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2010 Annual Report

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2010 Annual Report Dr. Naaman AZHARI - Chairman of BLOM BANK Group Mr. Saad AZHARI - Chairman and General Manager of BLOM BANK S.A.L. Table of Content CHAIRMAN’S LETTEr 06 12. Universal banking services 57 CUSTOMERS’ DEPOSITS EVOLUTION 08 12.1 Private and investment banking 57 EVOLUTION OF MAIN INDICATORS 09 12.2 Commercial and corporate banking 58 CONSOLIDATED FINANCIAL RATIOS 09 12.3 Retail banking 58 STRONG AND CONTINUOUS GROWTH FOR THE 12.4 Islamic banking 61 LAST 7 YEARS 10 12.5 Insurance products & services 62 BLOM BANK’S GROUP CHART 11 13. Information systems and technology 62 BLOM BANK’S ORGANIZATIONAL CHART 12 13.1 Customer relationship management 62 13.2 Advanced electronic payment systems 63 CORPORATE GOVERNANCE 13.3 Enterprise application integration (eai) 63 1. BLOM BANK s.a.l. Code of corporate governance 16 13.4 Basel ii & regulatory compliance 63 2. BLOM BANK s.a.l. Major common shareholders 16 13.5 Systems security & high availability 64 3. BLOM BANK s.a.l. Board of directors 17 13.6 Financial reporting & consolidation 64 3.1 List of board members 17 14. People development 64 3.2 Information about board of directors 18 14.1 General overview 64 3.3 Number and date of board meetings held 14.2 Policies and procedures 65 in 2010 23 15. Bank’s operational efficiency 67 4. Information on key members of BLOM BANK s.a.l. 16. Regional expansion 67 Management 24 5. BLOM BANK s.a.l. commercial arrangements 26 BLOM BANK S.A.L. CONSOLIDATED FINANCIAL 6. General management of BLOM BANK s.a.l. 27 STATEMENTS 1. Auditors’ report 72 ManagEMENT discUssion & analYsis 2010 2. Consolidated income statement year ended 31 1. Operating environment 32 December 2010 73 2. Overview 34 3. Consolidated statement of comprehensive income year 3. Evolution of total assets 35 ended 31 December 2010 74 4. Sources of funds 36 4. Consolidated statement of financial position at 31 4.1 Customers’ deposits 36 December 2010 75 4.2 Capitalization (tier I & tier II capital) 37 5. Consolidated statement of cash flows for the year 4.3 Banks & financial institutions 38 ended 31 December 2010 77 5. Uses of funds 38 6. Consolidated statement of changes in equity for year 5.1 Cash and balances with the central banks 39 ended 31 December 2010 78 5.2 Lebanese treasury bills and other governmental bills and bonds 39 NOTES TO THE CONSOLIDATED FINANCIAL 5.3 Bonds and financial instruments with fixed STATEMENTS 82 income 41 5.4 Banks and financial institutions BLOM BANK WORLDWIDE CORREPONDENT 5.5 Loans and advances to customers 42 BANKS 170 6. Liquidity 46 7. Profitabilty 46 BLOM BANK GROUP MANAGEMENT AND 7.1 Net interest income 47 DIRECTORY 171 7.2 Non-interest income 47 7.3 Staff and operating expenses 52 8. Dividend distribution and preferred shares revenues 53 9. Capital adequacy ratios 53 10. Interest rate risk 54 11. Risk management and Basel II preparations 55 5 Chairman’s Letter “BLOM BANK’s operations were broad-based in terms of business areas and regional expansion, helping to make BLOM BANK one of the prime leading banks in the Arab world.” Despite a struggling world economy, a hesitant regional recovery, and a tense domestic political scene, BLOM BANK S.A.L. achieved in 2010 record profits and strong growth. The Bank recorded the best ratios on the profitability charts of listed Lebanese banks, scoring the highest rate of return on average equity at 21% and the highest rate of return on average assets at 1.54%. Its balance sheet also witnessed robust and balanced growth, with assets increasing by 7.9% to $22.4 billion, deposits rising by 8.8% to $19.6 billion, and profits going up by 12.9% to $330.7 million. These strong results stood out among Lebanese banks, and came as a product of BLOM BANK’s reputed control over expenses and risk, as reflected in the lowest cost to income ratio at 35%, a low ratio of net non-performing loans at 0.47%, and a high capital adequacy ratio ala’ Basel II at 14%. And this control involved the Bank’s strict compliance with the rules and regulations set by the regulatory authorities, and that has made the Bank the renowned destination for safe and clean banking. BLOM BANK’s solid core business and high asset quality continued to ensure a sturdy revenue stream. In addition, its margin-centered approach produced among Lebanese banks the highest net interest Annual Report 2010 . L income at $495 million and the best net interest margin at 2.3%. The Bank’s total lending also saw . A . some remarkable increase, rising by 28.9% to $5.2 billion, noteworthy among which is retail lending S which increased by 46% to $ 1.56 billion - enabling the Bank to attain the highest market share among Lebanese banks in credit card loans at 32%, in car loans at 25%, and in housing loans at 14%. The Bank’s income stream was also broad-based, stretching across all the Bank’s areas of operation. BLOM BANK Accordingly, fee income increased by 23% to $178 million, constituting 27.2% of operating income, and driven by our activities in private and investment banking, and our brokerage, insurance, and asset management services. The latter services are especially eminent, since BLOM BANK S.A.L. stands as the only Lebanese Bank to have launched its own in-house mutual funds comprising financial instruments from different Arab countries including Lebanon, Jordan, and Egypt, and a new one launched in mid- 2011 comprising Saudi assets. BLOM BANK’s operations were also broad-based in the regional-expansion sense, stretching across the Bank’s operating footprints in the twelve Arab and European countries in which it is present. This feeds into our strategy of exploiting growth opportunities, diversifying our risk and revenue sources, and enlarging our customer base. And in the process, it also strengthens the Bank’s brand name and reputation, and helps turn BLOM BANK S.A.L. into one of the prime leading banks in the Arab region. Going forward, the Bank is mindful of the soft spots in the world economy and, more importantly, of the political and economic changes raging in the Arab world. These developments, though they might 6 cause the Bank to adjust its short-term priorities, they will not detract it from its overall focus and long-term goals. In the medium-to-long term, the Bank sees these developments as leading to more open economic and political systems in the Arab countries, something that will add to their allure as investment and business destinations. It is also something that the Bank will look forward to be a part of, in terms of further and deeper expansions in what could be promising future markets. As for the short term, the Bank aims at strengthening and developing its activities in all universal banking areas, while maintaining its tested conservative approach especially in the countries experiencing transitional changes. We are also cementing our syndicated lending and lending to small - and medium - sized enterprises, towards which a seperate marketing unit has been developed for each; and, of particular interest, strengthening our investment and corporate banking services in the Gulf. I am pleased to add that, given BLOM BANK’s Mr. Saad AZHARI excellent and steady performance, appreciation from international institutions has been unstinting. As a result, BLOM BANK S.A.L. received many accolades in 2010, prominent among them were the awards: “CEO of the Year, Pan-Arab/Middle East” from Emeafinance; “Best Retail Bank in the Middle East” and “Best Investment Bank in the Middle East” from The Banker Middle East; and “Best Bank in Lebanon” from Global Finance, World Finance, and Emeafinance. BLOM BANK’s success rests on the trust and confidence that its customers, shareholders, and the community place on it. What reinforces these attributes is BLOM BANK’s consistent delivery of financial “Peace of Mind” to its customers and better value to its shareholders. In the latter’s case, the Bank attained in 2010 an EPS of $1.46, up by a notable 13% on 2009; and distributed $0.45 per common share to its shareholders, constituting a dividend pay-out ratio of 31%. As to our bondage with the community, this represents an organic part of the Bank’s socially responsible corporate model. For the Bank remains very active in this domain, supporting various charitable organizations, sponsoring the world-class BLOM Beirut Marathon, and pioneering the educational program BLOM Shabeb and the internationally-recognised BLOM MasterCard® “Giving Card” that has as its target the removal of all 425,000 mines in the country, with 26,000 removed so far. I would like to close by also saying that BLOM BANK’s success as a business model is a collective effort, bringing together the hard work of its management and staff to realize efficiently and consistently the Bank’s values and vision. Thank you. Saad Azhari 7 BLOM Bank’s Consolidated Customers’ Deposits Evolution (in USD Millions) years 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 2010 19,606 2009 18,024 2008 15,109 2007 13,737 2006 11,735 2005 10,161 2004 8,992 2003 7,686 2002 6,215 2001 5,525 2000 5,056 1999 4,330 Annual Report 2010 . L . A 1998 3,861 . S 1997 3,333 1996 2,686 BLOM BANK 1995 1,805 1994 1,259 1993 871 1992 595 1991 504 8 BLOM Bank’s Consolidated Customers’ Deposits Evolution Evolution of Main Indicators (in USD Millions) (in USD MIllions or LBP Billions) 2010 2009 Change 10/09 Total Assets LBP 33,683.85 31,208.84 7.93% USD 22,344.18 20,702.38 7.93% Customers’ Deposits LBP 29,555.89 27,170.74 8.78% USD 19,605.90 18,023.71 8.78% Total Net Liquidity LBP 19,520.02 18,889.72 3.34% USD 12,948.60
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