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Annual Report 2016 ANNUAL REPORT 2016 Table of Contents Chairman’s Message p. 6 Bank of Beirut at a Glance p. 12 History Mission and Values Board of Directors Management Abroad Compliance Corporate Governance p. 18 CSR Youth Report p. 34 Consolidated Financial Statements and Independent Auditor’s Report p. 56 Chairman’s Message Chairman’s Message Chairman’s Message Chairman's Message Dear Stakeholders, When it comes to creating value for our clients, we are reinventing the customer experience with new digital services. Our drive for efficiency and our care for trust have placed integrity and transparency at the core of that trust. New trends are re-defining the customer experience creating challenges for people but also offering new opportunities to serve them better. As leaders in digital banking, we are stepping up our own transformation to ensure we stay relevant to customers in this changing environment. In everything we do, we aim not only to create value for our clients, shareholders and employees, but also to meet financial and social challenges. Dear Shareholders, Our country is doing well and so is our Bank. Our large branch network and the diversified product range we offer our customers have lead us to securing sound profits in market shares in both commercial and retail businesses, while maintaining our position as a leader in Trade Finance. On consolidated basis, the Bank’s total assets reached as at 31st December 2016 USD 17.2 billion, growing by 6.53% year-on-year. The growth in size was mainly funded by the increase in deposits and equity. Total Shareholders’ equity reached around USD 2.31 billion, while profits amounted to USD 202 million. Thus, Bank of Beirut ROAA reflecting its assets profitability and how these latter are efficiently employed is remarkably solid and stable reaching 1.21% in 2016 compared to 1.20% in 2015. Thus the dividend yield per common share is still rising to attain 3.53% in 2016 compared to 3.18% in 2015 reflecting an explicit sign of clear financial health and confidence for Bank of Beirut to pay out dividends. Therefore, I am very pleased to report that 2016 was a year of both sound progress and continuity for the Group. Within this highly competitive environment and compressed interest rates, our local and international teams once again delivered excellent financial results; strengthening our market position while simultaneously building for the future. All our business units and regions created value for Bank of Beirut shareholders and we further fortified our capital adequacy ratios at Group level. Dear Bank of Beirut Customers, It is no secret that customer expectations have changed and so have Bank of Beirut. Today’s online world requires new ways of banking: We are reinventing the customer experience with new digital services. This transformation is creating new challenges for our industry as innovation has always been central to the value we bring. We are working internally and externally to harness the next generation of technology; we have thus introduced the Hybrid branch concept where online and offline generations can bank together from any location they choose. During this year of digital transformation, we used digital technology to make banking simpler, better and faster for our customers, while keeping your money safe and your data secure. This integrated approach is paving the way to a phygital future where the combination of physical and digital banking is key and where everybody remains connected for an exciting banking experience. Dear Diaspora, Through our expansion overseas, we keep on building bridges with our diaspora around the world to set up a global footprint for a Greater Lebanon. This is the exciting future we can create collectively through our work together as one bank, one community, and one group. Our commitment to our role as a financial institution, providing support and promoting economic, social and environmental progress has secured a better quality banking services for people in various societies, while generating adequate returns for shareholders. Our beliefs for the years to come are for a Greater Lebanon, where as a bank, together with our stakeholders we can make a difference in a much favorable context where we can be a driver for our economy and a backbone for our country Lebanon. Our belief is that you can play an active role in this plan. We can be partners in building the greater Lebanon we look forward to and repatriate all those great minds to work for our beloved country. 9 Chairman’s Message Dear Youth, Our fascinating journey of engagement with you started 10 years ago and our story together shaped who we are, where we come from and where we are going. Our initiatives record true commitment to the matters of importance to you; it is an engagement to shaping our vision, the backbone of our power. We are proud of the work we’ve done and the achievements we have accomplished by your side, opening closed doors, venturing into the unthinkable and investing where others do not dare to. As a financial provider and corporate citizen, we are capturing every opportunity we have to provide you with the pulse to reach your full potential. Our focus is to connect the youth of today with a more promising tomorrow through the power of new technologies. Whether in Robotics, smart innovations, sports, education, arts and culture or any other social endeavor, you will find us there behind you because you are the essence of our country and the hope of tomorrow. For the years to come, we will condense the scale and efforts given to you, we will be your support, your voice, your network, and most importantly … your power. Dear Bank of Beirut Family, In a year when many in our sector have been reducing headcount, we have increased our talent pool, while simultaneously extending diversity in Lebanon and abroad. We have confidence in our future, in our plan, in our foundations, and in the talented and dedicated people who bring so much to the Bank of Beirut group. We recognize we cannot do it alone, and you are part of our success all through this journey. As always, we have been agile and adaptive, but what remains constant are the principles upon which we run our Bank. Given the current regulatory environment, our roadmap has been concerned with prudently identifying and making good choices that align with our vision. Corporate Governance and risk management always remain at the top of our agenda. But our annual report to stakeholders is about much more than compliance. Sustainability, diversity and social purpose are likewise at the center of our attention. On behalf of our Board, we thank our customers, business partners and communities for their trust and support and promise we will always remain true to our mission and will be a compelling destination for all our stakeholders to thrive and achieve their aspirations. Thank you Salim G. Sfeir Group Chairman - C 10 Chairman’s Message Bank of Beirut at a Glance Bank of Beirut at a Glance History With a well-targeted focus, Bank of Beirut has not only grown to become one of today’s leading commercial banks in Lebanon, but has also proved to be the pioneer in more than one field. After taking the lead in “Super Affluent Net-Worth Specific Services in Lebanon” according to Euro money Private Banking and Wealth Management Survey; and receiving Zawya Funds Ranking Award for its “Beirut Golden Income Fund II and winning the “Best CSR Initiative”, Bank of Beirut was recognized in 2014 as the “Fastest Growing Banking Lebanon” by “Banker Middle East” magazine. 2015 brought the Bank further recognitions: Bank of Beirut was recognized by Banker ME as “Best Transaction Bank in the Levant” and “Best Commercial Bank in Lebanon” and its Chairman-CEO was voted “Banker for the years 2015 and 2016 in the MENA Region”. Bank of Beirut adopted its present name in 1970, years following its establishment as a commercial bank. In 1993, the 5-branch Bank was acquired by a group of businessmen and bankers, headed by the current Chairman - CEO, Salim G. Sfeir. Its strategic alliances with regional Arab banking institutions and acquisitions have enhanced its market position and leveraged its expertise into local and regional markets. Bank of Beirut, rating 35th bank in Lebanon in 1993, and one of Lebanon’s five banks listed on the Beirut Stock Exchange since 1997, has climbed up to reach the 3rd position by equity, 3rd by profits, and 6th by assets, with 70 branches in Lebanon and 24 spanning 4 continents. In 2005, Bank of Beirut established “BOB Finance s.a.l.”, a wholly owned financial institution regulated by the Central Bank of Lebanon; in 2007, Bank of Beirut Invest s.a.l., an independent wholly owned specialized banking subsidiary, was created; in 2009, BoB Finance was appointed one of two exclusive Agents of Western Union in Lebanon; and in 2011, “Beirut Life Co.”, an insurance company offering a full array of life insurance services, was initiated. In 2012, the new (corporate identity and logo) reflecting the restyled brand image were adopted, and in 2013, B-Smart, the first virtual branch, opened its doors. In 2014, the Bank initiated a new representative office in Accra, Ghana. The primary activities of Bank of Beirut include retail banking services; commercial, corporate and correspondent banking services; as well as trade finance and asset management services targeting high net-worth customers in both domestic and regional markets. Acknowledged in the list of the “Fastest Movers” banks worldwide, Bank of Beirut is the leading provider of cash management services to commercial clients in Lebanon.

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