2014 ANNUAL REPORT The Landmark for a Valuable Customer Experience
CONTENTS Environment 02 |MacroEconomicOperating Organizational Structure...... CL ExecutiveCommittees...... Board Committees...... Shareholding Structure...... Biographies oftheBoardDirectors...... 24 Composition oftheBoardDirectors...... 23 Corporate GovernanceFramework...... 20 01 |CorporateGovernance CL GroupMedium-Term Strategy Excellence RecognitionAwards...... Financial Highlights...... Statement of the Chairman General Manager Credit Libanais’Identity ...... 16 ...... 6 28 14 10 28 30 34 4 Human Resources...... Operations andInformationTechnology Electronic Banking...... Retail BankingActivities...... Customer Optimization...... 130 Corporate Responsibilityand Corporate Governance...... 128 Corporate Responsibilityand CL Strategy Corporate Responsibilityand 06 |CLCorporateResponsibility Risk ManagementStrategy...... 100 Compliance andAML/CFT Internal Audit...... 04 |CLControlFunctions Investment Banking( and Wealth Management...... Group Treasury, GlobalMarkets Corporate Banking...... 03 |CLCoreBankingActivities Business ContinuityPlanning...... 122 Information SecurityRisks...... Information SecurityRisks...... 120 Operational RiskManagement...... 119 Country RiskManagement...... 118 Market, FinancialInstitutionsand ...... clib )...... 80 120 126 .50 66 74 60 84 96 92 56 the Environment...... 138 Corporate Responsibilityand Responsible Financing...... 137 Corporate Responsibilityand the Communities...... 136 Corporate Responsibilityand Customer Experience...... 133 Corporate Responsibilityand CL BranchAddressesinLebanon...... CL BranchAddressesWorldwide...... 264 08 |CLBranchAddresses CLA FinancialResults...... 248 CLA FinancialResults...... Financial Statements...... 172 Notes totheConsolidated Consolidated StatementofCashFlows...... 170 Changes inEquity...... 168 Consolidated Statementsof Comprehensive Income...... 166 Consolidated Statementof Consolidated StatementofFinancialPosition...... 164 Independent Auditor’s Report...... Management DiscussionandAnalysis...... 144 07 |FinancialResults CL Milestones 266 234 160
Annual Report 2014 Credit Libanais Group credit libanais’ identity
Vision Statement Credit Libanais’ Business Principles
Vision We Serve We deliver superior customer service. We gain customer satisfaction with service that exceeds customers’ Credit Libanais’ purpose is to enhance shareholder, expectations. customer, and employee value. We Act We are action-oriented and encourage personal initiative. Can Do and Will Do are basic attitudes of all employees.
Core Values We Perform We increase productivity each year. Revenue and Profit per employee are key measures for Bank performance. Credit Libanais’ core values are customer focus, innovation, teamwork and reward for performance We Improve We embrace change. We continuously seek better solutions to problems for the customer and the Bank.
We Cooperate We function as a team. Cooperation among individuals and Mission units is fundamental in delivering the whole Bank to the customers. Credit Libanais is the preferred bank in Lebanon-for We Communicate We are open. We encourage continual dialogue across all customers and employees. units and levels.
Credit Libanais is primarily a retail bank and serves We Empower We emphasize delegation. Acceptance of personal selected corporate customers. accountability permeates our corporate culture. We Build We continuously upgrade our skills. Commitment to self- development and training are the cornerstones of our Credit Libanais Group competitive advantage.
We Respect We value each other’s ideas. We treat colleagues fairly, sincerely and courteously regardless of differences in background. Annual Report 2014
4 5 Statement of the Chairman General Manager
In 2014, the Lebanese economy suffered to branches in Cyprus, Bahrain and Iraq, as well as from the ongoing conflict in Syria, which has a representative office in Montreal, Canada and a imposed several political, social, and economic subsidiary bank in Senegal. challenges to the country. Moreover, the large Furthermore, CL Group preserved a healthy inflow of Syrian refugees on its territories, liquidity ratio of 76.73%. At yearend, shareholders’ aggravated by the national presidential void, equity (including profits of the year) reached contributed to increasing Lebanon’s vulnerability USD 794 million, with the capital adequacy through restraining its overall macroeconomic ratio reaching 16.01% (according to Basel II performance. Yet, despite these deteriorating regulations). In this context, CL Group is well- conditions, CL Group relied on adaptability and prepared to embrace the Basel III requirements agility as key drivers to continue to grow and serve and regularly conducts stress testing scenarios to customers. mitigate potential risks.
In this context, CL Group’s major indicators In terms of organic growth, the year 2014 was the reported healthy increases in 2014: consolidated year of major accomplishments for our Group with assets reached USD 9.16 billion, revealing a y-o-y the new Headquarters Tower that stood as one increase of 9.60%, customer deposits neared of the most technologically advanced high rises USD 7.74 billion, posting a y-o-y increase of The year 2014 was yet another good year for Credit in Lebanon and the region, allowing for dynamic 8.12%, customer loans reached USD 2,86 billion, synergy among CL management teams in view Libanais Group with performance and financial demonstrating a y-o-y increase of 9.88%, loans-to- of further improving CL Customer Experience. results reflecting the strong foundations of the deposits ratio firmed at 36.92%, pre-tax return on The Bank’s new landmark responds to the latest average equity (ROaE) stood at to 11.41%, pre-tax Bank, operating in local and regional stalemate. trends in construction, technology and utilization return on average assets (ROaA) reached 0.86%, CL Group continued to support customers and sustainability. The new “Green IT” approach led while net profits amounted to USD 64.23 million. us to consider the optimization of our environment deliver consistent shareholder-returns thanks to with the introduction of new technology. In addition, CL Group demonstrated positive the Bank’s prudent strategy, embedded prudent Server virtualization is almost complete and results across all sectors of the business, and the implementation of the DCIM (Data Center risk management, vigilant compliance, thorough reported a net interest income of USD 139.71 Information Management) will further enhance corporate governance culture as well as to the million, with net fees and commission income such optimization. Credit Libanais Group Board’s unwavering focus on growth. Our key expanding to USD 37.51 million, fueling net strategic priorities continue to be the increasing financial revenues to USD 188.41 million. These Moreover, the Bank has introduced an integrated results were recorded through the extensive unified communication system to optimize efficiency of our operations while expanding into domestic network of 73 branches in Lebanon business processes and increase user productivity. niche markets, locally and in foreign markets. covering the entire national territories, in addition Such an ability to communicate seamlessly via a Annual Report 2014
6 7 chairman’s address THETHE YEAR YEAR 2014 2014 WAS WAS THE THE YEAR YEAR OF OF MAJOR MAJOR ADVANCED HIGH RISES IN LEBANON AND THE REGION, ACCOMPLISHMENTSACCOMPLISHMENTS FOR FOR OUR OUR GROUP GROUP WITH WITH ALLOWING FOR DYNAMIC SYNERGY AMONG CL THETHE NEW NEW HEADQUARTERS HEADQUARTERS TOWER TOWER THAT THAT STOOD MANAGEMENT TEAMS IN VIEW OF FURTHER IMPROVING ASSTOOD ONE OF AS THEONE MOST OF THE TECHNOLOGICALLY MOST CL CUSTOMER EXPERIENCE.
wide range of integrated components with tele-presence, audio and video conferencing monitoring and controls embedded in the activity Notwithstanding the challenges that continue to allows for mobility, collaboration and business process integration. model. face us locally, regionally and internationally, we remain well positioned to continue to grow, since During 2014, the Bank continued to strengthen its compliance function through In recognition of outstanding achievement, we operate on solid foundations. Our continuous appointing a dedicated FATCA team, acquiring automated solutions to adapt CL banking Citibank awarded Credit Libanais sal with the investment in our human capital, processes and systems to local and international laws and regulations, and is proceeding as per the “2014 US Dollar Payments Straight through technologies allows us to further boost the value FATCA agenda. Moreover, to extend compliance to all stakeholders and strengthen processing excellence award”. In fact, Credit creation in the communities where we operate. the entire control environment, the Bank continuously conducts extensive training Libanais provided high-quality international programs to familiarize all staff with constantly evolving new procedures and ensure payment services with a standard transaction rate On a final note, our business confidence could proper implementation. of 97% for Treasury Payments and a rate of 95% not have materialized without the hard work of for Commercial Payments. our management teams and staff who assist our In corporate banking, we diversified our portfolio and capitalized on the utilization of Moreover, Standard Chartered Bank granted Credit customers in becoming financially better off. I Banque Du Liban subsidized lines of credit characterized by low interest rates, which Libanais the “2014 USD Clearing Straight Through also want to particularly express my gratitude to are designed to stimulate the economy and boost the country’s GDP. Furthermore, Processing Excellence Awards”. our shareholders and Board of Directors for their in our era where technology is transforming every aspect of the banking activity, invaluable confidence and continuous support, and where customers connect with us through a panoply of smart devices, we opted On the other hand, in recognition to CL Group’s and for CL Group customers for their loyalty and to implement a sophisticated online banking platform with a view to empowering CSR role and commitment to the communities continued trust. customers by providing them with a secure e-channel to perform their banking needs where it operates, the Bank was granted the with our Group. National and Social Impact Award, for its program Dr. Joseph Torbey titled: “Supporting Those Who Defend Us” Chairman General Manager Based on our client-centric strategy and our stronger technological infrastructure, we designed to feed the Lebanese Army Martyrs’ Fund constantly revamp our retail banking services to satisfy the ever-evolving customer and promote the Internal Security Forces anti-drug needs throughout all the phases of their life. In 2014, CL reaffirmed its leading role in campaigns. supporting stability in the lives of Lebanese families, by extending various affordable housing loan schemes: in this context, BDL subsidized housing loans increased by 66%; In 2014, CL Group’s digital journey witnessed and other housing loans increased by 10%. the introduction of the digital signage solution in several branches ensuring the dissemination Furthermore, in view of creating value for small and medium enterprises while of the Bank’s latest products and services. supporting their sustainable development, the Bank provides them with advisory Furthermore, we introduced the free application services to grow and carries out SME-oriented initiatives in accordance with long-term
“CL e-bank” compatible with a large variety of Credit Libanais Group objectives and secures credit facilitiesfrom low-cost, long term resources through mobile devices. We also reinforced our on-line local and international institutions (IFC, BDL, ESFD, Kafalat, Arab Fund, etc...). In this communication plan on different distribution respect, SME outstanding facilities achieved a y-o-y growth of 10%, with core products channels to reach out to customers in our hyper- performing very well, such as ESFD (Economic and Social Fund for Development) connected digital age. where the existing scheme grew by 70%. In parallel, average percentage of total unpaid Annual Report 2014 bills related to retail products registered 0.72%, while the Non Performing Loans (NPL) ratio continued to remain well below the industry standards, owing to the tight
8 9 financial highlights
Strong Capital Base Sustainable Profitability and Value Creation As at 31 December 2014 2013 2012 2011 Shareholders’ Equity (billion LBP) Net Financial Income (billion LBP)
Balance Sheet 0 200 400 600 800 1000 1200 0 50 100 150 200 250 300 Total assets 13,812,327 12,602,250 11,981,081 10,814,554 (million LBP) 2011 858 2011 261 Customer deposits 11,665,846 10,790,958 10,493,393 9,486,202
Shareholders’ equity 1,197,015 1,148,350 933,205 858,493 2012 933 2012 276 Liquid assets 8,951,213 8,165,539 8,128,316 7,472,366 Loans & advances to customers 4,305,329 3,918,607 3,368,166 2,979,232 2013 1,148 Previous period 2013 288
Income Statement 2014 1,197 Current year 2014 284 Net interest income 210,610 206,292 189,222 184,275 0% 10% 20% 30% 40% 50% 60% Net financial income 284,035 288,423 276,387 261,214
Net profit for the year 96,829 103,218 92,072 97,792 Growth Trend in Banking Activity Liquidity ratio 76.73% 75.67% 77.46% 78.83% Total Assets (billion LBP) Total Customer Deposits (billion LBP) Return on Average Assets (ROA)* 0.86% 0.84% 1.00% 1.13% 0 2500 5000 7500 10000 12500 15000 0 2500 5000 7500 10000 12500 15000 Return on Average Equity (ROE)* 11.45% 12.06% 16.04% 18.48% 2011 10,815 2011 9,486
Growth 2012 11,981 2012 10,493 Total Assets 9.60% 5.18% 10.79% 9.83%
Customer deposits 8.11% 2.84% 10.62% 11.45% 2013 12,602 2013 10,791 Solvency ratio (As Basel II) 15.77% 16.63% 13.65% 14.15% Growth of loans 9.87% 16.34% 13.05% 19.49% 2014 13,812 2014 11,666 Loan to deposit 36.91% 36.31% 32.10% 31.41%
Liquidity/Assets 64.81% 64.79% 67.84% 69.10% Growth Trend in Banking Activity Liquid Assets (billion LBP) Loans & Advances to Customers (billion LBP) * Excluding extraordinary items & Preferred Shares 0 1250 2500 3750 5000 6250 7500 8750 0 600 1200 1800 2400 3000 3600 4200
2011 7,472 2011 2,979 Credit Libanais Group
11.45% 15.77% 9.60% 2012 8,128 2012 3,368 pre-tax Capital growth 2013 8,166 2013 3,919 Return On average Adequacy Ratio in total Equity (ROaE) (as per Basel II) assets 2014 8,951 2014 4,305 Annual Report 2014
10 11 facts and figures
291.000 Customers served in Lebanon at Year End 2014
95
ATMs
24/7 73 Branches 6 Countries of Geographical Outreach Customer Service Lebanon 69 Centre and Secure Cyprus 1 Lebanon Cyprus Online Banking Services Bahrain 1 Bahrain Iraq Iraq 2 Canada Senegal www.creditlibanais.com Lebanon: 1518
International: +961 1 900 111 Credit Libanais Group Annual Report 2014
12 13 excellence recognition awards
CITIBANK RECOGNIZES STANDARD CHARTERED CREDIT LIBANAIS FOR EXCELLENCE AWARDS CREDIT LIBANAIS FOR EXCELLENCE
Citibank awarded Credit Libanais sal the “2014 US Dollar The international bank Standard Chartered Payments Straight through processing excellence award”. granted Credit Libanais the “2014 STP Excellence Award USD Clearing”. Indeed, Credit Libanais provided high-quality international In fact, Credit Libanais processed payment services with a standard transaction rate of 97% international banking transactions with for Treasury Payments and a rate of 95% for Commercial Standard Chartered with high precision and Payments. quality.
THE CORPORATE RESPONSIBILITY DEUTSCHE BANK GRANTS THE 2014 EURO “NATIONAL AND SOCIAL IMPACT AWARD” STP AWARD TO CREDIT LIBANAIS TO CREDIT LIBANAIS
In recognition of CL Group’s CSR role and commitment to Deutsche Bank presented the 2014 Euro STP Excellence the communities where it operates, the Bank was granted Award to Credit Libanais for the exceptional quality of the National and Social Impact Award, for its program titled: payment messages. “Supporting Those Who Defend Us”.
The purpose of the CL’s program is to contribute to the funds Credit Libanais Group supporting the Lebanese Army martyrs’ families, and that of the Internal Security Forces (ISF) dedicated to promoting anti-drug campaigns. Annual Report 2014
14 15 CL group medium-term strategy
client centric approach and innovative banking responsibility to contribute to the sustainable financial services and products, tailored to our target markets, stability of the communities where it operates, by THE BANK BELIEVES while maintaining firm risk management and setting high standards for corporate responsibility in its compliance culture, combined with the best corporate activities. THAT ITS BUSINESS governance practices. This shall be accompanied by PILLARS ARE WELL an adequate optimization of the Bank’s operational Certainly, the targets ahead are challenging amid efficiencies, by improving the support functions and tough operating conditions, with reduced revenues and ESTABLISHED heightening the importance of IT in partnering with the squeezed margins in competitive markets, however, Business. In parallel, the Bank will continue to strive we at Credit Libanais are committed to maintaining our TO BALANCE ITS towards enhancing the management and development path towards excellence and to creating value for all our EARNINGS MIX AND of its human capital resources, adopting improved stakeholders. In Strategy 2014-2018, we will strengthen approaches to link reward to long term risk-adjusted and redirect our focus onto eight major critical strategic SATISFY INCREASINGLY performance. Furthermore, the Bank also has a major pillars: COMPLEX AND GLOBAL 1- Drive Growth, Expansion and Business Diversification locally and abroad (West Africa and Middle East). CUSTOMER NEEDS. 2- Maintain Sound Profitability Management improving Fee Income and Follow Responsible Cost Efficiency Management.
3- Maintain a Strategic Marketing vision based on Resources Optimization.
4- Focus on Sustainable Technological Growth and Engage in Digital Customer Journey.
With the Medium-Term Strategy 2014-2018, Credit regional and local political environment, the dynamic 5- Optimize People Capital, linking reward to long-term risk based performance. Libanais reaffirms its commitment to remain a leading changes in the local and international regulatory global universal Bank, in its home market and in framework, the globalization and technical progress
6- Optimize capital allocation and preserve Sound Capital and Liquidity Management. Credit Libanais Group selected captive markets, in the Middle East and West and the conservative projected local GDP growth in the Africa. The Bank will maintain its plans for further range of 1.5% to 2% for the period under review. 7- Maintain embedded prudent Risk Management, Compliance Culture and Corporate Governance capital enhancement, organic growth and acquisitions, Strategy. operational excellence and cultural changes, in order to The Bank believes that its business pillars are well differentiate and reposition itself against its local peers. established to balance its earnings mix and satisfy 8- Engage in a Transversal Corporate Responsibility Strategy, to ensure Sustainability across the People, The goals of the Bank are based on a number of key increasingly complex and global customer needs. The Annual Report 2014 Planet and Profit Dimensions. assumptions, taking into consideration the challenging Strategy outlines the path towards creating distinctive
16 17 Corporate Governance
Corporate Governance Framework 20
Composition of the Board of Directors 23
Biographies of the Board of Directors 24
Shareholding Structure 28
Board Committees 28
CL Executive Committees 30
Organizational Structure 34 corporate governance
corporate governance framework
CL Group Corporate Governance Moreover, Credit Libanais’ structure, functions and Assets and Liabilities Management (ALM) Audit, Risk Management, Compliance and lines of communication support dissemination of the other Internal Controls Credit Libanais Group is committed to safeguarding ALM function supports the capital and liquidity corporate strategy to all levels of the organization. the interests of all stakeholders and recognizes the management process, governed by the Group ALCO. The Bank’s Audit, Risk Management, Compliance and CL adopts and implements national and international importance of good Corporate Governance for its ALM is responsible for the development of the Group’s other Internal Control functions have the necessary corporate governance practices which are defined in its sustainable success. In this respect, CL Group has investment policies, market risk, interest rate risk authority, stature, independence, resources and access Code of Corporate Governance. These are dispatched established a dynamic action plan aimed at complying with and liquidity risk, in addition to the hedging of foreign to the Board to carry out their duties in an independent to staff and made available on the Bank’s website. local and international Corporate Governance standards. exchange exposures of capital investments abroad, and transparent manner. Those functions keep pace with changes related to the Bank’s risk profile, including Board of Directors Structure managing capital ratios, and the Group-wide capital CL Group governance framework and that of its major requirements. its organic and international growth. An open and timely The Bank has a robust and transparent organisational banking subsidiaries encompass the following areas: internal communication within the Bank concerning structure with clear responsibilities, including the Organisation and functioning of the Board and its Capital and Liquidity Adequacy as per Basel risk, audit and compliance is ensured, both across the committees. Board and its committees. The Board is structured in III requirements organization and through reporting to the Board and Overall internal governance framework. terms of size, frequency of meetings and the support CL Group abides by national and international SEM. Remuneration policies and systems. of specialized committees, to promote efficiency, deep requirements in terms of capital adequacy regulatory Clear lines of responsibility and accountability review of business matters and a robust and critical framework, internal capital adequacy assessment Anti-Money Laundering and Counter defined throughout the organization. discussion of issues. process, Basel III, liquidity coverage ratio, loan Financing of Terrorism (AML/CFT) Effective channels of communication ensuring In the increasingly interconnected and risky business impairment, related specific and collective provisions as Credit Libanais Group Remuneration Policy implementation of Group strategy. well as general reserves for retail loans portfolio. world, CL banking group gives particular attention to The remuneration policy supports the Bank’s corporate Corporate and risk culture. CL Group abides by the quantitative and qualitative AML/CFT and complies with all national and international values and is aligned with its business strategy’s long- Risk management framework. requirements of the third pillar of the Basel accord and regulations issued, across all entities of the group, Internal control framework including audit and term interests and risk appetite. The Policy does not its subsequent updates. financial institutions, correspondents and customers, compliance. incentivise excessive risk-taking and there is appropriate particularly those seeking to engage in cross-border Disclosure and transparency. allocation between variable and fixed remuneration. transactions or to utilize correspondent banks. Annual Report 2014
20 21 corporate governance
The Foreign Account Tax Compliance Act employees receive regular updates related to the latest Composition of the Board of (FATCA) developments in the banking industry, through the FX Directors and Market Snapshots, Weekly Market Watch, Monthly Lebanese banks as well as FFIs worldwide are required Economic Wrap, and CL Indices. This plethora of CL Group is governed by a board consisting of twelve * On April 30th, 2015 following the expiration of the to comply with the US FATCA enacted in 2010 by information is communicated via various internal and members, who are leading bankers and businessmen mandate of the current Board of Directors, the Ordinary Congress. In this respect, CL Group is proceeding as external e-channels. enjoying wide expertise in Lebanon and the region. General Assembly of the Bank met and elected the per the FATCA agenda and opted for the FATCA status Board Members are elected by the General Assembly following members as Directors for a mandate of three of “Participating Financial Institution” across all local, CL Group Employee Handbook of shareholders for a term of three years. years expiring on the date of the Ordinary General foreign branches and subsidiaries, as well as financial The handbook elaborates on the rights and duties of Assembly to be held in 2018 to approve the accounts institutions and correspondents. Extensive trainings is employees. It also incorporates CL’s code of conduct, The Board considers that it is of an appropriate size of the financial year 2017. Members are: Dr Joseph continuously conducted to ensure that staff understand business ethics and requirements to ensure that to oversee the Group’s businesses, with a suitable Torbey, Mr. Karim Ali Awad Saleh Salame, CIH Bahrain and implement new procedures. activities are conducted with integrity and honesty and diversity of backgrounds and a mix of experience and International Holding SAL represented by Mr. Abdullah expertise to maximize efficiency. To fulfill its duties, Group CL Reporting is made available to all staff on the Bank’s intranet Saudi, H.E. Mr. Marwan Hamade, Mr. Mohamad Wajih portal. In case of breaches to CL’s core principles and it has put in place a governance structure which El Bizri, Mr. Sarkis Demerjian, Mr. Efstratios Georgios Group CL reporting is made in accordance with values, a disciplinary council takes corrective action contributes to the effective oversight of all activities Arapoglou, Mr. Mohamad Abdel Halim Arafa Arafa, Dr. International Financial Reporting Standards (IFRS), to ensure that CL culture of trust is well preserved and across branches and subsidiaries, both in Lebanon and Michel Khadige, Mr. Mostapha Nasser, Ms. Fatma Lotfy, providing for a high degree of transparency and respected by all staff. internationally. and Mr. Philip El Khoury. The newly elected members facilitating comparability with international peers. convened in a Board meeting held on the same date Complying with regulatory requirements, CL Group’s CL on the Internet * During 2014, the following changes occurred to the and elected Dr. Joseph Torbey as Chairman General Annual Report has become richer in terms of disclosure The Bank’s internet website makes available all CL Board of Directors’ composition: (i) in connection with Manager. and information. activities, products and services at the fingertips of EFG Hermes’ controlling majority in the capital of the customers on-the-go. It is continuously updated with Bank, the ordinary General Assembly accepted the Internal Communications pertinent information relevant to all stakeholders. CL’s resignation of Mr. Hassan Haykal, Mr. Mohamed Arafa To optimize top-down and bottom-up channels of social media platforms are rapidly gaining ground in and Mr. Ramsay Zaki, and elected three new Directors: communication between staff and management, catering to the more demanding virtual customers. Mr. Karim Awad, Mr. Efstratios Arapoglou and the internal newsletter, Observer, is edited in three Mr. Mostapha Nasser, effective February 28, 2014 for languages: Arabic, English and French. This internal Corporate Citizenship and Responsibility the remainder of the current Board’s term and (ii) the communication platform informs, educates and Cognizant of its important role in society CL Group other nine Directors remain in office until the term of the encourages CL staff to share views across the Group, has embarked on a strategic Corporate Responsibility current Board, which expires upon the convening of the sister companies and entities abroad. The newsletter Project to ensure that sustainability is embedded in all General Assembly (expected in 2015) that examines disseminates informative, argumentative, financial and aspects of our business. CR initiatives, are reported in the accounts of the financial year 2014. Credit Libanais Group economic articles to staff members. Moreover, the internal newsletter as well as in the Annual Report. Annual Report 2014
22 23 corporate governance
Biographies of the Board of Directors
Chairman General Manager
Dr. Joseph Torbey is the Chairman and Managing Director of Credit Libanais Group. After H. E. Mr Marwan Hamade served in various capacities in different cabinets in Lebanon, including minister of graduating from university, he held numerous public functions, including Controller at the telecommunications, minister of economy and trade, minister of tourism, minister of health and minister for the Lebanese Audit Court and the Ministry of Finance, where he headed the Income Tax Department. Very active on the professional level, he held numerous public offices including Chairman of the displaced. He started his career as an economic and political columnist in An Nahar and L’Orient-Le-Jour daily Union of Arab Banks, the regional organization that comprises more than 320 Arab financial and newspapers before serving as an-Nahar Group President and Director. He served as a member of the Higher banking institutions and Chairman of the Association of Banks in Lebanon which represents the Council of the Lebanese Press; Consultant for the World Organization of Health for the Middle East; Member banking profession and defends the interests of the Lebanese banking sector. He is currently of the International Committee of Bioethics at UNESCO and is currently Member of the Strategic Council at Chairman of the World Union of Arab Bankers, the premier Arab professional organization Université Saint-Joseph, Lebanon. for Arab bankers and finance professionals. On the academic front, he is the co-founder and first Chairman of the Board of Directors of the Institut Supérieur d’Études Bancaires (ISEB) at Université Saint-Joseph (Beirut); serves as Member of the Executive Committee of the Arab Academy for Banking and Financial Sciences (Jordan) since 2001; and is an Honorary Professor at the University of Vienna. He has a number of publications on taxation, economics and banking.
Members
Mr. Karim Awad is Chief Executive Officer and board member of EFG Hermes, the leading investment bank Mr. Yasser El Mallawany is the Non-Executive Vice Chairman of the EFG Hermes Board. Since becoming the of the Arab world. Since assuming leadership of the firm in 2013, Mr. Awad has led EFG Hermes’ return to Chief Executive Officer of the firm in 2008, Mr. El Mallawany has played a key role in driving the consolidation of profitability by building a regional advisory pipeline. He enjoys a long track record advising major corporations Egypt’s investment banking sector and facilitated the emergence of EFG Hermes as the leading Arab investment on equity offerings, mergers and acquisitions transactions. Prior to assuming his current role, Mr. Awad was bank. Chief Executive Officer of the Investment Banking platform with an overall responsibility for managing the firm’s investment banking, securities brokerage, research, asset management and private equity divisions. At the beginning of his career he served for 16 years at the Commercial International Bank (CIB), formerly Chase National Bank, and left as the General Manager of the Corporate Banking Division.
CIH Bahrain International Holding sal Represented by Mr. Abdullah Saudi
Mr. Abdullah Saudi, a world-renowned and respected international banker. Founder of the Libyan Arab Foreign Mr. Mohamad Wajih El-Bizri is an influential Lebanese businessman. He is the President of SIPES Group, Bank, where he served as Executive Chairman, establishing branches of the Bank worldwide. Founder of the one of the largest paint manufacturers in the Middle East, which has production facilities in six Arab Arab Banking Corporation, Bahrain where he served as President and Chief Executive. In addition to being voted countries. Mr. El-Bizri serves as the Honorary Consul of the Republic of South Africa in Lebanon. He is also the one of the most Innovative Bankers by the representatives of governments and international commercial bankers President of the International Chamber of Commerce in Lebanon, Vice President of the Association of Lebanese attending the IMF and World Bank meetings in 1980, Mr. Saudi has won many international accolades, including Industrialists and Vice President of Business in the Community Association in Lebanon. Credit Libanais Group an award at Georgetown University and the award of Best Banker from the Association of Arab American Banks in New York in 1991. He was the first to receive the Arab Banker of the Year award in 1993 from the Union of Arab Banks. In recognition of his role in the development of banking relationships between Arab and European states, Mr. Abdallah Saudi was awarded in 1977 by the King of Spain and the President of Italy and by the President of Tunisia in 1996. He is currently the Executive Chairman of ASA Consultants W.L.L., Bahrain. Annual Report 2014
24 25 corporate governance
Mr. Sarkis Demerdjian is a civil engineer and a prominent Lebanese businessman. He is the Chairman of Mr. Efstratios Arapoglou is a Corporate Advisor with a long international executive career in Corporate and Demco Group, Lebanon’s leading steel supplier, trading and servicing company established in 1922, which has Investment banking, International Capital Markets and in managing, restructuring and advising Financial also ventured in the real estate industry, engaging various construction projects that preserve and respect the Institutions. environment. Mr. Demerdjian sits on the Council of Trustees of AGBU (Armenian General Benevolent Union) He has been CEO of Commercial Banking at EFG Hermes Holding SAE Group, operating in the Middle East established in 1906 and present in many countries around the world. and Africa, and served as Chairman and CEO of the National Bank of Greece Group, Chairman of the Hellenic Banks Association and Managing Director and Global Head of the Banks and Securities Industry for Citigroup. Mr. Arapoglou served on several boards of publicly listed companies in Europe, the Middle East and Africa, as well as on Boards of Educational Foundations, including the Institute of Corporate Culture affairs in Frankfurt as Chairman. He is Chairman of the International Advisory Board of Tufts University in Boston, Ma. and member of the Business Advisory Council for the International MBA program of Athens University of Economics and Business.
Mr. Rabah Jaber is an influential Lebanese businessman. A prominent investor in Lebanon and overseas, he Dr. Michel Khadige is a prominent and well known Lebanese banker, who has been serving Credit Libanais is active in various sectors encompassing real estate development and investment, industry, construction as well since 1988. Member of CL Board of Directors, he heads the Corporate Banking and Financial Institutions as hotels and tourism. Division at the Bank. He is member of a number of Senior Executive Committees and member of the General Rules and Banking Regulations Committee at the Association of Banks in Lebanon.
Mr. Rabah Idriss is a well-known Lebanese businessman enjoying a wide expertise in the fields of finance, Mr Mostapha Nasser is a Lebanese citizen. He holds a university degree in Literature and Philosophy from the trade, and manufacture of food products, and is very active in professional organizations, such as the Chamber Lebanese University in Beirut; he is a journalist and writer in several newspapers and advisor to Zeidan Group in of Commerce and Agriculture of Beirut, among many others. Saudi Arabia. He was also advisor to some former prime ministers in Lebanon. Credit Libanais Group Annual Report 2014
26 27 corporate governance
Shareholding Structure Audit Committee The following table sets out the composition of the holders of the Common Shares, as of December 31, 2014. The Audit Committee is composed of three Non- communication from the Bank’s Risk Management and Executive Directors and one Independent Director Chief Risk Officer (CRO). The Risk Committee Charter who acts as its Chairman. The Audit Committee’s main Shareholders / Group of Shareholders Country (Ultimate Economic Ownership) Percentage Ownership (1) satisfies BDL Basic Circular N°118. The Risk Committee mission is to assist the Board in its responsibilities, in meets at least once quarterly, or more frequently as
EFG Hermes CL Holding sal (2) Lebanon 63.74% terms of: adequacy of accounting, financial reporting needed. policies, internal control and compliance system. The CIH Bahrain International Holding sal (3) Lebanon 23.52% Audit Committee also recommends the appointment, Credit Policy Committee Over 1,000 shareholders (4) Majority Lebansese 12.74% compensation, effectiveness and dismissal of external The Credit Policy Committee is headed by the Total Shareholding 100% auditors; ensures the independence and effectiveness Chairman - General Manager and includes one Non- of the internal audit function; reviews and approves Executive Director, the Group Head of Corporate the scope and frequency of audits; and ensures that (1) Percentage ownership figures represent both Common Shares owned by the named Shareholders and are expressed as a percentage of the total Banking and Financial Institutions Division, the Group Senior Executive Management is taking the necessary number of Common Shares issued and outstanding. Head of Retail Banking and Branches Division, the corrective actions in a timely manner to address (2) EFG Hermes CL Holding sal is the major shareholder. Group Head of Risk Management and Strategy control weaknesses, non-compliance with policies, (3) CIH Bahrain International Holding sal, majority owned by Capital Investment Holding Manama Bahrain (99%). Division and the Group Head of Finance Division. laws and regulations and other problems identified by (4) More than 1000 other shareholders, mainly executives and employees of the Bank, each with less than five per cent. The General Controller - Group Head of Internal internal and external auditors. In addition, the Audit Audit Division participates as an observer. The Credit Committee oversees the establishment of accounting Policy Committee’s main mission is to set the Bank’s policies and practices by the Bank. The Audit lending policies at the level of Group CL, in line with Board Committees Committee Charter complies with BDL Basic Circular the Board’s objectives. The Credit Policy Committee No. 118 dated July 21, 2008. External auditors are The Board is supported by the Corporate Governance, performance standards consistent with the long-term defines credit risk strategies, policies and limits for the appointed for a renewable period of three years, with Nominations, Human Resources and Remuneration objectives, strategy and financial soundness of Group efficient management of the various counterparty risk the partner rotation principle applying for a maximum Committee (CGNHRR Committee), the Audit CL, and monitors the performance of (i) employees at exposures, industries, aggregate exposures by product, period of five years in line with BDL Basic Circular Committee, the Risk Committee, and the Credit all levels against these standards in an objective and segment of activity and country exposure on a stand- No. 122 dated August 13, 2009. The Audit Committee Policy Committee. Each Committee has an approved transparent manner and (ii) SEM on the basis of the alone and consolidated basis. The Committee meets at meets at least once quarterly, or more frequently as charter that sets out its mandate, scope and working Bank’s long-term performance and not on the sole basis least once a year, or more frequently as needed. needed. procedures in order to support the Board in its duties. of previous year performance. Dividend Policy Corporate Governance, Nominations, Human The remuneration includes basic fixed salary, risk- Risk Committee Upon recommendation of the Board and approval of Resources and Remuneration Committee adjusted performance bonus in addition to a number The Risk Committee is composed of one Non- of additional benefits. Furthermore, the remuneration Executive Director and two Independent Directors, one the General Assembly, CL Group has enjoyed a track In line with BDL Basic Circular No. 133 dated August of the Internal Control Function is based on the of whom acts as its Chairman. The Risk Committee’s record of dividend payments on common shares, for 6, 2014, the Board has approved the Remuneration achievement of its employee’s objectives and does not main mission is to advise the Board on the Bank’s the past fourteen years, demonstrating the Bank’s Policy and actively oversees its implementation. The compromise their objectivity and independence. The overall current and future risk tolerance/appetite and sustainability and value creation to shareholders. Remuneration Policy provides a sufficient level of Board approves the total granted remunerations as part strategy, and provide oversight of Senior Executive remuneration in accordance with the Bank’s risk profile, of the annual budget and compares them against the Management’s activities in implementing group-wide to attract and retain the highest quality individuals. future expected revenues in order to avoid any likely risk management policies for capital and liquidity Credit Libanais Group The Board ensures that the Remuneration Policy has negative results on the Bank’s profitability. Amounts of management, as well as credit, market, operational, appropriate incentives, which are aligned with prudent remuneration paid annually are disclosed in accordance compliance, reputational and other risks of Group CL. risk-taking and consistent with the Bank’s long- with the International Financial Standards concerning The effectiveness of the Risk Committee is further termstrategy. The Board also approved formal related parties disclosures. enhanced by receiving formal and informal Annual Report 2014
28 29 corporate governance
CL Executive Committee
Chairman Dr. Joseph Torbey Chairman - General Manager
Members Dr. Michel Khadige Deputy General Manager - Corporate Banking and Financial institutions
Mr. Michele Cherenti Deputy General Manager - Retail Banking and Branches
Mr. Georges Gerios Deputy General Manager - Operations and Support Services
Mr. Georges Karkabi Deputy General Manager - Investment Banking
Mr. Anthony Ussher Deputy General Manager - E-Banking
Mr. Elie Abimrad General Controller - Internal Audit
Mr. Alexandre Salem Deputy General Manager - Treasury, Global Markets and Wealth Management
Mrs. Nada Awad Rizkallah Deputy General Manager - Risk Management and Strategy
H.E. Dr. Alain Hakim Assistant General Manager - Marketing and Business Development
Mr. Badih Azzi Assistant General Manager - Human Resources Division
Mr. Najib Ghanem Assistant General Manager - Information Technology
Mr. Charbel Mourad Assistant General Manager - Finance
Secretary Mrs. Nina Elhajj Srour Head of Corporate Projects and Publications - CEO Office
CL Standing Committees managers. This Committee meets at least quarterly or to existing and new staff. It reviews and approves Committee sets the general strategies and policies for more frequently as needed. compensation policies and systems, as well as rewards developments relating to banking information technology, Group CL’s various committees are established with and incentives in line with performance objectives set. in accordance with the Bank’s master strategic plan. The clear missions, authorities and responsibilities. The Foreign Entities Committee The Committee also proposes the annual budget for Committee’s main objectives are to ensure the adequate Committees’ respective authorities are of a decisive The Foreign Entities Committee approves the training and development to the CGNHRR Committee, functioning and development of information technology and consultative nature, where all recommendations annual business plans of foreign entities, reviews and convenes quarterly or more frequently as needed. systems in line with the continuous development of that require Board approval are submitted through their business performance and evaluates their systems, applications and services to support the Bank’s Sales and Business Development Committee the Chairman - General Manager for review, decision- risk exposure. The Foreign Entities Committee expansion plans. This Committee convenes quarterly or The Sales and Business Development Committee making or ratification. The Board is kept informed of also ensures the compliance of foreign entities with more frequently as needed. all the major decisions governing the Bank’s overall applicable laws and regulations. The Committee ensures the introduction, maintenance and promotion of the Bank’s various products and services to the market. activities as submitted and recommended by the places emphasis on the ongoing monitoring of risk Business Continuity Planning Committee management, anti-money laundering, terrorism Moreover, it introduces new and profitable products and various committees. The Business Continuity Planning Committee (BCP) financing, fraudulent activities and information security services and ensures adequate funding and analysis of ensures continuity of service to the Bank’s customers in foreign entities, and convenes at least quarterly or the risk-adjusted-return on capital of such products and Management Committee and stakeholders in an efficient and timely manner
more frequently as needed. services. The Committee coordinates and implements Credit Libanais Group The Management Committee regularly reviews the in case of an eventual event that might disrupt the the Bank’s overall advertising strategy, and monitors growth and performance of the Bank and ensures the Human Resources and Training Committee Bank’s regular activities. The BCP Committee proposes results and feedback. It meets quarterly or more execution of the Bank’s policies and procedures as The Human Resources and Training Committee is policies, recommend priorities, and establishes plans frequently as needed. approved by the Board. The Management Committee responsible for establishing the policies and procedures to meet business continuity requirements; and ensures plays a key role in ensuring the participation of key pertaining to human resources management and Banking Group Information Technology adequate communication and training is maintained at employees in managerial decision-making through overseeing the execution of HR plans. The Committee Steering Committee Bank. The BCP Committee meets at least quarterly or Annual Report 2014 regular communication and liaison with all regional also supervises orientation and training programs The banking Group Information Technology Steering more frequently as needed.
30 31 corporate governance
ISO Executive Committee Risk Committee and the Board for final approval. The approval process of the financial institutions, and programs throughout the Bank and its affiliates; ALCO meetings are held on a monthly basis, or more the monitoring of the Committee’s decisions. The and provides solutions on how to deal with security The ISO Executive Committee oversees the breaches or control overrides. This Committee also development and implementation of the Bank’s Quality frequently as needed. Committee meets on a monthly basis or more frequently as need be. recommends security training programs for the Bank’s Management System and assists in the continuous Credit Committees staff and convenes at least once quarterly. improvement and long-term effectiveness of quality The Bank has a number of Credit Committees with Compliance, Anti-Money Laundering and systems impacting the Bank performance, as per different levels of lending authority, depending on the Counter-Financing Terrorism Committee the Bank’s business requirements. It also provides business segments concerned and the exposure. Credit The Compliance, Anti-Money Laundering and Counter- a framework for establishing and reviewing quality Committees are responsible for ensuring the adequacy Financing of Terrorism Committee (Compliance, AML/ objectives at all levels of the Bank. The ISO Executive of the Bank’s lending policies and compliance of lending CFT Committee) reviews all relevant policies and Committee meets once a year or more frequently as CREDIT LIBANAIS’ activities with the Bank’s credit policy and applicable procedures, in accordance with local and international needed. laws and regulations. The Credit Committees meet laws and regulations. It reviews the AML/CFT systems STRUCTURE, FUNCTIONS AND regularly and ensure the implementation and monitoring adopted by the Bank and ensures that adequate Risk Committees LINES OF COMMUNICATION of their decisions by the business owners under the are implemented to check the Bank’s clients and Group Asset and Liability Committee supervision and control of the Credit Administration transactions. It closely monitors suspicious cases SUPPORT DISSEMINATION OF The Group Asset and Liability Committee (ALCO) is and Control departments that report to the Credit Risk and takes pro-active steps to prevent AML/CFT responsible for managing and controlling the Bank’s Management Department. The presence of a member fraudulent activities within the Bank. The Committee THE CORPORATE STRATEGY balance sheet and income statements and formulating of the Risk Management Division is an integral part of reports suspicious cases to the Special Investigation TO ALL LEVELS OF THE the general financial strategy of each business unit. the credit approval process and the monitoring of the Commission at the BDL. It is also responsible ALCO reviews all activities of the Bank which impact Credit Committees’ decisions. for FATCA implementation and compliance. This ORGANIZATION. balance sheet items. It focuses on risks and strategic Committee meets at least once quarterly, or on a need issues related to interest rate monitoring, liquidity Financial Institutions and Country Credit basis. management and market risks, as well as their control Committee and mitigation. The ALCO reviews and validates all The Financial Institutions and Country Credit Banking Group Information Security relevant policies and procedures and ensures their Committee approves the banks and financial Committee compliance with regulatory guidelines pertaining to institutions whom the Bank deals with or intends to CL Banking Group Information Security Committee liquidity risks, investment portfolio risks, interest rate deal with. The Committee defines the credit lines to reviews and approves Group CL’s information security and foreign exchange risks, market risks, political and be granted for each banking and financial institution strategy, sets security policies and procedures and country risks, risks relating to the pricing of loans and counterparty in compliance with applicable laws and submits them for the approval of the Risk Committee deposits, profitability risks, and risks of unrealized regulations, and in line with the Board’s strategic and the Board. This Committee also reviews and Credit Libanais Group gains and losses resulting from long-term positions, objectives and the Group’s financial institutions credit approves the scope of security programs and related prior to submitting such policies and procedures to the policy. Risk Management is an integral part of the budgets; oversees the implementation of the security Annual Report 2014
32 33 corporate governance
Organizational Structure High Level Structure
Chairman General Manager Board of Directors Legal
CGNHRC* Committee
Audit Committee
Risk Committee
Credit Policy Committee *Corporate Governance, Nominations, HR and Compensation Committee.
Corporate Treasury, Risk Retail Banking and Global Markets Operations Banking Management Compliance Banking and Financial and Wealth Electronic Foreign Human and Support Information Internal Audit and Strategy and AML/CFT Branches Institutions Management Banking Entities Finance Resources Services Technology
Control Functions Business Lines Business Lines Support Functions
- Branch Audit - Risk Policies - Anti Money - Regional - Financial - Treasury - E-Banking - Cyprus - Financial - Recruitment - Administration - IT Infrastructure - Head Office and Strategy / Laundering / Branch Institutions and Management Card Systems, - Bahrain Control and Evaluation and Support - Network and ICAAP CFT Management** Correspondent Applications and Services Audit - Foreign - Senegal - Financial - Compensation Communication - Risk Mgt Project - Regulatory - Consumer Banking Exchange Development Management and Benefits - Engineering - Credit and - Iraq - Software E-Banking Audit Office / Credit Compliance Banking - Corporate and Management - Card - Reconciliation - Training and - Trade Finance Development Portfolio Mgt - Research and and Retail Medium Administration - Canada - Global - BDL Development - Central - Implementation - IT Audit / Credit Risk Training for Products Business Unit and Operations Markets Subsidies Processing and Support - Back Office Models AML/CFT - Commercial - Global - E-Channels and Audit - Private - Performance - Methods and - MIS Reporting - Credit Risk Retail Lending Business Banking and Customer and Budget Procedures - Regulatory - LIB Audit Management and Kafalat Development Wealth Service Control - Automated Reporting - CLIB Audit - Market, FI and - Marketing - Recovery Management - Merchant - Cards Payments Country Risk and Business Relationship - Overseas - Public - Middle Office Business Credit Libanais Group and Affiliates Management Development Relations Treasury - Customer - Treasury and Accounting Global Audit - Operational Risk - Information and Global Relationship - Corporate - Central Markets Back Management Department Markets Management - Quality Projects and Accounting Office Assurance and - Information - Insurance Publications (CRM) - Quality Improvement Security Risk Services Management Management - System - Business **Riad El Solh Hamra | Kaslik Implementation Annual Report 2014 Continuity Chtaura | North and Support Planning
34 35 corporate governance
Group Entities Structure
Group Entities
External Auditors Chairman General Manager Credit Libanais sal All subsidiaries are incorporated in Lebanon, except for Credit International sa, which is incorporated in Senegal.
Credit Libanais Investment Bank sal 99.86% Banking Shareholders
Lebanese Islamic Bank sal 99.84% Banking Board of Directors CGNHRC* Risk Audit Credit Policy Credit International sa - Senegal 92.82% Banking Board Committees Committee Committee Committee Committee
* Corporate Governance, Nominations, Human Resources and Compensation Committee Cedars Real Estate sal 99.92% Real Estate
Legal Sté Hermes Tourism & Travel sal 99.99% Tourism and Ticketing
Group Business Lines Soft Management sal 47.00% IT Solutions
Retail Banking and Branches Treasury, Global Markets and Wealth Management Credit Libanais d’Assurances sal 66.97% Insurance Corporate Banking and Financial Institutions Electronic Banking Business Development Center sarl 98.62% Advertising Foreign Entities Capital Real Estate sal 98.00% Real Estate Committees Credilease sal 99.26% Financial Institutions Management Committee Banking Group Information Group Asset Technology Steering Committee Collect sal 44.94% Collection Services of Receivables and Liability Committee Human Resources Compliance and AML/CFT and Training Committee Committee Foreign Entities Committee Financial Institutions Sales and Business and Country Credit Committee Development Committee Credit Committees Business Continuity Planning Committee Group Geographic Presence Banking Group Information Security Committee Credit Libanais sal - Group Lebanese Islamic Bank sal Credit Libanais d’Assurances et Lebanon de Réassurances sal ISO Executive Committee Credit Libanais Investment Bank sal Credilease sal Credit Libanais Group
Group Control and Support Functions Cyprus Limassol Branch
Internal Audit Human Resources Management Senegal Credit International sa - CISA Manama Branch Risk Management and Strategy Operations and Support Services Bahrain Canada Representative Office
Compliance and AML/CFT Banking Information Technology Annual Report 2014 Iraq Baghdad Branch Erbil Branch Finance
36 37 macro economic environment
macro economic operating environment
Year 2014 in Review DESPITE THE Gales continued to rage unabated for yet another year, of International Finance (IIF) expected a hike in net BLEAK SITUATION, trapping the Lebanese economy in the eye of the storm private capital inflows to Lebanon to around $4.4 billion for most of 2014 and blurring the country’s alleyway in the year 2014, from $2.9 billion in the year 2013. THE INSTITUTE OF to the year 2015. In fact, the glooms of the Syrian In a related note, the net foreign assets of Lebanon’s crisis further battered Lebanon’s political and social financial sector witnessed a deterioration during INTERNATIONAL stability throughout the year, blotching the country the year, with a deficit of $1,406.9 million as at end December 2014, compared to a deficit of $1,127.1 with a series of security incidents and pending political FINANCE (IIF) million the year before. issues of which we mention the prevailing presidential EXPECTED A HIKE void, the absence of a consensus pertaining to the The Lebanese real estate sector was also capable of parliamentary elections, military clashes in the regions defying the destructive wave threatening the Lebanese IN NET PRIVATE of Ersal, Tripoli, and the Bekaa and the kidnapping economy, managing to report a 2.20% annual increase CAPITAL INFLOWS of Lebanese soldiers. Lebanon also paddled through in the number of real estate transactions to 70,721 the various repercussions of the increasing number of in the full year 2014, from 69,198 transactions in TO LEBANON TO Syrian refugees on its territories,which added pressure 2013. Concurrently, the aggregate value of real estate AROUND $4.4 BILLION on public finances, unemployment rates, poverty levels, transactions burgeoned by 2.77% y-o-y to $8.95 billion and overall social canvas. in 2014, from $8.71 billion in 2013. It is worth noting, IN THE YEAR 2014, however, that the share of foreigners in real estate sale Despite such a bleak picture, the International Monetary transactions narrowed to 1.69% as at end of year 2014, FROM $2.9 BILLION IN Fund (IMF) upwardly revised its growth estimates for from 1.85% in 2013. In a related context, Lebanon’s Lebanon for the year 2014 from 1.0% in its April 2014 construction permits came in 6.05% higher on a yearly THE YEAR 2013. World Economic Outlook (WEO) report to 1.8% in its basis at 11,163,931 sqm in the year 2014, whereas October 2014 WEO report. In parallel, the Institute cement deliveries fell by 5.38% y-o-y to 5,516,827 tons.
For the Year
Real Estate Transactions 2014 2013 YOY % Change Credit Libanais Group
Number of Sale Transactions 70,721 69,198 2.20%
Value of Transactions (USD Billion) 8.95 8.71 2.77%
Average Value per Transactions (USD) 126,575 125,841 0.58%
Source: General Directorate of Land Registry and Cadastre, Credit Libanais Economic Research Unit Annual Report 2014
38 39 macro economic environment
Evolution of Cumulative Construction Permits (sqm) Yearly Evolution of Cement Deliveries
2,000,000 6,000,000 10,000,000 14,000,000 1,000,000 3,000,000 5,000,000 0 4,000,000 8,000,000 12,000,000 16,000,000 Tons 0 2,000,000 4,000,000 6,000,000
December 2008 14,258,037 2008 4,219,257
2009 11,509,142 2009 4,897,460 program “KAFALAT”, amassing a stake of 48.14% higher to 6,567,833 (including transit travelers) in the (399 guarantees) of total Kafalat guaranteed projects year 2014. The hospitality sector, however, continued
2010 15,187,403 2010 5,226,621 during the year 2014, followed by the industrial sector to suffer from a low occupancy rate of 52% in the full (35.15%) and the tourism sector (11.21%). year 2014 at Beirut’s four and five-star hotels, with the average room rate and yield dropping by 2.7% 2011 13,889,806 2011 5,549,769 As far as tourism activity is concerned, the year 2014 and 2.8% y-o-y respectively, compared to double-digit witnessed a shy 6.03% improvement in the number of drops in the year 2013. Nevertheless, tax-free spending 2012 12,361,736 2012 5,308,550 tourists flooding into the country to 1,354,647 visitors in Lebanon managed to increase by 8% y-o-y in the as at end of December, noting that said number may be last quarter of 2014, with spending by French tourists 2013 10,526,939 2013 5,830,616 upwardly biased by the inclusion of Lebanese visitors in rallying by 50% and spending by Saudi Arabians the headcount. Similarly, the total number of passengers increasing by 36%, followed by U.S. tourists (+33%) 2014 11,163,931 2014 5,516,827 via the Beirut International Airport (BIA) edged 4.84% and Jordanian tourists (+21%). Source: BDL, Credit Libanais Economic Research Unit
From another standpoint, Lebanon’s industrial sector mirrored by the 6.93% annual contraction in Lebanon’s Annual Growth in Spending in the Fourth Quarter of 2014 continued to whirl within a downward spiral amid the industrial exports to $3,150 million as at end of year -60% -40% -20% 0% 20% 40% 60% sustained political, security, and economic instabilities 2014, down from $3,384 million in 2013. Industrial reigning on the local front and in neighboring Syria, with imports of equipment and machinery were no exception, All Countries 8% tensions on the Lebanese-Syrian borders paralyzing shedding 10.42% y-o-y to $269.1 million as at end of Saudi Arabia 36% trade activities between Lebanon and many Arab 2014, compared to $300.4 million a year earlier. countries for another consecutive year. This was UAE -9%
For the Year Kuwait 5% 2014 2013 YOY % Change Jordan 21% Industrial Exports 3,149.8 3,384.3 -6.93%
Egypt Industrial Imports of Equipment & Machinery 269.1 300.4 -10.42% million USD 14%
Source: Lebanese Ministry of Industry, Credit Libanais Economic Research Unit France 50%
Qatar The outlook was not any better for Lebanon’s challenges for Lebanese farmers. Despite such harsh 13% agricultural sector, which, according to experts in the weather conditions, a rather satisfactory amount of Credit Libanais Group Syria -24% field, had to face several natural factors throughout the vegetables and fruit were harvested in 2014, yet year 2014, mainly the drought that had been prevailing remain in stock amid the ongoing war in Syria, through United States 33% since late 2013, which brought upon noticeable which around 80% of Lebanon’s agricultural exports damages to potato and wheat crops among others. are channeled. It is worth noting that the Lebanese Nigeria 11%
Frost also damaged the country’s stone fruits at agricultural sector detains the largest number of Annual Report 2014 different intervals of the year, creating additional guarantees provided by the government-subsidized Other Countries 2% Source: Global Blue, Credit Libanais Economic Research Unit
40 41 macro economic environment
As for Lebanon’s energy sector, onshore seismic Consequently, Lebanon’s gross public debt burden (1.37%) in 2014 to $10.95 billion, as gold prices in the reserves (286.8 tons) in 2014 according to the World surveys were conducted throughout the year 2014, grew heavier in 2014, adding $3.07 billion on an annual international market tumbled amid the upturn in US Gold Council, trailing behind Saudi Arabia (322.9 tons) yet the related results have not been disclosed to the basis to attain $66.56 billion as at end of December. financial markets. Lebanon, however, preserved its 19th and Turkey (523.8 tons). public and are expected to be released by around Domestic borrowing remained the government’s main rank in the world and 3rd in the region in terms of gold mid-2015. The bidding process was also postponed on source of financing in the year 2014 (61.54% of gross several occasions, leading to no palpable progress in public debt), specifically from banks (around 51% of End of year 2014 2013 2012 2011 2010 2009 2008 Lebanon’s hydrocarbon sector. LBP-denominated debt), in an attempt to finance the Gold 10.95 11.10 15.31 14.40 13.01 10.06 8.03 recurrent budget deficits and roll over maturing debt. From a public finance standpoint, the Lebanese Foreign Assets 37.86 35.29 35.74 32.24 30.60 28.30 19.73 Nonetheless, and despite the prevalence of such a government continued to bear the additional costs of billion USD burden, Lebanon managed to tame, to some extent, its Total Reserves 48.81 46.40 51.05 46.64 43.61 38.36 27.76 hosting over 1 million Syrian refugees on its territories, debt-to-GDP ratio to around 140% by the end of 2014, Source: Banque Du Liban, Credit Libanais Economic Research Unit which has put increased pressure on its health, from nearly 141% in the year 2013. education, and infrastructure expenses. On the other hand, and from a budget angle, 2014, down from $4.22 billion a year earlier, thanks Lebanon’s budget deficit continued to be a drain to some 15.48% annual expansion in government Public Debt December 2014 2013 YOY % Change on the government, notwithstanding the noticeable revenues to just over $10.87 billion, coupled with a Gross Public Debt 66.56 63.49 4.84% improvement throughout most of the year 2014. More shy 2.28% y-o-y increase in government expenditures - Domestic Debt 40.96 37.35 9.66% specifically, Lebanon’s fiscal deficit (budgetary & (including debt service) to around $13.95 billion.
- External Debt 25.60 26.13 -2.04% billion USD treasury) narrowed to around $3.07 billion in the year
Public Sector Deposits 9.26 10.28 -9.87% For the Year Net Public Debt 57.30 53.21 7.69% Public Finance 2014 2013 YOY % Change Source: The Association of Banks in Lebanon, Credit Libanais Economic Research Unit Revenues 10,879 9,420 15.48%
Also from a public finance perspective, the Ministry from international investors representing 25% for both Expenditures (including debt servicing) 13,952 13,640 2.28% million USD of Finance issued ten-year treasury notes carrying maturities. In a similar context, the Lebanese Ministry Debt servicing 4,380 3,980 10.03% an attractive yield of 7.98% per annum on served of Finance announced in late 2014 its intention to issue Total deficit (3,073) (4,220) -27.19% occasions during 2014. Concurrently, the Lebanese new Republic of Lebanon (ROL) Eurobonds for an Total Primary Surplus / (Deficit) 1,307 (240) -645.32% government successfully completed a voluntary debt aggregate amount of $4.4 billion in several stages, and Deficit / Total Expenditures 22.02% 30.94% exchange offer during the month of April 2014 with a this in an endeavor to finance the government’s needs Source: The Lebanese Ministry of Finance, Credit Libanais Economic Research Unit participation rate of 79.84%. In figures, government for the years 2015, 2016, and 2017. notes maturing in May 2014 and worth some $703.86 million were exchanged for longer term notes. In total, Lebanon’s snowballing public debt burden remains, On the current account side of the balance of payment, As previously mentioned, the Lebanese-Syrian borders the transaction resulted in bond issues worth some however, tamed by the robust reserves portfolio at the ongoing tumult in neighboring Syria weighed heavily constitute a center point for land trade exchanges from $1.4 billion, split between notes maturing in 2020 ($600 Banque Du Liban (BDL), with the ratio of total reserves on Lebanon’s trade activities, yet its impact on the Lebanon to the region, the thing which explains the million) and 2026 ($800 million tap). The 2020 notes (gold and foreign currencies) to gross public debt country’s trade deficit was somewhat muted amid the significant drop in Lebanese exports through the Syrian Credit Libanais Group were issued at a price of $100 and carry a yield of nearing the 74% mark. It is worth noting that total simultaneous drop in imports. In details, Lebanon’s territories. In this perspective, Lebanon’s total exports 5.80% per annum, while the 2026 notes were reopened reserves at BDL appreciated by $2.41 billion in 2014 balance of trade deficit narrowed to $17.18 billion as at plunged by 15.83% y-o-y to $3.31 billion, while imports at a tap price of $99.147, carrying a yield of 6.70% per to reach $48.81 billion at end of December, with the the end of the year 2014, compared to a slightly higher fell by 3.46% to around $20.49 billion. annum at issue. Local investors accounted for 88.5% foreign assets (foreign currency reserves) portfolio deficit of $17.29 billion by the end of the previous year. of total subscriptions in the 2020 notes and 66% of increasing by 7.28% y-o-y to $37.86 billion. The value Annual Report 2014 subscriptions in the 2026 notes, with demand of gold reserves, on the other hand, shed $0.15 billion
42 43 macro economic environment
LEBANESE BANKS REMAINED DETERMINED TO PROVE A HEALTHY ANNUAL INCREASE of 6.60% IN THEIR ONCE AGAIN THEIR EVER-PRAISED IMMUNITY DESPITE BALANCE SHEET TO $175.70 BILLION AS AT END OF THE LOCAL AND REGIONAL STALEMATE, POSTING YEAR 2014.
For the Year As already unveiled, the sluggish macroeconomic spillovers of the Syrian conflict. The agency praised, activity during the year 2014 has prompted the however, the Lebanese banking sector’s high liquidity, Balance of Trade 2014 2013 YOY % Change international rating agency, Moody’s Investors Service, the increasing inflows of deposits, and Lebanon’s high Exports 3,313 3,936 -15.83% to downgrade Lebanon’s government bond rating from GDP per capita and human development indicators, Imports 20,494 21,228 -3.46% million USD B1 to B2 on December 16, 2014, while maintaining which outperformed other countries with a similar rating. Trade Balance (17,181) (17,292) -0.64% the country’s “Negative” outlook. In addition, the rating agency downwardly revised the country’s foreign As far as inflation is concerned, the timid drop in Source: Higher Customs Council, Credit Libanais Economic Research Unit currency deposit ceiling from B1 to B2, while keeping Lebanon’s consumer price index (CPI) can be the foreign currency bond ceiling unchanged at Ba3. explained by the downturn in fuel prices in the year Cumulative Balance of Trade Deficit million USD Concurrently, Moody’s downgraded Lebanon’s local 2014, triggered by increased production in the -16,000 -8,000 0 8,000 16,000 24,000 currency bond and bank deposit ceilings to Ba2, from international market amid the discoveries of shale gas -20,000 -12,000 -4,000 4,000 12,000 20,000 Ba1 previously. The agency cited Lebanon’s high debt in the United States and the uninterrupted supply by burden, added to the prevailing political instability in the OPEC as a result of the excess reserves in GCC oil April 2013 the region and the spillovers of the Syrian conflict, as exporting countries, which was not met by an increase the major factors behind its decision to downgrade in demand. More specifically, the average price of a April 2013 Exports the country’s sovereign rating. In figures, the rating Lebanese basket of consumer goods fell by a shy agency shed light on the rising public debt, expecting 0.71% y-o-y to 99.29 in 2014, down from 100.00 a April 2014 Deficit the country’s debt to GDP ratio to reach 140% in 2015. year before, according to the Central Administration of Concurrently, the agency warned that Lebanon’s public Statistics (CAS). Figures released by the Association of April 2014 Imports Banks in Lebanon (ABL) also point to a 1.66% annual finances may further deteriorate in the upcoming Source: Higher Customs Council, Credit Libanais Economic Research Unit drop in the consumer price index (CPI) to 146.44 as at years, mainly owing to the spillovers of the Syrian crisis end of December 2014. leading to large fiscal deficits. The agency also noted In related news, the port of Beirut’s freight activity was As far as customs receipts are concerned, customs that the current presidential void in the country makes In the banking sector, Lebanese banks remained up by a mere 0.15% y-o-y to 8,281 thousand tons in the collections shed 4.59% y-o-y to around $2,771 million it difficult to implement the fiscal consolidation needed determined to prove once again their ever-praised year 2014, with that of the port of Tripoli gaining some by end of year 2014, as a result of some 2.92% to strengthen public finances and alleviate its burden immunity despite the local and regional stalemate, 1.33% on an annual basis to 1,343 thousand tons, contraction in VAT revenues to around $1,365 million on the economy. Fitch Ratings, on the other hand, posting a healthy annual increase of 6.60% in their succumbing to the swelling tensions in the northern and a 6.15% drop in customs revenues to $1,406 affirmed Lebanon’s “Negative” Outlook on December balance sheet to $175.70 billion as at end of year region, which paralyzed the cross-border circulation of million. 12, 2014, while maintaining the country’s long-term 2014, a rise of 6.09% in customer deposits to $147.64 merchandise. local and foreign currency Issuer Default Rating (IDR) billion, and some growth of 7.42% in the loans’ portfolio
For the Year unchanged at “B”. The agency also affirmed Lebanon’s to $50.90 billion. The sector remained highly liquid Credit Libanais Group 2014 2013 % Change senior unsecured local and foreign currency bonds in the year 2014, enjoying a primary liquidity ratio of issue ratings at “B”, with the country ceiling and short- 78.06% as at end of December. In parallel, the deposit Customs Revenues 1,406 1,499 -6.15% term foreign currency IDR both remaining unchanged dollarization rate in the banking sector fell to 65.71% VAT Revenues 1,365 1,406 -2.92% million USD at “B”. Fitch noted that the major factors constraining at end of 2014, compared to 66.10% a year before, Customs Collections 2,771 2,905 -4.59%
Lebanon’s sovereign ratings mainly arise from the despite the prevailing political and security tensions. Annual Report 2014 Source: Lebanese Customs, Credit Libanais Economic Research Unit political stalemate prevailing in the country and the
44 45 macro economic environment
Further on Lebanon’s interest rate environment, the 2014. The ABL has similarly advocated banks to raise
Activity in the Lebanese Banking Sector ABL lifted the Beirut Reference Rate on lending in the U.S. Dollar lending benchmark rate sequentially Lebanese Pounds on several occasions during the year throughout the year, with the Beirut Dollar Reference 0 20 40 60 80 100 120 140 160 2014, raising the LBP/BRR rate by 14 basis points (bps) Rate upwardly revised by 20 bps y-o-y to 6.12%. to 8.71% as at end of year, from 8.57% as of January 1, 2008
Rates as of January 1, 2014 Rates as of January 1, 2015 Change (bps) 2009 Loans (billion USD) BRR on LBP Lending 8.57% 8.71% 14
2010 Deposits (billion USD) BRR on USD Lending 5.92% 6.12% 20
Source: ABL, Credit Libanais Economic Research Unit 2011 Loans / Deposits Ratio
On the Beirut Bourse front, activity saw a major however, almost flat year-on-year, with the weighted 2012 Dollarization Rate (Deposits) rebound in the year 2014 after being held hostage by average Price to Earning (P/E) ratio ending the year at the regional turmoil since the onset of the Arab Spring 7.80x and the weighted average Price to Book (P/BV) 2013 revolutions in the year 2011. In figures, traded volume ratio reaching 0.97x. In this context, the BSE ranked gained a staggering 202.32% y-o-y to around 155.43 5th in the Arab region and 46th in the world in terms 2014 million shares, shoring up traded value to $602.78 of earnings in the year 2014 according to Bespoke Source: ABL, Credit Libanais Economic Research Unit million. The BSE’s valuation multipliers remained, Investment Group. 0% 10% 20% 30% 40% 50% 60% 70% 80% Analysis of the BSE Activity During the Year
The high exposure of the banking sector to the both banks. Nevertheless, Fitch praised the two banks’ 2014 2013 YOY % Change sovereign, however, prompted Moody’s Investors strong domestic franchise, experienced management, Traded Value ($ 000) 602,776 375,161 60.67% Service to downwardly revise the long-term deposit high liquidity levels, and strong deposit base. Traded Volume (000) 155,427 51,412 202.32% rating of 3 Lebanese banks in December, namely Bank million USD Audi, BLOM Bank, and Byblos Bank, to “B2”, from “Ba3” Also in the banking sector, interest rate levels did not Market Capitalization ($ Million) 11,222 10,545 6.42% for local-currency deposits and “B1” for foreign-currency show major fluctuations in the year 2014, with the Traded Value/Market Capitalization 5.37% 3.56% average interest rate on Lebanese Pound denominated deposits, while maintaining a “Negative” outlook for all Turnover Ratio 8.98% 3.07% deposits rising to 5.56% during the month of December three banks. Moody’s also changed its baseline credit Weighted Average P/E 7.80 7.73 assessments of the aforementioned banks from “b1” to 2014, up from 5.44% in December 2013. Similarly, Weighted Average P/BV 0.97 1.01 “b2”, and lowered the long-term national scale ratings the average interest rate on U.S. Dollar denominated Source: BSE, Credit Libanais Economic Research Unit (NSRs) of Bank Audi and BLOM Bank to Aa3.lb and deposits rose to 3.07% in December 2014, from 2.95% that of Byblos Bank to A1.lb. In parallel, Fitch Ratings in the same month in 2013. Commercial banks’ discount Evolution of Beirut Bourse Cumulative Trading Activity maintained Bank Audi and Byblos Bank’s long-term and lending rate stood at 7.49% on LBP denominated Issuer Default Rating (IDR) rating at “B” and Viability loans and 6.97% on USD denominated loans. 100,000 300,000 500,000 700,000 0 200,000 400,000 600,000 rating at “b”, while attributing a “Negative” outlook for
December 2013 375,161 Credit Libanais Group December 2014 November 2014 December 2013 December 2013 51,412 Traded Value (million USD) Interest Rate Levels LBP USD LBP USD LBP USD December 2014 602,776 Market Capitalization (million USD) Average Rate on Deposits 5.56% 3.07% 5.55% 3.10% 5.44% 2.95%
Term Savings & Deposits Rate 5.93% 3.54% 5.95% 3.56% 5.83% 3.44% million USD December 2014 155,427 Traded Volume (million USD)
Discount & Loans Rate 7.49% 6.97% 6.96% 7.01% 7.29% 6.88% Annual Report 2014 10,200 10,542 10,885 11,228 Source: Banque du Liban, Credit Libanais Economic Research Unit 10,372 10,716 11,057 11,400
46 47 CL Core Banking Activities
Corporate Banking 50 Group Treasury, Global Markets and Wealth Management 56
Investment Bank (CLIB) 60
Retail Banking Activities 66
Electronic Banking 74 Operations and Information Technology 80
Human Resources 84 CL core banking activities
corporate banking
At CL Group Corporate Banking Division we aim to Meanwhile, we strived to stay close to our customers’ be the Bank of choice for high net worth corporate needs by seeking continuous feedback through OUR CORE VALUES customers and envisage establishing segment proactive face to face interactions, and the offering of REST ON INTEGRITY, leadership in local and foreign markets. tailored products and services. Our mission is to reinforce customer loyalty, maintain We have also been stringent in boosting our lending RESPONSIBILITY, the highest portfolio quality rating and achieve portfolio quality by seeking real guarantees such RESPONSIVENESS AND sustainable profitable growth. as mortgages, fire and life insurance policies and assignment of proceeds, and scrutinizing compliance Our Core Values rest on integrity, responsibility, EFFICIENCY. with financial and non-financial covenants, cash flows, responsiveness and efficiency, cooperative teamwork customer management succession planning and the approach and win-win culture, stretching capabilities guarantors’ wealth sufficiency; on the other hand, we and continuous improvement are our core values. further developed our Risk Based Pricing methodology, In 2014, in light of the increasingly complex surrounding in line with the capital adequacy requirements of the geopolitical risks, CL Corporate Banking Division Basel III framework. adopted a conservative and selective lending strategy to ensure safe and sustainable growth. In fact, we Credit Libanais Group adopted the culture of preventive risk mitigation among the Heads of Business Units and Relationship Managers. Annual Report 2014
50 51 CL core banking activities
WHILE IN THE MIDST OF THE HUNT TO INCREASE PROFITABILITY AND MARKET VALUE, WE DID NOT LOSE SIGHT OF THE SOCIAL RESPONSIBILITY INITIATIVES AND THE FULL COMPLIANCE WITH AML REGULATIONS.
2014 in Review In 2014, aiming at increasing customers’ loyalty and new market and its legislative banking laws and The year 2014 was marked by the crystallization of a Moreover, we benefited from our financial partnerships raising the barriers for the competition, we concluded requirements. 5-Year Strategy that reconfirmed the Corporate Banking with several external parties for supporting our the Corporate Online Banking Vendor selection process, The Foreign Entities Committee convenes regularly role as a major enabler for the achievement of the customers’ financing needs through long term loans and will be implementing throughout 2015, a state-of- to review and monitor periodic performance of the Bank’s goals and objectives by projecting a substantial with affordable conditions, using our lines of credit held the art online banking platform to provide an innovative branches abroad against preset targets. It assesses increase in the contribution of corporate lending to the with the Arab Trade Program (ATFP), The European the market conditions, and other credit and operational Investment Bank (EIB), The International Finance channel and a new approach to dealing with corporate total Bank Loans Portfolio. risks in each of the respective markets, and ensures full Corporation (IFC) and others. customers in a paperless and remote environment. compliance and transparency with auditors, regulators, In line with the stated conservative and selective Due to the nature of the transactions involved and In the same context, we note the support provided by and stakeholders. lending approach, the Corporate Banking Division the high personalization and customization required the Corporate Banking Division to the various economic targeted, over the elapsed year, safe and stable for products and services, human capital remains the CL branches across 3 continents (Europe, Middle East sectors through the enrollment in several international economic sectors. In fact, we posted a 10% growth most valuable asset of the Corporate Banking Division. and Africa) promote the core values that have been and local incentive programs such as the IFC program in utilized funded facilities and safeguarded our high As such, we continued to enhance our appraisal nurtured for many years back home. Customer focus for financing sustainable energy projects and the risk rating by leveraging our efficient and effective management system and budgeting processes, fully and teamwork are just a few examples of the values BDL initiative to support knowledge-economy based recovery processes. At the same time, we increased the supported by the HR Division who enrolled employees that guide us in delivering superior banking solutions and services to our valued diaspora network. non-interest income by implementing supplementary startups. in the “Talent Development Program” and the “Product arrangement and commitments fees and by having In 2014, the Corporate Banking Division further Knowledge Campaign”. Moreover, we endeavored The deployment of modern technology and IT solutions a higher focus on commission based trade finance boosted the cross selling of products such as salaries to reinforce the Employees’ loyalty by offering them remains the key success factor in bringing our branches activities, such as Letters of credits, Letters of domiciliation, POS Machines, Fire and Life insurances, promising career paths. abroad to a seamless operating platform with CL Group guarantees and Documentary collections, contributing Credit Libanais Group personal loans, housing loans, car loans, credit cards Foreign Entities Head Office and branch network in Lebanon. The to a 20% increase in the unfunded facilities utilization. and others. intranet portal evolution has extended the reach of CL The Foreign Entities function’s main mission is to products and service capabilities. We also maximized the utilization of BDL lines of credit While in the midst of the hunt to increase profitability promote and support the CL franchise abroad. The Customers are now able to remotely check their characterized by low interest rates subsidized by the and market value, we did not lose sight of the social strategy of identifying lucrative growth markets, where investment portfolios and stay in touch with market and responsibility initiatives and the full compliance with Lebanese and other Arab communities prosper is government, aiming at stimulating the economy and price fluctuations, which enables them to make more Annual Report 2014 boosting the country’s GDP. AML regulations and Corporate Governance guidelines. paralleled by the intimate understanding of each informed and timely decisions.
52 53 CL core banking activities
2014 in Review Cyprus Branch
During 2014, the economy witnessed some contraction, At the regional level, the growth dynamics remained Iraq Branches Credit International SA – CISA Senegal and is expected to deliver 0% growth in 2015. The favorable despite some signs of cooling. The strong 2014 proved to be yet another challenging year for In Senegal, the economy continues to be driven by a bailout package of 10 billion Euros by the “Troika”: the performance of the GCC economies will be supportive Iraq. The renewed war conditions resulted in lower number of main players within the private sector. During European Commission, the European Central Bank and of growth in Bahrain. GCC growth is above all due than expected growth rates. The disputes over oil 2014, the construction sector recorded a growth of 6% the International Monetary Fund (IMF) underline some to robust non-oil growth drivers, and a massive exports between Baghdad and Kurdistan also halted during 2014, up from 3.3% the previous year, while changes that must be applied by the authorities in order infrastructure pipeline of projects has cushioned the the previously anticipated growth levels, and resulted other sectors like agriculture and industry declined. The to improve the credit rating and market perception. effects of lower oil prices. in budget cuts. Deterioration in the economy was effects of natural disasters, unemployment, and the Major economic sectors, such as construction, industry witnessed across wide sectors such as housing, recent outbreak of Ebola, were the main contributors to and commerce declined, while a negative sentiment Against this backdrop, along with unfavorable building materials, manpower supply, and consumer the unfavorable environment. loomed over cautious consumers and throughout the conditions in other markets, Bahrain has managed to households. retail trade sectors as a whole. Our branch worked attract some new investors across different economic Nevertheless, Senegal is expected to grow at a steady In the financial sector, most of the big players sustained diligently to maintain its client base, and achieved sectors. Tourism projects were on the rise in 2014, with rate of 6.7% - 8% in the coming 3 years. Our presence lower returns, as the liquidity crunch hit the market. reasonable results, considering the overall market the opening of 2 new 5 star hotel resorts. The financial will continue to thrive on a large network of Lebanese Demand for housing loans declined, and more defaults conditions. sector continued to maintain the highest standards of and other businesses, especially in the areas of trade on existing mortgages emerged. Consumer spending regulatory and banking practices in the region. finance, L/Cs and L/Gs, and we expect further growth Bahrain Branch declined, and overall investments slowed down. and favorable results in 2015 and beyond. Global uncertainty has depressed oil prices. Continuing CL Bahrain branch portfolio registered an Combined results from our 2 branches came short of the pattern of recent years, global growth remains unprecedented growth, as a result of attracting new our projected growth targets. However, we remain well Global Business Development Desk fragile and highly uneven. Despite the recent downturn client assets, and participating in syndicated loan poised in the market, and will continue to engage in The Global Business Development Desk continues to in global oil markets, economic growth in Bahrain operations. Hence, the YOY +125% growth in total correspondent banking and related L/C activities. Going actively identify target group of Lebanese, regional and remained robust with clear indications that infrastructure assets that reached over $185 million, YOY +181% forward, the financial system in Iraq is evolving. Our international institutions, domestically and in the MENA spending is significantly boosting the momentum of the growth in total deposits that reached over $155 million, long experience in electronic banking should give us a region, in line with the Group expansion and business non-oil sector. This serves as an important source of YOY +170% growth in loans portfolio that reached competitive advantage, as the new laws that will govern development strategy. economic resilience at a time of renewed weakness in nearly $8 million, and last, YOY +50% growth in Net the electronic banking services shall become effective much of the global economy. Profit that reached $1.96 million. in 2015. Credit Libanais Group Annual Report 2014
54 55 CL core banking activities treasury, global markets and wealth management
As the trusted advisor of customers in Lebanon and the services and safekeeping of various types of financial region, CL Group Treasury, Global Markets and Wealth instruments. The Bank also provides private banking IN 2014 WE FOLLOWED Management grew on the solid values of excellence, customers with continuous updated perspectives integrity and creativity. pertaining to market trends and economic forecasts. A MORE PROACTIVE Credit Libanais’ private banking and wealth APPROACH WHILE Ethics and deontology principles are highly respected management team is backed by an in-house research by our team of experts who invest their efforts in unit that regularly communicates market reports and CLOSELY MONITORING building a strong and reputable image for the Treasury, updates to customers, to assist them in making Global Markets and Wealth Management division with informed decisions regarding their future investments OUR PORTFOLIOS AND the objective of becoming a leading player in local and and portfolio allocations. regional markets. We aim to be viewed as the team TAKING APPROPRIATE of choice in terms of customer satisfaction, employee With the continued geopolitical developments in the MEASURES TO engagement, profitability and growth. In addition, we region in addition to the slow-down witnessed in are in full compliance with the Central Bank of Lebanon the Chinese economy and the European economic LIMIT AVOIDABLE and the Capital Markets Authority requirements and problems affected by Greece’s ongoing crisis, 2014 was regulations and have always adopted the best banking another challenging year, despite the improvement of EXPOSURES. international practices, norms and standards. the US markets that turned positive due to substantial improvements in major economic indicators. CL Group’s Treasury, Global Markets and Wealth Amidst such mixed developments, in 2014 we followed Management puts a broad range of investment a more proactive approach while closely monitoring solutions at the disposal of customers, as well as our portfolios and taking appropriate measures to limit portfolio management and brokerage services, including avoidable exposures. equities, fixed income, foreign exchange trading, multi- asset class investment funds, exchange traded funds This has resulted in a positive growth in both financial (ETFs), hedge funds, structured products with various results and assets under management, positively driven Credit Libanais Group underlying instruments, capital protected products, by increased volumes of customers seeking well- Sharia’a-compliant investment products, custody balanced investment opportunities. Annual Report 2014
56 57 CL core banking activities
Treasury and Foreign Exchange Global Markets The European market, despite following a relatively base, taking advantage of the markets’ improved Fixed Income Markets bullish trend, was affected throughout 2014 by outlook allowing investors to lock interesting levels of uncertainties related to both Greece and Ukraine’s gains on their portfolios. Our advisory team constantly Our Group Treasury continued to further build its CL Group Global Markets Division comprises the sale, sensitive problems. Accordingly, CL Group’s assists customers in developing investment strategies, capabilities by diversifying funding operations and trading and structuring of a wide range of financial experienced team was able to seize attractive market identifying appropriate entry and exit options, while effectively managing risks. The optimization of products including bonds, equities, equity-linked opportunities to attract new customers and further monitoring portfolios on an on-going basis. synergies throughout the Group enabled us to closely products, commodities and securitized instruments. develop existing business relationships. We succeeded select investment opportunities in various markets and Our primary concern remains the proper allocation of in branching out our coverage and developing our optimize our Asset/Liability management model. assets and investments to each particular investor, Proprietary trading activity focuses on fixed income offering terms to increase our market share. In 2014, The Group Treasury and Foreign Exchange desk allowing them to meet their specific requirements and trading where Credit Libanais acts as a Market-Marker mutual funds witnessed a regain in activity, based on supports various activities of our growing branch investment objectives. on all major fixed income markets, which increases our customer needs for risk mitigation and investment network, subsidiaries and affiliates both domestically capacity to satisfy customers’ transaction needs at very diversification. Investors showed a continuous and internationally. In parallel, we strive to diversify our Our comprehensive services include tailored-made competitive terms and conditions. In 2014, CL Group’s increased interest in ETFs, covering different economic customer base and products, by offering a variety of investment products, innovative solutions in terms of fixed income trading desk performed well despite sectors, commodities, and various geographic areas, services related to interest rates and foreign exchange assets and product allocation, as well as geographic the various challenges and continued difficult market mostly driven by capital gains or portfolio hedging. markets. Our activities encompass deposits, foreign diversification. Our Investment advisory process is conditions. Over the elapsed year, Beirut Stock Exchange (BSE), in exchange, lending, and raising money to fund assets based on customers’ risk tolerance, diversification which Credit Libanais holds a member seat through its and cater to specific transactions. Our professional Our market share and income streams increased in objectives, and risk/return expectations. subsidiary Credit Libanais Investment Bank, witnessed trading desk offers a combination of praised financial terms of volume and geographic coverage. For a more efficient interaction and portfolios follow-up, a limited demand and low volumes due to a dull services supported by efficient channels of execution. we have implemented a new online banking service performance caused by regional turmoil and domestic Risks inherent to our proprietary activities are managed that allows our customers to benefit from a quasi-live political tensions. Our money market and foreign exchange business also according to strict investment policies through a update of the value and performance of their securities experienced excellent results with record customer system of continuous monitoring of position limits, and holdings and portfolios. volumes, positively affected by a period of exceptional sensitivity analysis of our portfolios, in terms of credit Private Banking and Wealth volatility of Foreign Exchange and increasing customer risk, market risk and country risk exposures. Management hedging needs. All this despite challenges faced by Driven by highly trained and qualified professionals historically low interest rates and yields and further Equity Markets enjoying extensive knowledge and expertise, our tightening of the international regulatory framework. The prevailing favorable conditions affected by policies private banking and wealth management team offers Risks inherent to these activities are mainly driven by implemented by the US Federal Reserve that kept personalized investment advice to high net-worth exposure to foreign exchange fluctuations and interest interest rates at historically low levels in addition to the individuals. The team’s main drivers remain the long rate mismatches. We identify these sensitivity risks by positive improvements of the macro-economic outlook term satisfactory relationships with customers, with regularly running simulations and conducting stress test in the US contributed to the shifting of customers special emphasis on capital preservation and growth. analyses that enable us to better manage exposures towards equity trading, which reflected positively on the During 2014, CL Group’s Financial Advisors followed a according to changes in market conditions and trends volume of transactions conducted. proactive approach in developing their customer
58 59 CL core banking activities
investment banking (CLIB)
Chairman General Manager Board of Directors CLIB
Legal Advisor Risk Committee Group Chief Risk Officer*
Service Level Agreement Deputy General Manager Audit Committee Group Head of Internal With Credit Libanais Audit*
Treasury, Global Markets and Operations and Support Wealth Management Services (CPD) Administration and Support Service Human Resources Treasury and Global Markets Back Office
Marketing and Business Compliance Development
Finance Information Technologies
Finance and Securitization IT Department Corporate Finance, Credit Department Legal Department Credit Internal Audit *** Accounting and Structured Advisory and Administration and Credit Libanais Group Department Finance Research Control *** Annual Report 2014
60 61 CL core banking activities
Credit Libanais Investment Bank (CLIB) Profile
A fully-owned (99.83%) subsidiary of Credit Libanais, During the year 2014, CLIB analyzed and participated CLIB Corporate Finance and Advisory Services Credit Libanais Investment Bank assumes the role of in several local and regional mandates including Department CLIB Corporate Finance and Advisory Department the investment banking arm of Credit Libanais. Since securitization and investments in private equity venture The year 2014 was a solid year for the Corporate is well equipped to offer a wide array of tailor- its establishment in 1996, Credit Libanais Investment capital funds, generating as such sizeable revenue Finance Department at Credit Libanais Investment made financial services and solutions to private Bank has offered a plethora of services to its customers streams for the group. In addition, Credit Libanais Bank despite the strained geopolitical situation and institutional customers, locally, regionally and in accordance with legislative decree number 50, dated Investment Bank has studied acquisition opportunities, locally and in the region. More specifically, CLIB internationally, specifically in the following areas: July 1983. for the benefit of its mother company Credit Libanais, continued to play an advisory role to the Credit both on the local and international fronts. In this context, Owing to a dedicated team of professionals, Credit Libanais Group in terms of spotting and analyzing Financial Advisory net profits deriving from investment banking activities Libanais Investment Bank is constantly on the hunt business ventures and assessing attractive investment These include engineering financial solutions designed accounted for 11.81% of the Group’s consolidated net for new business opportunities and engaging in non- opportunities domestically and internationally. In to meet the strategic and organizational needs profits in 2014. organic growth opportunities for the Group, as well addition, the department analyzed and engaged in of institutional customers. This includes financial as for local, regional and international private and The year 2014 in Review several securitization transactions, particularly in the assistance to customers in need of: institutional customers in an endeavor to preserve the automotive sector. It also studied several regional Bank’s strong market positioning among its peers in The Lebanese economy remained subdued for the Evaluating the financial performance of their expansion ventures whether Greenfield or in the form Lebanon. fourth consecutive year, clawed by the Syrian crisis businesses. of acquisitions. CLIB, in this context, acted as advisor with the effect of the latter intensifying year after year. Assessing the viability of an expansion / investment CLIB strategy pivots around bolstering its position in and placement agent regarding the potential sale of a Notwithstanding the economic and political impasse, alternative. equity project financing and advisory services and minority stake in a bank operating in West Africa. CLIB succeeded in expanding its commercial and Seeking financial reengineering / turnaround. continuing to provide a wide array of investment investment banking portfolios, while preserving a On the asset management side, CLIB advisory arm Opening their capital to prospective investors. banking services, namely: healthy asset quality. In details, CLIB improved its structured and back-tested a USD-denominated fixed- Merging with / acquiring another business unit. A complete set of medium and long term investment position in 2014 among investment banks in Lebanon income fund expected to be launched in the second Strategic alliances and partnering transactions. plans. despite some 5.09% contraction in commercial loans quarter of the year 2015. In addition, the department Financial services. (SME & Corporate) which was offset by a 5.27% advised on engaging in a €2 million investment ticket in increase in housing loans. Meanwhile customer Issuance of bonds and Certificates of Deposit. a Euro-denominated money market fund. Debt and Equity Placements deposits at CLIB rose by a robust 13.64% in 2014 Syndication of loans. Establishment / participation in Services include advising customers to help them resulting in a parallel 11.85% year-on-year increase in investment funds. Finally, CLIB was active in injecting equity in funds make a more informed decision regarding the desirable the total balance sheet. Granting of medium and long term loans. labeled under BDL’s intermediary circular 331 which capital structure, locating financing sources, as well
Corporate finance and advisory activities. Apart from conventional commercial banking services, encourages banks to participate in start-up companies, as negotiating and repositioning their company more Credit Libanais Group CLIB is extending its customers an array of investment accelerators and incubators. More particularly, CLIB and favorably. Credit Libanais Investment Bank (CLIB) furnishes its banking services including funding for project finance, Credit Libanais committed to equity finance some $4 customers with a comprehensive bouquet of advisory million under the umbrella of three Lebanese venture and financing solutions ranging from term lending to direct equity financing, access to investment funds, capital funds that invest in start-up companies that highly structured and specialized products across the financial intermediation, corporate advisory services
operate in the knowledge-based economy. Annual Report 2014 investment banking spectrum. and research, only to name a few.
62 63 CL core banking activities
The Economic Research Unit at Credit Libanais Inception Inception Value on Value on % Change % Change Year High Year Low All Time All Time Mergers and Acquisitions Date Value January December in 2014 since High Low Investment Bank also published four research reports Services revolve around offering comprehensive 1, 2014 31, 2014 Inception during the year 2014 relating to the Beirut Stock assistance to customers seeking to merge with or CLASI Oct-06 1,000 1,004.78 1,083.93 7.87% 8.39% 1,103.50 1,004.78 1,801.01 836.11 Exchange (BSE), the Gold commodity, the Euro acquire other private or public business units. CLIB will CLFI Oct-06 1,000 1,256.75 1,371.53 9.13% 37.15% 1,394.58 1,256.75 1,666.64 864.82 currency and Lebanon’s Hydrocarbon sector. get involved in every step of the transaction including: CLCI Oct-06 1,000 613.33 631.31 2.93% -36.87% 747.45 613.33 1,948.82 586.63 The preparation of the sale. The Research Unit succeeded as such in making the The determination of the strategy. headlines of the economic sections of major local and The search. regional television channels, newspapers and bulletins. 1,200 The determination of the best financing structure. In addition, the Unit was active in several economic 1,100 interviews with local and foreign newspapers and The negotiation of the contract. 1,000 magazines, covering a variety of economic and banking The due diligence. 900 topics. Index Value 600 CLASI 7.87% The valuation. Credit Libanais Aggregate 500 Stock Index Annual Performance CLASI Recapitalization and Strategic Advisory Through its three domestic stock market benchmarks, 10-Jul-14 31-Jul-14 17-Apr-14 02-Oct-14 02-Jan-14 23-Jan-14 19-Jun-14 11-Sep-14 namely the Credit Libanais Aggregate Stock Index 13-Feb-14 06-Mar-14 27-Mar-14 08-May-14 29-May-14 21-Aug-14 13-Nov-14 04-Dec-14 25-Dec-14 Services consist of restructuring a company’s capital (CLASI), the Credit Libanais Financial Sector Stock structure with the aim of rendering its debt/equity Index (CLFI) and the Credit Libanais Construction assortment more sustainable. Sector Stock Index (CLCI), CLIB’s Research Unit Loan Syndication continues to monitor the daily performance and activity of the Beirut Bourse (BSE), hence providing insights 800 CLIB offers professional services in the structuring, 750 for local and regional stock market enthusiasts with pricing, and management of syndicated loan facilities, 700 in addition to participating in loan syndications arranged the objective of taking more rationalized investment 650 decisions. 600 by other banks. This calls for performing in-depth due Index Value 550 CLCI 2.93% Credit Libanais Construction Sector Stock index diligence on the corporate customer in an endeavor to 500 Annual Performance CLCI analyze the different aspects of a loan syndication such as risk, enforceability of contracts, pledges, guarantees, 10-Jul-14 31-Jul-14 02-Oct-14 17-Apr-14 02-Jan-14 23-Jan-14 19-Jun-14 11-Sep-14 21-Aug-14 13-Nov-14 04-Dec-14 25-Dec-14 13-Feb-14 06-Mar-14 27-Mar-14 08-May-14 29-May-14 ability to redeem the loan on time, among others.
CLIB Research Unit 1,500 The Economic Research Unit, and via its weekly 1,400 economic newsletter, sheds light on major local 1,300 economic developments as well as the local money 1,200 Credit Libanais Group market, fixed income and equity markets. In 2014, the 1,100 1,000 Economic Research Unit continued to widen the global Index Value 900 reach of its economic publications via weaving new 600 CLFI 9.13% Credit Libanais Financial Sector Stock alliances with renowned financial hubs and pertinent 500 Index Annual performance CLFI newswires around the globe, including Reuters, Annual Report 2014 10-Jul-14 31-Jul-14 17-Apr-14 02-Oct-14 02-Jan-14 23-Jan-14 19-Jun-14 11-Sep-14 Bloomberg, Zawya, MenaFn, FX Street, among others. 13-Feb-14 06-Mar-14 27-Mar-14 08-May-14 29-May-14 21-Aug-14 13-Nov-14 04-Dec-14 25-Dec-14
64 65 CL core banking activities
retail banking activities
RETAIL COMMERCIAL LENDING UNDERTAKES INITIATIVES IN banking services on the axis of customer satisfaction Among the products, subsidized housing loans and the creation of a valuable CL Customer Experience increased by 32%; while Iskan loans (housing) ACCORDANCE WITH LONG TERM OBJECTIVES TO CREATE VALUE across all retail banking segments. CL further highlights increased by 10%. its commitment to increase efficiency and reach out to Commercial Lending carried out its SME-oriented FOR SMES. the most distant customers, while expanding activities in initiatives in accordance with long-term objectives to remote markets and diversifying geographic presence. create value for these enterprises, to support their sustainable development and maintain their focus on 2014 in Review green environment. SMEs are seen as the Bank’s During 2014, retail banking once again achieved a good Since its inception, Credit Libanais planted the seeds The Retail Banking at CL aims to: business partners, and are provided with information performance despite deteriorating surrounding market for a modern Lebanon by encouraging and empowering Maintain a long-term sustainable ROE. and advisory services to grow their businesses. young and mature Lebanese entrepreneurs. Our firm Be the leading bank for individuals and SME. conditions. Adaptability and strategic thinking were the Retail commercial lending undertakes initiatives in values stem from the belief that the prosperity of future Be the best bank in Lebanon in terms of customer key drivers in doing so. accordance with long term objectives to create value generations depends on the sustainable development experience and satisfaction. Originated total lending (Commercial Lending and for SMEs and to support their sustainable development. and the responsible usage of the resources at hand. Our Create small economies in molecular geographic Products) contributed to a 51.20% share of the total of Credit Libanais, entered into several partnerships mission is to reaffirm our leading position as a leader by area. the bank, compared to 50.87% of the previous year (CL to secure credit facilities from low-cost, long term continuing to ensure an excellent customer experience Serve the ever evolving customers’ needs in an ever- and CLIB). resources, joining efforts with local and international while contributing to Lebanon‘s economic growth. evolving world. finance institutions (IFC, BDL, ESFD, Kafalat, Moreover, total retail products with specific focus on the In 2014, CL’s approach of “Contemporary banking Based on the historical successful performance, and Arab Fund, etc...). SMEs were further supported public sector amounted to 41% of total lending of the fine-tuned through a selective yield management” while carrying out operations with the responsibility of to specifically boost their exports or develop their Bank while retail commercial lending represented 10% continued to drive success while further enhancing CL’s creating value for the Lebanese economy, CL generates presence in the tourism or other sectors. (CL and CLIB). customer experience in the current market’s challenging and renders fast, flexible and reliable services. circumstances. Our global view continues to be Moreover, we deliver quality and swift services to Growth continued to be the expression of the energized by our ongoing and significant growth rate customer’s ever evolving needs. equilibrium in the composition of all strategic business in fundamental banking products. The growth achieved lines adjusted to the current prevailing market To swiftly serve customers, CL continuously upgrades has been in line with long-term strategies to diversify conditions where retail banking activities operate: business activities towards a universal banking model its technology infrastructure in accordance with the Customer deposits in December 2014 reached USD Credit Libanais Group and to expand regionally and internationally. demands and needs of modern times, and creates 7.74 billion compared to USD 7.16 billion in December Credit Libanais Group continues to offer customized 2013 with a growth of over 8%. Net banking income solutions that meet the needs of individuals and contribution to the group continued to be the highest companies doing business in local and international with 32.03% while engaging 20.41% of total assets. At markets, covering various aspects of asset conversion a ratio of 1.57, it represents the best return on assets Annual Report 2014 cycles. employed, or financial efficiency.
66 67 CL core banking activities
SMES ARE SEEN AS THE BANK’S BUSINESS PARTNERS, AND ARE PROVIDED WITH INFORMATION AND ADVISORY SERVICES TO GROW THEIR BUSINESSES.
Packages were created featuring special products customer relationship management within Credit With more than 50 years of banking experience, Credit Based on such analyses, CLA delivers the right and services geared toward the specific needs of Libanais. Efforts conducted within this area are Libanais has constantly been able to promptly adapt product to the client through the efficient channel at a SMEs in related segments or geographic areas, with administered under three main themes: developing to changing and developing circumstances, quickly competitive price and innovative approaches. a particular emphasis on credit products designed in the customer relationship management infrastructure, generating appropriate solutions according to economic synchronization with the cash flow patterns, adjusted to creating advanced in-house customer analytics and conditions and financial patterns. cyclicality. improving the Bank’s effectiveness at all points of contact with the customer via integrated channels in Bancassurance The SME department made a difference thanks to the view of identifying and serving comprehensive needs. Credit Libanais insurance services are offered in Bank’s far reaching branch network, product diversity, With an organic growth across the domestic network of coordination with Credit Libanais d’Assurance et information services and partnerships. 69 of branches, divided in 5 Regional Managements,CL Reassurances (CLA), the insurance arm of the Group. Customer Relationship Management was confirmed as having one of the largest branch CLA products offered through this synergy cover (CRM) networks among banks in the country. individual retirement plans, life insurance, car insurance and fire insurance. The network is completed by the branches in Limassol
The key issue remained the complete standardization Credit Libanais Group of action across the Bank by using the continuously (Cyprus), Manama (Bahrain), Erbil and Bagdad (Iraq) In an effort to further build on the customer experience, upgraded Customer Relationship Management (CRM) as well as the representative office in Montreal, Canada Credit Libanais concentrates on designing insurance system which supports the enhancement of customer- and Credit International SA subsidiary, fully operational products based on customer requirements, while giving oriented perspectives and the attainment of effective in Senegal since 2010. special care to customers’ needs and expectations. Annual Report 2014
68 69
70 71 Annual Report 2014
Credit LibanaisGroup
customer requirements by adding value and building and value adding by requirements customer travel tickets with the airline company of their choice choice their of company airline the with tickets travel
through teamwork and cooperation. and teamwork through
perception and developing new solutions to meet to solutions new developing and perception to redeem their accumulated and doubled points for for points doubled and accumulated their redeem to
embed those values into how we act and make decisions decisions make and act we how into values those embed
The Bank is constantly challenging predictable predictable challenging constantly is Bank The
affiliate of Credit Libanais Group. Cardholders were able able were Cardholders Group. Libanais Credit of affiliate
and stimulate progress; most importantly, we strive to to strive we importantly, most progress; stimulate and
Libanais cards at Hermes Tourism and Travel, an an Travel, and Tourism Hermes at cards Libanais Product Development Product
professional goals. Our core values guide us, inspire inspire us, guide values core Our goals. professional
their loyalty points whenever they used their Credit Credit their used they whenever points loyalty their
gives each individual the opportunity to better reach their their reach better to opportunity the individual each gives
projected results. projected
promotion was launched allowing customers to double double to customers allowing launched was promotion
environment enhances pride in the organization, and and organization, the in pride enhances environment
measurable results in view of validating outcomes with with outcomes validating of view in results measurable
cardholders to increase the use of their cards, a new new a cards, their of use the increase to cardholders
with flexibility and innovation. The sound business business sound The innovation. and flexibility with
and competition, organize the sales force and provide provide and force sales the organize competition, and
As part of the CL loyalty scheme designed to motivate motivate to designed scheme loyalty CL the of part As
and making a difference while handling change change handling while difference a making and technology, market, products, customer preferences preferences customer products, market, technology,
Campaigns core values based on integrity, team quality, transparency transparency quality, team integrity, on based values core take into account early indications of major shifts in in shifts major of indications early account into take
Loyalty Program and Visa Visa and Program Loyalty The Marketing and Development division is geared by by geared is division Development and Marketing The
weaknesses, opportunities and threats. Marketing plans plans Marketing threats. and opportunities weaknesses,
while analyzing relevant data such as strengths, strengths, as such data relevant analyzing while
offers with key players in the market. the in players key with offers
trust around it. around trust through sales, CRM and advertising campaigns campaigns advertising and CRM sales, through
and purchase behavior and on tailored partnerships and and partnerships tailored on and behavior purchase and developing awareness of our brand and on building building on and brand our of awareness developing their responsibilities. Marketing plans are deployed deployed are plans Marketing responsibilities. their
targeting of niche markets which exhibit similar needs needs similar exhibit which markets niche of targeting implemented consistently over time, focuses on on focuses time, over consistently implemented and ensure that team members are clear about about clear are members team that ensure and
on a market segmentation analysis that enables the the enables that analysis segmentation market a on sales activities and communication. This strategy strategy This communication. and activities sales actions plans provide an easy way to measure progress progress measure to way easy an provide plans actions
wide array of financial products. The strategy is based based is strategy The products. financial of array wide corporate customers while insuring growth through through growth insuring while customers corporate strategic marketing planning and the deployment of of deployment the and planning marketing strategic
professional personalized customer service and a a and service customer personalized professional developing an effective approach to serve retail and and retail serve to approach effective an developing strategic objectives and tactical action plans. The The plans. action tactical and objectives strategic
trust and commitments that last. CL delivers delivers CL last. that commitments and trust mission, mission, vision, our aligning by ourselves challenge We The Marketing and Development function aims at at aims function Development and Marketing The
development
marketing and business business and marketing
activities banking core CL CL core banking activities
and for hotel stays, thus increasing their chances of Marketing/CRM campaigns based on database domiciliation and some 34% of the Internal Security Based on this continuous data and information traveling and exploring new countries, anytime they sector segmentation, the Marketing and Development Forces’ salary domiciliation. gathering, several reports were distributed throughout want. division works toward developing long term customer CL provides special housing schemes to military the year. relationship and increasing the perceived value of institutions, as well as special payment cards with This offer was part of the CL Loyalty Program, which Advertising and Communication products while proposing new ones. Therefore, we dedicated loyalty schemes. In this context, CL allows cardholders to collect points whenever they succeeded in initiating cross selling and upselling developed the MasterCard Titanium card program, CL communication and advertising strategy is based settle their purchases using their cards, in Lebanon opportunities as well as understanding the propensities designed to support the Lebanese Army martyrs’ on a mix of communications. Several campaigns were and around the world, and redeem them for insurance of different customer segments. families, and promote anti-drug campaigns planned executed with creative concepts, strategic media services, payment of their domiciled phone and by the Internal Security Forces (ISF). Credit Libanais planning, and social media development, which enabled electricity bills, valuable gifts and rewards including Sales Force Team Group won the 2014 National and Social Impact Award the Bank to reach a wider audience and generate home appliances, accessories, electronics, gift The segmentation strategy per region and product, for its program “Supporting Those Who Defend Us” in valuable relationships with customers. vouchers and travel packages. along with its geographical structure, contributed recognition of its corporate responsibility policy, during a CL also maintained an active presence in the media New merchants joined Credit Libanais’ loyalty program towards improving adaptability to the Lebanese market, national ceremony organized early 2014. through efficient and consistent above the line with the purpose of granting cardholders exceptional thus enhancing productivity and effectiveness. Within advertising on TV stations, thus reaching a broad range privileges and rewards with every amount spent with this framework, the sales force team extended the sales Mystery Shopper Program of viewers. Moreover, extensive coverage through their cards and offering enhanced loyalty scheme and marketing action by focusing on the bank’s group This program was carried out for the eighth year in radio, outdoor campaigns and the print media was performance for the redemption of their points. network to cover CL sister companies. coordination with IPSOS-Lebanon, in order to provide carried out. objective feedback on our touch-points. In 2014, the points redemption rate increased by 60% The concerns and accomplishments of the sales team Below the line advertising constitutes a large part of YOY. tend to vary in order to establish long term relationships During 2014, the revised Mystery shopper programs Credit Libanais’ communication plan. In 2014, the with the Bank’s customers, provide services in a variety Bank continued to improve its image and identity by Credit Libanais was once again part of the campaign assisted us in our recommendations to the concerned of ways, and make any necessary adjustments to reshaping its advertisements via e-mails, SMS, Did you launched by Visa International during the months of staff, and in finding ways to improve performance January and February 2014, offering customers the improve the approach for future new product launches. and services, enhance staff product knowledge and Know letters, and statement of account messages. chance to win an all-expenses-paid trip to Brazil to sales skills that ought to result in increased customer In 2014, the Sales Force team increased its This has been also applied to the online advertising attend the world’s most passionately followed sporting satisfaction and retention levels. participation in the Bank’s group results, by channels. Accordingly, CL website, app, newsletters, event, the 2014 FIFA World Cup. Two lucky CL winners establishing new channels of distribution for this Social Media and other related platforms were updated won a trip for 2 to this magical event in Rio. Marketing Intelligence Unit business. with a fresh new look that offered CL customers with a In 2014, the unit employed and managed several Customer Relationship Management The Public Sector pleasant experience each time they visited the Bank’s (CRM) tools, among which competitive intelligence, Media online channels. Credit Libanais attained a high volume of salary monitoring, collection of news, materials and other Credit Libanais Group CRM is the most important tool adopted by Credit domiciliation through its medium and long term pertinent information, customer satisfaction and Libanais for meeting customer expectations at different marketing strategy, and through extensive domiciliation retention campaigns, closed accounts follow-ups, and stages, while at the same time achieving market share campaigns launched targeting mainly the ISF, Lebanese so on; backed up by data, collected from the Mystery and profitability goals. army, general security and other military institutions and Shopper Program, Customer Relation Management
Through the deployment of an integrated Customer covering most of the Lebanese territory. The Bank holds (CRM), internal resources, and external research Annual Report 2014 Relation Management strategy and continuous a 20% market share of the Lebanese Army’s salary partners.
72 73 CL core banking activities
electronic banking
CL electronic banking and customer service functions Loyalty Points Balance inquiry, assisting customers ATM Network strive to enhance customers’ experience by providing to check their reward points online. Our large network of ATMs offers value added services advanced banking services channeled through several E-Payment services developed for the payment of to customers in terms of cash and check deposits and electronic delivery channels. government taxes online as well as dues to the Order withdrawals, 24/7. In 2014, several technological advancements were of Engineers and Architects in Beirut, via CL payment introduced, namely: gateway, Net Commerce. Customer Service Center The digital signage throughout several Credit Private Banking and Wealth Management portal for Reachable at 1518 (Hotline) CL customer service Libanais branches, to communicate CL messages, corporate customers enabling them to get real time processes a large volume of phone requests, Monday products and offers on videos and visuals. access to their portfolio. through Saturday from 8:00hrs to 20:00hrs. Agents Advanced queuing dispensers with high-tech at the inbound call center provide product support, features and touch screens, whereby customers Mobile Banking customers’ information inquiries and complaints. can select the desired service and transaction “CL e-bank” mobile application is made available in Outbound calls are operated for telemarketing and specification, to be swiftly served. all stores and is compatible with smart phones and unpaid bills of collection. A new digital communication plan to improve CL devices. online presence on different distribution channels. CL e-bank allows customers to interact with the Bank Social Media New social media apps to optimize interaction and 24/7 and perform all banking transactions related to CL actively and dynamically interacts on Social Media connectivity with customers. accounts and cards, instantly and securely. channels: Facebook, Twitter, LinkedIn, YouTube and CL E-BANK ALLOWS WordPress. In 2014, our social customers reached To reach out to our customers on-the-go, we provide CUSTOMERS TO INTERACT some 40,000. the following e-services: WITH THE BANK 24/7 AND SMS Transaction Alert Service for
Online Banking Cards and Accounts PERFORM ALL BANKING Credit Libanais Group In 2014, CL online banking service has been largely Credit Libanais SMS cards and accounts alert system TRANSACTIONS INSTANTLY developed with the addition of several new services and is a powerful security and anti-fraud tool that notifies features, namely: subscribers of cards and accounts transactions via AND SECURELY. Merchant Funds Transfer, allowing merchants having SMS sent to the subscriber each time a transaction is
a CCM POS terminal to manage their accounts and made. SMS cards alerts also help customers keep track Annual Report 2014 transfer funds with a simple click. of their spending.
74 75 CL core banking activities
affiliated companies
Credit Card Management sal NetCommerce (CCM) The Payment Gateway for Internet NetCommerce also implements the Verified by Visa Credit Card Processing and MasterCard Secure Code protocols. These CCM is the largest processor for card payment CCM facilitated the sale of the cards’ sales by allowing NetCommerce SAL has been a leading provider of protocols provide 3D-Secure payment authentication acceptance and issuance in Lebanon. CCM offers a the merchant to set the card limit and validity at the internet payment services and e-business solutions between the merchant, cardholder, issuing bank, single point of contact to all merchants looking to accept point of sale during the time of the sale. This added since 1999, enabling Lebanese merchants to access and acquiring bank on each transaction to better international cards such as Visa, MasterCard and feature lowered the cost of unused card stocks with the worldwide markets and sell their products and services authenticate each payment online. Amex on all point of sale solutions: in-store top counter merchants. online in real-time, using Visa and MasterCard card POS to wireless and mobile POS. CCM also offers types. Ease of Integration merchants proprietary loyalty and gift card programs Over the elapsed year, CCM continued to deploy NetCommerce has self developed its payment platform A Reputation You Can Trust customized to their needs and businesses. PayMobey, the mobile payment service application on to respond to the different needs of the Lebanese some 3000 CCM POS. Todate, PayMobey remains the With a growing portfolio of more than 900 merchants market, with the ability to develop custom and vertical Online services are made available to existing best solution for remote payment in a non face to face who trust NetCommerce to process their payment solutions that tailor both market and customer needs. customers; merchants can securely access their environment offering convenience and security. transactions securely and reliably, NetCommerce has POS information, manage their proprietary card become the largest payment gateway in Lebanon, NetCommerce has facilitated the integration into its schemes in terms of card issuance requests, turnovers CCM General inquiries + 961 1 901230 processing hundreds of thousands of transactions each payment interface, with different options that best suit the different merchants’ needs. and earnings, and generation of accounting and Website www.ccm.com.lb year from various operating industries. management reports. Help desk + 961 1 899915 The Most Secure and Reliable Solution for NetCommerce’s forecast and expectations for the years CCM continued to deploy new series of POS embedded E mail [email protected] Payment Online to come is to continue gaining a significant market with more flexibility features and wireless connectivity NetCommerce adopts the latest world technology and share by acquiring new markets, remain in line with options, to better satisfy our customers. security implementations to deliver innovative reliable, technology and provide payment solutions for high In 2014, CCM enhanced the features, services and and secure payment processing solutions, and allows tech emerging businesses, E-Government projects, reporting tools already available from the secured web both merchants and cardholders to trade and purchase and mobile technologies. In this respect and in addition interface of the petroleum smart card solution. The online with confidence. to the previous success in governmental projects, new added flexibility allows gas stations to target new NetCommerce uses VeriSign Authentication Services NetCommerce efforts has continued to address new customers and follow up on promoting card activity and governmental services, Ministries, and Syndicates to and solutions that allow companies and consumers encouraging increased usage and retention. further move the online payment services in Lebanon Credit Libanais Group to engage in e-commerce transactions securely. towards a successful e-government. The product was offered to additional customers who NetCommerce is PCI-DSS (Payment Card Industry requested specific customizations, namely some CRM Data Security Standard) compliant since March NetCommerce General Inquiries + 961 1 879 709 capabilities. 2010. This program applies the latest security Website www.netcommerce.com.lb Prepaid cards were very much in demand with implementation derived by Visa and MasterCard Help desk + 961 1 879 709 (ext: 11) merchants, who were especially pleased with the ability in the protection of cardholder data and payment Annual Report 2014 E mail [email protected] to issue cards as per customer request. www.ccm.com.lb services.
76 77 CL core banking activities
IPN The International Payment Credilease Network
Established in 1996 at the initiative of Credit Libanais IPN services in terms of ATM Services include Cash Credilease is a financial institution affiliated to Credit Credilease is also ready to extend investment and and the participation of 5 other major Lebanese Withdrawal, Balance Inquiry, Mini Statement, Mobile Libanais sal, which extends a range of credit facilities private banking activities including equity and wealth banks, International Payment Network sal (IPN) grew Recharge, Account Transfers, Pin Change, BNA (band to customers, in a fast and personalized manner. management services. to become Lebanon’s leading ATM Network Switch. and envelop deposit), Bills Payment and much more. Solutions brought are efficient, confidential and Currently owned by 5 leading banks, it manages the competitive and are specifically designed to meet the A highly trained and skilled team is always available to most extensive network in the country with around 900 IPN services in terms of ATM Solutions include individual and corporate needs of each customer. develop the best suitable personalized service needed. ATMs and services more than 17 member banks. Installation of ATMs, Choice of ATM supplier, At Credilease, we understand the financial challenges Employees are knowledgeable and equipped with the To ensure an excellent service to customers in terms of Customized Screens and Receipts, Management of each business faces. For this reason, we strive latest technological tools to provide a fast, reliable and Automated Teller Machines, IPN continuously reinvests ATMs Cash Position, Control of Consumables, Control to provide financial alternatives to respond to all confidential service. in state of art technology and has finalized the main of Captured Cards, Encryption Key Management, 24/7 customers in our competitive world. part of its software solution from Base 24 to Base 24 Service Desk Support, Anti-Skimming Detective Alert, Assistance in Applying for all Visa/MasterCard/Amex Credilease offers the following financial services: EPS, known to be the most innovative finance services Credit Libanais Tower, Corniche el Nahr Adlieh – Beirut, Lebanon solution worldwide, which currently runs under the Non Mandate Certifications, and Host-to-Host connections. Leasing operations such as rent to own: machinery, Tel/Fax +961 1 425760/1/2/3/4 Stop High Availability System NS series. transport equipment, industrial equipment, hospital E mail equipment. [email protected] From the security perspective, following the EMV Credit facilities such as car loans, personal loans, Website www.creditlibanais.com IPN General inquiries + 961 1 871 248 compliance rightfully acquired several years ago, IPN is housing loans, subsidized loans. certified since 2011 as PCI compliant according to the Help desk + 961 1 878 470 (ext: 11) Consumer finance loans as well as credit facilities to norms of Visa and MasterCard international, and E mail [email protected] household and consumer appliances sectors. since 2012 as ISO 9001:2008 compliant. Credit Libanais Group Annual Report 2014
78 79 CL core banking activities
operations and banking information technologies
Following closely on the heels of this achievement, level of services to customers everywhere, through The Quality Management System It is noteworthy that the International Standard will another success story is in the making: The multiple delivery channels and supported by the latest (QMS) undergo a dramatic revision toward the end of 2015, management of the Credit Libanais d’Assurances et de technology. concerning new requirements. Given the success The success of Credit Libanais Group depends on our Réassurances - CLA (Sister Company) has decided to that Credit Libanais has achieved throughout the In this respect, CL Group’s core banking system, people. We are proud of staff involvement and aware apply for the ISO Certification. Our plan is to complete years in terms of implementing and maintaining the of the commitment of top-level management toward the which is a customer-centric universal banking system, ISO standards, the Bank will continue on its quest for this important project and obtain certification by 2015. implementation of the ISO requirements and toward the provides full universal banking functionalities for both perfection and will successfully implement the new mission to ensure continuous improvement within the Banking Information Technologies front and back office deployments. It is embedded with requirements to the highest possible standards. Bank. Credit Libanais has concluded a notable year filled enhancements for the wide range of retail banking instruments such as lending, deposits, and payments in In 2014, Credit Libanais renewed its ISO Certification with goals achieved and obstacles surmounted. We QMS is a management system for directing and addition to supporting business and enterprise banking for the third time since 2012. The SGS ISO External successfully completed and made significant progress controling an organization with regards to quality. requirements, including treasury and trade services. Auditors preformed the ISO Surveillance Audit visit in on key projects that speed access to technology QMS provides us with a framework for continuous Innovation is crucial for success, yet the focus remains October 2014, and the results were very positive. resources, and upgraded services to provide more on efficiency and productivity. improvement that helps us achieve the quality efficient and reliable services. objectives and enhances customer satisfaction. By The Quality Department, under the Operations A thorough review of the Bank’s infrastructure, products adopting the QMS system, we achieved: Our achievements have built a solid base for future Division assisted the International Payment Network and services has taken place and we have identified Improved business planning. progress, positioning us to enhance resources to play IPN (subsidiary) in obtaining the ISO Certification in areas that need to be addressed, in particular the Greater quality awareness. a key role in the development of the Bank’s major 2012. In addition, the IPN performed the successful environmental protection. The new “Green IT” approach Credit Libanais Group Improved communication. initiatives. implementation of the QMS system in accordance with led us to consider the optimization of our environment Higher customer satisfaction. the requirements of ISO 9001:2008 Standard, and the Next year and beyond will see us engaging in new with the introduction of new technology. Server Reduced costs of non-quality. benefits of this achievement are demonstrated each approaches for solving problems through professional virtualization is almost complete and the implementation Greater control of processes and activities year, during the SGS External Audit reports – a success IT solutions in order to provide maximized value, while of the DCIM (Data Center Information Management) will throughout the organization. that continues year after year. serving the mission of the Bank by providing the highest further enhance such optimization. Annual Report 2014
80 81 CL core banking activities
“GREEN IT” NEW APPROACH LED US TO CONSIDER THE OPTIMIZATION OF OUR ENVIRONMENT. SERVERS VIRTUALIZATION AND THE IMPLEMENTATION OF THE DCIM (DATA CENTER INFORMATION MANAGEMENT) WILL FURTHER ENHANCE SUCH OPTIMIZATION.
In 2014, the fully data center in the new Credit Libanais treasury, foreign trade transactions, deposit/treasury Headquarter Tower is one of the best data centers in deals and other payments processes). the area, one that has been visited by many peers in The year 2014 also witnessed the implementation of the the local and regional markets. A high-capacity cooling first phase of FATCA (Foreign Account Tax Compliance system uses chilled water to make the data center Act) covering Credit Libanais Group in Lebanon and more robust and less prone to failures, and significantly abroad. decreases running costs. Furthermore a modular UPS system adjusts capacity to actual IT loads with more Moreover, we provided the treasury department with a than 95% efficiency. telephony and recording solution that enables the trader Based on CL strategy to utilize the same core banking to handle customer orders in trading currencies or system for all foreign branches to improve efficiency, we equity in a very efficient way. undertook a project to migrate all branches to Equation IT launched the project to replace the existing core banking system installed in Lebanon. application in the administration department which was This unification will reduce operation and maintenance based on a very old technology, with the new ERP costs and improve management reports and MIS. (Enterprise Resource Planning) software based on the latest available software in the market, allowing In addition to the existing online banking facilities for accounts payable, budgeting and administration offered to customers, Credit Libanais shall give Credit Libanais Group processing. corporate customers in Lebanon and the region real time and secured access to CL’s entire current products Credit Libanais’ intranet is currently being upgraded and services basket. Customers shall be able to to the latest SharePoint edition, to allow for more complete their everyday banking transactions more collaboration and swifter communication among efficiently, reducing the costs and burdens associated management and staff. Annual Report 2014 with cash management (cash flow, reconciliation,
82 83 CL core banking activities
human resources
Recruitment and On-Boarding Providing the Bank with the required human capital to For the year 2014, the hiring ratio reached 5.5%, thus IN AN ATTEMPT TO meet its operational and strategic goals is a challenging accompanying the expansion of our business. matter that we continuously seek to accomplish. We In an attempt to keep up with the competition and retain KEEP UP WITH THE aim to recruit the right set of competencies at the right our highly qualified talent, we continue with our internal time in order to always provide high quality service to COMPETITION AND hiring practice, where our talented people are assigned our stakeholders. RETAIN OUR HIGHLY new and higher responsibilities based on experience. CL’s recruitment process ensures the selection of the Each high-value individual is given the opportunity of QUALIFIED TALENT, most qualified and best available staff in line with the taking part in the Bank’s success and growth. WE CONTINUE WITH principles of non-discrimination and equal opportunities, We count on this process to keep our people motivated, according to the Bank’ vision, mission and values. and look for ways to enhance the way we do business, as it constitutes our competitive strength in attracting OUR INTERNAL HIRING Different sources are exploited to widen the candidate new talent. PRACTICE, WHERE OUR pool for each vacancy: the large numbers of applications that are submitted are always reviewed in Performance Appraisals TALENTED PEOPLE order to find the most appropriate ones for the openings Our performance system translates our Bank’s overall at hand. We participate in the yearly job fairs of local strategy of departmental and individual plans taking ARE ASSSIGNED universities to attract fresh graduates. In fact, more than part in the growth and profit of the Bank. Our practices NEW AND HIGHER 3066 CVs were received during the year 2014. in this field ensure a positive work environment through the proper management of the performance appraisal RESPONSIBILITIES To ensure the good integration of our joining members, system, by providing status reports on the achievement we guarantee they go through the on-boarding process of goals and identifying talented people who have the COUNTING ON to have a full overview of our vision, mission and values, ability to move forward in their career and assume EXPERIENCES. so they can easily adapt to our environment and culture. greater responsibilities. Credit Libanais Group Annual Report 2014
84 85 CL core banking activities
As we look for the continuous enhancement of our remuneration reflecting a sustainable and risk adjusted Training By Category practices, we put the plan of implementing the Key performance. Moreover, it defines the performance Performance Indicators (KPIs) within our performance measurement system and the rewarding criteria system; a step forward in our management style - a including the employee’s commitment to the risk means to keep a subjective matter as objective as management policy and procedure, total revenues Executive possible, counting on tangible and achievable results. generated by the employee for the Bank and the risks associated with the operations performed, linking Remuneration Policy rewards to performance. Middle In line with the Central Bank requirements set out in the basic circular # 133 dated 6 August 2014, the Employee Relations remuneration policy and procedure was prepared and Staying close to customers is an important slogan, validated by the HR Committee in December 2014 applied to all Credit Libanais activities, including the Others prior to its submission to the CGNHRR committee for human resources function, which is always close to approval on the 20th of January 2015. In their meeting employees: communicating, listening, resolving their held in March 2015, the Board of Directors reviewed issues and taking appropriate actions towards keeping and approved the remuneration policy and procedure. a motivated and positive working environment. Training Activities by Field The remuneration policy translates Credit Libanais’ Our HR practices keep our people confident, satisfied objectives for good corporate governance. It ensures and motivated, and have a positive effect on the Bank’s effective remuneration, promoting long term profitability business and results, within applicable laws and and appropriate risk-taking behavior. The policy is regulations. consistent with the Bank’s long-term strategy which 6 aims at strengthening CL’s position amongst alpha banks in Lebanon. It also ensures attracting and Total HRS Training and Development 5 retaining our talent, as well as motivating and rewarding In 2014, CL Training and Development’s efforts focused good risk-based performance, while observing the on the main areas: Over HRS applicable laws and regulations. 4 The remuneration policy is applicable to all Credit Training activities. Ext HRS Libanais employees, at all levels and grades, in Training of New recruits. 3 Lebanon and abroad. It also considers the remuneration E-learning program. INT HRS of staff engaged in internal control functions, as Focused training. 2 independent of the performance of the business areas Schools. Credit Libanais Group they control. ABL and BDL trainings. 1 Career management programs. The policy covers the basic fixed remuneration, 0 50 100 150 200 250 300 350 400 450 reflecting relevant professional experience and Summer intership. organizational responsibility, in addition to the variable Annual Report 2014
86 87 CL core banking activities
Talent Management Program Career Management Programs - 2014 E-Learning Program Purpose of the Career Management Program: CL is proud to be the first retail Bank in the region to have implemented and benefited from the E-learning Matching Profiling This Program is an organizational process which process. The usage rate competed with top companies HR will send the names Every candidate will undergo involves potential employees, addresses their worldwide, according to the European e-learning to the concerned heads of a profiling assessment test ambitions, assigns roles and responsibilities aligned Identifying Confirming barometer. Flexibility is a major benefit of e-learning divisions to choose, modify corresponding to “manager” with their potential performance and promotes/prepares Human Resources prepare a and comment. HR will carry on the annual qualifications. them for job opportunities so as to accommodate the since it offers our staff the possibility of taking courses list of potential employees for Heads of divisions shall talent pool to the Career The results will then be anytime anywhere from the comfort of their home the developmental program. match the criteria needed Management Commitee. retrieved and an individual growth of our people. As a result a pool of employees or office. CL’s e-learning program yielded excellent The list will be based on for adding candidates to the CMC will then confirm the career plan will be set for channeled and ready to undertake new assignments scientific criteria and is list and resend the final list final names taking into each candidate accordingly. and positions is created to supply the Bank upon need. results; the majority of staff members are registered systematically generated. within a week. consideration several factors A meeting will be held with The Training and Development Department, based on users. Learners’ satisfaction, surveys and results are A full report is generated with The HR will then receive all like strategic needs and the candidate to review and a proactive approach, assesses, trains and matches extremely high. its related memo. the approved names and gaps. assess each plan in order to Names are kept confidential. check if they match the set A final list of names will be initiate the program. potential candidates for certain needed functions in criteria. generated. accordance with the of required positions and strategic plans.
Summer Internships Summer internships is a continuous program that provide us with an opportunity to evaluate the talents of a new generation of workers. In 2014, a considerable number of candidates were accepted from various renowned universities in Lebanon.
Career Management Pools Summer Internships Numbers of interns in each region and head office 58 55 Bright Pool: Nomination of a star employee from each department and branch.
Talent Pool: Talent profiling according to strategic 45 priorities and plans of the bank.
Leadership Mid managerial position filling and profiling for 36 Pool: next best fit and readiness.
33 Succession Pointing out successors 32 Pool: for key positions.
Regional Management Regional Management Kaslik Regional Management Hamra Regional Management Bekaa Regional Management North Head Office Riad El Solh & south
88 89 CL Control Functions
Internal Audit 92
Compliance and AML/CFT 96 Risk Management Startegy 100 Market, Financial Institutions and Country Risk Management 118
Operational Risk Management 119
Information Security Risks 120
Business Continuity Planning 122 CL control functions
internal audit
Audit Committee Head of Group Internal Audit Overseas Audit
Quality Assurance & Improvement Performance Measurement
Branch Audit Head Office Audit Back Office Audit Credit Audit E-Banking Audit IT Audit LIB Audit CLIB Audit
Internal Audit Division Objectives Stimulating objectivity, uniformity, comparability, The following factors are key components of an Confidentiality and transparency. effective internal audit function: The Internal Audit Division (IAD) is responsible Group CL (IAD)’ main objectives are to: Accelerating and promoting improvements. for strengthening Credit Libanais’ business risk/ Align audit activities with the Bank’s strategy. Fulfilling and properly handling management Organizational Structure of the IAD control environment by providing comprehensive and Address risky activities and processes by providing requests and special assignments in a timely independent professional audit and consulting services The IAD is business-centric, and is composed of tailored recommendations and implementing best manner. to all divisions and entities operating within the Bank, specialized audit departments that have gained practices. Meeting the auditees’ expectations and and by assisting management in maintaining proper assessments. sufficient experience in the business and can provide Add value to the business risk control environments. controls over the Bank’s assets, thus adding value to Conducting independent and objective audit best services and recommendations to improve the Ensure the adequate implementation of risk the overall business performance. reviews and evaluations. activities of business units. These departments include management procedures and methodologies and the Conducting adequate tests and reviews of Branch Audit, Head Office Audit, Credit Audit, E-banking Group CL Internal Audit Division (IAD) strives to provide efficient functioning of the internal control framework information systems. & Cards Audit, IT Audit, Back-Office Audit, Overseas the best quality of internal audit services while adding Complete a full coverage of the audit areas Appraising management regarding: Audit (Limassol, Bahrain, Senegal, Iraq), other affiliated value to all business units. mentioned in the audit year plan. Effectiveness of measures taken to assess and banks (Credit Libanais Investment Bank and Lebanese Credit Libanais Group Assign a risk control grade for each business unit manage risks. Islamic Bank) and subsidiaries (Credilease, CLA, etc). The Internal Audit Division (IAD) provides assurance to Reliability, consistency and integrity of data. Department Heads enjoy sufficient expertise to manage the Board through its Audit Committee that: and monitor its improvement over time. Measures taken to safeguard assets, a team composed of senior and junior auditors, and to T h e d e p l o y e d i n t e r n a l c o n t r o l s a r e a d e q u a t e t o deliver high quality audit and consulting services. They Other Objectives consist of: documents and records. mitigate risks. Compliance with policies, laws and regulations report hierarchically to the Head of IAD (Chief Audit Governance processes are effective and efficient. Providing consultancy services regarding organizing Respect of the code of conduct and the Bank’s Executive) who in turn reports to the Board of Directors, Annual Report 2014 Organizational goals and objectives are met. and improving the risk control framework. values. through the Audit Committee.
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Knowledge Management adding value, improving the Bank’s operations and Overseas Audit Quality Assurance and Improvement providing assurance to the Board that the Internal Audit All departments include staff that have full knowledge IAD audited the operations of overseas Department function is in conformity with the set standards and the and expertise over the business areas they examine. operations(Limassol, Bahrain and Iraq) during Code of Ethics. The timely follow-up conducted by this department They are experts in their domain of specialization, 2014. The reports issued were discussed with local on all audited businesses, to ensure that all capable of delivering high quality services to Branch Audit management and communicated to the regulatory observations raised in the internal audit reports were authorities. auditees, whether the latter are branches, centralized All branches are risk rated according to the level of well implemented within the agreed upon time frame, departments or affiliated companies. showed a significant improvement during the year 2014. internal control exercised by branch management and Back-Office Audit to operational risks inherent to their activities. Based on Review reports are being submitted to management and Audit Methodology and Approach The IAD exercises an off-site review over the MIS the risk rating assigned to them, corrective measures and exception reports, operations and activities to the Audit Committee on a quarterly basis showing The division follows a risk-based approach when are taken to enhance the branches’ risk profiles and to of branches, and exchanges inquiries with branch the major audit findings that might affect the realization auditing business units. This consists of identifying address the observations and deficiencies raised in the management for particular deficiencies. IAD closely of the Bank’s objectives, in addition to a briefing and assessing the inherent risks to the business, the audit reports. liaises with the branch audit function that performs showing the compliance of auditees with the audit effectiveness of the controls that mitigate those risks, The Internal Audit reports contributed to the issuance on-site visits to branches, thus complementing the recommendations and their current status. and the residual risks after these controls are in place. oversight function exercised by the IA Division and of new procedural notes and policies that improved the Major Achievements in 2014 Based on this risk approach, emphasis and priority are internal control framework and enhanced management improving the overall internal audit function. placed on the business areas where the highest risks oversight of branch operations. Introduction of new tools and techniques to better are considered. IT Audit manage and properly allocate the audit resources The department exercised regular follow-up with the Several audit assignments were performed on the and enhance the internal audit function within the Professional Staff branches in order to ensure that the reported audit IT functions which covered various applications and Group. deficiencies were properly addressed and regularized. processes applied at the Bank level. IT general control Standardization of the audit reports, including the Sufficient technical and on-the-job training is performed Audit assignments in branches were conducted reviews were also conducted to enhance physical and introduction of a systematic rating methodology of to allow our team to excel in their missions. Personal according to the annual audit plan approved by the logical security of IT environment. audit observations and the assignment of an overall development plans are performed for every auditor. Board Audit Committee for the year 2014. audit rating for auditees. Training and education is part of the personal Special Assignments Audit coverage included all branches and development plan in order to maintain proficiency. Head Office Audit Special assignments were performed by the IAD at departments within the last 2 years (Audit Cycle). Auditors are encouraged to enroll for the CIA (Certified This department covered all centralized departments the request of the General Management and different 800 training hours were invested in our audit team Internal Auditors) certification to enhance their issues that needed additional investigation and proper as scheduled in the year plan of 2014 and conducted through internal and external sessions pertaining to professional knowledge and skills. In this respect, follow-up were tackled. on-site missions among the different business divisions relevant business and banking topics. In addition, some members have already started attending the many auditors are currently preparing for the CIA and support functions. Affiliated Banks/Subsidiaries CIA courses, in addition to the E-learning courses that certification (Certified Internal Auditors). Resident auditors are assigned to review the operations were made available to all audit staff to enhance their Credit Audit The Audit Committee met on a regular basis (4 and activities of the affiliated banks (CLIB and LIB). technical knowledge and continuously improve their meetings in 2014 attended by all members) to Periodic risk-based audits, credit processes and Internal Audit reports issued based on an approved professional skills. discuss major activities and findings that occurred portfolios were undertaken by the Credit Audit year plan for 2014 were duly submitted to their Credit Libanais Group during the internal audit assignments. Out of Department. Audits included consideration of the respective Audit Board Committees. Support and Development adequacy and clarity of credit policy and procedure which 2 meetings were dedicated to discuss with In addition to the above, an audit field visit was The Quality Assurance and Improvement Department manuals; as well as in depth analysis of a sample of the external auditors the financial reporting and performed at Credit International SA (Senegal) covering within the IAD covers all aspects of internal audit accounts IAD covered credit assignments as scheduled accounting issues, and one meeting with the Head all activities of the Bank. activities and continuously monitors its effectiveness in the year plan of 2014 which encompassed retail of Compliance and AML to discuss developments through developing quality assurance techniques. products, retail and corporate commercial facilities and In accordance with regulatory requirements, the IAD and actions taken by the Bank to combat money Annual Report 2014 Quality Assurance & Improvement helps the IAD in credit risk management processes. covered the non-banking subsidiaries during 2014. laundering and financing terrorism.
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compliance and AML/CFT
Board of Directors and Senior Management’s AML/CFT department is entrusted with the following THE COMPLIANCE FUNCTION HAS THECredit LibanaisNECESSARY Group has embedded Regulatory involvement in enhancing the Compliance duties: Compliance across all entities, locally and abroad, to Culture Developing a corporate AML program including INDEPENDENCE, AUTHORITY, RESOURCES,ensure application EXPERTISE of sound banking ANDpractices within documented policies and procedures, designation Group CL Compliance strategy is designed in ACCESS TO INFORMATION TO PERFORMa safe financial ITS DUTIES.environment, while abiding by highly of compliance officers and compliance enhanced accordance with the Board of Directors and Senior recognized ethics and code of conducts. training programs for the Bank employees. Management guidelines. In fact, the compliance tone is Monitoring activities in view of identifying unusual set at the top to ensure effective and responsible follow- The Bank has put in place a compliance policy, or suspicious transactions, or ranging outside the up of the implementation of policies and procedures During 2014, CL Group continued to strengthen its Theprocedural Bank has manuals, put in place applicable a compliance standards policy, and risk profile parameters either set by legislation or in throughout the whole financial institution. compliance function through appointing a dedicated proceduralprocesses manuals,to reinforce applicable the application standards of compliance and accordance with the Bank’s risk assessment policies. DuringFATCA 2014, team theand CL acquiring Group continuedautomated to solutions strengthen to its processesbest practices to reinforce through thea dynamic application organizational of compliance Moreover, senior management assesses the activities Reporting unusual or suspicious transactions to the adapt CL banking systems to local and international compliance function through appointing a dedicated beststrategy practices and ensure through sustainable a dynamic business organizational advantages. of the Compliance Division for performance adequacy Central Bank’s Special Investigation Commission laws and regulations and is proceeding as per the FATCA team, acquiring automated solutions to adapt strategyCompliance and codeensure of sustainableethics is duly business respected advantages. through and efficiency. (SIC), investigating details surrounding the FATCA/IRS timetable agenda. Moreover, to extend CL banking systems to local and international laws Thethe organization.compliance code of ethics is duly respected The compliance function has the necessary suspicious transactions and documenting the compliance to all stakeholders and strengthen the entire and regulations, and is proceeding as per the FATCA/ throughout the organization independence, authority, resources, expertise and resolution. control environment, we implemented a compliance The compliance function sets out the Bank’s access to information to perform its duties. Identifying, documenting and assessing compliance IRSprocedural timetable framework agenda. Moreover,focused on to FATCA extend integration compliance Themechanisms compliance and function procedures sets outin view the Bank’sof: risks associated with customer’s activities on a pro- tothrough all stakeholders the Bank groupand strengthen as we amended the entire KYC control forms mechanisms and procedures in view of: Legal and Regulatory Compliance active basis. environment,and conducted we FATCA implemented due diligence a compliance with our procedural FFIs, ProtectingProtecting thethe reputationreputation ofof thethe BankBank andand increasingincreasing In accordance with local and international regulations, Assessing the adequacy of the Bank’s compliance frameworkin an effort focusedto ensure on a FATCA sound integrationcorrespondent through banking the itsits credibilitycredibility towardstowards allall stakeholdersstakeholders concernedconcerned withwith CL Group Legal Compliance Department identifies, procedures and guidelines, promptly remediating Banknetwork. group Extensive as we amended training programs KYC forms are and continuously conducted thethe safetysafety ofof thethe financialfinancial institutions’institutions’ interestsinterests andand prevents and mitigates legal risks; while ensuring any identified deficiencies or irregularities and FATCAconducted due todiligence familiarize with our our staff FFIs, with in ansuch effort new to soundsound reputation.reputation. compliance with local and foreign regulators’ proposing adequate adjustments. ensureprocedures a sound and correspondent regulatory requirements. banking network. MaintainingMaintaining efficientefficient AML/CFTAML/CFT compliancecompliance directives (Central Bank of Lebanon, Banking Control Providing guidance and advice to staff in Extensive training programs are continuously conducted A rigorous compliance culture toned at the top is spread proceduresprocedures andand compliantcompliant businessbusiness strategiesstrategies within Commission, Special Investigation Commission, collaboration with the legal department and relevant to familiarize our staff with such new procedures and throughout Credit Libanais Group. Our compliance respectrespect toto legallegal andand regulatoryregulatory frameworks.frameworks. Association of Banks or other Central Banks or business units. regulatory requirements. Assisting management in educating staff on policy applied through a strict body of procedures and EnsuringEnsuring thatthat policiespolicies andand controlscontrols areare efficientlyefficiently regulators where the Bank has presence abroad). appropriate rules of conduct, complies with international, compliance issues, and acting as a contact point A rigorous compliance culture toned at the top is spread applicableapplicable toptop downdown withinwithin thethe BankBank withwith respectrespect toto regional and local banking regulatory standards. We The AML /CFT Compliance within the Bank for compliance queries from staff throughout Credit Libanais Group. Our compliance thethe codecode ofof compliancecompliance ethicsethics andand thethe regulatoryregulatory ensure the effectiveness and competences of the firm’s In accordance with law 318 of April, 2001 and all members. compliancecompliance regulations.regulations. Credit Libanais Group policystructures, applied processes through aand strict procedures body of procedures in place in order subsequent BDL circulars regulating the control of Providing technical expertise to AML/CFT delegates MinimizingMinimizing thethe exposureexposure toto irregularitiesirregularities byby andto prevent, appropriate manage rules and of conduct,mitigate compliancecomplies with risks. financial and banking operations for Fighting Money by administrating in–house training. AML/CFT implementingimplementing aa preventivepreventive compliancecompliance programprogram toto international,Credit Libanais regional Group and has local embedded banking Regulatory regulatory Laundering and counterting financing terrorism the delegates will also enhance their performing skills by mitigatemitigate risks.risks. standards.Compliance We across ensure all entities,effectiveness locally and and competences abroad, to AML/CFT Compliance Department ensures a rigorous following external training sessions. SustainingSustaining soundsound relationshipsrelationships withwith thethe bankingbanking ofensure the firm’s application structures, of sound processes banking and practices procedures within control on banking transactions, correspondent Monitoring compliance by performing sufficient and financial community globally by conducting ina placesafe financial in order toenvironment, prevent, manage while andabiding mitigate by highly and financial community globally by conducting banking relations and all regulated banking operations compliance risk assessments and independent Annual Report 2014 transparent and comprehensive banking practices. compliancerecognized risks.ethics and codes of conduct. transparent and comprehensive banking practices. requesting a stringent AML/CFT program. testing.
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AML/CFT Procedural Framework Establishment of Account Purpose The Alert Management and Check Surveillance Tool Moreover, the Training Unit provides the Bank with Prior to opening an account for a customer, the Bank Know Your Customer within the AML/CFT Reporter procedural directives in the form of Compliance Enhanced KYC management is the due diligence gathers sufficient information from the customer The AML/CFT Reporter is implemented at both the branch Guidelines and a Duties and Responsibilities Manual. that financial institutions must perform to identify their concerning the purpose and reasons for the opening of level and the AML/CFT Compliance Unit level. An online In parallel, the Unit ensures the communication of customers and establish related relevant information to the account. system allows both ends to monitor accounts and analyze the Code of Conduct and Business Ethics and the undertake business with them; alerts when an unusual activity or suspicious customer promotion of the compliance culture internally, in Enhanced Customer Due Diligence accordance with BDL Basic circular 128. Enhanced customer due diligence is performed on profile breaks the expected client’s profile. Establishment of Customer Identity those customers identified as having a higher risk FATCA Implementation Process The Bank establishes and maintains relationships profile. Additional inquiries are made or information is The Designated Name Filtering System (DNFS) The Lebanese financial banking sector regulators exclusively with those customers whose source of obtained from those customers. The bank also has an integrated automated filtering tool issued directives to banks operating in Lebanon and wealth and funds, as well as the nature of the business that can assist it in comparing our customer Database AML/CFT Compliance Officers their foreign entities, to act as FATCA Compliant activities undertaken with our Bank, can be reasonably and funds transfer activity to International black- A successful Compliance Officer is a qualified delegate Participating Foreign Financial Institutions PFFI by the established as legitimate. listed names and the ones provided by the Special that abides by the Bank’s corporate culture, places US Internal Revenue Services (IRS) and enacted on Investigation Commission (SIC), and other lists of Moreover a reasonably designed Risk Based Approach emphasis on compliance, and possesses the ability March 18, 2010. undesirables published globally. framework and methodology for customer identification to manage compliance risks while permitting business Credit Libanais Group successfully registered since and verification is applied when assessing the degrees development. April 2014 to the Internal Revenue Services - IRS, as of potential Money Laundering risks associated with AML/CFT Committee a compliant PFFI to FATCA, and fully implemented customers and transactions which represent higher In this respect, the Bank has integrated compliance The AML/CFT Committee ensures that crucial compliance FATCA provisions regarding Foreign Financial risks to our Bank. In this respect Credit Libanais officers’ function in the branches as per the directives issues are coordinated and communicated throughout Institutions’ duties towards the American fiscal operates an Enhanced Due Diligence (EDD) in of the Central Bank of Lebanon (Intermediate Circular the Bank. Its main goal is to reflect the involvement of the authorities. customer screening and monitoring which relies on the 371) in order to apply rigorous compliance controls and whole bank’s Management in the decision making process following steps: stringent monitoring of banking operations and financial regarding AML/CFT issues. transactions at the branch level. Accordingly, Credit Libanais group has established the Application of appropriate Due Diligence when required procedural programs to implement a “FATCA AML/CFT Compliance Awareness and Training entering into a relationship with customers. Compliance Management Tools Strategy” and a “FATCA Action Plan” throughout CL In view of ensuring the understanding of the compliance An on-going monitoring of customer’s profiles The latest tools are accessible to the AML/CFT function Group. Moreover; a FATCA solution was acquired from regulatory requirements and adequate application of the and transactions throughout the course of the for more efficiency and effectiveness. Those are: a specialized vendor in order to assist Credit Libanais relationship. procedural framework, CL has implemented an AML/ FFIs in the identification and reporting process of Update of customer profiles and establishment of a The AML/CFT Reporter Compliance Training Unit which focuses on providing customers who must abide by FATCA regulations. clean customer’s database that enables customer AML-Reporter is an automated activity monitoring all Bank employees with adequate AML/Compliance in- identification processes as well as the assignment of system designed to mitigate reputation and regulatory house training sessions. Therefore, CL group acts as an entirely FATCA adequate banking services and products to the right risk. In conjunction with the bank’s AML (Anti-Money Compliant Group. A designated working group of
Moreover this Unit is dedicated to conducting AML/CFT Credit Libanais Group customers for business relationship enhancement. Laundering) program, the software helps meet the FATCA experts ensures the proper follow up and and Compliance research in view of assessing the risks requirements of local regulators, as well as the implementation process to avoid compliance breaches. associated with the implementation of new products Establishment of a Beneficial Owner recommendations of the international FATF (Financial FATCA focused training encompassing all Bank Whenever the Bank is required to identify a customer, Action Task Force) and now MENAFATF (Middle and activities at the Bank. employees is regularly conducted and supervised by the ultimate beneficial owner(s) are also effectively East and North Africa Financial Action Task Force) the Compliance Division, across all units and entities. identified. recommendations. Annual Report 2014
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risk management and strategy
Board of Directors Chairman - General Manager
Risk Committee Risk Management and Strategy
Chief Risk Officer
Risk Management Project Market, Financial Institutions Risk Policies and Office / Credit Portfolio Operational Risk Information Security Risk Credit Risk Management and Country Risk Business Continuity Planning Strategy / ICAAP Management / Credit Risk Management Management Management Models
Risk Management and Strategy The Risk Management and Strategy function is fully management throughout the organization: independent of the commercial lines of business, Balancing risk and reward is achieved through (a) reporting to the Chairman - General Manager and the aligning risk appetite with the Bank’s overall business Board through the Board Risk Committee. Its scope strategy, (b) diversifying risk, (c) pricing appropriately covers local and foreign banking and the financial for risk, and (d) mitigating risk through preventive institutions arms of CL Group. Duties are carried out controls. through an integrated strategic risk planning and Management of risk is shared at all levels of the process review, supported by sound risk management organization. practices and an effective framework. The cornerstone Effective decision-making is based on a strong of this function is a strong risk management culture understanding of risk.
supported by a robust set of policies, procedures and All business activities are conducted with a view to Credit Libanais Group limits, managed by professionals and other functional not risking the Bank’s reputation. teams. Ensuring that provided services are suitable for and understood by the Bank’s customers. Risk Appetite Framework Applying appropriate judgment as a mandate
CL Group applies the following six overarching throughout the organization for the management of Annual Report 2014 principles in the risk identification, monitoring and risk.
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Enterprise-wide Risk Management the Bank’s people, technology and capital. ERM policies include the following: implementing a policy that addresses the authorized types, limits and concentration of investments, other Framework (ERM) ERM process aggregates risks across the entire Group Capital Management financial instruments, and assets; the defined and to assess the Bank’s risk profile in relation to its risk The Bank follows a comprehensive ERM Framework, Capital Management’s fundamental elements include prudent levels of decision-making authority; identifying, absorption capacity. the implementation of a policy that addresses the appropriately scaled to its size, complexity and measuring, providing for and recording market quantity, quality and composition of capital needed, risk profile. Under ERM, the Board is responsible impairments; and monitoring and Board reporting Basel II/III - Solvency Supervision reflecting the Bank’s inherent risks related to current for confirming the risk appetite/tolerance, and requirements. monitoring compliance to risk management processes. and Capital Adequacy Framework and planned operations; the distribution of dividends Management is responsible for identifying, evaluating, At CL Group, Capital and liquidity requirements issued and redemption of capital instruments to shareholders; Asset and Liability Risk Management and monitoring and reporting requirements. mitigating and reporting on risk exposures. and reviewed by the Basel Committee on Banking CL Group Asset and Liability Risk Management’s Supervision (BCBS), covering capital adequacy, capital fundamental basics include implementing a policy that Credit Risk Management The ERM framework involves an objective, pro-active buffers, and liquidity risk management are applied on a addresses the limits on the balance sheet mix and Credit Risk Management implements policies that enterprise-wide view of all risks and their associated cross-border level across local and foreign subsidiaries. maturities of capital, deposits, loans and investments; address the authorized types and classes of credit risk appetite/tolerance to ensure that they are fully Moreover, CL Group fully complies with BDL and BCC criteria for pricing of deposits and loans; limits on instruments; limits or exclusions on credit exposures aligned with the Bank’s objectives and strategies, and regulatory requirements in accordance with the Basel II/ the exposure to Foreign Currency Risk; limits on including concentration; assessment criteria and credit reflect the quality, competencies and capacity of III framework. the exposure to changes in interest rates; use of risk mitigants for each authorized credit instrument; appropriate techniques for measuring the Bank’s Asset Below are the BDL ratios and deadlines introduced by Basic Circular No. 44 and its amendments, which are more effective credit assessment process; defined and and Liability Risk and evaluating the potential impact conservative and have earlier deadlines than the Basel III requirements: prudent levels of decision-making authority for approving credit exposures; the management of under current and reasonably foreseeable scenarios; delinquent and impaired loans; and monitoring and the use of analysis and appropriate consultation for Minimum Regulatory Requirements As at 31 December 2015 2014 2013 2012 Board reporting requirements. the purchase of derivatives for hedging purposes; and Common Equity Tier 1 Ratio 8% 7% 6% 5% monitoring and Board reporting requirements. Tier 1 Equity Ratio 10% 9.5% 8.5% 8% Operational Risk Management Liquidity Risk Management Total Regulatory Capital Ratio 12% 11.5% 10.5% 10% Operational Risk Management’s fundamental constituents include implementing a policy that Liquidity Risk Management’s fundamental features addresses the defined and prudent levels of decision- include implementing a policy that addresses the limits BDL adopted a capital conservation buffer of 2% and appropriate and prudent ERM policies that set out making authority; the security and operation of the on the sources, quality and amount of liquid assets 2.5% to be effective in 2014 and 2015 respectively, the risk limits for all significant risk areas and reviews Management Information Systems; the technology to meet normal operational and contingency funding which is incorporated in the above ratios. Group CL and confirms that the Bank’s risk exposure is aligned development and maintenance; the safeguarding of for significant deposit withdrawals and regulatory with its risk appetite/tolerance. In parallel, Senior the Bank’s premises, assets and records of financial requirements; and monitoring and Board reporting performed capital stress tests which proved the Bank’s Credit Libanais Group capacity to comply with the above new regulatory ratios Executive Management implements the ERM policies, and other key information; the disaster recovery and requirements. processes and controls which address the identification, on due dates. business continuity plans; the outsourcing of services; measurement, evaluation and mitigation of significant Internal Capital Adequacy the internal controls; the internal audit; and monitoring Assessment Process Risk Policies and Strategy / ICAAP risk exposures; it also ensures reporting on ERM and Board reporting requirements. processes and findings, including the level and direction The Bank operates with capital positions well above
Enterprise Risk Management (ERM) Policies of risk exposures and the extent of risk management Market Risk Management the minimum regulatory capital ratios, with an amount of Annual Report 2014 The Board approves and ensures the implementation of activities. Market Risk Management’s fundamental parts include capital that is commensurate with its risk profile on
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stand-alone and consolidated basis. In addition, the Noting that, the quality of capital, the approved capital Regulatory Capital Structure Bank has robust, forward-looking capital planning targets including the buffers and the capital planning, processes and governance, which account for its reflect appropriate levels. Therefore, the assessment of inherent risks and permit continued operations during the capital adequacy is ranked good. 2014 2013 times of economic and financial stress. Capital Structure and Regulatory Common Equity Tier 1 Capital resources Share capital 257,400 257,400 As per regulatory requirements, CL Group refined its Capital Ratios risk methodologies and included more sensitive risk Share premium account Group Credit Libanais maintains an actively managed measures for the evaluation of the Internal Capital Legal reserves 92,852 84,265
capital base to cover risks inherent to the business. C/V millions of LBP Adequacy Assessment Processes (ICAAP), to ensure Reserves for unspecified banking risks 90,019 76,030 The adequacy of the Bank’s capital is monitored that the Bank holds adequate capital to maintain ready Other reserves 210,756 200,154 using, amongst other measures, the rules and ratios access to funding, continue operations and meet Reserves for Assets under Liquidation 11,807 8,809 established by the BDL and the BCC, especially BDL its obligations to creditors and counterparties, and o o o Reserves for irrecoverable bad debts as per BDL Circular N . 73 4,010 4,246 continues to serve as a credit intermediary, even under Basic Circulars N . 44 and N . 43 as amended on Retained earnings 180,426 157,768 adverse conditions. Consequently, the Bank submitted November 12, 2014 and August 11, 2014 respectively o Profit or loss account (taking into account interim net losses) 96,794 102,874 the Fourth Internal Capital Adequacy Assessment and BCC Memo N . 5/2014 issued on August 14, 2014. Minority Interest 791 558 Report (ICAAR) on a consolidated basis for the BCC The Bank is being supervised on stand-alone and Revaluation of fixed assets 65,584 65,584 review and ensured that standalone capital ratios are consolidated basis and, as such, receives information Net unrealized Profit / Loss on Financial Assets held at FVOCI 27,744 22,002 appropriate. Various stress tests were conducted and on the capital adequacy of, and sets capital the preliminary results of the ICAAP showed that the requirements for, the Bank as a whole. Subsidiaries Foreign Currency Position 188 (599) Bank is able to sustain the low to medium stress tests are (i) directly regulated by their host banking Common Equity Tier 1 1,038,370 979,091 without reducing the capital conservation buffer. supervisors, who set and monitor their capital adequacy Common Equity Tier 1 Regulatory Adjustments Profit and loss account (96,794) (102,874) The Board, its Risk Committee and the ALCO approved requirements and (ii) monitored at Credit Libanais the ICAAR, under audit supervision. Head Office level, which conducts fully consolidated Gorss unrealized Profit on Financial Assets held at FVOCI (30,338) (24,679) regulatory reporting. Revaluation of fixed assets (65,584) (65,584) Reserves for Assets under Liquidation (11,807) (8,809) Risk Profile Effective strategies and policies are being additionally o Based on the detailed analysis of the different types of established and reviewed periodically by the Bank, with Reserves for irrecoverable bad debts as per BDL Circular N . 73 (4,010) (4,246) the Bank’s risks, the Bank considers that there is a low the aim of maintaining adequate levels of individual Intangible assets including goodwill (6,013) (4,569) risk of the Bank encountering difficulties in the future, capital. Foreign Currency Position (188) Credit Libanais Group considering its overall medium-high inherent risk, its Excess over limits of articles 152 and 153 of the Code of Money and Credit (13,278) (2,579) good internal governance, risk management and control Other Common Equity Deductions that are appropriate to its activities. Based on the Common Equity Tier 1 After Deductions 810,359 765,751 review of all types of risk, the Bank’s overall risk profile is ranked medium-low with some increasing trend, due to the unstable political and economic environment in Annual Report 2014 Lebanon and the potential future expansion plans.
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2014 2013 Credit Risk: Standardized Approach by Exposure Class Disclosure of the amount of exposures subject to the Standardized Approach of Credit Risk and their related risk Share Capital - Non-cumulative perpetual preferred shares 11,000 11,000 weighted assets and capital requirements. Share premium - Non-cumulative preferred shares 139,750 139,750 Additional Tier 1 Capital 150,750 150,750 2014 2013 Additional Tier 1 Capital Regulatory Adjustments
C/V millions of LBP Interest Rate Levels Exposure Value Risk Weighted Capital Exposure Risk Weighted Capital Total Tier 1 Capital 961,109 916,501 Assets Requirements Value Assets Requirements Tier 2 Capital Resources Central governments and central banks 7,604,718 2,102,509 168,201 6,665,147 1,771,044 141,684 Medium to long-term subordinated debt instruments 113,063 113,063 Public Sector Entities (PSEs) 10,503 ------Real estate revaluation approved by the BDL and qualifying under Tier 2 Capital 7,828 7,828 Banks 1,045,620 283,556 22,685 1,174,664 316,939 25,355 C/V millions of LBP 50% of the Foreign Currency Position 94 Corporates 1,817,885 1,840,914 147,273 1,925,855 1,717,314 137,385 50% of the gross unrealized profit on Financial Assets held at FVOCI 15,169 12,340 Small and Medium Enterprises (SMEs) 760,431 477,792 38,223 889,771 560,101 44,808 (Other Tier 2 Capital Deductions) (45,225) (22,613) Retail 462,760 346,619 27,730 471,058 353,307 28,265 Total Tier 2 Capital 90,928 110,618 Residential Mortgage Loan 1,245,974 434,874 34,790 1,078,258 376,280 30,102 Total Capital 1,052,037 1,027,119 Claims secured by Commercial Real Estate 51,988 51,988 4,159 48,791 48,620 3,890 Total Risk Weighted Assets 6,669,803 6,175,641 Securitization positions standardized approach 8,584 5,253 420 9,110 5,120 410 Common Equity Tier 1 Ratio 12.15% 12.40% Non-performing loans 86,625 57,453 4,596 49,882 43,982 3,519 Tier 1 Capital Ratio 14.41% 14.84% Other Assets 659,971 459,588 36,767 619,663 400,103 32,008 Total Capital Ratio 15.77% 16.63% Total for Credit Risk 13,755,059 6,060,544 484,844 12,932,199 5,592,810 447,425
The above three ratios are higher than Basel Ill regulatory requirements, so the Bank is considered as well capitalized. Market risk: Standardized Approach Pillar 1 Capital Requirements Disclosure of the level of Market Risk in terms of capital requirements and risk weighted assets as per the The tables below set out Pillar 1 Capital Requirements and associated risk weighted assets for Group Credit Libanais Standardized Approach, which is detailed in the BCC Circular No. 256 dated September 26, 2007. with separate disclosures for the credit risk, market risk and operational risk requirements.
2014 2013
2014 2013 Equity Position Risk 0 0 Pillar 1 Capital Requirements for: Interest Rate Risk (FVTP&L): Credit risk 484,844 447,425 Specific Risk 1,876 2,220 Market risk 8,377 7,991 General Market Risk 926 1,583 Credit Libanais Group Operational risk 40,364 38,636 Equities Risk (FVTP&L): C/V millions of LBP Total Pillar 1 Capital Requirements 533,585 494,052 Specific Risk 134 433 General Market Risk 134 433 Foreign Exchange Risk 5,308 3,322 Total Capital Requirements for Market Risk 8,377 7,991 Annual Report 2014 Total Risk Weighted Assets for Market Risk 104,714 99,886
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Disclosure of the level of Operational Risk in terms of capital requirements and risk weighted assets as per the Basic Credit Portfolio Management Appropriate pricing of the credit risks taken; applying Indicator Approach, which is detailed in the BCC Circular No. 257 dated October 08, 2007. consistent credit risk exposure measurements; and The Bank’s approach to controlling various risks begins Mitigating credit risk through prevention and early with optimizing the diversification of its commitments. C/V millions of LBP 2014 2013 detection and warning signals’ controls. The management criteria set out in its internal policies Capital Requirements for Operational Risk 40,364 38,636 include measures designed to maintain a healthy Our business activities are conducted in such a way as Risk Weighted Assets for Operational Risk 504,544 482,944 degree of diversification of credit risk in its portfolios as to avoid any reputational risks. The Bank has selective set out in the BDL Basic Circular No. 48, dated August lending criteria in this respect, such as avoiding: 13, 1998 and BCC Circular No. 276 dated June 21, Granting credit to entities subject to economic Internal Capital Required (Pillar 1 + Pillar 2) Credit Libanais’ expansion plans locally and abroad, 2013. These instructions are mainly reflected in the sanctions. a semi-annual 5-year capital planning exercise is This section of the ICAAP relates to the identification application of various aggregate limits on the scope of Credit transactions that facilitate illegal activity, or prepared, on a stand-alone and consolidated basis, and individual quantification of the different risks to its commitments. contribute to misleading financial statements or which is presented to the Board after being approved by which the Bank is or might be exposed in the future regulatory reporting. and their subsequent aggregation. The Internal Capital the ALCO and the Board Risk Committee. The criteria established for portfolio diversification Credit transactions involving undocumented Required (ICR) under the ICAAP: (a) is the sum of the Risk Management Project Office and related limits, which are set by type of business agreements, disbursements or transfers and funds. capital requirements needed under Pillar 1 and Pillar segments, products, entities, credit risk mitigants, In 2014, Risk Management launched several internal Credit facilities granted to a business or individuals 2, (b) is considered in the capital planning, and (c) is economic sector, regional and country exposures, are projects or organizational improvements aiming at a engaged in activities inconsistent with generally finally used to determine the Capital Targets, since the based on the findings of sector-based studies and proper measurement and management of risks within accepted standards of ethical behavior in the Bank, in the present and in the future period covered analyses conducted by the Risk Management and a governance structure ensuring timely information community. by its capital plan, holds a level of capital tailored to Strategy Division at Group level, and are approved and escalation, well beyond increasingly demanding its risks and an appropriate buffer in excess of the by the Credit Policy Committee. Continuous analyses Credit Risk Management Framework regulatory requirements now leading to Basel III. The minimum capital requirements under Pillar 1. are performed to anticipate problems with a sector The Credit Risk Management (CRM) Framework ultimate objective remains to optimize the allocation or borrower before they materialize as defaulted is broadly categorized into the following main Capital Targets of capital and reduce uncertainty, and thus, the cost of payments. components: (a) the Board, its Risk Committee, the Group Credit Libanais indicates its policies and capital. The projects encompass: Credit Policy Committee, Credit Committees and Senior targets for the distribution of capital among the various Reviewing and assisting in the implementation of the Credit Risk Management Executive Management’s oversight; (b) organizational significant legally independent institutions, considering Board-approved Code of Corporate Governance at Our credit risk management principles are guided by structure; and (c) systems and procedures for the individual risks of each entity, and specifically all the Group entities level, which include, inter alia, identification, acceptance, measurement, monitoring indicating the policy and capital targets of the Group. the six overall risk management principles discussed in the Bank’s five-year strategy as per BCC Circular and control of risks. Group Credit Libanais sets its capital targets that are the Risk Management overview section. In particular, No. 262 dated 2009, and the remuneration policy the result of the ICAAP, which include: the following principles are complemented by the and system as per the requirements of BDL Basic Credit Risk Governance Internal Capital Required calculated above; and items below with respect to credit risk management. Circular No. 133 dated August 6, 2014. Board Oversight the capital conservation buffer of 2% addressed in its The effective balancing of risk and return is achieved Managing the Corporate Governance, Nomination, The Board approves the Bank’s Credit Risk strategy capital planning. through: Human Resources and Remuneration Committee and policies relating to credit risk and its management
The aforementioned targets are compared with the Credit Libanais Group and the Risk Management Committee’s agendas, Ensuring that credit quality is not compromised for as per regulatory requirements, based on the Bank’s capital effectively available at the Group level as at documentation, and follow up on the implementation growth. overall business strategy, at least once annually. The December 31, 2014, stating available capital resources Diversifying credit risks in transactions, relationships of related decisions. Board’s responsibilities include: (a) delineating the in excess of the minimum capital requirements. and portfolios. Contributing to the upgrading of the data warehouse Bank’s overall risk tolerance/appetite in relation to credit Using our credit risk rating and scoring systems, Capital Planning for timely database risk aggregation at the Group risk in the Bank’s strategy; (b) ensuring that the Bank’s
policies and tools. Annual Report 2014 In light of the new Basel III requirements and Group level. overall credit risk exposure is maintained at prudent Upgrading the core banking system and related risks. levels and consistent with the available capital;
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(c) ensuring that Senior Executive Management as Limit setting Credit Origination related to a corporate or retail commercial facility, well as individuals responsible for CRM possess sound are submitted to the respective Credit Administration Limits are used to ensure the portfolio is well diversified The Bank operates within a sound and well-defined expertise and knowledge to accomplish the CRM and Control (CAC) Department for review before and within the risk tolerance/appetite, as approved criteria for new credits, as well as for the expansion function; (d) ensuring that the Bank implements sound disbursement after having been completed by RM/ by the Board and they are set by type of business of existing credits. Credits are extended within the fundamental principles that facilitate the identification, AM, in order to monitor that all the required terms and segments, products, entities, credit risk mitigants, target markets and lending strategy of the Bank. measurement, monitoring and control of credit risk; and conditions, approved by the Credit Committee are duly economic sector, regional and country exposures. Before approving any credit facility, the Bank makes (e) ensuring that appropriate plans and procedures for satisfied and complied with, to end up with a credit file an assessment of the risk profile of the customer/ CRM are in place. Credit Risk Management Functions prepared in line with the BCC Circular No. 238 October transaction. Upon structuring credit facilities, the Bank 23, 2002. Credit Risk Tolerance/Appetite To maintain the overall credit risk exposure within the appraises the amount and timing of the cash flows, parameters set by the Board, the Bank established a The Bank has a Board-approved statement of credit risk as well as the financial position of the borrower and Once disbursed, the Credit Department’s (at both sound risk management structure to facilitate effective appetite in place. purpose of the funding. Due consideration is given to Corporate and Retail Commercial) RM/AM is management oversight and proper execution of CRM the risk reward trade-off in granting a credit facility and responsible for the daily monitoring and performance and control processes as follows: Credit Strategy credit is priced to cover all embedded costs, Expected of the facilities. Review and renewal of facilities are The Bank’s credit strategy determines its risk appetite, Credit Risk Management Credit Losses (ECL) and Risk Adjusted Return On subject to the same approval process as the original and develops a plan to optimize return while keeping Capital (RAROC). granted facilities and are conducted a least once The Bank’s Credit Risk Management, fully independent credit risk within predetermined limits. The strategy annually or twice for files classified under watch. of the commercial lines of business, reports to the Chief provides continuity in approach and takes into account Commercial Facilities Risk Officer and ensures clear segregation of functions. the cyclical aspect of the country’s economy and the For commercial facilities, the Bank’s credit approval Retail Lending Products Responsibilities of the Credit Risk Management include: resulting shifts in composition and quality of overall process is either initiated by a Relationship Manager For Retail Lending Products, the Bank’s credit initiation (a) following a holistic approach in the management of credit portfolio. (RM) for corporate clients with a turnover above US$ process begins at the branch level or at the dealers’ credit risks inherent in the Bank’s portfolio and ensuring 2 million or total aggregate facilities exceeding US$ level, where applications are submitted based on a Credit Risk Policy that they remain within the risk appetite/tolerance 500,000- and by the Account Manager (AM) or branch standard loan application form. The credit application established by the Board;(b) ensuring that business Credit Risk Management contributes together with managers for Retail Commercial clients (SMEs) with a information is replicated on the Fair Isaac Corporation lines comply with risk parameters and prudential limits Senior Executive Management to develop and establish turnover below US$ 2 million or total aggregate facilities (FICO) system, in order to generate a risk score for the established by the Board; (c) establishing systems and credit risk policies and credit administration procedures, below US$ 500,000-. Standard Credit presentations loan in a standardized manner to assist in the decision procedures relating to risk identification, Management as part of the overall CRM Framework. Such policies are prepared and submitted by the RM/AM to the process. Credit Libanais Group and procedures provide guidance to the staff on various Information System, monitoring of loan/investment relevant Credit Committee members and in parallel to types of lending including corporate, SME, retail lending portfolio quality, early warning signals and impairments; the Credit Risk analysts who provide an independent The respective Retail Lending Unit reviews the loan products and corporate finance, and are disseminated (d) working out remedial measures when deficiencies/ recommendation to be taken into consideration by application, performs the preliminary credit assessment to all the concerned parties in the Bank. It is the prime problems are identified; and (e) undertaking portfolio the Credit Committee members prior to taking a final and forwards the application with the recommendation evaluations and conducting comprehensive studies responsibility of Senior Executive Management to decision. to the respective delegated Credit Committee for ensure effective implementation of the Risk policies on the environment to test the resilience of the loan decision. Decisions are based on the Lending products Annual Report 2014 approved by the Board. portfolio. Once approved, all reviewed or new files, whether standard criteria approved by the Bank’s Central
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Credit Committee which are reviewed annually taking Internal Credit Risk Rating In line with the BDL Basic Circular No. 58 dated November 10, 1998, the Bank maps the BDL classification against into consideration the market conditions and the Moody’s risk rating as per the table below: The Credit Risk Rating is a summary indicator of the products’ performance. Bank’s individual credit exposure. An internal rating Moody’s Loan Granding system categorizes all credits into various classes on Credit Administration BDL Classification Supervisory BDL Description Supervisory Moody’s Grading Description the basis of underlying credit quality. Credit Libanais The Credit Administration Function is an essential uses Moody’s Financial Analyst and Risk Advisor for 1 Normal 1 Excellent monitoring part of the credit granting process and Credit Risk Rating of commercial facilities and FICO for 1 Normal 2 Strong performs the following major monitoring and control credit scoring for Retail Lending Products. 1 Normal 3 Good functions: (a) Legal Documentation Review, (b) Credit 1 Normal 4 Satisfactory Disbursement and Limits Management, (c) Credit Credit Risk Rating System 2 Follow up 5 Adequate Monitoring, (d) Loan Repayment, (e) Maintenance and The corporate and SME Credit Risk Rating System is 3 Watch and Settlement 6 Marginal Custody of Credit Files, and (f) Collateral and Security designed to measure and identify the risks inherent 3 Watch and Settlement 7 Vulnerable Documents. in our credit activities in an accurate and consistent manner. Each obligor is assigned a borrower rating 4 Substandard 8 Substandard Credit Risk Measurement (BR), reflecting the probability of default (PD), after 5 Doubtful 9 Doubtful Capitalization under Pillar 1 an assessment of the credit quality of the obligor. 6 Loss 10 Loss In the calculation of the Credit Risk capital Generally, the key risk factors assessed include requirements, the following regulations are complied industry, markets, firm’s competitiveness, company’s with: qualitative assessment, management quality and Credit Risk Scoring System Credit Risk Monitoring and Control The Standardized Approach, according to the BDL financial performance indicators. In January 2011, Credit Libanais implemented the Credit risk monitoring refers to continuous monitoring Basic Circular No. 104 dated April 1, 2006. Fair Isaac Corporation (FICO) system that provides of individual credits inclusive of off-balance sheet Distribution of Loans portfolio, according to the BDL a single, flexible, accessible and consistent way of exposures to obligors, as well as the overall credit Basic Circular No. 115 dated December 14, 2007, rapidly processing credit applications related to retail portfolio of the Bank. The Bank enunciates a system which classifies the credit exposures as Retail, SME, lending products. Implementing the FICO system that enables it to monitor the quality of the credit Corporate, Residential and Commercial Real Estate makes it easier to ensure compliance with the Bank’s portfolio on a day-to-day basis and take remedial portfolios, as well as past due loans. Credit Risk Policy parameters, by deploying automated measures as and when any deterioration occurs. Credit Risk Mitigation, according to the BDL Basic standardized business and acceptance rules and This enables the Bank to ascertain whether loans are Circular No. 121 dated June 26, 2009 and the BCC scoring processes. The FICO solution facilitates the use being serviced as per facility terms, the adequacy of Circular No. 261 dated August 21, 2009, which is a of risk-based decision-making as a tool, thus enabling provisions, that the overall risk profile is within the
limits established by management and the compliance Credit Libanais Group technique used to reduce credit risks associated with the Bank to be more risk oriented in its customer of regulatory limits. The establishment of an efficient an exposure through the application of Credit Risk selection and to improve and streamline the scorecard and effective credit monitoring system enables Senior Mitigants. development process, which translates into tangible Executive Management to monitor the overall quality of In this respect, the Bank uses the comprehensive business benefits and improvement of the overall credit the total credit portfolio and its trends. approach for the treatment of collateral. decision-making process. Annual Report 2014
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Consequently, the management fine tunes or All collection activities are documented in the file of recoverable amount by marking to market the values 5- loans classified as “Doubtful” represent loans that reassesses its credit strategy/policy accordingly before each delinquent loan. Delinquent loans or excesses of available collateral with formal valuation and an display most of the criteria of “substandard loans” encountering any major setback. over limits are regularly communicated to the impairment test is performed in order to determine the albeit with a higher degree of severity. Partial specific Senior Executive Management and pertinent credit specific provisions needed. provision should be allocated against the loans after an Delegation of Authority committees. The following three stages are considered d- Status Report and Review: problem credits are impairment test, taking into consideration the expected The Bank establishes responsibility for credit sanctions when treating delinquent loans: (1) a collection subject to more frequent reviews and monitoring. cash flow to be generated from any existing credit risk and delegates authority to approve credits or changes campaign through SMS and outbound calls is launched Progress made on problem loans is reported to the mitigants. All interest and commissions are reserved in credit terms. The Board approves the overall lending for customers with one unpaid bill, (2) a first warning Recovery Committee, including all the proposals for and no longer recognized in the income statement of authority structure, and explicitly delegates credit letter demanding payment is issued for customers with impairment and provisioning in accordance with the the Bank; and sanctioning authority to Senior Executive Management two unpaid bills, (3) a second warning letter is sent in recovery progress. 6- loans classified as “Loss” represent loans that display and the Credit Committees. Lending authority assigned case of three unpaid bills, and (4) retail lending products most of the criteria of “doubtful loans” and denote a very Policy and Tools for the Monitoring and to officers is commensurate with the experience, ability are automatically transferred to recovery after the fourth limited or non-existent capacity of reimbursement. Full Recovery of Impaired Assets and personal character. The Bank develops risk-based unpaid bill with downgrade to BDL 4 classification. For specific provision should be allocated against these The BDL Basic Circular No. 58 requires, inter alia, authority structures where lending power is tied to the commercial files, decisions of downgrade are taken loans and all interest and commissions are reserved banks to classify loans into six categories as follows: risk ratings of the obligor and the type of the lending at the level of the respective credit committees, which and no longer recognized in the income statement of 1- loans classified as “Normal” represent loans that product. The Bank adopts multiple credit approval regularly review the list of irregular and unpaid files. the Bank. levels for the credit origination such as credit ratings, systematically respect all engagements and conditions risk approvals etc. to institute an effective system of Managing Problem Credits relative to granted lines. Consequently, the Bank believes that it has satisfied all checks and balances. The Credit Risk Policy specifies 2- loans classified as “Follow Up” represent loans the related regulatory requirements. The Bank establishes strict systems and policies to the escalation process to ensure appropriate reporting that show some reduction in profitability and financial identify and follow up on problem loans in line with the o performance, have some missing documents, are not in In line with BDL Basic Circular N . 81 revised December and approval of credit extension beyond prescribed o guidelines specified in the BDL Basic Circular N . 58 24, 2014 and BCC Circular No. 280 dated January 02, limits. It also defines the authorities for unsecured credit full compliance with the BDL and the BCC Circulars and and its amendments. Once the loan is identified as 2015, which refer to BCC Memo 14/2009 dated October while remaining within the home and host regulatory have been overdue for review for more than six months. problematic, it is managed under a dedicated remedial 16, 2009 and BCC Memo 15/2013 dated December 12, limits, approvals of disbursement in excess of limits and 3- loans classified as “Watch and Settlement” represent function independent of the originating business lines. 2013, the Bank has amended its own model for setting any other exceptions to credit policy. loans for which overdue repayments are between 60 The resources, expertise and more concentrated focus and 90 days in arrears, show deteriorating financials or out retail specific and collective provisions based on Managing Collection of Delinquent Loans of this function improve collection results. The problem conditions of the economic sector or the country where the new requirements, whereas non-retail collective A loan is delinquent if any of its scheduled payments loan management process encompasses the following the loans are used, have been rescheduled more than provision levels are based on six-year historical credit are in arrears by a period greater than three days. elements at least: once since the date of granting, are in excess over limit loss information, which is verified by the External Loans which are in arrears are actively managed by a- Negotiation and follow-up: a proactive effort is and the customer has non-performing loans at other Auditors. The Bank periodically reviews the SME the Collection Department with the intent of avoiding taken in dealing with defaulting obligors to implement banks. These loans are reviewed on a semi-annual and Corporate loan portfolios and allocates specific loss, or mitigating it to the greatest extent possible. remedial plans at an early stage, to prevent the Bank basis; provisions for loans. This exercise covers incurred Therefore, the Bank established a process whereby from litigations and loan losses. 4- loans classified as “Substandard” represent non- losses for credit activity of Group CL.
unpaid loans are effectively dealt with in a timely b- Workout remedial strategies: appropriate remedial performing loans with deteriorating creditworthiness Credit Libanais Group manner. Management makes general provisions for strategies such as restructuring of loan facility, and witnessing unpaid facilities or excesses above delinquent loans on a monthly basis, in accordance with enhancement of credit limits of reduction of interest 90 days and below 180 days overdue repayment. For the requirements of BDL Basic Circular No. 81 and BCC rates help improve obligor’s repayment capacity. these classified loans, all interest and commissions Circular No. 280. The Board receives periodic reports c- Review of collateral and performance of an are reserved and no longer recognized in the income on the status of delinquent loans. impairment test: the Bank ascertains the loan statement of the Bank. Annual Report 2014
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In line with BCC Circular No. 280, the Bank allocated at least the following percentage of specific and collective provisions based on the net outstanding amount of retail loans as per the table below:
Minimum Past Due Days BDL Supervisory Classification BDL Supervisory Description Housing Loan Car Loan Credit Cards Loan Other Retail Loan
0 - 30 Days**** 1 Normal ** 0.25% 0.25% 0.25%** 31 - 60 Days 1 / 2 Normal / Follow up --- 15% 25% 15% 61 - 90 Days 3 Watch and Settlement --- 20% 35% 25% 91 - 120 Days 30% 40% 35% 4 Substandard --- 121 - 180 Days 40% 50% 50% 181 - 360 Days 25%* 50% 100% 100% 1 - 2 Years 50%* 100% 2 - 5 Years 5 /6 Doubtful / Loss 100%* Above 5 Years 100% of the outstanding regardless of the value of the mortage
* Provisions are calculated on a net outstanding housing loan amount after deducting the value of the real estate *** Accrual of interest is ceased securing the loan or 60% of the fair value of the mortgage, whichever is lower **** As per article 7.4 of BCC 280, the Bank is required to: (i) set aside collective provisions of at least 0.25% of retail loans past due 30 days or less by ** Excluding housing, student and education loans the end of 2014, (ii) 0.5% by the end of 2015, (iii) 1% by the end of 2016, and (iv) 1.5% by the end of 2015
In addition, the Bank set aside general reserves in LBP In addition to the BCC’s periodic reviews, the Bank’s For many types of transactions, we mitigate the Social and Environmental Management of at least 0.5% of net outstanding retail loans past due external and internal auditors conduct an annual review of settlement risk by closing the transaction through a System (SEMS) the Bank’s loan portfolio, and provide recommendations clearing agent. Acceptance of settlement risk requires 30 days or less by the end of 2014 after excluding the The Credit Risk Management has developed the for the allocation of additional or new provisions. approval from the Financial Institutions and Country related amount of the collective provision, and (ii) will SEMS with the basic objective of ensuring that the increase this percentage by 0.5% annually over the Credit Committee. With reference to the BDL Basic Circular No. 50 dated environmental and social implications of a potential next six years starting in 2015. Housing, student and October 15, 1998, the Bank maintains a general reserve Environmental and Social Risks customer are identified and assessed early in the education loans are excluded from retail loans when on an annual basis which is included in Tier 1 Capital The Bank continuously endeavors to ensure effective Bank’s planning and decision-making process and that calculating the general reserves for the retail loan and charged against net profits, for unspecified risks of Social and Environmental Management practices in all these environmental considerations are incorporated portfolio. The general reserves are deducted from the an amount equal to a minimum of 0.2% and a maximum its lending activities and seeks to effectively manage into the preparation and approval of facilities. The net profit and included in Common Equity Tier 1 capital. of 0.3% of the Bank’s total RWA, as determined with and mitigate environmental and social risks in the procedures outline how the Bank incorporates these reference to the BDL’s capital adequacy requirements. objectives into its overall appraisal process and, during Moreover, the Bank set aside general reserves in projects they finance. This reserve is required to reach 1.25% of RWA, at implementation, at a practical level. The procedures LBP of at least 0.25% of net outstanding performing the end of the tenth fiscal year and 2% of RWA, at the International Finance Corporation (IFC) summarize the nature of the environmental appraisal non-retail loans by the end of 2014 after excluding the end of the twentieth fiscal year, which the Bank is in Group Credit Libanais is directed by its agreement and monitoring activities undertaken during the different related amount of the collective provision, and (ii) will compliance with. with the IFC to adhere to sound banking principles and stages of a project’s life cycle and the responsibilities increase this percentage by 0.5% annually over the next Credit Libanais Group promote the full range of its activities in environmentally for carrying them out. The purpose of such procedures three years starting in 2015. Non-retail loans for which Settlement Risk and socially reliable developments. The Bank is to improve the decision-making process and to the BCC has requested the allocation of provisions and Our trading activities may give rise to risk at the time of addresses this mandate and its general principles by ensure that the loan under consideration is socially and credits granted against pledged securities are excluded settlement of those trades. Settlement risk is the risk of ensuring that all loans granted to customers undergo environmentally sound and sustainable. from non-retail loans when calculating the general loss due to the failure of the counterparty to honor its environmental and social appraisal along with the reserves for the non-retail loan portfolio. The general obligations to deliver cash, securities or other assets as financial, economic and legal analysis of customers Annual Report 2014 reserves are deducted from the net profit. contractually agreed. prior to granting any facilities.
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Market, Financial Institutions and branches. Credit Libanais does not maintain material the Bank’s loan to deposit ratio does not exceed 70% well defined organizational responsibilities for risk Country Risk Management non-trading open currency positions in line with the and that net foreign currency liquidity over the Bank’s management, typically referred to as the three lines of local regulatory requirements, other than the structural Liabilities should be no less than 10%, noting that the defense: Market Risk Management foreign currency translation exposures arising from Bank complies with these ratios. Moreover, the Bank a- The first line of defense is the business line, which Group Credit Libanais is exposed to market risk its investments in foreign subsidiaries and associated abides by the new Liquidity Coverage Ratio (LCR) and takes risks and is responsible and accountable for through its trading activities, which are carried out undertakings and their related currency funding. Net Stable Funding Ratio (NSFR) as required by the the ongoing management of such risks. This includes both for customers and on a proprietary basis. The Basel III framework. identifying, assessing and reporting such exposures, overall objective of managing market risk is to avoid Credit Libanais applies various hedging strategies taking into account the Bank’s risk appetite and its unexpected losses due to changes in market prices to manage and minimize adverse effects arising Financial Institutions Risk policies, procedures and controls. The manner in which and to optimize the use of market risk capital. The Bank from these exposures. The policy requires structural Management the Business Lines execute their responsibilities reflects manages these potential exposures on a daily basis and capital ratio foreign exchange positions to be the Bank’s existing risk culture. The Financial Institutions’ Credit Risk strategy, policies within pre-defined limits for each of the major types of reviewed regularly by the Group Asset and Liability b- The second line of defense includes: (1) the risk and procedures serve as a basis for the Financial market risks established within the Bank’s policies and Management Committee (ALCO). The Bank is allowed management function, which complements the Institutions standard credit application presentation and commensurate with the risk appetite approved by the to hold a net trading position not exceeding 1% of its Business Lines’ risk activities through their monitoring review. The Bank defined a framework and an action Board. net shareholders’ equity, as long as the global foreign and reporting responsibilities. Among other things, it plan for activities with Banks and Financial Institutions position does not exceed 40% of its net shareholders’ is responsible for overseeing the Bank’s risk-taking in which credit risk is inherent and has set the criteria Interest Rate Risk equity, and that at the same time the Bank is abiding activities and assessing risks and issues independently for risk acceptance and the guidelines followed in the The interest rate risk the Bank is exposed to in its in a timely and consistent manner with the required of the Business Lines. The risk management function FI Risk Management process. The key objective behind banking book is assessed from both, the net interest solvency ratios as per the BDL Basic Circular No. 32 promotes the importance of Senior Executive the Financial Institutions Risk Management function is income and the economic value of equity (EVE) dated April 24, 1997. Management and Business Lines managers in identifying to assess, independently from correspondent banking perspectives using interest rate re-pricing gap analysis and assessing risks critically rather than relying only according to the BCC Circular No. 250 dated May Equity Position Risk initiating business lines, the inherent risks with specific on surveillance conducted by the risk management 23, 2006 and duration gap analysis on stand-alone The bank has established a comprehensive transaction Banks and Financial Institutions and how they are function, and (2) the compliance function, which, and consolidated levels. On the other hand, the and position based limits framework against which mitigated. A Financial Institutions Risk Administration among other things, routinely monitors compliance with management of interest rate risk in the trading book is regular monitoring is performed. The Group sets tight Unit has been established, and has the responsibility laws, corporate governance rules, regulations, codes achieved through mark-to-market, limit establishment, limits on equity exposures and the types of equity of following-up and monitoring the relationships of the and policies to which the Bank is subject. The Board exposure and sensitivity analysis. Group Credit instruments that traders are allowed to take positions in Bank with its financial counterparties. approves compliance policies that are communicated Libanais’ interest rate risk positions are monitored by as part of the Investment Policy. Country Risk Management to all staff. The compliance function ensures that the Treasury and Market Risk Management, and hedging compliance policies are observed and reports to Senior Liquidity Risk and Funding Management To effectively control the level of risk associated with strategies are used to ensure positions are maintained Executive Management and, as appropriate, to the Board international activities, Group Credit Libanais has a within established limits. One of the principal objectives The Bank’s Liquidity Risk Management Policy on how the Bank is managing its compliance risk. Risk Management process that focuses on the broadly of Group Credit Libanais is to optimize net interest establishes specific liquidity gap limits and includes c- The third line of defense consists of the Group defined concept of Country and Cross border risks. A income. In order to manage this risk optimally, the cash flow projections and emergency funding internal audit function which conducts risk-based sound Country Risk Management process includes function is under the supervision of the Group Asset mechanisms. The monitoring and control of liquidity and general audits and reviews in order to provide oversight by ALCO and Country exposure limits. Limits Credit Libanais Group and Liability Committee (ALCO), which regularly risk is established on an ongoing basis and involves assurance to the Board that the overall governance reflect several considerations, including the country’s monitors all interest rate risk positions, to ensure they balance sheet ratio analysis and the measurement of framework, including the risk governance framework, is risk rating and the Bank’s appetite for risk. comply with interest rate risk limits. the cash flow gaps and stress positions. In accordance effective and that policies and processes are in place with the BDL circulars, the ratio of net liquid assets to and consistently applied. The internal auditors are Foreign Exchange Risk (Currency Risk) deposits and commitments in foreign currencies and Operational Risk Management competent and appropriately trained and not involved
Non-trading currency risk derives from the Group’s Lebanese Pounds should not be less than 10% and Risk Governance Framework in developing, implementing and operating the risk Annual Report 2014 investments in overseas subsidiaries, associates and 40%, respectively. In addition, The BDL imposes that The Bank’s risk governance framework includes management function.
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Operational Risk Management Environment Self-Assessment (RCSA) process conducted at risk cases analyzed and issued for remedial actions of facilitators, who are usually Operational Risk Department/Unit levels, aiming at reviewing jointly with concerned Business Units; (iv) ORM reporting Management consultants and the approach consists of Identification and Assessment with the assessed Department/Unit, the quality of the to Senior Executive Management; (v) Risk Control Senior Executive Management ensures (i) the helping the business and support lines to identify and business processes and the effective controls in order Self Assessments; and (vi) Key Risk Indicators identification and assessment of the operational risks assess Operational Risk and related controls inherent Methodology. inherent in all material products, activities, processes to decide on a plan of action needed for mitigation in their existing or new products, processes, activities of inherent business risks and improvement of the or systems and either implement remedial action and and systems to make sure the inherent risks and Internal Loss Data Collection and Analysis incentives are well understood; and (ii) that there is operational risk control process. internal controls at the Bank, or decide on the transfer In line with the BCC Circular No. 252 dated September an approval process for all new products, activities, of the risks where possible. Throughout 2014, the ORMD continued to further 14, 2006, the ORMD developed procedures, under processes and systems that fully assesses operational build a suitable infrastructure for the Operational Risk which it launched the collection process on operational Key Risk Indicators (KRIs) risks. Management (ORM) framework through: i) identification loss events/probable events/near misses. So far, The ORMD identifies and develops appropriate Key Monitoring and Reporting and assessment of the Operational Risks inherent in all this has resulted in building up an ample operational Risk Indicators (KRIs) that provide management with Senior Executive Management implements a process material products, activities, processes and systems, risk database. The resulting financial losses are early warning signals of Operational Risk issues, which which regularly monitors operational risk profiles and ii) active participation in projects launched by the being mapped within the seven loss events and are primarily a selection from a pool of operations/ material exposures to losses. Appropriate reporting Bank; iii) review and assessment of Group procedures the eight business lines of the Basel II accord. The control indicators identified and tracked by various mechanisms are in place at the Board, Senior and operational manuals; iv) monitoring of critical guiding principle in operational risk management is functions of the Bank on a periodic basis and are Executive Management, and business line levels that P&L accounts, v) analysis of periodical reports vi) that management, at all levels of the organization, is considered to be relevant to the management of responsible for directing and managing operational support proactive management of operational risk. issuance of operational risk assessment case analysis tracking and escalation triggering. recommending corrective measures to remedy high risk. Operational risk management coordinators Control and Mitigation risks and vii) review of ORM reports. are assigned throughout the Bank to assist line Operational Risk Capital Requirements The Bank has a strong control environment that management in fulfilling this responsibility and to act As per the BDL Basic Circular No. 104 and the BCC Disclosures utilizes policies, processes and systems; appropriate as the eye and ear of the ORMD. Extensive training Circular No. 257, the capital charge required to cover The Bank’s public disclosures allow stakeholders to internal controls; and appropriate risk mitigation and/or sessions are periodically provided to the Operational the Operational Risk is calculated using the Basel II assess its approach to operational risk management. transfer strategies. Typical practices to control/mitigate Risk coordinators to improve the ORM environment and Basic Indicator Approach (BIA). operational risk in Group CL include the following: Operational Risk Management Function disseminate the risk culture. a- segregation of duties to avoid conflicts of interests in Information Security Risks The Operational Risk Management Function (ORMF) the responsibilities of individual staff; Incidents, which are reported, are analyzed and fed The Information Security Team managed to safeguard has a reporting structure independent of the risk b- maintaining safeguards for access to, and use of, the into a risk map also originating from other sources Group Credit Libanais’ “information asset” and in generating business lines and is responsible for the Bank’s assets and records; such as Risk Control Self Assessments, Key Risk particular the IT Environment against numerous cyber- design, maintenance and on-going development of c- accountability policy and ensuring that staff have Indicators or audit reports, are used as a tool to follow attacks by setting several security objectives at the the Operational Risk Framework within the Bank. This appropriate expertise and training; up on outstanding issues and as the basis for reporting beginning of the year and making sure that all of them function includes the operational risk measurement and d- regular verification and reconciliation of transactions Operational Risk to Senior Executive Management and are properly met. with internal P&L critical accounts; reporting processes, risk committees and responsibility the Board. for Board reporting. To note that these objectives were aligned with
e- written and updated procedures manuals; and Credit Libanais Group Risk Control Self-Assessments (RCSA) international security standards “ISO27001” and “PCI- f- insurance coverage used as an external mitigant. Policies and Procedures The Bank is implementing a number of programs DSS”. During 2014, the Operational Risk Management The ORM Policies and Procedures include the and tools to support line management. These include Department (ORMD) continued its operational tasks performed at the ORMD, mainly: (i) Loss Data RCSA which is a structured approach that helps line With respect to the general policy affirming that security risk assessment and monitoring of the new core Collection and Analysis; (ii) Data Loss Reconciliation management to identify and assess inherent risks and is the responsibility of each and every member, the banking system Equation, ensuring adequate control and Analysis of internal periodical reports received; (iii) take mitigating actions for risks which are rated high or Information Security Team achieved the following Annual Report 2014 environment, in addition to the Risk Control generation of ORM reports and follow up on operational medium. Risks are assessed with the assistance objectives with the collaboration of all Divisions and
120 121 CL control functions
within the organization. Our Business Continuity In 2014, the Bank pursued the following activities: program has reached a satisfactory level of maturity Convergence of all Group CL head office activities through the involvement and commitment of Senior to the new CL tower in Adlieh in 2015 raised a Executive Management (SEM) and staff; it is supported new disaster recovery challenge that the Bank by good management and not considered in isolation started to tackle during 2014. This included the from other working practices. review of existing plans for identifying the new risk scenarios and impacts, and accordingly budgeting/ As per applicable standards, the Business Continuity implementing the new pre-requisites in terms of Management (BCM) framework at Group CL is based contingent resources, mainly facilities, IT equipment, on a lifecycle comprising the following five elements: and people.
Maintenance of existing BCPs of critical activities 1- BCM Program management is the heart of up-to-date. This included the update of the plans, the the Business Continuity process. Group CL has contingency site and the technology that supports the team members from sister companies: Kept the findings of the internal and external IT established an effective program management recovery solution. Achieved and maintained PCI-DSS certification for auditors to a minimum for Group Credit Libanais and involving participation of bank SEM to ensure that Development of new plans for vital activities (with sister companies. mitigated them promptly. the BCM process is correctly introduced, adequately higher tolerance to interruption than the critical Developed a comprehensive security awareness The year 2014 was a fruitful year for Group Credit supported and resourced, and established as part of the activities). program; and increased the security awareness of Libanais from the information security perspective. organization’s culture. Enhancement of both CL Group primary and disaster CL staff members in different key areas and topics by Indeed, the Group increased its security posture and 2- Understanding the organization identifies the recovery sites and solutions for complete business publishing the security awareness course online and did not encounter any uncontrolled cyber threats or recovery requirements through availability risk goals– IT alignment, including the implementation requesting staff member to attend. major security incidents. Moreover, the Group managed assessments and business impact analyses of of new technologies to enable improvements, and Devised additional security standards for new to maintain the PCI-DSS certification for the Bank and mission-critical processes, IT services and suppliers. better support recovery time objectives (RTOs) and applications and platforms and pursued IT team to its sister companies. It establishes the map of dependencies between recovery point objectives (RPOs), while reducing implement them. Group CL activities and identifies the reliance it has on recovery costs. Created, managed and maintained the access rights Business Continuity Planning external organizations and any third party reliance. Improvement of usage of automated solutions for of Credit Libanais employees on Equation core Business Continuity is an ongoing priority for financial 3- Determining the BCM strategy outlines the strategic business continuity planning, emergency notification banking application and managed all access rights to industry participants and financial authorities. options and factors of plans that should address the and crisis/incident management. critical applications for the Group. Indeed the interest of banks in business continuity most probable and highest impact risks, while being in Ensuring adequate training for staff, enhancing the Automated several security processes to increase is the result of multiple factors, including the banks’ line with the strategic business objectives/expectations operational procedures, and promoting awareness efficiency and minimize the response time. pivotal role in the national and global economic and the Bank’s risk management program. across the Bank. Created a database consisting of logs and data activities, the concentration of clearing and settlement 4- Developing and implementing BCM response. entries intended to analyze threats, and if any, to processes in most financial systems, and the deep This element focuses on the development and Credit Libanais was and is still committed to ensuring remedy them promptly and efficiently. interdependencies among financial industry participants implementation of appropriate plans and arrangements continuity of critical businesses and functions, in order Conducted several security assessments for various and investors. At the same time, however, other factors for ensuring continuity, in accordance with the business to protect the bank’s assets and all stakeholders’ applications, devices and operating systems which such as the increasing complexity of operational goals and the strategic options of the Bank. interests, safeguard revenues, improve investors and enhanced and increased their security posture. risks in all areas of the financial system add to the 5- Exercising, maintaining, and reviewing is a key customers’ security, and sustain confidence. Enforced the implementation of the patch challenge of promoting the Bank’s resilience; For part of the BCM lifecycle at Group CL, for ensuring Credit Libanais Group management which reduced the vulnerabilities and example, the financial system is intensely dependent continuous validation, testing the efficiency of the plans, weaknesses of the IT environment. on automation and, in turn, on those elements of the and maintaining all the needed resources, including Applied and maintained security countermeasures on physical infrastructure that support automation, such as people availability and readiness, thus ensuring overall Credit Libanais’ ATMs. telecommunications and power. At CL, we recognize preparedness.
Safeguarded Group Credit Libanais from cyber- that business continuity is an institutional concern Annual Report 2014 attacks and from virus threats; and, affecting all the business units/supporting functions
122 123 CL Corporate Responsibility
Corporate Responsibility and CL Strategy 126 Corporate Responsibility and Corporate Governance 128 Corporate Responsibility and People Capital Optimization 130 Corporate Responsibility and Customer Experience 133
Corporate Responsibility and the Communities 136 Corporate Responsibility and Responsible Financing 137
Corporate Responsibility and the Environment 138 CL Corporate responsibility
corporate responsibility and CL strategy
At Credit Libanais, we are committed to our Corporate Founded in Beirut in 1961, Credit Libanais Group is Responsibility towards customers, employees, today a leading universal banking group with total communities and the environment, and aim to remain assets reaching USD 9.16 billion. Headquartered in one of the best corporate accountable citizen and a Ashrafieh, Beirut-Lebanon, CL Group serves some source of major wealth creation where we operate. 300,000 customers across its network of 73 local and foreign branches, and employs a workforce of Our Core Values are defined by high standards of 1631 employees. We operate in Lebanon, Cyprus, ethics and integrity, respect of human and labor rights, Bahrain, Senegal, Iraq and Canada. as well as national and international banking regulations and best practices.
Embedded CR Strategy Credit Libanais Group
Shareholders Human Capital Customers Community Regulators Suppliers Environment Annual Report 2014
126 127 CL Corporate responsibility
corporate responsibility across all pillars of activities
Corporate Responsibility and Corporate Governance Credit Libanais’ most fundamental contribution Remuneration Policy Fighting Corruption to society is the robust business model and In line with the Central Bank requirements set out As stated in CL Employee Handbook, the Bank the sustainable revenues the Bank generates. in the basic circular # 133 dated 6 August 2014, the encourages all stakeholders to report any dishonest Transparency and accountability ensure sustainability remuneration policy and procedure was validated by the or illegal activity (violation of a law, rule, regulation, and growth across all layers of our organization. HR Committee prior to its submission to the CGNHRR fraud, corruption) occurring at the Bank. CL prohibits committee for approval on the 20th of January 2015. retaliation of any kind against individuals who made Board Commitment to Corporate Governance In their meeting held in March 2015, the Board of reports in good faith, or complaints of violation of the The Bank recognizes the paramount importance of Directors reviewed and approved the remuneration business ethics and the code of conduct or other known corporate governance for its functioning, and exercises policy and procedure. or suspected illegal or unethical activity. its duties and authorities through Board committees. The Board places high importance on the corporate Preventing Financial Crime Transparency in Procurement impact on the communities where the Bank operates. Fraud and money laundering empoison all layers On the procurement side, purchases are made of society. Credit Libanais is firmly committed to based on a bidding call, which are then presented to Code of Corporate Governance fighting these crimes in accordance with national and bids committee, screening committee, compliance CL commitment to corporate governance has four international rules and regulations. We believe that committee and delivery acceptance committee. The key elements: good relations with shareholders; financial crime prevention is not only the responsibility installation of this purchasing system several years effective cooperation between the management and of the Group’s dedicated compliance officers, but also ago allowed the Bank to give equal opportunities
Board of Directors; a system of performance-related the duty of every staff member in each area of activity. Credit Libanais Group to suppliers based on the quality of their goods and compensation; and transparent and timely reporting. We have clear policies, procedures and rules of good services, while ensuring that Credit Libanais receives Effective governance processes are detailed in the conduct in place to prevent money laundering and best quality over price ratios. Code of Corporate Governance as per BDL circulars financial crimes in all jurisdictions where the Bank and the guidelines of the Association of Banks in operates. Lebanon. Annual Report 2014
128 129 articles among staff members. informative, argumentative, financialandeconomic The goalofthisinternalpublication istodisseminate Group, includingsistercompanies andentitiesabroad. and encouragesCL staff toshareviewsacrossthe internal communicationplatforminforms,educates covers alltheGroups’ activities. The Observer edited inthreelanguages: Arabic, English andFrench, publication oftheGroup’s internalnewsletterObserver, Projects andPublicationsdepartmentensuresthatthe down andbottom-upcommunication,theCorporate news amongCL Group’s employeesandfacilitatetop- To ensureanadequatecommunicationofcorporate Open ChannelsofCommunications 130 CL BankingGroupemployees the purpose,strategyandvaluesofBank. communication, toensurethatourpeoplefullyembrace also encouragedtransparencyandopenlinesof well asthelearninganddevelopmentprograms.We built ontheperformancemanagementsystemas thrive andachievetheirgoals.In2014,wefurther sustainable highperformance,whilehelpingthem and commitmentofouremployeestodrive CL Peoplepolicyconsistsofimprovingthecapability Employees and PeopleCapitalOptimization Corporate Responsibility Holders ofuniversitydegrees:83% Women intheworkforce:46% CL bankingGroupnumberofemployees:1631 Facts: external e-channels. of informationiscommunicated viavariousinternaland Monthly EconomicWrap, andCL Indices. This plethora the FXandMarketSnapshots, Weekly MarketWatch, the latestdevelopmentsin thebankingindustry, through Moreover, employeesreceiveregularupdatesrelatedto corporate publications. as thetimelypublishingof Annual Reportandother broadcast duringtheStaff Annual Ceremonyaswell the preparationof Annual Documentarymovie Projects andPublicationsdepartmentsalsoensures as wellperformanceachievements.Corporate It alsofeaturesCRinitiatives,staff latestnews,events, Dec -14LIB Dec -14CLIB Dec -14CL talent totheBank. local collegesanduniversities toattractthebestdiverse Moreover, CL Groupispresentin jobfairswithmajor division. and evaluationdepartmentattheHumanResources with theirimmediatesupervisorortherecruitment in theworkplaceisencouragedtoraisesuchissues training. Any employeeconcernedaboutdiscrimination discipline, termination,andaccesstobenefits advancement: selection, job assignment, compensation, policy governsallaspectsofemploymentandcareer and ensureequalopportunitiesforallstaff. This We strive tosupportdiversityatthebankingGroup Group strategyforpromotingorganicgrowth. internal recruitmentformoreseniorpositionsasa employment opportunitiesandcontinuestoencourage Credit Libanaisiscommittedtotheprinciplesofequal Employment OpportunitiesandRecruitment environment intheirdepartmentsandbranches. Managers areresponsibleforcreatingagoodworking stimulating andattractiveworkplaceforemployees. CL Groupiscommittedtoensuringapleasant, Satisfaction The Working Environment andEmployee know theconsequencesoftheirfinancialdecisions. same highqualityofprofessionalfinancialadviceand CL Groupemployeesensurethatcustomersreceivethe A Customer-CentricPerformanceCulture AND GROWTH ACROSS ALLLAYERS OFOURORGANIZATION. TRANSPARENCY ANDACCOUNTABILITY ENSURESUSTAINABILITY THE SUSTAINABLE REVENUESTHEBANKGENERATES. TO SOCIETYISTHEROBUSTBUSINESS MODELAND CREDIT LIBANAIS’MOSTFUNDAMENTAL CONTRIBUTION
important andvaluableassets. them, sincetheyareconsidered theBank’s most devoted andefficientemployees inviewofrewarding comprehensive approachthat highlightstheefforts of in theevaluationprocess. The aimremainstousea based ontheirperformance.Different criteriaareused Libanais honorsstaremployeesacrosstheGroup, Every year, duringtheStaff Annual Ceremony, Credit Honoring BestPerformers a few. feedback,tonamebut achievement, directsupervisor’s the employee’s individualperformance,e-learning year isdeterminedbyanumberoffactors,including where eachemployee’s compensationforthecurrent CL Groupreliesonapay-for-performancephilosophy, Pay forPerformance extremely high. users. Learners’ satisfaction,surveysandresultsare results; themajorityofstaff membersareregistered or office.CL’s e-learningprogramyieldedexcellent anytime anywherefromthecomfortoftheirhome since itoffers ourstaff thepossibilityoftakingcourses barometer. Flexibilityisamajorbenefitofe-learning worldwide, accordingtotheEuropeane-learning process. The usageratecompetedwithtopcompanies implemented andbenefitedfromtheE-learning We arethefirstretailBankinregiontohave Competency Development
CL Corporate responsibility 131
Annual Report 2014 Credit Libanais Group ceremony withvaluableprizes. three winnerswerehonoredduringtheBank’s annual and revealedtheartistictalentsofstaff. The first Heights”. The eventreceivedenthusiasticparticipation December 2014aroundthetheme:“ReachingHigher competition waslaunchedtoallCL Groupstaff in To synergizeemployeeengagement,aphotography Employee Engagement physical damageandcriticaldisruptionofoperations. of unexpectedlife-threateningeventsthatmaycause and conductingtrainings. The ERP isactivatedincase appointing wardensresponsibleforstaff evacuation, collecting detailedcontactinformationofallstaff, which consistsofevaluatingexistingsafetymeasures, Emergency ResponsePlan(ERP)acrosstheGroup, we havedesignedandsuccessfullyimplementedan are installedinallbranchesandbuildings.Moreover, wardens. Safetyinstructionboardsandexitsigns aid kits,inadditiontoevacuationsetsdistributed are equippedwithfireextinguishersandmedical is disseminatedacrosstheBank. All Groupentities and extensivetraininginsafetyinjuryprevention Regular firedrillsimulationsareconductedforstaff The healthandsafetyofourstaff isparamounttous. culture. important partofoureffort tocreateaperformance Maintaining ahealthyworkingenvironmentisan Employee HealthandWell-Being 132 Photography Competition FirstPrize. basketball andfootballtournaments. various Lebaneseregions,triathlons,rallies,aswell CL sponsoredmanyevents,includingmarathonsin To encouragestaff participationinsportsevents, Sports andRecreation and coach. and thewonderfulfollow-upofteam’s management performance ofCL teamplayers,thesupportoffans, CL teamwonthefinalgame,thankstoexcellent championship oftheinterbanksfoot-salletournament. In 2014,CL’s football teamalsoproudlywonthe closer together. teams reinforcethegroupspiritandbringourpeople compete againstmajorteamsinLebanon.Sports competition gamesareorganized,andourteams of theBank. Throughout theyear, tournamentsand of CL employeesfromvariousdivisionsandregions CL’s BasketballandMini-Football teamsarecomposed Team BuildingThroughSports as amotivationaltoolforemployees. ceding stockstoemployeesatadiscountbookvalue by theBanksinceitscreation. The programconsistsof contribution ofourshareholders,hasbeenadministered Program, introducedin2006thankstothegenerous Citizenship startsinternally. The StockOwnership Employee ShareOwnershipProgram Photography CompetitionSecondPrize. Facebook, Twitter, Linkedin, YouTube andWordPress in launchingCL’s varioussocialmedia campaigns on Over thecourseofyear, weactivelyparticipated Social MediaPlatforms regularly conductedbyourCustomerServiceCenter. of customerserviceistheusecourtesycampaigns of familiarizingourcustomerswiththehighestlevels customers toreachus. A moresophisticatedmethod our electronicinboxforcomplaintstomakeiteasier conduct mysteryshoppercampaignsandadvertise in additiontoqualitativefocusgroups.We also delivered throughonline,mobile,andphonechannels qualitative researchmethodologies,includingsurveys customers. We employallrelevantquantitativeand managing feedbackfrompersonalandbusiness implemented asystemforcollecting,measuringand banking solutions,servicesandadvice.CreditLibanais We strivetoprovideourcustomerswiththebest Customer Satisfaction by offering themtailoredservices. exercise, wewereabletobetterrespondtheirneeds turnover ofeachbusiness.Basedontheresultsthis commercial andcorporatecustomersdependingonthe Our commercialcustomersaregroupedintoretail Tailored CustomerRelationships they are. customers dotheirbankingaroundtheclockwherever advisers, tabletandmobileappsalsoallowour The availabilityofe-banking,videomeetingswith our success. believed thatsustainabilitycriteriaarekeyelementsof and theenvironment.We havealwaysgenuinely the whilecreatingbenefitsratherthanrisksforsociety and provideadequatefinancialreturnfortheBank,all and servicesprimarilymeetcustomers’ financialneeds how ourdecisionsaffect customers;infactourproducts We manageourbusinessresponsiblyandareawareof and CustomerExperience Corporate Responsibility In 2014,severalcampaignswerelaunched,including: electronic communityinteractionwithourBank. in viewoffacilitatingcommunicationandincreasing trip toBrazilforFIFA World Cup. Rewarding Visa CardholderCL’s Customers witha for thefirst-prizeandvaluable giftsforwinners. “ Flipit”competitionon Facebook.Travel tickets across Lebanon. citizens tobecomepartofavirtualhumanchain “United HandsForLebanon”post,anInitiativecalling branches. inaugurations ofJouniehandJalEL Dibnew CL Groupnewsandevents,suchasthe winners. A Mothers’ daycompetitionandoffering giftstothe show engagementofCreditLibanaisemployees. A Marathoncampaigntospreadawarenessand gifts forwinnersofmatchinggiftcards. persons forthefirst-prizeinadditiontotenvaluable season andoffering HTT traveltickets fortwo “ Flipit”competitiononFacebookduringChristmas trip toBrazilforFIFA World Cup. Rewarding Visa CardholderCL’s Customerswitha CL Corporate responsibility 133
Annual Report 2014 Credit Libanais Group 134 Twitter Account clarify theissueathand. openness andalwaysreplyinafriendlymoderatetoneviewofengagingconstructivedialoguethathelps At CL Group,welearnmuchaboutourcustomersonsocialmediaplatforms.Ouraimistoprovidetransparencyand Social MediaDialogue Card Issue Information aboutcards CL Corporate responsibility 135
Annual Report 2014 Credit Libanais Group Focused PublicSectorInitiatives 136 fees onlineinasecureandeasyway. at theBeirutBar Association canpaytheirsubscription With CL onlinepaymentservices,lawyersregistered internet Settlement ofsubscriptionfeesforlawyersoverthe stability. encourage economicdevelopmentandenhancesocial This protocolaimstosupportcivilservantsinLebanon, forces A HousingloanProtocolwiththeGeneralSecurity particular segment. Security ForcesweredesignedbyourBanktothis personal, housing)targetingtheLebanese Army and of publicsectorservants,specialretailloans(car, In amovetowardsfacilitatingthebankingexperience Communities Corporate Responsibilityandthe Resources topromoteeconomicself-sufficiency. capacity. Initiatives thathelpbuildwell-being,wealthand business. Economic growthincommunitieswherewedo To materializeoursustainabilitystrategy, wesupport: to maintainingouruniqueidentity. protecting ourheritageandfamilyvalues,isessential We believethatsafeguardingourcultureand
economy. small businessesalsopossiblewithintheLebanese and internationalagenciestomakethefinancingof very Credit Libanaispartnerswithnumerouslocal,regional entrepreneurs relytoearntheirliving. To thisend, Very smallloansarethe building blocksonwhichsmall Building CapacitythroughMicro-Finance order tolowerthecostofborrowingforourcustomers. funds withexistingsubsidiesintheLebanesemarket in guarantees. Wheneverpossible,wetrytomatchthese be intheformofrisksharing,capitalallocationorimport segments ofourcommunities.Suchpartnershipsmay to providingaccessaffordable capitaltowider with internationallendinginstitutionsaview We havepartneredandcontinuetoseeknewalliances Partnerships Facilitating Access toCapitalthroughLending access toavarietyofbankingproductsandservices. holders cashtheirsalariesatCreditLibanaisandhave the efficiencyofinstitutions.Consequently, newaccount procedure usuallyreducesoperatingcostsandboosts staff employeesthroughabankaccount,such enables theprivateandpublicsectorstoeasilytheir While domicilingsalariesofemployeesatourBank and insurance). (savings, depositservices,payment,transferservices has accesstofinancialservicesatanaffordable cost areas acrossLebanon.We ensurethateveryone an increasingnumberofLebaneseintownsandremote builds onitsbankinginclusionstrategytoreachout responsible towardsthesociety, CreditLibanaisfurther human rightbyallinternationalorganizations.Being Access tofinancialservicesisconsideredabasic Banking InclusionStrategy a conferenceoverthecourse oftheyear. communication invariousindustries, wesponsormany among peerprofessionalsandreinforcechannelsof To encourageexchangeofnewdevelopments Professional Conferences forums thatwereheldinvariousLebaneseuniversities. present thisyearatmajoreventssuchasjobfairsand presenting different employerstostudents. CL was events thataimatoffering professionalguidanceand We constantly contributetouniversityandschool Educational and Academic Events array ofactivitiesandinitiatives: Our areasofsponsorshipsencompassthefollowing regions andtowns. same token,boostedCL’s image invariousLebanese impacted thecommunitieswhereweworkandby sports, culturalandsocialactivitieshavepositively Our selectedcontributionstoprofessional,educational, Philanthropy start-up businessesandthelocaleconomy. according tonewcircularsissuedbyBDL tostimulate Continuous newfinancingschemesaredevised customers. affordable lendingavailabletoawidersegmentof International FinanceCorporation(IFC)tomake credit andarisksharingagreementwiththe Moreover, CreditLibanaishascontractedalineof businesses. less fortunatecustomersstartuporexpandtheir businesses. We believethattherightfinancinghelps institution tooffer subsidizedloanstosmallandmedium Credit LibanaishaslongpartneredwithKafalatnational Offering Attractive FacilitiestoSMEs the environmentandanti-corruption. principles intheareasofhuman rights,employee companies thatviolateinternationally recognized customers thattheirfundsarenotinvestedin Our responsiblefinanceschemesconstantlyassure Responsible Investing footprint andthatofourcustomersand/orcommunities. profitable incentivesfortheBankwhilealleviatingour facilities grantingprocessesinviewofsecuring remain committedtoregularlyreviewingourcredit while achievingsocialandenvironmentalgood.We investments inviewofmaximizingfinancialreturns Credit LibanaisGroupalwaysseekssustainable Responsible Financing Corporate Responsibilityand them prosper, CreditLibanaisprospersaswell. with them,therebydoublingtherewards.Byhelping communities andenableusleverageourpartnerships CR andSustainabilityinitiativesbringusclosertoour cities. national organizationsacrossLebanesetownsand supporter ofthenationalsilkeco-museumandother preserving ouruniqueheritage.We areapermanent in viewofencouragingarts,revivingtraditionsand all Lebanesecitiesandtownsthroughouttheseasons, CL supportsmusicandculturalfestivalsorganizedin Cultural andHeritageEvents “Union ofArab BanksAnnualConference 2014” CL Corporate responsibility 137
Annual Report 2014 Credit Libanais Group CL Corporate responsibility
Social and Environmental Management System Environmental Sustainability and Green Products At CL Group new Head Office Tower, special Recycled, Reused and Sustainable Mechanics and (SEMS) in credit assessment While green finance is still relatively new in Lebanon, attention has been given to using environmentally Materials In collaboration with the International Finance Credit Libanais weighs the importance of regularly friendly construction materials, taking into account Energy recovery ventilators are placed at each floor Corporation (IFC), Credit Libanais created and adopted reviewing and updating its lending strategies to align the use of renewable energy sources for future level. daily utilization. Considerations such as efficiently a tailor-made Social and Environmental Management them with industry standards in terms of Social and Double glazing with low U-value. using energy, water, and other natural resources, System (SEMS) that consists of assessing the Responsible Investment (SRI). Our strategy centers Central solar system for hot water production. reducing waste, pollution and environmental Non-CFC Refrigerant. environmental and social risks and opportunities arising around three priorities: degradation were also given broad attention High efficiency equipment (VRV for cooling and from customers’ business activities. Reducing the intensity of our environmental footprint. in all phases of the project, from design to Promoting environmentally responsible business heating). Environmental Considerations and the International commissioning. activity. Finance Corporation (IFC) Reduced Water Usage Offering environmental products and services. Through our agreement with IFC, we strive to enhance Architecture Central gray water treatment. and adhere to sound banking principles and promote On the IT side, virtualization of servers is almost All facades are curtain wall unitized panel or spider Re-usage of treated gray water for flushing and an environmentally and socially reliable development complete and the implementation of our DCIM (Data systems with double glazing low-E. irrigation. across the full range of our activities. Center Information Management) further enhances Re-usage of A/C condensate drain collection of water such optimization. Landscape for flushing and irrigation. Environmental Considerations and the European Shrubs and trees with low water consumption needs Investment Bank (EIB) Partnerships for the Modernization of Lebanon were planted. All projects financed by the Bank through the CL offers, in line with the Central Bank’s A large part of the ground floor levels is covered with European Investment Bank (EIB) must comply with recommendations and recently issued circulars, greenery. the environmental terms set by the bank. Credit green “facilities” to fund projects that have a positive Libanais is in acceptance and adherence with the EIB’s environmental impact. Projects encompass eco-friendly Interior and Lighting environmental objectives, namely to: initiatives in Lebanon, such as green architecture and All interior lightings are LED lights. Preserve, protect and improve the quality of the ecological ventures, implementation of renewable Each floor features an average of 50% of open space AT CL GROUP, WE HAVE configuration, in addition to low partitions for the environment. energy, wind power, solar water heating panels, energy ALWAYS GENUINELY BELIEVED Protect human health, in relation to the environment; saving lighting systems, tiles cladding, and eco-bricks. desks, which allows a higher amount of natural light Ensure the prudent and rational utilization of natural Loans are granted at competitive interest rates and for into the center of the floor. THAT SUSTAINABILITY resources to conserve nature. long terms, as a token of Credit Libanais’ commitment Open spaces and passageways are covered. with Promote measures to deal with regional or worldwide to the planet and a step towards green banking. carpet tiles that have total recycled content of 50% CRITERIA ARE KEY ELEMENTS environmental problems, notably climate change and are certified “Green Label Plus”. and access to potable water and sanitation. In doing Corporate Responsibility and the All peripheral sunscreens are 100% PVC free, OF OUR SUCCESS. so, the Bank apply the principles of “prevention”, Environment low VOC fabric, recyclable and feature a silver “precaution” and “polluter countries”, as embedded in A Sustainable Working Environment for employees backing which increases reflectivity to sunlight, thus the European Community policy. CL Group’s recently executed landmark 32-story decreasing the heat intake into the interior space, Credit Libanais Group In this perspective, all projects requesting financing Head Office Tower in Ashrafieh is one of the most and reducing the need for cooling during warm days. from the EIB have to comply with the Environmental technologically advanced in the region and responds All gypsum board partitions are made of 95% Survey covering both the environmental and the social to the latest trends in construction and utilization recycled content. impact of the project being financed. sustainability. Annual Report 2014
138 139 follows: CL Tier IIIdatacenterfeaturesaresummarizedas capacity needed. so thatspeedcanbeadjustedtoexactlytheamount of and thoseoftheCRACshaveECvariablespeedfans, variable chilled water pumps, and the fans of the chillers Chillers alsohavevariablespeedcompressorsand which greatlyincreasestheefficiencyandreducescost. data centerusesa10°Cchilledwatertemperature, systems forbuildingssupplywaterataround6°C;CL’s relatively hightemperatures.Normallywater-cooled The maindatacenterenvironmentiswatercooledat data center. (CCM), whichhasadedicatedserverroomwithinCL hosts thesistercompanyCreditCardManagement functions oftheBank. An additional350-m2space kW ofnetIT loadandisdesignedtohandleallthe CL Groupmaindatacenterisabout450m2with120 140 Tier IIICertifiedDataCenter (chlorofluorocarbons) derivatives. expansion) systemsandavoidsheavyuseofCFC system provideshigherefficienciesthanDX(direct Chilled water-cooledwhitespace. The chilledwater
exchange withofficespace exhaust. treated withanenergyrecoveryunitthroughthermal The freshairforthedatacenteriscentrallypre- system efficiency. return hotair, whichfurtherenhancesthe overall Cold aircontainmentpreventsmixingofcoldand to reduceenergyconsumption. with variablespeedECfansmodulatingfrom0-100% Computer roomairconditioningunitsareprovided further reducesenergyexpenditures. not requiresecondarychilledwaterpumps,which A specialvariableprimarychilledwatersystemdoes actual demand. 0-100% tooptimizeenergyconsumptionbasedon allowing thedirectcurrentmotorstomodulatefrom with electronicallycommutated(EC)technology, The chillercompressorsandpumpsareprovided space, thussavingenergy. need toprovidehumidificationinthecomputing Operating athigherwatertemperaturereducesthe costs. which significantlyincreasesefficiencyandrunning temperature (10°Cversus6°Cforstandardsystems), The chilledwatersystemuseshighsupply The systemallowsanoverall insightonthe KNX, anddatacenterinfrastructure(DCIM)controls. via SNMP (SimpleNetworkManagementProtocol), The BMSintegratesallsubsystems,eitherdirectlyor operation duringunoccupiedperiods. centralized parameterizationandschedulingtoavoid that includesautomaticmotionsensorsand The lightingisswitchedbyacontrolsystem 25% loadand96%at100%load. loads. The efficiencyoftheUPSsystemis 95.5%at Modular UPSsystemsadjustcapacitytoactualIT the amountoftreatedfreshair. battery roomthroughtransferfans,whichreduces Re-circulated airfromofficesventilatestheUPS/ performance) greaterthan4usingR-410refrigerant. to theofficespacewithUnitCOP (coefficientof The latestVRV systemtechnologyprovidescooling unoccupied periods. parameterization toavoidoperationduring management system)forschedulingandcentralized The systeminterfaceswiththeBMS(building high efficiencyandlowerenergyexpenditures. a VRV (variable refrigerantflow)systemfor Associated officespaceisairconditionedby throughout CL Group. in thegreencultureofbankingweareperpetrating These endeavorsconstituteanotherbuildingblock Consumption Recycling EndeavorsandReducingPaper documents, therebyreducingpaperconsumption. New printershavethefeaturestoprintdoublesided departmental onessharedbymanyemployees. place, personalprintersarereplacedbylarge To encourageenvironmentalmovesinthework Recycling ofprintercartridges. Group levelanddeliveredtoalocalrecyclingplant. Group toseparatepapersthatarecollectedatthe encourages thecontributionofalldivisionswithin to promotetherecyclingofusedpapers. This activity scrupulous procedureisintegratedatCreditLibanais To helpintheglobaleffort ofreducingpaper efficiency. DCIM optimizesoperationsandincreasesoverall expenditures, faults,andalerts. operations ofthedatacenter, monitoringallenergy CL Corporate responsibility waste, a 141
Annual Report 2014 Credit Libanais Group Financial Results Credit Libanais Group
Management Discussion and Analysis 144 Independent Auditors’ Report 160 Consolidated Statement of Financial Position 164 Consolidated Statement of Comprehensive Income 166 Consolidated Statement of Changes in Equity 168 Consolidated Statement of Cash Flows 170 Notes to the Consolidated Financial Statements 172 CLIB Financial Results 234 CLA Financial Results 248 operations ofcredit libanaisgroup of financial condition and results of management’s discussion andanalysis 144 information. 31 December 2014and2013onselected financial statements oftheGroup asatandfor theyears ended prepared basedontheaudited consolidated financial The following discussion andanalysis have been Basis ofPresentation (CLIB), LebaneseIslamicBank of CreditLibanais Credit LibanaisGroupwhichincorporatestheactivities at 31December2014representthefinancialpositionof The consolidatedfinancialstatementsoftheGroupas directly orindirectlyownedbyCreditLibanais LBP 71,427billionasat31December2013. (or US$50.90billion)asat31December2014upfrom banks increasedby7.42%in2014toLBP 76,730billion year. Total loans to private sector made by the Lebanese annual increaseofLBP 16,395billionor6.60%year-on- 31 December2013(orUS$164.82billion),reflectingan December 2014,comparedtoLBP 248,468 billionasat LBP 264,863 billion(orUS$175.70billion)asat31 Total Lebanesebankingsectorassetsreached Lebanese BankingSector consolidation purposes. with regulationsandstandardsagreeduponfor the consolidatedfinancialstatementsinaccordance years 2014and2013wereeliminatedwhenpreparing material inter-companytransactionsincurredduringthe International subsidiaries, CreditLibanaisInvestmentBank sa –Senegal(CISA)andothercompanies sal together with its wholly owned togetherwithitswhollyowned sal (LIB)andCredit sal sal . All
compared to5.07%atyear-end2013. banking sectorreached5.21%atyear-end2014, The Group’s shareoftotalassetstheLebanese stood at6.60%duringtheyear2014. growth intotalassetsoftheLebanesebankingsector consisted primarilyofcustomerdeposits. The average substantially matchedbyincreasesinfunding,which increase intotalassets,particularlyliquidwas year increaseofLBP 1,210.08 billionor9.60%. This billion asat31December2013,reflectingayear-on- of LBP 13,812.33billion,comparedtoLBP 12,602.25 As at31December2014,theGrouphadtotalassets Total Assets Analysis ofFinancialPosition end 2013. 31 December2014,comparedto64.73%asatyear- the depositdollarizationratedecreasedto64.28%asat 209,793 billionasat31December2013.Inaddition, US$ 147.64billion)asat31December2014fromLBP increased by6.09%in2014toLBP 222,564billion(or private deposits,heldbytheLebanesebankingsector Total customerdeposits,includingnon-resident CL group financial results 145
Annual Report 2014 Credit Libanais Group December 2013and2014,respectively. and 84.46%oftheGroup’s totalassetsasat31 source oftheGroup’s fundingandcomprised85.63% year 2014.Customerdepositsrepresenttheprincipal Lebanese bankingsectorstoodat6.09%duringthe while theaveragegrowthrateintotaldepositsof from LBP 10,790.96billionasat31December 2013, 8.11% toLBP 11,665.85 billionasat31December2014 Total customerdepositsoftheGroupincreasedby Customer deposits respectively: The followingtablesetsoutabreakdownoftheGroup’s sourcesoffundingasat31December2014and2013, Sources ofFunding 146 Total Customer Deposits Banks andFinancialInstitutions 31 December - Time savingaccounts - Sightsavingaccounts - Timedeposits - Demanddeposits - Timedeposits - Demanddeposits businesses, represented33.45%oftotaldeposits. deposits; andtimedeposits,whicharemostlyheldby rate offered bytheGroup,represented10.71%oftotal Demand deposits,whichearntheminimumbalance portion oftheGroup’s customer deposits55.85%. of approximately3to6months,representedthelargest mostly heldbyindividualsandhave,averagematurities As at31December2014,savingsaccounts,whichare 12,163,961 11,665,846 2014 6,294,375 3,901,700 1,249,246 220,525 455,236 498,115 42,879 10,967,592 10,790,958 2013 6,031,236 3,348,123 1,179,616 231,983 144,531 176,634 32,103 Percentage Change 214.97% 182.00% 16.53% 33.57% 10.91% -4.94% 5.90% 4.36% 8.11%
millions LBP reserved interest)amounted toLBP 4,305.33billion, customers (netofprovisions fordoubtfuldebtsand As at31December2014, loans andadvancesto Loans Portfolio time depositsandsavingsaccounts. Foreign currencydepositsareprimarilycomprisedof functional currency. customers traditionallyuseLebanesePoundasthe retail activitiesinruralareas(Bekaaregion)where averageprimarilybecauseoftheGroup’s the sector’s Group’s depositsinforeigncurrencywerelowerthan year-end 2014from64.73%asat2013. The deposits dollarizationdecreasedto64.28%asat marginally belowthesector, whilethebankingsector’s compared to53.85%asat31December2013and 54.43% oftotalcustomerdepositsasatsuchdate, foreign currencies,principallyUSDollars,represented As at31December2014,customerdepositsheldin 7.37% onLBP depositsintheLebanesebankingsector. 6.76% overtheyear2014,comparedtoanincreaseof December 2013,whileLBP depositsincreasedby higher asat31December2014,comparedto Year-on-year, foreigncurrency depositswere9.26% and 2014,respectively: The followingtablesetsoutthecompositionsofGroup’s customerdeposits,bycurrency, asat31December2013 Total (LBP billion) In foreigncurrency(convertedintoUSDmillion) In LBP (LBP billion) Deposits byCurrency 31 December Deposits 2014 11,665.85 5,316.43 4,211.88 Deposits 2013 10,790.96 3,854.96 4,979.60 average of35.24%forthe Lebanese bankingsector. 36.31% asat31December 2013andcomparedtothe to 36.91%asat31December 2014comparedto portfolio. The Group’s loans-to-depositsratioimproved conservative policyintermsofthequalityour the corporatesidewithoutcompromisingGroup’s improvement inourlendingactivities,particularlyon as at31December2013. This increasestems fromthe 31.17% asat31December2014,comparedto31.09% The ratiooftheGroup’s total loanstototalassetswas base. enlargement anddiversificationofitsretailcustomer of newconsumerlendingproductsresultinginthe position intheretailmarket,throughintroduction compared toyear-end2013,consolidatedtheGroup’s The growthintheloansvolumeasatyear-end2014, subsidised orguaranteedbyfinancialpublicinstitutions. individuals andcommercialfacilitiestoSMEs,whichare reflected primarilytheextensionofhousingloansto year 2014. The growthintheGroup’s loansportfolio made byLebanesebanksgrew7.42%duringthe Over thesameperiod,aggregateloanstoprivatesector 2013, reflectingayear-on-yearincreaseof9.87%. compared toLBP 3,918.61billionasat31December Increase 874.89 356.92 336.83 Group Percentage Change 9.26% 6.76% 8.11% CL group financial results Sector 6.09% 5.35% 7.37% 147
Annual Report 2014 Credit Libanais Group Credit LibanaisGroupimprovedthelevelofprovisions difficult economicconditionsprevailinginthecountry, To supportandreinforcetheloansportfolioduring December 2014. of 40.53%fortheLebanesebankingsectorasat31 at 31December2013,andcomparedtotheaverage 42.66% oftotalforeigncurrencycustomerdepositsas deposits asat31December2014,comparedto represented 41.41%oftotalforeigncurrencycustomer at 31December2014.Loansinforeigncurrencies currencies, principallyinUSDollars,exchangeas with theremaining61.07%denominatedinforeign or 38.93%weredenominatedinLebanesePounds, Of theGroup’s totalloansportfolio,LBP 1,676.17billion 2013, respectively: The tablebelowsetsoutthecompositionofGroup’s loansportfolio,bycurrency, asat31December2014and 148 Loans byCurrency Total (LBP billion) In foreigncurrency(convertedintoUSDmillion) In LBP (LBP billion) 31 December Loans 2014 4,035.33 1,744.06 1,676.17 Loans 2013 3,918.61 1,644.46 1,439.59 2013. year 2014,comparedtoLBP 6.39billionduringtheyear the incomestatementforLBP 5.74billionduringthe year resultinginsubstantialprovisionswritten-backto the amountofcollectionsandrecoveriesrealizedevery policy intermsofprovisionsonNPLs,asconfirmedby loans. The Groupcontinuestoadoptaconservative of thetotalloanportfolio,or78.45%non-performing 124.95 billionat31/12/2014andrepresented2.82% interest onnon-performingloansamountedtoLBP during theyear2013). Total provisionsandsuspended write backprovision(comparedtoLBP 13.01billion charge duringtheyear2014,beforedeductionof those bytheamountofLBP 15.86billionasprovision set againstnon-performingloans(NPLs),increasing Increase 386.72 236.58 99.60 Group Percentage Change 16.43% 9.87% 6.06% Sector 11.89% 7.42% 6.06% maintained highliquiditylevelswhichrepresented72% As at31December2014,CreditLibanaisGroup Liquidity December 2013. 1.05% and1.80%oftotalloans,respectively, asat31 31 December2014,comparedto14.85%,9.81%, 0.25% and1.82%oftotalloans,respectively, asat and agricultureloanscomprised13.74%,9.96%, industrial loans,constructionbrokerageloans to 31.71%asat31December2013. The Group’s of totalloansasat31December2014,compared trade andservicesloansdecreaseddownto31.45% compared to40.79%asat31December2013,while to 42.77%oftotalloansasat31December2014, Personal, consumerandhousingloansincreased accounting forspecifiedloanlossprovisionsasat31December2014and2013: economicactivity,The followingtablesetsoutthecompositionofGroup’s loansportfoliobytheborrower’s after Loans byIndustry Total Agriculture Brokerage Construction andRealEstate Industries Trade andServices Retail (personal,consumerandhousingloans) 31 December government’s financial support. and todealwithprimebanksthatcanbenefitfromtheir concentration ofliquiditywithasinglecorrespondent the creditlimitsgrantedtotheminawayavoidhigh and accordinglyredistributedtheliquidityheld exposures maintainedwithitsbankcorrespondents over theworld,Groupreconsideredrisk almost affected themajorityofbanksoperatingall As aresultoftheinternationalfinancialcrisisthat 51% and49%respectivelyasat31December2013. foreign currenciesat31December2014,comparedto on thebasisof49%inLebanesePoundsand51% as at31December2013.Liquiditywasdistributed of totalassets,comparedto73%and65%respectively, of totalcustomerdepositsandotherliabilities65% 2014 4,305,329 1,354,131 1,841,422 428,919 591,691 78,258 10,908 2013 3,918,607 1,242,536 1,598,215 384,252 581,753 70,689 41,162 CL group financial results Percentage Change -73.50% 10.71% 15.22% 11.62% 9.87% 1.71% 8.98% 149 millions LBP
Annual Report 2014 Credit Libanais Group LBP 1billion. The overallyieldontheGroup’s portfolio subscribed bytheaffiliatedbankCLIBandamountingto whereas thisyieldstoodat6.68%onsimilarbills and amountingtoLBP 2,706.54billionstoodat6.90%, compared toLBP 1,411.46 billionasatyear-end2013, amounting toLBP 1,122.86billionasatyear-end2014, The Groupheldinvestments andmarketablesecurities Investments andMarketableSecurities December 2014: The followingtablesetsoutthecompositionofGroup’s portfolioofLebanesetreasurybills,bymaturity, asat31 ordinary treasurybillssubscribedbyCreditLibanais The averagerateofreturnonLebanesePounds December 2014: The followingtablesetsoutthecompositionofGroup’s portfolioofLebanesetreasurybillsandEurobondsasat31 Lebanese governmentsecurities 150 Total Plus: Accrued interestontreasurybills Ordinary Treasurybills As at31December2014 As at31December2014 Total Lebanesetreasurybills Over 5years Between 2and5years Between 19and24months Between 13and18months Between 7and12months Less than6months sal
companies and are quoted in regulated financial markets. by Lebanesebanksandprime localandinternational investments consistedofinstruments andpapersissued reflecting a decrease of LBP 288.60 billion or 20.45%. All to 6.97%attheendofprecedingyear. currencies was6.61%at31December2014,compared Lebanese Governmenttreasurybillsissuedinforeign at theendofprecedingyear. The averageyieldon to 6.90%at31December2014,compared6.92% of treasurybillsheldinLebanesePoundsaggregated In LBP In LBP 2,707.54 2,740.42 32.88 2,708 1,004 509 215 215 290 475 In FC In FC 927.20 914.93 12.27 915 500 264 51 89 2 9 Total Total 3,622.47 3,667.62 45.15 3,622 1,009 1,267 266 304 292 484
billions LBP billions LBP and supplementarycapital(Tier II). Tier Icapital Shareholders’ equityisdividedintocorecapital(Tier I) Shareholders’ Equity the yearended31December2013. year ended31December2014,comparedto6.17%for deposit heldinforeigncurrenciesstoodat6.30%forthe Average rateofreturnonbondsandcertificates of of instrument,asat31December2014: The followingtablesetsoutthecompositionofGroup’s portfolioofinvestmentsandmarketablesecurities,bytype Total investmentandmarketablesecurities Certificates ofdepositsissuesbytheCentralBank Unquoted "edEquitySecuritiesPreferredShares Certificates ofdeposit Corporate Bonds&OtherSovereign 31 December As at31December2014 Total equity Non-controlling interest Total equityattributabletoholdersoftheBank Profit fortheyear Other reserves Fair valuereserve Retained earnings Capital reserves Share premium-preferredshares Share capital-preferredshares Share capital-commonshares Shareholders’ equity and 2013,respectively: Group’s shareholders’ equityasat31December2014 The followingtablesetsoutthecompositionof available-for-sale securities. risks, lessanyunfavorablechangeinfairvalueof retained earnings,andreservesforunspecifiedbanking comprises paid-upcommonsharecapital,reserves, In LBP 2014 1,076,639 1,052,898 221,688 186,183 139,750 257,400 501,146 496,370 117,880 23,741 91,253 27,744 11,000 4,776 ------In FC 2013 1,027,889 1,006,972 221,028 160,464 139,750 257,400 621,716 448,112 20,917 98,629 22,002 96,699 83,332 25,588 64,684 11,000 CL group financial results Percentage Change Total 1,122,862 944,482 13.50% 26.10% 21.90% 16.03% -7.48% 88,108 25,588 64,684 4.74% 4.56% 0.30% 0.00% 0.00% 0.00% 151 millions LBP millions LBP
Annual Report 2014 Credit Libanais Group dividend attheBank’s discretion,orwhenever Holders ofthesesharesreceiveanon-cumulative amounted toLBP 139,750pershare. an increaseofLBP 11,000 million. The sharepremium from LBP 257,400milliontoLBP 268,400million,thus of LBP 11,000; increasingthesharecapitalofBank non-cumulative preferredshareswithanominalvalue shareholders approvedtheissueof1,000,000perpetual In July2013,theextraordinarygeneralassemblyof declared from time to time. All issued shares are fully paid. of ordinarysharesareentitledtoreceivedividendsas with regardstotheBank’s residualassets. The holders nominal valueofLBP 11,000. All sharesrankequally capital comprised23,400,000ordinaryshareswitha At 31December2014,theauthorisedandissuedshare below at31December2013and2014: The Group’s consolidatedbalancesheetisstructuredinterms ofpercentagetotalassetsasshowninthetable Asset /LiabilityManagement 152 Assets Total Assets Other debtorsandreceivables Fixed assets Net loansandadvances Marketable securities Treasury billsandEurobonds Cash andbanks As at31December 2014 100% 31% 27% 37% 2% 2% 1% 2013 100% 31% 28% 35% 2% 2% 2% Total LiabilitiesandEquity Shareholders’ equity Other creditorsandpayables Long-term liabilities Customers deposits Due tobanks Liabilities &Equity the Group. into considerationcredit,marketandoperationalrisksof (compared totheminimumrequired10.5%),aftertaking adequacy ratiostoodat15.77%year-end2014 on theshareholders’ equityoftheGroup. The capital study toassesstheimplicationsofBaselII Accord During 2014,theGroupconductedaquantitativeimpact Capital Adequacy December 2014,comparedto8.16%atyear-end2013. Equity toassetsratioreached7.79%asat31 shares donothavevotingrights. dividends declaredforordinaryshareholders. These do nothavetherighttoparticipateinanyadditional dividends toordinaryshareholdersaredeclared. They 2014 100% 84% 9% 3% 4% --- 2013 100% 86% 9% 4% 1% --- bills heldbytheGroupinLebanesePoundswas6.90% The overallyieldontheportfolioofLebanesetreasury gathered throughtheGroup’s branchnetwork. assets thatislargelyfinancedbycustomerdeposits reflecting theGroup’s significantportfolioofliquid Assets classifiedatamortizedcostin2014and2013, substantial majorityoftheGroup’s portfolio ofFinancial Lebanese treasurybillscontinuedtocomprisethe currencies (includingprincipallyUSDollarsandEuro) Government andcorporateEurobondsissuedinforeign treasury billsdenominatedinLebanesePoundsand represents interestearnedprimarilyonLebanese Interest onFinancial Assets atamortisedcost change therein,foreachoftheyearsended31December 2014and2013,respectively: The followingtablesetsouttheprincipalcomponents oftheGroup’ Interest Expense change therein,foreachoftheyearsended31December2014and2013,respectively: The followingtablesetsouttheprincipalcomponentsofGroup’ Interest Income Results ofOperations Total Subordinated DebtIssued Deposits frombanks Customer deposits Loans fromCentralBankofLebanon 31 December 31 December Total Loans and Advances toCustomers Deposits withbanks Financial Assets atamortisedcost(includingLebanesegovernmentsecurities) interest incomefortheyearended31December2013. December 2014increasedby6.09%comparedtototal Accordingly, totalinterestincomefortheyearended31 LBP 386.72 billionor9.87%. customers duringtheyear2014whichincreasedby extension ofadditionalloanstoretailandcorporate by 6.79%duringtheyear2014primarilydueto Interest incomeontheGroup’s loansportfolioincreased 31 December2013. was 6.61%asat31December2014and6.97% government Eurobondsissuedinforeigncurrencies year-end 2013,andtheaverageyieldonLebanese as at31December2014,comparedto6.92% 2014 2014 s interestexpense,byamountandasapercentage s interestincome,byamountandasapercentage 706,234 285,940 328,398 459,624 482,614 91,896 7,547 3,282 2,181 2013 2013 665,693 267,761 336,012 459,401 447,525 61,920 4,085 7,611 180 CL group financial results Percentage Change Percentage Change 1,111.67% -19.66% +7.84% 48.41% -0.84% -2.27% 7.88% 6.09% 6.79% 153 millions LBP millions LBP
Annual Report 2014 Credit Libanais Group the competitivemarketintermsofattractingdeposits. economic downturnandtheregionalturmoilaswell returns ofsovereigninvestmentsamidsttheglobal ended 31December2013overcomingthediminishing December 2014fromLBP 206.29billionfortheyear in 2014toLBP 210.61billionfortheyearended31 The Group’s netinterestincomeincreasedby2.09% 7.84% asaresultoftheincreaseintotalGroup’s deposits increasedin2014,comparedto2013,by 2014. The totalamountofinterestpaidoncustomer aggregate to84.46%oftotalassetsat31December the primarysourceoffundingforGroupand interest paidoncustomerdeposits,astheseconstitute The Group’s interest expense is principally comprised of 154 31 December 31 December Total Non-interestIncome Share of profit of investments in equity accounted investees Other operatingincome Net gainonfinancialinvestments Net tradingincome Net Commissions Fees andCommissionsexpense Fees andCommissionsincome Net interestmargin(%) Net interestincome Interest paid Interest earned December 2014and2013,respectively: operating incomeforeachoftheyearsended31 income derivingfromcommissions,feesandother The followingtablesetsouttheGroup’s non-interest Non-interest income ended 31December2014and2013,respectively: income andnetinterestmarginforeachoftheyears The followingtablesetsouttheGroup’s netinterest Net InterestIncome compared to31December2013. customer depositsby8.11% asat31December2014 2014 2014 (495,624) (42,631) 210,610 706,234 85,410 17,958 56,541 99,172 1.66% 1,857 6,077 2,977 2013 2013 (459,401) (36,983) 206,292 665,693 90,558 18,229 56,102 93,085 1.75% 1,746 4,872 9,609 Percentage Change Percentage Change -69.02% 24.73% 15.27% -5.68% -1.49% 6.36% 0.78% 6.54% 2.09% 7.88% 6.09%
millions LBP millions LBP 31 December2013. income at31December2014,comparedto31.40% It contributedto30.07%oftheGroup’s netfinancial LBP 90.56 billionattheendofprecedingyear. down toLBP 85.41billionat31December2014,from The Group’s non-interestincomedecreasedby5.68% LBP 27.84 billionintheprecedingyear. amounted toLBP 20.94billionin2014,comparedto Net gainon Trading andFinancialInvestments subsidiary CreditLibanaisd’Assurances(CLA). bancassurance productsthroughtheGroup’s insurance cross-selling ofrelatedfinancialservices,including at different locationsthroughoutthecountry andthe its networkofpoint-of-sale(“POS”)terminalsinstalled Amex, theprocessingoftransactionsmadethrough debit andchargecardssuchasVisa, MasterCardand businesses, includingthesponsoringandprocessingof generated revenuessuchasfeesfromitsplasticcard electronic bankingproductsandothernon-interest transaction-processing, developmentofretailservices, origination andcommitmentfeesonloans issuances ofletterscreditandguarantee, primarily ofcommissionsandfeesonaccounts,for 31 December2013.Netcommissions,consisting compared toLBP 56.10billionfortheyear ended 56.54 billionfortheyearended31December2014, Total netcommissions,increasedby0.78%toLBP the yearsended31December2014and2013,respectively: The followingtablesetsouttheprincipalcomponents Staff ExpensesandRelatedCharges 31 December Total staffexpensesandrelatedcharges Other personnelexpenses Employee benefitsobligation Compulsory socialsecurityobligations Allowances totheBoardofDirectors Wages andsalaries of theGroup’s staff expensesand relatedchargesforeachof 4.69 billion. to LBP 0.26billionandotherincomeamounting toLBP amounting toLBP 1.11 billion,rentalincomeamounting received onsaleofassetsheldinrecoverybaddebts course ofbankingbusiness.ItisconstitutedIncome operations incurredbytheGroupoutsidenormal Other operatingincomeistheresultofactivitiesand 1.52%. December 2013,reflectingayear-on-yeardecreaseof compared toLBP 288.43billionfortheyearended31 31 December2014amountedtoLBP 284.04billion, the Group’s netfinancialincomefortheyearended As aresultofthecombinedeffects oftheforegoing, year ended31December2013. December 2014,comparedtoLBP 6.39billionforthe an amountofLBP 5.74billionfortheyearended31 Provisions written-backonloansdecreaseddownto preceding year. December 2014,comparedtoLBP 13.01billionforthe amounted toLBP 15.86billionfortheyear ended31 losses by21.91%at2014. Allowances forloanlosses The groupincreasedtheprovisionsallocatedforloan Net OperatingIncome 2014 104,528 16,026 10,573 71,308 4,099 2,522 2013 100,170 15,340 10,239 67.159 4,914 2,518 CL group financial results Percentage Change -16.59% 4.35% 4.47% 3.26% 0.16% 6.18% 155 millions LBP
Annual Report 2014 Credit Libanais Group ended 31December2013,reflectingayear-on-year 2014, comparedtoLBP 100.17billionfortheyear LBP 104.53billionfortheyearended31December Total staff expensesandrelatedchargesamountedto 31 December2014and2013,respectively: The followingtablesetsouttheprincipalcomponentsofGroup’ General OperatingExpenses 156 31 December Total generaloperatingexpenses Other expenses Training, documentationandservicesfees Board ofdirectorsattendanceallowances Office stationeryandprinting Computer maintenanceandcharges Advertising andpublicrelationsexpenses Insurance premiums Transportation charges Travel andentertainment Electricity, waterandheating Maintenance andrepairs Mail andtelecommunication(PTT, Swift) Data processingservices Lawyers, auditandconsultancyfees Rental chargesandrelatedexpenses Premiums fortheguaranteeofdeposits Taxes social securitycontribution. and itsimplicationontherelatedpersonnelcharges largely attributabletoyear-on-yearsalariesincrease increase of4.35%. The increaseinstaff expenseswas 2014 s generaloperatingexpensesfortheyearsended 60,288 2,654 2,406 1,393 2,403 5,780 2,432 3,037 2,444 4,178 4,601 3,060 3,275 4,161 6,456 5,397 5,975 636 2013 59,671 2,177 2,374 1,561 1,849 5,737 2,289 3,191 2,538 4,178 4,388 3,151 3,335 4,710 6,493 5,060 6,090 550 Percentage Change -10.76% -11.66% 21.91% 15.64% 29.96% -4.83% -3.70% -2.89% -1.80% -0.57% -1.89% 1.03% 1.35% 0.75% 6.25% 0.00% 4.85% 6.66%
millions LBP limited banks’ abilitytocompete intheFXmarket. This the newregulatoryrequirementsimposedwhichhave previous yearshavedramaticallydecreaseddueto which havesignificantlycontributedtoourprofitsin foreign exchangetransactionsinourIraqbranches suffered significantly. Morespecifically, profitsfrom neighbours SyriaandIraqwhereouroperationshave and turmoilinsurroundingcountriesnamelyourclosest elections as well as the civil unrest, extremist movement uncertainties relatedtothesuspendedpresidential by thepoliticalinstabilityinregionespecially This dropinperformancewaslargepartbroughton decrease of7.55%. US$ 79.22million)fortheyear2013,ayear-on-year million), comparedtoLBP 119.43 (ortheequivalentof to LBP 110.41 billion(ortheequivalentofUS$73.24 The Group’s pre-taxprofitsfortheyear2014amounted 31 December2013. 2014, comparedtoLBP 59.67billionfortheyearended LBP 60.29billionfortheyearended31December General operatingexpensesincreasedby1.03%to The followingtablesetsouttheGroup’s pre-taxprofitfortheyearsended31December2014and2013,respectively: Profit beforeTax 31 December Net profitfortheyear Income tax Profit beforeincometax compared to0.84%atthe end oftheprecedingyear. end 2013.Returnonaverageassetsrecorded0.86% 11.45% atyear-end2014,comparedto12.06%year- Return onshareholders’ equity(beforetax)stoodat around LBP 2.7billiontocomply. resulted inourbankhavingtoincreaseitsprovisions by of thelocaleconomicandpoliticalinstability. This has provisions forNon-PerformingLoansissuedinlight stringent regulatoryrequirementsin2014governing Lebanese bankshavealsohadtoadaptthenew contributed aroundLBP 8.4billiontotheprofitsof2013. from aswapoperationofBDL CDswhichhas extraordinary incomeintheformofprofitsgenerated Furthermore,thepreviousyearhaswitnessed around LBP 7.8billionin2014. has causedCreditLibanais’ profitsfromFXtodropby as at31December2013. 59.27% asat31December2014comparedto57.52% The Group’s overallcost-to-incomeratioincreasedto 2014 (13,579) 110,408 96,829 2013 (16,213) 103,218 119,431 CL group financial results Percentage Change -16.25% -6.19% -7.55% 157 millions LBP
Annual Report 2014 Credit Libanais Group The Group’s consolidatedprofitsfortheyearended31December2014aregeneratedfromfollowingentities: Profit Appropriation Libanais The General Assembly ofShareholdersCredit 158 78.82 billionasfollows: deriving fromCreditLibanais the appropriationofprofitsforyear2014 (after tax)amountingtoLBP 96.83billion,andresolved Group asat31December2014,showingnetprofits consolidated financialstatementsofCreditLibanais Profit fromCreditLibanais Net profitfortheyear Group’s shareinprofitsofsubsidiariesandaffiliatedcompanies Profits derivingfromtheGroup’s bankingactivities Eliminations oftheinter-groupdividenddistributions Profit fromLebaneseIslamicBank Profit fromCredilease Loss fromCreditInternational(Senegal) Profit fromCreditLibanaisInvestmentBank As at31December2014 ii- To allocate anamountofLBP 12.03billionto i- To transferanamount ofLBP 7.75billion as perBDL Circ.1439. commitments asattheend ofeachfinancialyear, risk weightedassetsandoff balancesheet computed onthebasisof2%ototal a specialreserveforunspecifiedbankingrisks, the CodeofMoneyandCredit. account aspertherequirementsofarticle132 representing 10%oftheseprofitstoalegalreserve sal meton30 the April 2015approved sal sal sal sal sal andamountingtoLBP Profits Before Tax iv- To allocateanamountofLBP 163.69million iii- To allocate1.28billion inreservesforRealEstate vi- To allocateanamountofLBP 5.59 billion To allocateanamountofLBP 10.55billion v- 110,408 BCC circularN financial instrumentsclassifiedasFVTPL asper representing unrealizedprofitonrevaluationof as perBCCmemo4/2008dated14/01/2008. disposed of,attherateof5%theirbookvalue acquired inrecoveryofbaddebtsnotyet LBP 527.63million. the distributionofthesedividendsamountingto amount oftaxchargedbythebankasaresult preferred sharesissued;andtodeductthe at anannualreturnof7%theUSD100million the periodbetween01/01/2014and31/12/2014, representing dividendsonpreferredsharesfor (7,576) 12,163 91,099 13,173 97,235 1,058 456 35 Income Tax o . 270datedSeptember19,2011. (12,282) (13,164) (13,579) (144) (724) (415) (14) ------Net Profits (7,576) 96,829 12,758 84,071 78,817 11,439 914 442 35
millions LBP In closing,theBoardofDirectorsCreditLibanais sal employees. and devotionoftheGroup’s seniormanagement and our Shareholdersandcustomers,fortheefforts continuous enthusiasm,confidenceandsupportof vii- To transfertheremainingprofits,after wouldliketoexpressitsgratitudeforthe N loan portfolioasperBDL intermediarydecision representing thecollectivereserveonbank’s Libanais 23.40 billiontocommonshareholdersofCredit of theseretainedearningsanamountLBP amount ofLBP 40.93billionandtodistributeout the retainedearningswhichwillaggregatean allocations anddistributionslistedabove,to amends decision7776dated21/02/2001. o . 11917 datedDecember24,2012which sal . Chairman and General Manager Dr. JosephTorbey Yours Sincerely, CL group financial results 159
Annual Report 2014 Credit Libanais Group report independent auditors 160 accounting policiesandotherexplanatory information. ended, andnotes, comprising asummaryofsignificant changes inequityandcash flows for the year then consolidated statements ofcomprehensive income, of financialpositionasat31December 2014,the or “Group”), whichcomprise theconsolidated statement financial statements ofCredit Libanais We have audited theaccompanying consolidated To theshareholders ofCredit Libanais sal (the“Bank” sal Beirut, Lebanon 17 April2015 KPMG Standards. consolidated cash flows for the year thenendedinaccordance withInternational FinancialReporting position oftheGroup asat31December 2014,andofitsconsolidated financialperformance andits In ouropinion,theconsolidated financial statements give atrue and fair view ofthe consolidated financial Opinion audit opinion. We believe thattheauditevidence we have obtained issufficientandappropriate to provide abasis for our evaluating theoverall presentation oftheconsolidated financial statements. accounting policiesusedandthereasonableness ofaccounting estimates madebymanagement,aswell as the effectiveness oftheentity’s internal control. Anauditalsoincludesevaluating theappropriateness of procedures thatare appropriate inthe circumstances, butnotfor thepurposeofexpressing anopinionon entity’s preparation andfair presentation oftheconsolidated financial statements inorder to designaudit due to fraud orerror. Inmakingthoseriskassessments, we consider internal control relevant to the assessment of therisksofmaterial misstatement oftheconsolidated financial statements, whether the consolidated financial statements. Theprocedures selected dependonourjudgment,includingthe An auditinvolves performing procedures to obtain auditevidence abouttheamountsanddisclosures in about whethertheconsolidated financial statements are free from material misstatement. that we comply withethical requirements andplanperform theauditto obtain reasonable assurance We conducted ourauditinaccordance withInternational Standards onAuditing.Thosestandards require Our responsibility isto express anopinionontheseconsolidated financial statements basedon ouraudit. Auditors’ responsibility are free from material misstatement, whether dueto fraud orerror. management determines isnecessary to enable thepreparation ofconsolidated financial statements that statements inaccordance withInternational FinancialReportingStandards, andfor suchinternal control as Management isresponsible for thepreparation andfair presentation oftheseconsolidated financial Management’s responsibility for theconsolidated financial statements DFK Fiduciaire duMoyen-Orient CL group financial results 161
Annual Report 2014 Credit Libanais Group CL group financial results consolidated statement of financial position
As at 31 December Note 2014 2013 Restated As at 31 December Note 2014 2013 Restated
Assets Shareholders’ equity Cash and balances with Central Banks 8 3,084,948 2,046,850 Share capital - common shares 26 257,400 257,400
Balances with other banks and financial institutions 9 1,075,776 1,202,414 millions LBP Share capital - preferred shares 26 11,000 11,000 millions LBP Loans and advances to customers 10 4,269,371 3,897,098 Share premium - preferred shares 26 139,750 139,750 Loans and advances to related parties 42 35,958 21,509 Capital reserves 27 186,183 160,464 Debtors by acceptances 145,142 165,384 Retained earnings 117,880 96,699 Financial assets at fair value through other comprehensive income 11 86,433 75,047 Fair value reserve 28 27,744 22,002 Financial assets at fair value through profit or loss 12 34,695 56,775 Other reserves 29 221,688 221,028 Financial assets at amortised cost 13 4,669,361 4,784,453 Profit for the year 91,253 98,629 Investments in equity-accounted investees 14 19,812 17,733 Total equity attributable to equity holders of the Bank 1,052,898 1,006,972 Property and equipment 15 226,180 173,707 Non-controlling interest 23,741 20,917 Intangible assets 16 6,013 4,569 Total equity 1,076,639 1,027,889 Assets held for sale 17 36,631 37,815 Total liabilities and equity 13,812,327 12,602,250 Other assets 18 122,007 118,896 The notes on pages 152 to 211 are an integral part of these consolidated financial statements. Total Assets 13,812,327 12,602,250 The consolidated financial statements were approved by the Board of Directors on 17 April 2015. Liabilities Loans and deposits from Central Banks 19 397,350 77,462 Dr. Joseph Torbey Chairman and General Manager Deposits from other banks and financial institutions 20 100,765 99,172 Deposits from customers 21 11,237,014 10,438,788 Deposits from related parties 42 428,832 352,170 Engagements by acceptances 145,142 165,384 Subordinated debt issued 22 120,376 120,461 Tax liabilities 23 16,716 17,848 Other liabilities 24 250,408 264,366 Provisions for risks and charges 25 39,085 38,710 Total Liabilities 12,735,688 11,574,361 Credit Libanais Group Annual Report 2014
162 163 CL group financial results consolidated statement of comprehensive income
For the year ended 31 December Note 2014 2013 As at 31 December Note 2014 2013
Interest income 30 706,234 665,693 Profit attributable to: Interest expense 30 (495,624) (459,401) Equity holders of the Bank 91,253 98,629
Net interest income 210,610 206,292 millions LBP Non-controlling interest 5,576 4,589 millions LBP Fee and commission income 31 99,172 93,085 Profit for the year 96,829 103,218 Fee and commission expense 31 (42,631) (36,983) Total comprehensive income attributable to: Net fee and commission income 56,541 56,102 Equity holders of the Bank 96,995 108,449 Net trading income 32 17,958 18,229 Non-controlling interest 5,576 4,589 Net gain on financial investments 33 2,977 9,609 Total comprehensive income for the year 102,571 113,038 Other income 34 6,077 4,872 The notes on pages 152 to 211 are an integral part of these consolidated financial statements. Total operating income 294,163 295,104 Net impairment on loans and advances 35 (10,128) (6,625) Net impairment losses on financial investments --- (56) Net operating income 284,035 288,423 Personnel expenses 36 (104,528) (100,170) Depreciation and amortisation 15, 16 (10,668) (10,897) Other expenses 37 (60,288) (59,671) Total operating expenses (175,484) (170,738) Share of profit of investments in equity accounted investees 14 1,857 1,746 Profit before income tax 110,408 119,431 Income tax expense 38 (13,579) (16,213) Profit for the year 96,829 103,218 Other comprehensive income, net of tax Items that will never be reclassified to profit or loss Fair value reserve (financial assets at fair value through other comprehensive income) Net change in fair value 28 5,742 9,820 Other comprehensive income for the year, net of tax 5,742 9,820 Total comprehensive income for the year 102,571 113,038 Credit Libanais Group Annual Report 2014
164 165 CL group financial results consolidated statement of changes in equity
Share capital- Share capital- Share Premium- Capital Retained Fair Value Non-controlling For the year ended 31 December 2014 Note common Shares preferred Shares preferred Shares Reserves Earnings Reserve Other Reserves Profit for the Year Total Interest Total Equity
Balance at 31 December 2013 257,400 11,000 139,750 160,464 96,699 22,002 221,028 98,629 1,006,972 20,917 1,027,889 Total comprehensive income for the year ---
Profit for the year ------91,253 91,253 5,576 96,829 millions LBP Other comprehensive income, net of tax --- Net change in fair value of financial assets at fair value through other comprehensive income ------5,742 ------5,742 --- 5,742 Total other comprehensive income ------5,742 ------5,742 --- 5,742 Total comprehensive income for the year ------5,742 91,253 96,995 5,576 102,571 Transactions with owners recorded directly in equity Contributions by and distributions to owners of the Bank --- Transfer to retained earnings ------98,629 --- (1,046) (98,629) ------Transfer to reserves ------25,756 (24,719) ------(9) 9 ------Dividend to preferred shareholders for the period from 16 September 2013 to 31 December 2013 26 ------(3,201) --- 6,001 --- (3,201) --- (3,201) Dividends to common shareholders 26 ------(53,223) --- (8,931) --- (47,222) (2,359) (49,581) Other movements ------9,131 --- 1,546 --- 200 (1) 199 Prior year adjustment ------2,303 --- 1,546 --- 1,546 Reserve for property acquired in settlement of debt (2,303) ------Tax on previous year inter group dividends ------(664) ------(664) (262) (926) Allowances to directors ------(2,469) --- 787 --- (2,469) (139) (2,608) Translation difference ------(37) ------660 --- 750 --- 750 Total contributions by and distribution to owners ------25,719 21,181 --- 660 (98,629) (51,069) (2,752) (53,821) Total transactions with owners of the Bank ------25,719 21,181 --- 221,688 (98,629) (51,069) (2,752) (53,821) Balance at 31 December 2014 257,400 11,000 139,750 186,183 117,880 27,744 91,253 1,052,898 23,741 1,076,639
The notes on pages 152 to 211 are an integral part of these consolidated financial statements. Credit Libanais Group Annual Report 2014
166 167 CL group financial results consolidated statement of changes in equity
Share capital- Share capital- Share Premium- Capital Retained Fair Value Non-controlling For the year ended 31 December 2013 Note common Shares preferred Shares preferred Shares Reserves Earnings Reserve Other Reserves Profit for the Year Total Interest Total Equity
Balance at 1 January 2013 as previously reported 257,400 ------138,482 66,925 12,182 230,839 88,192 794,020 18,702 812,722 Prior year tax adjustment 43 ------(6,911) ------(6,911) --- (6,911)
Restated balance at 1 January 2013 257,400 ------138,482 60,014 12,182 230,839 88,192 787,109 18,702 805,811 millions LBP Total comprehensive income for the year Profit for the year ------98,629 98,629 4,589 103,218 Other comprehensive income, net of tax Net change in fair value of financial assets at fair value through other comprehensive income ------9,820 ------9,820 --- 9,820 Total other comprehensive income ------9,820 ------9,820 --- 9,820 Total comprehensive income for the year ------9,820 --- 98,629 108,449 4,589 113,038 Transactions with owners recorded directly in equity Contributions by and distributions to owners of the Bank Issue of preferred shares --- 11,000 139,750 ------150,750 --- 150,750 Transfer to retained earnings ------88,192 ------(88,192) ------Transfer to reserves ------22,023 (6,984) --- (15,046) --- (7) 7 --- Other movements ------278 --- 278 --- 278 Dividends to equity holders 26 ------(40,416) 5,625 (34,791) (2,052) (36,843) Prior year adjustment ------(1,343) ------(1,343) 3 (1,340) Tax on previous year inter group dividends ------(592) ------(592) (227) (819) Allowances to directors ------(2,172) ------(2,172) (105) (2,277) Translation difference ------(41) ------(668) --- (709) --- (709) Total contributions by and distribution to owners --- 11,000 139,750 21,982 36,685 --- (9,811) (88,192) 111,414 (2,374) 109,040 Total transactions with owners of the Bank --- 11,000 139,750 21,982 36,685 --- (9,811) (88,192) 111,414 (2,374) 109,040 Balance at 31 December 2013 257,400 11,000 139,750 160,464 96,699 22,002 221,028 98,629 1,006,972 20,917 1,027,889
The notes on pages 152 to 211 are an integral part of these consolidated financial statements. Credit Libanais Group Annual Report 2014
168 169 cash flows consolidated statement of 170 Net cashusedinoperatingactivities Income taxespaid Interest paid Interest received Changes in: Adjustments for: Profit fortheyear Cash flowsfromoperatingactivities For theyearended31December - Provisionsforrisksandcharges - Otherliabilities - Depositsfromrelatedparties - Depositsfromcustomers - DepositsfromCentralBanks - Depositsfrombanksandfinancialinstitutions - Otherassets - Loansandadvancestorelatedparties - Loansandadvancestocustomers - Balanceswithotherbanksandfinancialinstitutions - CashandbalanceswithCentralBanks - Othermovements - Shareofprofitinvestmentsinequity-accountedinvestees - Tax expense - Netgainonassetsheldforsale - Netlossonsaleofpropertyandequipment - Netinterestincome - Netimpairmentlossonloansandadvancestorelatedparties - Netimpairmentlossonloansandadvancestocustomers - Depreciationandamortisation Note 2014 (265,146) (379,800) (967,951) (210,610) (489,110) (74,170) (13,967) (15,291) (80,837) (14,711) 694,797 792,136 317,876 (7,171) (2,079) (1,105) 16,482 13,579 10,668 96,829 (3,111) 76,113 1,746 9,283 375 845 7 2013 (156,599) (457,644) (344,034) (570,333) (206,292) (13,678) (12,141) (90,252) (73,434) (35,034) 658,757 243,020 103,218 (3,917) 21,450 52,562 77,281 22,623 16,486 16,213 10,897 3,738 1,424 5,201 (458) 278 2
millions LBP As at31December Cash andcashequivalentsat31December Effect of exchange rate fluctuations on cash and cash equivalents held Cash andcashequivalentsat1January Net decreaseincashandequivalents Net cash(usedin)fromfinancingactivities Changes innon-controllinginterest Allowances todirectors Dividends toequity Proceeds fromissueofpreferredshares Cash flowsfromfinancingactivities Net cashfrominvestingactivities Net changeinassetsheldforsale Proceeds fromthesaleofintangibleassets Acquisition ofintangibleassets Proceeds fromthesaleofpropertyandequipment Acquisition ofpropertyandequipment Net changeininvestmentsecurities Cash flowsfrominvestingactivities The notesonpages152to211areanintegralpartoftheseconsolidatedfinancialstatements. Note 39 2014 1,536,099 1,603,032 (67,683) (56,308) (51,087) (61,082) 125,098 (2,752) (2,469) (3,613) 62,795 2,289 750 21 82 --- CL group financial results 2013 1,603,032 1,606,968 (35,383) (43,224) 150,750 110,821 (3,227) (2,374) (2,172) (1,708) 42,551 10,997 76,212 (709) 158 116 171 millions LBP
Annual Report 2014 Credit Libanais Group CL group financial results notes to the consolidated financial statements
1- Reporting Entity 2- Basis of preparation 3- Changes in accounting policies (a) Basis of accounting Except for the change below, the Group has Credit Libanais sal (the “Bank” or the “Group”) is a The consolidated financial statements have been consistently applied the accounting policies as set out Lebanese joint stock Company registered since 1961 prepared in accordance with IFRS. Details of the in Note 4 to all years presented in these consolidated in Lebanon under No. 10742 in the Beirut register of Group’s accounting policies, including change during financial statements. Commerce, and under No. 53 on the Bank’s list at the the year, are included in Notes 3 and 4. The Bank has adopted the following amendments to Central Bank of Lebanon. The address of the Bank’s (b) Basis of measurement standards, with a date of initial application of 1 January registered office is Achrafieh, Kornich Nahr-Adlieh, The consolidated financial statements have been 2014. Credit Libanais Headquarter Building, Beirut, Lebanon. prepared on the historical cost basis except for the Offsetting Financial Assets and Financial Liabilities The consolidated financial statements of the Bank as following material items in the statement of financial (Amendments to IAS 32) at and for the year ended 31 December 2014 comprise position: As a result of the amendments to IAS 32, the Bank has the Bank and its subsidiaries (together referred to Financial instruments at fair value through other changed its accounting policy for offsetting financial as the Group and individually as Group entities). The comprehensive income are measured at fair value. assets and financial liabilities. The amendments clarify Group primarily is involved in retail, commercial Financial instruments at fair value through profit and when an entity currently has a legally enforceable right and investment banking activities through their loss are measured at fair value. to set-off and when gross settlement is equivalent to net headquarters as well as their branches and subsidiaries (c) Functional and presentation currency settlement. located in Lebanon, Cyprus, Bahrain, Iraq and Senegal. These consolidated financial statements are presented 4- Significant accounting policies in Lebanese Pounds (LBP), which is the Bank’s The parent company is EFG Hermes CL Holding sal Except for the change explained in Note 3, the functional currency. All amounts have been rounded to accounting policies set out below have been applied incorporated in Lebanon, and the ultimate parent the nearest million. company is EFG Hermes Holding sae incorporated in consistently to all years presented in these consolidated financial statements, and have been applied Egypt. (d) Use of estimates and judgements In preparing these consolidated financial statements, consistently by Group entities. management has made judgments, estimates and (a) Basis of consolidation assumptions that affect the application of the Group’s (i) Non-controlling interests
accounting policies and the reported amounts of assets, Non-controlling interests are measured at their Credit Libanais Group liabilities, income and expenses. Actual results may proportionate share of the acquiree’s identifiable net differ from these estimates. assets at the acquisition date.
Estimates and underlying assumptions are reviewed Changes in the Group’s interest in a subsidiary that do on an ongoing basis. Revisions to estimates are not result in a loss of control are accounted for as equity recognised prospectively. transactions. Annual Report 2014
172 173 impairment. gains, butonlytotheextentthatthereisnoevidenceof losses areeliminatedinthesamewayasunrealised the consolidatedfinancialstatements.Unrealised intra-group transactions,areeliminatedinpreparing currency transactiongainsorlosses)arisingfrom unrealised incomeandexpenses(exceptforforeign Intra-group balancesandtransactions,any (iii) Transactions eliminatedonconsolidation ceases. which controlcommencesuntilthedatewhen consolidated financialstatementsfromthedateon financial statementsofsubsidiariesareincludedinthe returns throughitspowerovertheinvestees. The with theinvesteeandhasabilitytoaffect those has rightsto,variablereturnsfromitsinvolvement The Groupcontrolsaninvesteeifitisexposedto,or Subsidiaries areinvesteescontrolledbytheGroup. (ii) Subsidiaries year. translated atthespotexchange rateattheendof the year, andtheamortisedcostinforeigncurrency adjusted foreffective interest andpaymentsduring the functionalcurrencyatbeginningofyear, items isthedifference betweenamortisedcostin date. The foreigncurrencygainorlossonmonetary functional currencyatthespotexchangeratethat currencies atthereportingdatearetranslatedto Monetary assetsandliabilitiesdenominatedinforeign the spotexchangeratesatdateoftransactions. the respectivefunctionalcurrenciesofoperationsat Transactions inforeigncurrenciesaretranslatedinto (i) Foreigncurrencytransactions (b) Foreigncurrency 174 amount ofthefinancialasset orliability. where appropriate,ashorter period)tothecarrying the expectedlifeoffinancial assetorliability(or, estimated futurecashpaymentsandreceiptsthrough interest rateisthethatexactlydiscounts loss usingtheeffective interestmethod. The effective Interest incomeandexpensearerecognisedinprofit or (c) Interest extent thatthetranslationdifference isallocatedtoNCI. translation reserve(translationreserve),excepttothe Income, andaccumulatedintheforeigncurrency differences arerecognisedinOtherComprehensive rates atthedatesoftransactions.Foreigncurrency operations aretranslatedtoLBP atspotexchange reporting date. The incomeandexpensesofforeign translated toLBP atspotexchangeratesthe The assetsandliabilitiesofforeignoperationsare (ii) Foreignoperations reclassified toprofitorloss). been recognisedinothercomprehensiveincomeare which caseforeigncurrencydifferences thathave comprehensive income(exceptonimpairmentin other comprehensiveincomearerecognisedin translation offinancialassetsatfairvaluethrough foreign currencydifferences arisingfromthe are generallyrecognisedinprofitorloss.However, Foreign currencydifferences arisingontranslation rate atthedateoftransaction. foreign currencyaretranslatedusingthespotexchange items thataremeasuredbasedonhistoricalcostina date thatthefairvaluewasdetermined.Non-monetary functional currencyatthespotexchangerate at fairvalueinaforeigncurrencyaretranslatedtothe Non-monetary assetsandliabilitiesthataremeasured the servicesarereceived. transaction andservicefees, whichareexpensedas Other feesandcommission expenserelatemainlyto related servicesareperformed. commission andplacementfees,arerecognisedasthe servicing fees,investmentmanagementsales Other feesandcommissionincome,includingaccount effective interestrate. or liabilityareincludedinthemeasurementof integral totheeffective interest rateonafinancialasset Fees andcommissionincomeexpensethatare (d) Feesandcommission liabilities innettradingincome. other changesinthefairvalueoftradingassetsand trading operationsandarepresentedtogetherwithall liabilities areconsideredtobeincidentaltheGroup’s Interest incomeandexpenseonalltradingassets basis. amortised costcalculatedonaneffective interestrate on financialassetsandliabilitiesmeasuredat statement ofcomprehensiveincomeincludeinterest Interest incomeandexpensepresentedinthe asset orliability. attributable totheacquisitionorissueofafinancial costs includeincrementalthataredirectly integral partoftheeffective interestrate. Transaction transaction costsandfeespaidorreceivedthatarean The calculationoftheeffective interestrateincludesall losses. terms ofthefinancialinstrument,butnotfuturecredit estimates futurecashflowsconsideringallcontractual When calculatingtheeffective interestrate,theGroup Deferred taxisrecognised inrespectoftemporary (ii) Deferredtax reporting date. using taxratesenactedorsubstantivelyatthe payable inrespectofpreviousyears.Itismeasured taxable incomefortheyearandanyadjustmenttotax Current taxcomprisestheexpectedpayableon (i) Currenttax comprehensive income. relates toitemsrecogniseddirectlyinequityorother recognised inprofitorlossexcepttotheextentthatit Income taxcomprisescurrentanddeferredtax.Itis (h) Incometax investments. shares. Dividendsarepresentedinnetgainonfinancial ex-dividend dateforequitysecuritiesandpreferred receive incomeisestablished.Usuallythisthe Dividend incomeisrecognisedwhentherightto (g) Dividends cost. net gainfromexchangeoffinancialassetsatamortised through profitorloss.Itincludesinterest,dividendsand financial assetsandliabilitiesdesignatedatfairvalue do notformpartofqualifyinghedgerelationshipsand derivatives heldforriskmanagementpurposesthat Net gainonfinancialinvestmentsrelatestonon-trading (f) Netgainonfinancialinvestments and foreignexchangedifferences. and unrealisedfairvaluechanges,interest,dividends to tradingassetsandliabilities,includesallrealised Net tradingincomecomprisesgainslesslossesrelated (e) Nettradingincome CL group financial results 175
Annual Report 2014 Credit Libanais Group tax entities,buttheyintend tosettlecurrenttaxliabilities tax authorityonthesametaxable entity, or ondifferent and assets,theyrelate totaxesleviedbythesame legally enforceablerighttooffset currenttaxliabilities Deferred taxassetsandliabilitiesareoffset ifthereisa liabilities. recover orsettlethecarryingamountofitsassetsand the Groupexpects,atendofreportingperiod, to consequences thatwouldfollowthemannerinwhich The measurementofdeferredtaxreflectsthe enacted atthereportingdate. they reverse,usingtaxratesenactedorsubstantively expected tobeappliedtemporarydifferences when Deferred taxismeasuredattheratesthatare realised. no longerprobablethattherelatedtaxbenefitwillbe reporting dateandarereducedtotheextentthatitis be utilised.Deferredtaxassetsarereviewedateach taxable profitswillbeavailableagainstwhichtheycan differences totheextentthatitisprobablefuture losses, unusedtaxcreditsanddeductibletemporary Deferred taxassetsarerecognisedforunused recognised for: amounts usedfortaxationpurposes.Deferredtaxisnot and liabilitiesforfinancialreportingpurposesthe differences betweenthecarryingamountsofassets 176 will notreverseintheforeseeablefuture. subsidiaries totheextentthatitisprobablethey Temporary differences relatedtoinvestmentsin accounting nortaxableprofitorloss. a businesscombinationandthataffects neither of assetsorliabilitiesinatransactionthatisnot Temporary differences ontheinitialrecognition conditions: measurement onlyifitmeets bothofthefollowing A financialassetqualifies foramortisedcost See Notes4(j),(k),(l)and(m). amortised costorfairvalue. The Groupclassifiesitsfinancialassetsasmeasured at Financial assets (ii) Classification attributable toitsacquisitionorissue. through profitorloss,transactioncoststhataredirectly initially atfairvalueplus,foranitemnot A financialassetorliabilityismeasured provisions oftheinstrument. date thattheGroupbecomesapartytocontractual are recognisedinitiallyonthetradedate,whichis assets designatedatfairvaluethroughprofitorloss) asset. All otherfinancialassetsandliabilities(including at whichtheGroupcommitstopurchaseorsell of financialassetsarerecognisedonthetradedate they areoriginated.Regularwaypurchasesandsales deposits andsubordinateddebtissuedonthedatethat The Groupinitiallyrecognisesloansandadvances, (i) Recognition (i) Financialassetsandfinancialliabilities from transactionsthatwereoriginallyinprofitorloss. loss becausetheygenerallyrelatetoincomearising These amountsaregenerallyrecognisedinprofitor as theliabilitytopayrelateddividendisrecognised. dividends bytheGrouparerecognisedatsametime Additional taxesthatarisefromthedistributionof liabilities willberealisedsimultaneously. and assetsonanetbasisortheirtax The assetisheldwithinabusiness modelwhose The Grouphasdesignated certainfinancialassetsat order tocollectcontractual cashflows. business modelwhoseobjectiveistoholdtheasset in Financial assetsheldfortradingarenotwithina Group considers: assets inordertocollectcontractualcashflows,the within abusinessmodelwhoseobjectiveistohold In makinganassessmentofwhetherassetisheld management. business ismanagedandinformationprovidedto at aportfoliolevelasthisreflectsbesttheway The Groupmakesanassessmentofabusinessmodel conditions, thenitismeasuredatfairvalue. If afinancialassetdoesnotmeetbothofthese extended timebeforematurity. maturity oraresoldshortlyafteracquisitionan extended periodoftimerelativetotheircontractual Whether assetsthataresoldheldforan The reasonforanyassetsales. The degreeoffrequencyanyexpectedassetsales. contractual interestrevenues. Whether management’s strategyfocuses on earning portfolio. How managementevaluatestheperformanceof practice. the portfolioandoperationofthosepoliciesin Management’s statedpoliciesandobjectivesfor amount outstanding. payments ofprincipalandinterestonthe rise onspecifieddatestocashflowsthataresolely The contractualtermsofthefinancialassetgive contractual cashflows objective istoholdassetsinordercollect (including anynewassetobtained lessanynewliability derecognised), andtheconsideration received carrying amountallocated to theportionofasset between thecarryingamountofasset(or On derecognitionofafinancialasset,thedifference of thefinancialasset. and rewardsofownershipitdoesnotretaincontrol neither transfersnorretainssubstantiallyalltherisks the financialassetaretransferredorinwhichGroup substantially alltherisksandrewardsofownership contractual cashflowsinatransactionwhich asset expire,orittransferstherightstoreceive contractual rightstothecashflowsfromfinancial The Groupderecognisesafinancialassetwhenthe Financial assets (iii) Derecognition at amortisedcost.SeeNote4(r). The Groupclassifiesitsfinancialliabilitiesasmeasured Financial liabilities business modelformanagingfinancialassets. initial recognition,exceptwhentheGroupchangesits Financial assetsarenotreclassifiedsubsequenttotheir held fortrading–seeaccountingpolicies4(m). certain investmentsinequityinstrumentsthatarenot comprehensive incomechangesinthefairvalueof The Grouphasmadeanelectiontopresentinother circumstances: fair valuethroughprofitorlossineitherofthefollowing arise. an accountingmismatch,whichwouldotherwise The designationeliminatesorsignificantlyreduces reported internallyonafairvaluebasis. The assetsorliabilitiesaremanaged,evaluatedand CL group financial results 177
Annual Report 2014 Credit Libanais Group than adequate(liability)for performingtheservicing. servicing feeismorethan adequate (asset)orisless for theservicingcontract,depending onwhetherthe derecognition criteria. An assetorliabilityisrecognised The transferredassetisderecognisedifitmeetsthe to servicethetransferredfinancialassetforafee. In certaintransactions,theGroupretainsobligation of thetransferredasset. the extenttowhichitisexposedchangesinvalue the extentofitscontinuinginvolvement,determinedby the asset,Groupcontinuestorecogniseasset to ownership ofafinancialassetanditretainscontrolover transfers substantiallyalltherisksandrewardsof In transactionsinwhichtheGroupneitherretainsnor rewards ofownershipsuchassets. as theGroupretainsallorsubstantiallyrisksand transaction similartosaleandrepurchasetransactions transaction isaccountedforasasecuredfinancing total rateofreturnswaponthetransferredassets, When assetsaresoldtoathirdpartywithconcurrent transactions. are securitieslendingandsalerepurchase are notderecognised.Examplesofsuchtransactions portion ofthem.Insuchcase,thetransferredassets the risksandrewardsoftransferredassetsora position, butretainseitherallorsubstantiallyof assets recognisedonitsstatementoffinancial The Groupentersintotransactionswherebyittransfers as aseparateassetorliability. that iscreatedorretainedbytheGrouprecognised transferred financialassetsthatqualifyforderecognition is recognisedinprofitorloss. Anyinterestinsuch been recognisedinothercomprehensiveincome assumed) andanycumulativegainorlossthathas 178 When available,theGroup measuresthefairvalue its non-performancerisk. access atthatdate. The fairvalueofaliability reflects the mostadvantageousmarkettowhichGrouphas measurement dateintheprincipalor, initsabsence, transaction betweenmarketparticipantsatthe an assetorpaidtotransferaliabilityinorderly Fair valueisthepricethatwouldbereceivedtosell (vi) Fairvaluemeasurement impairment. and thematurityamount,minusanyreductionfor any difference betweentheinitialamountrecognised amortisation usingtheeffective interestmethodof principal repayments,plusorminusthecumulative financial liabilityismeasuredatinitialrecognition,minus liability istheamountatwhichfinancialassetor The amortisedcostofafinancialassetor (v) Amortised costmeasurement as intheGroup’s tradingactivity. losses arisingfromagroupofsimilartransactionssuch only whenpermittedunderIFRS,orforgainsand Income andexpensesarepresentedonanetbasis simultaneously. a netbasisortorealisetheassetandsettleliability off theamountsanditintendseithertosettle themon when, andonlytheGrouphasalegalrighttoset amount presentedinthestatementoffinancialposition Financial assetsandliabilitiesareoffset andthenet (iv) Offsetting expire. contractual obligationsaredischarged,cancelledor The Groupderecognisesafinancialliabilitywhenits Financial liabilities to eithermarketorcreditrisk aremeasuredonthe managed bytheGroupon thebasisofnetexposure that areexposedtomarket riskandcreditthatare Portfolios offinancialassetsandliabilities positions atabidprice. an askprice,thentheGroupmeasuresassetsandlong If anassetmeasuredatfairvaluehasabidpriceand data orthetransactionisclosedout. the valuationiswhollysupportedbyobservablemarket over thelifeofinstrumentbutnolaterthanwhen is recognisedinprofitorlossonanappropriatebasis and thetransactionprice.Subsequently, thatdifference difference betweenthefairvalueatinitialrecognition is initiallymeasuredatfairvalue,adjustedtodeferthe from observablemarkets,thenthefinancialinstrument nor basedonavaluationtechniquethatusesonlydata price inanactivemarketforidenticalassetorliability price andthefairvalueisevidencedneitherbyaquoted value atinitialrecognitiondiffers fromthetransaction given orreceived.IftheGroupdeterminesthatfair transaction price–i.e.thefairvalueofconsideration instrument atinitialrecognitionisnormallythe The bestevidenceofthefairvalueafinancial would takeintoaccountinpricingatransaction. incorporates allofthefactorsthatmarketparticipants unobservable inputs. The chosenvaluationtechnique of relevantobservableinputsandminimisetheuse Group usesvaluationtechniquesthatmaximisetheuse If thereisnoquotedpriceinanactivemarket,thenthe information onanongoingbasis. with sufficientfrequencyandvolumetoprovidepricing active iftransactionsfortheassetorliabilitytakeplace market forthatinstrument. A marketisregardedas of aninstrumentusingthequotedpriceinactive investment securitiesmeasured atamortisedcostare level. All individuallysignificantloansandadvances and amortised costsatbothaspecific assetandcollective and advancesinvestmentsecuritiesmeasuredat The Groupconsidersevidenceofimpairmentforloans conditions thatcorrelatewithdefaultsinthegroup. status ofborrowersorissuersinthegroup,economic of assetssuchasadversechangesinthepayment a security, orotherobservabledatarelatingtoagroup bankruptcy, the disappearance ofanactivemarketfor indications thataborrowerorissuerwillenter terms thattheGroupwouldnotconsiderotherwise, restructuring ofaloanoradvancebytheGroupon or issuer, defaultordelinquencybyaborrower, the can includesignificantfinancialdifficultyoftheborrower Objective evidencethatfinancialassetsareimpaired asset(s) thatcanbeestimatedreliably. loss eventhasanimpactonthefuturecashflowsof after theinitialrecognitionofasset(s),andthat evidence demonstratesthatalosseventhasoccurred group offinancialassetsisimpairedwhenobjective at amortisedcostareimpaired. A financialassetora there isobjectiveevidencethatfinancialassetscarried At eachreportingdatetheGroupassesseswhether (vii) Identificationandmeasurementofimpairment date onwhichtheamountcouldberequiredtopaid. amount payableondemand,discountedfromthefirst The fairvalueofademanddepositisnotlessthanthe each oftheindividualinstrumentsinportfolio. liabilities onthebasisofrelativeriskadjustment adjustments areallocatedtotheindividualassetsand for aparticularriskexposure. Those portfolio-level long position(orpaidtotransferanetshortposition) basis ofapricethatwouldbereceivedtosellnet CL group financial results 179
Annual Report 2014 Credit Libanais Group that thereisnorealisticprospect ofrecovery. investment securities,when GroupCreditdetermines The Groupwritesoff certainloansandadvances or loss. decrease inimpairmentlossisreversedthroughprofit causes theamountofimpairmentlosstodecrease, an eventoccurringaftertheimpairmentwasrecognised advances orinvestmentsecuritiesatamortisedcost. If reflected inanallowanceaccountagainstloansand Impairment lossesarerecognisedinprofitorlossand asset’s originaleffective interestrate. value ofestimatedfuturecashflowsdiscountedatthe carrying amountofthefinancialandpresent cost arecalculatedasthedifference betweenthe Impairment lossesonassetsmeasuredatamortised ensure thattheyremainappropriate. regularly benchmarkedagainstactualoutcomesto rates andtheexpectedtimingoffuturerecoveriesare is suggestedbyhistoricaltrends.Defaultrates,loss actual lossesarelikelytobegreaterorlesserthan economic andcreditconditionsaresuchthatthe of lossincurred,andmakesajudgmentifcurrent of default,thetimingrecoveriesandamount statistical modellingofhistoricaltrendstheprobability In assessingcollectiveimpairment,theGroupuses with similarriskcharacteristics. and investmentsecuritiesmeasuredatamortisedcost impairment bygroupingtogetherloansandadvances individually significantarecollectivelyassessedfor securities measuredatamortisedcostthatarenot yet identified.Loansandadvancesinvestment for anyimpairmentthathasbeenincurredbutnot be specificallyimpairedarethencollectivelyassessed assessed forspecificimpairment. Thosefoundnotto 180 fair valuethroughothercomprehensive income. either amortisedcost,fairvalue throughprofitorloss are accountedfordepending ontheirclassificationas Subsequent toinitialrecognitioninvestmentsecurities (m) Investmentsecurities interest method. are measuredatamortisedcostusingtheeffective Subsequent toinitialrecognitionloansandadvances immediately orinthenearterm. active marketandtheGroupdoesnotintendtosell than investmentsecurities,thatarenotquotedinan assets withfixedordeterminablepayments,other Loans andadvancesarenon-derivativefinancial (l) Loansandadvances recognised aspartofnettradingincomeinprofitorloss. are measuredatfairvaluewithchangesin for short-termprofitorpositiontaking. Trading assets or holdsaspartofaportfoliothatismanagedtogether the purposeofsellingorrepurchasinginnearterm, liabilities thattheGroupacquiresorincursprincipallyfor Trading assetsandliabilitiesarethose (k) Tradingassetsandliabilities cost inthestatementoffinancialposition. Cash andcashequivalentsarecarriedatamortised term commitments. are usedbytheGroupinmanagementofitsshort- to aninsignificantriskofchangesintheirfairvalue,and months orlessfromtheacquisitiondatethataresubject liquid financialassetswithoriginalmaturitiesofthree unrestricted balancesheldwithcentralbanksandhighly Cash andcashequivalentsincludeonhand, (j) Cashandcashequivalents The estimatedusefullivesofsignificantitemsproperty andequipmentareasfollows: Items ofpropertyandequipmentaremeasuredatcost (i) Recognitionandmeasurement (n) Propertyandequipment through profitorloss. Other investmentsecuritiesaremeasuredatfairvalue earnings ondisposalofaninvestment. comprehensive incomearetransferredtoretained Cumulative gainsandlossesrecognisedinother they arerecognisedinothercomprehensiveincome. of partthecostinvestment,inwhichcase in profitorlossunlesstheyclearlyrepresentarecovery recognised inprofitorloss.Dividendsare never reclassifiedtoprofitorlossandnoimpairmentis Gains andlossesonsuchequityinstrumentsare instrument basisatinitialrecognition. election isirrevocableandmadeonaninstrument-by- strategic purposesinothercomprehensiveincome. The of certaininvestmentsinequityinstrumentsheldfor The Groupelectstopresentchangesinfairvalue using theeffective interestmethod,if: Investment securitiesaremeasuredatamortisedcost measured atfairvaluethroughprofitorloss. They havenotbeendesignatedpreviouslyas are solelypaymentsofprincipalandinterest. asset giverise,onspecifieddates,tocashflowsthat cash flowsandthecontractualtermsoffinancial objective toholdassetsinordercollectcontractual They areheldwithinabusinessmodelwithan power generators vehicles furniture andequipment installations andimprovements buildings 12.5 years 10 years 12.5 years 16.67 years 50 years Land isnotdepreciated. useful lives,andisgenerallyrecognisedinprofitorloss. values usingthestraight-linebasisovertheirestimated of propertyandequipmentlesstheirestimatedresidual Depreciation iscalculatedtowriteoff thecostofitems (iii) Depreciation maintenance areexpensedasincurred. expenditure willflowtotheGroup.Ongoingrepairsand is probablethatthefutureeconomicbenefitsof Subsequent expenditureiscapitalisedonlywhenit (ii) Subsequentcosts in profitorloss. item) isrecognisedwithinotherincome/otherexpenses proceeds fromdisposalandthecarryingamountof equipment (calculated as the difference between the net Any gainorlossondisposalofanitempropertyand equipment. as separateitems(majorcomponents)ofpropertyand have different usefullives,thentheyareaccountedfor If significantpartsofanitempropertyorequipment equipment. of therelatedequipmentiscapitalisedaspartthat Purchased softwarethatisintegraltothefunctionality impairment losses. less accumulateddepreciationandany CL group financial results 181
Annual Report 2014 Credit Libanais Group appropriate. are reassessedateachreportingdateandadjustedif Depreciation methods,usefullivesandresidualvalues At eachreportingdate,the Groupreviewsthecarrying (q) Impairmentofnon-financial assets reserves” inequity. The accumulatedreserveisclassifiedunder“Other of thedateenforcementatarate20%or5%. constituted forassetsnotdisposedofwithintwoyears the dateofenforcementsecurity. A reserve is These assetsareinitiallymeasuredatfairvalue Banking Regulators. for inaccordancewiththeDirectivesissuedby over loansandadvancestocustomersareaccounted Properties acquiredthroughtheenforcementofsecurity (p) Assetsheldforsale adjusted ifappropriate. residual valuesarereviewedateachreportingdateand ten years. Amortisation methods,usefullivesand for thecurrentandcomparativeperiodsisthreeto available foruse. The estimatedusefullifeofsoftware loss overitsestimatedusefullife,fromthedatethatitis Software isamortisedonastraightlinebasisinprofitor relates. All otherexpenditureisexpensedasincurred. benefits embodiedinthespecificassettowhichit capitalised onlywhenitincreasesthefutureeconomic Subsequent expenditureonsoftwareassetsis impairment losses. less accumulatedamortisationandany Software acquiredbytheGroupismeasuredatcost Software (o) Intangibleassets 182 tax, fromtheproceeds. new sharesareshowninequity asadeduction,netof Incremental costsdirectlyattributable totheissueof (i) Shareissuecosts (t) Sharecapitalandreserves liability. management’s bestestimatestotheriskspecific settle theobligation.Provisionsaredeterminedusing an outflowofeconomicbenefitswillberequiredto that canbeestimatedreliably, anditisprobablethat the Grouphasapresentlegalorconstructiveobligation A provisionisrecognisedif,asaresultofpastevent, (s) Provisions amortised costusingtheeffective interestmethod. transaction costs,andsubsequentlymeasuredattheir measured atfairvalueminusincrementaldirect Deposits andsubordinateddebtissuedareinitially sources ofdebtfunding. Deposits andsubordinateddebtissuedaretheGroup’s (r) Depositsandsubordinateddebtissued had beenrecognised. of depreciationoramortisation,ifnoimpairmentloss carrying amountthatwouldhavebeendetermined,net that theasset’s carryingamountdoesnotexceedthe An impairmentlossisreversedonlytotheextent Impairment lossesarerecognisedinprofitorloss. value inuseanditsfairlesscoststosell. The recoverableamountofanassetisthegreaterits amount isestimated. such indicationexists,thentheasset’s recoverable whether thereisanyindicationofimpairment.If amounts ofitsnon-financialassetstodetermine for calculatingimpairment on financialassets, instruments, includinganew expectedcreditlossmodel on theclassificationand measurement offinancial and Measurement.IFRS9includesrevisedguidance guidance inIAS39FinancialInstruments:Recognition IFRS 9,publishedinJuly2014,replacestheexisting (ii) IFRS9Financialinstruments application ofIFRS15. consolidated financialstatementsresultingfromthe The Groupisassessingthepotentialimpactonits January 2017,withearlyadoptionpermitted. effective forannualreportingperiodsonor after 1 guidance, includingIAS18Revenue.IFRS15is recognised. Itreplacesexistingrevenuerecognition determining whether, howmuchandwhenrevenueis IFRS 15establishesacomprehensiveframeworkfor (i) IFRS15Revenuefromcontractswithcustomers plan toadoptthesestandardearly. to theGrouparesetoutbelow. The Groupdoesnot statements. The newstandardswhichmayberelevant applied inpreparingtheseconsolidatedfinancial beginning after1January2014,andhavenotbeen and interpretationsareeffective forannual periods A numberofnewstandards,amendmentstostandards yet adopted (u) Newstandardsandinterpretationsnot events note. of thebalancesheetaredealtwithinsubsequent Dividends fortheyearthataredeclaredafterdate shareholders. in theperiodwhichtheyareapprovedbyGroup’s Dividends onordinarysharesarerecognisedinequity (ii) Dividendsonordinaryshares managing risk,andtheGroup’s managementofcapital. objectives, policiesandprocesses formeasuringand exposure toeachoftheabove risks,theBank’s This notepresentsinformationabouttheGroup’s financial instruments: The Grouphasexposuretothefollowingrisksfrom (a) Introductionandoverview 5- Financialriskmanagement financial statements. have asignificantimpactontheBank’s consolidated The followingamendedstandardsarenotexpectedto increase intheoveralllevelofimpairmentallowances. expected creditlossbasisistoresultinan calculation ofimpairmentfinancialinstrumentsonan on theBank’s financialstatements.Inparticular, This standardisexpectedtohaveapervasiveimpact application ofIFRS9. impact onitsfinancialstatementsresultingfromthe adoption permitted. The Bankisassessingthepotential beginning onorafter1January2018,withearly IFRS 9iseffective forannualreportingperiods derecognition offinancialinstrumentsfromIAS39. It alsocarriesforwardtheguidanceonrecognitionand and thenewgeneralhedgeaccountingrequirements. Operational risks. Market risks. Liquidity risk. Credit risk. (Amendments toIAS27). Equity MethodinSeparateFinancialStatements and Amortisation (Amendments to IAS 16 and IAS 38). Clarification of AcceptableMethodsofDepreciation CL group financial results 183
Annual Report 2014 Credit Libanais Group customer orcounterpartyto afinancialinstrumentfails Credit riskistheoffinancial losstotheGroupifa (b) Creditrisk which arereportedtothe Audit Committee. management controlsandprocedures,theresultsof undertakes bothregularandadhocreviewsofrisk in itsoversightrolebyInternal Audit. Internal Audit faced bytheGroup. The Audit Committeeisassisted risk managementframeworkinrelationtotherisks and procedures,reviewtheadequacyof compliance withtheGroup’s riskmanagementpolicies Committee (ALCO)overseehowmanagementmonitors Committee andthe Asset LiabilityManagement The BoardRiskCommittee,theCreditPolicy obligations. in whichallemployeesunderstandtheirrolesand disciplined andconstructivecontrolenvironment standards andprocedures,aimstodevelopa The Group,throughitstrainingandmanagement changes inmarketconditionsandtheGroup’s activities. policies andsystemsarereviewedregularlytoreflect risks andadherencetolimits.Riskmanagement set appropriaterisklimitsandcontrols,tomonitor to identifyandanalysetherisksfacedbyGroup, The Group’s riskmanagementpoliciesareestablished policies. developing andmonitoringBankriskmanagement Committee (ALCO),whichareresponsiblefor Committee andthe Asset andLiabilityManagement established theBoardRiskCommittee,CreditPolicy management framework. The BoardofDirectorshas for theestablishmentandoversightofBank’s risk The Bank’s BoardofDirectorshasoverallresponsibility Risk managementframework 184 Group’s creditrisk,including: Officer (CRO),isresponsibleformanagementofthe Management function,reportingtotheChiefRisk Credit Committees. An independentCreditRisk Committee, CreditPolicyCommitteeandallocated for theoversightofcreditrisktoitsRiskManagement The BoardofDirectorshasdelegatedresponsibility Management ofcreditrisk risk appetitedefinedbytheBoardofDirectors. within theGroup’s policiesandcommensuratewiththe for eachofthemajortypesmarketriskestablished exposures onadailybasiswithinpredefinedlimits market riskcapital. The Groupmanagesthesepotential to changesinmarketpricesandoptimisetheuseof managing market risk is to avoid unexpected losses due risk managementfunction. The overallobjectiveof trading assetsismanagedindependentlybythemarket For riskmanagementpurposes,creditarisingon and consolidatesallelementsofcreditriskexposure. management reportingpurposestheGroupconsiders other banks,andinvestmentdebtsecurities.Forrisk from theGroup’s loansandadvancestocustomers to meetitscontractualobligations,andarises to customersbythebusiness unitconcerned. of designated limits, prior to facilities being committed Committee assessesallcreditexposuresinexcess Reviewing andassessingcreditrisk. The Credit approval andrenewalofcreditfacilities. Establishing theauthorisationstructurefor requirements. and compliancewithregulatorystatutory reporting, documentaryandlegalprocedures, requirements, creditassessment,riskgradingand Formulating creditpoliciescoveringcollateral principally taken. who mayrequireappropriate correctiveactiontobe portfolios are provided to the Credit Policy Committee product types.Regularreportsonthecreditqualityof including thoseforselectedsectors,geographyand Reviewing compliancewithagreedexposurelimits, authority ofloan. loss provision;anddecidingthelevelofapproving credits andmoreaccuratecomputationoffutureloan of monitoring,analysismigrationdeteriorating tenure andpriceoffacility, frequencyorintensity such as:creditselection,amountofexposure, framework benefitstheGroupinanumberofways an internalratingframework. The internal rating the CentralBankofLebanon,Groupestablished credits inadditiontotheriskcategoriesprescribedby Group alreadyhasasystemforratingindividual stemmed fromdefaultinloanportfolios.Whilethe to thefactthathistoricallymajorlossesbanks credit ratingframeworkbecomesmoreeminentdue Group orabusinessline. The importanceofinternal individual creditsaswellincreditportfoliosofthe tool formonitoringandcontrollingriskinherentin well structured credit rating framework is an important classes onthebasisofunderlyingcreditquality. A rating systemcategorisesallcreditsintovarious of theGroup’s individualcreditexposure. An internal rating system. This systemisasummaryindicator Developing andmaintainingtheGroup’s creditrisk sectors, regionandsegments. limits atlevelofaggregateproducts,economic diversification ofitscommitmentsandbysetting controlling thisconcentrationofexposureisbythe geographies andsectors. The Group’s approachto Limiting concentrations of exposure to counterparties, same reviewprocess. Renewals andreviewsoffacilitiesaresubjecttothe allowance isestimatedtorelate. (rather thanindividuallyidentifiedassets)towhichsuch proportion ofthetotalassetswithinthesegrades that arecollectivelyimpairedrepresentstheestimated carrying amountofassetswithcreditgrades1to6 losses incurredbutnotyetspecificallyidentified. The classified withincreditgrades1to6isinrespectof assets. Allowance forimpairmentheldagainstassets impairment/loss heldbytheGroupagainstthose quality offinancialassetsandtheallowancefor The tablesbelowsetoutinformationaboutthecredit Analysis ofcreditquality undertaken byInternal Audit. Regular auditsofGroupCreditprocessesare portfolios, includingthosesubjecttocentralapproval. monitoring andcontrollingallcreditrisksinhis/her and performanceofhis/hercreditportfoliofor Each CreditOfficerisresponsibleforthequality to managementandtheGroupCreditCommittee. Each CreditOfficerreportsonallcreditrelatedmatters authorities delegatedfromtheGroupCreditCommittee. credit policiesandprocedures,withapproval Each CreditOfficerisrequiredtoimplementGroup management ofcreditrisk. promote bestpracticethroughouttheGroupin Providing advice,guidanceandspecialistskillsto CL group financial results 185
Annual Report 2014 Credit Libanais Group CL group financial results
Balances with Central Loans and Advances Loans and Advances Banks, Other Banks and Investment Debt Lending Commitments and to Customers to Related Parties Financial Institutions Securities Financial Guarantees 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
Carrying amount 4,269,371 3,897,098 35,958 21,509 4,100,929 3,186,008 4,704,056 4,841,228 Amount committed/guaranteed 757,739 837,847
Amount committed/guaranteed ------millions LBP Off balance sheet millions LBP Individually impaired Maximum exposure - Grade 4: Substandard 51,997 30,347 ------Lending commitments - Grade 5: Impaired 116,220 123,672 --- 3,742 10,189 10,385 ------Grade 1-3: low-fair risk 567,013 618,883 - Grade 6: Impaired 39,230 10,789 3,462 --- 129 129 ------Financial guarantees - Gross amount 207,447 164,808 3,462 3,742 10,318 10,514 ------Grade 1-3: low-fair risk 190,726 218,964 - Allowance for impairment (55,331) (47,416) (3,035) (2,329) (7,626) (7,626) ------Total exposure 757,739 837,847 - Unrealised interest (59,628) (56,238) (376) (47) ------Carrying amount 92,488 61,154 51 1,366 2,692 2,888 ------Past due but not impaired Impaired loans and investment debt securities - Grade 3: Low-fair risk 179,416 159,186 1,330 ------The Group regards a loan and advance or a debt is considered impaired if it is overdue for 90 days or security as impaired where there is objective evidence more. Loans that are subject to a collective provision for - Carrying amount 179,416 159,186 1,330 ------that a loss event has occurred since initial recognition losses incurred but not yet identified are not considered Neither past due nor impaired and such loss event has an impact on future estimated impaired. Impaired loans and advances are graded 4 to - Grades 1-2: Low-fair risk 4,000,309 3,682,803 34,572 20,141 4,064,081 3,165,072 4,629,512 4,760,254 cash flows from the asset. In addition, a retail loan 6 in the Bank’s internal credit risk grading system. - Allowance for collective impairment (18,198) (19,645) ------Interest receivable 15,356 13,600 5 2 34,156 18,048 74,544 80,974 - Carrying amount 3,997,467 3,676,758 34,577 20,143 4,098,237 3,183,120 4,704,056 4,841,228 Total carrying amount 4,269,371 3,897,098 35,958 21,509 4,100,929 3,186,008 4,704,056 4,841,228 Credit Libanais Group Annual Report 2014
186 187 assets byriskgrade. Set outbelowisananalysisofthegrossandnet(of 188 of collectionamountsowedtotheGroup. level ofsecurity/collateralavailableandorthestage that impairmentisnotappropriateonthebasisof principal paymentsarepastdue,buttheGroupbelieves securities arethoseforwhichcontractualinterestor Past duebutnotimpairedloansandinvestmentdebt debt securities Past duebutnotimpairedloansandinvestment necessary withrespecttoinvestmentdebtsecurities. The Groupbelievesthatnoimpairmentallowanceis Grade 6:Individuallyimpaired Grade 5:Individuallyimpaired Grade 4:Individuallyimpaired 31 December2013 Grade 6:Individuallyimpaired Grade 5:Individuallyimpaired Grade 4:Individuallyimpaired 31 December2014 Gross 164,808 123,672 207,447 Loans and Advances Loans 116,220 10,789 30,347 39,230 51,997 to Customers Net 61,154 40,095 21,059 92,488 52,474 40,014 ------allowances forimpairment)amountsofindividuallyimpaired Gross Loans and Advances to not besufficienttopaybacktheentireexposure. pay theobligation,orthatproceedsfromcollateralwill position suchthattheborrower/issuercannolonger financial /issuer’s significant changesintheborrower’s after consideringinformationsuchastheoccurrence of security isuncollectible. This determinationismade Group CreditCommitteedeterminesthattheloanor impairment lossesandsuspendedinterest,when security balance,andanyrelatedallowancesfor The Bankwritesoff aloanoraninvestmentdebt Write-off policy 3,742 3,742 3,462 3,462 Related Parties ------Net 1,366 1,366 51 51 ------Balances with Central Banks, Other Balances withCentralBanks,Other Banks andFinancialInstitutions Gross 10,514 10,385 10,318 10,189 129 129 ------Net 2,888 2,888 2,692 2,692 ------
millions LBP collateral heldagainstloansandadvancestocustomersrelatedparties. The Groupholdscollateralagainstcertainofitscreditexposures. Type ofcreditexposure Collateral held the yearbytakingpossessionofcollateralheldas The Groupdidnotobtainnon-financialassetsduring was heldat31December2014or2013. against investmentsecurities,andnosuchcollateral balances withotherbanksandfinancialinstitutions The Grouptypicallydoesnotholdcollateralagainst Principal type of collateral held for secured lending - Commitmentandcontingenciesreceived - Billsreceivedasguarantee - Mobilisationbillsreceivedasguarantee - Mortgagesandrealsecuritiesreceived - Personalguaranteesreceived - Engagementbysignaturereceived operations. does notusethenon-cashcollateralforitsown collateral inanorderlymanner. The Groupgenerally The Bank’s policyistopursuetimelyrealisationofthe million). security againstloansandadvances(2013:LBP 315 The tablebelowsetsouttheprincipaltypesof 2014 8,000,825 4,156,383 3,310,088 398,076 99,363 33,313 3,602 CL group financial results 2013 7,527,706 3,628,571 3,094,487 659,969 111,294 29,644 3,741 189 millions LBP
Annual Report 2014 Credit Libanais Group of creditriskfromloansandadvancesinvestmentsecuritiesisshownbelow: The Groupmonitorsconcentrationsofcreditriskbysectorandgeographiclocation. Concentration ofcreditrisk 190 based onthecountryofdomicile oftheissuer Concentration bylocationfor investmentsecuritiesis institutions arebasedonthecountryofdomicile. customers, relatedpartiesandbanksfinancial Concentration bylocationforloansandadvancesto Other Europe Middle Eastand Africa Lebanon Concentration bylocation Government Corporate Banks andfinancialinstitutions Agriculture Brokerage Construction andrealestate Industries Trade andservices Retail Concentration bysector Carrying amount 4,269,371 4,165,778 4,269,371 1,352,338 1,839,536 4,269,371 Loans and Advances Loans 415,362 573,273 2014 17,484 84,094 78,258 10,604 2,015 to Customers ------3,897,098 3,814,217 3,897,098 1,240,196 1,598,215 3,897,098 367,805 581,648 2013 10,985 69,836 70,689 38,545 2,060 ------Loans and Advances and Advances Loans 2014 to RelatedParties 13,557 18,418 35,958 35,958 35,958 35,958 1,793 1,886 304 ------(2013: LBP 837,847million). credit grade1to3,amountedLBP 757,739million commitments andfinancialguarantees,classifiedwithin of thesecurity. At 31December 2014,thelending 2013 21,509 21,491 21,509 16,447 21,509 2,617 2,340 105 18 ------Banks, Other Banks and Banks, OtherBanksand 4,100,929 3,091,863 4,100,929 3,025,153 1,075,776 4,100,929 Balances with Central Balances withCentral Financial Institutions 134,343 534,557 340,166 2014 ------3,186,008 2,029,680 3,186,008 1,983,594 1,202,414 3,186,008 An analysisofconcentrations 169,334 655,290 331,704 2013 ------4,704,056 4,704,056 4,588,531 4,704,056 4,612,108 105,421 2014 Investment Debt 83,284 2,270 7,834 8,664 Securities ------4,841,228 4,841,228 4,718,351 4,841,228 4,723,479 2013 29,904 87,845 19,091 19,646 84,140 ------
millions LBP another financialasset. financial liabilitiesthatare settledbydeliveringcashor difficulty inmeetingobligations associatedwithits Liquidity riskisthethatGroupwillencounter (c) Liquidityrisk rating agencies as per Basel II (Moody’s, Standard & Poor’s andFitch)whereapplicable,isasfollows: rating agenciesasperBaselII(Moody’s, Standard&Poor’s An analysisofthecreditqualitymaximumexposure,basedonmedianratingthreeeligible Trading assets counterparty specificapprovalsfromGroupRisk. free settlementtradesrequirestransactionspecificor described earlier. Acceptance ofsettlementriskon form partofthecreditapproval/limitmonitoringprocess contractual settlementobligations.Settlementlimits settled onlywhenbothpartieshavefulfilledtheir settlement/clearing agenttoensurethatatradeis this riskbyconductingsettlementsthrougha For certaintypesoftransactionstheGroupmitigates as contractuallyagreed. its obligationstodelivercash,securitiesorotherassets the riskoflossduetofailureanentityhonour settlement oftransactionsandtrades.Settlementriskis The Group’s activitiesmaygiverisetoriskatthetimeof Settlement risk through profitorloss Financial assetsatfairvalue 31 December2013 through profitorloss Financial assetsatfairvalue 31 December2014 From A+ to A- From A+ 15,562 2,271 From BBB+ to BBB- 18,214 12,269 From BB+ to BB- strategy areasfollows: reputation. The keyelementsoftheGroup’s liquidity unacceptable lossesorriskingdamagetotheGroup’s both normalandstressedconditions,withoutincurring sufficient liquiditytomeetitsliabilitieswhendue,under ensure, asfarpossible,thatitwillalwayshave The Group’s approachtomanagingliquidityis foreign branches. covering theliquiditypositionofbothBankand on aday-to-daybasisandreviewsdailyreports Central Treasury manages theBank’s liquidityposition approves theGroup’s liquiditypoliciesandprocedures. of thispolicytotheRiskCommitteeand ALCO. ALCO responsibility fortheoversightofimplementation strategy formanagingliquidityriskanddelegatesthe The Group’s BoardofDirectorssetstheGroup’s Management ofliquidityrisk 5,413 by currencyandmaturity. Carrying aportfolioofhighly liquidassets,diversified maintaining contingencyfacilities. customer deposits(bothretailandcorporate) Maintaining adiversifiedfundingbaseconsistingof --- From B+toB- 22,848 14,742 From CCC+ to From CCC+to CCC- orNR CL group financial results 151 --- Total 56,775 34,695 191 millions LBP
Annual Report 2014 Credit Libanais Group 192 net assetsconsistofcashandbalanceswith less than10%and40%respectively. The highlyliquid foreign currenciesandLebanesePoundsshouldnot be of netliquidassetstodepositsandcommitmentsin with theCentralBankofLebanoncirculars,ratio market conditionsintoconsideration.Inaccordance, deposits andcommitmentsinforeigncurrenciestaking ratio ofhighlyliquidnetassetsinforeigncurrenciesto specifically totheGroup. TheGroupmaintainsasolid stress factorsrelatingtoboththemarketingeneraland a varietyofscenarios,givingdueconsiderationto The liquiditypositionisassessedandmanagedunder nature. equivalent to15%ofalldepositsregardlesstheir Bank ofLebanoninterestbearingstatutoryinvestments currencies, theGroupmustretainwithCentral denominated inLebanesePounds. As forforeign 25% ofthesightdepositsand15%term with theCentralBankofLebanonequivalentto the Groupmustretainnon-interestbearingbalances Central Banks. As perLebanesebankingregulations, In addition,theGroupmaintainsstatutorydepositswith At 31December as potentialcollateralforobtainingfunding. Group’s assetsareencumberedandsonotavailable assets andliabilities,theextenttowhich behavioural characteristicsoftheGroup’s financial Monitoring liquidityratios,maturitymismatches, reporting datewasasfollows: of netliquidassetstodepositsfromcustomersatthe Control Commission.DetailsofthereportedGroupratio by theCentralBankofLebanonandBanking Group’s compliancewiththeliquiditylimitestablished but notidentical,calculationisusedtomeasurethe commitments maturingwithinthenextmonth. A similar, banks andfinancialinstitutions,otherborrowings an activeandliquidmarketlessanydepositsfrom and investmentdebtsecuritiesforwhichthereis considered asincludingcashandequivalents from customers.Forthispurposenetliquidassetsare liquidity riskistheratioofnetliquidassetstodeposits The keymeasureusedbytheGroupformanaging Exposure toliquidityrisk regulatory limitsonadailybasis. monitors complianceofallforeignbrancheswithlocal in co-ordinationwithCentral Treasury. Central Treasury managing itsoverallliquiditywithintheregulatorylimit by itslocalregulator, thebranchisresponsiblefor When abranchissubjecttoliquiditylimitimposed loans thatmaturewithinoneyear. deposits fromcustomersinadditiontoacceptancesand Deposits andcommitmentsarecomposedoftotal institutions anddepositsthatmaturewithinoneyear. institutions lessdepositsfrombanksandfinancial Central Banks,balanceswithotherbanksandfinancial 2014 32.23% 2013 30.85% The tablesbelowsetouttheremainingcontractualmaturitiesofBank’ Maturity analysisforassetsandliabilities Cumulative gap Liquidity gap Total liabilitiesandshareholders’ equity Shareholders’ equity Provisions forrisksandcharges Other liabilities Tax liabilities Subordinated debtissued Engagement byacceptances Deposits fromrelatedparties Deposits fromcustomers Deposits from other banks and financial institutions Loans anddepositsfromCentralBank Liabilities Total assets Other assets Assets heldforsale Intangible assets Property andequipment Investments inequity-accountedinvestees Financial assetsatamortisedcost Financial assetsatfairvaluethroughprofitorloss comprehensive income Financial assetsatfairvaluethroughother Debtors byacceptances Loans andadvancestorelatedparties Loans andadvancestocustomers Balances with other banks and financial institutions Cash andbalanceswithCentralBanks Assets 31 December2014 (1,404,042) (1,076,639) Maturity Amount Without (676,731) (676,731) (211,897) (39,085) (61,801) 226,180 122,007 727,311 (5,354) (7,313) (1,409) 89,646 93,864 19,812 74,283 55,779 36,631 2,779 6,013 (535) 260 (9) 57 ------(10,222,842) (7,249,892) (6,573,161) (9,558,665) Months 1,457,834 1,065,254 3,649,681 (127,937) (408,620) (63,932) (21,158) 1-3 (38,511) 127,937 732,582 231,391 (4,019) 34,406 277 ------(7,466,823) Months (888,566) (216,931) (947,389) (17,205) (18,666) (10,208) 3-6 165,825 730,458 471,698 (5,401) (7,343) 17,205 74,373 1,357 ------6 Months to 1 Yearto (7,315,580) s assetsandliabilities. (550,933) (534,340) (12,180) 134,025 262,305 151,243 702,176 284,734 (4,276) 20,907 (137) 205 ------1-5 Years (4,232,035) 3,083,545 3,524,381 2,271,781 (440,836) (193,642) (114,306) (113,063) (19,825) 867,721 366,322 10,987 7,538 32 ------CL group financial results More Than 5 Years 4,232,035 4,478,320 1,335,474 1,645,772 1,464,050 (246,285) (244,296) (1,989) 30,654 1,463 907 ------(13,812,327) (11,237,014) (1,076,639) 13,812,327 4,669,361 4,269,371 1,075,776 3,084,948 (100,765) (397,350) (250,408) (120,376) (145,142) (428,832) Total (39,085) (16,716) 122,007 226,180 145,142 36,631 19,812 34,695 86,433 35,958 6,013 ------193 millions LBP
Annual Report 2014 Credit Libanais Group 194 Cumulative gap Liquidity gap Total liabilitiesandshareholders’ equity Shareholders’ equity Provisions forrisksandcharges Other liabilities Tax liabilities Subordinated debtissued Engagement byacceptances Deposits fromrelatedparties Deposits fromcustomers Deposits from other banks and financial institutions Loans anddepositsfromCentralBanks Liabilities Total assets Other assets Assets heldforsale Intangible assets Property andequipment Investments inequity-accountedinvestees Financial assetsatamortisedcost Financial assetsatfairvaluethroughprofitorloss comprehensive income Financial assetsatfairvaluethroughother Debtors byacceptances Loans andadvancestorelatedparties Loans andadvancestocustomers Balances with other banks and financial institutions Cash andbalanceswithCentralBanks Assets 31 December2013 (1,350,352) (1,027,889) Maturity Amount Without (728,518) (728,518) (219,200) (38,710) (55,711) 621,834 173,707 118,896 (7,398) 47,471 55,109 80,786 37,815 17,733 80,360 1,368 3,406 4,569 (860) (584) 614 ------(6,548,558) (5,820,040) (9,603,831) (9,013,654) Months 1,418,743 1,183,925 3,783,791 (153,992) (336,724) (45,166) (44,610) 1-3 655,029 352,030 153,992 (7,279) (2,406) 20,072 ------(6,919,839) Months (371,281) (877,417) (819,490) (10,569) (14,586) (20,581) 3-6 (11,153) 506,136 243,766 144,720 (1,038) 90,217 15,083 11,153 1,197 ------6 Months to 1 Yearto (6,617,170) (429,657) (424,218) 272,858 302,669 732,326 345,720 113,484 (3,046) (2,154) (239) 239 25 ------1-5 Years (3,394,798) 3,222,372 3,508,948 2,395,966 (286,576) (125,715) (113,063) (25,890) (21,908) 782,947 303,007 26,984 44 ------More Than 5 Years 1,436,598 3,394,798 3,449,215 1,366,611 (54,417) (49,956) 590,450 (4,461) 27,980 27,576 ------(12,602,250) (10,438,788) (1,027,889) 12,602,250 4,784,453 3,897,098 1,202,414 2,046,850 (264,366) (120,461) (165,384) (352,170) Total (38,710) (17,848) (99,172) (77,462) 173,707 165,384 118,896 37,815 17,733 56,775 75,047 21,509 4,569 ------
millions LBP are expectedtomaintainastableorincreasingbalance. flows. Forexample,demanddepositsfromcustomers liabilities varysignificantlyfromthecontractualcash The Group’s expectedcashflowsonsomeassetsand earliest possiblecontractualmaturity. the Group’s assetsandliabilitiesonthebasisoftheir The abovetablesshowtheundiscountedcashflowson Overall authorityformarketriskmanagementisvested Management ofmarketrisks while optimisingthereturnonrisk. parameters inordertoensuretheGroup’s solvency and controlmarketriskexposureswithinacceptable the Group’s marketriskmanagementistomanage its holdingsoffinancialinstruments. Theobjectiveof rates willaffect theGroup’s incomeorthevalueof such asinterestrates,equityprices,foreignexchange Market riskisthethatchangesinmarketprices, (d) Marketrisks Liquidity reserves Cash andbalanceswithCentralBanks Carrying Amount 1,234,907 2014 market riskexposures. The Groupemploysarangeoftoolstomonitorandlimit for theday-to-dayreviewoftheirimplementation. policies (subjecttoreviewandapprovalby ALCO) and for thedevelopmentofdetailedriskmanagement trading portfolios. The GroupMarketRiskisresponsible a primaryfactorindeterminingtheleveloflimitssetfor aggregate andforportfolios,withmarketliquiditybeing in ALCO. ALCO setsuplimitsforeachtypeofrisk in with banks. In addition,theBankmaintainsagreedlinesofcredit they canbereadilysoldtomeetliquidityrequirements. for whichthereisanactiveandliquidmarketsothat reserves withCentralBanksandinvestmentsecurities comprising cashandequivalents,compulsory from financialliabilities,theGroupholdsliquidassets As partofthemanagementitsliquidityriskarising Fair Value 1,234,907 Carrying Amount 1,075,412 CL group financial results 2013 Fair Value 1,075,412 195 millions LBP
Annual Report 2014 Credit Libanais Group in marketinterestrates.Interestrateriskismanaged fair valuesoffinancialinstrumentsbecauseachange risk oflossfromfluctuationsinthefuturecashflowsor The principalrisktowhichportfoliosareexposedisthe Exposure tointerestraterisk 196 Cumulative gap Interest ratesensitivitygap Total liabilitiesandequity Shareholders’ equity Provisions forrisksandcharges Other liabilities Tax liabilities Subordinated debtissued Engagement byacceptances Deposits fromrelatedparties Deposits fromcustomers Deposits fromotherbanksandfinancialinstitutions Loans anddepositsfromCentralBanks Liabilities Total assets Other assets Assets heldforsale Intangible assets Property andequipment Investments inequity-accountedinvestees Financial assetsatamortisedcost Financial assetsatfairvaluethroughprofitorloss comprehensive income Financial assetsatfairvaluethroughother Debtors byacceptances Loans andadvancestorelatedparties Loans andadvancestocustomers Balances withotherbanksandfinancialinstitutions Cash andbalanceswithCentralBanks Assets 31 December2014 (13,812,327) (11,237,014) Carrying (1,076,639) 13,812,327 Amount 4,669,361 4,269,371 1,075,776 3,084,948 (250,408) (120,376) (145,142) (428,832) (100,765) (397,350) (39,085) (16,716) 122,007 226,180 145,142 36,631 19,812 34,695 86,433 35,958 6,013 ------Less Than 3 Months (5,612,826) (5,612,826) (8,818,662) (8,398,280) 3,205,836 1,457,834 (377,627) (23,780) (18,975) 231,391 685,874 796,331 34,406 ------(5,921,758) Months follows: summary oftheGroup’s interestrategappositionisas by havingpre-approvedlimitsforrepricingbands. A principally throughmonitoringinterestrategapsand (308,932) (922,841) (888,566) (18,666) (10,208) 3-6 613,909 471,698 (5,401) 74,373 67,838 ------(5,789,915) Months (550,933) (534,340) 6-12 (12,180) 131,843 682,776 284,734 134,025 263,812 (4,276) (137) 205 ------1-5 Years (3,083,679) 2,706,236 3,147,072 2,271,781 (440,836) (193,642) (113,063) (114,306) (19,825) 867,721 7,538 32 ------More Than 5 Years 4,200,474 4,446,759 1,335,474 1,645,772 1,464,050 1,116,795 (246,285) (244,296) (1,989) 1,463 ------Non Interest (2,832,770) (1,076,639) (1,222,186) (1,116,795) Bearing 1,715,975 (250,408) (145,142) (40,687) (39,085) (16,716) (32,402) 122,007 226,180 145,142 382,159 492,917 (2,192) (7,313) 36,631 19,812 74,283 34,695 86,433 89,646 6,013 57 ---
millions LBP Cumulative gap Interest ratesensitivitygap Total liabilitiesandequity Shareholders’ equity Provisions forrisksandcharges Other liabilities Tax liabilities Subordinated debtissued Engagement byacceptances Deposits fromrelatedparties Deposits fromcustomers Deposits fromotherbanksandfinancialinstitutions Loans anddepositsfromCentralBanks Liabilities Total assets Other assets Assets heldforsale Intangible assets Property andequipment Investments inequity-accountedinvestees Financial assetsatamortisedcost Financial assetsatfairvaluethroughprofitorloss comprehensive income Financial assetsatfairvaluethroughother Debtors byacceptances Loans andadvancestorelatedparties Loans andadvancestocustomers Balances withotherbanksandfinancialinstitutions Cash andbalanceswithCentralBanks Assets 31 December2013 (12,602,250) (10,438,788) Carrying (1,027,889) 12,602,250 Amount 4,784,453 3,897,098 1,202,414 2,046,850 (264,366) (120,461) (165,384) (352,170) (38,710) (17,848) (99,172) (77,462) 173,707 165,384 118,896 17,733 56,775 75,047 21,509 37,815 4,569 ------Less Than 3 Months (5,010,510) (5,010,510) (8,361,571) (8,026,126) 3,351,061 1,418,743 (319,948) (13,271) 352,030 904,095 656,121 (2,226) 20,072 ------(5,372,419) Months (361,909) (855,695) (819,490) (14,586) (20,581) 3-6 493,786 243,766 144,720 (1,038) 90,217 15,083 ------(5,069,750) Months (429,418) (424,218) 6-12 302,669 272,858 732,087 345,720 113,484 (3,046) (2,154) 25 ------1-5 Years (2,177,369) 2,892,381 3,178,957 2,395,966 (286,576) (125,715) (113,063) (25,890) (21,908) 782,947 44 ------CL group financial results More Than 5 Years 1,436,598 1,161,873 3,339,242 3,393,659 1,366,611 (54,417) (49,956) 590,450 (4,461) ------Non Interest (1,161,873) (2,614,573) (1,027,889) (1,043,239) Bearing 1,452,700 (264,366) (165,384) (38,710) (17,848) (17,636) (31,923) 283,236 382,701 173,707 165,384 118,896 (7,398) 37,815 55,109 17,733 80,360 56,775 75,047 4,569 1,368 (180) --- 197 millions LBP
Annual Report 2014 Credit Libanais Group overall positionarisingfromtheGroup’s activities. advances tobanks,depositsfrombanksmanagethe Risk Management,whichusesinvestmentsecurities, Overall interestrateriskpositionsaremanagedby scenarios. Standardscenariosthatareconsideredon to variousstandardandnon-standardinterestrate sensitivity oftheGroup’s financialassets and liabilities rate gaplimitsissupplementedbymonitoringthe The managementofinterestrateriskagainst 198 EUR USD LBP 31 December2013 EUR USD LBP 31 December2014 Change inbp the presentationcurrencyofGroup. with regardtothetranslationofforeignoperationsinto liabilities intothefunctionalcurrencyofGroup,and foreign currencytransactionsandmonetaryassets to anyindividualcurrencyinregardthetranslationof The Groupmonitorsanyconcentrationriskinrelation Exposure tocurrencyrisks curves andaconstantfinancialposition,isasfollows: rates, assumingnoasymmetricalmovementinyield sensitivity toanincreaseordecreaseinmarketinterest fall orriseinallyieldcurves. An analysisoftheGroup’s a monthlybasisinclude100point(bp)parallel +100 +100 +25 +50 +25 +50 Sensitivity ofNetInterestIncome (10,269) (47,938) (59,312) (11,886) (1,063) 46
millions LBP The followingtablepresentsthebreakdownofassetsandliabilitiesbycurrency: Total liabilitiesandequity Shareholders’ equity Provisions forrisksandcharges Other liabilities Current taxliabilities Subordinated debtissued Engagements byacceptances Deposits fromrelatedparties Deposits fromcustomers Deposits fromotherbanksandfinancialinstitutions Loans anddepositsfromCentralBanks Liabilities Total assets Other assets Assets heldforsale Intangible assets Property andequipment Investments inequity-accountedinvestees Financial assetsatamortisedcost Financial assetsatfairvaluethroughprofitorloss Financial assets at fair value through other comprehensive income Debtors byacceptances Loans andadvancestorelatedparties Loans andadvancestocustomers Balances withotherbanksandfinancialinstitutions Cash andbalanceswithCentralBanks Assets 31 December 6,694,189 5,202,583 6,444,603 3,236,796 1,674,780 1,147,969 (249,586) LBP 835,366 391,781 100,101 216,176 111,387 37,779 94,604 13,239 19,765 30,902 7,450 6,798 5,755 4,776 785 ------7,367,724 1,432,565 2,594,591 1,044,874 1,936,979 6,034,431 7,118,138 Other 2014 145,142 241,273 155,804 120,376 145,142 317,445 249,586 21,906 29,833 10,004 34,695 81,657 35,173 87,526 5,569 1,306 9,266 258 47 13,812,327 13,812,327 11,237,014 1,076,639 4,669,361 4,269,371 1,075,776 3,084,948 Total 250,408 120,376 145,142 428,832 100,765 397,350 122,007 226,180 145,142 39,085 16,716 36,631 19,812 34,695 86,433 35,958 6,013 --- 4,893,339 5,903,802 3,240,428 6,065,809 1,438,802 (162,007) LBP 102,108 162,286 805,136 140,981 907,567 86,276 13,134 77,462 17,686 37,688 19,494 11,738 6,827 4,314 3,450 785 55 55 ------CL group financial results 1,544,025 2,458,296 1,182,920 1,139,283 6,698,448 6,536,441 5,545,449 Other 2013 165,329 162,007 222,753 123,385 120,461 165,329 265,894 56,775 71,597 20,724 16,788 30,988 86,038 11,421 1,022 6,110 255 47 --- 12,602,250 10,438,788 12,602,250 1,027,889 4,784,453 3,897,098 1,202,414 2,046,850 Total 264,366 120,461 165,384 352,170 173,707 165,384 118,896 38,710 17,848 99,172 77,462 37,815 17,733 56,775 75,047 21,509 4,569 --- 199 millions LBP
Annual Report 2014 Credit Libanais Group effectiveness and innovation.Inallcases,theGroup damage totheGroup’s reputationwithoverallcost so astobalancetheavoidance offinanciallossesand The Group’s objectiveistomanageoperationalrisk risks arisefromalloftheGroup’s operations. accepted standardsofcorporatebehaviour. Operational from legalandregulatoryrequirementsgenerally credit, marketandliquidityrisks,suchasthosearising infrastructure, andfromexternalfactorsotherthan the Group’s processes,personnel,technologyand arising fromawidevarietyofcausesassociatedwith Operational riskistheofdirectorindirectloss (e) Operationalrisks follows: An analysisoftheGroup’s sensitivitytoachangeincurrencyrates,assumingallothervariablesremainconstant,isas in USDollarsorEuros. functional currency, whichistheLebanesePound(LBP).Mostofthesefinancialassetsandliabilitiesare denominated The GroupissubjecttocurrencyriskonfinancialassetsandliabilitiesdenominatedincurrenciesotherthantheGroup’s 200 XOF BHD EUR USD 31 December2013 XOF BHD EUR USD 31 December2014 Increase inCurrencyRate 1% 1% 1% 1% 1% 1% 1% 1% Effect onProfitBefore Tax management ofoperationalriskinthefollowingareas: by thedevelopmentofoverallBankstandardsfor address operational risk. This responsibility is supported for thedevelopmentandimplementationofcontrolsto operational riskstomanagementwhichisresponsible The BoardofDirectorshasdelegatedresponsibilityfor regulatory requirements. policy requirescompliancewillallapplicablelegaland transactions. Requirements forthereconciliation andmonitoringof including the independent authorisation of transactions. Requirements forappropriatesegregationofduties, (410) 307 301 151 51 42 5 4 Effect onEquity 3,096 3,219 ------
millions LBP positions incurrenciesand debtandequitysecurities. The marketriskapproach covers theriskofopen their relativerisk. and otherriskpositionsatweightedamountstoreflect position, off-balance-sheet commitmentsandmarket Group’s eligiblecapitalwithitsstatementoffinancial by theCentralBankofLebanon)comparing (minimum 8%asrequiredbyBISand12% of Lebanon. These ratiosmeasurecapitaladequacy are setat8%bytheBISand12%CentralBank the minimumrequirementsforcapitaladequacyratios Bank ofLebanonBasicCircularN Settlements (BIS).InlinewithBaselIIIandCentral uses ratiosestablishedbytheBankforInternational To monitortheadequacyofitscapital,Group Central BankofLebanonIntermediaryCircularN Capital adequacyratio- Total capital Capital adequacyratio- Tier 1capital effective. Risk mitigation,includinginsurancewherethisiscost Ethical andbusinessstandards. Training andprofessionaldevelopment. Development ofcontingencyplans. and proposedremedialaction. Requirements forthereportingofoperationallosses and procedurestoaddresstherisksidentified. operational risksfaced,andtheadequacyofcontrols Requirements fortheperiodicassessmentof Documentation ofcontrolsandprocedures. requirements. Compliance withregulatoryandotherlegal o . 44amendedby o . 282, Group’s RiskCommitteeforregular reviewand exercise arepresentedtoSenior Managementandthe The resultsofthecapitaladequacy computation of financialpositionequivalents. factors, designedtoconverttheseitemsintostatement account byapplyingdifferent categoriesofconversion Off-balance-sheet creditinstrumentsaretaken into support theholdingoftheseassets. risk weightingwhichmeansthatnocapitalisrequired to and LBP placementswiththeCentralBankhavea0% 35%, 50%,75%,100%)areapplied;forexamplecash support them.Sixcategoriesofriskweights(0%,20%, to theamountofcapitaldeemedbenecessary notional risk,beingassignedariskweightingaccording Assets areweightedaccordingtobroadcategoriesof adequacy ratioat31Decemberwasasfollows: the Groupasawhole. The Group’s regulatorycapital Lebanon, setsandmonitorscapitalrequirementsfor The Group’s leadregulator, theCentralBankof Regulatory capital (f) Capitalmanagement management oftheGroup. submitted tothe Audit Committeeandsenior are discussedwiththemanagement,summaries Internal Audit. The resultsofInternal Audit reviews a programmeofperiodicreviewsundertakenby Compliance withGroupstandardsissupportedby 2014 15.77% 14.41% CL group financial results 2013 16.63% 14.84% 201
Annual Report 2014 Credit Libanais Group The Bank’s regulatorycapitalpositionunderBaselIIIat31December wasasfollows: The Group’s regulatorycapitalcomprisestwotiers: sheet assets. for riskusingthesamepercentagesason-balance- The resultingequivalentamountsarethenweighted monitoring oftheGroup’s overallcapitalisationlevels. 202 Total regulatory capital Tier 2capital Tier 1capital Total riskweightedassets Operational risk Market risk Credit risk Risk weightedassets Tier 2capital,whichincludesqualifyingsubordinated purposes. equity butaretreateddifferently forcapitaladequacy adjustments relatingtoitemsthatareincludedin deductions forintangibleassets,andotherregulatory share premium,retainedearningsandNCIafter Tier 1capital,whichincludesordinaryshare requirements. have compliedwithallexternallyimposedcapital The Bankanditsindividuallyregulatedoperations business. confidence andtosustainfuturedevelopmentofthe base soastomaintaininvestor, creditorandmarket The Group’s policyistomaintainastrongcapital reserve. comprehensive incomeandrealestaterevaluation instruments measuredatfairvaluethroughother relating tounrealisedgainsandlossesonequity liabilities, andtheelementoffairvaluereserve 2014 2014 6,669,803 6,060,544 1,052,037 504,544 104,715 961,109 90,928 2013 2013 5,592,810 6,175,640 1,027,119 916,501 482,944 110,618 99,886
millions LBP millions LBP management’s bestestimateofthe recoverable individually forimpairment and isbasedupon impairment appliestofinancial assetsevaluated The specificcomponentofthetotalallowancesfor for impairmentonabasisdescribedinNote4(i)(vii). Assets accountedforatamortisedcostareevaluated Impairment financial riskmanagement(seeNote5). These disclosuressupplementthecommentaryon statements isdisclosedbelow. on theamountsrecognisedinconsolidatedfinancial accounting policiesthathavethemostsignificanteffect financial yearandaboutcriticaljudgementsinapplying of resultinginamaterialadjustmentwithinthenext estimation uncertaintiesthathaveasignificantrisk uncertainties. Informationaboutassumptionsand and assumptionsmaderelatingtomajorestimation critical accountingpoliciesandtheirapplication, development, selectionanddisclosureoftheGroup’s Management discusseswiththe Audit Committeethe revised andinanyfutureperiodsaffected. are recognisedintheperiodwhichestimates an ongoingbasis.Revisionstoaccountingestimates Estimates andunderlyingassumptionsarereviewedon Actual resultsmaydiffer fromtheseestimates. amounts ofassets,liabilities,incomeandexpenses. the applicationofaccountingpoliciesandreported judgements, estimatesandassumptionsthataffect in conformitywithIFRSrequiresmanagementtomake The preparation of the consolidated financial statements 6- Useofestimatesandjudgements considers thefollowingfactors. complex. Inmakingsuchanassessment,theGroup sovereign debt(seeNote5(b))isimpairedmaybe An assessmentastowhetheraninvestmentin impairment onthebasisdescribedinNote4(i)(vii). Investments inequitysecuritieswereevaluatedfor be identified. advances, buttheindividualimpaireditemscannotyet to suggestthattheycontainimpairedloansand risk characteristicswhenthereisobjectiveevidence portfolios ofloansandadvances,withsimilarcredit individually impairedcovercreditlossesinherentin individually significantbutthatwerenotfoundtobe Collective allowanceforgroupsofassetsthatare established for: A collectivecomponentofthetotalallowanceis Risk function. recoverable areindependentlyapprovedbytheCredit workout strategyandestimateofamountsconsidered Each impairedassetisassessedonitsmerits,andthe the netrealisablevalueofanyunderlyingcollateral. financialsituationand judgements aboutadebtor’s these recoverableamounts,managementmakes amounts thatareexpectedtobereceived.Inestimating creditworthiness. The ratingagencies’ assessments ofthe reflected inthebondyields. The market’s assessmentofcreditworthiness as that werenotfoundtobeindividuallyimpaired. Groups ofassetsthatareindividuallysignificantbut individually significant. Groups ofhomogenousloansthatarenotconsidered CL group financial results 203
Annual Report 2014 Credit Libanais Group factors. investments insovereigndebt,basedontheabove there isobjectiveevidenceofimpairmentits See Note5(b)fortheGroup’s assessmentofwhether inputs usedinmakingthemeasurements. value hierarchy, whichreflectsthesignificanceof The Groupmeasuresfairvaluesusingthefollowing (a) Valuationmodels specific instrument. pricing assumptionsandotherrisksaffecting the on liquidity, concentrationuncertaintyofmarketfactors, and requiresvaryingdegreesofjudgmentdepending have little price transparency, fair value is less objective, For financialinstrumentsthattradeinfrequentlyand using othervaluationtechniques. financial instruments,theGroupdeterminesfairvalues market pricesordealerpricequotations.Forallother that aretradedinactivemarketsbasedonquoted The fairvaluesoffinancialassetsandliabilities instruments 7- Fairvaluesoffinancial 204 mandatory debtforgiveness. in holderssuffering lossesthroughvoluntaryor The probabilityofdebtbeingrestructuredresulting markets fornewdebtissuance. The abilityofthecountrytoaccesscapital within Level1thatareobservable eitherdirectly(i.e. Level 2:inputsotherthanquoted pricesincluded instruments. (unadjusted) inactivemarketsforidentical Level 1:inputsthatarequotedmarketprices swaps thatuseonlyobservable marketdataand financial instruments,like interest rateandcurrency determining thefairvalueof commonandmoresimple The Groupuseswidelyrecognisedvaluationmodels for participants atthemeasurementdate. the liabilityinanorderlytransactionbetweenmarket would bereceivedtoselltheassetorpaidtransfer a fairvaluemeasurementthatreflectstheprice The objectiveofvaluationtechniquesistoarriveat and equitypricesforeigncurrencyexchangerates. include risk-freeandbenchmarkinterestrates,bond Assumptions andinputsusedinvaluationtechniques instruments forwhichmarketobservablepricesexist. discounted cashflowmodels,comparisonwithsimilar Valuation techniquesincludenetpresentvalueand instruments. are requiredtoreflectdifferences betweenthe significant unobservableadjustmentsorassumptions quoted pricesforsimilarinstrumentswhich includes instrumentsthatarevaluedbasedon effect ontheinstrument’s valuation. This category data andtheunobservableinputshaveasignificant technique includesinputsnotbasedonobservable includes allinstrumentsforwhichthevaluation Level 3:inputsthatareunobservable. This category from marketdata. significant inputsaredirectlyorindirectlyobservable active; orothervaluationtechniquesinwhichall instruments inmarketsthatareconsideredlessthan instruments; quotedpricesforidenticalorsimilar quoted marketpricesinactivemarketsforsimilar This categoryincludesinstrumentsvaluedusing: as prices)orindirectly(i.e.derivedfromprices). financial markets. based onspecificeventsandgeneralconditionsinthe on theproductsandmarketsispronetochanges observable marketpricesandinputsvariesdepending associated withdeterminingfairvalues. Availability of and estimationalsoreducestheuncertainty inputs reducestheneedformanagementjudgement Availability ofobservablemarketpricesandmodel the counterderivativessuchasinterestrateswaps. securities, exchange-tradedderivativesandsimpleover available inthemarketforlisteddebtandequity Observable pricesandmodelinputsareusually require littlemanagementjudgmentandestimation. CL group financial results 205
Annual Report 2014 Credit Libanais Group recognised inthestatementoffinancialposition. fair valuehierarchyintowhichthemeasurementiscategorised. The followingtableanalysesfinancialinstrumentsmeasuredatfairvaluethereportingdate,bylevelin (b) Financialinstrumentsmeasuredatfairvalue–hierarchy 206 Financial liabilitiesnotmeasuredatfairvalue Financial assetsnotmeasuredatfairvalue Financial assetsatfairvaluethroughothercomprehensiveincome Financial assetsatfairvaluethroughprofitorloss Financial assetsmeasuredatfairvalue 31 December2014 - Subordinateddebtissued - Depositsfromrelatedparties - Depositsfromcustomers - Depositsfromotherbanksandfinancialinstitutions - LoansanddepositsfromCentralBanks - Financialassetsatamortisedcost - Loansandadvancestorelatedparties - Loansandadvancestocustomers - Balanceswithotherbanksandfinancialinstitutions - CashandbalanceswithCentralBanks - Preferredshares - Quotedequitysecurities - Unquotedequitysecurities - Otherdebtinstruments ofdepositsissuedbytheCentralBankLebanon Certificates - - Certificatesofdepositsissuedbybanks - Financialinternationalsukuk - Corporatebonds - Lebanesegovernmenteurobonds Designated atFairValue 121,128 32,731 46,340 15,221 11,467 7,362 1,675 2,993 3,057 282 ------The amountsarebasedonthevalues Amortised Cost 13,135,414 4,669,361 4,269,371 1,075,776 3,084,948 arig Amount Carrying 35,958 ------Other FinancialLiabilities (12,284,337) (11,237,014) (120,376) (428,832) (100,765) (397,350) ------Total (12,284,337) (11,237,014) 13,135,414 4,669,361 4,269,371 1,075,776 3,084,948 (100,765) (397,350) (120,376) (428,832) 121,128 35,958 32,731 46,340 15,221 11,467 7,362 1,675 2,993 3,057 282 Level 1 1,424,984 59,795 46,340 15,221 11,467 9,476 1,675 3,057 282 ------
Level 2 (11,237,301) 4,236,702 1,075,776 3,025,153 3,252,112 (120,376) (428,832) (100,765) (397,350) 35,978 23,255 2,993 ------Fair Value
Level 3 7,362 ------
CL group financial results Total (11,237,301) 4,677,096 4,236,702 1,075,776 3,084,948 (100,765) (397,350) (120,376) (428,832) 15,221 35,978 32,731 46,340 11,467 2,993 3,057 7,362 1,675 282
207 millions LBP
Annual Report 2014 Credit Libanais Group 208 Financial liabilitiesnotmeasuredatfairvalue Financial assetsnotmeasuredatfairvalue Financial assetsatfairvaluethroughothercomprehensiveincome Financial assetsatfairvaluethroughprofitorloss Financial assetsmeasuredatfairvalue 31 December2013 - Subordinateddebtissued - Depositsfromrelatedparties - Depositsfromcustomers - Depositsfromotherbanksandfinancialinstitutions - LoansanddepositsfromCentralBanks - Financialassetsatamortisedcost - Loansandadvancestorelatedparties - Loansandadvancestocustomers - Balanceswithotherbanksandfinancialinstitutions - CashandbalanceswithCentralBanks - Quotedpreferredshares - Quotedequitysecurities - Unquotedequitysecurities - Otherdebtinstruments ofdepositsissuedbytheCentralBankLebanon Certificates - - Certificatesofdepositsissuedbybanks - Nonfinancialinternationalsukuk - Corporatebonds - Othersovereignbonds - Lebanesegovernmenteurobonds Designated atFairValue 131,822 29,478 39,662 22,815 18,256 5,907 5,505 1,599 2,993 4,287 1,320 ------Amortised Cost arig Amount Carrying 11,952,324 4,784,453 3,897,098 1,202,414 2,046,850 21,509 ------Other FinancialLiabilities (10,438,788) (11,088,053) (120,461) (352,170) (99,172) (77,462) ------Total (10,438,788) (11,088,053) 11,952,324 4,784,453 3,897,098 1,202,414 2,046,850 (120,461) (352,170) (99,172) (77,462) 131,822 21,509 29,478 39,662 22,815 18,256 5,907 5,505 1,599 2,993 4,287 1,320 Level 1 1,551,531 63,256 39,662 22,815 18,256 9,387 5,505 1,599 4,287 1,320 ------Level 2 (10,439,209) 3,241,141 3,935,917 1,202,414 1,983,594 (120,461) (352,170) (99,172) (77,462) 21,509 20,091 2,993 ------Fair Value Level 3 5,907 ------CL group financial results Total (10,439,209) 4,792,672 3,935,917 1,202,414 2,046,850 (120,461) (352,170) (99,172) (77,462) 21,509 29,478 39,662 22,815 18,256 5,907 5,505 1,599 2,993 4,287 1,320 209 millions LBP
Annual Report 2014 Credit Libanais Group regardless oftheirnature. deposit accountsdenominatedinforeigncurrency, (FCY) calculatedonthebasisof15%totalcustomers constitute mandatoryreservesinforeigncurrency pounds respectively. The Bankisalsorequiredto sight commitmentaccountsdenominatedinLebanese and 25%oftheaverageweeklycustomersterm mandatory reservesinLebanesepounds(LBP)of15% regulations, theBankisrequiredtoconstitute In accordancewithCentralBankofLebanon 8- CashandbalanceswithCentralBanks 210 Interest receivable Mandatory reserveswiththeCentralBankofSenegal Mandatory reserveswiththeCentralBankofBahrain Mandatory reserveswiththeCentralBankofCyprus Mandatory reserveswiththeCentralBankofIraq Mandatory reserveswiththeCentralBankofLebanon Unrestricted balanceswithCentralBanks Cash reserves arefloating-rateassets. LBP reserves arenon-interestbearing,whereasFCY the Group’s day-to-dayoperations.Cashinhandand Mandatory reservedepositsarenotavailableforusein which theyareoperating. the bankingrulesandregulationsofcountriesin requirements withvaryingpercentages,accordingto operations arealsosubjecttomandatoryreserve Foreign branchesandsubsidiarieswithbanking 2014 3,084,948 1,228,912 1,756,177 34,069 59,795 3,169 1,706 600 520 2013 2,046,850 1,068,450 890,652 63,256 17,530 3,194 2,532 400 836
millions LBP 10- Loansandadvancestocustomers 9- Balanceswithotherbanksandfinancialinstitutions Accrued interestreceivable Collective allowance Classified corporatecustomers: Classified retailcustomers: Regular corporatecustomers: Regular retailcustomers: 2014 Interest receivable Less specificallowanceforimpairment Impaired loanstobanksandfinancialinstitutions Loans andadvancestobanks Term deposits Current accounts Bad Doubtful Substandard Watch Bad Doubtful Substandard Watch Corporate Other Credit cards Personal Mortgage Cash collateral Gross Amount 1,971,198 1,430,371 4,402,528 137,523 395,141 110,044 15,128 50,100 40,498 41,893 38,237 55,318 15,356 24,102 66,120 11,499 --- Unrealised Interest (20,071) (10,549) (59,628) (11,134) (7,303) (9,137) (1,434) ------Impairment Allowance (73,529) (18,198) (14,965) (18,475) (14,066) 2014 (7,825) 1,075,776 683,064 379,380 (7,626) 10,318 10,553 ------87 CL group financial results Carrying Amount 2013 4,269,371 1,971,198 1,430,371 1,202,414 (18,198) 137,523 395,141 891,712 279,830 110,044 (7,626) 10,065 15,356 15,963 29,949 41,893 38,237 55,318 10,514 27,466 36,511 518 ------211 millions LBP millions LBP
Annual Report 2014 Credit Libanais Group 212 Accrued interestreceivable Collective allowance Classified corporate customers: Classified retailcustomers: Regular corporatecustomers: Regular retailcustomers: 2013 Bad Doubtful Substandard Watch Bad Doubtful Substandard Watch Corporate Other Credit cards Personal Mortgage Cash collateral Gross Amount 4,020,397 1,798,657 1,265,852 135,088 431,475 13,600 66,067 57,605 25,172 24,098 38,795 98,713 49,311 1,373 5,175 9,416 --- Unrealised Interest (56,238) (23,601) (19,113) (1,048) (3,894) (8,240) (342) ------Impairment Allowance (67,061) (19,645) (22,697) (18,166) (1,031) (5,522) ------Carrying Amount 3,897,098 1,265,852 1,798,657 (19,645) 135,088 431,475 13,600 24,257 38,795 98,713 15,838 16,932 24,098 49,311 4,127 ------
millions LBP 11- Financialassetsatfairvaluethrough othercomprehensiveincome Unrealised Interest Impairment allowance Accrued dividendreceivable Preferred shares Quoted equitysecurities Unquoted equitysecurities Balance at31December Unrealised interestwritten-off Unrealised interestrecovered Unrealised interest on non-performing loans Balance at1January Impairment lossfortheyear: Balance at1January Allowances forimpairment Balance at31December Write-offs Transfer from provisions for risks and charges - Recoveriesandreleases - Chargefortheyear 2014 2014 2014 (8,209) (3,633) (5,210) 59,628 56,238 14,493 67,061 73,529 86,433 30,654 46,340 11,599 2,077 7,362 818 --- CL group financial results 2013 2013 2013 (11,148) (4,154) (6,390) (9,800) 67,061 66,014 56,238 10,104 67,082 75,047 27,577 39,662 11,591 1,901 5,907 --- 213 millions LBP millions LBP millions LBP
Annual Report 2014 Credit Libanais Group 12- Financialassetsatfairvaluethroughprofitorloss 214 Interest receivable Other debtinstruments Interest receivable Certificates of deposits issued by the Central Bank of Lebanon Interest receivable Certificates ofdepositsissuedbybanks Interest receivable Financial internationalsukuk Interest receivable Non financialinternationalsukuk Interest receivable Corporate bonds Interest receivable Other sovereignbonds Lebanese governmenteurobonds 2014 15,221 15,146 34,695 11,467 11,315 3,045 1,675 1,666 2,993 2,985 3,057 282 277 152 12 75 ------5 9 8 2013 56,775 22,815 22,594 19,576 18,047 5,505 5,412 1,599 1,572 2,993 2,985 4,287 4,251 1,300 221 229 93 27 36 ------8
millions LBP 13- Financialassetsatamortisedcost Interest receivable Other debtinstruments-Corporatebonds Interest receivable Certificates ofdepositsissuedbybanks Interest receivable Certificates ofdepositsissuedbytheCentralBank Interest receivable Other sovereignbonds Lebanese governmenttreasurybillsandeurobonds 2014 4,669,361 3,656,159 3,571,370 944,200 922,612 46,406 46,272 22,596 22,536 21,588 52,501 32,288 134 60 CL group financial results 2013 4,784,453 1,217,076 1,187,502 3,485,228 3,419,830 59,576 59,258 22,573 22,513 29,574 50,408 14,990 318 60 215 millions LBP
Annual Report 2014 Credit Libanais Group During 2014,LibertyExecutiveCenter 14- Investmentsinequity–accountedinvestees Summary financialinformationforequity-accountedinvesteesisasfollows. The Group’s shareofitsequity-accountedinvesteesforthe year wasLBP 1,857million(2013:LBP 1,746million). 216 Company Profit Expenses Income Net assets liabilities Non current Current liabilities Non currentassets Current assets Dourrat Loubnan Al Iqaria Hot spotProperties Liberty ExecutiveCenter Net Commerce International PaymentNetwork Credit CardManagement Agence GénéraledeCourtaged’Assurances Dourrat Loubnan Al Iqaria Hot spotProperties Liberty ExecutiveCenter Net Commerce International PaymentNetwork Credit CardManagement Agence GénéraledeCourtaged’Assurances s s . . a a . . l l s s . . . . a a . . l l . . s s s s . . s s a a . . . . a a . . a a l l . . . . l l . . l l . . . . s s . . a a . . l l . . s s . . a a . . l l . . sal wasliquidated. Country ofIncorporation Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Ownership Interest 2014 2014 45.00% 48.12% 19.10% 20.18% 28.96% 25.86% 19,812 0.00% (10,122) (18,309) 3,761 1,681 1,624 2,626 9,859 (9,140) 17,286 49,041 43,485 33,005 261 7,164 --- Ownership Interest 2013 2013 (10,415) (17,833) 45.00% 48.12% 19.10% 20.18% 28.96% 25.86% (8,984) 17,090 39,102 34,926 47,211 17,733 6.27% 6,675 3,600 2,025 1,640 2,450 7,751 255 12
millions LBP millions LBP 15- Propertyandequipment Balance at31December2014 Balance at31December2013 Balance at1January2013 Carrying amounts Balance at31December2014 Disposals Depreciation fortheyear Balance at1January Balance at31December2013 Disposals Depreciation fortheyear Balance at1January2013 Depreciation Balance at31December2014 Transfers Disposals Additions Balance at1January Balance at31December2013 Transfers Disposals Additions Balance at1January2013 Cost 2014 2014 Buildings Land and 72,303 57,931 57,534 58,640 15,845 14,753 14,753 13,663 73,776 72,287 72,287 1,092 1,090 1,489 (16) ------Improvements Installations and 12,828 12,355 14,282 40,019 37,195 37,195 48,246 33,964 52,847 49,550 49,550 2,824 3,261 3,159 1,151 (30) (30) 183 138 ------Furniture and Equipment 16,415 17,946 18,537 34,417 31,065 31,065 27,647 50,832 46,184 49,011 49,011 4,216 4,169 2,420 3,303 (864) (751) (949) (788) 350 312 Vehicles 1,310 1,162 1,162 1,061 2,008 1,988 1,988 1,930 (30) (73) (34) (83) 698 826 869 178 174 141 54 ------Generators Power 1,572 2,278 2,278 2,107 1,364 1,364 1,156 2,365 793 914 951 108 210 208 (2) (2) 29 63 60 ------Expenditures on Capital Advances CL group financial results 137,515 137,515 (1,526) (3,569) 39,489 46,267 56,952 84,132 84,132 84,132 46,267 (98) ------Total 319,343 226,180 173,707 139,546 259,246 259,246 217,037 (1,015) 77,491 85,539 85,539 93,163 61,082 43,224 8,902 8,520 (854) (896) (985) ------217 millions LBP
Annual Report 2014 Credit Libanais Group 16- Intangibleassets 218 Balance at31December2014 Balance at31December2013 Carrying amounts Balance at31December2014 Disposals Amortisation fortheyear Balance at1January Balance at31December2013 Disposals Amortisation fortheyear Balance at1January2013 Amortisation Balance at31December2014 Disposals Additions Balance at1January Balance at31December2013 Disposals Additions Balance at1January2013 Cost 2014 2014 Key Money 1,631 1,593 1,593 1,555 1,883 1,853 1,853 1,853 252 260 38 38 30 ------Licenses 4,038 1,516 4,215 3,443 3,443 3,058 8,253 3,301 4,959 4,959 1,094 3,872 779 392 (7) (7) (7) (7) Software 16,675 17,031 17,031 15,569 14,238 14,238 12,674 17,292 1,723 2,793 1,331 1,564 (258) (21) 614 282 ------Total 21,415 19,274 19,274 17,287 27,428 23,843 23,843 22,400 6,013 4,569 2,148 1,994 3,613 1,708 (265) (28) (7) (7)
millions LBP 19- LoansanddepositsfromCentral Banks 18- Otherassets 17- Assetsheldforsale Accrued interestpayable Loans fromCentralBanks Current account Other assets Deferred charges Restricted depositswiththeCentral Treasury Inventories ofapartments Reinsurers’ shareoftechnicalreserves Accounts receivableandprepayments Balance at31December Disposals Additions Balance at1January 2014 2014 2014 397,350 395,158 122,007 (1,184) 37,815 36,631 87,608 14,550 2,183 4,744 6,015 8,231 859 --- 9 CL group financial results 2013 2013 2013 118,896 (7,395) 37,815 44,895 85,880 14,506 77,462 77,282 1,972 6,015 1,266 9,257 315 180 --- 219 millions LBP millions LBP millions LBP
Annual Report 2014 Credit Libanais Group intermediate circularN the CentralBankofLebanonoffered thecommercial 22- Subordinateddebtissued 21- Depositsfromcustomers 20- Depositsfromotherbanksandfinancialinstitutions 220 decision N Following theCentralBankofLebanonbasic Accrued interestpayable Subordinated debt Accrued interestpayable Other creditbalances Savings Current deposits Term deposits Accrued interestpayable Financial institutions Term deposits Current deposits o . 6116 relatedtobasiccircularN o . 367issuedon11 August 2014, o . 23and clients atanaverageinterestrateof5.2%. were givensubjecttograntingmainlyloansback per annumpayableonayearlybasis. These facilities banks facilitiesthataresubjecttoaninterestrateof1% 11,237,014 2014 2014 2014 6,318,979 1,180,772 3,637,981 100,765 120,376 113,063 61,801 37,481 52,703 40,152 7,375 7,313 535 10,438,788 2013 2013 2013 6,100,568 3,123,914 1,119,969 120,461 113,063 38,626 57,998 31,339 99,172 55,711 9,251 7,398 584
millions LBP millions LBP millions LBP of 6.75%payableannuallyandmaturingon15January an amountofUSD75,000,000bearinginterestrate During 2010,theBankissuedsubordinatedbondsfor 24- Otherliabilities 23- Taxliabilities Other payables Other creditors Unearned revenue Accrued expenses Technical reservesforinsurancecompanies Due toreinsurance Margins heldagainstdocumentarycredits Other taxes Deferred taxliabilities Taxes onsalaries Taxes oninterest Income tax capital asperlocalregulatoryrequirements. 2018. These subordinateddebtsareincludedin Tier 2 2014 2014 250,408 50,077 34,269 94,975 28,327 16,716 38,511 3,974 2,785 5,354 2,049 5,294 1,234 275 CL group financial results 2013 2013 264,366 49,996 43,653 30,030 45,166 17,848 84,611 1,153 9,757 3,461 4,355 2,019 5,260 2,753 221 millions LBP millions LBP
Annual Report 2014 Credit Libanais Group exchange position. Central BankCircularnumber32relatedtoforeign This provisionistakenaspertherequirementof (a) Provisionforstructuralexchangeposition 25- Provisionsforrisksandcharges 222 materially different fromwhatwouldberequiredasperIAS 19 Employeebenefits. The provisionforemployeebenefitsobligations’ amountrecognisedintheconsolidated financialstatementsisnot Balance at31December Provision written-off during the year Provision usedduringtheyear Provision raisedduringtheyear Balance at1January Provision forlossonforeigncurrencyposition(d) Provision forrisksandcharges(c) Provision foremployeebenefitsobligations(b) Provision forstructuralexchangeposition(a) obligations duringtheyearwasasfollows. The movementintheprovisionforemployeebenefits obligations (b) Provisionforemployeebenefits 2014 2014 (1,133) 29,045 31,683 39,085 31,683 3,827 1,516 5,611 (56) 275 2013 2013 29,045 24,780 38,710 29,045 4,843 4,070 5,318 (538) (40) 277
millions LBP millions LBP capital comprised23,400,000ordinaryshareswitha At 31December2014,theauthorisedandissuedshare premium 26- Sharecapitalandshare year-end foreignexchangeposition. provides foranamountequivalentto5percentofits As perlocalregulatoryrequirementstheGroup position (d) Provisionforlossonforeigncurrency The movementintheprovisionforrisksandchargesduringyearwasasfollows. (c) Provisionforrisksandcharges LBP 3,201perpreferredshare(2013:nil) LBP 2,118.85 per ordinary share (2013: LBP 1,574.49) Balance at31December Difference ofexchange Transfer tocollectiveallowance Provision released Provision usedduringtheyear Provision raisedduringtheyear Balance at1January Group duringtheyear. The followingdividendsweredeclaredandpaidbythe Dividends shares arefullypaid. dividends asdeclaredfromtimetotime. All issued The holdersofordinarysharesareentitledtoreceive with regardstotheBank’s residualassets. nominal valueofLBP 11,000. All sharesrankequally 2014 2014 (1,868) 52,782 49,581 3,201 1,516 4,070 (818) (26) 158 --- CL group financial results 2013 2013 36,843 36,843 4,652 4,070 (899) 307 10 ------223 millions LBP millions LBP
Annual Report 2014 Credit Libanais Group The LebaneseCommercialLawandtheGroup’s (b) Legalreserve distribution. 20 years,respectively. This reserveisnotavailablefor less than1.25%and2%bytheendof10 local andforeigncurrencies. This reserveshouldnotbe assets andoff-balance sheetfinancialinstruments in 0.2% andamaximumrateof0.3%theriskweighted reserve forgeneralbankingrisksataminimumof regulations andcommencingat1996,toset-upa The Groupisrequired,accordingtotheCentralBank (a) Generalbankingrisksreserve 27- Capitalreserves amounted toLBP 139,750pershare. an increaseofLBP 11,000 million. The sharepremium from LBP 257,400milliontoLBP 268,400million,thus of LBP 11,000; increasingthesharecapitalofBank non-cumulative preferredshareswithanominalvalue shareholders approvedtheissueof1,000,000perpetual In July2013,theextraordinarygeneralassemblyof Issue ofpreferredshares 224 Reserve appropriatedtocapitalincrease(c) Legal reserve(b) General bankingrisksreserve(a) th th increase caption. changes inequityunderreserveappropriatedtocapital sale andtransferredsubsequentlytothestatementof statement ofcomprehensiveincomeatthedate in settlementofdebtshouldberecognisedthe the gainrealisedonsaleofanassetacquired reserve isnotavailablefordistribution. annual profitsbetransferredtolegalreserve. This articles ofassociationstipulatethat10%thenet shares donothavevotingrights. dividends declaredforordinaryshareholders. These do nothavetherighttoparticipateinanyadditional dividends toordinaryshareholdersaredeclared. They dividend attheBank’s discretion,orwhenever Holders ofthesesharesreceiveanon-cumulative As perBankingControlCommissioncircularN (c) Reserveappropriatedtocapitalincrease 2014 186,183 92,980 90,396 2,807 2013 160,464 84,359 76,105 o . 173, ---
millions LBP 29- Otherreserves The movementinfairvaluereserveisasfollows: 28- Fairvaluereserve Other reserves Reserve for property acquired in settlement of debt Balance at31December Financial assets at fair value through other comprehensive income Balance at1January Fair valuereserve 2014 2014 2014 221,688 209,881 27,744 22,002 27,744 11,807 5,742 CL group financial results 2013 2013 2013 221,028 212,219 22,002 12,182 22,002 9,820 8,809 225 millions LBP millions LBP millions LBP
Annual Report 2014 Credit Libanais Group 31- Netfeeandcommissionincome 30- Netinterestincome 226 Net feeandcommissionincome Total feeandcommissionexpense Fees onvariousbankingtransactions Fees on credit cards and ATM transactions Fee andcommissionexpense Total feeandcommissionincome Fees onlettersofguarantee Fees onvariousbankingtransactions Fees ontransactionswithcustomers Fees on credit cards and ATM transactions Fee andcommissionincome Net interestincome Total interestexpense Subordinated debtissued Deposits fromrelatedparties Deposits fromcustomers Deposits from other banks and financial institutions Loans anddepositswithCentralBanks Interest expense Total interestincome Financial assetsatamortisedcost Loans andadvancestorelatedparties Loans andadvancestocustomers Balances with other banks and financial institutions Cash andbalanceswithCentralBanks Interest income Note 42 42 2014 2014 (495,624) (462,209) (42,631) (15,123) (27,508) (20,405) 210,610 706,234 328,398 284,860 (7,547) (3,282) (2,181) 56,541 99,172 36,823 27,587 27,279 88,270 7,483 1,080 3,626 2013 2013 (459,401) (432,191) (36,983) (12,951) (24,032) (15,334) 206,292 665,693 336,012 266,460 (4,085) (7,611) 56,102 93,085 32,451 29,715 24,340 58,207 6,579 1,301 3,713 (180)
millions LBP millions LBP million andUSD3respectively. Thegainonthetransaction amountedtoLBP 156million. on May2014andboughtLebanese RepublicEurobondsmaturingin April 2020andNovember2026amounting toUSD19.5 During 2014andfollowingthe offeroftheCentralBankLebanon,soldLebanese RepublicEurobondsmaturing LBP 2,209 million. one treasurybillmaturinginSeptember2025amounting toLBP 84,046million.Thegain onthetransactionamountedto (b) CertificatesofdepositsissuedbytheCentralBank of LebanonmaturingonMarch2014andJuneweresoldagainst amounted toLBP 6,187million. against onecertificateofdepositmaturinginJanuary2023 amountingtoLBP (a) CertificatesofdepositsissuedbytheCentralBank of LebanonmaturingonJanuary2014andDecemberweresold *During 2013andfollowingtheofferofCentralBank of Lebanon: 33- Netgainonfinancialinvestments to LBP 113 millionandLBP 912million. and November2018amountingtoUSD2million5respectively. Thegainonthesetransactionsamounted the Groupalsosold,forsamepurpose,corporatebonds(AbbeyNationalandMerrillL transactions amountedtoLBP 149million,LBP 2,879million,LBP 920millionandLBP 3,643millionrespectively. Moreover, 2021 amountingtoUSD23million,1917millionand18respectively certificates ofdepositsissuedbytheCentralBankLebanonmaturingon *During 2014,theGroupsoldformatchingliquiditypurposeseurobondsissuedbyLebaneseGovernmentand 32- Nettradingincome Net gainonsaleofotherfinancialinvestments Interest paidonislamicbankingactivities Net gain from exchange of financial assets at amortised cost* Dividend receivedonunquotedsecurities Dividend receivedonquotedsecurities Net gainonforeigncurrencyposition Net gain on sale of investments securities Net gainontradingportfolio * April 2015,March2017,2020and April 154,000million.Thegainonthetransaction ynch &Co.)maturingon April 2016 2014 2014 (1,107) 17,958 2,977 1,450 2,478 7,578 8,616 1,764 156 --- CL group financial results . Thegainonthese 2013 2013 (1,215) 18,229 17,445 2,242 9,609 8,396 130 784 56 --- 227 millions LBP millions LBP
Annual Report 2014 Credit Libanais Group 36- Personnelexpenses 35- Netimpairmentonloansandadvances 34- Otherincome 228 Other personnelexpenses Employee benefitsobligation Compulsory socialsecurityobligations Allowances totheBoardofDirectors Wages andsalaries Write-back of allowance for impairment on loans and advances to related parties Write-back ofallowanceforimpairmentonloansandadvancestocustomers Allowance forimpairmentonloansandadvancestorelatedparties Allowance forimpairmentonloansandadvancestocustomers Other income Gain onsaleofpropertyandequipment Rental income Gain onsaleofassetsheldfor 2014 2014 2014 (10,128) (14,493) 104,528 (1,375) 16,026 10,573 71,308 4,099 2,522 6,077 4,690 1,105 5,210 262 530 20 2013 2013 2013 (11,591) 100,170 (6,625) (1,424) 15,340 10,239 67,159 4,914 2,518 4,872 3,924 6,390 648 297 --- 3
millions LBP millions LBP millions LBP 38- Incometaxexpense 37- Otherexpenses Income tax expense on subsidiaries and branches Income taxexpenseontheBank’s operations Other expenses Training charges Stationery andofficesupplies Board ofdirectorsattendanceallowance Transportation charges Computer maintenancecharges Travel andentertainmentfees Premiums fortheguaranteeofdeposits Professional fees Postage andtelecommunicationcharges Repairs andmaintenancecharges Information technologycosts Insurance premiums Electricity, waterandheatingcharges Advertising expenses Taxes andsimilardisbursements Rental andbuildingcharges 2014 2014 (13,579) (12,058) (1,521) 60,288 2,654 1,393 2,406 3,037 2,403 2,444 5,397 4,161 3,060 4,601 3,275 2,432 4,178 5,780 5,975 6,456 636 CL group financial results 2013 2013 (16,213) (13,458) (2,755) 59,671 1,561 2,374 3,191 1,849 2,538 5,060 4,710 3,151 4,388 3,335 2,289 4,178 5,737 6,090 6,493 2,177 550 229 millions LBP millions LBP
Annual Report 2014 Credit Libanais Group 39- Cashandcashequivalents is notreimbursableandconsideredasafinalincometaxexpense. on corporateincometaxdue.Incasethiswithholdingexceedsthecalculatedexpense, theexcess *The BankinLebanonissubjecttoawithholdingtaxof5%oncertaininterestincomewhichconsideredas prepayment Reconciliation ofincometaxexpenseontheBank’soperationsinLebanon 230 Deposits fromotherbanksandfinancialinstitutions Loans anddepositswithCentralBanks Balances withotherbanksandfinancialinstitutions Cash andbalanceswithCentralBanks Effective incometaxrate Excess ofcorporatetaxoverpaidoninterest Less: taxpaidoninterestreceived Corporate incometaxexpenseat15% Taxable income Less: taxexemptincome Less: dividendsreceived 5% taxoninterestreceived Non-deductible expenses Less: profitofbranchesabroadandsubsidiaries Current taxliability Profit fortheyear Income taxexpense Profit beforeincometax * 2014 2014 1,536,099 1,065,223 (40,152) (19,343) (13,579) (13,574) (12,186) 513,211 110,408 12.30% (2,183) 96,829 12,184 81,229 11,958 5,437 (178) 100 --- 2013 2013 1,174,948 1,603,032 (31,339) (28,767) (12,189) (16,213) 459,603 103,218 119,431 13.58% (4,999) 13,729 91,526 12,258 8,794 1,200 1,540 (180) (178)
millions LBP millions LBP 41- Groupentities 40- Commitmentsandcontingencies Company Credit Libanais Credit International Collect Credilease Capital RealEstate Business DevelopmentCenter Credit Libanaisd’AssurancesetdeReassurances Hermes Tourism and Travel Soft Management RealEstate Cedar’s Lebanese IslamicBank Credit LibanaisInvestmentBank Assets undermanagement Other commitmentsreceived Commitments ofsignaturereceivedfromfinancialintermediaries Restricted andnon-restrictedfiduciaryaccounts Securities’ commitments Guarantees giventocustomers Guarantees Financing commitmentsgiventofinancialinstitutions Financing commitmentsgiventocustomers Financing commitments Credit Libanais Credit Libanais Credit Libanais sal sal sal sal sal sal sal (ErbilBranch) (BaghdadBranch) (BahrainBranch) (LimassolBranch) sa sal sal sal sal sarl sal sal Banking Banking Banking Banking Banking Collection services of receivables Leasing services Real estate Advertising Insurance Tourism andticketing IT solutions Real estate Banking Banking Business Activity Country ofIncorporation Iraq Iraq Bahrain Cyprus Senegal Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon Lebanon 2014 7,868,149 622,620 190,726 250,212 499,097 33,313 10,671 99,363 CL group financial results % ofControl 2014 Branch Branch Branch Branch 92.82 44.94 99.26 98.00 98.62 66.97 99.99 47.00 99.92 99.84 99.86 2013 % ofControl 7,386,768 218,964 190,884 560,809 637,301 111,294 29,644 11,346 2013 Branch Branch Branch Branch 92.82 44.94 99.26 98.00 98.62 66.97 99.99 47.00 99.92 99.84 99.86 231 millions LBP
Annual Report 2014 Credit Libanais Group (b) Balanceswithassociatedcompanies Key managementpersonnelcompensationfortheyearcomprised: No impairmentlosseshavebeenrecordedagainst for employeesoftheBank. related partiesareequaltotheinternallyapprovedrates Interest rateschargedonbalancesoutstandingfrom Key managementpersonnelandtheirimmediaterelativeshavetransactedwiththeGroupduringyearasfollows: (a) Transactionsandbalanceswithkeymanagementpersonnel 42- Relatedparties 232 Indirect facilities Direct facilities and credit balances Short-term employeebenefits Indirect facilities Direct facilities and credit balances - Lettersofguarantees - Deposits - Loansandadvances - Lettersofguarantees - Lettersofcredit - Deposits - Loansandadvances the yearend. management personnelandtheirimmediaterelativesat been madeforimpairmentlossesonbalanceswithkey management personnel,andnospecificallowancehas balances outstandingduringtheyearwithkey 2014 2014 2014 399,042 25,557 28,381 10,396 10,622 1,026 25 67 2013 2013 2013 320,140 31,170 12,532 10,113 8,975 8,819 265 26
millions LBP millions LBP millions LBP additional taxesandpenalties weresettledin2014. inspection forthetaxyears 2008to2011. These and penaltiesfollowingthe MinistryofFinance’s In 2014,theBankwasassessedforadditionaltaxes 43- Prioryeartaxadjustment (f) Interestexpenseondepositsfromrelated parties (e) Depositsfromrelatedparties (d) Interestincomeonloansandadvancestorelatedparties (c) Loansandadvancestorelatedparties Interest expenseondepositsfromrelatedparties Accrued interestpayable Savings Current deposits Term deposits Interest incomeonloansandadvancesrelatedparties Accrued interestreceivable Net loansandadvancestoassociatedcompanies Loans and advances to shareholders, directors and other key management personnel liabilities bythesameamount. 1 January2013byLBP 6,911 millionandcrediting other financial statementsbydebiting retainedearningsasat Accordingly, theBankhasrestateditsconsolidated 2014 2014 2014 2014 428,832 263,719 132,711 30,993 20,405 35,958 10,396 25,557 1,409 1,080 5 CL group financial results 2013 2013 2013 2013 352,170 217,288 116,826 17,196 15,334 21,509 12,532 1,301 8,975 860 2 233 millions LBP millions LBP millions LBP millions LBP
Annual Report 2014 Credit Libanais Group CLIB financial results
Financial Results Credit Libanais Investment Bank board of (CLIB) directors
CHAIRMAN GENERAL MANAGER Board of Directors 235 Management’s Dr. Joseph Torbey Discussion and Analysis of Results 236
Statement of MEMBERS Financial Position 242 Statement of Comprehensive H.E. Dr. Samir Makdessi income 244
Statement of H.E. Mr. Jacques Joukhadarian Cash Flows 245 Dr. Chafic Moharram Statement of Changes in Equity 246 Mr. Joe Issa El Khoury
Dr. Michel Khadige
Mr. Moustafa Alaeddine Credit Libanais Investment Bank (CLIB) Annual Report 2014
234 235 CLIB financial results management discussion and analysis of results
Basis of Presentation The following table sketches the changes in major asset classes year-on-year.
The following discussion and analysis have been As at end of 2014 2013 % Change
prepared based on the audited consolidated financial Cash and balances with Central Banks 128,985 111,263 15.93 statements of Credit Libanais Investment Bank (“CLIB”) Balances with other banks and financial institutions 413 1,176 -64.84
as at and for the years ended 31 December 2013 and Head Office, branches, parent company, sisters, fin. Inst. & subs. 458,533 344,571 33.07 millions LBP 2014 and on selected financial information. Loans and advances to customers 342,129 341,729 0.12 Loans and advances to related parties 393 573 -31.37 Analysis of Financial Position Financial assets at fair value/OCI 20,063 18,301 9.63 Financial assets at amortised cost 106,726 119,910 -11.00 1) Statement of Financial Position Investment in associates 38,969 39,157 -0.48 a) Total Assets Property & equipment 1,107 1,192 -7.09 CLIB’s Assets have witnessed a healthy 12% growth Intangible assets 977 1,938 -49.58 in 2014, particularly in liquid assets which was Assets held for sale 15,403 15,403 0.00 substantially matched by an increase in funding Other assets 3,142 3,299 -4.78 consisting primarily of customer deposits. Total Assets 1,116,840 998,512 11.85
b) Liabilities & Shareholders’ Equity Total Liabilities showed a 13.47% increase to reach On the equity side, shareholders’ equity increased LBP 963 billion in 2014 compared to LBP 849 billion at to LBP 153.83 billion in 2014, an increase of 2.66% yearend 2013. The 13.64% rise in total deposits, which compared to the LBP 149.85 billion recorded in 2013. constitute 99.44% of CLIB’s liabilities, was the main driver behind this increase. Credit Libanais Investment Bank (CLIB) Annual Report 2014
236 237 CLIB financial results
The following table sketches the development of the liability and equity accounts during the period 2013-2014: The above table clearly states that the entirety of CLIB’s financing is sourced from customer deposits
As at end of 2014 2013 % Change Uses of Funds As at end of 2014 2013 % of Total Uses
Loans and deposits with Central Banks 294 ------Head Office, branches, parent company, sisters, fin. Inst. & subs. 458,533 344,571 57.24 Head Office, branches, parent company, sisters, fin. Inst. & subs. --- 1 -100.00 Loans & advances to customers 342,129 341,729 42.71
Deposits from Customers 934,892 826,751 13.08 millions LBP Loans & advances to related parties 393 573 0.05 millions LBP Deposits from related parties 22,706 15,892 42.88 Total 801,056 686,873 100.00 Current tax liabilities 1,191 2,033 - 41.43 Other liabilities 2,103 2,351 -10.55 Provision for risks and charges 1,821 1,639 11.12 On the fund’s utilization front, loans and advances to the bulk of CLIB’s funds deployment at a ratio of Total Liabilities 963,007 848,667 13.47 customers, while remaining flat YOY, were reduced 57.24% in 2014 compared to 50.17% in 2013. to a 42.76% share of the total fund utilization in 2014 compared to 49.83% in 2013. 2) Statement of Income Credit Libanais Investment Bank posted after tax net Shareholders’ Equity 2014 2013 % Change On the other hand, CLIB’s current account with the Head Office, branches and parent company has profits of LBP 11.44 billion in 2014, an increase of Share capital-Common Shares 80,000 80,000 --- witnessed a 33.07% increase in 2014 to constitute 2.25% from the LBP 11.19 billion registered in 2013. Capital reserves 38,955 33,474 16.38
Available-for-sale financial instruments revaluation reserve 887 719 23.38 millions LBP Retained Earnings 12,996 15,572 -16.54 Other reserves 9,556 8,892 7.46 Result of the period 11,439 11,188 2.25 Total Shareholders’ Equity 153,833 149,845 2.66 Total Liabilities & Shareholders’ Equity 1,116,840 998,512 11.85
The following table portrays the evolution of CLIB’s sources and uses of funds during the period 2013-2014:
Sources of Funds As at end of 2014 2013 % of Total Sources
Head Office --- 1 --- Credit Libanais Investment Bank (CLIB) Customers’ deposits 934,892 826,751 97.63
Deposits from related parties 22,706 15,892 2.37 millions LBP Total 957,598 842,644 100.00 Annual Report 2014
238 239 CLIB financial results
The following table highlights the yearly change of the major items in CLIB’s statement of income: Profits of CLIB are stated on an individual basis and do CLIB’s Pre-tax consolidated return on average equity not include the share of the bank in the companies in and on average assets reached 11.38% and 1.59% which it holds a direct interest. respectively in 2014, compared to 11.58% and 1.60% 2014 2013 % Change respectively in 2013. Interest and similar income 57,204 52,594 8.77 After consolidating the share of CLIB in the profit of Interest and similar expense (38,554) (37,397) 3.10 affiliated companies, Net profits for the year 2014 would aggregate LBP 16.12 billion compared to LBP 15.06 Net interest income 18,650 15,197 22.72 millions LBP billion in 2013. Fees & commissions income 434 407 6.66 Fees & commissions expense (1,287) (92) 1,304.53 Net fees & commissions income / (loss) (853) 315 -370.57 Net gain (loss) on trading portfolio (1,021) 432 -336.61 Net gain on disposal of subsidiary --- 255 -100.00 Net gain on financial investments 4,924 2,769 77.82 Other operating income 803 2,821 -71.53 Total operating income 22,503 21,789 3.28 Credit loss expense (1,393) (979) 42.22 Net operating income 21,110 20,810 1.44 Staff costs (3,227) (3,225) 0.07 Depreciation and amortization (1,051) (1,057) -0.57 Other operating expenses (4,669) (4,184) 11.60 Total Operating Expenses (8,947) (8,466) 5.68 Operating Profit 12,163 12,344 -1.47 Profit before tax 12,163 12,344 -1.47 Income Tax expense (724) (1,156) -37.39 Profit for the year 11,439 11,188 2.25 Other comprehensive income Net gain on available-for-sale financial assets 168 100 68.00 Total comprehensive income for the year, net of tax 11,607 11,288 2.83 Credit Libanais Investment Bank (CLIB) Annual Report 2014
240 241 242 financial position statement of Total Liabilities Provision forrisksandcharges Other liabilities Current taxliabilities Related parties’ deposits Customers’ deposits Head office, branches,parentcompany, foreignsisterfinancialinstitutions & subsidiaries Loans anddepositswithCentralBanks Liabilities Total Assets Other assets Assets acquiredinrecoveryofbaddebts Intangible assets Property andequipment Investments inassociates Financial assetsatamortizedcost Financial assetsatFairvaluethroughothercomprehensiveincome Loans andadvancestorelatedparties Loans andadvancestocustomers Head office, branches,parentcompany, foreignsisterfinancialinstitutions & subsidiaries Due frombanksandfinancialinstitutions Cash andbalanceswiththecentralbank Assets As at31December 2014 1,116,840 963,007 934,892 342,129 458,533 128,985 106,726 22,706 15,403 38,969 20,063 1,821 2,103 1,191 3,142 1,107 977 393 413 294 --- 2013 341,729 344,571 998,512 848,667 826,751 119,910 111,263 15,403 39,157 18,301 15,892 1,176 3,299 1,938 1,192 1,639 2,351 2,033 573 --- 1
millions LBP Total Liabilities&Shareholders’ Equity Total Shareholders’ Equity Non-Controlling Interest Total Equity Attributable toEquityHoldersoftheBank Profit fortheyear Retained Earnings Fair valuereserve Special Reserves Against doubtfuldebts Reserve forpropertyacquiredinsettlementofdebt Other reserves Capital reserve General Bankingrisksreserve Legal reserves Share capital-Commonshares Shareholders’ Equity 2014 1,116,840 153,833 153,833 12,996 12,797 23,352 80,000 11,439 1,298 4,753 3,504 2,807 887 ---- CLIB financial results 2013 998,512 149,845 149,845 22,233 80,000 15,572 11,241 11,188 1,298 3,323 4,271 719 ------243 millions LBP
Annual Report 2014 Credit Libanais Investment Bank (CLIB) CLIB financial results statement of statement of comprehensive income cash flows
As at 31 December 2014 2013 2014 2013
Interest and similar income 57,204 52,594 Cash Flows From Operating Activities Interest and similar expense (38,554) (37,397) Profit before tax 12,162 12,344 millions LBP Net interest income 18,650 15,197 Adjustments for: millions LBP Fees and commission income 434 407 Depreciation and Amortization 1,051 1,057 Fees and commission expense (1,287) (92) Net (recovery) Impairment Loss on loans and advances to customers 1,389 979 Net fees and commission income (loss) (853) 315 Net Provision for End of service indemnity 189 231 Net gain/loss on financial investments 4,924 2,769 Gain /Loss on sale of shares in an associate --- (255) Net gain/loss on disposal of subsidiaries --- 255 14,791 14,356 Net gain on FVTPL financial instruments (1,021) 432 Financial Assets maturing later than 3 months (36,444) 15,862 Other operating income 803 2,821 Change in loans and advances to customers and related parties (1,613) (42,481) Total Operating Income 22,503 21,789 Change in other assets 158 (1,301) loss expense (1,393) (979) Change in deposits from customers 108,140 (38,819) Net Operating Income 21,110 20,810 Change in deposits from related parties 6,814 955 Staff expenses (3,227) (3,225) Change in Current Tax Liabilities (409) 161 Depreciation and Amortisation (1,051) (1,057) Change in other liabilities (248) (1,011) Other operating expenses (4,669) (4,184) 91,189 (52,278) Total Operating Expenses (8,947) (8,466) Income tax paid (1,156) (1,113) Profit Before Tax 12,163 12,344 Settled End of Service indemnity (3) (4) Income Tax Expense (724) (1,156) Net cash flows from operating activities 90,030 (53,395) Profit for the Period 11,439 11,188 Cash Flows From Investing Activities Change in Fair Value of Financial Instruments through OCI 168 100 Acquisition of Property and Equipment (6) (93) Total comprehensive income for the year 11,607 11,288 Proceeds from investments in associates 188 533 Net change in investment securities 11,590 (10,908) Net change in assets acquired in recovery of bad debts --- 7,017 Net cash used in investing activities 11,772 (3,451) Cash flows from financing activities Distribution of dividends (8,000) ---
Effect of exchange rate fluctuation on cash & cash 381 (138) Credit Libanais Investment Bank (CLIB) Net cash from financing activities (7,619) (138) Net decrease in cash and cash equivalents 94,183 (56,984) Cash and cash equivalents at 1 January 58,785 115,769 Cash and cash equivalents at 31 December 152,968 58,785 Annual Report 2014
244 245 CLIB financial results statement of changes in equity
Reserve For Special Reserves Share Capital- General Banking Property Acquired in Against Doubtful Fair Value Retained Profit For Common Shares Legal Reserve Risks Reserve Capital Reserve Other Reserves Settlement of Debt Debts Reserve Earnings the Year Total Equity
Balance at 01 January 2014 80,000 22,233 11,241 --- 4,271 3,323 1,298 719 15,572 11,188 149,845 Profit allocation 2013 --- 1,119 1,556 2,807 --- 600 ------5,106 (11,188) ---
Distribution of dividends ------(8,000) --- (8,000) millions LBP Transfer to retained earnings ------(1,148) ------1,148 ------Reserve for property acquired in settlement of debt ------830 ------(830) ------Adjustment ------381 ------381 Profit for the year ------11,439 11,439 Net Change in fair value of financial assets at fair value through OCI ------168 ------168 Total comprehensive income for the year 2014 ------168 --- 11,439 11,607 Balance at 31 December 2014 80,000 23,352 12,797 2,807 3,504 4,753 1,298 887 12,996 11,439 153,833 Balance at 01 January 2013 80,000 21,367 9,754 --- 3,298 3,516 1,386 619 10,098 8,657 138,695 Profit allocation 2012 --- 866 1,487 ------830 ------5,474 (8,657) --- Transfer to reserves ------1,111 (1,023) (88) ------Adjustment ------(138) ------(138) Profit for the year ------11,188 11,188 Net Change in fair value of financial assets at fair value through OCI ------100 ------100 Total comprehensive income for the year 2013 ------100 --- 11,188 11,288 Balance at 31 December 2013 80,000 22,233 11,241 --- 4,271 3,323 1,298 719 15,572 11,188 149,845 Credit Libanais Investment Bank (CLIB) Annual Report 2014
246 247 CLA financial results
Financial Results board of Credit Libanais d’Assurances et de Réassurances (CLA) directors
CHAIRMAN GENERAL MANAGER Board of Directors 249 Mr. Jacques Sehnaoui Statement of the Chairman 250 Management’s Discussion and MEMBERS Analysis of Results 252
Independent Auditors Report 254 Credit Libanais sal represented by Dr. Joseph Torbey
Statement of The Honourable Mr. Said Mirza Financial Position 256 Statement of Comprehensive Mr. Khaldoun Barakat income 258 H.E. Mr. Jacques Joukhadarian Statement of Changes in Equity 259 AGCA sal represented by Mr. Fady Rizk Statement of Cash Flows 260 Mr. Elie Torbey Credit Libanais d’Assurances et de Réassurances (CLA) Annual Report 2014
248 249 CLA financial results
statement of the chairman
In 2014, the Insurance industry in Lebanon recorded a yearly growth in premiums of 5.6% compared to 7% last year. In this context, noteworthy that Credit Libanais d’ Assurances et de Réassurances sal (CLA) recorded in 2013 a 9.46% growth in premiums.
During the current year under review, written premiums amounted to LBP 33.682 billion, well above the overall LBP 30.771 billion recorded in the 2013.
Moreover, in 2014 CLA net profit margin increased to reach 49.54% compared to 44.07% recorded in 2013, with a net profit recorded for the year under review amounting to LBP 16.685 billion and a return on equity (ROE) of 27.48%.
The reason behind the sustainable trend of profitable business over the years is mainly attributed to the conservative underwriting policy based on a full assessment of the risk to be insured, as well as the competence and devotion of CLA staff and management, backed by the continuous support of our shareholders and Directors. This strong management mix contributed to building the strong bond between CLA and its customer base, the main asset behind the sustained prosperity of the company.
Sincerely,
Jacques J. Sehnaoui Chairman Credit Libanais d’Assurances et de Réassurances (CLA) Annual Report 2014
250 251 CLA financial results management’s discussion and analysis of results
A Year in Review
CLA’s total assets increased confirming the company’s Performance by class of business Casualty strength since in 2014 the company total assets Motor Casualty business premium income generated for the amounted to LBP 193.659 billion as compared to LBP The motor line of business showed a slight decrease in year 2014 amounted to LBP 2.594 billion as compared 176.803 billion in 2013 with a percentage increase of premiums from LBP 4.862 billion in 2013 to LBP 4.029 to LBP 2.614 billion in 2013, a percentage decrease of 9.60%. billion for the year under review. 0.8 %.
Cash flow statement for the company at the end of the The loss ratio for the motor class of business for the The lines of business falling under the casualty class are mainly Hospitalization, Workmen’s compensation, year 2014 remained nearly similar to the cash flow year 2014 based on accounting year production is personal accident, theft on property…etc. statement of the year 2013. The net cash provided from 44.06 % as compared to 51.80 % in 2013. The loss ratio calculated on this line of business is operating activities decreased by only 4.58 % from LBP Marine 15.115 billion in 2013 to LBP 14.424 billion in 2014. 18.14 % in 2014 while it was 61.12 % in 2013. The marine business showed a decrease in premiums The total gross written premium amounting to LBP from LBP 205 million in 2013 to LBP 125 million for Technical Reserves 33.682 billion in 2014. As well as the Gross written 2014. At the end of year 2014, an increase in the unexpired risks reserves has been recorded to become LBP premiums for the life insurance business amounted to Fire LBP 19.872 billion in 2014. 90.636 billion with a difference of LBP 9.662 billion The premiums income for the fire business in 2014 between this year and the year 2013 when it recorded The after tax profits recorded in 2014, amounting to LBP totaled LBP 7.062 billion compared to LBP 5.519 billion LBP 80.974 billion including the premium deficiency 16.684 billion as compared to LBP 13.561 billion in 2013 achieved in the year 2013 this recording a percentage reserves. increase of 27.96% with a percentage increase of 23.02% mainly attributed Outstanding claims reserves increased from LBP 3.636 to the increase of operating and financial income. Life billion in 2013 to 4.339 LBP billion in 2014 including IBNR due to an increase in life claims. In 2014, the generated income under the life business totaled LBP 19.872 billion as compared to LBP 17.571 As a result, CLA recorded as technical reserves LBP
billion in 2013, a percentage increase of 13.09%. 94.975 billion in its books for 2014 as compared to LBP Credit Libanais d’Assurances et de Réassurances (CLA) 84.610 billion in 2013 with an increase of 12.25%. The loss ratio recorded for the year under review is 17.73 % compared to the loss ratio of 7.74 % recorded The loss ratio decreased from 25.84 % in 2013 to 23.58 in the year 2013. % in 2014. Annual Report 2014
252 253 CLA financial results independent auditors report
To the shareholders of Credit Libanais Managements responsibility for the financial statements d’Assurances et de Reassurances sal Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management Report on the financial statements determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. We have audited the accompanying financial statements of Credit Libanais D’assurances et de Reassurances sal Auditors’ responsibility which comprise the statement of financial position as Our responsibility is to express an opinion on these financial statements based on our audit. We conducted of 31 December 2014, the statements of comprehensive our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the income, changes in equity and cash flows for the year financial statements are free from material misstatement. then ended, and a summary of significant accounting An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the policies and other explanatory notes. financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Credit Libanais D’Assurances et de Reassurances sal as of 31 December 2014 and its financial
performance and its cash flows for the year then ended in accordance with International Financial Reporting Credit Libanais d’Assurances et de Réassurances (CLA) Standards.
10 February 2015 DFK Fiduciaire du Moyen-Orient Beirut, Lebanon Annual Report 2014
254 255 256 financial position statement of Total Equity Retained earnings Other reserves Legal reserve Capital Equity Equity andliabilities Total Assets Cash andcashequivalents Bank deposits Reinsurance assets Other receivables Reinsurance balancesreceivable Receivables fromrelatedparty Premium receivables Unquoted equityinvestments Financial assetsatamortisedcost Deferred acquisitioncosts Intangible assets Property andequipment Assets As at31December2014 193,659,509 135,965,928 60,713,875 16,684,799 30,689,077 10,005,000 14,550,201 10,333,122 2014 3,335,000 3,579,972 3,899,101 7,537,500 1,484,852 5,636,306 9,955,845 230,786 455,706 30,191 176,803,637 120,120,719 52,386,177 13,561,663 25,484,513 10,005,000 14,506,254 10,341,546 2013 3,335,000 3,727,948 3,773,188 7,528,078 5,636,306 9,516,002 893,961 349,230 398,914 11,489
thousands LBP Total liabilitiesandequity Total Liabilities Taxes payable Reinsurance deposits Reinsurance balancespayable Bank overdraft Other creditorsandaccruals Accounts payable Retirement benefitobligation commission Unearned reinsurance Insurance liabilities Liabilities 193,659,509 132,945,634 28,224,061 94,975,577 2014 1,446,579 3,333,563 1,185,708 3,347,654 380,195 52,297 --- CLA financial results 176,803,637 124,417,460 84,610,792 30,117,064 2013 1,240,588 3,504,316 1,338,651 3,212,259 388,351 5,294 146 257 thousands LBP
Annual Report 2014 Credit Libanais d’Assurances et de Réassurances (CLA) CLA financial results statement of statement of comprehensive income changes in equity
For the year ended 31 December 2014 2014 2013 For the year ended 31 December 2014 Capital Legal Reserve Other Reserves Profit For the Year Total
Insurance premium revenue 33,682,354 30,771,889 Balance as at 31 December 2012 10,005,000 3,231,412 21,412,762 11,391,914 46,041,088 Insurance premium ceded to reinsurers (7,847,269) (7,661,973) Allocation of 2012 profits --- 103,588 11,288,326 (11,391,914) --- Net insurance premium revenue 25,835,084 23,109,916 Dividends and Bonuses distributed (note 21) ------(7,216,575) (7,216,575) thousands LBP thousands LBP Change in unearned premium revenue (9,472,926) (7,040,132) Profit for the year 2013 ------13,561,663 13,561,663 Net earned premium 16,362,159 16,069,785 Balance as at 31/12/2013 10,005,000 3,335,000 25,484,513 13,561,663 52,386,177 Net investment income 9,113,025 8,361,971 Allocation of 2013 profit ------13,561,663 (13,561,663) --- Reinsurance commission income and profit sharing 3,235,554 1,652,629 Dividends and Bonuses distributed (note 21) ------(8,357,100) (8,357,100) Other operating income 6,279 68,902 Profit for the year 2014 ------16,684,799 16,684,799 Net income 28,717,016 26,153,286 Balance as at 31/12/2014 10,005,000 3,335,000 30,689,077 16,684,799 60,713,875 Insurance claims and loss adjustment expenses (4,954,425) (5,810,672) Insurance claims recovered from reinsurers 1,846,890 2,250,278 Change in outstanding claims (121,229) (147,277) Net insurance claims (3,228,763) (3,707,671) Expense for acquisition of insurance contracts (3,235,220) (3,522,019) Expense for administration and other expenses (4,650,322) (4,453,275) Depreciation and amortisation expense (182,899) (186,456) Provision for end of service indemnities (83,851) (257,500) Net foreign exchange loss (145,672) (6,218) Net allowance for provision (138,260) (132,923) Expenses (11,664,988) (12,266,061) Profit before tax 17,052,029 13,887,225 Income tax (367,230) (325,562) Total comprehensive income for the year 16,684,799 13,561,663 Credit Libanais d’Assurances et de Réassurances (CLA) Annual Report 2014
258 259 CLA financial results statement of cash flows
For the year ended 31 December 2014 2014 2013 2014 2013
Operating activities Cash flows from investing activities Profit for the year 17,052,029 13,887,225 Acquisition of Property and equipment (134,810) (25,290) Adjusted for: Acquisition of Intangible assets (7,794) (223,302) thousands LBP thousands LBP Depreciation and amortisation charges 182,899 186,456 Increase in bank deposits (more than 3 months) (40,261,883) (891,152) Provision for end of service indemnities 83,851 257,500 Matured bonds --- 4,552,500 Write off of Intangible assets 16,790 --- Subsidized loan granted to Dourat Loubnan (9,422) (7,528,078) Interest income (9,280,255) (8,587,171) Disposal of financial assets at fair value through OCI --- 1,510,342 Interest expense and related charges 167,230 225,200 Proceeds from disposal of property and equipment 10,779 2,421 Gain from sale of property and equipment (6,212) (1,214) Interest income received 9,288,505 8,587,171 Allowance of provision for doubtful debts 138,260 132,923 Net cash (used in) provided from financing activities (31,114,625) 5,984,611 Change in other creditors and accruals (8,156) 24,204 Cash flows from financing activities Change in other receivables (18,702) 23,746 Change in reinsurance deposits 121,304 (1,651,160) Change in reinsurance assets (43,946) 2,131,433 Dividends and bonuses distributed (8,357,100) (7,216,575) Change in insurance liabilities 10,364,786 6,283,812 Net cash used in financing activities (8,235,796) (8,867,735) Change in unearned reinsurance commissions (156,661) (278,081) Net increase in cash and cash equivalents (24,962,109) 12,232,233 Change in deferred acquisition cost (439,844) (117,087) Cash & cash equivalents at the beginning of the year 107,887,797 95,655,564 Change in premiums and reinsurance payables (1,881,861) 2,063,719 Cash & cash equivalents at the end of the year 82,961,549 107,887,796 Change in taxes payable (259,448) 104,108 Change in reinsurance balance receivables (125,913) 64,244 Change in premiums receivable (729,150) (758,781) Employees’ end of service benefits paid (138,730) --- Income tax paid (325,562) (301,679) Interest expense paid (167,230) (225,200) Net cash provided from operating activities 14,424,173 15,115,357 Credit Libanais d’Assurances et de Réassurances (CLA) Annual Report 2014
260 261 CL Branches Addresses
CL Branches addresses Worldwide 264
CL Branches addresses in Lebanon 266 Australia Luxembourg Westpac Banking Corporation - Sydney Clearstream Banking SA - Luxembourg
Austria Norway correspondent banks UniCredit Bank AG - Vienna DNB Bank ASA - Oslo
network Bahrain Saudi Arabia National Bank of Bahrain - Manama The National Commercial Bank - Jeddah Al Rajhi Bank - Riyadh Belgium Spain Help line for transfers KBC Bank NV - Brussels Banco Bilbao Vizcaya Argentaria SA (BBVA) - Madrid Banco de Sabadell - Sabadell Central Processing Department Canada Sri Lanka National Bank of Canada - Montreal Bank of Ceylon - Colombo Phone : + 961 1 258 106/9 Ext. 100/111 Bank of Montreal - Montreal Commercial Bank of Ceylon PLC - Colombo Fax : + 961 1 257 635/6 Cyprus Sweden Bank of Cyprus Public Company Ltd - Nicosia Skandinaviska Enskilda Banken AB (Publ) - Stockholm
Denmark Switzerland Danske Bank A/S - Copenhagen Credit Suisse AG - Geneva
France Turkey Natixis - Paris Akbank TAS - Istanbul Yapi Ve kredi Bankasi - Istanbul
Germany UAE Deutsche Bank AG - Frankfurt The National Bank of Abu Dhabi - Abu Dhabi Commerzbank AG - Frankfurt Standard Chartered Bank - Dubai
Italy Intesa Sanpaolo SPA - Milan UK UniCredit SPA - Milan Citigroup Global Markets Limited - London Standard Chartered Bank - London Credit Libanais Group
Japan USA The Bank of Tokyo-Mitsubishi UFJ LTD - Tokyo JP Morgan Chase Bank NA - New York Citibank NA - New York Standard Chartered Bank - New York Kuwait The Bank of New York Mellon - New York Gulf Bank KSC - Kuwait City Annual Report 2014 National Bank of Kuwait SAK - Kuwait City
264 265 Credit Libanais Credit Libanais d’Assurances Credit Libanais sal Investment Bank (clib) sal et de Reassurances (cla) sal head office and branch HEAD OFFICE HEAD OFFICE HEAD OFFICE network Credit Libanais Tower - Corniche El Nahr, Adlieh Roundabout Credit Libanais Tower - Corniche El Nahr, Adlieh Roundabout Credit Libanais Tower - Corniche El Nahr, Adlieh Roundabout Ashrafieh 1100 2811 - Beirut, Lebanon Ashrafieh 1100 2811 - Beirut, Lebanon Ashrafieh 1100 2811 - Beirut, Lebanon P.O.Box: 16-6729 P.O.Box: 16-6729 P.O.Box: 16-6729 Fax: +961 1 608 126 - Phone: +961 1 608 000 Fax: +961 1 425 637 - Phone: +961 1 425 671/2/3/4 Fax: +961 1 608 390 - Phone: +961 1 608 400 Call Center Website: www.creditlibanais.com +961 1 608000 Website: www.creditlibanais.com E-mail: [email protected] - [email protected] Website: www.creditlibanais.com E-mail: [email protected] - [email protected] +961 1 900 111 E-mail: [email protected] - [email protected] Lebanon 1518
BEIRUT
Adlieh (Main Branch) Credit Libanais Tower Corniche El Hamra Hamra St., Ghanem Bldg. Riad El Solh Beirut Central District, Riad El Solh Square, Asseily Bldg. Verdun (Unesco) Unesco St., Boubes Bldg. Nahr, Adlieh Roundabout, Fax: (01) 340 390 - Phone: (01) 346 960 - 342 954/5 - 350 293 Fax: (01) 983 141 - Phone: (01) 983 141/2/3 Phone/Fax: (01) 790 511 - 790 289 Fax: (01) 608 047 - Phone: (01) 608 048/9 - 608 050 Branch Manager: Mr. Ahmad Kechli Branch Manager: Ms. Lina Dabaghi Branch Manager: Ms. Fadia Hammoud Branch Manager: Mr. Rami Nassif Rmeil Nahr St., Zoghbi Bldg. Liberty Tower Hamra, Rome St., Liberty Tower Bldg. Ashrafieh Zahret Al Ihsan St., Sausalito Bldg. Fax: (01) 445 275 - Phone: (01) 445 684 - 443806 MOUNT LEBANON Fax: (01) 740 017 - Phone: (01) 740 017/8/9 Fax: (01) 204 643 - Phone: (01) 216 540 - 204 641 Branch Manager: Ms. Katia Ayoub Branch Manager: Mr. Kamal Abdel Sattar Branch Manager: Mr. Naji Khayat Amchit Main Road, Jafoury Bldg. Sassine Sassine Square, Independance Ave., Credit Libanais Bldg. Fax: (09) 621 072 - Phone: (09) 622 781/2 Badaro Badaro St., Khatoun Center Mar Elias Mousaitbeh, Mar Elias St. Fax: (01) 203 007 - Phone: (01) 332 889 - 218 608 Branch Manager: Mr. Paul Ajaltouni Fax: (01) 382 145 - Phone: (01) 387 878/9 Fax: (01) 312 028 - Phone: (01) 819 116 - 312 021 Branch Manager: Mr. Joseph S. Raad Branch Manager: Ms. Clauda Khoury Branch Manager: Mr. Houssam El Hajj Antelias Rahabneh St., Antelias Square, St. Elie Center Credit Libanais Group Sofil (Main Branch) Ashrafieh, Charles Malek Ave., Sofil Center Fax: (04) 419 760 - Phone: (04) 418 582/3 Gefinor Clemenceau St., Gefinor Center 1st floor, Bloc C Mazraa Corniche El-Mazraa, Salam Blvd., Choueiry Bldg. Fax: (01) 215 044 - Phone: (01) 200 028/9 - 201 292 Branch Manager: Ms. Nouhad Torbey Fax: (01) 740 168 - Phone: (01) 739 830/1 Fax: (01) 300 937 - Phone: (01) 313 590 - 317435 Branch Manager: Ms. Georgette Abdo Branch Manager: Ms. Noha Yammout Branch Manager: Mr. Bassam Matta Awkar Main Road Geitawi Facing Geitawi Hospital Raouche Hajj Toufic Nassar Bldg. Starco Mina El Hosn, George Picot St., Starco Center, Bloc A, 1st Floor Fax: (04) 544 763 - Phone: (04) 544 760/1/2 Fax: (01) 582 087 - Phone: (01) 580 715/6 Fax: (01) 807 475 - Phone: (01) 807 454 - 807 492 Phone/Fax: (01) 367 582/3 Branch Manager: Ms. Amal El Azar
Branch Manager: Mr. Costi Saroufim Branch Manager: Mr. Saadeddine Akel Branch Manager: Mr. Ali Berro Annual Report 2014
266 267 Bauchrieh Industrial City St., Boulghourjian Bldg. Haret Hreik Hady Nasrallah Blvd., Diab and Ayad Bldg. Mkalles Main Road, Factory Center Amioun Koura Main Road, Azar Bldg. Fax: (01) 497 332 - Phone: (01) 497 092- 497 260 Fax: (01) 278 004 - Phone: (01) 278 042/9 - 278 121 Fax: (01) 698 753 - Phone: (01) 698 750/1/2/3/4 Fax: (06) 952 714 - Phone: (06) 952 715/6/7 Branch Manager: Ms. Hoda Gemayel Branch Manager: Mr. Noureddine Ballout Branch Manager: Mr. Emile Moukarzel Branch Manager: Mr. Esper El Azar
Batroun Main Road, Juliette Adaymi Bldg. Beit Mery Notre Dame St., Dr. Sawan Bldg. Haret Hreik Menchieh St., Dabaja Bldg. Sin El Fil Fouad Chehab Road, St. Georges Center Fax: (06) 642 168 - Phone: (06) 742 074/5 Fax: (04) 871 176 - Phone: (04) 871 916 - 871 761 Fax: (01) 556 784 - Phone: (01) 556 780/1/2 Fax: (01) 491 899 - Phone: (01) 495 370/1 - 482 368 Branch Manager: Mr. Nidal Farah Branch Manager: Mr. Adib Hamouche Branch Manager: Mr. Ali Mahfouz Branch Manager: Mr. Atef Renno Kobbe Kobbe Main Road, Yehya Center Bhamdoun Main Road, Bhamdoun Station, Mouttawah Center Haret Sakhr Jounieh highway, Credit Libanais Tower Zouk Jounieh Highway, Zeayter Bldg. Fax: (06) 393 902 - Phone: (06) 393 900/1 Fax: (05) 260 247 - Phone: (05) 260 244/5/6/7 Fax: (09) 636 842 - Phone: (09) 636 841 - (03) 675 004 Fax: (09) 211 556 - Phone: (09) 210 485/7 - 211 542 Branch Manager: Mr. Walid Rima Branch Manager: Mr. Imad Abdel Nour Branch Manager: Mr. Chakib Khoury Branch Manager: Mr. Joseph B. Khoury Tripoli - Azmi Azmi St., Haytham Center Bourj El Brajneh Zein Harb Road, Yassine Bldg. Hazmieh Jisr El Bacha Main Road, S & S Center Zouk Mosbeh Geita Main Road, Near Pizza Hut Fax: (06) 215 900 - Phone: (06) 215 900/1/2 Fax: (01) 450 471 - Phone: (01) 450 470/2 Fax: (05) 952 425 - Phone: (05) 952 426 Fax: (09) 211 083 - Phone: (09) 211 082 - 210 744 - 210 711 Branch Manager: Mr. Nazih Naja Branch Manager: Mr. Nadim Hatoum Branch Manager: Ms. Randa Khater Branch Manager: Ms. Amale Araman Tripoli - Tell Abdel Hamid Karame St., Kantara Bldg. Bourj Hammoud Municipality Square, Mukhtarian & Sarkissian Bldg. Jal El Dib Main Road, Next to Mar Takla Church, Facing The Public Garden Fax: (06) 430 350 - Phone: (06) 430 350/1/2 - 424 434 Fax: (01) 265 299 - Phone: (01) 262 393 BEKAA Fax: (04) 721 853 - Phone: (04) 721 850/1/2 Branch Manager: Mr. Fouad Kabbara Branch Manager: Ms. Arpie Tcheboukjian Branch Manager: Ms. Marie Abi Haidar Bar Elias Damascus Road, Araji Bldg. Zghorta Main Road, Kareh & Mouawad Bldg. Broummana Main Road, Tawil Bldg. Fax: (08) 510 267 - Phone: (08) 510 265/6/7 Fax: (06) 668 601 - Phone: (06) 668 600/1/2/3 Jbeil Main St., Kordahi & Matta Center Fax: (04) 862 105 - Phone: (04) 960 664 - 960 349 Branch Manager: Mr. Wajih Araji Branch Manager: Ms. Elissar Frangieh Fax: (09) 949 588 - Phone: (09) 942 588 - 949 558 Branch Manager: Mr. Naoum Labaki Branch Manager: Mr. Antoine Habib Chtaura Damascus Road, Rose Massabki Bldg. Chehim Main Road, El Chraifeh St., Raiif Abdallah Bldg. Fax: (08) 544 802 - Phone: (08) 540 833 - 543 555/666 SOUTH Jbeil Collège des Frères, Street 13, Khoury Business Center Fax: (07) 242 405/6 - Phone: (07) 242 405/6/7 Branch Manager: Mr. Wassim Rahal Phone/Fax: (09) 540 496/7/8 - 540 534 Branch Manager: Mr. Ahmad Charafeddine Bint Jbeil Main Road, Charara Center Branch Manager: Mr. Akram Khoury Ferzol Main Road, Ordre Salvatoriens Bldg. Fax: (07) 450 802 - Phone: (07) 450 800/1 - (03) 675 012 Dekwaneh Main Road, Rawda Roundabout Fax: (08) 950 540 - Phone: (08) 950 54/12/3/4 Branch Manager: Mr. Ghassan Ghafari Jdeideh Nahr El Mott Roundabout, Montelibano Bldg. Fax: (01) 686 903 - Phone: (01) 686 794/5 Branch Manager: Mr. Michel Gerges Fax: (01) 887 780 - Phone: (01) 898 065 - 887 779 Branch Manager: Ms. Reine Abi Hatab Nabatieh Main Road, Sabbagh Bldg. Branch Manager: Mr. Kamal Zakhem Jeb Jannine Ismaïl Sharanek Bldg. Fax: (07) 767 911 - Phone: (07) 767 909/10/11 Dora Dora Roundabout, Bassil Bldg. Fax: (08) 660 233 - Phone: (08) 660 233 - 660 710 Branch Manager: Mr. Zahi Jaffal Jisr Dora Highway, Karantina Bridge, Azar Bldg. Fax: (01) 264 813 - Phone: (01) 251 832 - 260 358 Branch Manager: Mr. Souheil Charanik Fax: (01) 257 641 - Phone: (01) 257 640/1 Branch Manager: Mr. Antoine Kmeid Saida East Blvd., Elia Roundabout, Center Zaatari 2035 Branch Manager: Mr. Antoine Saba Machghara Main Road, Albert Karam Bldg. Fax: (07) 755 793 - Phone: (07) 755 790/1/2 Fanar Fanar Roundabout, Samra Center Phone/Fax: (08) 650 250 - 650 297 Branch Manager: Mr. Mohamad Saad Jounieh Facing La Cité Fax: (01) 902 362 - Phone: (01) 902 360/1/2 Branch Manager: Mr. Antoine Hajjar Fax: (09) 832 075 - Phone: (09) 832 069/70 - 832 063/5 Branch Manager: Ms. Antoinette Tannoury Saida Riad El Solh St., Zaatary Bldg. Branch Manager: Mr. Michel Ghalieh Rachaya - Dahr El Ahmar Dib Mounzer Bldg. Fax: (07) 721 401 - Phone: (07) 721 401/2 - 751 101/2/3 Furn El Chebbak Damascus Road, Ghaoui Bldg. Fax: (08) 590 303 - Phone: (08) 591 013/4 Branch Manager: Mr. Samih Kaakour Kaslik Main Road, Kaslik Plaza Center Phone/Fax: (01) 281 518/9 Branch Manager: Mr. Nidal Abou Hjeili Fax: (09) 640 244 - Phone: (09) 639 945 - 640 794 - 640 118 Branch Manager: Mr. Amin Zakhour Tyr Rest House St., Farran Bldg. Branch Manager: Mr. Joseph Kmeid Zahle Hoch Al Omara, Deir Mar Chaaya Bldg. Fax/Phone: (07) 742 854/5/6 Credit Libanais Group Ghobeiry Airport Blvd., Moucharafieh Square, Wazneh Bldg. Fax: (08) 800 459 - Phone: (08) 810 142/3 - 803 200 Branch Manager: Mr. Riad Chebli Khaldeh (Al-Kobbé) Saida Highway, Credit Libanais Bldg. Fax: (01) 552 781 - Phone: (01) 552 781/2 Branch Manager: Mr. Aziz Chamma Fax: (05) 810 893 - Phone: (05) 810 891/2/3 Branch Manager: Mr. Fawaz Toufeili Tyr Abbassieh Abbassieh, Main Road, Jal Al Baher, Sea Center Branch Manager: Mr. Mahfoud Ghanem Fax: (07) 351 094 - Phone: (07) 351 064 - 351 074 - 351 084 Hadeth Adib Al Chidiac St., Kafaa’t Intersection, Wehbe Center NORTH Branch Manager: Mr. Hussein Abdel Majid Saleh Kornet Chehwan Main Road, Forum 600 Center Fax: (05) 466 680 - Phone: (05) 466 681/2 Fax: (04) 913 911 - Phone: (04) 913 911 - 928 240 Abdeh Abdeh Main Road, Haddad Bldg. Branch Manager: Mr. Youssef Chartouni Branch Manager: Mr. Joseph Mallouk Fax: (06) 470 650/1/2 - Phone: (06) 470 650/1/2 - (03) 583 586 Annual Report 2014 Branch Manager: Mr. Aghiad Dandachi
268 269 Credit International sa, Immeuble le Goelan, Boulevard Djily Mbaye, Intersection Henri Dunan Chrysalia Court, 1st Floor, 206 Arch. Makarios III Avenue, CY 3303 B.P.: 50117 Dakar RP P.O.Box: 53-492, Limassol Cyprus Fax: +221 33 822 80 80 - Phone: +221 33 829 64 64 / +221 33 889 18 18 Fax: +357 25 376 807 - Phone: +357 25 376 444 General Manager: Mr. Christian Khalife Branch Manager: Ms. Hayat Harfouche Website: www.cisenegal.com Credit International, Cyprus Branch E-mail: [email protected] - [email protected] E-mail: [email protected] SA (CISA) Senegal
Seef Area, 428, Road 2806 Newroz Street, Worech 44, Credit Libanais Bldg.
P.O.Box: 5576, Manama Kingdom of Bahrain P.O. Box: 20 Newroz E-fax: +973 17 910 573 - Fax: +973 17 582 224 - Phone: +973 17 560 570 Fax: +964 66 2296690 - Phone: +964 750 3000111 / +964 770 0000766 / +964 750 3000666 / +964 770 0000103 Mobile: +973 39 912 912 / +973 39 981 981 SWIFT/CIB: CLIB IQ BA SWIFT/BIC: CLIB BH BB General Manager: Mr. Fouad Kabbara Branch Manager: Mr. Aghar Kanafani Website: www.creditlibanais.com.lb Bahrain Branch E-mail: [email protected] - [email protected] E-mail: [email protected] Erbil Branch
Street No. 14, Selman Al Faek, 904, Credit Libanais Bldg.
P.O. Box: 81018, Abi Nawas
Montreal, Quebec, Place du Canada, 1010 de la Gauchetière Ouest Fax: +964 727 0020385 - Phone: +964 770 0434434 / +964 750 5000555 - # 1325, 13th Floor, Montreal, Quebec H3B 2N2 Canada Mobile: +964 750 5000111 / +964 770 0000665 SWIFT/BIC: CLIB IQ BA Fax: +1 514 866 6220 - Phone: +1 514 866 6688 +1 800 864 5512 General Manager: Mr. Marwan Abi Hana Representive Office- Office Manager: Mr. Elie Ayoub Website: www.creditlibanais.com.lb Montreal, Canada E-mail: [email protected] - [email protected] E-mail: [email protected] Baghdad Branch Credit Libanais Group Annual Report 2014
270 271 milestones Convergence of CL Group head office staff to the newly built Headquarters Tower in Adlieh. Opening of new branches in Jal el Dib and Adlieh, Lebanon Launching Opening of the fully-owned Winning of Citibank “2014 USD of banking banking subsidiary Credit Payments Straight Through operations in International sa, Senegal Processing Excellence Award”. Issuance of three- the Kingdom of Acquisition by EFG Hermes Launching of operations in Winning of Standard Chartered year Euro CD listed on Bahrain Group of a controlling Iraq (Baghdad and Erbil) Bank “2013-2014 USD Clearing international markets Changing of majority in the capital of Migration to the core banking Straight Through Processing Acquisition Launching of Islamic affiliated leasing Credit Libanais system, Equation, across all Excellence Awards”. of both First Acquisition of banking operations company Issuance of USD 75 branches of the Group Winning of the Social and Phœnician the operations in Lebanon through Credilease into million Subordinated Launching construction Economic Award - for the Bank and of American the Bank’s subsidiary a Lebanese Bonds of maturing in 7 work of the new landmark Program “Supporting Those Establishment Capital Express Bank, “Lebanese Islamic financial years - Transaction over - CL Group Headquarters in Who Defend us”, in recognition of the Bank. Trust Bank. Lebanon. Bank”. institution. subscribed. Ashrafieh, Lebanon. of the Bank’s CSR Role. 1961 1994 2000 2005 2007 2010 2012 2014 1977 1996 2004 2006 2008 2011 2013 Acquisition Launching of the Issuance of A capital increase Successful management Best in category: Social Increase of CL Tier One capital of investment banking arm cumulative of USD 102 by the Bank, with Credit and Economic Award for by 18.28% Continental of the Group through the Preferred Shares million by existing Suisse & Byblos Bank, Housing Loans JP Morgan Elite “Quality Bank. majority owned subsidiary maturing in 2011 shareholders of the 2009 Republic Social Media launching Recognition for Outstanding “Credit Libanais Acquisition of Implementation of Lebanon voluntary Achievement” Award Investment Bank” exchange transaction Best Website Awards ISO 9001:2000 of an Employee granted to affiliates: Hermes Winning the CrossKnowledge First issuance of Certification Stock Ownership for a total consideration of some USD 2.3 billion. Travel and CISA (Senegal) Special Award in the Best Euro CDs listed on for Quality Plan for a total e-learning Category international markets by Management consideration of PCI DSS compliance for a Lebanese bank. System. 5.7% of the Bank’s subsidiaries Netcommerce World Finance “Best common shares and IPN. Commercial Bank” Award Winning of the World Confederation of Golden Pan Arab Businesses (WORLDCOB) Corporate Website “Peak of Success” Award Award. Launching of the first e-payment services for built property taxes in Lebanon Launching of the first e-payment services for the Order of Engineers and
Architects in Beirut Credit Libanais Group Opening of the new Jounieh branch. Annual Report 2014
272 273 The Corporate Projects and Publications Department – CEO Office Credit Libanais Tower | Corniche El Nahr - Adlieh P.O.Box: 16 - 6729 Beirut, Lebanon -Tel: +961 1 608122 - Fax: +961 1 608126 [email protected] - www.creditlibanais.com Designed by Publimedia sarl The Forest Stewardship Council www.FSC.org is an international organization promoting responsible forest management. FSC has developed principles for forest management of forest holdings, and a system of tracing, verifying and labeling timber and wood products, which originate from FSC-certied forests.