every $100 purchases using the card. In addition to
this, BLOM Gifts Loyalty program allows cardholder to win valuable gifts for purchases at
certain merchants over a period of 6 months.
- Consumer loans: BLOM BANK customers can take advantage of a number of consumer
loans on offer such as KARDI for personal loans, SAYARATI for car loans, DARATI or
Housing CPH for house loans and PC loans.
- Saving plans: BLOM BANK offers DAMANATI, a retirement saving plan denominated in
US Dollar coupled with life insurance. Moreover, WALADI a savings program dedicated to
child’s education, coupled with life insurance is also offered to the Bank’s customers.
- E-banking: BLOM BANK offers to its customers phone banking services such as “Allô
BLOM” ( a 24-hour customer service) as well as internet banking services such as e-BLOM.
In addition, the Bank provides free of charge SMS ALERT services, enabling customers to
be alerted whenever the balance of accounts changes or whenever a transaction is being
performed.
63
12. UNIVERSAL BANKING SERVICES
13. INFORMATION SYSTEM & TECHNOLOGY
12.4 Islamic banking
Blom Development Bank (BDB), a full fledged Islamic bank , was established in February
2006 and started operation in march 2007. BDB carries out all its banking and investment
transactions in compliance with provision of the Islamic Shari’a and pursuant to the
instructions and regulations issued by Banque Du Liban and the direction of its Shari’a
Board consisting of the three prominent shari’a scholars.
BDB business covers all spectrum of banking services including , acceptance of deposits
provision of various Islamic financing solutions in the form of Murabaha, Ijara , Tawaruk ,
Forward lease , Wakala and istisna’a.
Since its inception, BDB established relationships with major Islamic Banks and
Investment Companies operating in the region and played a major role in developing products
which suits the requirements of its clientele; On the Retail side “Al Yassir” Restricted Investment
Account was introduced aiming at providing depositors with monthly profit distribution resulting
from Sharia compliant short-term investments concluded with rated Islamic institutions.
Furthermore, “Mowasalati”, car Murabaha finance as well as “Manzili” home Murabaha
finance, were initiated aiming at providing Islamic wary customers with Islamic solutions to
finance their acquisitions of cars and homes based on Murabaha structure which could be
later adjusted to suit an Ijara structure as per customers’ requirements.
On the international financing front, BDB participated with other regional Islamic Banks
in raising funds in favor of major corporations operating in the Gulf and played a major role
in the issuance of two Islamic Sukuk transactions, namely: the Wakala Sukuk to” Berber
Cement co “ and the Ijara Sukuk to “Dar Al Arkan”
On the collective investment front , BDB is currently exploring lot of investment opportunities
in several asset classes and is in the process of developing products carrying acceptable
returns compared to the risks involved and shall, during the course of next year’s launch such
products to savvy investors.
12.5 Insurance Products & Services
Life and non-life insurance products and services are offered through our subsidary
Arope Insurance in Lebanon. Our second insurance subsidary, Arope Syria, provides as
well insurance services in Syria.
13. INFORMATION SYSTEMS & TECHNOLOGY
In today’s technology-driven world, it is a well-known fact that “if you are standing still, you
are falling behind”. That is the reason why we are constantly seeking to grow and evolve our
64
Management discussion & analysis 2007
business by proactively using powerful information technologies.
Thus, we have been putting Information Technology, Finance and Relationship Management
in partnership using leading-edge technology deployments in order to enhance customers’
experiences, enrich products and services portfolio, achieve Enterprise Application
Integration (EAI), streamline business processes by transforming them into STP (Straight
Through Processing) mode, address national and international compliance and regulatory
requirements (such as Basel II and others…) and improve systems availability and reliability.
13.1 Customer Relationship Management
During this year, we kept on developing our eBlom suite, which encompasses advanced
electronic customer relationship management (eCRM) services. Through the eBlom initiative, we have been interacting with our customers however, wherever and whenever they
desire.
Our eBlom suite of integrated electronic banking delivery channels consists of:
- eBlom – ALLO BLOM – the Bank’s Interactive Voice Response System
- eBlom – Internet Banking – our online banking service that offers a wide array of services in a high level of trust and security enabled by a public key infrastructure (PKI) and
digital certificates as a second factor for authentication.
- eBlom – SMS Alerts – a real-time alerting system based on delivering messages to our
customers’ mobile phones to inform them, instantly, about events in relation with their
accounts or cards.
- eBlom – Contact Center – our contact center is available 24 hours a day all year long and
is benefiting from continuous enhancements based on CTI and IP telephony to achieve
seamless integration with the Bank’s CRM application.
- eBlom – Self Service – using the bank Network of ATMs deployed all over Lebanon and
where additional services are being constantly planned and added.
- eBlom –Live Information Broadcasting System – a system that enables the bank to
broadcast in real-time over large LCD screens deployed at the branches live and updates
information covering stock quotes, foreign exchange quotes, news feeds ect...
65
13. INFORMATION SYSTEM & TECHNOLOGY
14. PEOPLE DEVELOPMENT
13.2 Targeted Marketing Systems
In addition, we identified the need to provide customer-facing employees with a powerful
tool that would allow them to present new products and services to customers during
their presence at the branch. Consequently, we introduced “T.I.P.S.” which stands for
Targeted Information Processing System and which includes a teller lead referral system
coupled with a back-office marketing management system. The aim of this tool is to increase
our marketing campaigns efficiency by improving the hit rate of marketing campaigns by
offering customers new products and services that are tailored to their needs. In addition, this
system has the ability to send instant SMS messages containing information pertaining to our
marketing campaigns while the customer is visiting his/her branch.
13.3 Enterprise Application Integration (EAI)
Moreover, as a financial institution that has been around for over 55 years, we have in place
well defined business processes and rules that allow us to deliver banking products and
services to our customers and to manage our internal operations. However, we identified the
need to re-organize these business processes in order to achieve a higher degree of automation.
To this end, we decided to adopt the Service Oriented Architecture (SOA) framework to
achieve the highest degree of integration between our different applications through the use
of web-services and of a powerful and flexible workflow engine thus achieving straight-through
processing (STP) throughout our different systems.
This EAI framework was applied to many processes, in particular, our consumer loan processing
system consisting of a loan origination system, a loan assessment system, and a loan granting
system. This high degree of automation has allowed us to drastically reduce the time to
process a car loan from origination to final approval and to increase the volume of our car loan
activity, and consequently sustain our uncontestable leadership position in the car loan market.
The success of the EAI framework implementation has led us to plan the movement of many
of the bank’s business processes into this system during the coming year.
13.4 Advanced Electronic Payment Systems
On the other hand, and based on our recently deployed EFT SWITCH we have completely in-sourced
our ATM driving, management and monitoring activities. In addition, we became an active
player in the POS market thus gaining more and more on POS market share.
On the cards issuing side, we continued to develop our Information Systems infrastructure in
order to keep adding more features to our existing cards products and loyalty programs, in
addition to introducing new types of payment cards including Visa prepaid cards with online
refill capability, Visa EURO Cards, Credit cards with grace period, BLOM MasterCard cards,
66
Management discussion & analysis 2007
Co-branded cards; and we also started issuing EMV cards. In addition, we introduced an
online card fraud monitoring system capable of sending real-time alerts to the bank call center
agents, thus enabling for immediate action and insight as well as reporting and tracking
should a fraud pattern be detected. This card fraud monitoring system drastically reduced
fraud losses and incidences.
13.5 Basel II Compliance
Regarding the Basel II rules and regulations, we have taken several measures in order to
be compliant with these regulations and, in particular, we have completed the implementation
of a system from MOODYS for corporate and commercial credit risk rating, and we started
the implementation of an Assets and Liabilities management and Funds Transfer Pricing
system in partnership with SUNGARD.
13.6 Systems High Availability
Finally, it is worth noting that we have constantly in mind our information security and
availability, where we are looking very closely at ensuring the highest possible availability for
our systems, raising employees’ awareness through the development of Information
Security Policies and Procedures and addressing security threats and systems failure
incidents pro-actively through implementing advanced preventive and detective controls
and online monitoring systems and procedures
14. PEOPLE DEVELOPMENT
The Bank has proceeded with its policy of growth through development and training of
employees by organizing intensive in-house and external training sessions as well as the
recruitment of a young and skilled workforce. In 2007, the number of the Bank’s employees
reached 2,759 compared to 2,216 in 2006.
In 2007, BLOM BANK expanded further its range of services, launching the asset
management department, responsible for promoting structured products, besides developing
other business lines such as investment banking and brokerage.
67
13. INFORMATION SYSTEM & TECHNOLOGY
14. PEOPLE DEVELOPMENT
15. BANK’S OPERATIONAL EFFICIENCY
16. REGIONAL EXPANSION
Regarding training activities and development of human resources, BLOM BANK organized
and sponsored the participation of its employees in various seminars and workshops. The
Bank has also in place special training programs such as:
- Manager Training Program (MTP): a five-year program where the Manager Training Officer
(MTO) gets exposed to the different departments and entities within the Bank before being
assigned to a managerial position
- Fast Track Program (FTP): a five-year program which promotes a fast career path for the
employees.
In 2007, the Bank conducted 6,444 employees training sessions for a total of 45,785 hours. Training
sessions involved employees from all BLOM and BLOMINVEST departments and covered various
topics related to banking techniques, management, marketing, information technology as well as
language courses.
15. BANK’S OPERATIONAL EFFICIENCY
In 2007, the net profit by branch decreased by 7.55% to USD 1,898,148 while the net profit per
employee also dropped by 8.87% to USD 74,302 compared to USD 81,538 a year earlier.
Bank’s Operational Efficiency Indicators
Number of Employees
Number of Branches
USD Net Profit per Employee
USD Average Assets per Employee
USD Average Assets per Branch
USD Net Profit per Branch
2007
2006
2,759
108
74,302
5,154,766
131,685,185
1,898,148
2,216
88
81,538
6,416,773
161,586,009
2,053,273
16. REGIONAL EXPANSION
BLOM BANK pursued its aggressive expansion policy, inaugurating new branches within the
Lebanese territory and expanding further regionally.
On the local front, in 2007, BLOM BANK opened four additional branches in the areas of Tabaris
(Beirut), Jbeil, Mina El Hosn as well as a retail branch in Hamra Street. The Bank is looking forward
to expanding further its local network and is planning to inaugurate new branches within the year
On the regional front, two new branches have been inaugurated in Jordan during the year
2007 while two others should be opened in the incoming year, rising the total number of BLOM
BANK branches in Jordan to six.
68
Management discussion & analysis 2007
BSO (Bank of Syria and Overseas) is also expanding in Syria and opened, in 2007, a new
branch in Aleppo. BSO is focusing on developing its branches network within Syria in 2008 and
the Bank has set the robust objective to increase the number of its branches from 10 to 20 by
the end of the year 2008.
BLOM BANK EGYPT is also expanding its network in Egypt and the number of branches in
operation has increased from 9 branches in 2006 to 20 branches in 2007. On another note, the
five branches located in Romania and previously affiliated to BLOM BANK EGYPT, have been
consolidated with BLOM BANK FRANCE in December 2007. In 2008, the Bank is looking forward
to bringing the number of its branches in Egypt to 30, in line with BLOM BANK group’s robust
expansion strategy.
On another note, BLOM BANK was awarded license to establish a representative office in
Abu Dhabi by the end of 2007 while BLOMINVEST BANK received the approval to launch in
January 2008 an investment bank in Saudi Arabia named BLOMINVEST Saudi Arabia. In April
2008, the Bank expanded further and was granted a license to establish a commercial and private
bank in Qatar, financial center, BLOM BANK QATAR. In addition BLOM BANK FRANCE has applied
for a bank license in Algeria.
All in all, in the incoming years, BLOM BANK is looking forward to penetrating new Arab markets
enhancing its market accessibility and developing further its international network.
69
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF THE BLOM BANK SAL
CONSOLIDATED INCOME STATEMENT Year ended 31 December 2007
74
CONSOLIDATED INCOME STATEMENT Year ended 31 December 2007
NOTES
Interest and similar income
Lebanese and other governmental treasury bills and bonds – available for sale
Lebanese and other governmental treasury bills and bonds – trading
Deposits and similar accounts with banks and financial institutions
Bonds and other financial assets with fixed income – non trading
Bonds and other financial assets with fixed income – trading
Bonds and other financial assets with fixed income – fair value through profit or loss
Loans and advances to customers
Loans and advances to related parties
Interest and similar charges
Deposits and similar accounts from banks and financial institutions
Deposits from customers and other credit balances
Deposits from related parties
Net interest received
Net provisions less recoveries on loans and advances
Provisions for loans and advances
Recovery of provisions for loans and advances
4
Revenues from shares and financial assets with variable income
Net commissions
Commissions received
Commissions paid
5
2007
LL million
Restated 2006
LL million
1,490,749
341,600
5,738
488,825
347,724
303
245
305,553
761
1,264,824
319,473
3,271
375,578
323,649
1,049
241,703
101
(1,034,637)
(19,112)
(1,010,636)
(4,889)
(857,569)
(13,342)
(838,657)
(5,570)
456,112
407,255
11,435
(20,026)
31,461
(808)
(19,660)
18,852
969
1,123
89,380
96,007
(6,627)
76,989
81,804
(4,815)
Profit from financial operations
Profit from trading investments
Profit from non-trading investments
Profit from foreign exchange operations
6
7
49,376
3,843
18,469
27,064
45,505
10,381
10,037
25,087
Loss on financial operations
Loss on trading investments
Loss on non-trading investments
Loss on foreign exchange operations
6
7
(9,708)
(1,820)
(7,888)
(18,706)
(3,796)
(514)
(14,396)
39,668
26,799
Net profit from financial operations
Other operating income
8
24,618
22,394
Other operating expenses
9
(14,446)
(11,675)
General and administrative expenses
Salaries and related benefits
General operating expenses
10
11
(210,450)
(129,133)
(81,317)
(183,238)
(112,399)
(70,839)
Depreciation and amortization of tangible and intangible assets
12
(18,350)
(16,143)
-
395
(13,350)
(1,458)
Profit before tax
365,586
321,633
Income tax
(57,000)
(49,829)
Profit for the year
308,586
271,804
12,395
10,969
303,472
5,114
308,586
269,604
2,200
271,804
Net provisions less recoveries on financial fixed assets
Provision for contingent liabilities
Basic/ diluted earnings per share attributable to equity holders of the parent for the year (in LL)
Attributable to:
Equity holders of the parent
Minority interest
The accompanying notes 1 to 56 form part of these consolidated financial statements.
13
14
75
CONSOLIDATED BALANCE SHEET At 31 December 2007
CONSOLIDATED BALANCE SHEET At 31 December 2007
NOTES
ASSETS
Cash and balances with the Central Banks
Lebanese and other governmental treasury bills and bonds
Bonds and financial assets with fixed income
Shares, securities and financial assets with variable income
Banks and financial institutions
-Current accounts
-Time deposits
Loans and advances to customers (*) (**)
-Commercial loans
-Other loans to customers
-Overdraft accounts
-Net debtor accounts against creditor and cash collateral accounts
-Advances to related parties
-Doubtful debts (net)
Bank acceptances
Investments and loans to related parties
Tangible fixed assets
Intangible fixed assets
Other assets
Regularization accounts and other debit accounts
Goodwill
15
16
17
18
19
20
21
22
23
24
25
26
27
TOTAL ASSETS
* Of which substandard loans
** After deduction of:
Provision for doubtful debts and provision for commercial and
consumer loans not classified at the balance sheet date
Unrealized interest on:
-Substandard loans
-Doubtful debts
OFF-BALANCE SHEET ITEMS
Financial assets sold with an option to repurchase
Engagements received
Bad loans fully provided for
Foreign currencies to deliver against foreign currencies to receive
2007 Restated 2006
LL million
LL million
6,330,031
5,080,323
1,165,140
11,725
7,536,533
327,558
7,208,975
4,179,307
3,228,892
848,043
11,932
14,308
5,940
70,192
245,357
27,208
272,642
4,459
34,216
119,487
60,586
6,246,406
3,474,920
386,100
8,403
7,754,284
300,789
7,453,495
2,996,698
2,388,501
521,241
8,190
10,826
7,400
60,540
173,260
3,220
219,372
2,845
33,715
61,408
63,980
25,067,014 21,424,611
20
36,285
34,456
20
20
259,209
82,968
14,238
68,730
264,156
87,593
13,899
73,694
143,647
7,088,518
28,312
2,939,186
10,199,663
5,467,773
43,905
2,144,617
7,656,295
42
20
43
The consolidated financial statements were authorized for issue in accordance with a resolution of the board of
directors on 18 March 2008.
76
CONSOLIDATED BALANCE SHEET At 31 December 2007
NOTES
LIABILITIES AND EQUITY
LIABILITIES
Banks and financial institutions
-Current accounts
-Time deposits
Customers' deposits
-Sight deposits
-Time deposits
-Saving accounts
-Credit accounts and cash margins against debit accounts
-Related parties’ accounts
Engagements by acceptances
Other liabilities
Regularization accounts and other credit accounts
Provisions for risks and charges
28
29
21
30
31
32
TOTAL LIABILITIES
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF PARENT
Share capital
Revaluation reserves
Reserve for general banking risks
Reserves and premiums
Cumulative changes in fair values
Treasury shares
Retained earnings
Profit for the year
2007
LL million
Restated 2006
LL million
1,555,914 1,308,844
159,362
186,913
1,369,001 1,149,482
20,708,516 17,690,381
2,341,594 1,897,765
9,589,749 7,874,196
7,862,422 7,180,465
662,696
812,788
75,259
101,963
173,260
245,357
141,067
194,460
129,869
189,792
64,646
80,566
22,974,605 19,508,067
33
23
34
35
36
37
MINORITY INTEREST
240,000
14,727
69,503
1,221,804
14,497
(36,122)
176,454
303,472
2,004,335
88,074
240,000
14,727
59,324
1,162,790
21,430
(52,108)
121,606
269,604
1,837,373
79,171
TOTAL EQUITY
2,092,409
1,916,544
TOTAL LIABILITIES AND EQUITY
OFF-BALANCE SHEET ITEMS
Financing commitments given to:
-Financial intermediaries
-Customers
Bank guarantees given to:
-Financial intermediaries
-Customers
Commitments on term financial instruments
Financial assets bought with an option to resell
Fiduciary deposits, assets under management and custody accounts
Foreign currencies to receive against foreign currencies to deliver
25,067,014 21,424,611
44
44
43
46
43
359,374
21,043
338,331
786,996
196,378
590,618
34,142
143,647
3,959,136
2,942,549
8,225,844
307,186
13,051
294,135
689,528
96,098
593,430
17,659
2,774,360
2,146,755
5,935,488
The consolidated financial statements were authorized for issue in accordance with a resolution of the board of
directors on 18 March 2008.
The accompanying notes 1 to 56 form part of these consolidated financial statements.
77
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2007
CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2007
NOTES
OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Depreciation and amortization of tangible and intangible fixed assets
Provision for impairment of assets taken in recovery of debts
Write-back of provision for impairment of assets taken in recovery of debts
Provision for end of service indemnity, net
Provision for complementary taxes and contingent liabilities related to a subsidiary bank, net
(Write-back of provision) provision for risk and charges, net
Provision for outstanding claims and IBNR reserves, net
(Write-back of various provisions) provisions for risks and charges, net
(Write-back of provision) provision for doubtful loans and advances, net
Provision for impairment of investment in a non consolidated subsidiary
Unrealized loss on shares, securities and financial assets with variable income held for trading
Profit from sale of shares, securities and financial assets with variable income not held for trading
Unrealized profit on investments related to unit-linked contracts
Profit from sale of certificates of deposit – Central Banks
Profit from sale of Lebanese and other governmental treasury bills and bonds not held for trading
Unrealized profit from Lebanese and other governmental treasury bills and bonds held for trading
(Profit) loss on disposal of tangible and intangible fixed assets
Provision for doubtful sundry debtors
Other equity transactions
Foreign currency translation reserve realized upon sale of branches in Romania
12
23
23
32
32
32
32
4
6
7
25
7
6
26
2
Changes in operating assets and liabilities:
Lebanese and other governmental treasury bills and bonds held for trading
Shares, securities and financial assets with variable income held for trading
Bonds and other financial assets with fixed income held for trading
Loans and advances to customers
Banks and financial institutions-debit
Other assets
Regularization accounts and other debit accounts
Banks and financial institutions-credit
Customers' deposits
Other liabilities
Regularization accounts and other credit accounts
Cash from operations
Taxes paid
End of service indemnities paid
Provision for risks and charges paid
Net cash from operating activities
78
30
32
32
2007
LL million
Restated 2006
LL million
365,586
321,633
18,350
(1,044)
2,491
13,142
(240)
2,507
(607)
(11,435)
44
129
(3,034)
(2,910)
(14,558)
(201)
(2,152)
(37)
189
300
(7,169)
359,351
13,725
2,418
(3,121)
5,498
1,370
434
169
1,322
808
5
3,010
(472)
(902)
(9,265)
(484)
(9,595)
80
326,633
(24,249)
(1,693)
(66,714)
(1,171,174)
(409,095)
2,409
(58,281)
91,021
3,018,135
48,930
59,923
(23,401)
7,138
(479,524)
339,099
(9,027)
(8,881)
(4,224)
2,372,892
(12,097)
34,998
1,848,563
(53,953)
(2,694)
(54)
1,865,408
(45,515)
(703)
(464)
1,791,862
1,818,726
NOTES
INVESTING ACTIVITIES
Lebanese and other governmental treasury bills and bonds not held for trading (1)
Balances with the Central Banks (term accounts and certificates of deposit) (1)
Investments and loans to related parties
Purchase of tangible and intangible fixed assets
Shares, securities and financial assets with variable income not held for trading
Bonds and other financial assets with fixed income not held for trading
Cash proceeds from the disposal of tangible and intangible fixed assets
Purchase of an additional equity interest in a subsidiary
3
Net cash used in investing activities
FINANCING ACTIVITIES
Issuance of common shares
Sale (purchase) of treasury shares, net
Premium from issuance of common shares
Dividends paid
Minority interest, net
Share in a subsidiary’s equity before consolidation
33
37&38
Net cash (used in) from financing activities
Effect of exchange rate changes
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents as of 1 January
Cash and cash equivalents as of 31 December
39
2007
LL million
Restated 2006
LL million
(457,574)
(484,133)
(24,032)
(84,136)
1,694
(714,664)
15,367
-
(815,611)
423,178
(144)
(49,576)
3,478
37,981
16,293
(4,031)
(1,747,478)
(388,432)
12,818
(147,245)
(773)
-
30,000
(52,044)
374,059
(117,002)
15,267
219
(135,200)
250,499
19,432
22,570
(71,384)
1,703,363
8,924,912
7,221,549
8,853,528
8,924,912
(1) Non cash transactions in the investing activities include a decrease in certificates of deposit-Central Banks
in the amount of LL 1,109,280 million (2006: increase in the amount of LL 800,784 million) against an increase in
Lebanese and other governmental treasury bills and bonds not held for trading for the same amount (2006:
decrease in the amount of LL 800,784 million) during 2007.
The accompanying notes 1 to 56 form part of these consolidated financial statements.
79
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2007
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2007
Attributable to equity holders of the parent
Revaluation
reserves
LL million
Share
capital
LL million
80
Reserve for general
banking risks
LL million
Reserves
and premiums
(Note 35)
LL million
At 31 December 2005 (as previously reported)
210,000
14,727
50,719
725,783
Correction of an error (note 40)
At 31 December 2005 (as restated)
Net movement in cumulative changes in
fair values (note 36)
Currency translation difference
Profit for the year- 2006 (restated)
Total income and expenses for the year
Dividends’ distributions (note 38)
Appropriation of 2005 profits
Issuance of common shares net of issuance
costs (note 33)
Purchase of treasury shares, net
Gain on sale of treasury shares
Decrease in minority interest due to
acquisition by the bank
Other
Minority interest in share capital increase
of subsidiaries
Dividends on treasury shares
210,000
14,727
50,719
725,783
-
-
255
255
8,350
19,641
19,641
42,636
30,000
-
-
-
374,059
64
-
-
-
607
-
-
-
-
At 31 December 2006
Net movement in cumulative changes in
fair values (note 36)
Currency translation difference
Profit for the year- 2007
Total income and expenses for the year
Dividends’ distributions (note 38)
Appropriation of 2006 profits
Sale of treasury shares, net
Net loss on sale of treasury shares
Increase in minority due to decrease in majority share
Minority interest in dividends distribution in a subsidiary
Dividends on treasury shares
Foreign currency translation reserve realized
upon sale of branches in Romania (note 2)
Other
240,000
14,727
59,324
1,162,790
-
-
305
305
9,874
-
10,962
10,962
58,020
(3,168)
-
-
-
-
(7,169)
369
At 31 December 2007
240,000
14,727
69,503
1,221,804
Total
equity
Minority
interest
Cumulative
changes
in fair value
LL million
Treasury
shares
LL million
Retained earnings
LL million
Profit for the year
LL million
Total
LL million
LL million
LL million
81,067
-
99,238
202,188
1,383,722
60,163
1,443,885
81,067
-
(11,844)
87,394
202,188
(11,844)
1,371,878
60,163
(11,844)
1,432,041
(59,637)
(59,637)
-
-
398
398
32,979
269,604
269,604
(118,223)
(83,965)
(59,637)
20,294
269,604
230,261
(118,223)
-
(19)
3,885
2,200
6,066
-
(59,656)
24,179
271,804
236,327
(118,223)
-
-
(52,108)
-
-
-
404,059
(52,108)
64
-
404,059
(52,108)
64
-
-
(386)
-
221
(2,334)
(2)
(2,334)
219
-
-
1,221
-
1,221
15,278
-
15,278
1,221
21,430
(52,108)
121,606
269,604
1,837,373
79,171
1,916,544
(7,006)
73
(6,933)
-
15,986
-
452
452
53,319
1,146
303,472
303,472
(148,391)
(121,213)
-
(7,006)
11,792
303,472
308,258
(148,391)
15,986
(3,168)
1,146
(264)
4,826
5,114
9,676
2,141
(2,871)
-
(7,270)
16,618
308,586
317,934
(148,391)
15,986
(3,168)
2,141
(2,871)
1,146
-
-
(69)
-
(7,169)
300
(45)
2
(7,214)
302
14,497
(36,122)
176,454
303,472
2,004,335
88,074
2,092,409
The accompanying notes 1 to 56 form part of these consolidated financial statements.
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACTIVITIES
2. SIGNIFICANT ACCOUNTING POLICIES
1. ACTIVITIES
BLOM Bank SAL (the "Bank"), a Lebanese joint stock company, was incorporated in 1951 and
registered under No 2464 at the commercial registry of Beirut and under No 14 on the banks’
list published by the Bank of Lebanon. The headquarters of the Bank are located in Verdun,
Rashid Karameh Street, Beirut, Lebanon.
The Bank, together with its subsidiaries, BLOM INVEST Bank SAL, Arope Insurance SAL, Syria
International Insurance (Arope Syria) SA, BLOM Bank France SA, BLOM Bank (Switzerland)
SA, Bank of Syria and Overseas SA, BLOM Bank Egypt SAE, BLOM Egypt Securities SAE,
BLOM Development Bank SAL and BLOM Invest- Saudi Arabia (under establishment) (the
Group), provide all banking activities (commercial, investing and private), as well as insurance
and brokerage activities.
On 1 January 2006, the Bank’s branch in Cyprus started to be treated as a local branch and not
as an international banking unit.
On 14 February 2008, the Central Bank of the United Arab Emirates licensed BLOM Bank SAL
to open a representative office and operate in the United Arab Emirates. This license is valid
for five years.
On 12 July 2007, the Bank’s board of directors approved on the establishment of a bank in the
state of Qatar to be located in Qatar Financial Center with share capital of US$ 10 million,
whereby the Bank will subscribe in 99% of its capital. On 18 February 2008, the Bank obtained
the approval of the Central Bank of Lebanon on the establishment provided that the Bank provides
the Central Bank of Lebanon and the Banking Control Commission with the approval of the
regulatory authorities in Qatar.
2. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies adopted in the preparation of the consolidated financial
statements are set out below:
Basis of preparation
The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) and general accounting plan for banks in Lebanon and
the regulations of the Bank of Lebanon and the Banking Control Commission.
84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
The consolidated financial statements are prepared under the historical cost convention as
modified for the restatement of certain tangible real estate properties in Lebanon according
to the provisions of law No 282 dated 30 December 1993, and for the measurement at fair
value of derivatives, Lebanese and other governmental treasury bills and bonds, bonds and
financial assets with fixed income, and shares, securities and financial assets with variable
income held for trading and available for sale, and investments related to unit-linked contracts
(fair value through profit or loss).
The consolidated financial statements have been presented in million of Lebanese Lira (LL million), which
is the functional currency of the Bank. Balances denominated in other currencies have been presented
in thousands.
Changes in accounting policies
The Group has adopted IFRS 7 Financial Instruments: Disclosures and amendments to IAS 1
Presentation of Financial Statements effective for the year ended 31 December 2007 which
has resulted in amended and additional disclosures relating to financial instruments and associated
risks, capital and capital management.
Other accounting policies are consistent with those used in the previous year.
Future changes in accounting policies
Below is the list of standards issued but not yet effective for the year ended 31 December
2007:
IAS 1 (Revised): Presentation of Financial Statements
IAS 23: Borrowing costs
IFRS 8: Operating Segments
IFRIC 9: Reassessment of Embedded Derivatives
IFRIC 11: IFRS 2 – Group and Treasury Share Transactions
IFRIC 12: Service Concession Arrangements
IFRIC 13: Customer Loyalty Programmes
IFRIC 14: IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction
Management do not expect the above standards to have a significant impact on the Group’s
financial statements when implemented in future years.
85
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation
The consolidated financial statements comprise the financial statements of BLOM Bank SAL
and its controlled subsidiaries drawn up to 31 December each year. The financial statements
of subsidiaries are prepared for the same reporting year as the Bank, using consistent
accounting policies.
All intra-group balances, transactions, income and expenses and profits and losses resulting
from intra-group transactions are eliminated in full.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
Control is achieved where the Bank has the power to govern the financial and operating policies
of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or
disposed of during the year are included in the consolidated income statement from the date
of acquisition or up to the date of disposal, as appropriate.
Minority interests represent the portion of profit or loss and net assets not owned, directly or
indirectly, by the Group and are presented separately in the income statement and within
equity in the consolidated balance sheet, separately from parent shareholders’ equity.
Acquisitions of minority interests are accounted for using the parent entity extension method,
whereby, the difference between the consideration and the fair value of the share of the net
assets acquired is recognized as goodwill. If the cost of acquisition below the fair values of the
identifiable net assets acquired (i.e. a discount on acquisition), the difference is recognized directly
in the income statement in the year of acquisition.
The consolidated financial statements include the financial statements of BLOM Bank SAL
and the subsidiaries listed in the following table:
% EQUITY INTEREST
BLOM Bank France SA (c)
BLOM Bank (Switzerland) SA
(100% owned by BLOM Bank France SA)
BLOM Invset Bank SAL
BLOM Development Bank SAL
(99.98% owned by BLOM Invest Bank SAL)
Bank of Syria and Overseas SA (a)
Arope Insurance SAL
Syria International Insurance (Arope Syria) SA (b)
BLOM Bank Egypt SAE (c)
BLOM Egypt Securities SAE
(99.8% owned by BLOM Bank Egypt SAE)
86
Country
Activities
of incorporation
France
Banking activities
Switzerland
Lebanon
2007 %
2006 %
99.998
99.998
99.998
99.875
99.998
99.875
Lebanon
Syria
Lebanon
Syria
Egypt
Banking activities
Banking activities
Islamic banking
activities
Banking activities
Insurance activities
Insurance activities
Banking activities
99.980
39.000
88.560
42.06
99.371
99.980
39.000
88.560
42.06
99.371
Egypt
Brokerage activities 99.371
99.371
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
(a) Effective 1 January 2004, the Group obtained control, by virtue of agreement with other investors,
over Bank of Syria and Overseas SA, and consequently, the financial statements of Bank of Syria
and Overseas SA have been consolidated with those of the Group.
(b) Effective 1 January 2006, the Group obtained control, by virtue of agreement with other investors,
over Syria International Insurance (Arope Syria) SA, and consequently, the financial statements
have been consolidated with those of the Group.
(c) In November 2007, Blom Bank Egypt SAE sold its branches in Romania to Blom Bank France SA.
Consequently, the Group realized foreign currency translation reserve in the amount of LL
7,169 million upon the sale of the branches in Romania.
Business combinations and goodwill
Business combinations are accounted for using the purchase method of accounting. This involves
recognizing identifiable assets (including previously unrecognized intangible assets) and liabilities
(including contingent liabilities but excluding future restructuring) of the acquired business at fair
value. Any excess of the cost of acquisition over the fair values of the identifiable net assets
acquired is recognized as goodwill. If the cost of acquisition is less than the fair values of the identifiable
net assets acquired, the discount on acquisition is recognized directly in the income statement in the year
of acquisition.
Goodwill acquired in a business combination is initially measured at cost being the excess of the
cost of the business combination over the Group’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities acquired. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may
be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of
whether other assets or liabilities of the acquiree are assigned to those units or groups of units.
Each unit or group of units to which the goodwill is allocated:
- represents the lowest level within the Group at which the goodwill is monitored for internal
management purposes; and
- is not larger than a segment based on either the Group’s primary or secondary reporting format
determined in accordance with IAS 14 Segment Reporting.
87
2. SIGNIFICANT ACCOUNTING POLICIES
Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and
part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain
or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured
based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.
When subsidiaries are sold, the difference between the selling price and the net assets plus
cumulative translation differences and unamortized goodwill is recognized in the income
statement.
Impairment is determined by assessing the recoverable amount of the cash-generating unit
(group of cash-generating units), to which the goodwill relates. Where the recoverable
amount of the cash-generating unit (group of cash-generating units) is less than the carrying
amount, an impairment loss is recognized.
Trading investments
Trading investments include:
- Lebanese and other governmental treasury bills and bonds,
- Bonds and financial assets with fixed income,
- Shares, securities and financial assets with variable income.
These are initially recognized at cost (being the fair value given) and subsequently remeasured at
fair value. All related realized or unrealized gains or losses are included in the consolidated income
statement. Interest earned is included in interest and similar income while dividends received are
included in revenues from shares and financial assets with variable income.
Non-trading investments
These are classified as follows:
- Available for sale,
- Investments carried at fair value through profit or loss,
- Investments carried at amortized cost (loans and receivable).
Non-trading investments include:
- Certificates of deposit,
- Lebanese and other governmental treasury bills and bonds,
- Bonds and financial assets with fixed income,
- Shares, securities and financial assets with variable income,
- Investments and loans to related parties,
- Investments related to unit-linked contracts.
88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
All investments are initially recognized at cost, being the fair value of the consideration given
including acquisition costs.
Premiums and discounts on non-trading investments are amortized using the effective interest rate
method and are taken to interest income.
Available for sale
Available-for-sale financial investments are those investments which are designated as such or do
not qualify to be classified as designated at fair value through profit or loss, held-to-maturity or
loans and receivables.
After initial recognition, investments which are classified “available for sale” are normally
remeasured at fair value. If the Group is not able to estimate the fair value, available for sale
investments are then carried at cost, less provision for impairment in value. Fair value changes
which are not part of an effective hedging relationship, are reported as a separate component of
equity until the investment is derecognized or the investment is determined to be impaired. On
derecognition or impairment, the cumulative gain or loss previously reported as “cumulative
changes in fair value” within equity, is included in the consolidated income statement for the period.
That portion of any fair value changes relating to an effective hedging relationship is recognized
directly in the consolidated income statement.
Investments carried at fair value through profit or loss
Investments are classified as fair value through profit or loss account if the fair value of the investment can be reliably measured and the classification as fair value through profit or loss account is
as per the documented strategy of the Group. Investments classified as “Investments at fair value
through profit or loss” upon initial recognition are remeasured at fair value with all changes in fair
value being recorded in the consolidated income statement.
Investments carried at amortised cost
Debt instruments which do not meet the definition of held to maturity and which have fixed or
determinable payments but are not quoted in an active market are carried at amortised cost,
less provision for impairment in value.
89
2. SIGNIFICANT ACCOUNTING POLICIES
Derecognition of financial assets and financial liabilities
i. Financial assets
A financial asset (or, where applicable a part of a financial asset or part of a group of similar
financial assets) is derecognised where:
- the rights to receive cash flows from the asset have expired; or
- the Group has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a
‘pass-through’ arrangement; and
- either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b)
the Group has neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into
a pass-through arrangement, and has neither transferred nor retained substantially all the risks
and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent
of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of
a guarantee over the transferred asset is measured at the lower of the original carrying amount
of the asset and the maximum amount of consideration that the Group could be required to repay.
ii. Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or
cancelled or expires. Where an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability are substantially modified,
such an exchange or modification is treated as a derecognition of the original liability and the
recognition of a new liability, and the difference in the respective carrying amounts is recognised
in profit or loss.
Fair values
For investments and derivatives quoted in an active market, fair value is determined by reference
to quoted market prices. Bid prices are used for assets and offer prices are used for liabilities.
For unquoted financial instruments, fair value is determined by reference to the market value of similar
investments, or is based on the expected discounted cash flows, or by using other techniques.
The estimated fair value of deposits with no stated maturity, which includes non-interest bearing
deposits, is the amount payable on demand.
90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
Due from banks and financial institutions
These are stated at fair value of consideration given less any amounts written off and allowance for
impairment.
Loans and advances to customers
Loans and advances are stated at fair value of consideration given, net of suspended interest, provisions
for doubtful debts, any amounts written off, and allowance for impairment.
Renegotiated loans
Where possible, the Group seeks to restructure loans rather than to take possession of collateral.
This may involve extending the payment arrangements and the agreement of new loan conditions.
Once the terms have been renegotiated, the loan is no longer considered past due. Management
continuously reviews renegotiated loans to ensure that all criteria are met and that future payments
are likely to occur. The loans continue to be subject to an individual or collective impairment
assessment, calculated using the loan’s original effective interest rate.
Investments in associates
The Group’s investments in associates are accounted for using the equity method of accounting.
An associate is an entity in which the Group has significant influence and which is neither a subsidiary
nor a joint venture.
Under the equity method, the investment in the associate is carried in the balance sheet at cost plus
post-acquisition changes in the Group’s share of net assets of the associate. Losses in excess of
the cost of the investment in an associate are recognized when the Group has incurred obligations
on its behalf. Goodwill relating to an associate is included in the carrying amount of the investment
and is not amortized. The income statement reflects the Group’s share of the results of operations
of the associate. Where there has been a change recognized directly in the equity of the associate, the
Group recognizes its share of any changes and discloses this, when applicable, in the statement of
changes in equity. Unrealized profits and losses resulting from transactions between the Group and the
associate are eliminated to the extent of the interest in the associate.
The reporting dates of the associate and the Group are identical and the associate’s accounting policies
conform to those used by the Group for like transactions and events in similar circumstances.
91
2. SIGNIFICANT ACCOUNTING POLICIES
Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation and any accumulated
impairment in value. Certain of tangible real estate properties purchased prior to 1 January
1994 were restated for the changes in the general purchasing power of the Lebanese Lira
according to the provisions of law No 282 dated 30 December 1993. The net surplus arising on
revaluation is credited to the account of revaluation reserves recognized in shareholders’
equity.
Changes in the expected useful life are accounted for by changing the depreciation period or
method, as appropriate, and treated as changes in accounting estimates.
Depreciation is calculated on a straight line basis to write down the cost of tangible fixed
assets to their residual values over their estimated useful lives. Freehold land is not depreciated.
The estimated useful lives are as follows:
Buildings
Vehicles
Furniture, office installations and computer equipment
2007
2006
50 years
6.67 years
2 – 16.67 years
40 years
6.67 years
5 – 11.11 years
The impact of the depreciation expense due to the change in the estimated useful lives is
accounted for prospectively.
An item of tangible fixed assets is derecognised upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in
‘Other operating income’ or ‘Other operating expenses’ in the income statement in the year the asset is
derecognised.
The carrying values of tangible fixed assets are reviewed for impairment to determine whether
events for changes in circumstances indicate the carrying value may not be recoverable. If any
such indication exists and where the carrying values exceed the estimated recoverable amount,
the assets are written down to their recoverable amount, being the higher of the fair value less
costs to sell and their value in use.
Expenditure incurred to replace a component of an item of tangible fixed assets that is
accounted for separately is capitalised and the carrying amount of the component that is
replaced is written off. Other subsequent expenditure is capitalised only when it increases
future economic benefits of the related item of tangible fixed assets. All other expenditure is
recognised in the income statement as the expense is incurred.
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
Collateral pending sale
The Group occasionally acquires real estate in settlement of certain loans and advances. Such real
estate is stated at the lower of the amount of the related loans and advances and the current fair
value of such assets based on the instructions of the Control Authorities. Gains or losses on disposal,
and revaluation losses, are recognized in the consolidated income statement for the period.
Intangible fixed assets
Intangible assets are initially measured at cost. following initial recognition, intangible assets are
carried at cost less any accumulated amortization and any accumulated impairment losses. The
useful lives of the intangible assets are assessed to be either finite or indefinite. Intangible assets
with finite lives are amortized over the useful economic life and tested for impairment whenever
there is an indication that the intangible asset may be impaired. Intangible assets with indefinite
useful lives are not amortized but tested for impairment annually and whenever there is an indication
that the intangible asset may be impaired.
If the carrying value of the intangible asset is more than the recoverable amount, the intangible
asset is considered impaired and is written down to its recoverable amount. The excess of carrying
value over the recoverable amount is recognized in the income statement.
Impairement losses on intangible assets recognized in the income statement in previous periods,
are reversed when there is an increase in the recoverable amount.
Amortisation is calculated using the straight-line method to write down the cost of intangible assets
to their residual values over their estimated useful lives as follows:
Key money:
Software development cost:
the lesser of lease period or 5 years
2-5 years
Customer deposits
All customer deposits are carried at the fair value of the consideration received, less amounts repaid.
Taxation
(i) Current tax
Taxation is provided for in accordance with the fiscal regulations of the respective countries
in which the Bank and its branches and subsidiaries operate.
93
2. SIGNIFICANT ACCOUNTING POLICIES
Current tax assets and liabilities for the current and prior years are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws
used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
The Bank’s profits from operations in Lebanon are subject to a tax rate of 15% after deducting
the 5% tax on interest received according to Law no. 497/2003 dated 30 January 2003.
Dividends are subject to a flat 10% tax, reducible to 5% provided that the Bank is listed on a
regulated stock exchange.
(ii) Deferred tax
Deferred income tax is provided using the liability method on temporary differences at the balance sheet
date between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the
year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the balance sheet date.
Current tax and deferred tax relating to items recognized directly in equity are also recognized
in equity and not in the income statement.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all
or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed
at each balance sheet date and are recognized to the extent that it has become probable that
future taxable profit will allow the deferred tax asset to be recovered.
Provisions for risks and charges
Provisions are recognized when the Group has a present obligation (legal or constructive) arising from a
past event and the costs to settle the obligation are both probable and able to be reliably measured.
Employees’ end-of-service benefits
The Group provides end of service benefits to its employees. The entitlement of these benefits are
based upon the employees’ final salary, length of services and other local regulations where the
Group operates. The expected costs of these benefits are accrued over the period of employment.
With respect to employees based in Lebanon, the Group makes contribution to the National Social
Security Fund calculated as a percentage of the employees’ salaries. The Group’s obligations are
limited to these contributions, which are expensed when due.
94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
Treasury shares
Own equity instruments which are acquired (treasury shares) are deducted from equity and are
accounted for at weighted average cost. No gain or loss is recognized in the income statement on
the purchase, sale, issue or cancellation of the Bank’s own equity instruments.
Derivatives
Derivatives are stated at fair value.
For the purposes of hedge accounting, hedges are classified into three categories:
(a) fair value hedges which hedge the exposure to changes in the fair value of a recognized asset
or liability;
(b) cash flow hedges which hedge exposure to variability in cash flows of a recognized asset or liability
or a forecasted transaction, and
(c) hedges of the net investment in a foreign subsidiary bank.
In relation to effective fair value hedges any gain or loss from remeasuring the hedging instrument
to fair value, as well as related changes in fair value of the item being hedged, are recognized immediately in the consolidated income statement.
In relation to effective cash flow hedges, the gain or loss on the hedging instrument is recognized initially in
equity and is transferred to the income statement in the period in which the hedged transaction impacts
the income statement, or included as part of the cost of the related asset or liability.
In relation to effective hedges of the net investment in a foreign subsidiary bank, any gain or loss
from remeasuring the hedging instrument to fair value is recognized immediately in equity and is
transferred to the income statement once the investment is sold.
For those hedges which do not qualify for hedge accounting, any gains or losses arising from
changes in the fair value of the hedging instrument are taken directly to the consolidated income
statement for the period.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or
exercised, no longer qualifies for hedge accounting or is revoked by the Group. For effective fair
value hedges of financial instruments with fixed maturities any adjustment arising from hedge
accounting is amortised over the remaining term to maturity. For effective cash flow hedges, any
cumulative gain or loss on the hedging instrument recognized in equity remains in equity until the
hedged transaction occurs. If the hedged transaction is no longer expected to occur, the net cumulative
gain or loss recognized in equity is transferred to the consolidated income statement.
95
2. SIGNIFICANT ACCOUNTING POLICIES
Fiduciary assets
Assets held in a fiduciary capacity are not treated as assets of the Group and accordingly are
recorded as off balance sheet items.
Off balance sheet items
Off balance sheet balances include commitments which may take place in the Group’s normal operations
such as commitments for loan granting, letters of guarantees, and letters of credit, without deducting the
margins collected and related to these commitments.
Offsetting
Financial assets and financial liabilities are only offset and the net amount reported in the balance
sheet when there is a legally enforceable right to set off the recognized amounts and the Group
intends to either settle on a net basis, or to realize the asset and settle the liability simultaneously.
Financial guarantees
In the ordinary course of business, the Group gives financial guarantees, consisting of letters of
credit, guarantees and acceptances. Financial guarantees are initially recognised in the financial
statements at fair value, in ‘Other liabilities’, being the premium received. Subsequent to initial
recognition, the Group’s liability under each guarantee is measured at the higher of the amortised
premium and the best estimate of expenditure required to settle any financial obligation arising as
a result of the guarantee.
Any increase in the liability relating to financial guarantees is taken to the income statement in
‘Provisions for loans and advances’. The premium received is recognised in the income statement
in ‘Commission received’ on a straight line basis over the life of the guarantee.
Revenue recognition
Interest income and fees that are considered part of the effective interest is recognized using the
effective yield method unless there is doubt of uncollectibility. The recognition of interest income
is suspended when loans become impaired, such as when overdue by more than 90 days.
Notional interest is recognized on impaired loans and other financial assets based on the rate used
to discount future cash flows to their net present value. Other fees receivable are recognized as
the services are provided. Dividend income is recognized when the right to receive payment is
established.
When the Group enters in interest rate swap contracts to change the interest rate from fixed to variable
(or vice-versa), interest income or expense is adjusted by the net difference resulting from the swap.
96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
Foreign currencies
The consolidated financial statements are presented in Lebanese Lira which is the Bank’s functional
currency. Each entity in the Group determines its own functional currency and items included
in the financial statements of each entity are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency at the rate of
exchange ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated into Lebanese
Lira or other functional currencies at rates of exchange prevailing at the balance sheet date. Any
gains or losses are taken to the consolidated income statement.
Translation gains or losses on non-monetary items carried at fair value are included in equity as part
of the fair value adjustment on securities available-for-sale, unless part of an effective hedging strategy.
Translation of financial statements of foreign entities
The assets and liabilities of foreign branches and subsidiaries are not deemed an integral part of the
head office’s operations and are translated at rates of exchange ruling at the balance sheet date.
Income and expense items are translated at average exchange rates for the period. Any exchange
differences are taken directly to a foreign currency translation adjustment reserve.
Cash and cash equivalents
Cash and cash equivalents as referred to in the Cash Flow Statement comprise balances with original
maturities of a period of three months including: cash and balances with the Central Banks, deposits
with banks and financial institutions, deposits due to banks and financial institutions, and treasury
bills.
Repurchase and resale agreements
Assets sold with a simultaneous commitment to repurchase at a specified future date (repos) continue
to be recognized in the balance sheet. Amounts received under these agreements are treated as liabilities
and the difference between the sale and the repurchase price is treated as interest expense using the
effective yield method. Assets purchased with a corresponding commitment to resell at a specified future
date (reverse repos) are not recognized in the balance sheet. Amounts paid under these agreements are
treated as assets and the difference between the purchase and resale price is treated as interest income
using the effective yield method.
97
2. SIGNIFICANT ACCOUNTING POLICIES
Impairment and uncollectibility of financial assets
An assessment is made at each balance sheet date to determine whether there is objective evidence that
financial assets may be impaired. If such evidence exists, any impairment loss is recognized in the
consolidated income statement.
Impairment is determined as follows:
(a) for assets carried at amortised cost, impairment is based on estimated cash flows that are
discounted at the original effective interest rate;
(b) for assets carried at fair value, impairment is the difference between cost and fair value less any
impairment loss previously recognized in the consolidated income statement; and
(c) for assets carried at cost, impairment is the present value of future cash flows discounted at the
current market rate of return for a similar financial asset.
For available for sale equity investments, reversal of impairment losses are recorded as increases in
cumulative changes in fair values through equity.
For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the
bank’s review of credit risk characteristics such as asset type, industry, geographical location, collateral
type, past-due status and other relevant factors.
Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those
in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the
effects of current conditions that did not affect the years on which the historical loss experience is based
and to remove the effects of conditions in the historical period that do not exist currently. Estimates of
changes in future cash flows reflect, and are directionally consistent with, changes in related observable
data from year to year (such as changes in property prices, payment status, or other factors that are
indicative of incurred losses in the group and their magnitude). The methodology and assumptions used
for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates
and actual loss experience.
Trade and settlement date accounting
All “regular way” purchases and sales of financial assets are recognized on the trade date, i.e. the
date that the Group commits to purchase or sell the asset. Regular way purchases or sales
are purchases or sales of financial assets that require delivery of assets within the time frame
generally established by regulations.
Operating leases
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are
classified as operating leases. Operating lease payments are recognized as an expenses in the
income statement on a straight-line basis over the lease term.
98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
Accounting policies of subsidiary-insurance companies
The financial statements of the subsidiary insurance companies have been prepared in accordance with
International Financial Reporting Standards and the requirements of the regulations related to insurance
and reinsurance companies where the subsidiaries operate. The key accounting policies are as follows:
Premiums earned
Net premiums and accessories (gross premiums) are taken to income over the terms of the policies to
which they relate using the prorata temporis method for non-marine business and 25% of
gross premiums for marine business. Unearned premiums reserve represent the portion of
the gross premiums written relating to the unexpired period of coverage.
If the unearned premiums reserve is not considered adequate to cover future claims arising on these premiums a premium deficiency reserve is created.
Commissions earned and paid
Commissions earned are recognized at the time policies are written.
Commissions paid are expensed over the terms of the policies to which they relate using the
pro-rata temporis method for non-marine business and 25% of commissions paid for marine business.
Deferred acquisition costs represent the portion of commissions paid relating to the unexpired period of
coverage.
2.a SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES
Judgments
In the process of applying the Group’s accounting policies, management has made the following
judgements, apart from those involving estimations, which have the most significant effect in the
amounts recognised in the financial statements:
Classification of investments
Management decides on acquisition of an investment whether it should be classified as held to
maturity, held for trading, carried at fair value through profit or loss account, or available for sale.
The Group classifies investments as trading if they are acquired primarily for the purpose of making a
short term profit by the dealers.
Classification of investments as fair value through profit or loss account depends on how management
monitors the performance of these investments. When they are not classified as held for trading but have
readily available reliable fair values and the changes in fair values are reported as part of profit or loss
in the management accounts, they are classified as fair value through profit or loss.
All other investments are classified as available for sale.
99
2. SIGNIFICANT ACCOUNTING POLICIES
3. BUSINESS COMBINATION
4. NET PROVISIONS LESS RECOVERIES ON LOANS AND ADVANCES
Impairment of investments
The Group treats available for sale equity investments as impaired when there has been a significant or
prolonged decline in the fair value below its cost. In addition, the Group evaluates other factors, including
normal volatility in share price for quoted equities and the future cash flows and the discount factors for
unquoted equities.
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed below:
Impairment losses on commercial loans and advances
The Group reviews its problem commercial loans and advances on a regular basis to assess whether a
provision for impairment should be recorded in the consolidated income statement. In particular,
considerable judgment by management is required in the estimation of the amount and timing of future
cash flows when determining the level of provisions required. Such estimates are necessarily based on
assumptions about several factors involving varying degrees of judgment and uncertainty, and actual
results may differ resulting in future changes to such provisions.
In addition to specific allowances against individually significant loans and advances, the Group also
makes a collective impairment allowance against exposures which, although not specifically identified
as requiring a specific allowance, have a greater risk of default than when originally granted. This takes
into consideration factors such as any deterioration in country risk, industry, and technological
obsolescence, as well as identified weaknesses or deterioration in cash flows.
Impairment losses on consumer loans
An estimate of the collectible amount of consumer loans is made when collection of the full amount is no
longer probable. This estimation is assessed collectively and a provision applied according to the length
of time past due, based on historical recovery rates.
Fair value of financial instruments
Where the fair values of financial assets and financial liabilities recorded on the balance sheet
cannot be derived from active markets, they are determined using a variety of valuation techniques
that include the use of mathematical models. The input to these models is taken from observable
markets where possible, but where this is not feasible, a degree of judgment is required in establishing
fair values. The judgments include consideration of liquidity and model inputs such as correlation and
volatility for longer dated derivatives.
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
3. BUSINESS COMBINATION
BLOM Bank Egypt SAE
In 2006, the Group acquired an additional 2.6% of the voting shares of BLOM Bank Egypt SAE for a
total consideration of LL 4,031 million with effective date 30 November 2005.
LL million
Group’s interest (2.6%)
Goodwill arising on acquisition (note 27)
Cost of acquisition (net cash outflow)
2,323
1,708
4,031
In 2006, BLOM Bank Egypt SAE increased its ownership in BLOM Egypt Securities SAE from 67.74%
to 99.37%. The total cost of acquisition is approximately LL 174 million. Net cash inflow on acquisition
amounted to LL 219 million. The Bank consolidated BLOM Egypt Securities SAE with effect from 1
January 2006.
During 2006, BLOM Bank and two of its subsidiaries subscribed in 979,313 shares representing 49%
of the voting shares of Syria International Insurance (Arope Syria) SA, a newly established insurance
company in Syria with a total investment amount of LL 14,559 million.
4. NET PROVISIONS LESS RECOVERIES ON LOANS AND ADVANCES
Provision for doubtful loans and advances:
Provision for doubtful loans and advances
Provision for doubtful consumer loans
Provision for consumer loans not classified at the balance sheet date
Recoveries on loans and advances:
Recoveries on doubtful and bad loans and advances
Recoveries on doubtful loans from off balance sheet
Recoveries on personal loans
Recoveries on commitments by signature
2007
LL million
Restated 2006
LL million
(12,661)
(3,427)
(3,938)
(13,394)
(6,266)
(20,026)
(19,660)
28,852
2,590
19
31,461
11,435
18,107
583
162
18,852
(808)
101
5. NET COMMISSIONS
6. NET PROFIT FROM TRADING INVESTMENTS
7. NET PROFIT FROM NON-TRADING INVESTMENTS
8. OTHER OPERATING INCOME
9. OTHER OPERATING EXPENSES
10. SALARIES AND RELATED BENEFITS
11. GENERAL OPERATING EXPENSES
5. NET COMMISSIONS
2007
LL million
2006
LL million
Less: commissions paid on correspondents’ accounts
25,448
22,494
10,766
6,041
13,685
8,431
9,142
96,007
(6,627)
22,084
17,931
7,907
9,832
11,950
5,446
6,654
81,804
(4,815)
Net commissions received
89,380
76,989
Commissions received:
Letters of credit, guarantees and acceptances
Loans and advances to customers
Asset management and correspondents’ accounts
Checking accounts and transfers
Customers’ deposits
Credit cards
Other services
6. NET PROFIT FROM TRADING INVESTMENTS
Trading loss from equities
Trading income from debt securities
2007
LL million
2006
LL million
(129)
2,152
2,023
(3,010)
9,595
6,585
2007
LL million
2006
LL million
14,558
3,034
877
18,469
9,265
472
(214)
9,523
7. NET PROFIT FROM NON-TRADING INVESTMENTS
Profit from sale of certificates of deposit
Profit from sale of equities
Others
8. OTHER OPERATING INCOME
Premiums earned on insurance contracts
Other miscellaneous income
102
2007
LL million
2006
LL million
19,760
4,858
24,618
16,181
6,213
22,394
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
9. OTHER OPERATING EXPENSES
Claims paid on insurance contracts
Others
2007
LL million
2006
LL million
14,005
441
14,446
11,369
306
11,675
10. SALARIES AND RELATED BENEFITS
Salaries and wages
Social security contributions
Provisions for end of service indemnities (note 32)
Additional indemnities paid
Other allowances (including bonuses)
2007
LL million
2006
LL million
65,215
12,412
2,615
12,610
36,281
129,133
58,667
10,692
5,498
10,628
26,914
112,399
2007
LL million
2006
LL million
1,416
2,631
5,893
6,224
3,594
7,883
8,557
5,648
3,400
727
8,140
5,326
2,080
19,798
81,317
1,077
2,875
5,494
4,259
2,469
5,986
7,028
6,175
3,262
764
7,904
4,670
2,129
16,747
70,839
11. GENERAL OPERATING EXPENSES
Board of directors’ attendance fees
Taxes and fees
Fee for guarantee of deposits
Rent and related charges
Electricity and fuel
Professional fees
Postage and telecommunications
Maintenance and repairs
Travel expenses
Insurance
Marketing and advertising
Stationery and printings
Fiscal stamps
Others
103
12. DEPRECIATION AND AMORTIZATION OF TANGIBLE AND INTANGIBLE ASSETS
13. PROVISION FOR CONTINGENT LIABILITIES
14. EARNINGS PER SHARE
15. CASH AND BALANCES WITH THE CENTRAL BANKS
16. LEBANESE AND OTHER GOVERNMENTAL TREASURY BILLS AND BONDS
12. DEPRECIATION AND AMORTIZATION OF TANGIBLE AND INTANGIBLE ASSETS
Tangible fixed assets (note 23)
Intangible fixed assets (note 24)
Provision for impairment against real estate acquired in settlement of debts (note 23)
2007
LL million
2006
LL million
17,717
633
18,350
13,328
397
2,418
16,143
13. PROVISION FOR CONTINGENT LIABILITIES
Provision for complementary taxes and contingent liabilities
related to a subsidiary bank (note 32)
Others
2007
LL million
2006
LL million
13,327
23
13,350
1,455
3
1,458
14. EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing the net profit for the year attributable
to ordinary equity holders of the parent by the weighted average number of ordinary shares
outstanding during the year.
The following reflects the income and share data used in the basic earnings per share
computation:
Net profit for the year
Less :Proposed dividends on preferred shares (note 38)
Minority interest
Net profit attributable to equity holders of the parent
Weighted average number of common shares
Basic earnings per share
LL million
LL million
LL million
LL million
LL
2007
2006
308,586
(40,890)
(5,114)
262,582
21,183,704
12,395
271,804
(40,891)
(2,200)
228,713
20,850,721
10,969
No figure for diluted earnings per share has been presented as the Bank has not issued any
instruments which would have an impact on earnings per share when exercised.
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
15. CASH AND BALANCES WITH THE CENTRAL BANKS
Cash
Central Banks:
Current accounts
Time deposits
Accrued interest at 31 December
Certificates of deposit – loans and receivables
Accrued interest at 31 December
2007
LL million
2006
LL million
128,083
92,767
951,922
2,429,799
43,935
3,425,656
2,718,370
57,922
2,776,292
6,330,031
884,505
1,630,300
21,300
2,536,105
3,534,441
83,093
3,617,534
6,246,406
Cash and balances with the Central Banks include non-interest bearing balances held by the Group at the
Bank of Lebanon in coverage of the obligatory reserve requirements for all banks operating in Lebanon on
deposits in Lebanese Lira as required by the Lebanese banking rules and regulations. This obligatory reserve
is calculated on the basis of 25% of sight commitments and 15% of term commitments.
In addition to the above, all banks operating in Lebanon are required to deposit with the Bank of
Lebanon interest- bearing placements at the rate of 15% of total deposits in foreign currencies
regardless of nature.
Foreign subsidiaries are also subject to obligatory reserve requirements with varying percentages, according
to the banking rules and regulations of the countries in which they are located.
16. LEBANESE AND OTHER GOVERNMENTAL TREASURY BILLS AND BONDS
Trading:
-Treasury bills and bonds (quoted)
-Accrued interest at 31 December
Available for sale:
- Treasury bills and bonds
- Accrued interest at 31 December
2007
LL million
2006
LL million
75,537
1,412
76,949
49,511
1,037
50,548
4,904,147
99,227
5,003,374
5,080,323
3,353,399
70,973
3,424,372
3,474,920
As of 30 December 2005, the Group reclassified treasury bills and bonds denominated in
Lebanese Lira and in foreign currencies from investments held to maturity to investments
available for sale. Accordingly, the Group is not allowed to classify investments as held to
maturity before 1 January 2008, according to IAS 39. Consequently, held to maturity investments
were carried at fair value and reclassified as available for sale as at 31 December 2005. This
reclassification resulted in an increase in the fair value of the available for sale investments
as at 31 December 2005 with a corresponding increase in cumulative changes in fair values
in the consolidated statement of changes in equity.
Available for sale investments include unquoted governmental bonds in the amount of LL
132,645 million (2006: LL 243,668 million) that are stated at cost, which approximately equal to
fair value.
105
17. BONDS AND FINANCIAL ASSETS WITH FIXED INCOME
18. SHARES, SECURITIES AND FINANCIAL ASSETS WITH VARIABLE INCOME
19. BANKS AND FINANCIAL INSTITUTIONS – DEBIT
17. BONDS AND FINANCIAL ASSETS WITH FIXED INCOME
Trading:
- Bonds
Fair value through profit or loss:
- Bonds
Available for sale:
- Bonds
Loans and receivables:
- Certificates of deposit
2007
LL million
2006
LL million
21,244
-
45,470
-
872,185
139,501
226,241
1,165,140
246,599
386,100
Included in bonds and financial assets with fixed income, accrued interest up to 31 December 2007
amounting to LL 15,990 million (2006: LL 7,408 million).
As of 30 December 2005, the Group reclassified bonds and financial assets with fixed income from
investments held to maturity to investments available for sale. Accordingly, the Group is not allowed
to classify investments as held to maturity before 1 January 2008, according to IAS 39.
Consequently, held to maturity investments were carried at fair value and reclassified as available
for sale as at 31 December 2005. This reclassification resulted in an increase in the fair value of the
available for sale investments as at 31 December 2005 with a corresponding increase in cumulative
changes in fair values in the consolidated statement of changes in equity.
Bonds and financial assets with fixed income include unquoted available for sale investments in the
amount of LL 44,331 million (2006: LL 44,213 million) and unquoted certificates of deposit in the
amount of LL 16,952 million (2006: LL 38,023 million) that are stated at cost, which approximately
equal to fair value.
18. SHARES, SECURITIES AND FINANCIAL ASSETS WITH VARIABLE INCOME
Trading:
Shares
Investment fund
Available for sale:
Shares
2007
LL million
2006
LL million
4,663
1,849
6,512
4,073
875
4,948
5,213
11,725
3,455
8,403
Trading investments include unquoted investments in the amount of LL 1,149 million (2006: LL 980 million)
and available for sale investments include unquoted investments in the amount of LL 3,842 million (2006:
LL 2,198 million) that are stated at cost due to the unpredictable nature of future cash flows and lack of
suitable other methods for arriving at a reliable fair value.
106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
19. BANKS AND FINANCIAL INSTITUTIONS – DEBIT
Current accounts:
- Current accounts
- Checks for collection
- Accrued interest at 31 December
Time deposits:
- Term deposits
- Granted financial loans
- Accrued interest at 31 December
2007
LL million
2006
LL million
254,966
72,458
134
327,558
231,257
69,352
180
300,789
7,094,791
85,933
28,251
7,208,975
7,536,533
7,359,698
70,335
23,462
7,453,495
7,754,284
Included in banks and financial institutions - debit, time deposits amounting to US$ 620,000 thousand
(2006:
US$ 840,000 thousand) being guarantees against short term borrowings in the amount of Euro
325,000 thousand (2006: Euro 525,000 thousand) reflected under banks and financial institutions –
credit. According to the contracts entered into with these banks, the Bank can withdraw these term
deposits upon the settlement of the short-term borrowings.
Included also in banks and financial institutions - debit, time deposits amounting to US$ 1,600 thousand
(2006: nil), being guarantees against two letters of credit maturing in September 2008 and amounting to
US$ 800 thousand each.
107
20. LOANS AND ADVANCES TO CUSTOMERS
20. LOANS AND ADVANCES TO CUSTOMERS
Commercial loans
Other loans to customers (consumer loans)
Overdraft accounts
Net debtor accounts against creditor and cash collateral accounts
Advances to related parties
Doubtful debts (including consumer loans)
Total loans
Provision for doubtful loans
Provisions for commercial loans not classified as doubtful debts
at the balance sheet date
Provision for doubtful consumer loans
Provision for consumer loans not classified as doubtful debts
at the balance sheet date
Total provisions
Unrealized interest – substandard loans
Unrealized interest – doubtful loans
Total unrealised interest
Commercial loans
Less:
Provision for doubtful loans and provision for commercial loans not
classified as doubtful debts at the balance sheet date
Unrealized interest-substandard loans
Unrealized interest-doubtful loans
Consumer loans
Less:
Provision for doubtful consumer loans and provision for consumer loans
not classified as doubtful debts at the balance sheet date
2007
LL million
2006
LL million
3,265,402
865,793
11,932
14,308
5,940
358,109
4,521,484
(215,626)
2,442,417
535,053
8,190
10,826
7,400
344,561
3,348,447
(210,071)
(22,272)
(3,561)
(40,017)
(256)
(17,750)
(259,209)
(14,238)
(68,730)
(82,968)
4,179,307
3,643,411
(13,812)
(264,156)
(13,899)
(73,694)
(87,593)
2,996,698
2,813,138
(237,898)
(14,238)
(68,730)
3,322,545
878,073
(250,088)
(13,899)
(73,694)
2,475,457
535,309
(21,311)
856,762
4,179,307
(14,068)
521,241
2,996,698
Commercial loans as at 31 December 2007 include substandard loans amounting to LL 36,285 million (2006:
LL 34,456 million).
Breakdown by economic sector
Agriculture and forestry
Manufacturing
Trade retail
Trade wholesale
Services
Construction
Freelance professions
Consumer loans
108
2007
LL million
2006
LL million
32,226
471,274
335,005
760,096
935,475
756,436
365,179
865,793
4,521,484
20,187
435,275
161,188
855,142
677,833
240,496
423,264
535,062
3,348,447
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
The movement of provision for doubtful loans and advances by class is as follows:
2006
2007
Provision for
doubtful
commercial loans
and provision for
commercial loans
not classified yet
LL million
Provision for
doubtful
consumer loans
and provision for
consumer loans
not classified yet
LL million
Total
LL million
Provision for
doubtful
commercial loans
and provision for
commercial loans
not classified yet
LL million
Provision for
doubtful
consumer loans
and provision for
consumer loans
not classified yet
LL million
Total
LL million
250,088
14,068
264,156
256,383
9,009
265,392
12,661
5,956
7,365
-
20,026
5,956
13,394
1,566
6,266
-
19,660
1,566
25
-
25
-
-
-
268,730
21,433
290,163
41
271,384
15,275
41
286,659
(6,869)
(23,738)
(103)
(19)
(6,972)
(23,757)
(5,885)
(7,675)
(1,207)
(5,885)
(8,882)
(225)
(30,832)
237,898
215,626
(122)
21,311
3,561
(225)
(30,954)
259,209
219,187
(7,400)
(336)
(21,296)
250,088
210,071
(1,207)
14,068
256
(7,400)
(336)
(22,503)
264,156
210,327
22,272
237,898
17,750
21,311
40,022
259,209
40,017
250,088
13,812
14,068
53,829
264,156
345,829
12,280
358,109
344,305
256
344,561
Balance at 1 January
Add:
Charge for the year
Foreign exchange difference
Provision transferred
from off balance sheet
Provision of acquired subsidiary Blom Egypt Securities SAE
Less:
Provisions written-off
Recovery of provisions
Provision transferred to
off balance sheet
Foreign exchange difference
Balance at 31 December
Individual provision
Provision for loans
not classified yet
Gross amount of loans individually
determined to be impaired
109
20. LOANS AND ADVANCES TO CUSTOMERS
21. BANK / ENGAGEMENTS BY ACCEPTANCES
The following is a reconciliation of the individual provision for impairment losses on loans and advances
and provision for loans not classified yet:
2006
2007
Individual
provision
LL million
Balance at 1 January
Add:
Charge for the year
Provisions transferred from
off-balance sheet
Difference of exchange
Provision of acquired subsidiaryBLOM Egypt Securities SAE
Less:
Provisions written off
Recovery of provisions
Provisions transferred
to off balance sheet
Foreign exchange difference
Balance at 31 December
Provision for loans
not classified yet
LL million
Total
LL million
Individual
provision
LL million
Provision for loans
not classified yet
LL million
Total
LL million
210,327
53,829
264,156
213,897
51,495
265,392
16,088
3,938
20,026
13,092
6,568
19,660
25
5,956
-
25
5,956
1,567
-
1,567
232,396
57,767
290,163
41
228,597
58,063
41
286,660
(6,972)
(6,012)
(17,745)
(6,972)
(23,757)
(5,885)
(4,649)
(4,234)
(5,885)
(8,883)
(225)
(13,209)
219,187
(17,745)
40,022
(225)
(30,954)
259,209
(7,400)
(336)
(18,270)
210,327
(4,234)
53,829
(7,400)
(336)
(22,504)
264,156
The movement of unrealized interest is as follows:
Balance at 1 January
Add:
Unrealized interest for the year
Foreign exchange difference
Less:
Recoveries of unrealized interest
Amounts written-off
Transferred to off-balance sheet
Foreign exchange difference
Balance at 31 December
2007
LL million
2006
LL million
87,593
88,472
12,827
874
101,294
14,062
102,534
(5,114)
(13,212)
(18,326)
82,968
(9,224)
(1,831)
(3,821)
(65)
(14,941)
87,593
As required by Bank of Lebanon regulations, doubtful loans fulfilling certain conditions have been transferred to off-balance sheet, together with the related provisions and unrealized interest.
110
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
The movement of provisions against fully provided bad loans included off balance sheet accounts is as
follows:
Balance at 1 January
Add:
Transferred from balance sheet
Provision transferred from balance sheet
Less:
Provisions written-back
Amounts written-off
Provision transferred to balance sheet
Balance at 31 December
2007
LL million
2006
LL million
20,202
13,795
162
20,364
7,400
139
21,334
(2,265)
(1,056)
(25)
(3,346)
17,018
(400)
(732)
(1,132)
20,202
The movement of unrealized interest included in off balance sheet accounts is summarized as
follows
Balance at 1 January
Add:
Unrealized interest for the year
Transferred from balance sheet
Foreign exchange difference
Less:
Recoveries
Amounts written-off
Balance at 31 December
Total provisions and unrealized interest included in off
balance sheet accounts
21. BANK / ENGAGEMENTS BY ACCEPTANCES
Acceptances as of 31 December
2007
LL million
2006
LL million
23,703
22,436
1,484
185
25,372
1,697
3,821
161
28,115
(325)
(13,753)
(14,078)
11,294
(183)
(4,229)
(4,412)
23,703
28,312
43,905
2007
LL million
2006
LL million
245,357
173,260
Acceptances resulted from letters of credit opened for accounts of customers, with deferred
payments.
111
22. INVESTMENTS AND LOANS TO RELATED PARTIES
23. TANGIBLE FIXED ASSETS
22. INVESTMENTS AND LOANS TO RELATED PARTIES
Ownership percentage
Country of
incorporation
Investments in nonconsolidated subsidiaries
and associates
BLOM Services SARL
Société de Services d’Assurances et de
Marketing SAL
International Payment Network SAL
Arope services SAL
BLOM Invest – Saudi Arabia (under establishment)
Investments available for sale
Misr for Central, Clearing, Depository and
Central Registry
Banque de l’Habitat SAL
BLOM Real Estate SAL
Swift
Investment property
Immobilière Foch 65 SARL
Less: Provision for impairment
2007
2006
2007
LL million
2006
LL million
Lebanon
-
99.70%
-
149
Lebanon
Lebanon
Lebanon
Saudi Arabia
99.92%
23.50%
90.00%
59.94%
99.92%
23.50%
90.00%
-
50
752
24,120
24,922
50
752
951
Egypt
Lebanon
Lebanon
France
2.85%
7.23%
0.01%
0.46%
2.85%
7.23%
0.01%
1,431
220
33
1,684
48
1,431
220
31
1,730
France
100.00%
100.00%
1,029
(427)
602
27,208
922
(383)
539
3,220
The carrying values of the investments in subsidiaries which were not consolidated because they are
immaterial to the consolidated financial statements as at 31 December are detailed as follows:
Shareholders’ equity
BLOM Services SARL (*)
Société de Services d’Assurances et de Marketing SAL
2007
LL million
2006
LL million
153
212
102
Arope Services SAL is a dormant company. Accordingly, the carrying value of this investment was not consolidated
because it is immaterial to the consolidated financial statements as at 31 December 2007 (2006: the same).
(*)The partners in their meeting dated 3 May 2005 resolved to liquidate the company and appointed a liquidator.
On 29 May 2006, the Ordinary Meeting of Partners approved the completion of the liquidation process which was
announced in the Official Gazette on 8 March 2007.
BLOM Invest – Saudi Arabia (under establishment)
The Bank, together with BLOM Invest SAL (a subsidiary), established BLOM Invest – Saudi Arabia and contributed
in 10% and 50% respectively to its capital. The regulatory institutions in Lebanon and the Kingdom of Saudi
Arabia approved on this investment in January 2008. BLOM Invest – Saudi Arabia is under establishment and is
not included in the consolidation of the Group as of 31 December 2007, and no pre – incorporation expenses have
been incurred for the year then ended. It will be consolidated when established.
112
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
23. TANGIBLE FIXED ASSETS
Freehold land and
buildings
LL million
Cost
At 1 January 2007
156,031
Additions
19,938
Disposals
(115)
Transfers
5,414
Translation difference
1,544
At 31 December 2007
182,812
Depreciation
At 1 January 2007
27,361
Charge for the year
3,604
Relating to disposals
(58)
Transfers
Translation difference
291
At 31 December 2007
31,198
Impairment
At 1 January 2007
Provided during the year
Provision written back during the year
Translation difference
At 31 December 2007
Net carrying value
At 31 December 2007
151,614
Vehicles Furniture, office
installations
LL million
and computer
equipment
LL million
Advances on
acquisition
of fixed assets and
construction
in progress
LL million
Fixed assets
acquired in settlement of debts
LL million
Total
LL million
3,464
1,200
(365)
136
63
4,498
119,359
31,418
(8,464)
1,826
1,980
146,119
31,049
24,270
(7,516)
780
48,583
25,912
5,346
(11,936)
777
20,099
335,815
82,172
(20,880)
(140)
5,144
402,111
1,640
748
(363)
14
39
2,078
79,452
13,365
(5,129)
(32)
1,333
88,989
-
-
108,453
17,717
(5,550)
(18)
1,663
122,265
-
-
-
7,990
(1,044)
258
7,204
7,990
(1,044)
258
7,204
2,420
57,130
48,583
12,895
272,642
113
23. TANGIBLE FIXED ASSETS
24. INTANGIBLE FIXED ASSETS
Freehold land and
buildings
LL million
Cost
At 1 January 2006
147,457
Additions from the acquisition
of subsidiaries
Additions
6,654
Disposals
(970)
Transfers
1,365
Translation difference
1,525
At 31 December 2006
156,031
Depreciation
At 1 January 2006
23,528
Accumulated depreciation from
the acquisition of subsidiaries
Charge for the year
3,652
Relating to disposals
(243)
Transfers
201
Translation difference
223
At 31 December 2006
27,361
Impairment
At 1 January 2006
Provided during the year
Provision written back during the year
Translation difference
At 31 December 2006
Net carrying value
At 31 December 2006
128,670
Vehicles Furniture, office
installations
LL million
and computer
equipment
LL million
Advances on
acquisition
of fixed assets and
construction
in progress
LL million
Fixed assets
acquired in
settlement of
debts
LL million
Total
LL million
2,929
97,086
17,560
35,843
300,875
1,025
(499)
9
3,464
101
15,480
(1,411)
7,106
997
119,359
22,378
(387)
(8,483)
(19)
31,049
2,875
(12,688)
12
(130)
25,912
101
48,412
(15,955)
2,382
335,815
1,483
70,887
-
-
95,898
605
(450)
2
1,640
77
9,071
(1,210)
627
79,452
-
-
77
13,328
(1,903)
201
852
108,453
-
-
-
8,734
2,418
(3,121)
(41)
7,990
8,734
2,418
(3,121)
(41)
7,990
1,824
39,907
31,049
17,922
219,372
Certain freehold land and buildings purchased prior to 1 January 1999 were restated for the changes
in the general purchasing power of the Lebanese Lira giving rise to a net surplus amounting to LL
14,727 million, which was credited to equity under “revaluation reserves”.
114
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
24. INTANGIBLE FIXED ASSETS
Cost
At 1 January 2007
Additions
Transfers
Translation difference
At 31 December 2007
Amortization
At 1 January 2007
Charge for the year
Transfers
Translation difference
At 31 December 2007
Net carrying value
At 31 December 2007
Cost
At 1 January 2006
Additions
Disposals
Translation difference
At 31 December 2006
Amortization
At 1 January 2006
Charge for the year
Relating to disposals
Transfers
Translation difference
At 31 December 2006
Net carrying value
At 31 December 2006
Software
development
LL million
Key money
LL million
Advances on
acquisition
of intangible
fixed assets
LL million
Total
LL million
4,443
1,077
140
347
6,007
8,305
564
8,869
887
887
12,748
1,964
140
911
15,763
4,078
495
18
336
4,927
5,825
138
414
6,377
-
9,903
633
18
750
11,304
1,080
2,492
887
4,459
Software
development
LL million
Key money
LL million
Advances on
acquisition
of intangible
fixed assets
LL million
Total
LL million
4,004
254
(121)
306
4,443
8,908
886
(2,097)
608
8,305
224
(224)
-
13,136
1,140
(2,442)
914
12,748
3,696
217
(121)
286
4,078
5,488
180
(201)
358
5,825
-
9,184
397
(121)
(201)
644
9,903
365
2,480
-
2,845
115
25. OTHER ASSETS
26. REGULARIZATION ACCOUNTS AND OTHER DEBIT ACCOUNTS
27. GOODWILL
25. OTHER ASSETS
Compulsory deposits (i)
Precious metals and stamps
Investments related to unit-linked contracts- fair value through
profit or loss (ii)
Other assets
2007
LL million
2006
LL million
14,903
564
14,690
512
17,600
1,149
34,216
16,751
1,762
33,715
(i) Compulsory deposits represent amounts deposited with local authorities based on local regulations of
the countries in which the subsidiaries are located, and are detailed as follows:
BLOM Invest SAL
Bank of Syria and Overseas SA
BLOM Development Bank SAL
2007
LL million
2006
LL million
1,500
8,903
4,500
14,903
1,500
8,690
4,500
14,690
(ii) The unrealized profit on investments related to unit-linked contracts amounted to LL 2,910 million for the
year ended 31 December 2007 (2006: LL 902 million).
26. REGULARIZATION ACCOUNTS AND OTHER DEBIT ACCOUNTS
Customers’ transactions between head office and branches
Prepaid expenses
Sundry debtors (i)
Other revenues to be collected
Revaluation variance on foreign exchange forward contracts
related to the Group’s customers (note 43) (ii)
Reinsurers’ share of technical reserves
Taxes paid in advance in a subsidiary bank
Other accounts
(i) Sundry debtors
Sundry debtors
Less: Provision against sundry debtors
116
2007
LL million
2006
LL million
28,739
8,143
23,107
1,754
14,510
8,308
8,476
3,557
8,935
12,190
19,997
16,622
119,487
901
10,501
14,565
590
61,408
2007
LL million
2006
LL million
24,573
(1,466)
23,107
9,740
(1,264)
8,476
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
The movement of provision against sundry debtors is summarized as flows:
Balance at 1 January
Provided during the year
Translation difference
Balance at 31 December
2007
LL million
2006
LL million
1,264
189
13
1,466
1,253
11
1,264
(ii) Revaluation variance on foreign exchange forward contracts
“Revaluation variance on foreign exchange forward contracts hedging operations related to
Group’s customers” represents operations in which the Group is engaged to hedge foreign
exchange operations for its clients. As at 31 December 2007, the revaluation of these contracts
resulted in unrealized losses (2006: same).
27. GOODWILL
Cost:
At 1 January
Acquisition of a subsidiary
Exchange difference
At 31 December
2007
LL million
2006
LL million
63,980
(3,394)
60,586
61,758
1,708
514
63,980
Impairment testing of goodwill
Goodwill acquired through business combinations with indefinite lives have been allocated to
two individual cash-generating units, which are subsidiaries of the Bank, for impairment testing
as follows:
- BLOM Bank Egypt SAE
- BLOM Bank (Switzerland) SA
The carrying amount of goodwill to each of the subsidiaries is as follows:
BLOM Bank Egypt SAE
BLOM Bank (Switzerland) SA
2007
LL million
2006
LL million
59,480
1,106
60,586
62,989
991
63,980
Key assumptions used in value in use calculations
The recoverable amount of BLOM Bank Egypt SAE has been determined based on a value in use
calculation, using cash flow projections based on financial budgets approved by senior management covering a ten-year period. The following rates are used by the Bank.
117
27. GOODWILL
28. BANKS AND FINANCIAL INSTITUTIONS - CREDIT
29. CUSTOMERS' DEPOSITS
30. OTHER LIABILITIES
2007 %
2006 %
9.15
30
0
9.15
30
0
Discount rate
Projected growth rate (average during the first 4 years in 2007 and 5 year in 2006)
Projected growth rate beyond the four year period in 2007 and five year period in 2006
The calculation of value in use for BLOM Bank Egypt SAE is most sensitive to the following assumptions:
- Interest margins;
- Discount rates;
- Projected growth rates;
- Gross domestic product of the country where the subsidiary operates;
- Local inflation rates.
Interest margins
Interest margins are based on average values achieved in the 13 months proceeding of the budget
period. These are increased over the budget period for anticipated market conditions.
Discount rates
Discount rates reflect management’s estimate of return on capital employed. Discount rates are calculated by using the weighted average cost of capital.
Projected growth rates, GDP and local inflation rates
Assumptions are based on management analysis and published industry research.
Sensitivity to changes in assumptions
Management believes that reasonable possible changes in key assumptions used to determine the
recoverable amount will not result in an impairment of goodwill.
118
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
28. BANKS AND FINANCIAL INSTITUTIONS - CREDIT
Current accounts
Term:
Term
Accrued interest at 31 December
29. CUSTOMERS' DEPOSITS
Sight deposits
Time deposits
Saving accounts
Credit accounts and deposits against debit accounts
Related parties’ accounts
2007
LL million
2006
LL million
186,913
159,362
1,365,807
3,194
1,369,001
1,555,914
1,147,370
2,112
1,149,482
1,308,844
2007
LL million
2006
LL million
2,341,594
9,589,749
7,862,422
812,788
101,963
20,708,516
1,897,765
7,874,196
7,180,465
662,696
75,259
17,690,381
Customers' deposits include coded deposit accounts in BLOM Bank SAL and BLOM Invest Bank
SAL amounting to LL 76,092 million as of 31 December 2007 (2006: LL 73,182 million).
30. OTHER LIABILITIES
Margins on letters of credit (i)
Income tax payable (ii)
Distribution tax due on subsidiary’s dividends (note 40)
Other taxes due
Deposits related to entities under constitution
Transactions pending between consolidated subsidiaries
Advances from customers for acquisition of securities
Sundry creditors
Dividends payable
2007
LL million
2006
LL million
77,300
31,984
12,984
9,587
12,875
12,789
12,170
24,483
288
194,460
64,046
28,079
12,426
9,354
2,975
5,884
7,868
10,251
184
141,067
(i) Margins on letters of credit
Margins on letters of credit represent deposits by the clients on account of documentary credits
opened by the Group on their behalf.
(ii) Income tax payable
The relationship between taxable profit and accounting profit of BLOM Bank SAL and its foreign
branches and subsidiaries is as follows:
119
30. OTHER LIABILITIES
2007
LL million
2006
LL million
365,586
(5,125)
360,461
321,633
(4,874)
316,759
5,009
37,102
3,376
2,751
143
408,842
6,299
15,054
338,112
Less:
Dividends received and previously subject to income tax
Provisions no more required and previously subject to income tax
Remunerations already taxed
4% of a subsidiary’s capital eligible to be tax deductible
Write-back of provisions previously subject to income tax
Non taxable income
Difference in depreciation of fixed assets
Permanent deductible charges
Others
(2,194)
(8,301)
(400)
(20,552)
(1,762)
(2,433)
(71,021)
(855)
(329)
(6,645)
(400)
(4,732)
(830)
-
Taxable profit
301,324
325,176
Profit before income tax
Less: Results of the subsidiary insurance company located in Lebanon (*)
Accounting profit before income tax
Add:
Provisions non tax deductible
Other non tax deductible charges
Unrealized loss on difference of exchange
Capital gain
Others
The effective income tax rate of the Group is approximately 15.27%
(2006: 15.31%).
(*) The insurance company in Lebanon is subject to income tax at the rate of 15% calculated based on
gross insurance premiums weighted differently for each class of business.
120
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
Income statement:
Current income tax:
Current income tax charge (a)
Adjustments in respect of current income tax of previous years (b)
Current distribution tax due (c)
Income tax payable is detailed as follows:
At 1 January
Tax expense for the year
Tax paid during the year
Exchange difference
At 31 December
2007
LL million
2006
LL million
55,839
603
558
57,000
49,247
582
49,829
2007
LL million
2006
LL million
28,079
33,198
(30,709)
1,416
23,561
26,454
(22,722)
786
31,984
28,079
(a) Current income tax charge in the consolidated income statement is detailed as follows:
5% tax paid on interest revenue during the year
Income tax on profit for the year
2007
LL million
2006
LL million
22,641
33,198
55,839
22,793
26,454
49,247
(b) During 2007, the tax authorities reviewed the Bank’s accounts in Lebanon for the years 2003 to
2005 (inclusive), and the review resulted in complementary taxes and fines amounted to LL 603
million, settled in full during the year ended 31 December 2007.
(c) Movement of distribution tax due recognized in the balance sheet is detailed as follows:
2007
LL million
2006
LL million
Balance at 1 January
Provided during the year
12,426
558
11,844
582
Balance at 31 December
12,984
12,426
2007
LL million
2006
LL million
41,940
13,011
2,049
57,000
37,959
9,568
2,302
49,829
For more information about distribution tax due, refer to note 40.
Current income tax allocation is as follows:
Income tax-BLOM Bank SAL
Income tax-foreign subsidiaries
Income tax-subsidiaries in Lebanon
121
30. OTHER LIABILITIES
31. REGULARIZATION ACCOUNTS AND OTHER CREDIT ACCOUNTS
32. PROVISIONS FOR RISKS AND CHARGES
Income tax paid during 2007 and 2006 reflected in the consolidated cash flow statement is detailed as follows:
Income tax paid for the years 2006 and 2005
5% tax paid on interest revenue during the year
Adjustments in respect of current income tax of previous years
2007
LL million
2006
LL million
30,709
22,641
603
53,953
22,722
22,793
45,515
2007
LL million
2006
LL million
54,399
32,684
8,472
6,127
120,794
189,792
3,566
1,342
92,277
129,869
31. REGULARIZATION ACCOUNTS AND OTHER CREDIT ACCOUNTS
Accrued expenses
Revaluation variance on foreign exchange forward contracts
hedging a net investment in a foreign subsidiary bank (note 43)
Transactions pending between branches
Unearned premiums and liability related to unit linked insurance contracts
2007
LL million
2006
LL million
3,188
3,374
9,512
26,160
6,903
26,432
38,512
24,136
2,358
836
80,566
852
2,268
681
64,646
2007
LL million
2006
LL million
Balance at 1 January
Charge for the year
Provisions paid during the year
Provisions written-back during the year
Exchange difference
3,374
382
(54)
(622)
108
3,288
759
(464)
(325)
116
Balance at 31 December
3,188
3,374
32. PROVISIONS FOR RISKS AND CHARGES
Provision for risks and charges (i)
Provision for outstanding claims and IBNR reserves related to subsidiaryinsurance companies (ii)
Provision for end of service indemnities (iii)
Provision for complementary taxes and contingent liabilities related
to a subsidiary bank (iv)
Provision for contingencies of correspondents’ operations related to
a subsidiary bank
Provision for unusual commitments related to a subsidiary bank (v)
Other provision
(i) Provisions for risks and charges
The provision for risks and charges mostly represent a provision against probable taxes on interest
taken by a subsidiary insurance company in the amount of LL 1,638 million not finalized yet with the
Ministry of Finance, in addition to a provision taken by a subsidiary bank in the amount of LL 1,237
million against contingent liabilities.
122
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
(ii) Provisions for outstanding claims and IBNR reserves related to subsidiary-insurance companies
2007
LL million
2006
LL million
Balance at 1 January
Provision for outstanding claims and IBNR reserves charged for the year
Provisions used during the year
Exchange difference
6,903
2,857
(350)
102
6,734
169
-
Balance at 31 December
9,512
6,903
2007
LL million
2006
LL million
Balance at 1 January
Charge for the year
Indemnities paid
Provisions written-back
Exchange difference
26,432
2,615
(2,694)
(124)
(69)
21,664
5,498
(703)
(27)
Balance at 31 December
26,160
26,432
(iii) Provisions for end of service indemnities
(iv) Provision for complementary taxes and contingent liabilities related to a subsidiary bank
Provision for complementary taxes and contingent liabilities related to a subsidiary bank
represents mainly accruals for additional complementary taxes in a subsidiary resulting
from inspection by tax authorities for the years from 1991 onwards.
Movement in provision for complementary taxes and contingent liabilities related to a
subsidiary bank recognized in the balance sheet are as follows:
2007
LL million
2006
LL million
Balance at 1 January
Charge for the year
Provision written-back during the year
Exchange difference
24,136
13,327
(185)
1,234
22,868
1,455
(85)
(102)
Balance at 31 December
38,512
24,136
2007
LL million
2006
LL million
Balance at 1 January
Charge for the year
Exchange difference
2,268
90
971
1,301
(4)
Balance at 31 December
2,358
2,268
(v) Provision for unusual commitments related to a subsidiary bank
123
33. SHARE CAPITAL
33. SHARE CAPITAL
21,500,000 common shares of LL 10,000 per share
750,000 preferred shares (2002 issue) of LL 10,000 per share
750,000 preferred shares (2004 issue) of LL 10,000 per share
1,000,000 preferred shares (2005 issue) of LL 10,000 per share
Total preferred shares
2007
LL million
2006
LL million
215,000
215,000
7,500
7,500
10,000
7,500
7,500
10,000
25,000
240,000
25,000
240,000
a) The Extraordinary General Meeting of Shareholders held on 30 December 2005, resolved to increase
the Bank’s capital from LL 210,000 million to LL 240,000 million by the increase of LL 30,000 million
through the issuance of 3,000,000 new common shares, of LL 10,000 per share. The subscription in
these shares is limited to Bank of New York to be fully settled in cash. The issuance and subscription
in these common shares was based on the following conditions:
Number of issued shares
Par value of issued shares (LL 10,000 per share)
Premium (denominated in US$)
3,000,000
LL 30,000 million
US$ 85.34443 as determined by the Extraordinary General
Assembly of Shareholders held on 13 February 2006.
On 16 February 2006, the Extraordinary General Assembly of Shareholders approved the subscription of
these common shares amounting to 3,000,000 shares, which were approved to be issued and fully paid in
the amount of LL 30,000 million plus a premium amounting to US$ 256,033 thousand (equivalent to LL 385,970
million) based on US$ 85.34443 per share. The commission and the issuance costs amounted to US$ 7,590
thousand (equivalent to LL 11,911 million) which was deducted from the issuance premium.
It is to be noted that the Board of Directors decided on 7 February 2006 to list the GDSs in the Beirut
and Luxembourg Stock Exchanges in parallel with the current GDRs of the Bank.
b) According to the provisions of Law no 308 dated 3 April 2001, the Extraordinary General Assembly
Meeting of Shareholders held on 11 October 2002, and then the Extraordinary General Assembly
Meetings of Shareholders held on 4 June 2004 and 17 September 2005, resolved to issue preferred
shares at the following conditions:
124
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
Number of shares
2002 ISSUE
2004 ISSUE
2005 ISSUE
750,000
750,000
1,000,000
LL 7,500 million
LL 10,000 million
LL 105,590 million (USD
70,043 thousands)
An annual amount for each
share equal to USD 8.5 based
on the exchange rate on the
date of the General Assembly
Meeting, (subject to the
approval of the Shareholders’
General Assembly Meeting
and the availability of a nonconsolidated distributable net
income for the year).
LL 140,720 million (USD
93,347 thousands)
2005 distributions to be based
on a fixed amount of USD 3.75
per share and thereafter at an
annual amount equal to 6% of
the net consolidated profit of
the Bank, with a minimum of
7.5% and a maximum of 9.5%
of the issue price (subject to the
approval of the Shareholder’s
General Assembly Meeting
and the availability of a nonconsolidated distributable net
income for the year).
Par value of issued shares
LL 7,500 million
(LL 10,000 per share)
Premium
(denominated in USD)
Non cumulative benefits
LL 105,593 million (USD
70,045 thousands)
An annual amount equal to
11.25% of the net consolidated
profitsoftheBank,withaminimum
of USD 10 per share and not in
excess of USD 15 per share,
(subject to the approval of the
Shareholders’ General Assembly
Meeting and the availability of a
non-consolidated distributable
net income for the year).
These preferred shares (2002, 2004 and 2005 issues) are redeemable 60 days after the annual
general assemblies dealing with the accounts for the years 2007, 2009 and 2010 respectively at
the discretion of the Bank at issue price (LL 10,000 per share plus paid premium) in addition to any
dividends declared but not paid during the years prior to the redemption year.
In the event of any liquidation, dissolution or winding-up of the Bank, the holders of series 2002, 2004 and
2005 preferred shares shall be entitled to be paid out of the assets of the Bank available for distribution
to its shareholders on a pro rata basis, before any payment shall be made to common shareholders.
c) On 12 May 2006, the Extraordinary General Assembly of shareholders decided to list 750,000
preferred shares (2002 issue), 750,000 preferred shares (2004 issue), and 1,000,000 preferred
shares (2005 issue), in addition to 7,166,667 common shares in the regulated markets in Lebanon
and / or abroad.
The Beirut Stock Exchange Committee decided on 24 August 2006 to list, trade and value one third
of the common shares and all the preferred shares (2002, 2004 and 2005 issues) issued by BLOM
Bank SAL as detailed above in the official market of the Beirut Stock Exchange. These four types
of shares became listed on 25 August 2006.
125
33. SHARE CAPITAL
34. RESERVES FOR GENERAL BANKING RISKS
35. RESERVES AND PREMIUMS
Accordingly, the shares of the Bank listed on the Beirut and the Luxemburg Stock Exchanges are detailed
as follows:
2006
2007
Number of shares
Number of shares
7,389,601
7,166,667
750,000
750,000
1,000,000
17,056,268
7,389,601
7,166,667
750,000
750,000
1,000,000
17,056,268
GDR
Common shares
Preferred shares (2002 issue)
Preferred shares (2004 issue)
Preferred shares (2005 issue)
34. RESERVES FOR GENERAL BANKING RISKS
According to the Bank of Lebanon regulations, banks are required to appropriate from their annual net
profit a minimum of 0.2 percent and a maximum of 0.3 percent of total risk weighted assets and offbalance sheet accounts based on rates specified by the Bank of Lebanon to cover general banking risks.
The consolidated ratio should not be less than 1.25 percent of these risks at the end of year ten (2007) and
2 percent at the end of year twenty (2017). This reserve is part of the Bank’s equity and cannot be distributed
as dividends. This reserve is based on the denomination (Lebanese Lira and US Dollars) of the risk
weighted assets and off-balance sheet accounts.
35. RESERVES AND PREMIUMS
Legal
reserve
LL million
General
reserve
LL million
13,037
18,718
-
94,921
10
18,323
250,012
20,982
5,003
3,331
10,907
913
-
351,903
-
-
725,783
19,641
42,636
-
-
(44,613)
-
64
44,613
-
-
374,059
-
374,059
64
31,755
1,850
-
113,254
31
23,250
-
(6)
226,375
2,856
25,848
-
6
8,404
8,922
(3,168)
607
57,040
6,225
-
351,903
-
607
374,059 1,162,790
10,962
58,020
(3,168)
33,605
136,535
(7,169)
247,910
14,158
369
63,634
351,903
(7,169)
369
374,059 1,221,804
Reserve
for translation
difference
LL million
At 31 December 2005
Currency translation difference
Appropriation of 2005 profits
Issuance of common shares
net of issuance costs (note 33)
Transfer to non-distributable reserves
Gain on sale of treasury shares
Transfer to reserve for increase
in share capital
Other
At 31 December 2006
Currency translation difference
Appropriation of 2006 profits
Net loss on sale of treasury shares
Foreign currency translation reserve
realized upon sale of branches in
Romania (note 2)
Other
At 31 December 2007
126
NonReserve for
increase distributable
of share capital
reserves
LL million
LL million
Premium on Premium on
issuance issuance of
of preferred
common
shares
shares
LL million LL million
Total
LL million
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
Legal reserve
According to the Lebanese Code of Commerce and to the Money and Credit Act, banks and
companies operating in Lebanon have to transfer 10% of their annual net profit to a legal
reserve. This reserve cannot be distributed as dividends.
General reserve
The Group appropriated general reserves from its retained earnings to strengthen its equity.
This reserve amounting to LL 247,910 million as at 31 December 2007 (2006: LL 226,375 million)
is available for dividends distribution.
Reserve for increase of share capital
The balance amounting to LL 14,158 million (2006: LL 8,404 million) represents a regulatory
reserve pursuant to circular no. 167 issued by the Banking Control Commission. This reserve
cannot be distributed as dividends.
Details of the reserve for increase of share capital are as follows:
Recoveries of provisions for doubtful debts
Revaluation reserves for fixed assets sold
Gain on sale of treasury shares
2007
LL million
2006
LL million
12,253
438
1,467
14,158
3,331
438
4,635
8,404
Premium on issuance of preferred shares
2002 issue (note 33)
2004 issue (note 33)
2005 issue (note 33)
2007
LL million
2006
LL million
105,593
105,590
140,720
351,903
105,593
105,590
140,720
351,903
Non distributable reserves
During 2006, a subsidiary increased its share capital partially from a transfer of LL 44,613 million from general reserves.
127
36. CUMULATIVE CHANGES IN FAIR VALUES
37. TREASURY SHARES
38. PAID AND PROPOSED DIVIDENDS
39. CASH AND CASH EQUIVALENTS
36. CUMULATIVE CHANGES IN FAIR VALUES
According to the Bank of Lebanon regulations, banks are required to appropriate from their annual net
Balance at 1 January
Realized during the year
Net changes in fair values during the year
Difference on exchange
Balance at 31 December
2007
LL million
2006
LL million
21,430
(7,006)
73
14,497
81,067
(458)
(59,607)
428
21,430
37. TREASURY SHARES
Movement of treasury shares recognized in the balance sheet is as follows:
2007
No.
of common shares
At 1 January
Acquisition of treasury shares
Sales of treasury shares
At 31 December
414,400
619,885
(728,285)
306,000
2006
No.
Amount
LL million of common shares
52,108
65,189
(81,175)
36,122
414,400
414,400
Amount
LL million
52,108
52,108
The treasury shares represent Global Depository Receipts (GDR) owned by the Group. The market
value of one GDR was US$ 90.20 as of 31 December 2007 (2006: US$ 57.65).
The Bank refunded the distribution of dividends on the treasury shares amounting to LL 1,146 million
(2006: LL 1,221 million) resulting from the distribution of dividends for all ordinary shares in 2006.
The Group realized losses of LL 3,168 million on the sale of treasury shares during the year 2007 (2006:
nil). This loss is reflected under “Reserve for increase of share capital” in the “Reserves and premiums” (note 35).
128
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
38. PAID AND PROPOSED DIVIDENDS
According to the resolutions of the General Assembly Meetings held during the years 2007
and 2006, dividends paid were as follows:
Preferred shares – 2002 issue: LL 22,612.50 per share
(2006: LL 22,612.50 per share)
Preferred shares – 2004 issue: LL 12,813.75 per share
(2006: LL 12,813.75 per share)
Preferred shares – 2005 issue: LL 14,321.25 per share
(2006: LL 5,653.125 per share)
Common shares: LL 5,000 per share (2006: LL 4,000 per share)
2007
LL million
2006
LL million
16,959
16,959
9,610
9,610
14,322
107,500
148,391
5,654
86,000
118,223
In their meeting held on 18 March 2008, the board of directors proposed the distribution of dividends for
2007 as follows:
LL million
118,250
16,959
9,610
14,321
40,890
159,140
Common shares (LL 5,500 per share)
Preferred shares – 2002 issue (LL 22,612.50 per share)
Preferred shares – 2004 issue (LL 12,813.75 per share)
Preferred shares – 2005 issue (LL 14,321.25 per share)
39. CASH AND CASH EQUIVALENTS
Cash and balances with the Central Banks
Lebanese and other governmental treasury bills and bonds held not for
trading (whose original maturities are less than three month)
Deposits with banks and financial institutions (whose original
maturities are less than 3 months)
Less:
Due to banks and financial institutions (whose original
maturities are less than 3 months)
2007
LL million
2006
LL million
3,611,152
2,916,938
17,297
-
6,674,691
10,303,140
7,301,537
10,218,475
(1,449,612)
8,853,528
(1,293,563)
8,924,912
Balances with the Central Banks include term placements with the Bank of Lebanon, which are
considered as cash equivalent based on a contractual agreement with the Bank of Lebanon.
129
40. CORRECTION OF AN ERROR
41. RELATED PARTIES TRANSACTIONS
42. ENGAGEMENTS RECEIVED
43. DERIVATIVES
40. CORRECTION OF DEFFERRED TAX LIABILITY
During the previous years, the Bank did not provide for deferred tax liability on its share of dividend
distribution from subsidiary, BLOM INVEST BANK SAL, in accordance with International Accounting
Standard No 12 (Income taxes). Accordingly, the Bank corrected comparative financial statements and
increased income tax expense by LL 558 million and LL 582 million for 2007 and 2006, respectively, and
decreased retained earnings as of 31 December 2005 by LL 11,844 million and increased deferred tax
liability by LL 558 million and LL 12,426 million as of 31 December 2007 and 2006, respectively.
41. RELATED PARTIES TRANSACTIONS
The Group enters into transactions with major shareholders, directors, senior management, and their
related concerns, and entities controlled, jointly controlled or significantly influenced by such parties
in the ordinary course of business at commercial interest and commission rates. All the loans and
advances to related parties are performing advances and are free of any provision for possible credit
losses.
The transactions with related parties are as follows:
Deposits
Loans and advances
Indirect facilities
Interest received from loans
and advances
Interest paid on deposits
Accounting services’ revenues
from a non-consolidated subsidiary
Major shareholders
LL million
Board of directors
and senior
management
LL million
Other
related parties
LL million
2007
LL million
2006
LL million
69,676
4,340
33
28,072
1,600
-
4,215
25
101,963
5,940
58
75,259
7,400
25
556
3,341
205
1,346
202
761
4,889
101
5,570
-
-
203
203
217
The board of directors and senior management remunerations are as follows:
Board of directors and senior management remunerations
2007
LL million
2006
LL million
20,729
19,197
All remunerations paid to board of directors and senior management are short in nature.
130
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
42. ENGAGEMENTS RECEIVED
Guarantees received
Personal guarantees received from customers
Mobilization bills
Mobilization bills (renegotiated loans)
Directors’ shares in guarantee of their management
Real estate guarantees received
Cash collateral received
Treasury bills in pledge
2007
LL million
2006
LL million
26,537
3,379,093
51,735
1,736
58
2,742,486
783,423
103,450
7,088,518
82,453
2,268,645
53,413
1,736
58
2,159,787
734,773
166,908
5,467,773
43. DERIVATIVES
The following schedule shows the positive and the negative fair values of the derivatives and
their notional amounts according to maturity. The notional amount is the amount of a derivative’s
underlying asset, reference rate or index and represents the basis for measuring the change in
the derivatives value. The notional amounts show the volume of operations at year end and do
not reflect either market or credit risk.
Notional amount by maturity
31 December 2007
Forward contracts on foreign
currencies for hedging purposes
Forward contracts on foreign
currencies for trading purposes
31 December 2006
Forward contracts on foreign
currencies for hedging purposes
Forward contracts on foreign
currencies for trading purposes
Positive
fair value
LL million
Negative
fair value
LL million
Total notional
amount
LL million
Less than
3 months
LL million
3 to 12
months
LL million
1 to 5
Years
LL million
-
8,472
238,735
89,387
149,348
-
166,406
166,406
157,471
165,943
2,703,814
2,942,549
2,651,292
2,740,679
52,522
201,870
-
831
4,397
210,793
210,793
-
-
4,450
5,281
3,549
7,946
1,935,962
2,146,755
676,561
887,354
1,259,401
1,259,401
-
Additionally, the Group holds or issues currency options for trading purposes that are primarily related to
the Group’s customers operations. The notional amount of these contracts is as follows:
Currency options
2007
LL million
2006
LL million
34,142
17,659
All these contracts mature during 2008 that are primarily related to the Group’s customers’ operations.
131
43. DERIVATIVES
44. COMMITMENTS AND CONTINGENT LIABILITIES
Derivative held or issued for hedging purposes
As part of its asset and liability management, the Group uses derivatives for hedging purposes in order
to reduce its exposure to currency risk.
The Group uses forward foreign exchange contracts to hedge against specifically identified currency
risks.
The Bank uses forward foreign exchange contracts (to sell Euros and buy US Dollars) to hedge its net
investment in a foreign subsidiary denominated in Euro and amounting to Euro 107,904 thousand (2006:
same). The notional amount of these contracts amounted to Euro 107,900 thousand as at 31 December
2007 (2006: same). The forward foreign exchange contracts were revalued as of 31 December 2007 and
resulted in unrealized losses of LL 8,472 million (2006: LL 3,566 million), refer to note 31. The contracts
mature on 30 April 2008 at latest.
44. COMMITMENTS AND CONTINGENT LIABILITIES
Credit – related commitments
Credit-related commitments include commitments to extend credit, standby letters of credit, guarantees
and acceptances which are designed to meet the requirements of the Group's customers.
Letters of credit, guarantees (including standby letters of credit), and acceptances commit the Group to
make payments on behalf of customers contingent upon the failure of the customer to perform under the
terms of the contract.
Commitments to extend credit represent contractual commitments to make loans and revolving credits.
Commitments generally have fixed expiration dates, or other termination clauses. Since commitments
may expire without being drawn upon, the total contract amounts do not necessarily represent future
cash requirements.
132
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
The Group has the following credit related commitments:
Commitments on behalf of customers:
Letters of credit
Letters of guarantees
Authorized but unutilized facilities
2007
LL million
2006
LL million
359,374
786,996
1,146,370
1,358,444
2,504,814
307,186
689,528
996,714
986,641
1,983,355
Please refer to note 21 for acceptances outstanding as of 31 December 2007 and 2006 respectively.
Capital and operating lease commitments
The commitments on capital expenditures and operating lease commitments at the balance
sheet date, which were not provided for, were as follows:
2007
LL million
2006
LL million
Capital commitments
Tangible fixed assets purchases
82,172
48,513
Operating lease commitments
Minimum payments for future lease contracts:
During one year
More than 1 year and less than five years
More than five years
3,531
13,980
13,192
2,362
9,015
8,649
Total operating lease commitments at the balance sheet date
30,703
20,026
133
45. SEGMENTAL INFORMATION
46. FIDUCIARY DEPOSITS, ASSETS UNDER MANAGEMENT AND CUSTODY ACCOUNTS
47. CONCENTRATION OF ASSETS, LIABILITIES AND OFF BALANCE SHEET ITEMS
45. SEGMENTAL INFORMATION
The Group operates in two geographic markets based on the location of its markets and customers. The
local market represents the Lebanese market and the international market represents markets outside
Lebanon. The following table shows the distribution of the Group’s gross income, total assets and capital
expenditure by geographical segment:
Domestic
Total
International
2007
LL million
2006
LL million
2007
LL million
2006
LL million
2007
LL million
2006
LL million
Net interest received
288,335
Net provisions less recoveries on loans
and advances
12,102
Revenues from shares and financial assets
with variable income
524
Net commissions
44,650
Net profit from financial operations
21,812
Other operating income
16,247
256,369
167,777
150,886
456,112
407,255
8,620
(667)
(9,428)
11,435
(808)
329
33,424
12,906
16,930
445
44,730
17,856
8,371
794
43,565
13,893
5,464
969
89,380
39,668
24,618
1,123
76,989
26,799
22,394
Gross income
328,578
238,512
205,174
622,182
533,752
(134,846)
(86,469)
(76,210)
(243,246)
(211,056)
(3)
(13,327)
395
(1,455)
(13,350)
395
(1,458)
226,870
193,729
138,716
127,904
365,586
321,633
Total assets
12,837,800
10,953,024
12,229,214 10,471,587
25,067,014 21,424,611
Total liabilities
12,411,356
11,240,625
10,563,249
8,267,442
22,974,605 19,508,067
31,071
18,094
53,065
31,482
383,670
Operating expenses and amortization
and depreciation
(156,777)
Net provisions less recoveries on financial
fixed assets
Provisions for contingent liabilities
(23)
Profit before tax
Capital expenditures
84,136
49,576
The Group’s major business segment is banking. Insurance activities represent 1.71% of profit before
income tax and 1% of total assets.
46. FIDUCIARY DEPOSITS, ASSETS UNDER MANAGEMENT AND CUSTODY ACCOUNTS
Fiduciary deposits
2007
LL million
2006
LL million
3,959,136
2,774,360
Fiduciary accounts include notes, checks, policies, treasury bills/bonds, shares and documents for collection held by the Group to the order of third parties.
134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
47. CONCENTRATION OF ASSETS, LIABILITIES AND OFF BALANCE SHEET ITEMS
Concentrations arise when a number of counter parties are engaged in similar business activities or
activities in the same geographic region, or have similar economic features that would cause their
ability to meet contractual obligations to be similarly affected by changes in economic, political or
other conditions. Concentrations indicate the relative sensitivity of the Group’s performance
developments affecting a particular industry or geographic location.
The distribution of assets, liabilities, and off-balance sheet items by geographic region was as
follows:
2006
2007
Geographical Location
Lebanon
Outside Lebanon
Assets
LL million
Liabilities
LL million
12,837,800
12,229,214
25,067,014
12,411,356
10,563,249
22,974,605
Assets
LL million
Liabilities
LL million
Off-balance
sheet
LL million
5,078,702 10,953,024
3,147,142 10,471,587
8,225,844 21,424,611
11,240,625
8,267,442
19,508,067
1,719,322
4,216,166
5,935,488
Off-balance
sheet
LL million
135
48. BALANCE SHEET BY CATEGORY
48. BALANCE SHEET BY CATEGORY
31 December 2007
Loans
and receivables
LL million
Assets
Cash and balances with
the Central Banks
Lebanese and other governmental
treasury bills and bonds
Bonds and financial assets
with fixed income
Shares, securities and financial
assets with variable income
Deposits with banks
and financial institutions
Loans and advances to customers
Bank acceptances
Investments and loans
to related parties
Tangible fixed assets
Intangible fixed assets
Other assets
Regularization accounts
and other debit accounts
Out of which:
Revaluation variance on foreign
exchange forward contracts
hedging operations related
to the Group’s customers
Goodwill
Liabilities
Due to banks and other
financial institutions
Customers’ deposits
Engagements by acceptances
Other liabilities
Regularization accounts
and other credit accounts
Provisions for risks and charges
136
Fair value
Available
for sale
through
LL million profit or loss
LL million
Held for
trading
LL million
Non
Derivatives Amortized cost
financial
designated
LL million
assets and
as hedging
liabilities and
instruments
others
LL million
LL million
Total
LL million
6,330,031
-
-
-
-
-
-
6,330,031
-
5,003,374
-
76,949
-
-
-
5,080,323
226,241
872,185
45,470
21,244
-
-
-
1,165,140
-
5,213
-
6,512
-
-
-
11,725
7,536,533
4,179,307
245,357
-
-
-
-
-
-
7,536,533
4,179,307
245,357
-
1,684
-
17,600
-
-
-
25,524
272,642
4,459
16,616
27,208
272,642
4,459
34,216
-
-
-
-
-
-
105,820
105,820
18,517,469
5,882,456
63,070
13,667
118,372
-
-
13,667
60,586
60,586
485,647 25,067,014
-
-
-
-
- 1,555,914
- 20,708,516
245,357
-
- 1,555,914
- 20,708,516
245,357
194,460
194,460
-
-
-
-
8,472
8,472 22,509,787
189,792
181,320
80,566
80,566
456,346 22,974,605
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
31 December 2006
Loans
and receivables
LL million
Assets
Cash and balances with
the Central Banks
Lebanese and other governmental
treasury bills and bonds
Bonds and financial assets
with fixed income
Shares, securities and financial
assets with variable income
Deposits with banks
and financial institutions
Loans and advances to customers
Bank acceptances
Investments and loans
to related parties
Tangible fixed assets
Intangible fixed assets
Other assets
Regularization accounts
and other debit accounts
Out of which:
Revaluation variance on foreign
exchange forward contracts
hedging operations related
to the Group’s customers
Goodwill
Liabilities
Due to banks and other
financial institutions
Customers’ deposits
Engagements by acceptances
Other liabilities
Regularization accounts
and other credit accounts
Provisions for risks and charges
Fair value
Available
for sale
through
LL million profit or loss
LL million
Held for
trading
LL million
Non
Derivatives Amortized cost
financial
designated
LL million
assets and
as hedging
liabilities and
instruments
others
LL million
LL million
Total
LL million
6,246,406
-
-
-
-
-
-
6,246,406
-
3,424,372
-
50,548
-
-
-
3,474,920
246,599
139,501
-
-
-
-
-
386,100
-
3,455
-
4,948
-
-
-
8,403
7,754,284
2,996,698
173,260
-
-
-
-
-
-
7,754,284
2,996,698
173,260
-
1,730
-
16,751
-
-
-
1,490
219,372
2,845
16,964
3,220
219,372
2,845
33,715
-
-
-
-
156
-
60,351
60,507
17,417,247
3,569,058
16,751
901
56,397
156
-
901
63,980
63,980
365,002 21,424,611
-
-
-
-
- 1,308,844
- 17,690,381
173,260
-
- 1,308,844
- 17,690,381
173,260
141,067
141,067
-
-
-
-
3,566
3,566 19,172,485
129,869
126,303
64,646
64,646
332,016 19,508,067
137
49. FAIR VALUE OF THE FINANCIAL INSTRUMENTS
49. FAIR VALUE OF THE FINANCIAL INSTRUMENTS
The following table shows the difference between the carrying values and fair values for the financial assets
and liabilities classified in the balance sheet. This table does not show the fair values of non-financial assets
and liabilities.
2006
2007
Fair
value
LL million
Unrecognized
gains (losses)
LL million
Carrying value
LL million
6,330,031
6,418,226
88,195
6,246,406
6,389,936
143,530
5,080,323
5,080,323
-
3,474,920
3,474,920
-
1,165,140
1,163,720
(1,420)
386,100
384,700
(1,400)
11,725
7,536,533
4,179,307
245,357
27,208
11,725
7,543,196
4,182,755
245,357
27,208
6,663
3,448
-
8,403
7,754,284
2,996,698
173,260
3,220
8,403
7,755,827
3,020,631
173,260
3,220
1,543
23,933
-
1,555,914
20,708,516
245,357
1,555,911
20,667,815
245,357
(3)
(40,701)
-
1,308,844
17,690,381
173,260
1,308,844
17,658,161
173,260
(32,220)
-
Carrying value
LL million
Financial assets
Cash and balances with the Central Banks
Lebanese and other government treasury
bills and bonds
Bonds and financial assets
with fixed income
Shares, securities and financial
assets with variable income
Banks and financial institutions
Loans and advances to customers
Bank acceptances
Investments and loans to related parties
Financial liabilities
Banks and financial institutions
Customers’ deposits
Engagements by acceptances
Total unrecognized change
in unrealized fair value
56,182
Fair Unrecognized
value gains (losses)
LL million
LL million
135,386
The following describes the methodologies and assumptions used to determine fair values for those
financial instruments which are not already recorded at fair value in the financial statements:
Assets for which fair value approximates carrying value
For financial assets and financial liabilities that are liquid or having a short term maturity (less than three
months) it is assumed that the carrying amounts approximate to their fair value. This assumption is also
applied to demand deposits, savings accounts without a specific maturity and variable rate financial
instruments.
138
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
Fixed rate financial instruments
The fair value of fixed rate financial assets and liabilities carried at amortized cost are estimated
by comparing market interest rates when they were first recognized with current market rates
offered for similar financial instruments. The estimated fair value of fixed interest bearing deposits
is based on discounted cash flows using prevailing money-market interest rates for debts with
similar credit risk and maturity. For quoted debt issued the fair values are calculated based on
quoted market prices. For those notes issued where quoted market prices are not available, a
discounted cash flow model is used based on a current interest rate yield curve appropriate
for the remaining term to maturity.
Financial instruments recorded at fair value
The following table shows an analysis of financial instruments recorded at fair value, between
those whose fair value is based on quoted market prices and those involving valuation techniques
where all the model inputs are observable in the market.
2007
Quoted market
Valuation
prices techniques market
LL million
observable
inputs
LL million
Financial assets
Lebanese and other governmental
treasury bills and bonds
2,181,751 2,765,927
Bonds and financial assets with
fixed income
894,568
Shares, securities and financial
assets with variable income
6,734
Investments and loans
to related parties
3,083,053 2,765,927
2006
Unquoted
LL million
Total
LL million
Quoted market
prices
LL million
Valuation
techniques market
observable
inputs
LL million
132,645 5,080,323
1,285,169
1,946,083
Unquoted
LL million
Total
LL million
243,668 3,474,920
44,331
938,899
95,288
-
44,213
139,501
4,991
11,725
5,225
-
3,178
8,403
1,684
1,684
183,651 6,032,631
1,385,682
1,946,083
1,730
1,730
292,789 3,624,554
The unquoted financial instruments that are stated at cost approximately equal to fair value.
139
50. RISK MANAGEMENT
50. RISK MANAGEMENT
The Bank manages its business activities within risk management guidelines as set by the Group’s “risk
management policy” approved by the board of directors. The Bank recognizes the role of the board of
directors and executive management in the risk management process as set out in the Banking Control
Commission circular 242. In particular, it is recognized that ultimate responsibility for establishment of
effective risk management practices and culture lies with the board of directors as does the setting up
of Bank’s risk appetite and tolerance levels. The board of directors delegates through its risk management committee the day–to–day responsibility for establishment and monitoring of risk management
process across the Bank’s group to the head of risk management, who is directly appointed by the board
of directors, in coordination with executive management at BLOM Bank SAL.
The Group is exposed to credit risk, liquidity risk, market risk and operational risk.
The board’s risk management committee has the mission to periodically (1) review and assess the risk
management function to the Group, (2) review the adequacy of the Bank’s capital and its allocation
within the Group, and (3) review risk limits and reports and make recommendations to the Board.
The head of risk management undertakes his responsibilities through the “Risk Management
Department”, with its employees reporting directly to the head of risk management. The risk manager is
responsible for establishing the function of the department and its employees.
BLOM Bank’s risk management department aids executive management in controlling and actively managing the Group’s overall risk. The department mainly ensures that:
- Risk policies and methodologies are consistent with the Group’s risk appetite.
- Limits and risk across banking activities are monitored throughout the Group.
Through a comprehensive risk management framework, transactions and outstanding risk exposures are
quantified and compared against authorized limits, whereas non-quantifiable risks are monitored against
policy guidelines as set by the Group’s “Risk Management Policy”. Any discrepancies, breaches or deviations are escalated to executive senior management in a timely manner for appropriate action.
140
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
In addition to the Group’s risk management in Lebanon, risk managers and / or risk officers
were assigned within the Group’s foreign subsidiaries or branches to report to the department
and executive senior management in a manner that ensures:
- Standardization of risk management functions and systems developed across the Group.
- Regional consistency of conducted business in line with the board’s approved risk appetite.
In respect to Basel 2 capital adequacy ratio calculations, risk management started, since
December 2004 consolidated balances, to issue internal reports to executive management
and the board revealing multiple scenarios of capital adequacy calculations for credit and
market risks under the standardized approaches and for operational risk under the basic indicator
approach. In addition, the Bank sent to the Banking Control Commission a quantitative impact study
for the Basel 2 capital adequacy calculations for June 2007 balances revealing a ratio well above the
minimum international requirement of 8%.
50.1 Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and
cause the other party to incur a financial loss. The Group attempts to control credit risk by
monitoring credit exposures, limiting transactions with specific counter parties, and continuously
assessing the creditworthiness of counter parties.
The Group manages credit risk by setting limits for individual borrowers and groups of borrowers and
for geographical and industry segments. In addition the Group obtains security where appropriate.
The debt securities included in investments are mainly sovereign risk and standard grade
securities. Analysis of investments by counterparty is provided in notes 16 and 17. For details
of the composition of the loans and advances refer to note 20. Information on credit risk relating to derivative instruments is provided in note 43 and for commitments and contingencies in
note 44. The information on the Group’s net maximum exposure by economic sectors is given
in note (A) below.
The Group maintains a general credit risk policy that is in compliance with the Group’s general risk
management related to the Group’s credit transactions. It consists of the following:
- The permissible activities, segments, programs and services that the Group intends to deliver
and the acceptable limits;
- The mechanism of the approval on credit-facilities;
- The mechanism for managing and following up credit-facilities; and
- The required actions for analyzing and organizing credit files.
141
50. RISK MANAGEMENT
The Group attempts to control credit risk by monitoring credit exposures, limiting transactions with
specific counter parties, and continually assessing the creditworthiness of counter parties. The
Group’s risk management are designed to identify and to set appropriate risk limits and to monitor the
risk adherence to limits. Actual exposures against limits are monitored daily, monthly and periodically. Risk
management is responsible for monitoring the risk profile of the Group’s loan portfolio by producing
internal reports highlighting any exposure of concern in corporate, commercial and consumer lending. The
Group examines the level of concentration whether by credit quality, client groupings or economic
sector and collateral coverage. Further, the Group monitors non-performing loans and takes the
required provisions for these loans.
The Group in the ordinary course of lending activities holds collaterals and guarantees as security to
mitigate credit risk in the loans and advances. These collaterals mostly include cash collateral, quoted
shares and debt securities, real estate mortgages, personal guarantees and others. In addition, the collection
unit in the Group dynamically manages and takes remedial actions for non-performing loans.
The Group uses an internal classification system based on risk ratings for its corporate and middle
market customers. The risk rating system, which is managed by an independent unit, provides a rating
based on client and transaction level. The classification system includes six grades, of which three
grades relate to the performing portfolio (regular credit facilities: risk rating “1” and “2” and special
mention – watch list: risk rating “3”), one grade relates to substandard loans (risk rating “4”) and two
grades relate to non-performing loans (risk rating “5” and “6”). Credit cards, personal loans, car
loans, housing loans and other loans related to these loans are classified as regular as they are
performing and have timely repayment with no past dues; except for those loans that have unsettled
bills due for more than 90 days. Each individual borrower is rated based on an internally developed
debt rating model that evaluates risk based on financial as well as qualitative inputs. The associated
loss estimate norms for each grade have been calculated based on the Group’s historical default
rates for each rating. These risk ratings are reviewed on a regular basis.
As for credit rating system, the Bank is implementing the Moody’s KMV Risk Advisor for credit analysis
and rating systems for corporate and commercial borrowers, in order to aid the Group in moving at a later
stage to internal rating-based measurements under Basel 2. The Bank has obtained a license from
Moody’s KMV to implement this system on the whole Group.
142
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
A- Maximum exposure to credit risk
An analysis of the Group’s financial assets before and after taking into account collateral held
or other credit enhancements, is as follows:
2006
2007
Balances with the Central Banks
Lebanese and other governmental treasury bills and bonds
Bonds and financial assets with fixed income
Shares, securities and financial assets with variable income
Banks and financial institutions
Loans and advances to customers
Bank acceptances
Investments and loans to related parties
Other assets
Regularization accounts and other debit accounts
Contingent liabilities
Commitments
Total credit exposure
Gross maximum
exposure
LL million
Net maximum
exposure
LL million
Gross maximum
exposure
LL million
Net maximum
exposure
LL million
6,201,948
5,080,323
1,165,140
11,725
7,536,533
4,179,307
245,357
2,286
34,216
119,487
24,576,322
1,146,370
1,358,444
2,504,814
27,081,136
6,201,948
5,080,323
1,165,140
11,725
7,478,790
1,706,143
2,286
34,216
119,487
21,800,058
990,776
603,691
1,594,467
23,394,525
6,153,639
3,474,920
386,100
8,403
7,754,284
2,996,698
173,260
2,269
33,715
61,408
21,044,696
996,714
986,641
1,983,355
23,028,051
6,153,639
3,474,920
386,100
8,403
7,697,175
1,448,185
2,269
33,715
61,408
19,265,814
802,395
517,852
1,320,247
20,586,061
For on-balance sheet financial assets, the exposures set out above are based on net carrying
amount as reported in the balance sheet.
143
50. RISK MANAGEMENT
Collateral and other credit enhancements
The amount, type and valuation of collateral is based on guidelines specified in the risk management
framework. The main types of collateral obtained include real estate, quoted shares, cash collateral and
bank guarantees.
The revaluation and custody of collaterals are performed independent of the business units.
B- Risk concentrations of maximum exposure to credit risk
2007
Balances with the Central Banks
Lebanese and other governmental treasury bills and bonds
Bonds and financial assets with fixed income
Shares, securities and financial assets with variable income
Banks and financial institutions
Loans and advances to customers
Bank acceptances
Investments and loans to related parties
Other assets
Regularization accounts and other debit accounts
Contingent liabilities
Commitments
Total credit exposure
Domestic
LL million
International
LL million
Total
LL million
4,567,394
4,836,164
163,843
6,990
584,437
2,322,535
103,956
1,651
24,019
50,380
12,661,369
200,998
1,078,209
1,279,207
13,940,576
1,634,554
244,159
1,001,297
4,735
6,952,096
1,856,772
141,401
635
10,197
69,107
11,914,953
945,372
280,235
1,225,607
13,140,560
6,201,948
5,080,323
1,165,140
11,725
7,536,533
4,179,307
245,357
2,286
34,216
119,487
24,576,322
1,146,370
1,358,444
2,504,814
27,081,136
2006
Balances with the Central Banks
Lebanese and other governmental treasury bills and bonds
Bonds and financial assets with fixed income
Shares, securities and financial assets with variable income
Banks and financial institutions
Loans and advances to customers
Bank acceptances
Investments and loans to related parties
Other assets
Regularization accounts and other debit accounts
Contingent liabilities
Commitments
Total credit exposure
144
Domestic
LL million
International
LL million
Total
LL million
5,238,073
3,240,591
209,663
5,506
552,752
1,396,537
89,450
1,651
32,647
35,424
10,802,294
191,242
664,879
856,121
11,658,415
915,566
234,329
176,437
2,897
7,201,532
1,600,161
83,810
618
1,068
25,984
10,242,402
805,472
321,762
1,127,234
11,369,636
6,153,639
3,474,920
386,100
8,403
7,754,284
2,996,698
173,260
2,269
33,715
61,408
21,044,696
996,714
986,641
1,983,355
23,028,051
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
C- Credit quality per class of financial assets
In managing its portfolio, the Group utilizes ratings and other measures and techniques which
seek to take account of all aspects of perceived risk. Credit exposures classified as “High”
quality are those where the ultimate risk of financial loss from the obligor’s failure to discharge
its obligation is assessed to be low. These include facilities to corporate entities with financial
condition, risk indicators and capacity to repay which are considered to be good to excellent.
Credit exposures classified as “Standard” quality comprise all other facilities whose payment
performance is fully compliant with contractual conditions and which are not “impaired”. The
ultimate risk of possible financial loss on “Standard” quality is assessed to be higher than that
for the exposures classified within the “High” quality range.
The credit quality of financial assets is managed by the Group using internal credit ratings.
The table below shows the credit quality by class of financial asset for balance sheet lines,
based on the Group’s credit rating system
2007
Lebanese and other governmental treasury bills and bonds
Bonds and financial assets with fixed income
Shares, securities and financial assets with variable income
Banks and financial institutions
Loans and advances to customers
Bank acceptances
Investments and loans to related parties
Neither past due nor impaired
High
Standard
grade
grade
LL million
LL million
Past due but
not impaired
LL million
Past due and
impaired
LL million
Total
LL million
105,078
105,078
35,095
35,095
70,192
70,192
5,080,323
1,165,140
11,725
7,536,533
4,179,307
245,357
2,286
18,220,671
Past due but
not impaired
LL million
Past due and
impaired
LL million
Total
LL million
34,349
34,349
60,540
60,540
3,474,920
386,100
8,403
7,754,284
2,996,698
173,260
2,269
14,795,934
5,080,323
1,165,140
11,725
7,536,533
3,968,942
245,357
2,286
18,010,306
2006
Neither past due nor impaired
High
Standard
grade
grade
LL million
LL million
Lebanese and other governmental treasury bills and bonds
Bonds and financial assets with fixed income
Shares, securities and financial assets with variable income
Banks and financial institutions
Loans and advances to customers
Bank acceptances
Investments and loans to related parties
3,474,920
386,100
8,403
7,754,284
2,840,945
173,260
2,269
14,640,181
60,864
60,864
145
50. RISK MANAGEMENT
D- Aging analysis of past due but not impaired loans
2007
Loans and advances to customers
Less than
90 days
LL million
More than 90
days
LL million
Total
LL million
13,048
22,047
35,095
2006
Loans and advances to customers
Less than
90 days
LL million
More than 90
days
LL million
Total
LL million
13,792
20,557
34,349
Impairment assessment
The main considerations for the loan impairment assessment include whether any payments of principal
or interest are overdue by more than 90 days or there are any known difficulties in the cash flows of
counterparties, credit rating downgrades, or infringement of the original terms of the contract. The Group
addresses impairment assessment in two areas: individually assessed allowances and collectively
assessed allowances.
Individually assessed allowances
The Group determines the allowances appropriate for each individually significant loan or advance on an
individual basis. Items considered when determining allowance amounts include the sustainability of the
counterparty’s business plan, its ability to improve performance once a financial difficulty has arisen,
projected receipts and the expected dividend payout should bankruptcy ensue, the availability of other
financial support and the realisable value of collateral, and the timing of the expected cash flows. The
impairment losses are evaluated at each reporting date, unless unforeseen circumstances require more
careful attention.
Collectively assessed allowances
Allowances are assessed collectively for losses on loans and advances that are not individually significant
(including credit cards, housing loans and unsecured consumer lending) and for individually significant loans
and advances where there is not yet objective evidence of individual impairment. Allowances are evaluated
on each reporting date with each portfolio receiving a separate review.
146
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
The collective assessment takes account of impairment that is likely to be present in the portfolio
even though there is not yet objective evidence of the impairment in an individual assessment.
Impairment losses are estimated by taking into consideration of the following information: historical
losses on the portfolio, current economic conditions, the approximate delay between the time a loss
is likely to have been incurred and the time it will be identified as requiring an individually assessed
impairment allowance, and expected receipts and recoveries once impaired. Management is
responsible for deciding the length of this period which can extend for as long as one year. The
impairment allowance is then reviewed by credit management to ensure alignment with the Group’s
overall policy.
Financial guarantees and letters of credit are assessed and provision made in a similar manner as
for loans.
E- Credit quality using external risk ratings
2007
Moody’s
equivalent
grades
S&P
equivalent
grades
Total risk
LL million
High grade
Risk rating class 1
Risk rating class 2
Risk rating class 3
Risk rating class 4
Aaa
Aa1 – A3
Baa1 – Baa2
Baa3
AAA
AA+ to A3
BBB+ to BBB
BBB-
247,553
7,227,824
1,013,378
74,902
Standard grade
Risk rating class 5
Risk rating class 6
Risk rating class 7
Ba1
Ba2 – Ba3
B1 – B2
BB+
BB to BBB+ to B
116,132
11,922
Sub-standard grade
Risk rating class 8
Risk rating class 9
B3
Caa – C
BCCC+ to C
9,449,028
-
Impaired
Risk rating class 10
D
-
274,244
Unclassified
8,666,153
27,081,136
147
50. RISK MANAGEMENT
50.2 Liquidity Risk
Liquidity risk is the risk that the Group will be unable to meet its liabilities when they fall due under normal and
stress circumstances. Liquidity risk can be caused by market disruptions or credit downgrades which may
cause certain sources of funding to dry up immediately. To limit this risk, management has arranged
diversified funding sources in addition to its core deposit base, manages assets with liquidity in mind,
maintaining a healthy balance of cash and cash equivalents and readily marketable securities.
The management of liquidity risk is currently governed by the Group’s Assets and Liabilities Management
policy. The main objectives converge around the following:
- Set targets and ranges for key balance sheet or income statement ratios to assure that the needed liquidity
capacity of the Group is maintained at all times, while providing sufficient flexibility to enable the Group to
address short term fluctuations in liquidity pressures.
- Provide general guidance on the sequence to be followed in drawing on the Group’s funding sources to
meet a liquidity drain.
- Review the current and prospective liquidity positions and monitor alternative funding sources.
- Develop parameters for the pricing and maturity distributions of deposits, loans and investments.
- Promulgate a contingency liquidity plan that identifies early indicators of stress conditions and describe
actions to be taken in the event of financial difficulties arising from systemic or other crises, while minimizing
adverse long-term implications for the Group’s business.
In accordance with Lebanese banking rules and regulations, the Group maintains a non-interest bearing
balances at the Bank of Lebanon calculated on the basis of 25% of sight commitments and 15% of term
commitments in Lebanese Lira. Regarding foreign currencies, the Group maintains interest-bearing
placements at the Bank of Lebanon at the rate of 15% of total deposits in foreign currencies regardless
of nature. Foreign subsidiaries are also subject to obligatory reserve requirements with varying percentages,
according to the banking rules and regulations of the countries in which they are locates.
The liquidity position is assessed and managed under a variety of scenarios, giving due consideration to
stress factors relating to both the market in general and specifically to the Group. One of these methods
is to maintain limits on the ratio of liquid assets to customers’ deposits, set to reflect market conditions.
Net liquid assets consist of cash and balances with the Central Banks, deposits with banks and financial
institutions, Lebanese and other governmental treasury bills and bonds less deposits due to banks and
financial institutions due to mature within the next month. The ratio during the year was as follows:
148
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
At 31 December
Average during the year
Highest
Lowest
50.2.1
2007 %
2006 %
33.79
33.79
35.15
32.29
36.48
36.83
37.83
36.19
Analysis of financial liabilities by remaining contractual maturities
The table below summarizes the maturity profile of the Group’s financial liabilities at 31
December 2007 and 2006 based on contractual undiscounted repayment obligations. As the
special commission payments up to contractual maturity are included in the table, totals do
not match with the balance sheet. The contractual maturities of liabilities have been
determined on the basis of the remaining period at the consolidated balance sheet date to
the contractual maturity date and do not take into account the effective expected maturities
as shown on note 50-2-2 below (maturity analysis of assets and liabilities). Repayments which
are subject to notice are treated as if notice were being given immediately. However, the
Group expects that many customers will not request repayment on the earliest date the Group
could be required to pay and the table does not reflect the expected cash flows indicated by
the Group’s deposit retention history.
31 December 2007
Up to 1
month
LL million
1 to 3
months
LL million
3 to 12
months
LL million
1 to 5
years
LL million
Over 5
years
LL million
Total
LL million
Due to banks and financial institutions
Customers’ deposits
Engagements by acceptances
1,487,146
15,507,373
72,930
2,414
4,049,966
119,773
8,295
1,095,153
50,400
12,924
155,694
2,254
48,052 1,558,831
12,635 20,820,821
245,357
-
Total undiscounted financial liabilities
17,067,449
4,172,153
1,153,848
170,872
60,687 22,625,009
149
50. RISK MANAGEMENT
31 December 2006
Up to 1
month
LL million
1 to 3
months
LL million
1 to 5
years
LL million
3 to 12
months
LL million
Total
LL million
Over 5
years
LL million
Due to banks and financial institutions
Customers’ deposits
Engagements by acceptances
1,298,281
13,267,629
49,543
226
3,399,508
123,717
12,908
1,079,216
-
21,775
-
- 1,311,415
- 17,768,128
173,260
-
Total undiscounted financial liabilities
14,615,453
3,523,451
1,092,124
21,775
- 19,252,803
The table below shows the contractual expiry by maturity of the Group’s contingent liabilities and commitments:
2007
Up to 1
month
LL million
Contingent liabilities
Commitments
Foreign currencies to receive against foreign
currencies to deliver
1 to 3
months
LL million
3 to 12
months
LL million
1 to 5
years
LL million
Over 5
years
LL million
Total
LL million
1,146,370
1,358,444
-
-
-
-
1,146,370
1,358,444
2,504,814
2,740,679
2,740,679
201,870
201,870
-
-
2,942,549
5,447,363
2006
Up to 1
month
LL million
Contingent liabilities
Commitments
Foreign currencies to receive against foreign
currencies to deliver
150
1 to 3
months
LL million
3 to 12
months
LL million
1 to 5
years
LL million
Over 5
years
LL million
Total
LL million
996,714
986,641
-
-
-
-
996,714
986,641
1,983,355
887,354
887,354
1,259,401
1,259,401
-
-
2,146,755
4,130,110
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
The Group expects that not all of the contingent liabilities or commitments will be drawn
before expiry of the commitments.
50.2.2
Maturity analysis of assets and liabilities
The table below shows an analysis of assets and liabilities analyzed according to when they
are expected to be recovered or settled. See note 50-2-1 above for the Group’s contractual
undiscounted financial liabilities.
The maturity profile of the Group’s assets and liabilities as at 31 December 2007 is as follows:
More Than one year
Less Than one year
Up to 1
month
LL million
1 to 3
months
LL million
3 months
To 1 Year
LL million
ASSETS
Cash and balances with
114,458
1,998,077
303,205
the Central Banks
Lebanese and other
governmental treasury
115,423
235,026
760,030
bills and bonds
Bonds and financial assets
30,139
10,266
106,403
with fixed income
Shares, securities and financial
assets with variable income
827,810
89,451
Banks and financial institutions 6,224,244
307,679
985,520
Loans and advances to customers 1,695,238
119,773
72,930
50,400
Bank acceptances
Investments and loans
to related parties
Tangible fixed assets
Intangible fixed assets
23
26,959
111
Other assets
Regularization accounts
15,368
80,315
23,656
and other debit accounts
Goodwill
10,343,055 1,530,673 2,318,776
TOTAL ASSETS
LIABILITIES
22,204
18,955
Banks and financial institutions 1,469,530
15,398,393 4,112,411 1,053,796
Customers’ deposits
119,773
72,930
50,400
Engagements by acceptances
69,211
68,118
55,498
Other liabilities
Regularization accounts
28,957
156,888
2,815
and other credit accounts
3,954
Provisions for risks and charges
17,169,813 4,352,556 1,181,464
TOTAL LIABILITIES
(6,826,758) (2,821,883) 1,137,312
NET LIQUIDITY GAP
Subtotal
LL million
(1-2) years
LL million
(2-5) years Over 5 years
LL million
LL million
Subtotal
LL million
Total
LL million
2,415,740
878,256
2,263,172
772,863
3,914,291
6,330,031
1,110,479
1,133,887
2,236,508
599,449
3,969,844
5,080,323
146,808
45,298
272,862
700,172
1,018,332
1,165,140
7,141,505
2,988,437
243,103
309,094
309,057
2,254
42,188
742,703
-
11,725
43,746
139,110
-
11,725
395,028
1,190,870
2,254
11,725
7,536,533
4,179,307
245,357
27,093
-
21
27,208
272,642
4,459
7,102
27,208
272,642
4,459
7,123
27,208
272,642
4,459
34,216
119,339
14,192,504
133
2,677,979
1,510,689
20,564,600
243,103
192,827
59,151
2,254
1,633
188,660
3,954
22,703,833
(8,511,329)
890
63,928
2,614,051
119,487
148
15
60,586
60,586
60,586
5,557,469 2,639,062 10,874,510 25,067,014
72,794
-
45,225
11,971
-
45,225 1,555,914
143,916 20,708,516
245,357
2,254
194,460
1,633
189,792
242
1,132
80,566
76,612
76,612
270,772 22,974,605
72,794 134,050
5,484,675 2,505,012 10,603,738 2,092,409
151
50. RISK MANAGEMENT
The maturity profile of the Group’s assets and liabilities as at 31 December 2006 is as follows:
More Than one year
Less Than one year
Up to 1
month
LL million
ASSETS
Cash and balances with
the Central Banks
Lebanese and other
governmental treasury
bills and bonds
Bonds and financial assets
with fixed income
Shares, securities and financial
assets with variable income
Banks and financial institutions
Loans and advances to customers
Bank acceptances
Investments and loans
to related parties
Tangible fixed assets
Intangible fixed assets
Other assets
Regularization accounts
and other debit accounts
Goodwill
TOTAL ASSETS
(1-2) years
LL million
(2-5) years Over 5 years
LL million
LL million
Subtotal
LL million
3 months
To 1 Year
LL million
1,072,713
615,949
501,454 2,190,116
889,808
2,401,613
764,869
4,056,290
6,246,406
41,070
37,203
361,973
440,246
618,269
1,986,939
429,466
3,034,674
3,474,920
18,320
1,478
62,400
82,198
70,940
178,830
54,132
303,902
386,100
6,603,818
1,567,276
49,543
769,183
248,809
123,717
191,821 7,564,822
653,964 2,470,049
173,260
-
183,161
196,263
-
243,461
-
8,403
6,301
86,925
-
8,403
189,462
526,649
-
8,403
7,754,284
2,996,698
173,260
21,542
6,144
27,686
-
-
3,220
219,372
2,845
6,029
3,220
219,372
2,845
6,029
3,220
219,372
2,845
33,715
7,787
47,778
61,034
5,469
9,422,060 1,810,270 1,777,081 13,009,411
152
1,958,593
-
Subtotal
LL million
LIABILITIES
13,808
Banks and financial institutions 1,282,646
12,390 1,308,844
13,311,728 3,321,788 1,051,578 17,685,094
Customers’ deposits
123,717
49,543
173,260
Engagements by acceptances
55,213
38,502
141,067
Other liabilities
47,352
Regularization accounts
15,345
98,906
123,185
and other credit accounts
8,934
Provisions for risks and charges
14,781,325 3,529,871 1,120,254 19,431,450
TOTAL LIABILITIES
(5,359,265) (1,719,601)
NET LIQUIDITY GAP
656,827 (6,422,039)
5,287
2,968
8,255
1,950,338
16
206
63,980
4,810,859 1,645,748
61,408
374
63,980
63,980
8,415,200 21,424,611
-
- 1,308,844
5,287 17,690,381
173,260
141,067
-
43
3,673
64,646
43
68,319
4,810,816 1,577,429
129,869
6,684
64,646
64,646
76,617 19,508,067
8,338,583 1,916,544
-
50.3 Market risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate
due to changes in market prices. Market risks arise from open positions in interest rate and currency
rate, all of which are exposed to general and specific market movements and changes in the level
of volatility of market rates or prices such as interest rates and foreign exchange rates.
152
Total
LL million
1 to 3
months
LL million
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
Risk management is responsible for generating internal reports quantifying the Group’s earnings
at risk due to extreme movements in interest rates, while daily monitoring the sensitivity of the
Group’s trading portfolio of fixed income securities to changes in market prices and / or market
parameters. Interest rate sensitivity gaps are reported to executive management and to the
Banking Control Commission unconsolidated on a monthly basis and consolidated (Group level) on
a semi- annual basis. The Bank’s Asset and Liability Management (ALM) policy assigns authority
for its formulation, revision and administration to the Asset / Liability Management Committee
(ALCO) of BLOM Bank SAL. Risk management will be responsible for monitoring compliance with
all limits set in the ALM policy ranging from core foreign currency liquidity to liquidity mismatch
limits to interest sensitivity gap limits. The Bank is also in the process of implementing the newly
acquired Asset and Liability Management system “Focus ALM” aimed at automating the management
of the Bank’s assets and liabilities from a static and dynamic perspectives including stress testing and
extensive scenario analysis.
50-3-1 Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future
profitability or the fair values of financial instruments. The Group is exposed to interest rate risk as a
result of mismatches of interest rate repricing of assets and liabilities and off-balance sheet items that
mature or reprice in a given period. The Group manages this risk by matching the repricing of assets
and liabilities through risk management strategies.
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonable possible change in interest
rates, with all other variables held constant, of the Group’s income statement or statement of
changes in equity.
The sensitivity of the income statement is the effect of the assumed changes in interest rates
on the net interest income for one year, based on the floating rate non-trading financial assets
and financial liabilities held at the year end, including the effect of hedging instruments. The
sensitivity of equity is calculated by revaluing the available for sale investments, based on the
assumption that there are parallel shifts in the yield curve.
153
50. RISK MANAGEMENT
The sensitivity of equity is analyzed by maturity of the assets or cash flow hedge swaps. All the non-trading book exposures
are monitored and analyzed in currency concentrations and relevant sensitivities are disclosed in local currency.
ThesensitivityanalysisdoesnottakeaccountofactionbytheGroupthatmightbetakentomitigatetheeffectofsuchchanges.
Sensitivity of equity
Increase
in basis points
2007
Currency
Lebanese Lira
United States Dollar
Euro
Others
0.50%
0.50%
0.25%
0.25%
Sensitivity of
net interest
income
LL million
(4,756)
2,655
735
1,049
0 to 6 months
LL million
(4,559)
(3,225)
(85)
(101)
6 months to 1
year
LL million
(1 – 5)
years
LL million
More than 5
years
LL million
(3,777)
(3,873)
(90)
(101)
(10,681)
(22,967)
(73)
(582)
(11,392)
(214)
Total
LL million
(19,017)
(41,457)
(248)
(998)
Sensitivity of equity
Decrease
in basis points
2007
Currency
Lebanese Lira
United States Dollar
Euro
Others
-0.50%
-0.50%
-0.25%
-0.25%
Sensitivity of
net interest
income
LL million
4,756
(2,655)
(735)
(1,049)
0 to 6 months
LL million
4,694
9,279
169
102
6 months to 1
year
LL million
(1 – 5)
years
LL million
More than 5
years
LL million
3,899
7,844
140
102
11,408
38,974
114
591
15,099
218
Total
LL million
20,001
71,196
423
1,013
Sensitivity of equity
Increase
in basis points
2006
Currency
Lebanese Lira
United States Dollar
Euro
Others
0.50%
0.50%
0.25%
0.25%
Sensitivity of
net interest
income
LL million
(6,243)
7,261
1,144
1,202
0 to 6 months
LL million
(4,293)
(1,554)
(84)
(107)
6 months to 1
year
LL million
(1 – 5)
years
LL million
More than 5
years
LL million
(4,221)
(1,554)
(84)
(48)
(9,004)
(8,567)
(198)
(305)
(3,202)
(115)
Total
LL million
(17,518)
(14,877)
(366)
(575)
Sensitivity of equity
Decrease
in basis points
2006
Currency
Lebanese Lira
United States Dollar
Euro
Others
154
-0.50%
-0.50%
-0.25%
-0.25%
Sensitivity of
net interest
income
LL million
6,243
(7,261)
(1,144)
(1,202)
0 to 6 months
LL million
4,345
3,211
170
96
6 months to 1
year
LL million
(1 – 5)
years
LL million
More than 5
years
LL million
4,264
3,211
169
48
9,133
15,816
406
310
4,574
117
Total
LL million
17,742
26,812
745
571
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
Effective interest rates of financial instruments
The effective interest rates by major currencies for each of the monetary financial instruments are as follows:
ASSETS
Central banks and other banks
Lebanese and other governmental treasury bills and bonds
Bonds and financial assets with fixed income
Loans and advances to customers
LIABILITIES
Banks and financial institutions
Customers’ deposits
LL
%
Other currencies
%
4–5
8.25 – 9.25
11.5 – 12.5
11 – 12
5–6
7.75 – 8.25
7.5 – 8
8 – 8.5
5–6
7.5 – 8.5
4.5 – 5
4.75 – 5.25
155
50. RISK MANAGEMENT
Interest rate sensitivity gap
The Group’s interest rate sensitivity position based on contractual repricing arrangements or
maturity as at 31 December 2007 has been shown in the table below.
Up to
1 month
LL million
ASSETS
Cash and balances with
the Central Banks
Lebanese and other
governmental treasury
bills and bonds
Bonds and financial assets
with fixed income
Shares, securities and financial
assets with variable income
Banks and financial institutions
Loans and advances to customers
Bank acceptances
Investments and loans
to related parties
Tangible fixed assets
Intangible fixed assets
Other assets
Regularization accounts
and other debit accounts
Goodwill
TOTAL ASSETS
1 to
3 months
LL million
3 months
to 1 year
LL million
(1 – 2)
years
LL million
(2 – 5)
years
LL million
More than Non interest
5 years
sensitive
LL million
LL million
Total
LL million
984,113
88,314
279,400
878,256
2,176,206
772,863
1,150,879
6,330,031
217,525
78,264
716,789
1,133,887
2,236,509
599,449
97,900
5,080,323
7,537
28,617
100,096
43,996
272,199
699,866
12,829
1,165,140
1,770
5,899,948
1,392,262
-
821,991
305,829
-
87,177
933,274
8,079
2,729
309,094
306,435
-
42,188
967,822
-
43,746
84,740
-
7,226
332,389
188,945
237,278
11,725
7,536,533
4,179,307
245,357
-
-
-
-
-
-
27,208
272,642
4,459
34,216
27,208
272,642
4,459
34,216
1,323,015 2,124,815
2,674,397
8,503,155
5,694,924 2,200,664
119,487
119,487
60,586
60,586
2,546,044 25,067,014
171,075 1,555,914
905,674 20,708,516
237,278
245,357
178,323
194,460
LIABILITIES AND EQUITY
156
Banks and financial institutions
Customers’ deposits
Engagements by acceptances
Other liabilities
Regularization accounts and
other credit accounts
Provisions for risks and charges
Shareholders' equity
1,298,955
14,752,113
-
22,184
3,932,547
16,137
18,475
986,626
8,079
-
47,393
-
72,794
-
45,225
11,369
-
-
-
-
-
-
-
TOTAL LIABILITIES AND EQUITY
16,051,068
3,970,868 1,013,180
47,393
72,794
56,594
Total interest rate sensitivity gap
(7,547,913) (2,647,853) 1,111,635
2,627,004
Cumulative interest rate sensitivity gap
(7,547,913) (10,195,766) (9,084,131) (6,457,127)
189,792
80,566
2,092,409
3,855,117 25,067,014
5,622,130 2,144,070 (1,309,073)
(834,997) 1,309,073
189,792
80,566
2,092,409
-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
The Group’s interest rate sensitivity position based on contractual repricing arrangements or
maturity as at 31 December 2006 was as follows:
1 to
3 months
LL million
3 months
to 1 year
LL million
(1 – 2)
years
LL million
(2 – 5)
years
LL million
53,132
301,500
467,325
888,805
23,526
12,173
591,076
15,075
77,995
6,304,058
1,421,873
-
More than Non interest
5 years
sensitive
LL million
LL million
Total
LL million
2,401,613
707,941
1,426,090
6,246,406
612,917
1,822,301
338,574
74,353
3,474,920
28,639
51,940
152,442
54,133
5,876
386,100
769,183
248,809
-
191,821
653,964
-
183,161
196,263
-
243,461
-
6,301
86,925
-
8,403
299,760
145,403
173,260
8.403
7,754,284
2,996,698
173,260
-
-
-
-
-
3,220
219,372
2,845
33,715
3,220
219,372
2,845
33,715
7,817,664
1,409,660 1,932,825
1,933,086
Banks and financial institutions
Customers’ deposits
Engagements by acceptances
Other liabilities
Regularization accounts and
other credit accounts
Provisions for risks and charges
Shareholders' equity
1,123,330
11,353,495
-
12,390
13,808
3,321,788 1,051,578
-
5,287
-
-
TOTAL LIABILITIES AND EQUITY
12,476,825
Total interest rate sensitivity gap
(4,659,161) (1,925,936)
Up to
1 month
LL million
ASSETS
Cash and balances with
the Central Banks
Lebanese and other
governmental treasury
bills and bonds
Bonds and financial assets
with fixed income
Shares, securities and financial
assets with variable income
Banks and financial institutions
Loans and advances to customers
Bank acceptances
Investments and loans
to related parties
Tangible fixed assets
Intangible fixed assets
Other assets
Regularization accounts
and other debit accounts
Goodwill
TOTAL ASSETS
4,619,817 1,193,874
61,408
61,408
63,980
63,980
2,517,685 21,424,611
-
-
159,316 1,308,844
1,958,233 17,690,381
173,260
173,260
141,067
141,067
-
-
-
129,869
64,646
1,916,544
3,335,596 1,063,968
5,287
-
-
4,542,935 21,424,611
868,857
1,927,799
LIABILITIES AND EQUITY
-
-
Cumulative interest rate sensitivity gap (4,659,161) (6,585,097) (5,716,240) (3,788,441)
129,869
64,646
1,916,544
4,619,817 1,193,874 (2,025,250)
831,376 2,025,250
157
50. RISK MANAGEMENT
50.3.2 Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rate. The
Bank protects its capital and reserves by holding a foreign currency position in US Dollars representing 60% of its shareholders’
equity after adjustment according to specific requirements set by the Bank of Lebanon. The Bank is also allowed to hold a
net trading position not to exceed 1 percent of its net shareholders’ equity, as long as the global foreign position does not
exceed, at the same time, 40 percent of its net shareholders’ equity, and that the related banks are abiding in a timely and
consistent manner with the required solvency rate (Bank of Lebanon circular number 32).
The table below indicates the consolidated balance sheet detailed by currency.
The following consolidated balance sheet as of 31 December 2007, is detailed in Lebanese Lira (LL) and foreign currencies,
translated into LL.
Foreign currencies in Lebanese Lira
ASSETS
Cash and balances with the Central Banks
Lebanese and other governmental treasury bills and bonds
Bonds and financial assets with fixed income
Shares, securities and financial assets with variable income
Banks and financial institutions
Loans and advances to customers
Bank acceptances
Investments and loans to related parties
Tangible fixed assets
Intangible fixed assets
Other assets
Regularization accounts and other debit accounts
Goodwill
TOTAL ASSETS
OFF-BALANCE SHEET ITEMS
Financial assets sold with an option to repurchase
Engagements received
Bad loans totally provided for
Foreign currencies to deliver against foreign currencies to receive
Total
LIABILITIES
Banks and financial institutions
Customers’ deposits
Engagements by acceptances
Other liabilities
Regularization accounts and other credit accounts
Provisions for risks and charges
Total liabilities
NET EXPOSURE
OFF-BALANCE SHEET ITEMS
Financing commitments given to
-Financial intermediaries
-Customers
Bank guarantees given to
-Financial intermediaries
-Customers
Commitments on term financial instruments
Financial assets bought with an option to resell
Fiduciary deposits, assets under management and custody accounts
Foreign currencies to receive against foreign currencies to deliver
158
LL million
US Dollars in
LL million
1,107,807
2,394,543
361
68,158
329,369
2,453
143,444
825
6,500
23,810
4,077,270
3,622,031
2,335,517
1,079,976
7,079
5,103,048
2,146,453
175,950
22,658
8,363
5
5,783
35,365
__
14,542,228
664,524
6,436
670,960
143,647
5,017,484
18,531
689,891
5,869,553
32,367
3,298,803
52,356
150,103
25,241
3,558,870
518,400
181,010
13,073,502
175,950
82,240
19,400
1,849
13,533,951
1,008,277
22,322
22,322
9,172
31,494
285,045
18,651
266,394
397,216
94,657
302,559
143,647
3,338,397
665,806
4,830,111
Euro in Other foreign Total foreign
LL million currencies currencies
LL million
LL million
Total
LL million
71,219 1,528,974 5,222,224 6,330,031
106,103 244,160 2,685,780 5,080,323
22,816
62,348 1,165,140 1,165,140
11,725
91
4,194
11,364
1,905,281 460,046 7,468,375 7,536,533
304,940 1,398,545 3,849,938 4,179,307
245,357
35,335
34,072
245,357
27,208
805
1,292
24,755
272,642
2,681 118,154
129,198
4,459
483
3,146
3,634
34,216
59
21,874
27,716
119,487
7,497
52,815
95,677
60,586
60,586
60,586
2,457,310 3,990,206 20,989,744 25,067,014
80,626 1,325,884
3,345
617,397 1,631,898
701,368 2,957,782
143,647
143,647
6,423,994 7,088,518
28,312
21,876
2,939,186
2,939,186
9,528,703 10,199,663
1,202,947 139,590 1,523,547 1,555,914
1,296,025 3,040,186 17,409,713 20,708,516
245,357
35,335
34,072
245,357
194,460
16,227
43,637
142,104
189,792
1,698
18,591
39,689
80,566
283
53,193
55,325
2,552,515 3,329,269 19,415,735 22,974,605
(95,205) 660,937 1,574,009 2,092,409
47,191
27,138
754
1,638
46,437
25,500
149,862 217,596
85,635
16,086
64,227 201,510
34,142
89,212 522,355
537,607 1,739,136
858,014 2,506,225
359,374
21,043
338,331
764,674
196,378
568,296
34,142
143,647
3,949,964
2,942,549
8,194,350
359,374
21,043
338,331
786,996
196,378
590,618
34,142
143,647
3,959,136
2,942,549
8,225,844
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
The following consolidated balance sheet as of 31 December 2006, is detailed in Lebanese Lira
(LL) and foreign currencies, translated into LL.
Foreign currencies in Lebanese Lira
ASSETS
Cash and balances with the Central Banks
Lebanese and other governmental treasury bills and bonds
Bonds and financial assets with fixed income
Shares, securities and financial assets with variable income
Banks and financial institutions
Loans and advances to customers
Bank acceptances
Investments and loans to related parties
Tangible fixed assets
Intangible fixed assets
Other assets
Regularization accounts and other debit accounts
Goodwill
TOTAL ASSETS
OFF-BALANCE SHEET ITEMS
Engagements received
Bad loans totally provided for
Foreign currencies to deliver against foreign currencies to receive
Total
LIABILITIES
Banks and financial institutions
Customers’ deposits
Engagements by acceptances
Other liabilities
Regularization accounts and other credit accounts
Provisions for risks and charges
Total liabilities
NET EXPOSURE
OFF-BALANCE SHEET ITEMS
Financing commitments given to
-Financial intermediaries
-Customers
Bank guarantees given to
-Financial intermediaries
-Customers
Commitments on term financial instruments
Fiduciary deposits, assets under management and custody accounts
Foreign currencies to receive against foreign currencies to deliver
LL million
US Dollars in
LL million
1,363,907
1,997,940
361
62,795
248,083
2,602
127,024
6,386
18,230
3,827,328
3,987,084
1,161,781
329,926
6,437
5,347,351
1,647,814
73,451
9,263
18,514
14,336
12,595,957
575,620
12,411
588,031
4,524,189
28,498
812,936
5,365,623
2,113
3,116,951
39,147
110,154
26,010
3,294,375
532,953
125,162
11,739,074
73,451
60,447
6,451
6,551
12,011,136
584,821
25,819
447
25,372
12,410
38,229
229,739
12,411
217,328
274,922
64,628
210,294
1,375,658
584,713
2,465,032
Euro in Other foreign Total foreign
LL million currencies currencies
LL million
LL million
Total
LL million
211,877 683,538 4,882,499 6,246,406
89,860 225,339 1,476,980 3,474,920
386,100
10,797
386,100
45,377
8,042
82
8,403
1,523
1,888,249 455,889 7,691,489 7,754,284
228,707 872,094 2,748,615 2,996,698
173,260
91,611
173,260
8,198
618
569
3,220
49
92,348
573
219,372
82,512
2,845
128
2,845
2,717
27,329
273
33,715
8,542
43,178
9,753
61,408
19,089
63,980
991
63,980
62,989
2,533,470 2,467,856 17,597,283 21,424,611
71,793 296,171
2,996
36,257 1,295,424
111,046 1,591,595
4,892,153
31,494
2,144,617
7,068,264
5,467,773
43,905
2,144,617
7,656,295
1,081,544 100,025 1,306,731 1,308,844
992,995 1,841,361 14,573,430 17,690,381
173,260
91,611
173,260
8,198
101,920
9,642
141,067
31,831
19,715
3,520
129,869
9,744
38,636
3,560
64,646
28,525
2,182,872 2,019,684 16,213,692 19,508,067
350,598 448,172 1,383,591 1,916,544
55,503
21,944
117
523
55,386
21,421
100,530 288,257
15,913
15,110
84,617 273,147
17,659
252,313 1,133,979
299,536 1,262,506
725,541 2,706,686
307,186
13,051
294,135
663,709
95,651
568,058
17,659
2,761,950
2,146,755
5,897,259
307,186
13,051
294,135
689,528
96,098
593,430
17,659
2,774,360
2,146,755
5,935,488
159
50. RISK MANAGEMENT
51. OPERATIONAL RISK
52. PREPAYMENT RISK
53. CAPITAL MANAGEMENT
The table below indicates the extent to which the Group was exposed to currency risk at 31
December 2007 on its foreign currency positions. The analysis calculates the effects of a reasonably
possible movement of the currency rate against the Lebanese Lira, with all other variables held
constant, including the effect of hedging instruments, on the consolidated income statement (due
to the fair value of currency sensitive non-trading monetary assets and liabilities) and equity (due
to the change in fair value of currency swaps and forward foreign exchange contracts used as
cash flow hedges). The effect on equity is not significant. A negative amount in the table reflects
a potential net reduction in consolidated income statement or equity, while a positive amount
reflects a net potential increase.
Change in currency
rate % 2007
Effect on
profit before tax 2007
LL million
Change in currency
rate % 2006
Effect on
profit before tax 2006
LL million
± 1%
± 1%
± 10,328
± 500
± 1%
± 1%
± 8,126
± 693
Currency
USD
EUR
51. OPERATIONAL RISK
Operational risk is the risk of loss arising from systems failure, human error, fraud or external
events. When controls fail to perform, operational risks can cause damage to reputation, have
legal or regulatory implications, or lead to financial loss. The Group cannot expect to eliminate
all operational risks, but through a control framework and by monitoring and responding to
potential risks, the Group is able to manage the risks. Controls include effective segregation
of duties, access, authorization and reconciliation procedures, staff education and assessment
processes, including the use of internal audit.
52. PREPAYMENT RISK
Prepayment risk is the risk that the Group will incur a financial loss because its customers and
counterparties repay or request repayment earlier than expected, such as fixed rate housing
loans when interest rate falls. The fixed rate assets of the Group are not significant compared
to the total assets. Moreover, other market conditions causing prepayment is not significant
in the markets in which the Group operates. Therefore, the Group considers the effect of prepayment
on net interest income is not material after taking into account the effect of any prepayment penalties.
160
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007
53. CAPITAL MANAGEMENT
The Bank maintains an actively managed capital base to cover risks, inherent in the business.
The adequacy of the Bank’s capital is monitored using, among other measures, the rules and
ratios established by the Bank of Lebanon and the Banking Control commission.
The Bank should maintain a required capital adequacy ratio (not less than 12%) based on the
total tier one capital over the total risk weighted assets and off-balance sheet items.
The Bank manages its capital structure and makes adjustments to it in the light of changes in
economic conditions and the risk characteristics of its activities. In order to maintain or adjust
the capital structure, the Bank may adjust the amount of dividend payment to shareholders, return
capital to shareholders or issue capital securities. No changes were made in the objectives, policies
and processes from the previous years.
Regulatory capital
Tier 1 capital
Tier 2 capital
Total capital
Risk weighted assets
Tier 1 capital ratio
Total capital ratio
2007
LL million
2006
LL million
1,839,001
29,224
1,868,225
6,430,811
28.60%
29.05%
1,665,170
36,157
1,701,327
4,714,398
35.32%
36.09%
Regulatory capital consists of Tier 1 capital, which comprises share capital, reserves and premiums,
reserves for general banking risks, treasury shares, retained earnings and profit for the year less dividend
distributed, intangible assets and goodwill. The other component of regulatory capital Tier 2 capital, which
includes revaluation reserves and cumulative changes in fair values.
161
54. COMMITMENTS AND CONTINGENCIES
55. COMPARATIVE AMOUNTS
56. SUBSEQUENT EVENTS
54. COMMITMENTS AND CONTINGENCIES
a) Due to the nature of its business, the Group is a defendant in various legal proceedings.
Management, after discussing with its counselors all such cases and proceedings
against the Group, considers that the aggregate liability or loss, if any, resulting from an
adverse determination would not have a material effect on the consolidated financial
position of the Group.
b) The Bank’s books in Lebanon have not been reviewed by the tax authorities for the years
2006 and 2007. The ultimate outcome of any review that may take place by the tax authorities
cannot be presently determined.
c) The Bank’s books in Lebanon have not been reviewed by the National Social Security Fund
(NSSF) since 1998. The ultimate outcome of any review by the NSSF on the Bank’s books from
1998 to 2007 cannot be presently determined.
55. COMPARATIVE AMOUNTS
Except for the correction of an error in note 40 to the financial statements, the following
reclassifications were just to enhance the presentation in the current year:
- Provision for real estate taken in recovery of debt was reclassified from “Provisions for risks
and charges” caption to “Tangible fixed assets” caption. Comparative amounts totaling to LL
11,715 million were classified accordingly.
- Other income was reclassified from “Net commission income” caption to “Other operating
income” caption. Comparative amounts of LL 5,714 million were reclassified accordingly.
56. SUBSEQUENT EVENTS
- On 26 December 2007, the extraordinary general assembly of the shareholders of Arope
Insurance SAL (a subsidiary) resolved to increase the Company’s capital from LL 21,600 million to
LL 43,200 million. Accordingly, the Bank has subscribed in its share of the subsidiary’s capital
increase in full (LL 19,129 million) on 11 February 2008.
- On 5 March 2008, the Bank obtained the preliminary approval of the Bank of Lebanon for the
redemption of the 750,000 preferred shares - issue 2002 amounting to LL 7,500 million.
162
WORLDWIDE CORRESPONDENT BANKS
WORLDWIDE CORRESPONDENT BANKS
CORRESPONDENT BANK
COUNTRY
Australia, Sydney
Belgium, Brussels
Bahrain, Manama
Canada, Toronto
Canada, Toronto
Denmark, Copenhagen
France, Paris
Germany, Frankfurt am Main
Germany, Frankfurt am Main
Germany, Frankfurt am Main
Italy, Milan
Italy, Rome
Japan, Tokyo
Japan, Tokyo
KSA, Jeddah
KSA, Riyadh
Kuwait, Kuwait
Netherlands, Amesterdam
Norway, Oslo
Qatar, Doha
Spain, Madrid
Sweden, Stockholm
Switzerland, Geneva
Switzerland, Zurich
Switzerland, Zurich
U.A.E, Dubai
U.K, London
U.K, London
U.S.A, New York
U.S.A, New York
164
AUD
EUR
BHD
CAD
CAD
DKK
EUR
EUR
EUR
EUR
EUR
EUR
JPY
JPY
SAR
SAR
KWD
EUR
NOK
QAR
EUR
EUR
CHF
EUR
EUR
AED
GBP
GBP
USD
USD
Commonwealth Bank of Australia
Fortis Bank S.A. / N.V.
National Bank of Bahrain
Royal Bank of Canada
Imperial Bank of Commerce (The)
Danske Bank A/S
BLOM BANK France SA
Commerzbank AG
Deutsche Bank AG
Dresdner Bank AG
Banca Intesa San Paolo SPA
Banca Nazionale Del Lavoro SPA
Bank of Tokyo-Mitsubishi Ltd
JP Morgan Chase Bank N.A.
The National Commercial Bank
Riyad Bank
Gulf Bank KSC
ABN AMRO Bank N.V.
DnB NOR Bank ASA
Commercial Bank of Qatar (The) (QSC)
Banco Bilbao Vizcaya Argentaria S.A. (BBVA)
Skandinaviska Enskilda Banken AB
BLOM BANK Switzerland SA
Credit Suisse
UBS AG
BLOM BANK France SA
BLOM BANK France SA
National WESTMINSTER BANK PLC
Bank of New York (The)
JP Morgan Chase Bank N.A.
BLOM BANK GROUP DIRECTORY
BLOM BANK GROUP DIRECTORY
DIRECTORY - BLOM BANK GROUP
167
170
170
170
171
171
173
173
173
173
173
173
166
BLOM BANK GROUP DIRECTORY
BLOM BANK GROUP CHAIRMAN:
Dr. Naaman AZHARI
LEBANON
Headquarters
Verdun – Rachid Karami St, BLOM BANK bldg
P.O. Box: 11-1912 Riad El-Solh, Beirut 1107 2807,
Lebanon
Phone: (961-1) 743300 – 738938
Fax: (961-1) 738946
Telex: Electronic Telex in London: 94015829
Answerback BLOM G
Reuter: BLOM
Swift Code: BLOMLBBX
E-mail: [email protected]
Domain: http://www.blom.com.lb
Call Center: (961-1) 753000
MOHAFAZAT BEIRUT BRANCHES
Main Branch
Verdun, Rachid Karami St, BLOM BANK bldg
Phone: (961-1) 738938 – 743300
Fax: (961-1) 738946
Email: [email protected]
Senior Manager / Branches: Mr. Walid ARISS
Achrafieh
Sassine Square
Phone: (961-1) 200147/8 – 320949
Fax: (961-1) 320949
Email: [email protected]
Branch Manager: Mr. Ara BOGHOSSIAN
Ain El-Mreisseh
Ibn Sina St
Phone: (961-1) 372780 – 370830 – 373102
Fax: (961-1) 370237
Email: [email protected]
Branch Manager: Mr. Mahmoud MARRACH
Bliss
Bliss St, opposite Hobeish Police Station –
Ras Beirut – Al Rayess Bldg
Phone: (961-1) 363732/34/42
Fax: (961-1) 363732
Email: [email protected]
Branch Manager: Mr. Ziad SROUJI
Burj Abi Haidar
Burj Abi Haidar St, Salam Tower
Phone: (961-1) 310687 – 310677/8/9 - 817560
Fax: (961-1) 310679
Email: [email protected]
Branch Manager: Mr. Mahmoud BAYDOUN
Hamra
Abdel Aziz St, Daher bldg
Phone: (961-1) 346290/1/2/3 – 341955 - 343503
Fax: (961- 1) 744407
Email: [email protected]
Branch Manager: Mr. Sami FARHAT
Hamra - Retail Branch
Abdel Aziz St, Daher bldg
Phone: (961-1) 747752 /59 /60
Fax: (961-1) 747749
Email: [email protected]
Branch Manager: Mrs. Zeina KHATTAB
Sanayeh
Chamber of Commerce & Industry bldg
Phone: (961-1) 346042/3 – 748339 - 749623
Fax: (961-1) 346043
Email: [email protected]
Branch Manager: Mrs. Nahida WEHBE
Istiklal
Istiklal St, Karakol El-Druze Area, next to
Kettaneh Palace, Salhab bldg
Phone: (961-1) 738050/1 - 749624
Fax: (961-1) 748337
Email: [email protected]
Branch Manager: Mr. Mouhamad SIDANY
Sodeco – Retail Branch
Sodeco Square, Damascus Road
Phone: (961-1) 611360/1
Fax: (961-1) 611 362
Email: [email protected]
Branch Manager: Mrs. Souraya N. Bashouti
Jnah
Bir Hassan Area, United Nations St, next to
Beirut Hospital, Jaber bldg
Phone: (961-1) 855903/4/5
Fax: (961-1) 855906
Email: [email protected]
Branch Manager: Mr. Abbas KALOT
Tabaris
Gebran Tueini Square- Sursock Tower
Phone: (961-1) 203142//3/4
Fax: (961-1) 203145
Email: [email protected]
Senior Manager/Branches: Ms. Claire ABOU
MRAD
Maarad
Emir Bechir St, Hibat el Maarad bldg Downtown
Phone: (961-1) 983230/1/2/3/4
Fax: (961-1) 983230
Email: [email protected]
Branch Manager: Mr. Amer KAMAL
Tariq Al-Jedideh
Al Malaab Al Baladi Square – Salim bldg
Phone: (961-1) 818620/1 – 309959 - 816985
Fax: (961-1) 818620
Email: [email protected]
Branch Manager: Mr. Khodr MNEIMNEH
Mar Elias
Corniche El Mazraa – opposite Helou’s barracks, Zantout bldg
Phone: (961-1) 818616/7 – 818009 – 818038 864112
Fax: (961-1) 818618
Email: [email protected]
Branch Manager: Mr. Mohamad Abd el wahab
Al TABSH
Verdun
Verdun St, opposite F.S.I. Barracks, Abdo bldg
Phone: (961-1) 788412/3 – 800081 - 788411
Fax: (961-1) 800032
Email: [email protected]
Branch Manager: Mr. Hani BAWAB
Mazraa
Corniche El Mazraa, Barbir Square
Phone: (961-1) 648020/1/2 - 664337
Fax: (961-1) 648020
Email: [email protected]
Branch Manager: Mr. Mohammad MAWASS
Noueiri
Al Noueiri Station – Hamada bldg
Phone: (961-1) 630309– 658611 – 658610 - 664487
Fax: (961-1) 630319
Email: [email protected]
Branch Manager: Mr. Yehia ORFALI
Raouché
Raouche Blvd – Al Rayess & Bou Dagher Bldg
Phone: (961-1) 812603/4/5/6
Fax: (961-1) 801634
Email: [email protected]
Branch Manager: Mr. Mohamad MARRACHE
Rmeil
Ashrafieh, Orthodox Hospital St, Medica Center
Phone: (961-1) 565252 – 565454 – 567140 –
567141
Fax: (961-1) 565252
Email: [email protected]
Branch Manager: Mrs. Salma ACHKOUTY
Saifi
Al Arz Street – Akar bldg
Phone: (961-1) 449899 – 581683 – 586340 –
566794 - 587196
Fax: (961-1) 449899
Email: [email protected]
Branch Manager: Dr. Ousama CHAHINE
Verdun - Retail Branch
Verdun, Rachid Karami St, BLOM BANK bldg
Phone: (961-1) 750160/1/2/3
Email: [email protected]
Branch Manager: Mr. Marwan PHARAON
MOHAFAZAT MOUNT LEBANON BRANCHES
Ain El-Remaneh
Chiyah District, Lamaa St, Next to Kasarjian
Barracks
Phone: (961-1) 386750/1/2/3
Fax: (961-1) 386750
Email: [email protected]
Branch Manager: Mr. Jhonny SALIBI
Aley
Al Balakine, Property of Faysal Sultane Wahab
Phone: (961-5) 556612/13
Fax: (961-5) 556614
Email: [email protected]
Branch Manager: Mrs. May Bou Alwan
Antelias
Next to the Armenian Patriarchate – Kheirallah
bldg
Phone: (961-4) 411472 – 520210 – 410123 –
411418 - 410848
Fax: (961-4) 523666
Email: [email protected]
Branch Manager: Mr. Laurent CHIBLI
167
BLOM BANK GROUP DIRECTORY
Aramoun
Choueifat – Al Koba, Aramoun Road, Zaynab
Center
Phone: (961-5) 808591/2/3/4
Fax: (961-5) 808594
Email: [email protected]
Branch Manager: Mrs. Nawal Merhi ABOU
DIAB
Badaro
Badaro Main St - Damascus Road intersection
– Buick – Khoury bldg
Phone: (961-1) 615818/19/20/21 – 615826 - 615952
Fax: (961-1) 615825
Email: [email protected]
Branch Manager: Mr. Raoul CHERFAN
Burj Al-Barajneh
Ain El Sekka St – Rahal bldg
Phone: (961-1) 450381/2/3/4 – 450446/7
Fax: (961-1) 450384
Email: [email protected]
Branch Manager: Dr. Hassan JABAK
Burj Hammoud
Harboyan Center
Phone: (961-1) 262067 – 266337/8 – 243604/5 –
242792 - 243139
Fax: (961-1) 268939
Email: [email protected]
Branch Manager: Mr. Jean HOMSI
Chiyah
Chiyah Blvd, Round About Mar Mekhayel,
Orient Center Bldg.
Phone: (961-1) 270172/3/4 - 275783
Fax: (961-1) 270174
Email: [email protected]
Senior Manager / Branches: Mr. Abbas TLEISS
168
Furn el Chebbak - Retail Branch
Furn el Chebbak, Abraj Center, Main Str., Beirut
Phone: (961-1) 293810 /13
Fax: (961-1) 293816
Email: [email protected]
Branch Manager: Mrs. Alice AHMARANI
Sin El-Fil
Horsh Tabet, Charles De Gaulle St, Tayar Center
Phone: (961-1) 485270/1/2
Fax: (961-1) 485273
Email: [email protected]
Branch Manager: Mr. Fadi EL MIR
Ghobeyri
Corniche El Ghobeyri - Chiah Blvd – Tohme &
Jaber & Kalot bldg
Phone: (961-1) 825509 – 825870 – 821895 – 856219
Fax: (961-1) 820153
Email: [email protected]
Branch Manager: Mrs. Magida MIKATI
Zalka
Zalka St, Blom BANK bldg, Interior Road
Phone: (961-4) 713074/5/6
Fax: (961-4) 713077
Email: [email protected]
Branch Manager: Mrs. Denise JALKH
Haret Hreik
Al Abiad Area, Sayyed Hadi Nasrallah Highway,
Abou Taam & Hoteit bldg
Phone: (961-1) 543662 – 543658 – 543659
Fax: (961-1) 543661
Email: [email protected]
Branch Manager: Mr. Ali CHRIEF
Hazmieh
Damascus Road, Joseph Chahine Center
Phone: (961-5) 955240/1/2/3/4
Fax: (961-5) 955240
Email: [email protected]
Branch Manager: Mr. Ziad KAREH
Jbeil
Voie 13 – Near Mar Charbel Junction
Phone: (961-9) 943702 /3 /4
Fax: (961-9) 943701
Email: [email protected]
Branch Manager: Mr. Zakhia SARKIS
Choueifat
AL Omaraa, Main Road, Al Tiro’s Junction
Phone: (961-5) 433203/6
Fax: (961-5) 433208
E-mail: [email protected]
Branch Manager: Mr. Kamal SLIM
Jounieh
Facing “Palais de Justice” – Next to Fouad
Chehab Playground
Phone: (961-9) 638011/12/13/14
Fax: (961-9) 638011
Email: [email protected]
Branch Manager: Mr. Rachad YAGHI
Dora
Bawchrieh, Tripoli Road, Banking Center bldg
Phone: (961-1) 256527/28/32/37/38/39/41
Fax: (961-1) 256522
Email: [email protected]
Senior Manager/ Branches:
Mrs. Marlène DOUMIT
Kaslik
Kaslik Main St, Debs Center
Phone: (961-9) 640273 – 640095 – 636998/9 –
640297
Fax: (961-9) 831112
Email: [email protected]
Branch Manager: Mr. Charles AOUDE
Elissar
Beit El Kiko, Antelias - Bickfaya Road
Phone: (961-4) 916111/2/3/4
Fax: (961-4) 916115
Email: [email protected]
Branch Manager: Mr. Joseph GHOUSOUB
Mansourieh
Mansourieh el Maten, Dar El Ain Plaza – New
Highway
Phone: (961-4) 532856/7/8
Fax: (961-4) 532854
Email: [email protected]
Branch Manager: Mr. Walid LABBAN
Zouk Mousbeh
Zouk Mousbih,Main St, Le Paradis Centre, Jeita’s
cave junction
Phone: (961-9) 226991/2/3/4/5
Fax: (961-9) 226990
Email: [email protected]
Branch Manager: Mr. Joseph KILADJIAN
MOHAFAZAT NORTH LEBANON BRANCHES
Tripoli - Abi Samra
Al-Dinnawi Square, Khaled Darwiche bldg
Phone: (961-6) 423565/6/7/8/9
Fax: (961-6) 423565
Email: [email protected]
Branch Manager: Mr. Abdel Rahman HOMSI
Tripoli – Azmi
Azmi St, Fattal bldg
Phone: (961-6) 433064 – 443550/1/2
Fax: (961-6) 443550
Email: [email protected]
Branch Manager: Mr. Edmond HAMATI
Tripoli – Al Tell
Abdel Hamid Karameh Square, Ghandour bldg
Phone: (961-6) 430153 – 628200/2 - 431624
Fax: (961-6) 628200
Email: [email protected]
Branch Manager: Mr. China ASSI
Tripoli - Zahrieh
Al Tall St, Alam AL Din & Bissar bldg
Phone: (961-6) 430150/2 – 423415 - 423414
Fax: (961-6) 430151
Email: [email protected]
Branch Manager: Mr. Fouad El HAJJ
MOHAFAZAT BEKAA BRANCHES
Chtaura
Main St, Najim El Din bldg
Phone: (961-8) 540078 – 542504 – 544329/30 544914
Fax: (961-8) 542504
Email: [email protected]
Branch Manager: Mr. Elie FREIJI
BLOM BANK GROUP DIRECTORY
Zahleh
Manara Center, Fakhoury & Kfoury bldg
Phone: (961-8) 807680/1/2/3/4 – 805383 - 820661
Fax: (961-8) 807680
Email: [email protected]
Branch Manager: Mr. Marwan EL SHAKRA
MOHAFAZAT NABATIYEH BRANCH
Nabatiyeh
Nabatieh That, Hassan Kamel Al Sabbah
St, Office 2000 bldg
Phone: (961-7) 767854/5/6
Fax: (961-7) 767857
Email: [email protected]
Branch Manager: Mr. Hany HAMOUD
MOHAFAZAT SOUTH LEBANON BRANCHES
Saida
Riad Solh St, Al Zaatari & Fakhoury & Bizri bldg
Phone: (961-7) 724866 – 723266 – 722801 – 739276
Fax: (961-7) 722801
Email: [email protected]
Branch Manager: Mr. Moufid NAJJAR
Tyr
Main St, Chehade bldg
Phone: (961-7) 740900 – 741649 - 742903
Fax: (961-7) 348487
Email: [email protected]
Branch Manager: Mrs. Mayssa RAHAL
STAND BY BRANCH MANAGERS*
Mr. Ziad CHANOUHA
Mr. Wassim FAHS
Ms. Nelly HARFOUCHE
Mr. Antoine MATAR
Mr. Ahmad Jamal SINNO
Mr. Ahmad Koussai SINNO
Mr. Adel THAMINE
* by alphabetical order
BRANCHES UNDER ESTABLISHMENT
Abbasya - Tyr
Dekwaneh
Hadath
Mina El Hosn branch – Beirut
Sin el Fil - Retail Branch
BLOM BANK
BRANCHES ABROAD & REPRESENTATIVE OFFICE
CYPRUS
Victory House
205Z Archbishop Makarios Ave
3030 Limassol
P.O.Box: 53243, 3301 Limassol, Cyprus
Phone: (357-25) 376433/4/5
Fax: (375-25) 376292
Swift Code: BLOM CY 21
E-mail: [email protected]
Branch Manager: Mr. Ziad EL MURR
SYRIA
Damascus Free Zone, Al-Baramkeh
Phone: (963-11) 2133170/1
Fax: (963-11)2133173
E-mail: [email protected]
Branch Manager: Mr. Joseph HAYEK
ABU DHABI – U.A.E.
Representative Office
Al Bateen Towers – Tower C 6 – Suite C 907-9th floor
Al Bateen – Bainuna Street – Abu Dhabi – U.A.E.
P.O. Box: 63040 - Al Bateen – Abu Dhabi – U.A.E.
Phone:
00971-2-6676100
Fax: 00971-2-6676200
E-mail: [email protected]
Mr. Ramzi AKKARI - Chief Representative
JORDAN
Headquarters - Jordan
Amman - Al-Charif Abdel Hamid Sharaf St
P.O. Box 930321 Shmeisani ,Amman 111 93
Phone: (962-6) 5001200
Fax: (962-6) 567 71 77
Reuter: BLMJ
Swift Code: BLOMJOaAM
E-mail: [email protected]
Domain: http://www.blom.com.lb
Regional Management - Jordan
Dr. Adnan AL AARAJ
General Manager - Jordan
Mr. Adnan SALLAKH
Consultant for General Management in Lebanon
Heads of Departments and Units - Jordan
Dr. Mohamed AMRO - Treasury and Investment
Mr. Mohanad BALBISSI (AL) - Financial Control
Mr. Yaccoub ALEM (EL) - Credit
Mr. Moder KHOURDY (AL) - Client Relationship
Mr. Ihab KHALIL - Sales & Retail Marketing
Ms. Nahla ALLOUSH - IT Operations
Mr. Mohamed ALLAN - Central Operations
Mr. Said OBEIDALLAH - Internal Audit
Mr. Nabil OBALI - Risk Management
Mr. Maan ZOABI - Compliance
Mr. Hani DIRANI - Legal and Collection
Ms. Mona KHOUZAI - Personnel
BRANCHES IN JORDAN
Shmeisani
Amman- Al-Charif Abdel Hamid Sharaf St
P.O. Box 930321 Shmeisani- Amman 111 93
Phone: (962-6) 5001200
Fax: (962-6) 65277177
E-mail: [email protected]
Branch Manager: : Mr. Abdeljawad Al- Owaisi
Sweifieh Branch
Abed Al Rahim Al Hajj Mohammad St
P.O. Box 852112 Amman 111 85
Phone: (962-6) 5864714 -5814935
Fax: (962-6) 5865346
Email: [email protected]
Branch Manager: Baker Haddadin
Mecca Street
Tlaa El Aali - Makka Str.
P.O.Box 1191, Amman, 11821 Jordan
Phone: (962-6) 5503130/1/2/3/4/5
Fax: (962-6) 5521347
E-mail: [email protected]
Branch Manager: Mohannad Younes
Wihdat
Al Amir Hassan St, Oum Heiran -Amman
Change to P.O. Box 110061 Amman 111 10
Phone: (962-6) 4750050
Fax: (962-6) 4750055
Email: [email protected]
Branch Manager: Mr. Mahmoud Sadaka
Jubeiha
Mefleh Al-lozi st.,Amman
P.O Box 2435 Amman 11941
Phone: (962-6) 5336591
Fax: (962-6) 5336657
Email: Jubeiha @blom.com.jo
Branch Manager: Mr. Omar Abu Assaf
Irbid
Al-Qubba Circle-Irbid
P.O Box 4345 Irbid 21110
Phone: (962-2) 7240006
Fax: (962-2) 7240057
Email: [email protected]
Branch Manager: Mr. Ahmad DABAAN
Branch Under Establishment in Jordan
Aakaba
169
BLOM BANK GROUP DIRECTORY
AFFILIATED BANKS & INSURANCE COMPANIES
ROMANIA
FRANCE
Headquarters - Bucharest
66 Unirii Boulevard, Bloc K3, Sector 3,
Bucharest
P.O. BOX 1-850 Bucharest
Phone: (004) 021/302.72.06 – 302.72.01
Fax: (004) 021/318.52.14 - 318.52.03
Swift : BLOM RO BU
E-mail: [email protected]
General Management
1, Rue de la Rôtisserie, Geneva, Switzerland
P.O. Box: 3040 – CH 1211 Geneva 3 – Switzerland
Phone: (41-22) 81771 00 (General)
Fax: (41-22) 8177190
SWIFT: BLOMCHGG
E-mail: [email protected]
Website: www.blombank.ch
General Management
Mr. Jean Pierre BAAKLINI - General Manager
Mrs. Veronika PETERESCU - Deputy General
Manager
Board of Directors
Dr. Naaman AZHARI - Honorary Chairman of the Board
Mr. Saad AZHARI - Chairman
Mr. André CATTIN - Vice Chairman
Headquarters
38-40 avenue des Champs-Elysées
75008 Paris - France
Phone: (33-1) 44 95 06 06
Fax: (33-1) 44 95 06 00
Telex : 644401 F BANOPAR
Reuter : BANO
Swift : BLOM FRPP
E.mail : [email protected]
Website : www.banorabe.com
Board of Directors
Mr. Samer AZHARI
Chairman & General Manager
Dr. Naaman AZHARI - Honorary President and
Permanent Representative of BLOM BANK S.A.L
Directors
HE Sheikh Ghassan Ibrahim SHAKER
(Grand officier de la légion d’Honneur)
Mr. Christian DE LONGEVIALLE
Mr. Jean-Paul DESSERTINE
Mr. Marwan JAROUDI
General Management
Mr. Michel ADWAN - Deputy General Manager
Mr. Gilbert MOINE - Senior Manager
Mr. Iskandar ARAMAN - Manager Head Office
Mr. Amr TURK - Senior Manager - London
Mr. Bassem ARISS - Regional Manager - UAE
Mr. Jean-Pierre BAAKLINI - General Manager - Romania
BLOM BANK FRANCE BRANCHES ABROAD
UNITED ARAB EMIRATES
Dubai
Deira, Al Maktoum St
Sheikh Ahmad Ben Rached al Maktoum bldg
P.O. Box 4370 – Dubai – United Arab Emirates
Phone: (971-4) 2284655 – 2278196 General
(971-4) 2224812 - Forex
Fax: (971-4) 2236260
Telex : 45801 BANO EM – General
48836 BANO FX EM – Forex
Swift : BLOM AE AD
E.mail : [email protected]
Branch Manager: Mr. Samir Hobeika
Sharjah
Khaled Lagoon, Corniche al Buhairah
Sheikh Nasser Bin Hamad al Thani bldg
P.O. Box 5803 – Sharjah – United Arab Emirates
Phone: (971-6) 5736700 – 5736100
Fax: (971-6) 5736080
Telex : 68512 BANO EM
E.mail : [email protected]
Branch Manager : Mr. Mokhtar KASSEM
UNITED KINGDOM
London
193-195 Brompton Road
London SW3 1LZ – England
Phone: (44-20) 75907777
Fax: (44-20) 78237356
Swift : BLOM GB 2L
E.mail : [email protected]
Senior Manager : Mr. Amr TURK
170
Branches
Head Office - Bucharest
66 Unirii Boulevard, Bloc K3, Sector 3,
Bucharest
P.O. BOX 1-850 Bucharest
Phone: (004) 021/302.72.06 – 302.72.01
Fax: (004) 021/318.52.14 - 318.52.03
Swift : BLOM RO BU
E-mail: [email protected]
Branch Manager: Mrs. Florentina DELLA
Victoria (Bucharest)
72 Buzesti St., Bucharest
Phone: (004) 021/315.42.05-315.42.06
Fax: (004) 021/315.42.08
E-mail: [email protected]
Branch Manager: Mr. Marius VOICULET
Bucharest Hotel
4 Prel. George Enescu St., Bucharest Hotel
P.O. Box 1-850
Phone: (004) 021/312.27.51- 312.27.52
Fax: (004) 021/312.27.53
E-mail: [email protected]
Branch Manager: Mrs. Monica FILIP
Constanta
25 Bis Mamaia Boulevard, Constanta
P.O. Box 2-89
Phone: (004) 0241/510.950
Fax: (004) 0241/510.951
E-mail: [email protected]
Branch Manager: Mr. Mihai BUTCARU
Brasov
23 Mihail Kogalniceanu St., Bloc C7, Brasov
Phone: (004) 0268/547.640
Fax: (004) 0268/547.641
E-mail: [email protected]
Branch Manager: Mr. Hosny HESHAM
Cluj
11 T. Cipariu St., Cluj
Phone: (004) 0364/410.277
Fax: (004) 0264/450.594
E-mail: [email protected]
Regional Manager: Mr. Mircea CHIOREAN
Directors
Dr. Warner FREY
ME. Peter De La GANDARA
Mr. Ahmad G. SHAKER
Management Committee
Mr. Antoine MAZLOUM - General Manager
Mr. Thierry OTT - Manager
Mrs. Eléonore DAESCHER - Deputy Manager
Mr. Salim DIAB - Deputy Manager
General Management
Verdun , Rachid Karami St
BLOM BANK bldg
P.O. Box: 11-1912, Riad El Solh, Beirut 1107
2080 Lebanon
Phone: (961-1) 738938 – 743300 – 348246
Fax: (961-1) 738938
E-mail: [email protected]
Website: www.blominvestbank.com
Board of Directors
Mr. Saad AZHARI - Chairman & General Manager
Directors
Messrs. BLOM BANK SAL
Mr. Joseph KHARRAT
Mr. Samer AZHARI
Mr. Marwan JAROUDI
Mr. Habib RAHAL
General Management
Dr. Fadi OSSEIRAN - General Manager
Senior Managers*
Mr. Elie CHALHOUB - Administration
Mr. Michel CHIKHANI - Asset Management
& Structured Products
Mr. Georges TABET - Private Banking
& Wealth Management
Managers*
Mr. Walid KADRI - Organization & Business
Development
Mr. Marwan MIKHAEL - Economic Research
Mr. Nicolas PHOTIADES - Investment Banking
& Corporate Finance
Mr. Ramzi TOHME - Operations
* by alphabetical order
BLOM BANK GROUP DIRECTORY
Headquarters
Damascus – Al Harika – Bab Barid
Lawyers’ Syndicate Building
P.O. Box: 3103 Damascus – Syria
Phone: (963-11) 2460560
Fax: (963-11) 2460555
Swift: BSOMSYDA
E-mail: [email protected]
Board of Directors
Dr. Rateb AL SHALLAH - Chairman
Mr. Amr AZHARI - Vice Chairman
Mr. Georges SAYEGH - General Manager
Directors
Dr. Ihsan BAALBAKI
Mr. Ibrahim SHEIKH DIB
Mr. Mohamed Ramzi CHABANI
Mr. Mehran KHWANDA
Mr. Habib BETINJANEH
Mr. Samer AZHARI
Mr. Saad AZHARI
Managers - Central Departments
Mr. Bashir YAKZAN - Credit
Mr. Georges HADDAD - Internal Audit
Mr. Samir ASMAR - Administration
Ms. Inaya SOUBRA - International
Ms. Rima JAWAD ZEIN - Human Resources
Mr. Mohamad Yehia KHALED - Retail Banking
Mr. Salem MAHMOUD - InformationTechnology
Mr. Michel MANNEH - Operations
Mr. Shady DIAR BAKERLY - Accounting
Branches
DAMASCUS
Harika
Damascus – Al Harika, Bab Barid
Lawyers’ Syndicate Building
P.O. Box: 3103 Damascus – Syria
Phone: (963-11) 2460560
Fax: (963-11) 2460555
Mobile: (963) 932 460560
Email: [email protected]
Branch Manager: Mr. Samir BASSOUS
Damascus (Al Nejmeh Square)
Damascus- Nejmeh Square
Facing Dar As Salam School
P.O. Box: 3103 Damascus – Syria
Phone: (963-11) 3344001
Fax: (963-11) 3344021
E-mail: [email protected]
Branch Manager: Mr. Fadi ISTWANI
Al Kassaa
Damascus, Kassaa – Brj Al Russ,Facing
National Park
P.O. Box: 3103 Damascus – Syria
Phone: (963-11) 5431350
Fax: (963-11) 5431360
E-mail: [email protected]
Branch Manager: Mr. Omar HAMMOUD
MEZZEH
Damascus, next to Al Razi Hospital
P.O. Box: 3103 Damascus – Syria
Phone: (963-11) 6132411
Fax: (963-11) 6132409
E-mail: [email protected]
Branch Manager: Mr. Tarek CHEHAB
ALEPPO
Al Azizieh Aleppo
Aleppo – Azizia, Saad el Dine Al Jabiri St
P.O. Box: 9966 Aleppo – Syria
Phone: (963-21) 9960- 225850- 60-70
Fax: (963-21) 2249800
E-mail: [email protected]
Branch Manager: Mr. Eddy BECHARA
Al Madina -Aleppo
Sabeh Bahrat St
P.O. Box: 9966 –Aleppo – Syria
Phone: (963-21) 9961
Fax: (963-21) 3335377
E-mail: [email protected]
Branch Manager: Mr. Amro KAYAL
LATTAKIA
Lattakia
Lattakia – Al Kamilia, 8th March St
P.O. Box: 371 Lattakia , Syria
Phone: (963-41) 3010- 452516/9
Fax: (963-41) 452573
E-mail: [email protected]
Branch Manager: Mr. Bassem MERHEJ
SWEIDA
Sweida, Tishreen Str.
P.O. Box: 74 SWEIDAA - Syria
Phone: (963 –16) 9960
Fax: (963-16) 233478
E-mail: [email protected]
Assistant Branch Manager: Mr. Abdullah N.
KAMALEDDINE
DARAA
Daraa
Al Mahata, Al Kouwatli Str.
P.O.Box: 555 Daraa – Syria
Phone: (963-15) 9960
Fax: (963-15) 233055
E-mail: [email protected]
Branch Manager: Mr. Anwar EL HARESS
BRANCHES UNDER ESTABLISHMENT
Kfarsousa - Damascus
Al Midan - Damascus
Al Mazraa – Damascus
Al Mantaka el horra – Damascus
Al Mouhafaza – Aleppo
Al Sheikh Najjar – Aleppo
Al Souleimaniya – Aleppo
Aadra
HAMA
Hama
Hama – Kouwatly St
P.O. Box: 820 Hama ,Syria
Phone: (963-33) 213834- 5 - 9960
Fax: (963- 33) 213833
E-mail: [email protected]
Branch Manager: Mr. Hussein OBEID
HOMS
Homs
Homs, City Center Bldg.
P.O. Box: 1377 Homs, Syria
Phone: (963-31) 9960 - 453925
Fax: (963-31) 453936
E-mail: [email protected]
Branch Manager: Mrs. Anna DIBE
TARTOUS
Tartous
Tartous- Al Sawra St
P.O. Box: 824 Tartous – Syria
Phone: (963-43) 9960 - 227474
Fax: (963-43) 226869
E-mail: [email protected]
Branch Manager: Mr. Chamel MAKARI
Headquarters
54 Lebanon St. – Mohandessen
Tel: (202) 33039825 – 33039824 - 33039805
Fax: (202) 33039806
P.O Box : 144 Al Mohandessen
Swift: MRBAEGCXXX
Website: www.blombankegypt.com
Board of Directors
Mr. Saad AZHARI :Chairman
Mr. Alaa El Din Ahmad SAMAHA: Managing
Director & Chief Executive Officer
Directors
Mr. Elias ARACTINGI
Dr. Fadi OSSEIRAN
Mr. Shaker ABDULLAH
Mr. Samir KASSIS
Mr. Hani DANA - Chairman Advisor & Senior
Credit Officer
Assistant Managing Directors
Mrs. Maya EL KADY - Retail
Mr. Talal IBRAHIM - Total Quality Management
Mr. Tarek METWALLY - Institutional
171
BLOM BANK GROUP DIRECTORY
Group Heads
Mr. Belal FAROUK - Compliance
Mr. Talaat ABD EL AAL Al OUMDA - Human Resources
Mr. Mohamed RASHWAN - Internal Audit
Mr. Maher ANWAR - Legal Affairs
Mr. Abdel Aziz ALY - General Administration
Mr. Khaled ABDEL HAMID - Branches Regional
Manager
Mr. Hazem EL GOHARY - Information Technology
Mr. Gamal DIAA - Medium Size Finance
Mr. Ayman EL SHALKANI - Retail Sales Manager
Mr. Khaled YOUSSRY - Financial Institution
Mr. Yehia RASHED - Risk Management
Mr. Imad EL JUNDY - Central Operation
Mr. Mohamed EL BENDARY - Financial Control
BRANCHES in Egypt
Heliopolis
31 El Hegaz St. Heliopolis
Tel: (202) 22592030 – 22583120
Fax: (202) 24519730 – 24519710
E-mail:
[email protected]
m
Branch Manager: Mr. Mohammed ABD EL
RAHMAN
Mohandessen
54 Lebanon St. – Mohandessen
Tel: (202) 33039817 - 33039819
Fax: (202) 33039806
E-mail: [email protected]
Branch Manager: Mr. Ahmed SABRY
Maadi
4 Street 269 from Nasr St. – New Maadi –
Cairo
Tel: (202) 25198085 – 25197960 – 25197710
Fax: (202) 25199293 – 25197232
E-mail: mawad.ahmed @blombankegypt.com
Branch Manager: Mr. Moawad AHMED
Shoubra
232 Shoubra St. – EL Khalafawy
Tel: (202) 2431 1409 – 732 – 485
Fax: (202) 24311364 – 24312678
E-mail: [email protected]
Branch Manager: Mr. Sherif TAHER
New Maadi
17/5 El Laselky - Nasr St. – New Maadi
Tel: (202) 27550768 – 27550778
Fax: (202) 27550740
E-mail: [email protected]
Branch Manager: Mrs. Hanem FAHMY
Mohie Eldin Aboul Ezz
64 Mohie Eldin Aboul Ezz St. Dokki
Tel: (202) 37494563 – 696
Fax: (202) 37494652 – 79
E-mail: [email protected]
Branch Manager: Mrs. Wafaa EZZAT
Nasr city
El Akkad Mall – El Nasr Road – Nasr City
Tel: (202) 26906801 – 26906802 – 26906804 –
26906806
Fax: (202) 26906803 – 26906805
E-mail:
[email protected]
Branch Manager: Mr. Hossam ABU EL
SOWOOD
Cairo
15 Abu El Feda St. – Zamalik – Cairo
Tel: (202) 27353292 – 27368045
Fax: (202) 27370481 – 27358613
E-mail: [email protected]
Branch Manager: Mr. Sherif SEIF EL NASR
New Cairo
101 City Commercial Center – El Tagamoa El
Khames – New Cairo
Tel: (202) 29281193 – 29281200
Fax: (202)
E-mail: [email protected]
Branch Deputy Manager: Mr. Hazem El Khabeery
Oroba
1 Cleopatra St. El Orouba – Heliopolis – Cairo
Tel: (202) 24144796 – 24144759
Fax: (202) 24144793
E-mail: [email protected]
Branch Manager: Mr. Mohamed HUSSEIN
172
Ismalia
15 Street 144 Teraat Al Ismalia – in front of el
Rai Bridge
Tel: (2064) 3921758 – 3921759
Fax: (2064) 3921767
E-mail: [email protected]
Branch Manager: Mr. Ahmed ABD EL AAL
Khalifa El Maamoun
20 Al Khalifa El Maamoun St. – Manshiet El Bakry
Tel: (202) 22575625 – 22575647 – 22575641
Fax: (202) 22575651 – 22575665
E-mail: [email protected]
Branch Manager: Mrs. Heba SAAD
Opera
4 , 4a , 6 Abdel Haak El Sonbaty – Opera
Square
Tel: (202) 23927885 – 23923127
Fax: (202) 23925265
E-mail: [email protected]
Branch Manager: Mr. Ali Ezzat KHAFAGY
6 th October
Central Axis – El Madiena Commercial Center
– Area No.4 – 1st District – 6th October city
Tel: (202) 38320537 – 38321024 – 38321098
Fax: (202) 38339279
E-mail: [email protected]
Branch Manager: Mr. Mamdouh ZAYED
Abbasia
109 Abbasia St.
Tel: (202) 29222343 – 29222342
Fax: (202) 29222350
E-mail: [email protected]
Branch Manager: Mr. Hesham FOUAD
Al Hurghada
7 El Mena St. Saqala Square– Hurghada
Tel: (2065) 3448516 – 9
Fax: (2065) 3447834
E-mail: [email protected]
Branch Manager: Mr. Hussein EL SWAIFY
Al Mansoura
35 Saad Zaghloul St. – Touril – Mansoura
Tel: (2050) 2309120 – 2309123 – 2309124
Fax: (2050) 2309122 – 2309125
E-mail:
[email protected]
Branch Manager: Mr. Mohammed DAADAR
ALEXANDRIA
Stadium
1 Soliman Yousri St. ( Loumomba ) – Alexandria
Tel: (203) 4951641 – 45
Fax: (203) 4951635 – 4951636
E-mail: [email protected]
Branch Manager: Mr. Ayman TALAAT
El Shatby
17 Port Said St. – El Shatby – Alexandria
Tel: (203) 5934055 (10 Lines )
Fax: (203) 5934058
E-mail: [email protected]
Branch Manager: Mr. Ashraf TAHIO
Sporting
273 El Horria Road – Sporting – Alexandria
Tel: (203) 4200098 – 4270211 – 4282050 – 4279680
Fax: (203) 4200094
E-mail: [email protected]
Branch Manager: Mrs. Magda FAYED
Montaza
414 Gamal Abd El Naser – El Mandara Alexandria
Tel: (203) 5488550 – 5488593
Fax: (203) 5488713
E-mail: [email protected]
Branch Manager: Mr. Ibrahim ABAZA
Sharm El Sheikh
Naama Bay – El Amir Abdouallah St. – Murray
Mall – Sharm El Sheik
Tel: (2069) 3603592 – 3603593 – 3603594 –
3603547
Fax: (2069) 3603541
E-mail: [email protected]
Branch Manager: Alaa METWALLY
Branches Under Establishment
El Mansheya ( opening soon )
6A Ahmed Orabi Square in front of unknown
solider – Manshia square
Tel:
Fax:
E-mail: [email protected]
Branch Manager: Mr. Mohamed Refaat
Dokki
64 Mohy El Din Abu El Ezz street
BLOM BANK GROUP DIRECTORY
*
Headquarters: Doha
Headquarters
8 Geziat el Arab st. - Mohandeseen
Tel: (202 ) 37621611 – 1764 - 1754
Fax: (202) 37617680
E-mail: [email protected]
* Under Establishment
Board of Directors
Mr. Alaa El Deen SAMAHA - Chairman
Mr. Ahmed GEMEI - Deputy Chairman & Managing Director
Directors
Mr. Belal Farouk TAWFEK
Mr. Tarek Ibrahim METWALY
Mrs. Maya Tawfek AL KADY
Mr. Khaled MOHAMED
Mr. Mohamed EL BANDARY
General Management
Mr. Ahmed GEMEI - Deputy Chairman & Managing Director
Mr. Tawhed ZAHER - Chief Operating Manager
Mr. Mahmoud EL GAMMAL - Compliance Officer
Mr. Ahmed A. RAHMAN - Financial Control
Mr. Emam WAKED - Head of Institutional Desk
Headquarters
Abdel Aziz St, Daher bldg
Beirut, Lebanon
Phone: (961-1) 751090/1/2/3
Fax: (961-1) 751094
Email: [email protected]
Board of Directors
Mr. Saad AZHARI: Chairman & General Manager
Directors
Mr. Nicolas SAADE
Dr. Fadi OSSEIRAN
General Management
General Manager - Mr. Mouataz NATAFGI
Managers
Mr. Tarek HOUSSAMI - Main Branch Manager & Head of
Retail Department
Mr. Mustapha SIBAI - Financial Control & Investment
*
Board of Directors
Mr. Abdallah Abd Al Latif Ahmad AL FAWZAN - Chairman
Mr. Mohamed Abd El Aziz Ibrahim AL AKIL- Member
Mr. Wali Abd El Aziz Saleh AL SAGHIR - Member
Mr. Saad Naaman AZHARI - Member
Mr. Fahim Mohamed MOADAD - Member
Dr. Fadi Toufic OSSEIRAN - Member
Mr. Marwan Mohamed Toufic AL JAROUDI - Member
Headquarters: Riyad
Tyr
Main Road
Phone: (961 – 7) 740 900 – 741 649
Fax: (961 – 7) 348 487
Zahlé
Zahlé Entrance – Manarah Center
Phone / Fax: (961-8) 818640
Headquarters
Verdun – Rachid Karami St,
BLOM BANK bldg, Arope Plaza
P.O. Box: 113-5686 Beirut – Lebanon
Phone: (961-1) 759999
Fax: (961-1) 344012
Call Center: (961-1) 747555 (01) or ( 03) 1219
E-mail: [email protected]
Domain: http://www.arope.com
Board of Directors
Mr. Habib RAHAL - Chairman & General Manager
Mr. Fateh BEKDACHE - Vice Chairman & General
Manager
Directors
Mr. Samer AZHARI
SCOR SE (Represented by Mr. Patrick LOISY)
Mr. Serge OSOUF
Mr. Marwan JAROUDI
Mr. Rami HOURIE
Mr. Victor PEIGNET
General Management
Mr. Fateh BEKDACHE - General Manager
Ms. Faten DOUGLAS - Assistant General Manager
BRANCHES
Aley
Al Balakine
Phone: (961 – 5) 556 613
Fax: (961 – 5) 556 614
Aramoun
Choueifat – Al Koba, Aramoun Road
Phone: (961 – 5) 808 591 / 2/ 3
Fax: (961 – 5) 808 594
Bur Al Barajneh
Ain El Sekka Road
Phone / Fax: (961 – 1) 452 917
Headquarters
Damascus Al Rawda, Zuhair Ben Abi Salma st.
Malki Bldg N18
P.O. Box: 33015
Phone: (963-11) 9279
Fax: (963-11) 3348144
E-mail: [email protected]
Board of Directors
Mr. Amr AZHARI - Chairman
Mr. Fateh BECKDACHE - Vice Chairman
Directors
Mr. Samer AZHARI
Mr. Habib BATENJANI
Mr. Ibrahim EL SHEIKH DIB
Mr. Marwan JAROUDI
Mr. Hassan BAALBAKI
General Management
Miss Faten DOUGLAS - General Manager
BRANCHES
Aleppo
Aleppo- Azizieh- Majed Al Deen Al Jabri Street
Tel: (963-21) 9279
Fax: (963-21) 2118800
P. O. Box: 1293
Homs
City center Building
Tel: (963-31) 9279
Dora
Main Road – Cebaco Center
Phone / Fax: (961-1) 262222
Lattakia
Al Kamilia - 8 March Street
Tel: (963-41) 475213
Fax: (963-41) 475223
Jbeil
Voie 13, near Saint Charbel Junction,
Phone / Fax: (961 – 9) 943 701
Hama
Al Ashek Building – Al Amin Street
Tel: (963-33) 9279
Saida
Riad Solh Street – Fakhoury bldg
Phone / Fax: (961-7) 725 303
Al Kamshli
Tel: (963-52) 430670
Fax: (963-52) 430670
Tripoli
Zehrieh – Al Tall Street – Byssar bldg
Phone / Fax: (961-6) 446 877
Dair Al Zoor
Tel : (963-51) 372828
* Under Establishment
173